HomeMy WebLinkAbout1041 GormanIn Re: Joseph Gorman
STATE ETHICS COMMISSION
308 FINANCE BUILDING
HARRISBURG, PENNSYLVANIA 17120
File Docket: 95- 026 -C2
Date Decided: 2/20/97
Date Mailed: 3/7/97
Before: Daneen E. Reese, Chair
Austin M. Lee, Vice Chair
Roy W. Wilt
Rev. Joseph G. Quinn
Boyd E. Wolff
This is a final adjudication of the State Ethics Commission.
Procedurally, the Investigative Division of the State Ethics Commission
conducted an investigation regarding . a possible violation of the Public Official and
Employee Ethics Law, Act 9 of 1989, P.L. 26, 65 P.S. §401 el seq., by the above -
named Respondent. At the commencement of its investigation, the Investigative
Division served upon Respondent written notice of the specific allegation(s). Upon
completion of its investigation, the Investigative Division issued and served upon
Respondent a Findings Report identified as an "Investigative Complaint." An Answer
was filed and a hearing was waived. The record is complete. A consent agreement
was submitted by the parties to the Commission for consideration which was
subsequently approved.
This adjudication of the State Ethics Commission will be made available as a
public document thirty days after the mailing date noted above. However,
reconsideration may be requested. Any reconsideration request must be received at
this Commission within thirty days of the mailing date and must include a detailed
explanation of the reasons as to why reconsideration should be granted in conformity
with 51 Pa. Code §21.29(b). A request for reconsideration will not affect the finality
of this adjudication but will defer its public release pending action on the request by
the Commission.
The files in this case will remain confidential in accordance with Act 9 of 1989,
65 P.S. §408(h). Any person who violates confidentiality of the Ethics Law is guilty
of a misdemeanor subject to a fine of not more than $1,000 or imprisonment for not
more than one year, 65 P.S. §409(e). Confidentiality does not preclude discussing this
case with an attorney at law.
Gorman, 95- 026 -C2
Page 2
1. ALLEGATION:
That Joseph Gorman, as a councilman for Lansdowne Borough, Delaware
County, and the Lansdowne Borough Treasurer, violated provisions of the State Ethics
Act (Act 9 of 1989) when he used the authority of his office to obtain a private
pecuniary benefit for himself and /or a business with which he was associated by
participating in discussions, actions, and decisions of the Borough in the Borough's
efforts to award a contract to administer the Borough Police Pension Fund; when he
participated in his official capacity in the administration of said contract; when, as
borough treasurer, he participated in the process to obtain a tax anticipation loan; and
when he used confidential information received through holding public office for the
private pecuniary benefit of himself and /or a business with which he was associated.
Section 3. Restricted Activities
(a) No public official or public employee shall
engage in conduct that constitutes a conflict of interest. 65
P.S. §403(a).
Section 2. Definitions
"Conflict" or "conflict of interest." Use by a public
official or public employee of the authority of his office or
employment or any confidential information received
through his holding public office or employment for the
private pecuniary benefit of himself, a member of his
immediate family or a business with which he or a member
of his immediate family is associated. "Conflict" or
"conflict of interest" does not include an action having a de
minimis economic impact or which affects to the same
degree a class consisting of the general public or a subclass
consisting of an industry, occupation or other group which
includes the public official or public employee, a member of
his immediate family or a business with which he or a
member of his immediate family is associated. 65 P.S.
§402.
I1. FINDINGS:
1. Joseph F. Gorman served as a Lansdowne Borough, Delaware County, council
member from January 5, 1988 to December 31, 1993.
2. Gorman was appointed Chairman of the Council Finance Committee on January
5, 1988 and held that position until December 31, 1993.
a. The Finance Committee reviews all financial transactions of the Borough
and makes recommendations to council.
b. This would include pension plans and tax anticipation loans
3. Gorman also served as a member of the Police and Fire Committee from January
6, 1992 to December 31, 1993.
Gorman, 95- 026 -C2
Page 3
4. Gorman has been employed as a Vice President with PFPC, 400 Bellevue
Boulevard, Wilmington, DE 19809 since April of 1991.
a. Gorman is the Director of Mutual Fund Accounting Training with duties
including designing and teaching mutual fund accounting based on
Security Exchange Commission and Internal Revenue Service regulations.
5. PFPC is a subsidiary of PNC Bank of Delaware which is a subsidiary of PNC
Bank of Pittsburgh.
a. PNC Bank is the successor to Provident Bank.
6. Lansdowne Borough maintains a pension fund for the Borough police officers.
a. The fund is supported through contributions from the police officers and
the Commonwealth of Pennsylvania.
b. The Borough is required to make contributions if funding from the officers
and the State are not sufficient to make the fund solvent.
7. The Lansdowne Borough Police Pension Fund was administered by Borough
Treasurer Merlyn Kirkwood from January of 1980 to December of 1993.
8. Kirkwood invested the Pension Fund monies in United States Treasury Notes.
9. The Pension Fund grew from $985,000 in 1980 to over $4,000,000 in 1993.
a. The growth of the Fund was a function of the economic climate of the
1980's in which interest rates were extremely high, and the fact that
there were fewer claims against the Fund in those years.
10. The Borough Treasurer, Merlyn Kirkwood, reported directly to Borough Council
and the President of the Borough Council.
a. Joseph Gorman gave Merlyn Kirkwood little direction until October of
1993, when Gorman directed Kirkwood to purchase Treasury Bills.
Kirkwood wanted to continue to purchase Treasury Notes. Joseph
Gorman reminded Kirkwood that the Police Pension Fund would be
managed by a professional money manager beginning in early 1994. The
Borough's portfolio of Treasury Notes was to be sold in the open market
and the proceeds used to purchase stocks and bonds in accordance with
the Borough's investment policy. Joseph Gorman informed Kirkwood
that Treasury Notes were investments for two to five years and have the
risk of being sold for less than their purchase price if economic conditions
change. Interest rates were low for new Treasury Notes at this time,
below 5 %. The purchase of Treasury Bills would provide safety and
liquidity as they are a 90 day investment. The interest rate environment
changed rapidly in 1994, and Joseph Gorman's decision saved the
Borough from a loss of $15,000.00.
11. At the February 1, 1993, meeting of Lansdowne Borough Council, Kirkwood
reported on the status of the Police Pension Fund for 1992.
Gorman, 95- 026 -C2
Page 4
a. Kirkwood reported that as of that time the fund was earning enough to
pay for pensions and other expenses.
b. With additional people in the plan, it was necessary for the Borough to
contribute $11,704 to the fund to make it actuarially sound.
c. He did not foresee interest rates going up and expenses going down.
d. He redeemed the last of the old style notes on January 15, 1993.
e. Because of older investments, Kirkwood reported that the fund was still
earning about 6 %.
12. Prior to or in May of 1993, several members of the police department
approached the Mayor of Lansdowne Borough and /or the Solicitor of the
Borough regarding the feasibility of an investment advisor making a presentation
to the Borough Council regarding the Police Pension Fund.
a. The decision was made to allow a specific company to make the
presentation.
b. After the presentation, the decision was made to institute a process
whereby other investment managers could make presentations to the
Borough Council.
