Loading...
HomeMy WebLinkAbout90-014 Confidential..,� a w7 o ✓ ice , _: -�� �.. STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 OPINION OF THE COMMISSION Before: Helena G. Hughes, Chair Robert W. Brown, Vice Chair Dennis C. Harrington James M. Howley Daneen E. Reese DATE DECIDED: Mav 17, 1990 DATE MAILED: June 13, 1990 90 -014 Re: Conflict, Public Official, Mayor, City, Executive -On -Loan, Compensation, Salary Paid by Corporation. This Opinion is issued in response to your confidential request of March 20, 1990. I. Issue: Whether the Public Official and Employee Ethics Law imposes any prohibition or restrictions upon the mayor of a city from appointing an individual to a position where the corporate employer of that individual would continue to pay his salary and where the salary would exceed the compensation established by ordinance. II. Factual Basis for Determination: On behalf of the Mayor of the City of A you request advice under Act 9 of 1989 regarding the possible appointment of an individual to a position with the City. The position would fall within the definition of "public official" under the Ethics Law and the Mayor would be the "appointing authority" for the individual who is currently employed by a corporation which does not, to your knowledge, have any city contracts. The individual has advised the Mayor that he is willing to accept the appointed position at the rate of compensation established by ordinance. However, the Mayor is considering asking the corporation to place the individual on an "executive -on -loan" status whereby the corporation would continue to pay the individual's selary at the current corporate salary which exceeds the salary set by ordinance for that appointed position. If the corporation agrees to the arrangement, the individual will then forego the compensation set by ordinance. In light of the prohibition against soliciting or accepting "a severance payment or anything of value contingent upon the assumption or acceptance of public office or employment" provided for in Section 3(e) of Act 9 of 1989, you inquire as to whether that provision of law would prohibit the "executive -on -loan" arrangement. Page 2 If the arrangement is not prohibited by the Ethics Law, you then inquire as to what restrictions would be imposed under the Ethics Law as to this individual in the executive -on -loan status. In particular, you ask whether the corporation would continue to be a business with which the individual is associated as that term is defined under the Ethics Law; if the individual continues to be associated with his corporation, such could affect any action the individual might take relative to the corporation. At the current time, to your knowledge, there are no matters affecting the corporation that you could anticipate which would come before the individual in his capacity as public official. III. Discussion: The Mayor of the City of A is a "public official" as that term is defined under the Ethics Law. The individual, if appointed, would be a "public employee." 65 P.S. 402; 51 Pa. Code 1.1. As such, their conduct is subject to the provisions of the Ethics Law. 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 ;ninimis 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. Page 3 Section 3 of the Ethics Law provides in part as follows: Section 3. Restricted Activities. (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. Section 3. Restricted activities. (e)(1) No person shall solicit or accept a severance payment or anything of monetary value contingent upon the assumption or acceptance of public office or employment. (2) This subsection shall not prohibit: (i) Payments received pursuant to an employment agreement in existence prior to the time a person becomes a candidate or is notified by a member of a transition team, a search committee or a person with appointive power that he is under consideration for public office or makes application for public employment. (ii) Receipt of a salary, fees, severance payment or proceeds resulting from the sale of a person's interest in a corporation, professional corporation, partnership or other entity resulting from termination or withdrawal therefrom upon the assumption or acceptance of public office or employment. (3) Payments made or received pursuant to paragraph (2)(i) and (ii) shall not be based on the agreement, written or otherwise, that the vote or official action of the prospective public official or employee would be influenced thereby. (4) This subsection shall not be applied retroactively. Section 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 and no public official /employee shall solicit or accept any thing of monetary value based upon the understanding that the vote, official action, or judgement of the public official /employee would be Page 4 influenced thereby. Reference is made to these provisions of the law not to imply that there has or will be any transgression thereof but merely to provide a complete response to the question presented. In applying the provisions of Section 3(a) of the Ethics Law to the instant matter, that provision of law would restrict the Mayor from using the authority of office or confidential information to obtain a private pecuniary benefit for himself, a member of his immediate family or business with which he is associated. Since the proposed appointment of the individual does not fall within any of three enumerated categories, Section 3(a) would not restrict the Mayor from making such an appointment. Since Section 3(e) of the Ethics Law quoted above is a new provision which was added by Act 9 of 1989, it would be worthwhile to consider any advisories that we issued on this subject under Act 170 of 1978. In Baxter, Opinion 81 -004, we held that individuals in an executive exchange program were public employees required to file the Financial Interests Statements. Thereafter, in Mazziotti, Opinion 87 -005 -R we considered the propriety of the receipt by a nominee to an executive cabinet position of a severance