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HomeMy WebLinkAbout87-005 MazziottiHonorable Donald F. ;lazziotti c/o Morey M. Myers General Counsel Commonwealth of Pennsylvania Office of General Counsel Room 225, Main Capitol Building . Harrisburg, PA 17120 Re: Acting Secretary of Commerce, Executive Director Of The Economic Development Partnership, Termination Agreement, Severance Payment Dear Mr. Mazziotti: This opinion is issued in response to your request of June 25, 1987. I. Issue: Whether the State Ethics Act presents any restrictions upon the Acting Secretary of Commerce and Executive Director of the Economic Development Partnership relating to the receipt of a severance payment which represents a private subsidization of a public employee's salary which was entered into as a pre - condition to the acceptance of public employment. II. Factual Basis for Determination: The following is a summarization of your testimony before this Commission on July 21, 1987. From July 1981 you served as the Executive Director of the Pennsylvania Business Roundtable, formerly known as the Business Council of Pennsylvania. Chonologically, on December 10, 1986, you briefed the yovernor on a partnership program for Pennsylvania's economic development. On December 11, 1987, you were contacted by the Governor's designated Chief of Staff who urged you to consider heading up the economic initiative. You responded by stating that you were flattered but were not lookiny for another position. On December 21, 1987, after you returned from an Oregon trip, you received numerous calls indicating that you had been selected for a position with the new administration; you responded that you could not take a job with such a large salary reduction. On December 31, 1987, because of these rumors, you STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 OPINION OF THE COMMISSION DATE DECIDED: July 21, 1987 DATE MAILED: August 5, 1987 87 -005 Honorable Donald F. Mazziotti Page 2 wrote to your supervisor, Mr. Quentin Wood and advised him that the rumors were without foundation and that you were not looking for other employment. A copy of the December 31, 1987 letter is attached hereto and made a part hereof. On January 6, 1987, you were contacted and asked if you would interview for the position. You responded that you would not be interviewed for the position but would be willing to suggest viable candidates. You went to Pittsburgh on January 10, 1987, met with the selection committee and gave them the names of three individuals who you believed would be qualified for the job. Although you were pressed by the committee to accept the position, you stated that you could be helpful by staying with the Pennsylvania Business Roundtable, hereinafter Roundtable. Subsequently, on January 13, 15 and 29, you spoke with members of the Governor's transition team who asked whether you were interested in the position. You responded that the financial cost would be too great and that you could be helpful in your current position. Mr. Vince Gregory, a former Roundtable Chairman, contacted you on January 29 and asked if you could do the job. You responded that you could, but that the financial penalty would be too great. When Mr. Gregory asked whether you believed the Governor wanted you to serve, you responded that you thought so. Lastly, Mr. Gregory asked if you would object if he would contact Mr. Wood. You responded that it would not be a problem. It is your recollection that this was the first time that the possibility of a financial proposal was considered. Mr. Wood, on January 30, 1987, asked you if you would be interested in a package whereby there would be a termination allowance for your past service. You responded that if your services were needed, you could do the job and that a termination package should be in writing and be both legal and ethical. You then met with the Governor's General Counsel on January 30, 1987, to discuss your background and the serverance agreement. On February 2, when you met with Governor Casey, Mr. Keisling asked if you could attend the announcement of your selection for the cabinet position. At a press conference on February 3, the Governor announced that you were his selection to head the Economic Deveopment Department. Shortly after the announcement, you were asked about a severance package to which you responded that it was still in negotiation. On February 5, you met with Mr. Keisling who asked when you could start your position. You responded that it would take about two weeks for you to wind down your activities at the Roundtable. Further testimony provided during the public meeting noted, that in the period between February 3rd and 17th, you did appear at the Department of Commerce, met with employees and began informally to exercise the authority of the Office of Secretary of Commerce. The severance agreement, which is incorporated herein by reference, was sent to you on February 13. After you read the agreement, you signed the document and sent it back to the Roundtable. The termination agreement provided for the payment of $166,000 as a severance by the Roundtable and purported to sever all obligations between you and the Roundtable. You received on February 14, a copy of the executed agreement together with a check in the amount of $125,790.77, ($166,000 minus taxes), which was drawn on the reserve of the Roundtable. As per the agreement, you terminated your services with the Roundtable at midnight February 15, 1987. You formerly began your duties with the Commonwealth of Pennsylvania on February 17, 1987. Honorable Donald F. Mazziotti Page 3 Based upon the foregoing, you now ask whether, in your position as Acting Secretary of Commerce and Executive Director of the Economic Development Partnership, hereinafter EDP, the Ethics Act imposes any restrictions upon your receipt from the Roundtable of the severance payment. III. Discussion: As Acting Secretary of Commerce and Executive Director of EDP, you are to be considered a "public official" within the definition of that term as set forth in both the Ethics Act and the Regulations of this Commission. 