Loading...
HomeMy WebLinkAbout802 GilchristIn re: Calvin Gilchrist STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 : File Docket: 85 -162 -C Date Decided: July 12, 1991 . Date Mailed: T„1y 16, lgg Before: Robert W. Brown, Chair Dennis C. Harrington, Vice Chair James M. Howley Daneen E. Reese Roy W. Wilt Austin M. Lee The State Ethics Commission received a complaint regarding a possible violation of the State Ethics Act, No. 170 of 1978, 65 P.S. 401 et. seq. Written notice, of the specific allegation(s) was served at the commencement of the investigation. A Findings Report was issued and served, upon completion of the investigation, which constituted the Complaint by the Investigation Division. An Answer was filed and a hearing was held. The record is complete. This adjudication of the Commission is hereby issued which sets forth the individual Allegations, Findings of Fact, Discussion, Conclusions of Law and Order. This adjudication is final and will be made available as a public document fifteen days after issuance. However, reconsideration may be requested which will defer public release of this adjudication pending actin on the request by the Commission. A request for reconsideration, however, does not affect the finality of this adjudication. A reconsideration request must be received at this Commission within fifteen days of issuance and must include a detailed explanation of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code §2.38. The files in this case will remain confidential in accordance with Section 8(a) of Act 170 of 1978 during the fifteen day period and no one unless the right to challenge this Order is waived, may violate confidentiality does not preclude discussing this case with an attorney at law. Any person who violates confidentiality of the Ethics Act 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). I. ALLEGATION: That you, Councilman of the City of Harrisburg, violated Section 3(a) of the Ethics Act (Act 170 of 1978) which prohibits a public employee's or public official's use of office or confidential information gained through that office to obtain financial gain; and Section 3(b) which prohibits a public employee, or public official or candidate from offering, soliciting or accepting anything of value based on an understanding that the vote, official action or judgment of the public official, public employee or candidate will be influenced by accepting campaign contributions from firms associated with the underwriting of multi - million dollar bond issues in return for your vote and support of said projects: II. FINDINGS: ADJUDICATION Section 3. Restricted Activities. (a) No public official or public employee shall use his public office or any confidential information received through his holding public office to obtain financial gain other than compensation provided by law for himself, a member of his immediate family, or a business with which he is associated. 65 P.S. §403(a). Section 3(b) of the Ethics Act provides: (b) No person shall offer or give to a public official or public employee or candidate for public office or a member of his immediate family or a business with which he is associated, and no public official or public employee or candidate for public office shall solicit or accept, anything of value, including a gift, loan, political contribution, reward, or promise of future employment based on any understanding that the vote, official action, or judgment of the public official or public employee or candidate for public office would be influenced thereby. 65 P.S. S403(b). 1. Calvin Gilchrist served as Councilman for the city of Harrisburg, Dauphin County, Pennsylvania from January 1982 until December 1989. 2. October 1985, the City of Harrisburg determined to undertake the Dock Street Dam Project which consists of the following: a. The planning, design, and construction of a new movable crest dam and 34.4 MW hydroelectric generating transforming and transmission facility. b. Capital improvements including the City Island Infrastructure; the lower river front steps; storm sewer improvements; preservation of the river front development of a lake and recreational facilities; development of a secondary water source; and creation of soil erosion controls on both sides of the Susquehanna River. c. The funding of a debt service reserve fund; a reasonable working capital fund; and a reserve and replacement fund. d. The funding of interest during construction and for six months thereafter. e. The payment of the costs of issuance of the bonds and certain expenses incurred by the City with respect to the Project. f. Revenue bonds were initially issued in the amount of $215 million aggregate to support the Project. Subsequently, two re- issues of these bonds were approved by City Council. g. The bonds were to be used to finance the design, engineering and construction of a movable crest dam and hydroelectric generating and conveyance facility and related infrastructure improvement to the waterfront and to pay the costs of the issuance of the bonds and other project expenses. 3. Bill No. 59 of 1985 (Ordinance No. 32 of 1985) was passed by Harrisburg City Council on October 29, 1985. The ordinance authorized the issuance of $215 million revenue bonds to finance the design, engineering and construction of a movable crest dam and hydroelectric generating and conveyance facility and related infrastructure improvement to the riverfront; to pay costs of the issuance of the bonds and certain expenses incurred by the city related to the project. a. The Ordinance was passed by a 5 to 2 vote. Voting to pass the ordinance were Council Members Braxton, DeGarcia, Gilchrist, Hodgkiss and Moore; opposing were Council Members Gohl and Robinson. b. The bill was signed by Mayor Stephen Reed on October 31, 1985. c. Section No. 6 of the ordinance appointed the investment banking firms of Russell, Rea & Zappala; Arthurs, LeStrange & Short; Goldman, Sachs & Co.; and Prescott, Ball & Turben as the initial remarketing agent. 