13. The Borough Council's decision to hire a professional money manager was
based on a number of factors and concerns, including: a) the Borough's need
for administration of the Fund which included check disbursements and IRS
filings; b) increased payouts from the Fund to future retirees; c) the low interest
rate environment; and d) the Borough's need for flexibility of investment policies
to take advantage of economic conditions.
a. The borough wanted to see a greater return on investments.
14. Borough Council directed that joint committees consisting of members of the
Finance Committee, the Police and Fire Committee and the Mayor, assisted by
the Borough Solicitor Michael F.X. CoII, review the possibility of an outside
company administering the Fund.
a. Members of the Lansdowne Police Department were also to be included
on the joint committees, and were to have input into the decision making
process regarding professional administration of the Fund.
b. Mayor John Rankin served as the informal chairman.
15. The Finance Committee was made up of council members:
Joseph F. Gorman Chairman
George Bochanski
William Smith
16. The Police and Fire Committee was made up of council members:
Gorman, 95- 026 -C2
Page 5
George Bochanski Chairman
Joseph Gorman
Charlene Hennessy
17. At the May 3, 1993, Council meeting Councilman Bochanski, Chairman of the
Police and Fire Committee, reported on the Police Committee meeting on May
13, 1993, to investigate the possibility of having an outside firm manage the
Police Pension Fund.
a. Bochanski stated a firm will be present to make a presentation and other
firms will also be asked to make presentations.
18 Various investment companies were contacted by members of the joint
committee and officers from the Borough Police Department who requested that
the companies submit proposals on administering the Fund.
a. There were no formal advertised requests for proposals issued by the
Borough.
19. In approximately June or July, 1993, Gorman directed Borough Manager R.J.
Robinson to contact the managers of the PNC Bank and the First Fidelity Bank
at their branch offices in the Borough of Lansdowne and inform them the
Borough was seeking an outside company to handle the Fund.
20. Nine firms presented proposals to the joint committee for their consideration.
21. From May of 1993 to December of 1993, Gorman, in his capacity as Chairman
of the Finance Committee gave verbal reports to Borough Council, at their
monthly meetings, on the activities of the joint committee in reference to their
search for an investment company and the presentations made by the nine
firms.
22. Minutes of Lansdowne Borough Council meetings confirm various committee
reports made by Joseph Gorman regarding the selection of an outside pension
fund manager.
May 19, 1993:
Police and Fire Committee. Bochanski reported that the committee met
on 05/13/93 to listen to a presentation regarding the Police Pension
Fund. The committee will listen to several presentations.
June 16, 1993:
Administration and Finance Committee. Gorman reported that the Police
and Administration Committees will have a joint meeting on 06/29/93 to
listen to another presentation. Gorman advised that due to low interest
rates the Borough is looking into ways to increase the fund.
July 6, 1993:
Gorman reported regarding the presentation on 06/29/93. Another
presentation from professionals for the police pension fund was
scheduled for 07/21/93. The Joint Committee will hear two more
presentations and then make a decision.
Gorman, 95- 026 -C2
Page 6
Gorman advised that all firms interviewed felt a Pension Review Board
should be set up.
July 21, 1993:
Administration and Finance Committee. Gorman reported that the
Administration and Police Committee have been meeting with money
managers relative to the Police Pension Fund.
The Committee met that evening with a representative of Dean Witter
Reynolds. There will be other presentations.
August 2, 1993:
Gorman reported that the Administration and Police Committees are
continuing to meet with firms interested in managing the Police Pension
Fund.
Gorman advised that the Committees want to hear presentations from
two Lansdowne Banks and the Treasurer.
August 18, 1993:
Gorman reported that the Committees are continuing to hear
presentations from financial consultants relative to the management of
the Police Pension Fund.
September 7, 1993:
Gorman reported that a meeting of the Administration and Police
Committees to hear wrap -up presentations #8, 9 and 10 on managing
the Police Pension Fund will be held on 09/08/93. Solicitor Coll to meet
with Gorman and Bochanski on 09/14/93 to shorten the list. Gorman
stated he would put together a summary prior to the meeting.
September 15, 1993:
Gorman reported that the Committees have heard nine presentations
from investment managers and a presentation from Mr. Kirkwood
(Treasurer). They will begin the process of pairing down the proposals
to a manageable number.
Council President Alpigini appointed the following Police Pension
Committee:
George Bochanski
Joseph Gorman
John Murphy
Mayor Rankin
William Smith
October 4, 1993:
Gorman reported the Police Pension Committee met last Thursday, made
up parameters and cut the number of proposals to four. The four will be
asked to meet with the Committee again to assess the full costs.
Gorman was to put together a new proposal form for the bidders to
complete so that the Committees could make a comparison.
Gorman, 95- 026 -C2
Page 7
October 20, 1993:
Gorman reported regarding the reduction to four proposals and informed
that two presentations will be heard on October 28, 1993 and two on
November 10, 1993. All members of council were invited to attend.
November 17, 1993:
Gorman reported the Police Pension Committee will meet on November
23, 1993, with financial managers to discuss the handling of the Police
Pension Fund.
23. Joseph Gorman participated as a member of Council and the Joint Committee
in the review process leading to the selection of a Police Pension Fund Manager.
24. Because of his background in investment and banking, Gorman was given the
assignment of interpreting the proposals and putting them into terminology that
the other members of the joint committee could understand.
25. Gorman prepared a chart, at his borough office, listing the names, strategy,
experience with municipalities, and fees of the various companies submitting
proposals.
a. The chart was typed up by Gorman's secretary at PFPC.
b. Gorman felt that a blend of performance, experience and fees should be
considered in choosing an investment company.
26. The chart prepared by Gorman'listed eight of the management firms submitting
proposals.
a. The chart also identified investment strategies, experience with municipal
pension funds and fees based on a $4,000,000 investment of each firm.
b. The following firms were identified:
Spagnola - Cosack
Consulting Group
Rich Investments
Investment Management Consulting Services
(Dean Witter Reynolds)
First Fidelity Bank
PNC Bank
Glenmede Trust
Unity Management
c. Specific fees to administer the police pension fund were listed for each
firm.
1. PNC's fees were listed as "Mutual Fund Fees."
27. Gorman participated in the joint committee discussions of the merits of each
presentation and the decision to narrow the number of applicants to four.
Gorman, 95- 026 -C2
Page 8
a. Gorman recommended PNC, Glenmede Trust Company, the Consulting
Group and Rich Investments.
b. Rich Investments was excluded by the other members of the joint
committee from the final selection process.
28. Gorman and the Mayor would have recommended First Fidelity, except for the
strong opposition by representatives of the Police Department.
29. The final four companies were asked to make presentations to the joint
committee answering a list of questions provided by the committee.
a. The Mayor asked Gorman to prepare several questions that would help
"laymen" understand the financial jargon.
