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HomeMy WebLinkAbout89-014-R Cappabianca_• I. Issue: Honorable Italo S. Cappabianca State Representative 1216 West 26th Street Erie, PA 16508 II. Factual Basis for Determination: STATE ETHICS COMMISSION • 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 OPINION OF THE COMMISSION Before: .Helena G. Hughes, . Chair Robert W. Brown, ; Vice «,Chair '' _ ..Thomas Andrews" _G. Sieber Pancoast :Dennis C. Harrington;` James M. Howley Michael J. Washo.. - DATE DECIDED: October 26. 1989 DATE MAILED:. December 19. 1989 89 -014 -R Re: Conflict, General Assembly, Representative, Travel Agency, Airline Tickets, Legislative District Office, Rental of Own Building, Reconsideration Dear Mr. Cappabianca: This Opinion is issued in response to a motion of August 30, 1989 requesting reconsideration of Cappabianca, Opinion 89 -014. Whether a member of the General Assembly under the Public Official and Employee Ethics Law may purchase airline tickets for travel to and from Harrisburg from a travel agency of which he is president, thereby generating a 10% commission for that agency and whether the member of the General Assembly may charge his legislative district account with rent at the local prevailing rate for a district office in a building he owns You'serve " -as elected member of the.Pennsylvania.Hou * e,of 'Representatives.; > In -this capacity you frequently _travel :between..Erie, your legislative district, and Harrisburg. 'It is generally your' `- practice to purchase your: airline_ tickets. from Cappabiance.Travel Agency of which you are president.: Your agency receives %. commission from the airline for the sale of such tickets.. :This510% - commission, =you -. advise is . an industry practice. �' fj { � .= .79aa:3b Honorable Italo S. Cappabianca Page 2 When you purchase an airline ticket through your agency, you submit payment to the airline less the commission which is retained by your travel agency. The used airline ticket would be then submitted for reimbursement based upon the face amount of the ticket. Since you are entitled to constitutional mileage for each week that you attend a legislative session, the reimbursement for the airline ticket is offset by that mileage. You advise that since the time of your original request for an advisory opinion you have elected to forego retaining the 10% commission on the purchase of your tickets. You also own a building in Erie which contains two apartments with separate entrances, electrical connections, water heaters, furnaces, air conditioning and utility connections for each apartment. One apartment serves as your personal residence, and the other is utilized for your legislative district office. The rent for the apartment used as your district office is paid from one of your legislative accounts. In order to obtain reimbursement, you are required to retain an independent realtor who provides an appraisal of the apartment. You also formed a corporation which holds title to the portion of the property that serves as your district office and have leased the apartment from that corporation. You have indicated that based upon the prior decision of this Commission in Romanelli which allowed legislators to rent their own buildings for district offices and in light of the provisions of the House Rules which allow for such rentals, you began charging rent in 1985 when you moved to your current building. For accounting purposes, you note that as long as you have reimbursable expenses and do not charge to the maximum allowable rent, you are not permitted to take depreciation for tax purposes. In addition, although the rent is reportable as income to the corporation, a "wash" exists because the income does not cover the mortgage or expenses. As to this facility, you note that the office is not used for any purpose other than official legislative business. The office is available to your constituency during normal working hours and is staffed by employees related to legislative endeavors. Travel agency employees do not work in your legislative district office and you do not use the facilities such as copy machines, telephones, FAX or anything else for activities other than legislative business. You inquired as to whether either of these two activities would be restricted under the provisions of the Ethics Law of June 26, 1989. On July 28, 1989, we considered this matter and determined that the aforementioned activities were not prohibited by the Ethics Law. Of the four activities who restrict restricted by three determined Law.Th h that such ac Chair tiviti dissentd. Honorable Italo S. Cappabianca Page 3 The Chair by letter of August 30, 1989 and pursuant to 51 Pa. Code 2.15 requested reconsideration of Cappabianca, Opinion 89 -014. In the reconsideration request, it was argued that although travel and legislative district office rental are authorized expenditures, the action of selecting your travel agency to purchase the airline tickets or your own building for a district office results in a private pecuniary benefit to yourself consisting of the 10% commission and rental which inure to your benefit. III. Discussion: On August 30, 1989, reconsideration was requested of Cappabianca, Opinion 89 -014. Regulation 2.15 of this Commission provides: §2.15. Reconsideration of opinions. Any person may request within 15 days of service of the opinion that the Commission reconsider its opinion. The person requesting reconsideration should present a detailed explanation setting forth the reasons why the opinion requires reconsideration. 