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HomeMy WebLinkAbout91-002 ConfidentialI. Issue: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 OPINION OF THE COMMISSION Before: Robert W. Brown, Vice Chair G. Sieber Pancoast Dennis C. Harrington Daneen E. Reese Roy W. Wilt DATE DECIDED: February 14, 1991 DATE MAILED: March 21, 1991 II. Factual Basis for Determination: 91 -002 Re: Public Official, Former Public Official, Executive Level Employee, Offer of Employment. This Opinion is issued in response to your confidential request of December 5, 1990. Whether the Public Official and Employee Ethics Law presents any prohibition or restrictions upon an executive -level state employee from accepting an offer of employment from a corporation that has involvement with his agency. A heads the O. A also chairs various boards and Commissions within the 0 such as T. In addition, U is an agency outside of the 0 of which A is a board member. A inquires as to the propriety of his employment by C as its president under the Ethics Law. C as a Pennsylvania non - profit corporation was formed in May 1983 and qualifies as a tax - exempt organization under Section 501(c)(3) of the Internal Revenue Code. C is a supporting organization of the D which is also a Pennsylvania non- profit corporation and a tax - exempt industry association under Section 501(c)(6) of the internal Revenue Code. C has a corporate purpose as follows: Page 2 " a. To foster the growth of advanced technology; b. To support and strengthen advanced technology enterprises; c. To promote the development of advanced technology; d. To promote education concerning and involving advanced technology; e. To encourage an awareness of advanced technology; f. To provide access to information concerning the development and implementation of advanced technology; and g. To develop and maintain communications with regard to advanced technology with members of the business community, the media, and the federal, state and local governments in order to promote an awareness and support of advanced technology." The board of directors of C are also directors of D. In addition, the executive director of D is also the executive director of C and additional administrative personnel have direct responsibility for C's programs. After submitting the names of the six current directors of the board of C, you state that the corporation during its first four years of operation carried out its public program, education and regional economic development activities largely funded by grants from private and corporate foundations in western Pennsylvania including the E. The activities of C have focused on the diversification and strengthening of the economy in western Pennsylvania and to that end the objectives of the organization have evolved to include the following: "1) extend the benefit of the emerging technology industry throughout the region; 2) improve the competitive posture of the existing traditional manufacturing sector; 3) build on the existing research base to create a viable biomedical industry; and 4) foster the area's knowledge resources (at all levels) and increase the public's awareness of the opportunities presented by the growing technology industry." The public programs since 1983 have included educational programs which provide advice and guidance to an array of school systems on preparing graduates for knowledge -based technology- driven economy. In particular, the programs include seminars, plant tours and a series of annual job fairs directed towards bringing greater awareness and understanding of job opportunities and the requirements of such positions. A major initiative was undertaken by C in 1986 regarding extending the benefits of the growing technology industry to parts of the region which were hardest hit by the recession of the 1980's. With Page 3 the support of a number of private and corporate foundations including the G, C worked with the I in establishing an incubator designed to attract new business to J and other parts of B. Further in 1988, C undertook activities such as launching the K a non - profit entity designed to facilitate the commercialization of promising biomedical technology in western Pennsylvania which action was undertaken to address the gap both in targeted funding and in enhancing the capacity of scientists to deal with business building aspects of their field. The K was capitalized with over $1.2 million in private foundation support. Also in 1988, C led a consortium of universities, and area economic development agencies and industry groups to create the L as a separate program within the C corporate structure. C has raised between 300 and 500 thousand dollars annually in grants and fee income and between 1.5 and 2 million dollars in in- kind support for this program. L has also received from the Commonwealth of Pennsylvania 1.7 million dollars in each of the program years for 1988 -1989 and 1989 -1990 and has been awarded a contract for 1.4 million dollars in payments for the year 1990 -1991. C in 1990 established a special M designed to provide capital loans to companies in Pennsylvania which are attempting to become more competitive in the manufacturing process. The M will be used primarily to finance the installation of information systems and other software systems and such program has been capitalized through a $1.5 million grant from the H. It is anticipated in 1991 that C will restructure from a supporting organization tied to the D to a stand alone entity independent of D. C's future activities would be expanded to include a number of regionally based economic development activities. In addition, the N will be merged into C and initiatives will be undertaken to expand investment and exports and focus on worker training and education, with L continuing as a significant C program. It is