30. Gorman participated in the joint committee's meetings with the final four
companies and took an active role in the discussions.
a. The meeting with the four companies took place on November 10, 1993,
having been rescheduled from October 28, 1993.
31. Gorman prepared a handwritten summary of the companies' presentations and
submitted the comparison to the other committee members for their review.
32. The handwritten summary prepared by Gorman listed the following
qualifications of the final four firms:
* Experience
* Service charge to pay pensioners
* Liquidation of securities
* Investment
* After fee return percent
* Annual fee
Dollars Expense Ratio
Glenmede Trust $35,356 .88%
Consulting Group $58,000 1.45%
PNC $34,000 .85%
Spagnola -Cosak $45,200 1.13%
33. Gorman participated in the joint committee meetings, and that [sic] the joint
committee decided to recommend to the Borough Council the hiring of PNC as
the Borough's investment company for the Police Pension Fund.
34. Craig Aronhalt, PNC Bank, Assistant Vice President for Marketing, was
responsible for making PNC's presentation.
35. Records of Craig Aronhalt indicate that during the period from August 10,
1993, through the second presentation by PNC to the Joint Committee on
November 10, 1993, Gorman and Aronhalt discussed PNC's proposal. Gorman
spoke privately with representatives of each of the other presenters on various
occasions. All of the presenters would call at various times seeking information.
The representative from Glenmede called Gorman more than any of the other
presenters. In fact, a chart similar to the chart described in Findings 25 -26 was
Gorman, 95- 026 -C2
Page 9
incorporated in the Consulting Group's presentation booklet on November 10,
1993. The chart indicated that the respective fees of each of the presenters
based on Four Million Dollars in assets were as follows:
Spagnola -Cosak $60,000
Consulting Group $58,000
PNC $ 50,000
Glenmede Trust $62,400
Neither Spagnola - Cosak, PNC nor Glenmede Trust's presentation booklets
contained such a chart. Spagnola - Cosak, PNC and Glenmede Trust listed only
their respective fees.
a. Gorman recommended to Aronhalt specifics to be included in the
proposal.
b. Gorman advised Aronhalt what to stress and when to make PNC's
presentation.
c. Gorman counseled the PNC representatives as to what approaches to
take. +�
d. The PNC representative used an outdated prospectus, and therefore used
outdated fees. Even with the outdated fees, the PNC fees were the
lowest of all of the presenters (the actual fees were even lower).
e. None of the information transmitted by Mr. Gorman to Mr. Aronhalt was
confidential in nature.
36. On or about September 30, 1993, Gorman had a telephone conversation with
Aronhalt and the other presenters during which the following was discussed:
a. The Committees met on September 29, 1993, and that PNC made the
short list.
37. Information regarding various aspects of the proposals that were submitted was
discussed by Joseph Gorman and the respective representatives of the
presenters prior to their presentations.
38. Records of Aronhalt indicate the specifics of his conversation with Gorman as
follows during the above discussion:
a. Aronhalt was advised that fees are the big issue.
b. Aronhalt was advised that Gorman has to abstain from voting.
c. The Committee was down to five members.
d. There would be a second presentation.
39. On or about October 15, 1993, Gorman advised the presenters of potential
meeting times on November 10, 1993.
Gorman, 95- 026 -C2
Page 10
a. Gorman informed that they must bring the portfolio managers.
40. PNC made their presentation on November 10, 1993, at approximately 8:30
p.m.
a. PNC was advised by letter dated November 5, 1993, authored by Joseph
Gorman.
41. On or about October 15, 1993, George Beck, Manager of PNC's Lansdowne
Branch advised Aronhalt that it was between PNC and John Spagnola's firm to
be named Lansdowne Police Pension Fund Manager.
42. On or about November 2, 1993, Aronhalt was informed by Joe Gorman that he
would need to stress in PNC's presentation client service and flexibility.
a. Aronhalt was to cite examples.
b. The PNC presentation booklet dated November 10, 1993, contains 16
pages. There is no mention of client service or flexibility, or any
examples thereof, in PNC's presentation booklet.
43. On or about November 3, 1993, Aronhalt discussed the short list of
presentations with Gorman.
a. The short list included PNC, Glenmede Trust, Shearson and Spagnola-
Cassack.
44. Prior to the November 10, 1993, presentation made by PNC, Aronhalt and
Gorman corresponded telephonically and by fax communication at Gorman's
PFPC office.
a. On November 10, 1993, Gorman observed that the fees stated in PNC's
proposal were incorrect and that Aronhalt used an outdated prospectus.
Gorman asked that Aronhalt provide the correct expense ratio as stated
in the Prospectus for Institutional Shares for the PNC funds. Joseph
Gorman did not see or review PNC's presentation booklet prior to PNC's
presentation on the evening of November 10, 1993. Gorman became
aware of the incorrect fees sometime after the presentation. On
November 22, 1993, following Joseph Gorman's discovery of Aronhalt's
mistake, Aronhalt provided the current expense ratios as listed in the
current prospectus supplement dated September 1, 1993.
b. The prospectus with the correct expense ratio would have an expense of
$29,200, or .73 %, which is significantly lower than the $34,000 or
.85% for PNC as listed in finding 32(a).
45. Aronhalt had proposed that Lansdowne's Police Pension Fund be considered in
the Service Class of PNC Family of Mutual Funds. Aronhalt mistakenly included
outdated fees taken from an outdated Institutional Class PNC prospectus in
PNC's presentation booklet. Aronhalt had no ability or authority to include
anything but the current institutional class fees in the presentation booklet.
Gorman, 95-026-C2
Page 11
46. The joint committee met with other members of Borough Council at the
December 1993 Business Meeting and discussed the merits of the various
proposals.
a. Gorman participated in the discussion with other members of Borough
Council.
47. Borough Council met on December 15, 1993 and voted 6 -0 to approve
Resolution 93 -17 which authorized the selection of PNC Bank, N.A., as Pension
Fund Manager.
48. Resolution 93 -17 provided, in part, as follows:
a. The appropriate Borough officials are hereby authorized to take all
appropriate steps including, but not limited to, entering into a written
agreement with PNC Bank, N.A., to provide investment advice and
management services and to act as trustee to the Borough of Lansdowne
Police Pension Fund.
b. All proposals and other information collected by Borough Council in the
course of its investigation shall be made available for public inspection
in the office of the Borough Manager.
49. Gorman submitted a conflict of interest memorandum dated 12/15/93 which
stated in substance that he was an employee of PNC Bank and would abstain
from the vote on Resolution 93 -17.
50. Although Gorman did not vote on the final selection of PNC, he participated in
the review and consideration of the PNC proposal. Gorman's participation in the
review of the PNC proposal and the other proposals were at the request of the
Mayor and Borough Council.
51. Although PNC received remuneration according to the prospectus fee schedule
for its selection as the police pension fund administrator, Joseph Gorman did
not personally obtain any financial benefit as a result of the placement of the
police pension fund assets for investment with PNC funds.
52. Joseph Gorman's participation in the analysis of proposals for investment of
police pension fund assets was done at the request of the Mayor and members
of Borough Council who were all in full knowledge of the fact of Joseph
Gorman's position with PNC Bank.