51 Pa. Code 52.15. The Regulations of this Commission further provide the necessary criteria precedent for granting a reconsideration request of an agency adjudication as follows: Reconsideration may be granted at the discretion of the .Commission only where any of the following occur: (1) A material error of law has been made. (2) A material error of fact has been made. (3) New facts or evidence are provided which would lead to reversal or modification of the order and where these could not be or were not discovered previously by the exercise of due diligence. 51 Pa. Code S2.38. It has been specifically submitted in support of the instant request for reconsideration that the Commission's rationale in Opinion 89 -014 constituted a material error of law. The advanced position Honorable Italo S. Cappabianca Page 4 proffers that the clear and unambiguous language of Section 3(a) of the Ethics Law unequivocally addresses and prohibits the activity in which the requestor seeks to engage. Any finding to the contrary, it is argued constitutes a material error of law, thus necessitating a reconsideration of the instant matter by the Commission. Pursuant to the above quoted regulation, the timely request and proffered arguments as more thoroughly delineated below, this Commission grants reconsideration. As an elected member of the Pennsylvania House of Representatives, you are a "public official" as that term is defined in the Public Official and Employee Ethics Law of June 26, 1989. As such, you are subject to the provisions of that law. Section 3(a) of the Ethics Law provides: Section 3. Restricted Activities. (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. The following terms are defined under the Ethics Law: Section 2. Definitions. "Conflict or conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. "Conflict" or "conflict of interest" does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member or his immediate family or a business with which he or a member of his immediate family is associated. "Authority of office or employment." The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. Honorable Italo S. Cappabianca Page 5 "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 has a financial interest. Initially, since you are president of Cappabianca Travel Agency, it is clear that said agency is a business with which you are associated as defined above. As to the two questions you pose, we must determine whether there would be a use of the authority of office for a private pecuniary benefit to you or the business with which you are associated. It is assumed that the travel in question relates to the performance of legislative duties and that the travel expense, just as the rental for a district office, is within the allowable legislative limits for such expenses. As previously noted, the Public Official Compensation Law, 65 P.S. 5366.1 et. seq., provides, in part, that members of the General Assembly are to receive $47,000 per annum as a salary as well as mileage to and from their homes at a rate of $.20 per mile, circular for each week a member was in attendance. Additionally, each member may receive an allowance for clerical assistance and other expenses incurred during his term in connection with the duties of his office in the sum of $7,500 annually, as well as $2,500 which is appropriated through the General Appropriations Act of each year. 65 P.S. S366.4. Members were also allocated an unvouchered expense allowance of $12,000 per annum for the period commencing July 1, 1987 and ending November 30, 1988. 65 P.S. S366.51. There is no question that funds are allocated for legislatively related travel and for a legislative district office within allowable limits. However, our focus in this case relates not to the propriety of the authorized expenditure but to the question of whether a conflict exists regarding the specific manner in which the expenditure is to be utilized in the instant situation. In particular, the issue with which we are confronted is whether a conflict arises when you select your travel agency for the purchase of the airline ticket or your building for your legislative district office. We must decide whether the foregoing actions are a use of the authority of office to obtain a private pecuniary benefit for yourself and the_business with which you are associated. The two key questions then are whether there is a use of authority of office and secondly whether there is a private pecuniary benefit. There can be no doubt that it is only as a result of your official position that you are able to expend public funds or seek Honorable Italo S. Cappabianca Page 6 legislative reimbursement for incurred expenses relating to your official duties and responsibilities. The decision regarding where your legislative office will be located is one that rests solely with you as a legislator and is a decision that is made only in that capacity. So too, is the decision regarding your official mode of transportation. The power to make such decisions as noted above and expend public funds which are clearly in aid of your legislative duties and responsibilities is part of the actual power provided by law to a legislator. Such, without a doubt would constitute a use of the authority of your public office. As to the second question, regarding whether there would be a private pecuniary benefit we note that the Public Official Compensation Law, Act 39 of 1983, 65 P.S. 366.1 et seq., Section 4(a) provides: (a) Members salary, expense and mileage. -The salary of members of the General Assembly shall be $47,000 per annum and mileage to and from their homes at the rate of 20 cents per mile, circular, for each week a member was in actual attendance in session between their