65 P.S. §402; 51 Pa. Code §1.1. For the purpose of addressing the issue at hand, it is important to determine the precise time at which you became a "public official." In this regard it is noted that the Governor made an announcement on February 3, 1987, that you were his designee for the position of Executive Director of the EDP. • On February 4, 1987, the Governor created the EDP by Executive Order 1987 -4, which is incorporated herein by reference. The term candidate is defined in Section 1.1 of the Commission's regulations as follows: Section 1.1. Definitions. Candidate - -- Any individual who seeks nomination or election to public office, other than a judge of elections or inspector of elections, whether or not such individual is nominated or elected. An individual shall be deemed to be seeking nomination or election to such office if he has: (i) received a contribution or made an expenditure or given his consent for any other person or committee to receive a contribution or make an expenditure for the purpose of influencing his nomination or election to such office, whether or not the individual has made known the specific office for which he will seek nomination or election at the time the contribution is received or the expenditure is made; or (ii) taken the action necessary under the laws of the Commonwealth to qualify himself for nomination or election to such office. 51 Pa. Code 1.1. Honorable Donald F. Mazziotti Page 4 It is clear that as of February 3, 1987, you were a candidate as that term is defined in the above quoted regulation. Thus, you were an individual who sought nomination to a public office with the Commonwealth of Pennsylvania. Further, you took the necessary steps under the laws of this Commonwealth to qualify yourself for nomination to the position. The Preamble to the Ethics Act provides, in part, that: "Because public confidence in government 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 ". 65 P.S. §401, The Commonwealth Court of Pennsylvania supported this statutory construction of the Ethics Act in Phillips v. State Ethics Commission, 79 Pa. Cmwith. 491 (1984), where it was noted that the Ethics Act is to be liberally construed with broad application but narrow exclusions. As a candidate for public office as of February 3, 1987, and as a public official as of February .17, 1987, this Commission must determine whether there are any restrictions under the Ethics Act based upon the facts as presented and the documents as submitted to or obtained by this Commission. Section 3(a) of the Ethics Act provides as follows: Section 3. Restricted activities. (a) No public official or public employee shall ue 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). It is provided in Section 3(b) of the Ethics Act: Section 3. Restricted activities. (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. 403(b). Honorable Donald F. Mazziotti Page 5 In considering Sections 3(a) and 3(b) of the Ethics Act, it is most important to reiterate your statements before this Commission. You do not dispute that the severance in question facilitated your decision to accept your public position. In fact, but for the receipt of the $166,000.00 you would not take the job as Secretary of Commerce and Executive Director of the EDP. It was further established in your testimony that the severance payment of $166,000.00 was designed to represent the difference between your salary as former Executive Director of the Roundtable and your salary as a public official over a four year period, subject to an adjustment for pension considerations. Under the foregoing circumstances, it is our view that you have used your public office, as Executive Director designee as of February 3, 1987 to obtain a financial gain other than compensation provided by law. Our decision is based upon the fact the legislature has, by statute, limited the salary of Secretary of Commerce to the annual sum of $61,500.00. See 65 P.S. §366.3(a). Thus, through this severance package, you would be securing for yourself remuneration in excess of the salary that has been fixed for your cabinet level position as provided by the legislature. Commonwealth Court in McCutcheon v. State Ethics Commission, 77 Pa. Cmwlth. 