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HomeMy WebLinkAbout82-003 SmithMiles Smith, Director Great Bend Borough Community Development Office Box 125 Great Bend, PA 18821 RE: Contract, loan, solicitor Dear Mr. Smith: I. Issue: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 January 20, 1982 OPINION OF THE COMMISSION 82 -003 You have requested advice as to whether you would violate the provisions of the Ethics Act by entering into a contractual loan agreement with the solicitor of Great Bend Borough. II. Factual Basis for Determination: You request advice as the Director of the Community Devel- opment Office of Great Bend Borough. As Director you are responsible for processing applications for loans to rehabili- tate private rental properties under Great Bend Borough's Community Development Programs (Housing and Urban Development Small Cities Grant program). One such application has been presented to your office on behalf of a Mr. Francis O'Connor. Mr. O'Connor serves as solicitor for Great Bend Borough. He is, of course, a member of the Bar of Pennsylvania and is engaged in the private practice of law, serving as Great Bend Borough Solicitor as part of this practice. Mr. O'Connor also acts as solicitor to the Community Development Office. We note that Mr. O'Connor's letter of January 14, 1982 has been received and reviewed and is made part of this Opinion by reference. You question whether you may contract with Mr. O'Connor on behalf of the Borough given Mr. O'Connor's relationship with the Borough. Miles Smith, Director January 20, 1982 Page 2 III. Applicable Law: The law to be applied to this question is as follows: • Section 1. Pupose. The legislature hereby declares that public office is a public trust and that any effort to realize personal financial gain through public office other than compensation provided by law is a violation of that trust. In order to strengthen the faith and confi- dence of the people of the State in their government, the Legislature further declares that the people have a right to be assured that the financial interests of holders of or candidates for public office present neither a conflict nor the appearance of a conflict with the public trust. Because public confidence in govern- ment can best be sustained by assuring the people of the impartiality and honesty of public officials, this act shall be liberally construed to promote complete disclosure. Section 2. Definitions. "Person." A business, individual, corporation, union, association, firm, partnership, committee, club, or other organization or group of persons. 65 P.S. 402. "Public employee." Any individual employed by the Commonwealth or a political subdivision who is responsible for taking or recommending official action of a nonministerial nature with regard to: (1) contracting or procurement; (2) administering or monitoring grants or subsidies; (3) planning or zoning; (4) inspecting, licencing, regula- ting or auditing any person; or (5) any other activity where the official action has an economic impact of greater than a de minimus nature on the interests of any person. 65 P.S. 402 Miles Smith, Director January 20, 1982 Page 3 V. Discussion: "Public Official." Any elected or appointed official in the Executive, Legislative or Judicial Branch of the State or a political subdivision thereof, provided that it shall not include members of advisory boards that have no authority to expend public funds other than reimbursement for personal expense, or to otherwise exercise the power of the State or any political sudivision thereof. "Public official" shall not include any appointed official who receives no compensation other than reim- bursement for actual expenses. 65 P.S. 402. Section 3. Restricted Activities (c) No public official or public employee or a member of his immediate family or any business in which the person or a member of the person's immediate family is a director, officer, owner or holder of stock exceeding 5% of the equity at fair market valued at $500 or more with a governmental body unless the contract has been awarded through an open and public process, including prior public notice and subse- quent public disclosure of all proposals considered and contracts awarded. Any contract made in vio- lation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of making of the contract. 65 P.S. 403(c). Section 3(c) of the Ethics Act does, as noted above, place restraints upon the ability of a public official or public employee to contract with a "governmental body." The Commission has previously ruled that the restrictions extend to the "governmental body" with which a public official or public employee may be associated. See Williams, 79 -012. Miles Smith, Director January 20, 1982 Page 4 However, in order to determine whether these restrictions 'apply we must initially determine whether the person in question falls within the definition of "public official" or "public employee." In reviewing this question are bound by two recent decisions of the Pennsylvania Supreme Court. The first decision is Ballou v. State Ethics Commission, Pa. 436 A.2d 186 (1981). In that case the Supreme Court held that: "... in his capacity as solicitor, appellee (Ballou) is neither a 'public employee' nor a 'public official! within the scope of-the Ethics Act and, hence, is not statutorily compelled to comply with the act's financial disclosure requirements... Accordingly, we affirm only that portion of the order of the Commonwealth Court which declares that the Ethics Act does not apply to appellee." Ballou, supra at 187. The second case is Snider v. Thornburgh, Pa. 436 A,2d 593 (1981). In that case the Court dealt with the question of the application of the term "public official" to members of school boards. The Court, in dictum, indicated that if a cognizable class of public servants is excluded from the definition of "public