53. Neither the proposal of PNC Bank nor any of the other proposals to the Borough
of Lansdowne were based upon confidential information conveyed by Joseph
Gorman to the mutual fund officials.
54. The PNC Bank funds were determined to be the best of all investment options
in the opinion of the borough committee with respect to the fees charged for
investments and the performance history of the mutual funds. The investigation
conducted by the Ethics Commission has found no evidence to suggest that the
determination by the Borough Council was not accurate.
Gorman, 95- 026 -C2
Page 12
55. The investment fees charged by PNC Bank to the Borough of Lansdowne are the
same fees charged to all other institutional investors similar to the Lansdowne
borough Police Pension Fund and are a matter of public record. PNC Bank did
not, nor was it ever permitted to, negotiate a special fee for the Borough of
Lansdowne.
56. The process of awarding the management of the police pension fund assets was
open and public as delineated in the Ethics Law. Joseph Gorman timely signed
and filed a conflict of interest statement which disclosed his association with
PNC Bank, and which was a matter of public record.
57. At the January 3, 1994, Reorganization Meeting of Lansdowne Borough
Council, Gorman was appointed Lansdowne Borough Treasurer.
a. Gorman's term of office as a councilman had expired.
58. Gorman was appointed to the Police Pension Committee by Borough Council on
January 31, 1994.
59. Gorman's duties as Borough Treasurer consisted of the following:
a. Maintenance of the accounting system.
b. Preparation of the annual budget.
c. Supervision of borough funds and investments, deposits and transfers of
funds from various accounts including the police pension fund.
d. Advise the manager and council on all fiscal matters.
60. Minutes of the January 31, 1994 Borough Council meeting confirm that a
motion was passed appointing the following to the Police Pension Committee:
Mayor (Chair of the Committee)
Chair of the Financial management Committee
Chair of the Public Safety Committee
Treasurer (Non- voting member)
Representative From The Police Department (Who is a non - voting member)
61. On February 17, 1994, the Police Pension Committee met with representatives
of PNC Bank.
a. Gorman attended the meeting in his capacity as Borough Treasurer.
62. In a letter dated March 9, 1994 (which is after the contract was awarded to
PNC), from James P. Dunigan, Senior Vice President and Chief Investment
Officer for PNC Bank, addressed to Joseph F. Gorman, Vice President, PFPC,
Inc., 103 Bellevue Parkway, Wilmington, DE, Dunigan refers to the Investment
Strategy the Police Pension Committee discussed and asks Gorman to advise
him of any other changes the Police Pension Committee wishes to make.
Lansdowne Borough Ordinance 1 130 provides for this Investment Strategy.
Gorman, 95- 026 -C2
Page 13
63. In May of 1994 the Police Pension Fund Agreement was signed by the Borough
and PNC Bank.
a. The agreement was a PNC document which was revised by Borough
Solicitor Coll.
b. The agreement did not list specific amounts to be charged to the borough
for administering the police pension fund.
64. On June 3, 1994, Gorman, in his capacity as Borough of Lansdowne Treasurer,
directed the Federal Reserve Bank Securities Division to transfer all securities
in the Borough of Lansdowne Police Pension Fund Account Number 1300 -001-
8014, totaling $3,290,000 to PNC Bank, 3 -5 Trust Funds Account Number
110-262-1, Further Credit Account Number 350021028160.
a. Gorman also directed the transfer of $760,000 in cash from Police
Pension Fund Accounts to the account of PNC.
65. On June 15, 1994 Borough Council passed Resolution 94 -13 which, in part,
provided:
a. That the Borough Treasurer, Joseph F. Gorman, is hereby authorized to
transfer all securities currently standing in the Treasury Direct Account
Number 1300- 001 -8014 to PNC Bank Account Number 110 -262 -1
b. The Borough Treasurer is hereby authorized to sign all documents on
behalf of the Borough of Lansdowne and to take any other appropriate
action to effectuate said transfer of investments.
66. On July 5, 1994 Borough Council passed Ordinance Number 1 130 regarding the
establishment of a Police Pension Advisory Board and its powers and duties.
67. Ordinance No. 1 130 provides, in part, as follows:
Section 1. Establishing Police Pension Advisory Committee
The Police Pension Advisory Committee shall consist of five (5) voting members
who shall be the Mayor, serving ex officio, who shall preside at meetings, the
member of the Borough Council who serves as Chairman of the Police
Committee, the member of Borough Council who serves as the Chairman of the
Finance Committee, the Borough Treasurer, serving ex officio, and a
representative of the Lansdowne Borough Police Department duly elected by
and from the membership of the police collective bargaining unit.
Section 3. Powers and Duties of Advisory Committee
a. The Advisory Committee shall report to Borough Council and shall meet
regularly with the authorized representatives of the financial institution
which manages or gives investment advice concerning the assets of the
Police Pension Fund.
b. The Advisory Committee shall have the authority to make investment
decisions in consultation with the representatives of the financial
Gorman, 95- 026 -C2
Page 14
institution which manages or gives advice concerning the investments
of the Police Pension Fund; said authority shall be limited in scope to
making decisions which do not increase the risk factors associated with
investments of Pension Fund assets.
c. Whenever the Police Pension Advisory Committee is of the opinion that
the risk factors which govern the investment of assets or the investment
policy guidelines should be changed to enhance the return on the
investment of Pension Fund assets, or to conserve said assets, the
Committee shall make such recommendations in writing to Borough
Council on a timely basis.
Section 5. Meetings and Reports
a. The Police Pension Advisory Committee shall meet with the
representatives of the financial institution which manages or gives advice
on investments of the Pension Fund assets at least one time each quarter
and on additional occasions as needed. All written reports received by
the committee shall be forwarded to the Borough Manager along with any
recommendations which the committee shall direct to Borough Council.
Any reports or other documents pertaining to investments of Pension
Fund assets received by the Borough Manager shall be made available to
the Police Pension Fund Advisory Committee on a timely basis. A
quorum for the conduct of business shall consist of three members
present at a meeting.
b. The Police Pension Fund Advisory Committee shall report annually, within
sixty (60) days after the end of the Borough's fiscal year, to Borough
Council on the performance of the investments of the Police Pension
Fund assets and shall make appropriate comments and recommendations
either for the continuation of the current investment policy guidelines or
for specific changes in such policy guidelines giving the reasons upon
which said recommendations are based.
Section 6. Final Responsibility
The final responsibility and authority for making all investment decisions
concerning Police Pension Fund assets shall remain with the Borough
Council of Lansdowne.
68. At the July 5, 1994, meeting Gorman, as Treasurer, reported that $700,000
of police pension monies had been invested with PNC Bank according to the
guidelines.
a. Gorman also reported that all Treasury Notes are being transferred to
PNC Bank.
69. During 1994 and 1995 Gorman, in his capacity as Lansdowne Borough
Treasurer, corresponded with representatives of PNC Bank directing them to
make cash transfers from the PNC Fund to Fidelity Bank.