anticipated that C's operations will become more pro- active, that is, to seek or assist manufacturers who because of size or other reasons might not avail themselves of C services. In addition, C will shift from a focus of partial reliance on state funding to cover some of its operation costs, to corporate and private foundation grants, federal grants and fees for service income as the majority sources of its revenue. There are no current plans to apply for other state grants although C will undertake new activities which are yet to be determined. If such would occur, A would remove himself from the process. The proposed employment of A by C will be as its president with overall responsibility for operations. Since L will remain a program within C and some funding may continue from the Commonwealth on a declining basis, all necessary procedures would be implemented in order to comply with the provisions of Section 403(g) of the Ethics Law. Thus, A would not appear, contact, communicate, or correspond with employees or representatives of the 0 nor would he represent C in any Page 4 fashion before the 0. Furthermore no bid or contract proposals with the Department would be signed by him or contain his name during a period of one year after his resignation. A would not during his first year as president have direct responsibility for the day -to -day operations of any program which would involve state funding and all reasonable procedures to prevent any inadvertent transgression of Section 3(g) of the Ethics Act would be implemented. You then express your view that Section 3(i) of the Ethics Law is inapplicable to A since the specific prohibition as to an executive -level state employee is limited as to active participation regarding recruitment or inducement to open a new plant, facility or branch or the expansion thereof within the Commonwealth. Although the P was established in July of 1987 which was prior to A becoming Secretary of the 0, the implementation occurred during his tenure. Thereafter in May 1988, a request for proposal (RFP) process created R for the P. C became a recipient of state funds through the above RFP which was issued generally to all persons within the Commonwealth. In responding to the RFP, C led a consortium of universities, area economic development agencies and industry groups in submitting a proposal which was considered with many others and was one of several which were selected as successful programs. Although there was one other proposal submitted for S, there was no actual decision to make between that proposal and the proposal by C which had the coalition of universities, corporations, cities, counties as well as the community support, matching funds and other factors. Although C voluntarily requested to participate in the state program, you state that it was not sought after and that A did not actively recruit or induce C. Finally, all of C's involvement with the 0 in connection with the P has been with individuals serving as Directors of the Q and not directly with A. It was the Q that implemented the program and the RFP's as well as made the selection process and recommendations; A reviewed and approved the recommendations as to R with consultation of the F. As Secretary of the 0, A did have and has had discussions with directors and officers of the D and C in connection with regional development activities. Further, C received no funding from Pennsylvania until it responded to the RFP. However, you state that A had no direct involvement with C concerning the P nor did he request or solicit or otherwise induce its participation in such a program. A as Secretary of the 0 had ultimate responsibility for the P, and his actions in fulfilling the responsibilities with regard to C and the commitment of state funds to L was to supervise and review the activities and approve the recommendations of the Director of the Q. D has received grants from the V which have come from the regional center with Pennsylvania giving a cursory review. A as Chair of the Board of the V does have certain oversight and approval responsibility. Page 5 The process is decentralized and it is rare for a regional center to be overturned since A's review is pro forma. C is interested in securing the talents of A whom it considers a critical component for the success of its efforts to expand and extend the rejuvenation of the Pennsylvania economy. The salary which will be paid to A during his employment with C will be paid entirely from private funds. You therefore request the views of this Commission as to the propriety of the proposed employment by A as president of C. III. Discussion: As Secretary of 0, A is a public official as that term is defined under the Ethics Law, and hence he is subject to the provisions of that law. In addition, he is an executive -level state employee as that term is defined under the Ethics Law, infra and subject to the requirements of Section 3(i), infra. 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 in the Ethics Law as follows: 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 Page 6 and responsibilities unique to a particular public office or position of public employment. "Executive -level State employee." The Governor, Lieutenant Governor, cabinet members, deputy secretaries, the Governor's office staff, any State employee with discretionary powers which may affect the outcome of a State agency's decision in relation to a private corporation or business or any employee who by virtue of his job function could influence the outcome of such a decision. In addition, Sections 3(b) and 3(c) of the Ethics Law provide in part that no person shall offer to a public official /employee and no public official /employee shall solicit or accept any thing of monetary value based upon the understanding that the vote, official action, or judgment of