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HomeMy WebLinkAbout89-019 ConfidentialI. Issue: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 OPINION OF THE COMMISSION Before: Helena G. Hughes, Chair Robert W. Brown, Vice Chair W. Thomas Andrews G. Sieber Pancoast James M. Howley Michael J. Washo DATE DECIDED: September 27, 1989 DATE MAILED: October 10, 1989 89 -019 Re:- Conflict, Public Employee, Contract, Consulting Services, Represent, Governmental body with which associated, Person, Police, Assistance Services, Business with which he is associated. This Opinion is issued in response to your request of July 18, 1989 for a confidential opinion. Whether the Public Official and Employee Ethics Law imposes any prohibition or restrictions upon the activities of a municipal employee, who coordinates and provides assistance services to police officers, when he seeks to terminate public employment and then provide the same services through a contract with the municipality by a corporation wholly owned by the municipal employee. II. Factual Basis for Determination: Mr. X is employed in the Director's Office of the Municipality of Y and is assigned to the Police Department in order to coordinate and provide employee assistance services to police officers. The Director's Office and Police Department have decided to have the services program managed by a private entity under contract with the Municipality rather than by a municipal employee. As a result Mr. X has been asked by the Director's Office to submit a proposal to provide a services program by contract. Mr. X has submitted a proposal, a photocopy of which has been supplied. The proposal was Page 2 submitted under the name of Z Corporation, which is 100% owned by Mr. X as President and C.E.O. The parties contemplate that the Police Department and Z Corporation would execute a contract whereby Mr. X would leave municipal employment prior to the effective date of the contract. Pending resolution of this request for advice, negotiations and execution of the proposed contract have been suspended. You inquire as to whether a contract between the municipality and Z Corporation proposed by Mr. X is permissible under the Ethics Law. Specifically, you question whether such a contract would contravene Section 3(g) of the Ethics Law. In your letter of request, you cite several Commission Opinions and Advices of Counsel: DeNinno, 81 -562, Massiah- Jackson, 80 -036, Teets, 85 -542, Hagen, 84 -019, Pinto, 84 -021, Grav, 83 -596, Cohen, 79- 045, Watson, 85 -583, Knafelc, 87 -508, McClellan, 86 -551, and Andress, 88 -648. You provide your analysis of the above cited advices in the context of the restrictions of Section 3(e) of Act 170 of 1978 upon former public employees with their former governmental bodies. After asserting that the advisories found the restrictions of 3(e) applicable to post - employment activities in some cases but inapplicable in others, you conclude that you are uncertain as to the rule which would be applied in the case of Mr. X. You ask whether Mr. X may continue to perform the services under the proposed contract that he does as a municipal employee with the change in his status from employee to contractor occurring at the suggestion of the municipality. You assert that Mr. X did not participate in the decision to provide the services program via contract and did not take official action which inured to his benefit. III. Discussion: As an employee of the Director's Office of the municipality of Y, Mr. X is a public employee as that term is defined under the Public Official and Employee Ethics Law of June 26, 1989, Act 9 of 1989. Accordingly, he is subject to the provisions of the Ethics Law, and restrictions therein apply to him. In order to answer the posed question, it is necessary to review Sections 3(a), (b), (c), (f), and (g) of the Ethics Law which will be considered seriatim. Section 3. Restricted Activities. (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. Page 3 The following terms are defined in 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. "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 Section 3(a) prohibits a public employee from engaging in a conflict of interest, defined, in part, as using the authority of office for the private pecuniary benefit of himself or a business with which he is associated. As a public employee there can be no doubt that Mr. X owes a clear and unwavering duty to his public employer. In his current position he performs, as noted in your letter of request, duties that are identical to the functions he will be performing through Z Corporation. These functions include developing policy statements, providing management services in relation to the noted program as well as a number of other administrator functions. If in fact he is currently performing similar duties, it is difficult to perceive how he has not had input into the reports that have been forwarded to the municipality concerning cost aspects of the currently existing program as well as the administrative functions of the program. Page 4 Clearly, with these duties, it is hard to perceive how he has not played some role in the basis for the municipality's ultimate decision. As such, it is evident that there would be a use of the authority of office as he has no doubt had some type of input that would have formed a basis for the final decision in this matter. In addition, as Mr. X is the sole owner and stockholder of Z Corporation, such is a business with which he is associated. Finally the contract with the municipality would necessarily result in a private pecuniary benefit for Mr. X and Z Corporation. Therefore, such activity by Mr. X would contravene 53(a) of the Ethics Law as all requisite elements would be present if such action is completed. Sections 3(b) and 3(c) of the Ethics Law provide in part that no person shall offer to a public official /employee anything of monetary value or no public official /employee shall solicit for the vote, official action, or judgment of the public official /employee would be influenced thereby. Mr. X must be aware of the two cited provisions of the Ethics Law and conform his conduct thereto. Section 3(f) of the Ethics Law imposes restrictions upon a public official /employee who seeks to contract with his governmental body: (f) No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official or public employee is associated or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the public official or public employee is associated, unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the public official or public employee shall not have any supervisory or overall responsibility for the implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of the making of the contract or subcontract. Page 5 Additionally, the term "contract" is defined in part under