Gorman, 95- 026 -C2
Page 15
a. Gorman summarized the PNC status reports for the Police Pension
Committee at the request of the Mayor. The PNC status report was 18
pages in length and the Mayor asked Gorman to summarize the report on
one page and to make it understandable to the Police Pension Committee.
Gorman presented a sample report to the Police Pension Committee, and
with several minor changes, the report form was approved.
70. PNC issues monthly reports, which were summarized by Gorman on a "cash -
flow" basis. Gorman would indicate the cost of the investments and the market
value thereof.
71. At the November, 1993, meeting Lansdowne Borough Council considered
obtaining a Tax Anticipation Loan for 1994.
a. Gorman made a motion, which was unanimously approved that the
secretary read a proposed resolution for requesting bids for a Tax
Anticipation Loan in the amount of $450,000.
b. The resolution authorized the borough secretary to advertise for sealed
bids for the purchase of public sale of the Tax Anticipation Note in the
amount of $450,000.
c. Bids were to be received by December 15, 1993.
d. The note was to be dated January '1, 1994, and shall be due and payable
on December 31, 1994.
72. Bids were received from three banks by the Borough Manager and were
announced at the council meeting held on December 15, 1993.
Bidder Rate
a. First Fidelity 2.95%
Philadelphia National Bank 2.94%
PNC Bank 2.90
b. The bids were turned over to the Finance Committee for their
consideration and recommendation.
c. The Finance Committee was chaired by Joseph Gorman.
73. At the meeting of December 15, 1993, council, upon the recommendation of
Gorman, as Finance Committee Chairman, moved to adopt Resolution 93 -16 for
the Tax Anticipation Loan.
74. Gorman was the Finance Committee chairman for eight years. Gorman always
made the motion to accept to the low bid of the bank that bid on the Tax
Anticipation Note for each of the eight years he was Finance Committee
chairman. In 1988, 1989 and 1990, Gorman was not employed by PNC Bank
nor its predecessors at the time the bids for the next year were made, and the
following banks were awarded the Tax Anticipation Note:
December 1988 (for 1989): Provident (now PNC) Bank
December 1989 (for 1990): Provident (now PNC) Bank
Gorman, 95- 026 -C2
Page 16
December 1990 (for 1991): Philadelphia National (now
Corestates) Bank
75. Borough Council took the following action in reference to Resolution 93 -16 on
December 15, 1993:
Resolutions
Mr. Gorman moved that the Secretary summarize a proposed Resolution
authorizing and awarding the 1994 Tax Anticipation Loan. The motion was
seconded by Mr. Smith and carried unanimously.
Resolution Number 93 -16
Authorizing the issuance of Tax and Revenue Anticipation Notes, Series 1994
with the terms set forth in the foregoing and attached certificate and
transmittal; approving a form of note; authorizing designated officers to execute
and deliver the notes; authorizing and directing the filing of proceedings with the
Department of Community Affairs; providing for the payment and security of
the notes; appointing a paying agent, registrar and sinking fund depository;
creating a sinking fund; making certain federal income tax covenants in respect
of the notes; accepting the proposal of PNC Bank, National Association, for the
purchase of notes; and repealing inconsistent resolutions.
Mr. Gorman moved that this Resolution be adopted as summarized. The motion
was seconded by Mrs. Hennessy. On roll call Mr. Bochanski, Mrs. Hennessy,
Mr. Campuzano, Mr. Smith, Mrs. Merlino, and Mr. Alpignini vote "Aye ". Mr.
Gorman abstained as he is an employee of the PNC Bank.
76. Gorman filed a Conflict of Interest Memorandum advising that he was an
e6 ployee of PNC Bank and that he would abstain from voting on Resolution 93-
77. At the council meeting held on January 4, 1994, Gorman, in his capacity as
Borough Treasurer, gave a report on the Tax Anticipation Loan.
a. Gorman reported that funds were received.
b. Gorman reported that after checking with Corestates, Fidelity and PNC,
the funds were placed with PNC, as they had the highest interest rate.
78. In May, 1994, tax revenues received by Lansdowne Borough were deposited
into the Borough's accounts at First Fidelity Bank.
a. Gorman moved $ 1,000,000 of Certificates of Deposit from First Fidelity
to three mutual fund accounts with PNC Bank.
b. Gorman was given authorization by Council to transfer funds at his
discretion to places pre- approved by Council.
79. In November, 1994, Borough Council considered a Tax Anticipation Note for
1995.
Gorman, 95- 026 -C2
Page 17
a. Gorman reported at the November 1, 1994, meeting that interest rates
are predicted to continue to rise which will impact the rate of the 1995
Note.
80. On December 21, 1994, council noted that bids were received for the 1995 Tax
Anticipation Note.
a.
Bidder Rate
Corestates - Philadelphia National
Corestates - Philadelphia National
First Fidelity
Mellon Bank
PNC Bank
b. The bids were turned over
recommendation.
5.25%
5.09% (if mature by
06/30/95)
5.28%
5.38%
4.95%
to the Finance Committee for review and
81. On December 21, 1994, council passed Resolution 94 -27 appointing the low
bid of PNC Bank for the 1995 Tax Anticipation Note.
a. Mrs. Hennessy moved that this Resolution be adopted as summarized.
The motion was seconded by Ms. Juliano. Mr. Campuzano asked
Solicitor Coll if there was any conflict of interest since Mr. Gorman was
an employee of PNC Bank. Mr. Coll said there was none as Mr. Gorman
has no vote on the matter. On roll call Mrs. Hennessy, Mr. DuFrayne,
Ms. Juliano, Mr. Campuzano, Mr. Smith, Mrs. Merlino & President
Bochanski voted "Aye."
82. Resolution 94 -27, provided as follows:
Resolution 94 -27:
Authorizing the issuance of Tax and Revenue Anticipation Notes Series 1995
with the terms set forth in the foregoing and attached certificate and
transmittal; approving a form of note; authorizing designated officers to
execute and deliver the notes; authorizing and directing the filing of
proceedings with the Department of Community Affairs; providing for the
payment and security of the notes; appointing a paying agent, registrar and
sinking fund depository; creating a sinking fund; making certain federal income
to [sic] covenants in respect of the notes; accepting the proposal of PNC Bank,
National Association for the Purchase of the notes; and repealing .. .
83. Gorman, in his capacity as Borough Treasurer, had the responsibility to oversee
the receipt, deposit and disbursement of the Tax Anticipation Notes.
84. PNC Bank earned approximately $11,000 to $ 14,000 in 1994 as the result of
being named Police Pension Fund managers, and approximately $24,000 to
$28,000 in 1995.
Gorman, 95- 026 -C2
Page 18
a. PNC earned $112,000,000 (per its annual report) in mutual fund income
in 1994. PNC earned approximately $154,000,000 (per its annual
report) in mutual fund income in 1995.
85. PNC earned interest income as a result of the tax anticipation notes as follows:
$13,000 in 1994
$22,000 in 1995
III. DISCUSSION:
At all times relevant to this matter, the Respondent, Joseph Gorman, hereinafter
Gorman, has been a public official subject to the provisions of the Public Official and
Employee Ethics Law ( "Ethics Law "), Act 9 of 1989, Pamphlet Law 26, 65 P.S. §401,
leg..