1) The section also authorized the city to appoint additional or substitute remarketing agents. 4. A Remarketing Agreement dated October 29, 1985 was entered into by the City of Harrisburg, and the investment banking firms of Russell, Rea & Zappala; Arthurs, LeStrange & Short; Goldman, Sachs & Co.; and Prescott, Ball & Turben. a. Section 5 of the agreement outlines the fees to be paid to the investment banking firm. 1) A fee of 1.8% of the bonds outstanding on November 15, 1988. 2) An annual fee of 1/8 of 1% of the principal amount of the bonds, including bonds purchased by the trustee, outstanding on November 15 of each year during the term of the remarketing agreement. 5. Bill No. 28 of 1986 (Ordinance No. 15 of 1986) was passed by Harrisburg City Council on July 10, 1986. The bill authorized the retiring of the $215 million dollar bond issue approved by Ordinance. a. This bill was approved unanimously upon motion by Gilchrist, and seconded by Mitchell. Moore was present and participated in the vote. b. The bill was signed by Mayor Stephen Reed on July 11, 1986. 6. Bill No. 29 of 1986 (Ordinance No. 16 of 1986) was passed by Harrisburg City Council on July 10, 1986. THe bill authorized the issuance of $394,295,000 amount of revenue bonds. a. The bill was passed by unanimous vote upon motion by Reizdan Moore, and seconded by 0. Frank DeGarcia. b. The bill was signed by Mayor Stephen Reed on July 11, 1986. c. The purpose of the bond issue was to provide funds to: 1) Finance revenue producing projects for the City, including the design, engineering and construction of a hydroelectric generating facility. 2) Fund a Debt Service Reserve Fund, Working Capital Reserve Fund and Capitalize Interest Fund. 3) Pay the costs of the issuance of the bonds and certain expenses incurred by the City related to the project. d. The proposals of Commonwealth Securities & Investments, Inc.; Russell, Rea & Zappala; Arthurs, LeStrange & Co.; Goldman, Sachs & Co.; and Pryor, Govan, Counts & Co. were accepted by the City Council to market the bonds at a private, negotiated sale. e. The Ordinance authorized the mayor, controller, treasurer, clerk or other proper officials of the City of Harrisburg to pay or cause to be paid from the proceeds of the bonds or otherwise, all costs and expenses incurred by the City in connection with the issuance of the bonds. 7. Bill No. 29 of 1988 (Ordinance No. 17 of 1988) was passed on September 28, 1988 by Harrisburg City Council. The bill amended Ordinance 16 -1986, Section 5.09 to extend the date by which conditions set forth in Section 9.09B must be satisfied. a. The bill was approved by a 5 to 1 vote upon motion by Moore, seconded by Gilchrist. b. Section 9.09B of Ordinance 16 -1986 requires that one of the conditions to be satisfied before disbursement of the monies from Restricted Escrow Accounts is that all necessary federal, state and local environmental approvals for the dam project be obtained. c. Section 5.09 of Ordinance 16 -1983 requires the City to present a resolution, and the Mayor to present a certificate of approval to the trustee that conditions in 9.09B have been met. This section also requires a mandatory purchase of the bonds on November 15, 1988. d. The Ordinance required that by October 5, 1988. e. The City could not meet this this be accomplished deadline, because Pennsylvania Department of Environmental Resources denied the City's requests for certification under Section 401 of the Federal Water Pollution Control Act. 8. Harrisburg City Council discussed the Dock Street Dam Project at various council meetings. Calvin Gilchrist, as a member of Council, participated in those discussions and decisions: a. OCTOBER 8, 1985 The first reading of BILL NO. 59 -1985 was moved by 0. Frank DeGarcia and seconded by Reizdan B. Moore. BILL NO. 59 -1985 entitled: Authorizing and directing the issuance of $215 million aggregate principal amount of revenue bonds, to be known as Electric Revenue Bonds (City of Harrisburg Hydroelectric Project); series of 1985, to finance the design, engineering and construction of a movable crest dam and hydroelectric generating and conveyance facility and related infrastructure improvements to the river front; to pay the costs of the issuance of the bonds and certain expenses incurred by the City related to the Project. The consensus of Council was that this matter be carefully reviewed and be subject to public hearings for community input. b. OCTOBER 29, 1985 Mr. Moore reported on the Administration Committee meeting of October 28, 1985: - Dock Street Dam Hydroelectric Project (Bill No. 59 -1985) - State Pension Recovery Program (Resolution No. 242 -1985) At this meeting, Mr. Moore acknowledged receipt of correspondence from the Mayor indicating his intended use of the bond proceeds from the Dock Street Dam Project. BILL NO. 59 -1985 (as amended) was moved by 0. Frank DeGarcia and Reizdan B. Moore and seconded by Dolores Hodgkiss, Mrs. Braxton and Mr. Gilchrist for final passage. The bill established: An ordinance authorizing and directing the issuance of $215 million aggregate principal amount of revenue bonds, to be know as Electric Revenue Bonds (City of Harrisburg Hydroelectric Project), Series of 1985, to finance