payment from the nominee's prior employer which payment was made as an inducement to accept the position. In the cited Opinion, we found that the severance payment which was as a salary subsidization was not restricted by Section 3(a) of Act 170 because the nominee received the payment at a point in time when he was not serving as a public official and hence could not have used public office to secure such compensation. We did impose' restrictions that he could not use confidential information or participate in matters which would result in financial gain to the membership of his former employer; in addition, he could not participate in any matters in which he was previously involved with his employer. Finally, in Keisling, Opinion 88 -005, the issue under the Ethics Act was whether the Chief of Staff to the Governor could accept a supplemental pension allowance from his former employer, a non - profit corporation, which leases space to the Commonwealth. We found that the portion of the payment from the former employer which was negotiated prior to public employment was permissible but the remaining payments constituted a subsidization of his public compensation which would be prohibited by the Ethics Act. / Thereafter, the General Assembly addressed the concerns that we raised in the cited opinions by adding Section 3(e) to Act 9 of 1989 and in fact that section was a direct response to said issues. Section 3(e) of the Ethics Law restricts an individual from either soliciting or accepting a severance payment or anything of Page 5 value conditioned upon the acceptance of public employment. We note that the operative phrase in Section 3(e) is "contingent." The foregoing necessitates that our inquiry focus upon the circumstances relative to the consideration of this individual for this appointed position. Under the proffered facts, it appears that the individual is willing to accept the position at the rate of compensation set by ordinance but the Mayor is desirous of asking the corporation to place the individual on the executive -on -loan status whereby the corporation would pay the individual's salary at a rate which is higher than set by ordinance. In applying the facts of this matter to the provisions of Section 3(e) we believe that such an arrangement would be prohibited under the Ethics Law. We note that the individual is being considered for this appointment and further that the Mayor is contemplating having this individual serve on an executive -on -loan status. Under the circumstances, we must assume that there have been discussions or negotiations between this individual, the Mayor and possibly the corporation as to the source of payment of the salary. Therefore, because of the pre- existing negotiations or discussion prior to the acceptance of assumption of the public employment, we believe that the requisite "contingent" element exists which would prohibit such an arrangement. In addition, the salary for this position is set by ordinance. If the individual were to take his corporate salary which exceeds the amount set by ordinance, such would be a subsidization of his salary: This we believe was the exact situation that the Legislature was attempting to avoid through the implementation of this provision. We also note that these two enumerated exceptions set forth in Section 3(e)(2) have no application. The two exceptions relate to payments received from pre- existing employment agreements or payments received as a result of a termination or withdrawl agreement. Accordingly, at this point, if the individual accepts the appointment, he must do so in a fashion whereby his salary will be paid by the City within the legal limit set by ordinance. The individual would of course have to forego his corporate salary. The Preamble of the Ethics Law provides in part: "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 the facts of this case, we believe that the acceptance of the salary from the corporate employer would not only contravene Section 3(e) but would be contrary to the intent of the Preamble. / As to the matter of the relationship of the individual relative to the current corporate employer, we note that you have stated that the corporation to your knowledge does not have any City contracts. In addition, you anticipate that the corporation would not come before the individual in his capacity of public official. Since, on the presented facts, it has been indicated that no contact would be made Page 6 between the individual and the corporation, we will not address he question of restrictions on the individual vis -a -vis the corporation. If in the future such a situation would arise, you are advised to contact this Commission for further advice at that time. 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 Act has not been considered in that they do not involve an interpretation of the Ethics Law. IV. Conclusion: A city mayor and the appointed individual are public officials subject to the provisions of the Ethics Law. Under Section 3(e) of the Ethics Law, an individual could not be appointed to a position with the city whereby his current corporate employer would pay his salary since the individual would be accepting something of monetary value contingent upon the acceptance or assumption of public employment. The individual could serve if he accepts the salary from the city within the compensation limits set forth by ordinance. The individual would be considered a "public employee" required to f)le the Financial Interests Statement. Lastly the propriety of the proposed conduct has only been addressed under the Ethics Law. Pursuant to Section 7(10), the person who acts in good faith on this opinion issued to him shall not be subject to criminal or civil penalties for so acting provided the material facts are as stated in the request. such. This letter is a public record and will be made available as 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 the ommission, e ena G. Hughes, hair Dennis C. Harrington and James M. Howley dissent.