The issue before us is whether Gorman, as a councilman for Lansdowne
Borough, Delaware County, and the Lansdowne Borough Treasurer, violated Section
3(a) of Act 9 of 1989 regarding the allegation that he used the authority of his office
to obtain a private pecuniary benefit for himself and /or a business with which he was
associated by participating in discussions, actions,'and decisions of the Borough in the
Borough's efforts to award a contract to administer the Borough Police Pension Fund;
when he participated in his official capacity in the administration of said contract;
when, as borough treasurer, he participated in the process to obtain a tax anticipation
loan; and when he used confidential information received through holding public office
for the private pecuniary benefit of himself and /or a business with which he was
associated.
Pursuant to Section 3(a) of the Ethics Law quoted in Section I above, a public
official /public employee is prohibited from engaging in conduct that constitutes a
conflict of interest. The term "conflict of interest" is defined under Act 9 of 1989 as
set forth in Section I above.
Having noted the issues and applicable law, we shall now summarize the facts.
The events which are relevant to this case occurred over a span of time during
which Gorman served in various Borough positions. From January 5, 1988 to
December 31, 1993, Gorman served as a Lansdowne Borough Council Member and
as Chairman of the Council Finance Committee. Gorman also served as a Member of
the Police and Fire Committee from January 6, 1992 until his term as a Council
Member ended on December 31, 1993. On January 3, 1994 — just a few days after
Gorman's term of office as a Council Member had expired — Gorman was appointed
by Borough Council to be the Lansdowne Borough Treasurer. Four weeks later, on
January 31,1994, Gorman was also appointed by Borough Council to the Police
Pension Committee.
In his private capacity, Gorman has been employed as a Vice President with
"PFPC" since April of 1991. PFPC is a subsidiary of PNC Bank of Delaware. PNC
Bank of Delaware is itself a subsidiary of PNC Bank of Pittsburgh. PNC Bank is the
successor to Provident Bank.
Gorman, 95- 026 -C2
Page 19
This case involves two separate matters: a contract awarded by the Borough
to PNC Bank for the management of the Borough's multi - million dollar Police Pension
Fund, and a tax anticipation loan obtained by the Borough through PNC Bank.
With regard to the Borough's Police Pension Fund, during the entire time that
Gorman served as a Borough Council Member, the Borough Treasurer, who at that
time was Merlyn Kirkwood, administered the Fund. However, during Gorman's final
year as a Council Member, at the suggestion of several members of the police
department, the decision was made to allow investment managers to make
presentations to the Borough Council regarding the Police Pension Fund.
Borough Council directed that joint committees consisting of members of the
Finance Committee, the Police and Fire Committee, members of the Police Department,
and the Mayor, assisted by the Solicitor, review the possibility of having an outside
company administer the fund. Gorman participated as a Member of Council and as a
Member of the Joint Committee in the review process which ultimately led to the
selection of PNC Bank as the Police Pension Fund Manager.
There were no formal advertised requests for proposals issued by the Borough.
Various investment companies were contacted by members of the joint committee and
the officers from the Borough Police Department 'and were asked to submit proposals
for administering the fund. Gorman directed the Borough Manager to contact the
Managers of the PNC Bank and the First Fidelity Bank at their branch offices in the
Borough and inform them that the Borough was seeking an outside company to handle
the Fund.
Nine firms presented proposals to the joint committee for consideration.
From May of 1993 to December of 1993, Gorman, as Chairman of the Finance
Committee, gave verbal reports to Borough Council at the Borough's monthly meetings
as to the activities of the joint committee in its search for an investment company and
specifically as to the presentations made by the nine firms. At the September 15,
1993 meeting, where Gorman reported that the Committees had heard nine
presentations and would begin the process of paring down the proposals to a
manageable number, the Council President appointed a "Police Pension Committee"
consisting of five Council Members including Gorman. On October 4, 1993, Gorman
reported that the Police Pension Committee had met, had made up "parameters," and
had cut the number of proposals to four. Gorman indicated that the four would be
asked to meet with the Committee again to assess the full costs. Gorman was to put
together a new proposal form for the bidders to complete so that the Committees
could make a comparison.
Because of his background in investment and banking, Gorman was assigned
to interpret the proposals and to put them into terminology that the other members of
the Joint Committee could understand.
Gorman felt that a blend of performance, experience, and fees should be
considered in choosing an investment company. He prepared a chart, at his Borough
office, listing the names, strategy, experience with municipalities, and fees of the
various companies submitting proposals. The chart was typed by Gorman's secretary
at PFPC. The chart identified eight of the nine management firms, including PNC Bank.
Gorman, 95- 026 -C2
Page 20
Gorman participated in the Joint Committee's discussions of the merits of each
presentation and the decision to narrow the number of the applicants down to four.
Gorman recommended four companies including PNC Bank. One of the firms which
Gorman recommended and another that he would have recommended were excluded
from consideration based upon the views of others.
The final four companies were asked to make presentations to the Joint
Committee, answering a list of questions provided by the Committee. The Mayor
asked Gorman to prepare several questions that would help laymen understand the
financial jargon.
Gorman spoke privately with representatives of each of the presenters, including
PNC, on various occasions. All of the presenters would call at various times seeking
information. Information regarding various aspects of the proposals that had been
submitted were discussed by Gorman and the respective presenters prior to their
presentations.
Gorman specifically discussed PNC's proposal with its presenter, Craig Aronhalt,
during the period from August 10, 1993 through the second presentation by PNC to
the Joint Committee on November 10, 1993. None of the information transmitted by
Gorman to Aronhalt was confidential in nature:- Aronhalt's records indicate that
Gorman advised him that fees were the big issues, that Gorman had to abstain from
voting, that the Committee was down to five members, and that there would be a
second presentation. Gorman recommended to Aronhalt specifics to be included in
PNC's proposal. Gorman advised Aronhalt what to stress and when to make PNC's
presentation. Gorman counseled the PNC representatives as to what approaches to
take. On or about November 2, 1993, which was shortly before the second
presentation was to be made, Gorman informed Aronhalt that he would need to stress
client service and flexibility in PNC's presentation and cite examples. Aronhalt
discussed the short list of presentations with Gorman on or about November 3, 1993.
On or about November 5, 1993, Gorman authored the letter advising PNC of its
presentation date and time.
The Joint Committee met with the final four companies on November 10, 1993.
Gorman participated in the Joint Committee's meetings with the final four companies
and he took an active role in the discussions. Gorman prepared a handwritten
summary of the companies' presentations and submitted the comparison to the other
Committee members for their review. The chart listed the following qualifications of
the four firms: experience; service charge to pay pensioners; liquidation of securities;
investment; after fee return percent; and annual fee. The chart also listed an expense
ratio for each firm. Per the chart, PNC's expense ratio was the lowest of the four, and
was indicated as .85 %. However, on November 10, 1993, after the PNC presentation
had been made, Gorman observed that the fees used in PNC's proposal were incorrect
and that Aronhalt had used an outdated prospectus. The correct expense ratio would
have been .73 %, which was even lower than the .85% that had been noted for PNC.