the design, engineering and construction of a movable crest dam and hydroelectric generating and conveyance facility and related infrastructure improvement to the river front; to pay the . costs of the issuance of the bonds and certain expenses incurred by the city related to the project. A motion to amend BILL NO. 59 -1985 (as amended) was moved by Earl F. Gohl, Jr. and seconded by Dolores M. Hodgkiss and Reizdan B. Moore to: - include a provision for an Electric Revenue Bond Committee to review the monthly progress reports of the Independent Consultant. The committee will be comprised of three members appointed by the Mayor, three members appointed by City Council who will serve with the Business Administrator of the City. This would provide for public comment and input during the pre- construction and construction period. Motion carried by unanimous vote. The Council received a presentation from the financial team and underwriters on the market for this bond, and the terms and conditions of the bond. Mr. Moore recognized Mrs. Hodgkiss for a motion to waive the Rules to introduce Resolution No. 244- 1985, seconded by Mr. DeGarcia. The motion carried by a 6 to 1 vote with Councilman Robinson voting no. Motion by Moore, seconded by Hodgkiss, to pass RESOLUTION NO. 244 -1985: Directing the issuance of $215 million aggregate principal amount of revenue bonds, to be known as Electric Revenue Bonds (City of Harrisburg Hydroelectric Project) series of 1985, to finance the design, engineering and construction of a movable crest dam and hydroelectric generating and conveyance Motion carried by a 6 to 1 vote. Voting affirmatively were Mrs. Braxton, Mr. DeGarcia, Mr. Gilchrist, Mr. Gohl, Ms. Hodgkiss and Mr. Moore. Voting no was Councilman Robinson. Prior to the vote, Mr. Moore explained that the Resolution accepts the proposal of Russell, Rea and Zappala for the investment of proceeds from the electric revenue bond issue. It is a component of the Dock Street Hydroelectric Dam Project as adopted this evening by the Council (BILL NO. 59 -1985, as amended). c. JULY 1, 1986 facility and related infrastructure improvement to the river front; to pay the costs of the issuance of the bonds and certain expenses incurred by the City related to the Project. BILL NO. 28 -1986 was moved by Calvin E. Gilchrist for passage and seconded by Stanley H. Mitchell. The bill authorized: Amending the terms and of Ordinance No. 32- 1985 and providing that the amendment of such prior ordinance shall be for the purpose of retiring all of the issued and outstanding $215,000,000.00 bond floated 6 months earlier in order to refinance the bond issue. Chairman DeGarcia recognized a motion to suspend the rules in order to receive a presentation from the bond counsel and bankers proposing the bond issue. William Balaban, Bond Counsel for the City, stated that the $25,000,000.00 bond issue was ready to be floated. He went on to say that the City must decide about the bond issue by November 15, 1988. At that time, the Project financing would be in place and the advance capital would be put toward immediate expenses. If the decision by all parties involved was not to go ahead with the Project, the bonds would be recalled. Mr. Balaban stated that on November 1, 1988, Main Hurdman, Auditing Firm, would certify that the money to fund the Hydroelectric plant was available. He further related that this BILL NO. 28 -1986 was identical to the earlier Bill which established the $215,000,000.00 bond issue, and the all affirmative action clauses are in the measure. BILL NO. 29 -1986 was moved by Calvin Gilchrist for passage and seconded by Stanley Mitchell. The bill further directed: Authorize and direct the issuance of 329,840,000 aggregate principal amount of revenue bonds, to be known as electric revenue bonds (City of Harrisburg Hydroelectric project), fixed /adjustable rate series of 1986; determining that such bonds shall be issued for the purpose of providing funds to finance various revenue producing . projects for the City, including, the design, engineering and construction of a movable crest dam and hydroelectric generating and conveyance facility and related infrastructure improvements to the river front; and authorizing and directing officers of the City to do, to take and to perform necessary acts to effect the issuance of the bonds. Councilman Gilchrist commented that this was a good bill because it replaces the debt of BILL NO. 28 -1986. Chairman DeGarcia recognized a motion to suspend to receive a presentation by Thomas Balaban by Mr. Mitchell and seconded by Mr. Gilchrist. All members signified their approval by voice vote. Dan Lispi Hydroelectric Project Director for the City of Harrisburg listed the reasons for the additional cost for the Project: 1) Because the final location for the dam was relocated due to a conflict with the Paxton Creek. 2 Also because Rite Aid Corporation was building in an industrial park near the original location. 