official ", that class would be exempt from the strictures of the "Act as a whole." Snider, supra at 602. Applying the ruling in Ballou and the concepts enunciated in Snider, we are constrained to conclude that Mr. O'Connor, as a part -time solicitor for Great Bend Borough and,your office, is not within the statutory definition of "public official" or "public employee." Because the Supreme Court has excluded such individuals as Mr. O'Connor from these definitions, he must be deemed exempt from the other strictures of the Ethics Act. This means that Mr. O'Connor and the Borough (including your office) would not be bound to follow the contracting restraints contained in Section 3(c) which apply to "public officials" and "public employees." We reach this ruling reluctantly and only as required by the above- referenced opinions of the Supreme Court. We note in doing so that we are departing from our past rulings that exclusion from the definitional sections relating to the term "public officials or "public employee" did not exclude any class of persons from the strictures of the Act, in general. Accordingly, our prior rulings to this effect and contrary to this ruling are over- ruled. See, in particular, Newton, 80 -025. We do state, however, that even though solicitors may not fall within the definition of "public official" or "public employee" they remain "persons." Thus, we believe that Section 3(b) of the Ethics Act 65 P.S. 403(b) which prohibits any "person" from offering any thing of value to a public official or public Miles Smith, Director January 20, 1982 Page 5 employee with the understanding that the official's conduct would be influenced thereby, would remain applicable to solici- tors. However, this issue of any violation or application of Section 3(b) is not before us in this case. However, our review cannot end simply because Mr. O'Connor as Solicitor is not within the definition of "public employee" or "public official." The question you pose relates to your conduct and ability to contract with Mr. O'Connor. In this regard we conclude initially that you, as Director of the Community Development Office, fall within the definition of "public employee" because of your role in taking or recommen- ding official action with regard to administering or monitoring grants or subsidies. As a public employee, your conduct must comport with the requirements of the Ethics Act. Thus, we must question what conduct is appropriate or required of you in dealing with this loan application from Mr. O'Connor. We conclude that you are required to avoid even the appearance of a conflict of interest in dealing with this loan application from Mr. O'Connor who is serving the Borough and your office as legal advisor. Under Section 1 of the Ethics Act you are required to assure the people of the impartiality and honesty of your office and decisions made upon loan appli- cations. We note that the Borough's guidelines for operation of this program prohibit certain policy- making public officials and employees from participating in this program. This clearly recognizes the potential for such officials and employees to secure loans by use of confidential information, by subtle pressure or by direct contact with the loan decision - making process. You advised us that in this process Mr. O'Connor would be in a position to review and approve for legality the loan agreements applicable to his own properties. We feel that as a public employee your action in accepting such legal advice under these circumstances would create at least the appearance that your impartiality as Director would be compromised. This conclusion is particularly clear where other Borough officials and employees are totally precluded from participation in this program as noted above. Thus, assuming that the basic process of loan applications is open and available to the public in general, when you as a public employee are asked to review and approve a loan applica- tion of a person serving the Borough or your office in an advisory capacity such as exists here, you may not solicit or accept or rely on that advisor's reports or recommendations which relate to the advisor's loan application. This stricture would apply to advice already in progress and such should be reviewed by a non - applicant /advisor. If you need advice similar to that which the advisor - applicant would render, but for this restriction on your conduct, such advice must be secured from a person not directly or indirectly associated with the advisor - applicant. Miles Smith, Director January 20, 1982 Page 6 Finally, we make no representations or rulings, nor would we have jurisdiction to interpret the provisions of the program guidelines governing such loan applications developed by the Borough of Great Bend which include "Conflict of Interest" provisions, Section 1.1. V. Conclusion: Your office may freely contract through this loan agree- ment with Solicitor, Francis O'Connor, because the constraints of the Ethics Act placed, in general, upon the conduct of "public officials" and "public employees" are inapplicable to Mr. O'Connor as Solicitor. In order to avoid even the appearance of impropriety on your part as a public employee, however, you may not solicit, accept or rely on the advice of a solicitor -loan applicant which relates to the processing or approval of that solicitor's loan application. If such advice or work toward advice has been rendered, this should be reviewed by a non- applicant advisor. Pursuant to Section 7(9)(i), this opinion is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any civil or criminal proceeding, providing the requestor has disclosed truthfully all the material facts and committed the acts complained of in reliance on the advice given. This letter is a public record and will be made available as such. cc: Francis X. O'Connor, Esq. SSC /rdp Sincerely, `-PAUL J. M H Chairm n