Gorman asked Aronhalt to provide the correct expense ratio and subsequently,
Aronhalt did so.
The Joint Committee decided to recommend to the Borough Council the hiring
of PNC as the Borough's investment company for the Police Pension Fund. In
December, 1993, the Joint Committee met with other Members of Borough Council
at the business meeting and discussed the merits of the various proposals. Gorman
participated in the discussion with other members of Borough Council. On December
Gorman, 95- 026 -C2
Page 21
15, 1993, Borough Council voted 6 -0 to approve Resolution 93 -17 which authorized
the selection of PNC Bank, N.A., as Pension Fund Manager. Gorman submitted a
conflict of interest memorandum bearing the same date which stated that he was an
employee of PNC Bank and would abstain from the vote on Resolution 93 -17.
The PNC Bank funds were determined to be the best of all investment options
in the opinion of the borough committee with respect to the fees charged for
investments and the performance history of the mutual funds. The investigation
conducted by the Ethics Commission has found no evidence to suggest that the
determination by the Borough Council was not accurate.
Although Gorman did not vote on the final selection of PNC as noted above, he
did participate in the review and consideration of the PNC proposal. Gorman's
participation in the review of the PNC proposal and the other proposals was at the
request of the Mayor and Borough Council, who knew of Gorman's position with PNC
Bank. Neither the proposal of PNC Bank nor any of the other proposals to the Borough
were based upon confidential information conveyed by Gorman to the mutual fund
officials. Furthermore, the parties have stipulated that the process of awarding the
management of the Police Pension Fund assets was open and public as required by the
Ethics Law.
As noted above, on December 31, 1993, Gorman's term as a Council Member
expired. Shortly thereafter, Gorman was appointed by Borough Council to be the new
Borough Treasurer and a non - voting Member of the Police Pension Committee.
As Borough Treasurer, Gorman's duties included supervising Borough funds and
investments, handling deposits and transfers of funds from various accounts including
the Police Pension Fund, and advising the Manager and Council on all fiscal matters.
On February 17, 1994, Borough Treasurer Gorman attended a meeting of the
Police Pension Committee at which the Committee met with representatives of PNC
Bank. Subsequently, the Senior Vice President and Chief Investment Officer for PNC
Bank wrote a letter addressed to "Joseph F. Gorman, Vice President, PFPC, Inc."
asking Gorman to advise him of any other changes the Police Pension Committee
wished to make to the "investment strategy."
The Police Pension Fund Agreement was signed by the Borough and PNC Bank
in May of 1994. The agreement did not list specific amounts to be charged to the
Borough for administering the Police Pension Fund.
Thereafter, in June of 1994, Gorman as Borough Treasurer directed the transfer
of all securities in the prior pension fund account, totaling $3,290,000.00, to a PNC
Bank account and directed the transfer of $760,000 in cash from Police Pension Fund
accounts to the account of PNC. Subsequently, the Borough Council passed a
resolution which authorized the transfer of the securities from the old account to the
PNC account and which authorized the Treasurer (Gorman) to sign all documents on
behalf of the Borough and to take any other appropriate action to effectuate the said
transfer of investments.
At the July 5, 1994 meeting, Gorman as Treasurer reported on the transfers of
Police Pension monies and treasury notes to PNC Bank, and Borough Council passed
an ordinance regarding the establishment of a Police Pension Advisory Board. The
Gorman, 95- 026 -C2
Page 22
Ordinance designated the Borough Treasurer, serving ex officio, as one of the five
voting members of the Police Pension Advisory Committee.
During 1994 and 1995, Gorman as Borough Treasurer corresponded with
representatives of PNC Bank directing them to make cash transfers from the PNC fund
to Fidelity Bank.
At the request of the Mayor, Gorman summarized the PNC status reports for the
Police Pension Committee.
PNC Bank earned approximately $11,000 to $14,000 in 1994 and
approximately $24,000 to $28,000 in 1995, as the result of being named Police
Pension Fund Manager for Lansdowne Borough. Gorman did not personally obtain any
financial benefit as a result of the placement of the Police Pension Fund assets for
investment with PNC.
The following facts pertain to tax anticipation loans obtained by the Borough
through PNC Bank.
At the November, 1993 meeting of the Borough Council, while Gorman was still
a Borough Council Member, Council considered obtaining a tax anticipation loan for
1994. Gorman made a motion, which was unanimously approved, that the Secretary
read a proposed resolution for requesting bids for a tax anticipation loan in the amount
of $450,000. Bids were to be received by December 15, 1993.
Bids were received from three banks, including PNC Bank. PNC Bank's rate was
the lowest of the three. The bids were turned over to the Finance Committee, chaired
by Joseph Gorman, for its consideration and recommendation.
Historically, during Gorman's 8 years as Chairman of the Finance Committee,
Gorman had always made the motion to accept the low bid on the tax anticipation
note for each year. On December 15, 1993, Gorman took the following actions: (1)
Gorman moved that the Secretary summarize a proposed resolution authorizing and
awarding the 1994 tax anticipation loan, which motion carried unanimously; and (2)
Gorman moved that Resolution 93 -16 be adopted as summarized. Resolution 93 -16,
inter alia, accepted the proposal of PNC Bank, N.A. for the purchase of notes. Council
voted to adopt Resolution 93 -16 for the tax anticipation loan. Gorman abstained from
the vote to adopt the Resolution and filed a conflict of interest memorandum advising
that he was an employee of PNC Bank and that he would so abstain.
As of January 3, 1994, Gorman was no longer a Borough Council Member but
was the new Borough Treasurer. Gorman, in his capacity as Borough Treasurer, had
the responsibility to oversee the receipt, deposit, and disbursement of the tax
anticipation notes. At the Borough Council meeting on January 4, 1994, Gorman as
Treasurer reported that the funds had been received and that after checking with
Corestates, Fidelity, and PNC, the funds were placed with PNC as it had the highest
interest rate.
In May, 1994, tax revenues received by the Borough were deposited into the
Borough's accounts at First Fidelity Bank. Gorman moved one million dollars of
certificates of deposit from First Fidelity to three mutual fund accounts with PNC Bank.
Gorman was given authorization by Council to transfer funds at his discretion to places
pre- approved by Council.
Gorman, 95- 026 -C2
Page 23
PNC Bank earned interest income in the amount of $13,000 as a result of the
tax anticipation note in 1994.
In November, 1994, Borough Council again considered a tax anticipation note
for 1995. Gorman reported at the November 1, 1994 meeting that interest rates were
predicted to continue to rise which would impact upon the rate of the 1995 note.
On December 21, 1994, Council noted that bids had been received for the 1995
tax anticipation note. The lowest rate was from PNC Bank. The bids were turned
over to the Finance Committee for review and recommendation.