3) And finally, the dam would be located 3,000 feet from the original sight, and 3,200 across instead of 3,000 feet, with a second powerhouse and additional caulker dams for more power generation. Mr. Thomas Balaban, one of the bond underwriters, responded that because tax reforms are on the way, the bonds must be floated immediately to protect the City's investment. Acres International had been hired to provide up to the minute information about the bond market. He remarked that the Federal Government had given cities until 9/1/86 to save bond deals. Any local deal must be passed by August 15, 1986. The City, he said, must decide on a project or no project. Mr. Balaban also remarked that at stake was 98 million dollars if the City did not move expeditiously. Ms. Smith asked the Law Bureau what action could bond counsel take against the City in 1988, if Council voided the agreement. Mr. Balaban responded that Bond Counsel would be unable to sell the bonds. The Chair called for questions from the public: Dick Simpson, member of the Hydroelectric review board, questioned why new engineers were needed and why did they change their professional judgment in one night. The Chairman instructed bond counsel to have all team members including the engineers at Monday, July 7, 1986 presentation. d. JULY 8, 1986 The second reading of BILL NO. 28 -1986 was moved by Calvin Gilchrist and seconded by Stanley H. Mitchell. Mr. Gilchrist stated that this bill would retire the City's current $215,000,000 bond issue on the Hydroelectric Dam Project. The reading of BILL NO. 29 -1986 was moved by Calvin Gilchrist and seconded by Stanley Mitchell. Mr. Gilchrist related that this bill would establish a new bond issue for $395,000,000.00. He stated that one more discussion session would be held on Wednesday, July 10, 1986 to inform the public about the process. e. JULY 10, 1986 BILL NO. 28 -1986 (as amended) was moved by Calvin Gilchrist for approval and seconded by Stanley Mitchell. The Chair recognized a motion to suspend the rules in order to receive a report from the finance team, moved by Gilchrist and seconded by DeGarcia. On voice vote, all members indicated that they were in favor. Bond Counsel indicated that BILL NO. 28 -1986 was contingent upon the new issue on bonds being sold (BILL NO., 29- 1986). The motion to approve BILL NO. 28 -1986 (as amended) was carried by unanimous vote with Mr. Moore, Mr. DeGarcia, Mrs. Braxton, Mr. Gilchrist, Mr. Gohl, Mr. Mitchell and Ms. Smith; all voting affirmatively. BILL NO. 29 -1986 was moved by Calvin Gilchrist for approval and seconded by Stanley Mitchell. A motion to suspend the rules was passed unanimously in order to receive a presentation by bond counsel concerning changes in the bills financial breakdown. Joseph Herenza, representing bond counsel, reported that the bond figure had been reduced from $394,295,000.00 to $391,000,000.00. The AAA rating would be maintained and the city's credit rating would remain high. He went on to say that only hydroelectric revenues may be pledged to secure the bonds and that no city water funds or incinerator funds could be pledged to secure the bonds. And finally, an independent revenue consultant would be appointed to appraise the value of the escrow account and all revenue projections must be certified by the independent consultant. The motion to pass BILL NO. 29 -1986 was carried by unanimous vote with Mr. Moore, Mr. DeGarcia, Mrs. Braxton, Mr. Gilchrist, Mr. Gohl, Mr. Mitchell and Ms. Smith; all voting. Mr. Gilchrist thanked all members of the finance team and all council members for their hard work and support in considering these bond issues. Mr. Mitchell asked all members to support this bill because it would create over 500 jobs for the citizens of Harrisburg. Mr. DeGarcia agreed with Mr. Mitchell that the bill should be passed. Mr. Gilchrist added that he felt very proud about the bill for the City of Harrisburg. He also opened that the vote tonight to be unanimous. He also thanked Mr. Balaban, Earl Harris and Trevor f. SEPTEMBER 13, 1988 g. Berbeck as well as the City Clerk. Ms. Smith said that the presentations by bond counsel are what changed her vote to a yes. Mrs. Braxton said that she would support the measure. Mr. Gohl said that he would support the measure but felt that the project itself would not get off the ground because of the cost of the electricity and inflation. Mr. Moore added that hopefully this vote tonight would be a giant step forward for Harrisburg. To correct revenue problems while the city risks no money and loses no money, we should all support the measure. The first reading of BILL NO. 29 -1988 was moved by 0., Frank DeGarcia and seconded by Sherri Levin. This bill was outlined by Mr. DeGarcia as the proposal to remarket previously issued bonds pertaining to Dock Street Dam. SEPTEMBER 27, 1988 Mr. Moore reported on the Administration Committee meeting of September 26, 1988, noting that the Dock Street Dam Bond Remarketing Agreement was on the agenda and that various changes had been recommended by Council for inclusion in the remarketing agreement. h. SEPTEMBER 30, 1988 This was the recessed meeting of Tuesday, September 27, 1988 and was reconvened at 12:15 p.m. on Friday, September 30, 1988. The second reading of BILL NO. 29 -1988 was moved by Reizdan B. Moore and seconded by Calvin E. Gilchrist. A motion to suspend the rules was passed unanimously in order to review BILL NO. 29 -1988 with the Bond Counsel. After a brief final review of dates and amounts of fees related to the remarketing, discussion was closed on the Motion To Amend BILL NO. 29 -1988. Mr. Moore outlined revisions and requested the support of all members present. It was moved by Reizdan B. Moore and seconded by Calvin E. Gilchrist to pass BILL NO. 29 -1988 (as amended), motion carried by a 5 to 1 vote. 9. Mayor Stephen Reed appointed all of the firms associated with the engineering, financing and consulting . associated with the Dock Street Dam project. a. Mayor Reed negotiated the fees paid to each of these firms. 