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HomeMy WebLinkAbout84-006 SteinmanNeal Steinman, Esquire Blank, Rome, Comisky & McCauley Four Penn Center Plaza Philadelphia, PA 19103 II. Factual Basis for Determination: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 OPINION OF THE COMMISSION February 24, 1984 RE: Carbon County, Hospital Authority, Abstentions Dear Mr. Steinman: I. Issue: 84 -006 You ask whether, under the State Ethics Act, abstentions of certain individuals are required where a county is to guarantee certain bonds of a hospital where a county official's spouse is employed by the hospital. You write on behalf of the Board of County Commissioners, hereinafter the Board, of the County of Carbon, hereinafter the County, as Solicitor with respect to an upcoming vote of the Board on the request that the County guarantee a bond issue, hereinafter the Bonds or the Bond Issue, of the Carbon County Hospital Authority, hereinafter the Authority. You indicate that the Authority will shortly issue the Bonds in an approximate aggregate principal amount of $11.5 million for a 30 -year term. The issue of the Bonds is designed to provide for a construction and renovation project of the Gnaden Huetten Memorial Hospital, a non - profit acute and long -term care institution, located within the County, hereinafter referred to as the Hospital. It should be noted that the Hospital is a tax - exempt charitable entity for purposes of the Internal Revenue Code of 1954. However, to secure the lowest possible interest rates on the Bonds and, therefore, to help control health -care costs in the County, the Hospital has applied for municipal bond insurance on the Bonds to be issued from the American Municipal Bond Assurance Corporation, hereinafter AMBAC. AMBAC issues insurance policies from municipal bond issues on a selective basis covering the payment of principal and interest on the Bonds. If the Bonds receive an AMBAC insurance policy, a "AAA" rating is ascribed by Standard and Poor's Corporation, a national agency for rating bond issues. Notably, bonds rated "AAA" bear the lowest available market rates of interest and the bonds would not he rated "AAA" without such an insurance policy being issued. Neal Steinman, Esquire February 24, 1984 Page 2 AMBAC has indicated to the hospital that it will insure the Bonds, thereby assuring that a "AAA" rating will be secured, it the County guarantees the Bonds. Under the Pennsylvania Local Government Unit r)ebt Act, hereinafter the Debt Act, the authorizing legislation applicable to guarantee by a County of obligations of an Authority indicates that the County must enact an ordinance in which specified covenants of guarantee must be articulated. See Debt Act, Section 404, 53'P.S. 6780 -154. The County has indicated that it intends to enact such an ordinance, hereinafter the Ordinance, and initial passage of the Ordinances occurred at the Board's December 20, 1983 meeting. Final Board action on the Ordinance is expected to occur sometime in January, 1984. This second, final step in the action of the County is being taken by reason of the technical provisions of the Debt Act which may require stipulation, in the Ordinance, of the exact rates of interests that the Bonds will bear. That information -- as to the exact rates of interest on these bonds -- will not be known until early January, 1984. You also indicate that the Board consists of three Commissioners. One Commissioner, Albert U. Koch, is also the Chairman of the Board of the Hospital. At the December 20, 1983 meeting of the Board, Mr. Koch abstained from voting on the Ordinance with respect to the Hospital and the Bonds and will abstain with respect to the question of passage of this Ordinance at the January, 1984 Board meeting in view of his Chairmanship of the [hoard of the Hospital. The two other Commissioners at the time of your letter to us of December 26, 1983, were a Mr. John Angst and Mr. Charles Wildoner. Those two Commissioners (Angst and Wildoner) have no relation to the Hospital. However, Mr. Dean D. W. DeLong will replace Mr. Angst as a Commissioner as of January 3, 1984. Mr. DeLong's wife is a pharmacy clerk at the Hospital and has been employed by the Hospital for approximately eight years. You also indicate that Mr. DeLong has served for the past two years as Chairman and as a Board member for three years prior to that, of the Hospital Festival Corporation. The Hospital Festival Corporation is a non - profit corporation that sponsors an annual fund- raising carnival for the benefit of the Hospital. In both his position as Chairman and Board member of the Hospital Festival Corporation Mr. DeLong is or was not paid. You are concerned that Mr. DeLong, when he assumes his post as Commissioner, if he were required to abstain from the vote on the ordinance regarding the Bond Issue and the Hospital along with Mr. Koch's abstention, would leave only one Commissioner eligible to participate in the passage of the Ordinance. Such circumstances could, you state, call into question the validity of the County guarantee of the Bonds and with that the favorable financing structure for these Bonds would be called into question. Additionally, unless final adoption of the Ordinance is delayed until January or later in 1984, the underwriters for the Bonds indicate that an additional cost of between g750,O00 and $1,000,000 in interests could be added to the Neal Steinman, Esquire February 24, 1984 Page 3 cost of the Bonds over the life of the issue of the Bonds. The participants to the transaction including the County and the Hospital do not desire to incur the additional costs associated with a requirement that final enactment of the Ordinance take place prior to Commissioner DeLong's assumption of his office as a Commissioner. Nevertheless, you request the response with respect to the degree to which Commissioner DeLong can participate in final passage of this Ordinance whenever that occurs. III. Applicable Law: The law to be applied to this question is as follows: Section 1. Purpose. 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 confidence 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 government can best he sustained by assuring the people of the impartiality and honesty of public officials, this act shall be liberally construed to promote complete disclosure. 65 P.S. 401. 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 2. Definitions. "Immediate family." A spouse residing in the person's household and minor dependent children. 65 P.S. 402. "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or holder of stock. 