529 (1983), specifically held that the receipt of gain in and through one's public position other than compensation statutorily provided for by law violated Section 3(a) of the Ethics Act. The foregoing principle has been followed in opinions and numerous orders of this Commission. For similar reasons, this Commission finds a prohibition under Section 3(b) of the Ethics Act. That section prohibits any public official or candidate for public office from receiving anything of value based on the understanding that their official action would be influenced thereby. In this instance, you received, after you were appointed Executive Director of EDP, a severance payment of $166,000.00. It is clear from your testimony that prior to the offer of the severance package, you refused to accept public employment. The $166,000 payment was the inducement which influenced you to accept public employment. It is clear from the record, that the severance payment was offered and accepted with the understanding that your decision to accept public employment was influenced thereby. Your acceptance of the severance, clearly a thing of value while in the position of candidate for public office, is prohibited by Section 3(b) of the Ethics Act. The payment was admittedly intended to influence your decision as a candidate to accept the public position. In Taglieri, No. 487, this Commission considered a complaint against a candidate for public office who promised to pledge $1,000.00 annually to the local political committee provided she would be endorsed and elected. No violation was found under Section 3(a) both because the offer was made to members of a political committee who were not public officials and secondly, Honorable Donald F. Mazziotti Page 6 because the solicitation of the endorsement was not based upon a understanding that her vote, official action or judgement would be influenced thereby. However, this Commission did find the action so "highly questionable" that the matter was referred to the appropriate law enforcement authorities. Based upon the foregoing facts and circumstances, this Commission finds that there is a prohibition both under Section 3(a) and 3(b) of the Ethics Act as to the receipt of this severance payment in the amount of $166,000.00. To sanction such a severance in this situation would establish a precedent for other similar arrangements. Any conclusion to the contrary might even give rise to financial arrangements far beyond what has been contemplated in this case. We are reminded under the Preamble of the Ethics Act that public office is a public trust. The Preamble also addresses the appearance of conflict of interest with the public trust. Concern is noted that you were the former Executive Director of the Roundtable. Although the Roundtable is a non profit corporation, it is composed of 38 or 39 corporate members. As many as 8 or 9 of these members would be members of the EDP. If that situation does not at least provide for the potential of a conflict of interest, it certainly creates the appearance. Any individual who seeks public office must do so subject to the mandated duties, responsibilities and limitations contained in that particular office. An office, such as yours, carries with it compensation which is fixed by law. While it is regretable that you may believe that the existing salary for a public position is not sufficient to attract qualified and competent individuals to fill such position, nevertheless, the salary is as fixed by law. It is then each individual's decision as to whether he can accept employment based upon the fixed salary for that particular position. In this instance you have, through what might be described as passive action, succeeded in receiving a private subsidization of your salary in excess of the amount which is provided by law. Such an arrangement is prohibited by the Ethics Act. In reaching our decision, this Commission does not question your integrity or competence for the position; that is not the issue in this case. In fact, based upon all of the material and testimony concerning you, this Commission does not question that you are eminently qualified for this position. However, our concern must focus upon the subsidy, offered by the Roundtable consisting of the $166,000.00 severance payment, to take the position of state employment. As has been noted, it is our view under 3(a) that the receipt of severance payment constitutes a financial gain other than compensation provided for by law for the reasons outlined above. Further, the receipt of $166,000.00, based upon the understanding that you would take the public position is prohibited under 3(b). Honorable Donald F. Mazziotti Page 7 It is argued that this Commission's prior opinion in Baxter, 81 -004, supports the propriety of the arrangement where the Roundtable offered a serverance in order for you to accept public employment. You argue that if Baxter supported a program concept whereby individuals from private industry would work "on loan" for the Commonwealth of Pennsylvania on a continuing basis, then a fortiori, it would be proper for you to come from the private sector in light of the fact that all obligations between the Roundtable and yourself were terminated as of midnight February 15, 1987. In Baxter, although an opinion was requested as to the impact of the Ethics Act on the Governor's Executive Exchange Program, this Commission decided only the narrow question as to whether the so called loaned employees were "public employees" under the Ethics Act and subject to the requirement of filing the Financial Interests Statement. Although this Commission did laud the program, we noted that we could "only address the question of the applicability or impact of the Ethics Act to persons 'exchanged'...." Furthermore, there is a very major difference in Baxter because it involved service purchase contracts between the Commonwealth and private corporations which were subject to the various reviews, checks and balances inherent in that contracting process. The foregoing checks and balances in the contracting process involving