10. The following firms were selected by Mayor Reed as part of the Financial team for the Dock Street Dam project. Fees were paid to these firms for the original marketing as well as the 1986 and 1988 remarketing of the bonds. ORIGINAL ISSUE: PAYEE Dauphin Deposit Bank and Trust Company Pennsylvania National Bank & Trust Company Packard Press Packard Press CUSIP Service Bureau Standard & Poor's Corporation Stevens & Lee, P.C. Baskin and Steingut, P.C. Malatesta, Hawke, McKeon & Morris PURPOSE Fee of Trustee Paying Agent's Initial and Authentication Fees and Expenses Printing Preliminary and Final Official Statement; Blue Sky and Legal Investment Surveys Printing 1985 Fixed/ Adjustable Rate Series Bonds CUSIP Numbers Rating Fee Expenses of Co -Bond Counsel Fee Expenses of Co -Bond Counsel AMOUNT $ 50,000.00 15,045.00 To be Paid Post Closing 96,926.72 To be Paid Post Closing To be Paid Post Closing 30,000.00 150,000.00 To be Paid Post Closing 120,000.00 To be Paid Post Closing Trevor Edwards, Esquire Fee Expenses of Co -Bond Counsel Obermayer, Rebmann, Maxwell & Hippel Balaban and Balaban KMG /Main Hurdman Generation Development Corporation Hough Associates Wickwire, Gavin & Gibbs Baskin & Steingut Obermayer, Rebmanetal Stevens & Lee Malatesta, Hawke, McKeon & Morris Myers & Associates 1986 REMARKETING PAYEE Public Financial Management Financial Advisor Commonwealth Securities - Computer Services Fee Expenses of Under - Writers Counsel Fee Expenses of Under - Writers Counsel Verification of Bond Proceeds Financial Report Engineering Report FERC Counsel Additional Expenses Additional Expenses .Additional Expenses Additional Expenses Printing Standard & Poor's - Credit Rating Acres International - Profs. Services Stevens & Lee - Co. - Bond Counsel TOTAL AMOUNT $ 201,395.60 75,000.00 25,000.00 150,000.00 214,541.08 15,000.00 To be Paid Post Closing 85,000.00 To be Paid :Post Closing To be Paid Post Closing 65,,507.53 3,000.0D 100,000.00 25,000.00 To be Paid Post Closing 9,398.58 2,764.93 28,948.44 35,000.00 914.99 $832,506.19 Packard Press - Printing Official Statements CUSIP Service Bureau - Assignment of CUSIP Numbers Group One Research - Revenue Consultant Obermayer, Rebmann, Maxwell & Hippel Underwriters Counsel Delores Wilson - Co -Bond Counsel Melville G. M. Walwyn - Co. Bond Counsel Trevor Edwards - Co- Underwriters Counsel Earl L. Harris - Co -Bond Counsel Packard Press - Printing of Bonds Eckert, Seamans, Cherin & Mellott - Co-Bond Counsel Balaban & Balaban - Co- Underwriters Counsel Dauphin Deposit Trustee's Initial Fee PA National - Paying Agent's Fee Commonwealth Securities - Bond Salomon Brothers - Additional Cost in Purchase of U.S. Treas. Strips Baskin, Flaherty, Elliott & Maninno - Co-Bond Counsel Fee KMG Main Hurman (Actual Requisition Enclosed) Verification of computa- tions, 1986 issue Eckert, Seamans, Cherin & Mellott (Expenses) 1988 REMARKETING TOTAL 30,000.00 63.00 50,233.00 111,900.00 27,000.00 22,400.00 25, 000.00 41,600.00 . -5,000.00 131,142.19 _ 68;977.58 75,000.00 27,046.25 6,068,250.00 180.64 25,000.00 15,000.00 5,139.02 $7,394,868.36 Financial Advisor (Includes out -of- pocket and expenses due) - Public Financial Management Remarketing Agents' Counsel ($75,000 to Obermayer, Maxwell & Hippel & $75,000 to Edwards & Harris) Special Remarketing Agents' Counsel - Kutak Rock & Campbell Restructuring Fee - Commonwealth Securities and Investments, Inc. Special Tax Counsel - Haynes & Miller Bond Counsel - Stevens & Lee Trustee - Dauphin Deposit Bank & Trust Co. Rating Agency - Standard & Poors Printing of the Remarketing Memorandum - (Packard Press) Computer Verification - Commonwealth Securities and Investments, Inc. Rate Consultants Fee - Resource Management International Inc. (includes travel) Group One Research, Inc. Remarketing Fees - Commonwealth Securities and Investments, Inc. Transcript Preparation - Peat Marwick Bond Counsel (Stevens & Lee) - Expenses Haynes & Miller - Expenses Obermayer, Rebmann, Maxwell & Hippel Kutak Rock & Campbell - Expenses Edwards & Harris - Expenses TOTAL AMOUNT $ 155,000 150,000 75,000 250,000 280,000 475,000 50,000 22,000 35,000 100,000 175,000 3,890,925 6,000 9,400 3,000 5,500 3,000 1,700 $5,686,525 SEPARATE ACCOUNT (E &L) 1988 REMARKETING Packard Press for Print Costs 3rd Printing of Remarketing Memorandum Inv. - Reg. 92 Paid to Obermayer, Rebman, Maxwell & Hippel for Professional Services for Co- Remarketing Agent's Counsel - Reg. 83 Paid to Edwards and Harris for Legal Services for Remarketing, of Electric Revenue Bonds - Reg. 84 Paid to Peat Marwick Mitchell & Co. CPA's for Professional Services Associated with Remarketing Electrical Revenue Bonds - Reg. 86 Paid to Resources Management International Inc. for Consulting Services for Remarketing of Project Fund Bonds - Reg. 88 Paid to Eckert, Seamans, Cherin & Mellott for out of pocket expenses during 1986 - 1988 Reg. 93 Paid to Eckert, Seamans, Cherin & Mellott for Legal Services Rendered During the Period of 1986 Through 1988 - Reg. 93 AMOUNT $ 14,668.50 25,000.00 160,000.00 4,000.00 57,565.65 3,080.87 90,533.75 TOTAL $354,848.77 11. Brinjac Kambic and Associates, or Brinjac Chester Engineering was selected by Mayor Stephen Reed as the engineer for the project. The firm received payments for services in relation to the Dock Street Dam project as listed below. The fees were negotiated by Mayor Reed. The following fees were paid: a. BRINJAC KAMBIC & ASSOCIATES (ORIGINAL ISSUE) 12/5/85 to 7/1/86 Total - $433,001.00 1986 REMARKET g• 8/1/86 to 12/9/90 Total - $1,077,478.10 b. SUBACCOUNT FOR BRINJAC KAMBIC ASSOCIATES AND BRINJAC CHESTER ENGINEERING Briniac Kambic Associates 12/11/86 to 7/27/89 Total - $89,289.37 Briniac- Chester Engineering 3/9/87 to 8/8/88 Total - $80,721.41 GRAND TOTAL FOR BRINJAC RAMBIC ASSOCIATES AND BRINJAC ENGINEERING - $1,680,489.80 12. David DiCarlo is an Investment