65 P.S. 402. Neal Steinman, Esquire February 24, 1984 Page 4 IV. Discussion As a County Commissioner and an elected official, Mr. DeLong is clearly a "public official" as that terra is defined in the Ethics Act. See Section 2 of the Ethics Act, 65 P.S. 402. As such, his conduct must conform to the requirements of the State Ethics. However, with respect to the questions that you raised, we are required to review, in particular, Section 3(a) of the Ethics Act Section 1 of the Ethics Act, and the definitions of the terms "immediate family" and a "business with which he is associated" as set forth in Part III of this Opinion. Obviously, the wife of Commissioner DeLong i s a member of his "immedi ate family" as that term is set forth in the Ethics Act. Likewise, the Hospital is a "business" with which the wife is "associated" by virtue of her employment relationship with the Hospital. However, our inquiry cannot end here. We must proceed to question whether the participation of Commissioner DeLong in the question of the passage of the Ordinance guaranteeing the Bond Issue of the Hospital will, in any respect, constitute a use of his public office to secure financial gain for this member of his immediate family or for that business (the Hospital) with which that member of his immediate fcmfy (his wife) is "associated" as an employee. We must also question whether if such participation is undertaken, an appearance of a-.conf1ict or an actual conflict of interest with the public trust will arise. In this regard, we review the status of Commissioner DeLong's wife as a pharmacy clerk at the Hospital as significant. Specifically, if the Hospital Bond Issue is to be guaranteed through this Ordinance by the County, it is unlikely that Commissioner DeLong's wife as a pharmacy clerk at the Hospital will be benefitted in any significant, individual or unique manner. Of course, if one assumes that the Bond Issue is necessary to the continued operation of the Hospital in general, there would be a remote, indirect interest shared by Commissioner DeLong, through his wife, insofar as her continued employment with the Hospital would be concerned. However, the interest that Commissioner DeLong's wife has in this regard, and that, therefore, Commissioner DeLong himself might be said to share, is no different than the interest any other employee of the Hospital would have in the continuation of the Hospital 's operations in general. Commissioner feLong's wife would be affected no more or less than any other Hospital employee if this Bond Issue i s guaranteed by the County. Likewise, the fact that Commissioner DeLong's wife serves merely as a pharmacy clerk is significant insofar as she does not hold a high -level position with the Hospital and could not be expected to garner any significant, individual, or personal benefit, other than that shared by all employees of the Hospital as noted above, if the Commissioners were to pass the Ordinance to guarantee the Bond Issue of the Hospital. Thus, the fact that Commissioner DeLong's wife is employed by the Hospital as a pharmacy clerk would not, of itself, require his recusal with respect to the County's consideration and passage of this Ordinance. Neal Steinman, Esquire February 24, 1984 Page 5 Likewise, the fact that Commissioner DeLong has served as a member of the Board and as Chairman of the Hospital Festival Corporation does not compel us to conclude that Commissioner DeLong should be precluded from acting as a member of the Commission Board on the issue of the passage of this Ordinance. We perceive this Hospital Festival Corporation to be a separate and distinct entity in the legal sense from the Hospital itself. Although the activities of this Hospital Festival Corporation benefit the Hospital, the fact that Mr. DeLong serves in some capacity with the Hospital Festival Corporation is not an association with the Hospital where there would be any immediate direct or indirect personal financial gain to be garnered by Commissioner DeLong as a member of or Chairman of the Hospital Festival Corporation. Thus, we are not compelled to conclude that he must, as a public official, abstain from participating in matters such as the passage of this Ordinance which may effect the Hospital because of his role with the Hospital Festival Corporation. Even if we were to conclude that Commissioner DeLong's association as a Chairman and Board member of the Hospital Festival Corporation were sufficient to warrant his recusal on matters presented to the County relating to the Hospital, we would have to review a limited application of the rule of necessity that would allow him to participate in the County's decisions. Specifically, we have previously ruled that where the number of officials required to undertake official action would be disqualified from participating in the official decision the application of the "rule of necessity" could allow the participation or voting of the otherwise disqualified official(s). See Hahalis, R3 -009. The Commission in this ruling indicated that the votes of any normally disqualified members must, however, be tempered by the vote or possible votes of members who have no conflict of interests and, therefore, are not disqualified with respect to the subject matter. In this case, therefore, if Commissioner DeLong and Kotch, who would be disqualified from participating on the ground(s) as outlined above, were to be permitted to vote, the remaining Commissioner (Charles Wildoner) would be required to participate in the County's decision along with these persons who might be disqualified. Under these circumstances, the County would be able to undertake the action on the Ordinance as necessary. V. Conclusion: We agree that Commissioner Koch should not, under these circumstances, because of his relationship at the Hospital, participate in the County's decisions regarding this Bond Issue. Commissioner DeLong, under the circumstances outlined above, is not compelled by the Ethics Act to abstain from participation in the County's decision regarding the Ordinance to guarantee this Bond Issue of the Hospital. Even if, for some reason, Commissioners Koch and DeLong would both be required to abstain from participation in this matter, a limited application of the rule of necessity would, under prior Commission rulings, indicate that both Commissioners would be allowed to participate in the County's decision relative to the Hospital's Bond Issue. Neal Steinman, Esquire February 24, 1984 Page 6 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 of the advice given. This letter is a public record and will be made available as such. Finally, any person may request within 15 days of service of the opinion that the Commission reconsider its opinion. The person requesting reconside- ration should present a detailed explanation setting forth the reasons why the opinion requires reconsideration. SSC /rdp By the Commission,