the Ethics Law as follows: "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. (Emphasis added) Mr. X, through the business with which he is associated, Z Corporation, is contemplating entering into a contract with the municipality of Y to provide consulting services. This proposed course of action clearly falls within the purview of Section 3(f) which requires an open and public process before any contract, valued at $500 or more, may be awarded to a public employee or the business with which he is associated. Since the consideration in the proposed contract is $5,500.00 per month, Section 3(f) has application and would require an open and public process including prior public notice and subsequent public disclosure. In addition, Section 3(f) specifically prohibits the public official /employee from any supervisory or overall responsibility for the implementation or administration of the contract. In the instant matter, there has been no open and public process but rather private negotiations between Mr. X and the municipality. Further, Mr. X would administer the contract through Z Corporation. Due to such circumstances, Mr. X proposed activity would contravene Section 3(f) of the Ethics Law, that is, Section 3(f) would prohibit such contracting. Even if Mr. X were to terminate public employment and thereafter enter into a contract, such activity would contravene Section 3(g) of the Ethics Law which imposes limitations upon the actions of a former public official /employee. Section 3. Restricted activities. (g) No former public official or public employee shall represent a person, with promised or actual compensation, on any matter before the governmental body with which he has been associated for one year after he leaves that body. The Ethics Law defines the following terms contained in Section 3 (g): Section 2. Definitions "Governmental body." Any department, authority, commission, committee, council, board, bureau, division, service, office, officer, administration, legislative body, or other Page 6 establishment in the Executive, Legislative or Judicial Branch of a State, a nation, or a political subdivision thereof or an agency performing a governmental function. "Person." A business, governmental body, individual, corporation, union, association, firm, partnership, committee, club or other organization or group of persons. "Represent." To act on behalf of any other person in any activity which includes, but is not limited to, the following: personal appearances, negotiations, lobbying and submitting bid or contract proposals which are signed by or contain the name of a former public official or public employee. Since Mr. X is presently a public employee, he would become a former public employee when he resigns his position with the municipality. As a former public employee, Mr. X would be subject to Section 3(g) of the Ethics Law which prohibits a former public employee from representing a "person" before the government body with which he has been associated. In this case, Mr. X on behalf of Z Corporation, would enter into a contract on behalf of that business with the municipality. The contract would be with the municipality of Y which is the governmental body with which Mr. X is associated. The contract would be effectuated after Mr. X's resignation from the municipality, which is within the one year period of termination of public service. Most importantly, Mr. X would engage in contractual negotiations and enter into an agreement as the representative of Z Corporation. Thus, such activity would be clearly prohibited by Section 3(g) of the Ethics Act. You assert that because Mr. X through his business will be performing the same functions under the contract with the municipality as he does in the capacity of public employee, Section 3(g) should not restrict the contracting. Although the functions being performed would be the same, there is a substantial differences in the status of Mr. X. The difference involves the changed relationship between Mr. X and the municipality of Y in that Mr. X would no longer be a municipal employee, but an independent contractor. Z Corporation under contract may serve the interests of the Police Department but Mr. X would also be upholding the interest of Z Corporation. You assert that the prior advisories decided under Section 3(e) of the Act 170 of 1978 might serve as precedent for the situation of Mr. X. Since we have to decide this matter under Act No. 9 of 1989 which has substantial changes both in the one year restriction provision as well as in the definitions, those prior decisions are not dispositive. Page 7 The instant matter is quite similar factually to Krieger, Order #595. Although that case was decided under Section 3(e) of Act 170, the matter is noteworthy because, just as in the instant matter, Mr. Krieger was employed by a municipal authority and during his employment he negotiated a contract with that authority for his consulting firm to provide the same services he performed as an employee. In that case, we found Krieger violated Sections 3(a), (c) and (e) of the Ethics Act. Parenthetically, we note that Mr. X has already had negotiations with the municipality. Although such actions may implicate Section 3(a) of the Ethics Law, we can not address that issue in this prospective advisory opinion since such actions have already occurred. The proposed activity of Mr. X in this case would be prohibited by of the Ethics Law. 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: Mr. X in the Director's Office of the municipality of Y is a "public employee" subject to the provisions of the Ethics Law. Section 3(a) of the Ethics Law would prohibit Mr. X from using the authority of office to obtain a private pecuniary benefit for a business with which he is associated, Z Corporation, to provide consulting service to the Police Department for the municipality of Y. Such contracting would be restricted by Section 3(f) of the Ethics Law due to the lack of an open and public process. Alternatively, should Mr. X terminate public employment and thereafter enter into a contract with the municipality to private consulting services, such representation of Z Corporation by Mr. X within one year after termination of public service before his former governmental body, the municipality of Y, would be prohibited by Section 3(g) of the Ethics Law. 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. This letter is public record and will be made available as such. Page 8 Finally, any person may request the Commission to reconsider its Opinion. The reconsideration request must be received at this Commission within fifteen days of the mailing date of this Opinion. The person requesting reconsideration should present a detailed explanation setting forth the reasons why the Opinion requires reconsideration. By th Commission elena G. Hughes Chair