Banker with Russell, Rea and Zappala. a. His firm was the "Lead Banker" on the initial bond issue of the Dock Street Dam Project. b. DiCarlo attended several meetings in Harrisburg pertaining to the Dock Street Dam Project. c. He provided expertise on the financing of a bond issue. d. It is his opinion that the market place determined the fees paid to firms involved in a bond issue. e. Russell, Rea and Zappala was not the lead banker on at least one of two re- issuances of the bonds: f. He was never pressured by Reed, Moore or Gilchrist for campaign contributions. His firm had a political action committee to regulate its policy on campaign contributions. Good candidates for public office were sought. Members of his firm have an expertise in seeking such candidates. h. His firm's campaign contribution to Gilchrist was $100, which he emphasized was a minimal contribution. 13. Charles Gomulka serves as the Chief Operating Officer of Russell, Rea & Zappala: a. Members of his firms tend to support candidates who are in favor of good government. b. Dave DiCarlo is Russell, Rea & Zappala's contact person in Harrisburg. c. Campaign contributions made by his firm to Harrisburg public officials had nothing to do with the Dock Street Dam Project. d. His firm was trying to develop business throughout the state, not only in Harrisburg. His business is very competitive and political contributions are a fact of life. e. The financing structure Russell, Rea & Zappala did for Harrisburg was set -up to allow the city to conduct engineering studies of the impact of the Dock Street Dam project. 14. Employees of the investment banking firms of Russell, Rea and Zappala, Greenwood Enterprises and Arthurs, LeStrange & Short contributed to the campaigns of Mayor Stephen Reed and Councilmen Reizdan Moore and Calvin Gilchrist. a. All of these employees were physically located in the Pittsburgh, PA area. b. Their contributions were made through the individual company's political action committees. c. The employees were encouraged to make contributions by their employers. 15. Robert Weber serves as President of Arthurs, LeStrange & Short an investment banking firm. a. His firm has a long standing presence for municipal projects. b. His firm has been involved in a number of projects in the Harrisburg area. c. The firm was involved in the Dock Street Dam project, and others with the City of Harrisburg. d. It was a normal business practice for members of his firm to make campaign contributions to elected officials where the firm did business. e. There had been an on -going satisfactory relationship with Harrisburg officials that is essentially why the firm supported the incumbents. 16. Calvin Gilchrist sought re- election to Harrisburg City Council in 1985 and 1989. 17. Calvin Gilchrist filed Campaign Finance Reports at the Dauphin County Bureau of Elections when he sought election to Harrisburg City Council. a. The Political Committee Registration Statement dated February 28, 1991 identified the committee as Committee to elect Calvin Gilchrist. b. In 1981, campaign expense records do not reflect any contributions from any of the individuals or firms associated with the Dock Street Dam project. c. In 1985, campaign expense records disclose that Gilchrist received $11,435.00 in contribution. Of that amount, $4,000.00 was contributed by the firms associated with the Dock Street Dam project. d. The largest contributor in 1985 was the land underwriter, Arthurs, Lestrange & Short - $1,250.00. e. In 1988 - 1989, campaign expense records reflect that Gilchrist received $4,220.00 in contributions of which $925.00 was received from individuals or firms associated with the Dock Street Dam project. f. The largest contributor in 1988 - 1989 was Earl Harris, an attorney who was Co -Bond Counsel, contributed $500.00. 18. Campaign contributions Gilchrist received from individuals or firms involved in the Dock Street Project were reported on the Campaign Finance Reports filed with Dauphin County Bureau of Elections: a. Balaban & Balaban 5/17/85 - $ 100.00 10/2/85 200.00 TOTAL - $ 300.00 b. Baskin & Steinqut 4/28/85 - $150.00 10/2/85 - 200.00 TOTAL — $350.00 c . e. Trevor Edwards 1/26/89 - $225.00 5/1/89 - 500.00 TOTAL d. Arthurs, 4/8/85 10/18/85 TOTAL - $725.00 LeStrange & Short - $ 500.00 - 500.00 - 250.00 $1,250.00 Russell, Rea & Zappala 10/28/85 - $ 250.00 TOTAL - $ 250.00 f. Briniac & Kambic and Briniac Kambic PAC 10/3/85 - $200.00 TOTAL - $200.00 g. Earl Harris 10/2/85 - $250.00 1/12/89 - 500.00 TOTAL - $750.00 19. Firms involved in the Dock Street Dam project, who made contributions to Calvin Gilchrist campaigns, have received payments from the City of Harrisburg are as follows: Names Amount Baskin & Steingut, P.C. and Malatesta, Hawke, McKeon & Morris. Earl L. Harris, Esquire Balaban & Balaban Brinjac - Kambic Associates $ 155,000.00 41,600.00 134,485.11 89,289.37 Trevor Edwards, Esquire Edwards & Harris Russell, Rea & Zappala, Inc. Arthurs, Lestrange & Short 40,000.00 75,000.00 2,516,812.50 2,661,022.50 TOTAL $6,303,994.60 a. The amount of money made by Arthurs, Lestrange & Short does not include how much they made with the remarketing of the bonds for 1988. According to Daniel Lispi, Project Director for the Harrisburg Hydroelectric Project, the information they have in their files does not individually list each bond underwriter and how much money they made for the reissuance of the bonds in 1988. 