homes and the State Capitol and, except as provided herein, no other compensation shall be allowed whatsoever, except each member of the General Assembly shall receive an allowance for clerical assistance and other expenses incurred during his term in connection with the duties of his office in the sum of $7,500 annually; the salary to be payable in equal monthly installments the first day of the month, including the installment due December 1 of each even - numbered year except that the salaries of Senators elected at the General Election of 1986 during the remainder of their term shall be $35,000 per annum and such members shall receive, in addition to the allowance for clerical assistance and other expenses, the unvouchered expense allowance of $12,000 per annum. (Emphasis added). The above quoted provision of law makes allowance for legislative salaries, expenses and mileage, but also provides that "no other compensation shall be allowed whatsoever - - -" Although there is statutory authorization for maintenance of a legislative district office and travel to and from Harrisburg, the rental of your own building for a district office and the utilization of your own travel agency to purchase tickets results in a private Honorable Italo S. Cappabianca Page 7 pecuniary benefit because these allowances are in whole or part inuring to your private financial benefit. You have chosen your building for a legislative office and your travel agency for the purchase of airline tickets thereby generating income in both instances to yourself individually or through the business with which you are associated. Therefore, such would be a use of the authority of office to obtain a private pecuniary benefit. Such benefit is a financial gain which is not provided in law because there is no authorization in the Public Official Compensation Law for the resultant private pecuniary benefit. In fact, it may be argued that such income is prohibited by law since the Act states that "no other compensation shall be allowed whatsoever." Such action results in a private pecuniary benefit through the commissions received by Cappabianca Travel Agency and through the rental received by you as owner of the building. Regarding the rental situation you have argued that you do not profit from the rental arrangement and that in fact you suffer a tax loss due to such. It cannot be denied however that the funds received as rent, offset any loss which would obviously be greater without such. Indeed, you have proffered that you previously leased space privately and only purchased the building that houses your current district office after you became aware that such an arrangement would be permissible. As to the receipt by the agency of a 10% commission on the sale of airline tickets this is a straightforward profit received by a business with which you are associated and thus constitutes a private pecuniary benefit to that entity. Such activities are therefore restricted by Section 3(a) of the Ethics Law. We are aware that in Romanelli, Opinion 79 -006, we decided that a member of the General Assembly could utilize a building, which he jointly owned with his wife, as his legislative district office. However, that decision is distinguishable for three reasons. Initially, Romanelli was decided under Act 170 of 1978, the restricted activities sections of which is different from those contained in Act 9 of 1989. Additionally, we only considered the applicability of the contracting provision of Act 170 in Romanelli but not the issue of whether the activity was restricted by Section 3(a). Finally, the definition of "contract" under the current law has an exclusion concerning expenses between a public official l -and the State or political subdivision: "Contract." An agreement or arrangement for the acquisition, use or disposal by the Commonwealth or a political subdivision of consulting or other services or of supplies, materials, equipment, land or other personal or real property. "Contract" shall not mean an Honorable Italo S. Cappabianca Page 8 agreement or arrangement between the State or political subdivision as one party and a public official or public employee as the other party, concerning his expense, reimbursement, salary, wage, retirement or other benefit, tenure or other matters in consideration of his current public employment with the Commonwealth or a political subdivision. Therefore, Romanelli is not controlling on the issue of whether Section 3(a) of the current law restricts a member of the General Assembly from renting his own building for a legislative district office. We are considering this issue for the first time pursuant to the provisions of Section 3(a) of the Ethics Law. Finally, we take note of the exclusionary language within the definition of conflict as to actions which affect to the same degree a subclass consisting of a group which includes the public official. Although it has been suggested that all members of the General Assembly who rent their own buildings for legislative district offices comprise a subclass of landlords, the argument is unavailing because these members are not a subclass but are rather several individual, members who have legislative district offices in their own buildings and who charge their legislative account for rent. In reviewing this issue we must take heed of the underlying purpose of the Ethics Law which provides in part that: Section 1. Purpose., (a) 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 nominees or candidates for public office do not conflict with the public trust. 