the public official /employee would be 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. Section 3(i) of the Ethics Law provides: Section 3. Restricted Activities (i) No former executive -level State employee may for a period of two years from the time that he terminates his State employment be employed by receive compensation from, assist or act in a representative capacity for a business or corporation that he actively participates in recruiting to the Commonwealth of Pennsylvania or that he actively participated in inducing to open a new plant, facility or branch in the Commonwealth or that he actively participated in inducing to expand an existent plant or facility within the Commonwealth, provided that the above prohibition shall be invoked only when the recruitment or inducement is accomplished by a grant or loan of money from the Commonwealth to the business or corporation recruited or induced to expand. Under Section 3(a) of the Ethics Law quoted above, a public official may not use the authority of office or confidential information to obtain a private pecuniary benefit for himself, a member of his immediate family, or a business with which he or a member of his immediate family is associated. Page 7 As quoted above, Section 3(i) sets forth a specific prohibition that a former executive -level state employee for a period of two years after termination of state employment may not be employed or receive any compensation or act in a representative capacity for a business or corporation that the former executive -level state employee participated in recruiting or inducing. It should be further noted that the above restriction specifically applies to the situation where the recruitment or inducement is accomplished by a grant or loan of money or a promise of a grant or loan of money from the Commonwealth to the business or corporation recruited or induced to expand. The intendment of the above provision of the Ethics Law is to prohibit an executive -level state employee from obtaining employment or acting as a representative for various businesses or corporations that were recruited or induced to expand. Thus, Section 3(i) of the Ethics Act would restrict employment for a two year period as to any business or corporation if the recruitment or inducement was accomplished by a grant or loan of money or promise of a grant or loan of money from the Commonwealth to the business or corporation which was recruited or induced to expand. Section 3(i) of the Ethics Act would not preclude employment or representation of clients unless the above qualifying condition of Section 3(i) is applicable. In applying the proffered facts to Section 3(a) of the Ethics Law, Section 3(a) would prohibit A from using the position or emoluments of public office or confidential information to advance an opportunity of private employment with C. Once again, it is not suggested that A has engaged in such conduct and the foregoing is provided to give a complete response to your inquiry. As to Section 3(i) of the Ethics Law, A is subject to that provision of law since he is an executive -level state employee. However, Section 3(i) would not restrict him from the position of employment with C provided he did not actively participate in recruiting or inducing C to open a new facility or branch in the Commonwealth or participate in inducing C to expand an existing plant or facility that was accomplished by a grant or loan of money from the Commonwealth to C that was recruited or induced to expand. In the instant matter, we do not believe that the employment of A by C would be prohibited by Section 3(i) of the Ethics Act because the proffered facts do not establish that A actively participated in either recruiting or inducing C to open a new facility or branch or expand through a grant or loan of money from the Commonwealth. Although it is true that A as Secretary of the 0 would have certain broad overview responsibilities by the very nature of his position, the submitted facts state that there has been no active participation in the recruitment or inducement. Accordingly and based upon the foregoing assumptions, we are of the opinion that A would not be prohibited from accepting the position of employment with C. Page 8 At such time as A terminates public service, he would become a former public official subject to the restrictions of Section 3(g) of the Ethics Law. 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 term "governmental body with which a public official or public employee is or has been associated" is defined under the Ethics Law as follows: Section 2. Definitions "Governmental body." Any department, authority, commission, committee, council, board, bureau, division, service, office, officer, o administration, legislative body, or other 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. In applying the above definition to the instant matter, we must conclude that the governmental body with which A was associated upon termination of public service would be 0, hereinafter Department, which would specifically include all boards and commissions both within and outside of the Department as to which A chaired or was a member. The above is based upon the language of the Ethics Law, the legislative intent (Legislative Journal of House, 1989 Session, No. 15 at 290, 291) and the prior precedent of this Commission. Therefore, within the first year after termination of public service, Section 3(g) of the Ethics Law would apply and restrict representation of persons or new employers vis -a -vis the Department. Turning now to the scope of the restrictions under Section 3(g), the Ethics Law does not affect one's ability to appear before agencies or entities other than with respect to the former governmental body. Likewise, there is no general limitation under Section 3(g) on the type of employment in