20. Calvin Gilchrist provided a statement to the State Ethics Commission: a. Gilchrist's actions or votes as a city councilman were never influenced by any campaign contributions. b. Gilchrist's campaign committee did most of the public contact work and that most of the help he received was from family and friends and through occasional fund - raisers. c. Gilchrist did receive some campaign help from colleagues, Mayor Stephen Reed and Reizdan Moore. d. In 1985, Mayor Stephen Reed's Committee for Better Harrisburg contributed $900.00 to Gilchrist's campaign. Reed's committee received substantial contribution contracts relating to the dam project. e. Gilchrist never solicited any campaign contributions. 21. Members of Harrisburg City Council never met as a legislative body to select any of the firms involved in the Dock Street Dam project. a. City Council was not consulted by Mayor Reed on any of these selections. b. City Council members were not made aware what criteria or guidelines the Mayor used when making selections. c. There were no advertisements for bids or proposals. d. Mayor Stephen Reed had the final say in regards to the selection of the engineers, bond underwriters, bond counsel and consultants associated with the dam project. 22. By memo dated October 31, 1985, Nathan Waters, Acting City Solicitor, responded to a request from Councilman Robinson regarding the actions of Council President Moore and Councilman Gilchrist: a. Robinson inquired as to whether Moore's and Gilchrist's failure to disclose that they received campaign contributions from underwriters and bond counsel participating in the bond constituted a conflict of interest within the meaning of Rule 3 of City Council. b. Waters noted the test applied by the State Ethics Commission to determine if it was proper to vote on a matter was whether or not the personal or private interest of the council members is more than that of any citizen affected by the vote. c. Waters concluded that he was satisfied that Moore and Gilchrist did not have a personal or private interest in the Dock Street Dam bill as to require disclosure to City Council. 23. In a follow -up memo dated November 12, 1985, Waters advised Robinson as follows: a. I continue to be satisfied that the giving and receiving of political contributions by supporters and Council Members respectively is not improper, per -se, and no impropriety should attach to the aforesaid transactions. However, if there is reason to believe that contributions are, in fact, bribes then proof must follow accusations. In the present case, there are no allegations that contributions were made to influence or control voting on any issue, bill or resolution. This office, therefore, assumes that there was no such intent. b. I do not recall legally addressing the question of political contributions in the past. I do reiterate that Council Members should avoid the appearance of impropriety, but I find no actionable impropriety in the present case. III. DISCUSSION: As a member of Harrisburg City Council, Calvin Gilchrist, hereinafter Gilchrist, was a public official as that term is defined under the Ethics Act. 65 P.S. 402; 51 Pa. Code §1.1. As such, his conduct is subject to the provisions of the Ethics Act and the restrictions therein are applicable to him. Initially, it is noted that Section 9 of Act 9 of June 26, 1989 provides, in part, as follows: "This amendatory act shall not apply to violations committed prior to the effective date of this act, and causes of action initiated for such violations shall be governed by the prior law, which is continued in effect for that purpose as if this act were not in force. For the purposes of this section, a violation was committed prior to the effective date of this act if any elements of the violation occurred prior thereto." Since the occurrences in this case transpired prior to the effective date of Act 9 (June 26, 1989), we must apply the provisions of Act 170 of October 4, 1978, P.L. 883, to determine whether the Ethics Act was violated. Under Section 3(a), quoted above, this Commission has determined that use of office by a public official to obtain a financial gain for himself or a member of his immediate family or a business with which he is associated which is not provided for in law transgresses the above provision of law. Thus, use of office by a public official to obtain a financial gain which is not authorized as part of his compensation is prohibited by Section 3(a): Hoak /McCutcheon v. State Ethics Commission, 77 Pa. Commw. Ct. 529, 466 A.2d 283 (1983); Yacobet v. State Ethics Commission, 109 Pa. Commw. Ct. 432 531 A.2d 536 (1987). Similarly, Section 3(a) of the Ethics Act would prohibit a public official /employee from using public office to advance his own interests; Koslow v. State Ethics Commission, 116 Pa. Commw. Ct. 19, 540 A.2d 1374 (1988). Likewise, a public official /employee may not use the status or position of public office for his own personal advantage; Huff, Opinion 84 -015. Under Section 3(b) of the Ethics Act quoted above, no person shall offer or give to a public official and no public official shall solicit or accept anything of value including a political contribution based upon the understanding that the vote, official action or judgment of the public official /employee would be influenced thereby. In the instant matter, we must determine whether Gilchrist violated either Section 3(a) or 3(b) of the Ethics Act regarding the receipt of campaign contributions from firms associated with the underwriting of a multi - million dollar bond issue relative to a project which Gilchrist supported. Gilchrist served on Harrisburg City Council from 1982 through 1989. In October of 1985, the City considered undertaking the Dock Street Dam Project to construct a hydroelectric plant for the