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 financial disclosure as specified in this act. Furthermore, it is recognized that clear guidelines are needed in order to guide public officials and employees in their actions. Thus, the General Assembly by this act intends to define Honorable Italo S. Cappabianca Page 9 as clearly as possible those areas which represent conflict with the public trust. We believe that this decision will further insure that the private financial interests of public officials will not conflict with the public trust. The activities in question thus are prohibited by Section 3(a) of the Ethics Law. We are mindful of the fact that this decision may in some cases result in a greater capital outlay for office space. We, however are duty bound to review such questions under the provisions of the Ethics Law and interpret said Law in a manner that is consistent with the clear language thereof and the legislatively stated purpose as noted above. We also must note that we do not herein intend to imply that there has been any actions which were occasioned by less than appropriate motivations. Indeed we note that this matter, one of great difficulty, was voluntarily brought to the Commission for review. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Law; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Law has not been considered in that they do not involve an interpretation of the Ethics Law. IV. Conclusion: The request of August 30, 1989 seeking reconsideration of Opinion 89 -014 is granted and said Opinion is vacated. As a member of the General Assembly, you are a public official subject to the provisions of the Ethics Law. Section 3(a) of the Ethics Law restricts the business with which you are associated from receiving a commission on airline tickets you purchase for legislatively related travel to and from Harrisburg. In addition Section 3(a) restricts you from charging your legislative district account for rent at the local prevailing rate for a district office in a building you own. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Law. 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. Honorable Italo S. Cappabianca Page 10 such. This letter is a public record and will be made available as By 1 e Commgt.ssio lens G. Hughe /Chair G. Sieber Pancoast and Dennis C. Harrington dissent as to the granting of the request for reconsideration and the final adjudication. W. Thomas Andrews concurs as to the granting of the request for reconsideration and dissents as to the final adjudication. ITALO S. CAPPABIA �A rA s•~ STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 December 19, 1989 DISSENTING OPINION On July 28, 1989, the Commission considered a request from the Honorable Italo S. Cappabianca for an Opinion on the following question: Whether a member of the General Assembly under the Public Official Employee Ethics Law may purchase airline tickets for travel from and to Harrisburg, Pennsylvania from a travel agency of which he is a president, thereby generating a 10% commission for that agency, and whether the member of the General Assembly may charge his Legislative District account with rent at the local prevailing rate for a district office in a building he owns. On July 28, 1989, after considerable discussion, the Commission expressed an Opinion affirming the ethical propriety of Mr. Cappabianco's actions in each case, i.e., it was appropriate for him to charge his tickets to and from Harrisburg to a travel agency of which he was a stockholder, and it was appropriate for him to charge his Legislative District account with rent at the local prevailing rate for a district office in a building he owns. Chairperson Hughes dissented from the opinion of the majority and requested reconsideration. On October 26, 1989, the Commission considered her request to reconsider the original Opinion, and agreed to do so. On reconsideration, the commissioners voted 4 - 3 to reverse the Opinion expressed at the July 28, 1989 meeting. A. SHOULD THE REQUEST FOR RECONSIDERATION HAVE BEEN GRANTED? I dissent from the decision to reconsider the original opinion and from the majority opinion after reconsideration. Reconsideration may be granted only where the Commission finds one or more of the following: (1) A material error of law has been made. (2) A material error of fact has been made. (3) New facts or evidence are provided, which would lead to reversal or modification of the Order and where these would not be or were not dis- covered previously by the exercise of due diligence. 51 Pa. Code 52.38. The Code further provides that the person requesting consideration should present a detailed explanation setting forth the reasons why the Opinion requires reconsideration (italics mine). §2.15. The only explanation setting forth her reasons for reconsideration appear in her letter dated August 30, 1989 and in their pertinent parts are set forth below. . .although these items are authorized legislative expenses, the action of selecting his own travel agency to purchase his airline tickets or using his own building for his district office results in a pecuniary benefit to Repre- sentative Cappabianca which is above and beyond the mere utilization of these expenses. I submit that a conflict exists since Representative Cappabianca would be using the authority of his office by using his travel agency to purchase his airline tickets or of selecting his building for his district office. Derivatively, such use of authority of office results in a private pecuniary benefit through the generation of a 10% commission to his travel agency and the payment of rent to himself for for a legislative business office in a building he owns." Based on that request, the majority voted to