On December 21, 1994, Council passed Resolution 94 -27 which, inter alia,
accepted the proposal of PNC Bank, N.A. for the purchase of the notes. One Council
Member asked the Solicitor if there was any conflict of interest since Gorman was an
employee of PNC Bank. The Solicitor stated that there was none as Gorman had no
vote on the matter.
PNC earned interest income in the amount of $22,000 as a result of the tax
anticipation note in 1995.
Having summarized the above relevant fact, we must now determine whether
the actions of Gorman violated Section 3(a) of Act 9 of 1989.
The elements for a Section 3(a) violation are the use of the authority of the
public position or confidential information received by being in that position, for the
private pecuniary benefit of the public official /public employee himself, a member of
his immediate family, or a business with which he or a member of his immediate family
is associated.
The parties have stipulated that Gorman did not personally receive any private
pecuniary benefit in this case. Thus, any violations of Section 3(a) in this case must
be based upon a private pecuniary benefit to PNC Bank as a business with which
Gorman is associated. PFPC is clearly a business with which Gorman is associated
(See, Anaelini, Order No. 677 at 18). Yet, Gorman has repeatedly represented that
he is an employee of PNC Bank (see, Findings 49, 52, 56, 75, 76, and 81), and the
negotiated Consent Agreement reflects the consensus of the parties that PNC Bank
is a business with which Gorman is associated. Accordingly, based upon the facts
before us and the Consent Agreement, we find that PNC Bank is a business with
which Gorman is associated.
We find that a Section 3(a) violation has been established as to Gorman's
participation in his official borough capacity in the process utilized by the Borough
regarding the award of a contract to PNC Bank to administer the Borough's Police
Pension Fund. Although Gorman abstained from the actual vote to select PNC Bank
as the Police Pension Fund Manager, the use of the authority of office is not limited
to mere voting, but "extends to all of the tasks needed to perform the functions of a
given position." Juliante, Order No. 809 at 16. Gorman repeatedly used the authority
of his office as a Borough Council Member in the process utilized by the Borough
regarding the award of the contract to administer the Borough's Police Pension Fund.
Gorman also committed a technical violation of Section 3(a) when he
participated as a Borough official — the Borough Treasurer — in the administration of
Gorman, 95- 026 -C2
Page 24
the aforesaid contract. Again, Gorman used the authority of his public position
extensively and repeatedly as to this matter.
The private pecuniary benefit to PNC Bank was substantial. As noted above,
PNC. Bank earned approximately $11,000 to $ 14,000 in 1994, and approximately
$24,000 to $28,000 in 1995, as the result of being named Police Pension Fund
Manager.
Gorman committed a technical violation of Section 3(a) when he participated as
a Borough official in the official process for a tax anticipation loan from PNC Bank for
the Borough. As Borough Treasurer, Gorman used the authority of his office in
overseeing the receipt, deposit, and disbursement of the tax anticipation notes. The
private pecuniary benefit to PNC Bank from handling the tax anticipation loan was in
the nature of earned interest income and was again substantial, as set forth in Finding
85.
Gorman did not violate Section 3(a) in relation to the use of confidential
information for the private pecuniary benefit of a business with which he was
associated in that the parties have stipulated that no such information was used.
The Stipulation of Findings and Consent Agreement which the parties have filed
sets forth a proposed resolution of the allegation. We believe that the Consent
Agreement is the proper disposition for this case based upon our review as reflected
in the above analysis and the totality of the facts and circumstances. We note that
Joseph Gorman asserts that his conduct was exclusively motivated by his desire to
serve the interest of Lansdowne and fulfill his fiduciary duty as an elected member of
borough council. The investigation conducted by the Ethics Commission has found no
evidence to contradict this assertion. Furthermore, Joseph Gorman asserts that he
was not motivated by an intention to confer any financial benefit upon PNC Bank to
the detriment of the Borough of Lansdowne. The investigation conducted by the
Ethics Commission has found no evidence to contradict this assertion.
Based upon all of the above, the proposed Consent Agreement is approved. The
parties have negotiated an agreement whereby Gorman shall make payment to the
Borough of Lansdowne (but forwarded to the State Ethics Commission) in the total
amount of $10,000, to be paid over a period of twenty -four months in equal
installments of $416 and with a final payment of $432. Payments shall be made on
the first day of each month, commencing next month, so that the first payment is due
on or before April 1, 1997.
Conditioned upon Gorman's compliance with the above, we shall take no further
action in this matter.
Gorman, 95- 026 -C2
Page 25
IV. CONCLUSIONS OF LAW:
1. Joseph Gorman ( "Gorman "), as a Council Member for Lansdowne Borough,
Delaware County, and as the Lansdowne Borough Treasurer, has at all times
relevant to this case been a public official subject to the provisions of Act 9 of
1989.
2. Gorman violated Section 3(a) of Act 9 of 1989 when he participated in his
official borough capacity in the process utilized by the Borough of Lansdowne
regarding the award of a contract to administer the Borough's Police Pension
Fund to PNC Bank, a business with which he was associated.
3. Gorman committed a technical violation of Section 3(a) of Act 9 of 1989 when
he participated as a borough official in the administration of the PNC Bank
contract to administer the Borough's Police Pension Fund.
4. Gorman committed a technical violation of Section 3(a) of Act 9 of 1989 when
he participated in the official process for a tax anticipation loan through PNC
Bank, a business with which he was associated.
5. Gorman did not violate Section 3(a) of the'€thics Law in relation to the use of
confidential information for the private pecuniary benefit of a business with
which he was associated in that no such information was used.
In Re: Joseph Gorman
ORDER NO. 1041
File Docket: 95- 026 -C2
Date Decided: 2/20/97
Date Mailed: 3/7/97
1. Joseph Gorman ( "Gorman "), as a public official of Lansdowne Borough,
Delaware County, violated Section 3(a) of Act 9 of 1989 when he participated
in his official borough capacity in the process utilized by the Borough of
Lansdowne regarding the award of a contract to administer the Borough's Police
Pension Fund to PNC Bank, a business with which he was associated.
2. Gorman committed a technical violation of Section 3(a) of Act 9 of 1989 when
he participated as a borough official in the administration of the PNC Bank
contract to administer the Borough's Police Pension Fund.
3. Gorman committed a technical violation of Section 3(a) of Act 9 of 1989 when
he participated in the official process for a tax anticipation loan through PNC
Bank, a business with which he was associated.
4. Gorman did not violate Section 3(a) of the Ethics Law in relation to the use of
confidential information for the private pecuniary benefit of a business with
which he was associated in that no such information was used.
5. Per the negotiated agreement of the parties, Gorman is directed to make
payment to the Borough of Lansdowne through this Commission in the total
amount of $10,000. Said payment is to be made over a period of twenty -four
(24) months in equal installments of $416 and with a final payment of $432.
Payments are to be made on or before the first of each month, commencing
next month, so that the first payment is due on or before April 1, 1997.
a. Compliance with the foregoing will result in the closing of this case with
no further action.
b. Failure to comply will result in the institution of an order enforcement
action.
BY THE COMMISSION,
66 aL4A_J
DANEEN E. REESE, CHAIR