generation of electricity. In order to implement the project, the City of Harrisburg enacted Ordinance 32 of 1985 authorizing the issuance of $215 million revenue bonds to finance the project. The ordinance passed on a five to two vote with Gilchrist voting with the majority. The ordinance provided for the appointment of the investment banking firms of Russell Rea & Zappala; Arthurs, LeStrange & Short; Goldman, Sachs & Co.; and Prescott, Ball & Turben as remarketing agents. Ordinance 15 of 1986, which was unanimously enacted with Gilchrist's motion and vote, authorized the retiring of the original $215 million dollar bond issue; thereafter, Ordinance 16 of 1986 authorized the issuance of $394,295,000 in revenue bonds and was unanimously enacted. The bond issue was designed to provide funds for the design and construction of the project as well as to create reserve and interest funds to pay for the various costs related to the project. Prior to the passage of the foregoing ordinances, there were discussions of Council in which Gilchrist participated. However, it was the function of the Mayor to appoint all of the firms associated with the engineering, financing and consulting relative to the project. The names of those parties, the amounts paid and the services which they performed are outlined in Fact Findings 10 and 11. A review of the campaign financing reports filed by Gilchrist with the County Board of Elections as to his 1981 campaign expense records do not reflect any contributions from any individuals or firms involved with the project. However, in 1985, Gilchrist received $11,435.00 in contributions of which $4,000.00 of that amount came from individuals or firms associated with the project; his largest contributor was the firm of Arthurs, LeStrange & Short which contributed $1,250.00. Gilchrist's 1988 -89 campaign expense records reflect that he received $4,220.20 in contributions, of which $925.00 was received from individual firms associated with the project; the largest contributor was Attorney Earl Harris who as Co -Bond Counsel contributed $500.00. Fact Finding 18 recites the various firms and individuals involved with the project which contributed monies to Gilchrist's election campaigns. In addition, Fact Finding 19 sets forth the fees received by those individuals or firms for the services performed as to the project. Lastly, it is noted that City Council members never selected any of the firms involved in the project and were not consulted by the Mayor when he made his selections. In applying the provisions of Sections 3(a) and (b) of the Ethics Act to the above facts, we are constrained to find that no violation exists as to either Section since there is no evidence that there was a use of office to obtain a financial gain under Section 3(a) or an understanding under Section 3(b) between the campaign contributors and Gilchrist as to his participation and voting. In Bartle, Order 659, we held that a county commissioner did not violate Sections 3(a) or 3(b) of the Ethics Act in participating in a matter involving a firm from which various individuals contributed to his re- election campaign, since there was no evidence to establish a connection between the involvement by the public official and the re- election campaign contributions by persons in the firm. See also Wolfgang, Opinion 89 -028. Since we find that there was no understanding under Section 3(b) of the Ethics Act and no linkage between the use of office of Gilchrist in voting and the financial gain consisting of the campaign contributions, no violation occurred. Our determination in this case is consonant with Moore, Order 780, wherein we found no violation as to another member of Harrisburg City Council as to the same allegation based upon parallel facts. IV. CONCLUSIONS OF LAW: 1. Calvin Gilchrist, as Councilmember of Harrisburg City Council, was a public official subject to the provisions of the Ethics Law. 2. Gilchrist did not violate Section 3(a) of the Ethics Act regarding participating or voting as to the Dock Street Dam Project when firms associated with the underwriting of that project made contributions to Gilchrist's election campaign, because no linkage was established between the use of office of Gilchrist in voting for the project and the receipt of election campaign contributions. 3. Gilchrist did not violate Section 3(b) of the Act regarding receiving election campaign contributions from firms associated with the underwriting of bond issues as to the Dock Street Dam Project, since there is no evidence to establish an understanding between Gilchrist and the firms as to the receipt of the campaign contributions and his voting. In re: Calvin Gilchrist : File Docket: 85 -162 -C : Date Decided: July 12, 1991 : Date Mailed: July 14, 1991 ORDER No. 802 1. Calvin Gilchrist, as a Councilmember of Harrisburg City Council, did not violate Section 3(a) of the Ethics Act regarding participating or voting as of the Dock Street Dam Project when firms associated with the underwriting of that project made contributions to Gilchrist's election campaign, because no linkage was established between the use of office of Gilchrist in voting for the project and the receipt of election campaign contributions. 2. Gilchrist did not violate Section 3(b) of the Act regarding receiving election campaign contributions from firms associated with the underwriting of bond issues as to the Dock Street Dam Project, since there is no evidence to establish an understanding between Gilchrist and the firms as to the receipt of the campaign contributions and his voting. BY THE COMMISSION, ROBERT W. BROWN, CHAIR