reconsider -2- the Opinion of July 28, 1989. From the request itself, it is obvious that no new facts or evidence were offered, no material error of fact was alleged, and no citation of a material error of law was offered. In the past, the Commission has been requested to reconsider numerous Opinions and Orders. In almost every instance, those requests for reconsideration were denied out of hand without public hearing and without serious debate. The mere fact that any person" is simply dissatisfied with the Commission ruling does not fulfill the requirement that a detailed explanation be given. My concern is that the business of the Commission may be very seriously impaired if, after every Opinion in which there is a dissent, or in every Opinion where the full Commission is not present, or in every Opinion where any person" considers it to be an important Opinion, that the Commission then would be required to grant reconsideration. If we accept the reason stated in Chairperson Hughes' letter, the majority would be bound in the future to accept for reconsideration any case in which the respondent requests reconsideration and in plain language, cites the reason that "I want my case reconsidered because I didn't like your first opinion." B. I FURTHER DISSENT TO THE OPINION AS EX MESSED BY THE MAJORITY ON THE ,MERITS OF THE CASE. A copy of the original Opinion decided by the Commission July 28, 1989 is attached and is included in this dissent. The legislature has established specific procedures setting forth -3- circumstances under which its members are permitted to request reimbursement for district office rentals. Members of the legislature are encouraged to make themselves accessible to their constituency. To encourage such practices the members are allowed to charge their legislative district account with rent for the district office. To guarantee against abuses of the practice, certain restrictions are placed on the rentals. The requirements and limitations are set forth in the majority opinion. To obtain the benefit of rental allowances, the legislator must comply with certain procedural steps. Those are set forth in the majority opinion. The General Assembly has clearly set forth those rules and regulations and procedures and no distinction is made between office space owned and occupied by the legislator and real estate owned by others and occupied by the legislator. Every precaution is taken to protect the practice from abuse. The record in this case clearly demonstrates that Mr. Cappabianco meticulously attended to the necessary procedures before charging his legislative district account with rent for his district office. When the Legislature has established and approved a course of conduct for its members and the member has complied fully, then there can be no legal error in that action. As so aptly stated by Commissioner Pancoast at the public hearing of October 26, 1989, .The control of legislative expense accounts is the primary responsibility of the General Assembly itself within the House and the Senate. If these funds are being expended within the rules and regulations of the legislative body, not violating • • .the use of expense accounts,. . . I -4- believe there is no error in law. . -5- . . .In this particular instance. . .these are matters to be handled directly by the Senate and the House of Representatives with respect to the use of. . ." public funds. By its opinion, the majority of the Commissioners would impose a limit on legislators not to be found in the rules of the General Assembly. On the issue of travel, every travel agency receives a commission of 10% of the base rate of the cost of the ticket (the cost of the ticket less 7 1/2% tax). The Cappabianca travel agency is incorporated. Italo Cappabianca is a stock holder in the corporation. From the sale of his tickets to and from Harrisburg by the Cappabianca Travel Agency, he may, in fact, receive some very, very small benefit if the Agency shows a profit. By its opinion, the majority proposes unreasonable restrictions and interferes with the legislator's prerogatives. The public official compensation law provides that members of the General Assembly receive mileage to and from their homes at a rate of $.20 per mile circular for each week a member was in attendance. Assume, then, that the legislator in fact, spends only $.18 cents a mile in travel. Does that then oblige this Commission to examine the expense accounts of each legislator to determine whether or not the legislator should refund the $.02 cents per mile, since, although small, it clearly would be a private pecuniary benefit under the majority interpretation? I think not. The majority quotes Section 2 of the Ethics Law to support the conclusion that a conflict of interest exists. That same Section, however, specificially eliminates from the definition of conflict of interest the facts presented in this particular case. . . . "conflict" or "conflict of interest" does not include an action having a de minimus ecoa}omiq impact (italics mine), gm which affects to the same degree a class consisting of the general public, or a sub -class consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated." If Mr. Cappabianco's actions have any economic impact at all, it is, in fact, one favorable to the taxpayers of the Commonwealth of Pennsylvania. Even in light of the most restrictive interpretation that could be imposed by the majority view, there could only be a de minimus economic impact and therefore not a conflict of interest. Respectfully submitted, DCH:jc W. Thomas Andrews concurs in this Dissenting Opinion. G. Sieber Pancoast concurs in this Dissenting Opinion.