service purchase contracts were not present in the private contract between yourself and the Roundtable. There are no checks and balances in the latter situation and, therefore, there is absolutely no correlation between the exchange program under Baxter and the private subsidization present in this instance. Another fundamental difference in Baxter is that the loaned employees served in an advisory capacity subject to the supervision of a Commonwealth official /employee. Here, you, as Executive Director of the EDP would serve with 8 or 9 members of the EDP who are also members of the Roundtable. As previously noted, this situation is fraught with the potential for influence or conflict or the appearance of a conflict. For the foregoing reasons this Commission's decision in Baxter is distinguishable. IV. Conclusion: As acting Secretary of Commerce and Executive Director of the EDP, you are a "public official" as that term is defined in the Ethics Act. Further, as a candidate for public office as of February 3, 1987, you became subject to the restrictions of the Ethics Act at that time. The severance payment, as part of your termination agreement with the Roundtable, is prohibited both by Sections 3(a) and 3(b) of the Ethics Act. You are advised that if you retain the $166,000 and continue to serve in the position of acting Secretary of Commerce and Executive Director of EDP and further if a complaint is filed with this Commission, this Commission would find a violation of Sections 3(a) and 3(b) of the Ethics Act. Honorable Donald F. Mazziotti Page 8 Pursuant to Section 7(9)(i), this ipinion 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 reconsider- ation should present a detailed explanation setting forth the reasons why the opinion requires reconsideration. 51 Pa. Code §2.15. By the Commission, G. Sieber Pancoast Chairman STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 DISSENT Through the office of general counsel, Mr. Mazziotti has requested the State Ethics Commission to issue an opinion on the following question: Is Mr. Mazziotti prohibited, pursuant to the Ethics Act, to serve as either Secretary of Commerce or Executive Director of the Economic Development Partnership by virtue of having received a severance payment from his previous employer. An opinion has been filed over the signature of the chairman in which it is concluded that Mr. Mazziotti may not so serve and further that if a Complaint is filed, the Commission will find a violation of various sections of the Act. From this conclusion, - I must dissent for the following reasons: 1. The published opinion and conclusion does not properly reflect the will of the majority of the Commission. In fact, Chairman Pancoast has publicly declared that his vote was cast as a result of a misapprehension of the motion and that it was his intention to vote in favor of the motion made by Commissioner Andrews and against the motion made by Commissioner Marshall. The opinion and conclusion, therefore, does not have sufficient support to make it effective. 2. It is my opinion that the matter currently before the Commission is controlled by opinion of the Commission. In re: Baxter, 81 -004. 3. With all due respect to the other members of the Commission, it is my opinion that the conclusion is unenforceable in that it denies Mr. Mazziotti certain basic procedural rights that are his by virtue of law. By: Dennis C. Harrington State Ethics Commissi:n Member /1N ,E1 \ \\JElf:ber • Pennsylvania Business Roundtable 31, 1986 Mr. Quentin E. Wood Chairman and Chief Exec. Officer Quaker State Oil Refining Corporation 2SS Elm Street Oil City, A 16301 Dear Quentin: Best wishes for the New Yearl I say that as both your staff director for the Roundtable and as a very pleased stockholder. As a simple matter of rumor control, I want to let you know that I have been repeatedly contacted by Bob Casey's staff director (Bill Keisling) and, finally by-his transition team director (Bill Smith) urging me to apply for the position of executive director of the proposed statewide economic development corporation which will be the Governor's lead agency for development. I have declined, suggesting that I could be of greater value to economic development and the Governor in my currant position. Rumors persist, however, that I am going to be the executive director which will coma as news to the selection committee formed for this purpose chaired by Dick Cyert. I have also been contacted by Neil Goldschmidt, Governor - elect of Oregon, President of Nike, Inc. and former U.S. Secretary of Transportation requesting that I serve as his chief of staff, economic development director or director of the Port of Portland. I have declined all of those offers, but I have agreed to help him formulate a management approach to economic development in Oregon based in large part on the economic strategy we have developed. Sincere17, Mr. Quentin X. 1*z,od December 31, 1984 Page '11,0 Donald 1. Xazsiotti While I have no present plans to do anything but continue with the Roundtable, 1 do intend to consider my options in early 1987 if for no other reason than to evaluate my own future. Since I perceive no push, it would take a strong pull to change directions. We have done a lot and ther•'s a lot more to be done. In any event, I won't hide the ball. With regard to the meeting on January 14 and the Philadelphia Chamber event on the fifteenth, I will be --- :'forwarding materials to you on both in the near future. •