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HomeMy WebLinkAbout87-006 ScheinerMr. James I. Scheiner 707 South Front Street Harrisburg, PA 17104 I. Issue: II. Factual Basis for Determination: 7 i 7 r '; STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 OPINION OF THE COMMISSION DATE DECIDED: 10/14/87 DATE MAILED: 10/20/87 87 -006 Re: Conflict of Interest; Member, State Employees' Retirement Board; Investment of Pension Funds Dear Mr. Scheiner: This responds to your letter of September 21, 1987, in which you requested the opinion of the State Ethics Commission. Whether the State Ethics Act imposes any prohibitions upon you as member of the State Employees' Retirement Board from becoming a member of the board of a private company which is seeking venture capital from an investment firm in which the Retirement Board has pension fund investments. In your letter of September 21, 1987, you state that you are currently a member of the State Employees' Retirement Board, hereinafter SERB, and are interested in joining the Board of Keystone Management Systems Inc., hereinafter KMS, which is a company that specializes in providing information systems management and systems engineering services to both governmental bodies and utilities relative to transportation matters. You further state that the SERB has invested $2 million in Zero State Capital Fund pursuant to the statutory authorization of 71 Pa. C.S.A. §5101 et. seq. Zero State Capital Fund, hereinafter ZSCF, in turn, may invest some of its funds as venture capital in KMS. You state that you are interested in accepting an invitation to become a member of the Board of KMS, Inc., but question whether a conflict of interest would exist in light of your membership on SERB. In this regard, you note that at the time when SERB voted on July "9, 1986 to invest $2 million to ZSCF, you had no knowledge of the existence of KMS. Mr. James I. Scheiner Page 2 As previously noted, KMS is a company that provides certain services in the transportation area for governmental bodies and utilities. As to informational services, KMS is designed to supply feasibility studies, information relative to system design, software for system development, testing for new systems, data base conversion, system implementation, training and follow -up. As to engineering and maintenance management services, KMS offers services in the areas of road and bridge management systems, system inventory and condition monitoring, testing for pavement evaluation, survey and field testing, preliminary engineering designs, maintenance system management and life -cycle analysis. Lastly, it is noted that KMS contemplates offering services in other areas of management (water, sanitary and utility) and information systems (water, other natural resources, tax and revenue records, and land locational records). It is also noted that you are the former Secretary of Revenue of the Commonwealth of Pennsylvania, having terminated your state service in January, 1987. Based upon the above facts and circumstances, you ask whether your board membership on KMS would create a conflict with your membership on SERB in light of the fact that KMS is seeking venture capital from ZSCF in which SERB has pension fund investments. III. Discussion: As a board member of SERB, you are a "public official" as that term is defined under the Ethics Act. Accordingly, you are subject to the provisions of the Ethics Act and the restrictions therein are applicable to you. This Commission must consider whether your simultaneous service on SERB and your intended board membership on KMS would create a conflict of interest because of the investments outlined above. Section 3(a) of the Ethics Act provides: 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(a) basically provides that a public official may not use his public office or confidential information to obtain a financial gain other than compensation as provided for by law. Mr. James I. Scheiner Page 3 • Under Section 3(a), you may not use your public position to secure any financial gain for KMS or ZSCF. However, as outlined above, there does not appear to be a real possibility of any financial gain or inherent conflict arising if you were to serve both as a public official and board member of KMS. Basically, the Ethics Act does not state that it is inherently incompatible for a public official to serve as a board member in a private company. The main prohibition under the Ethics Act and Opinions of the Ethics Commission is that you may not serve the interests of two persons, groups, or entities whose interests may be adverse. See Alfano, 80 -007. In the situation outlined above, you would not be serving entities with interests which are adverse to each other. It is further 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). Under Section 3(b) of the Ethics Act cited above, which you must observe, you must neither offer nor accept anything of value on the understanding or with the intention that your official judgment would be influenced thereby. It is assumed such a situation does not exist here. This Section is referenced not to indicate that any such activity has been or w i l l be undertaken but in an effort to provide a complete response to your inquiry. Under the facts and circumstances of this case, it does not appear that your membership on SERB would conflict with your proposed membership on the Board of KMS. In this regard, it is noted that SERB invested in ZSCF at a time when you had no knowledge of KMS. Furthermore, SERB did not directly invest in KMS but invested in ZSCF which, in turn, may invest venture capital in KMS. Lastly, it is assumed, for purposes of this Opinion, that you did not use any confidential information, as a member of SERB, which resulted in the offer to you of the board membership on KMS. Mr. James I. Scheiner Page 4 However, under the Ethics Act, this Commission must observe the stated purpose of that Act which is to strengthen the faith and confidence of people in their government by assuring the public that the financial interests of the holders of or candidates for public office present neither a conflict nor the appearance of a conflict with the public trust. See Section 1 of the Ethics Act, 65 P.S. §401. Although there is no per se conflict between your simultaneous board membership on SERB and KMS, you are advised, however, that you should neither vote nor participate in any matter on SERB involving either ZSCF or KMS. You should also publicly disclose this fact in a meeting of SERB which should be recorded in the minutes. Lastly, since there is a reasonable expectation that KMS will be seeking venture capital from other sources that deal with SERB, the foregoing restrictions would be equally applicable to such other sources. It must be noted that this Commission has only addressed the propriety of your conduct under the Ethics Act regarding your simultaneous membership on SERB and the Board of KMS. Other statutes, federal or state, regulations or codes of conduct, such as the Governor's Code of Conduct or the State Adverse Interest Act, and specifically 71 Pa. C.S.A. §5931(e) (State Employees' Retirement Code) have not and cannot be addressed by this Commission. Further, since KMS contemplates providing information systems relative to tax and revenue records, you may seek further advice from this Commission as to the applicability of Section 3(e) of the Ethics Act concerning the one -year representation restriction and Section 3(g) relative to the two -year restriction provision as to former executive -level state employees. IV. Conclusion: As a board member of SERB, you are a public official as that term is defined in the Ethics Act. Accordingly, you are subject to the provisions of the Ethics Act and the restrictions therein are applicable to you. Although there is no per se prohibition against your simultaneous board membership with SERB and KMS, you are advised that you may neither vote nor participate in any matter on SERB concerning either ZSCF or KMS. You should publicly disclose this fact in a meeting of SERB which should be recorded in the minutes. Since there is a reasonable expectation that KMS will be seeking venture capital from other sources that deal with SERB, the foregoing restrictions would also apply to these sources as well. Furthermore, this Commission has only considered your opinion request under the Ethics Act; it has not considered the applicability of any other statute, federal or state, regulation, code, ordinance, or any other code of conduct such as the Governor's Code of Conduct or the State Adverse Interest Act or the provisions of the State Employees' Retirement Code. Mr. James I. Scheiner Page 5 Lastly, you may seek further advice from this Commission as to the applicability of Section 3(e) of the Ethics Act concerning the one -year representation restriction and Section 3(g) relative to the two -year restriction provision as to former executive -level state employees. 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. By the Commission, otf jecAalrw 1a0wr D. G. Sieber Pancoast Chai rman