which a person may engage, following departure from his governmental body. It is noted, however, that the conflicts of interest law is primarily concerned with financial conflicts and violations of the public trust. The intent of the law generally is that during the term of a person's public employment he must act consistently with the public trust and upon departure from the public sector, that individual should not be allowed to utilize his Page 9 association with the public sector, officials or employees to secure for himself or a new employer, treatment or benefits that may be obtainable only because of his association with his former governmental body. In respect to the one year representation, the Ethics Law defines "Represent" as follows: Section 2. Definitions. "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. In addition, the term "Person" is defined as follows under the Ethics Law: Section 2. Definitions. "Person." A business, governmental body, individual, corporation, union, association, firm, partnership, committee, club or other organization or group of persons. In Popovich, Opinion 89 -005, we have also interpreted the term "representation" as used in Section 3(g) of the Ethics Law to prohibit: 1. Personal appearances before the former governmental body or bodies, including, but not limited to, negotiations or renegotiations in general or as to contracts; 2. Attempts to influence; 3. Submission of bid or contract proposals which are signed or contain the name of the former public official /employee; 4. Participating in any matters before the former governmental body as to acting on behalf of a person; 5. Lobbying, that is representing the interests of any person or employer before the former governmental body in relation to legislation, regulations, etc. This Commission has also held that listing one's name as the person who will provide technical assistance on such proposal, document, or bid, if submitted to or reviewed by the former Page 10 governmental body constitutes an attempt to influence the former governmental body. Therefore, within the first year after termination of service, A should not engage in the type of activity outlined above. A may, assist in the preparation of any documents presented to the Department so long as he is not identified as the preparer. A may also counsel any person regarding that person's appearance before the Department. Once again, however, the activity in this respect should not be revealed to the Department. Of course, any ban under the Ethics Law would not prohibit or preclude the making of general informational inquiries to secure information which is available to the general public. This must not be done in an effort to indirectly influence the former governmental body or to otherwise make known to that body the representation of, or work for the new employer. 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 Secretary for 0, is a public official and executive -level state employee subject to the provisions of the Ethics Law. Under Section 3(i) of the Ethics Law, the Secretary would not be prohibited from accepting a position of employment with C since he did not actively participate in inducing or recruiting C to open or expand a facility or branch through a grant or loan of money from the Commonwealth. When the Secretary terminates service, he as a former public official must comply with the restrictions of Section 3(g) noted above. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Law. Further, should service be terminated, as outlined above, the Ethics Law also requires that a Statement of Financial Interests be filed for the year following termination of service. 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. This letter is a public record and will be made available as such. Finally, any person may request the Commission to reconsider its Opinion. The reconsideration request must be received at this Page 11 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 Commission, ennis . Har ngton, Commissioner Robert W. Brown, Vice Chair dissents only as to the finding that the employment is not prohibited by Section 3(i) of the Ethics Law. STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 Date: March 21. 1991 DISSENTING OPINION On February 14, 1991, the Commission considered a confidential request for an opinion as to the propriety of an executive -level state employee, specifically the Secretary of the 0, accepting an offer of employment from a corporation that has involvement with his agency. The complex factual record is thoroughly set forth in the first five pages of the majority opinion and will not be repeated herein. However, this dissent is most significantly based upon the following facts. A heads the 0. C is a Pennsylvania non - profit corporation which qualifies as a tax - exempt organization under Section 501(c)(3) of the Interal Revenue Code. C is the prospective employer of A. In 1988, C led a consortium of universities and area economic development agencies and industry groups to create the L as a separate program within the C corporate structure. C raised between three hundred and five hundred thousand dollars annually in grants and fee income and between 1.5 and 2 million dollars in in -kind support for this program. L has also received from the Commonwealth of Pennsylvania 1.7 million dollars in each of the program years for 1988 -1989 and 1989 -1990 and has been awarded a contract for 1.4 million dollars in payments for the year 1990 -1991. Although C has plans to restructure and to shift from a focus of partial reliance on state funding to cover some of its operation costs, to corporate and private foundation grants, federal grants and fees for service income as the majority sources of its revenue, L will continue as a significant C program and some funding may continue from the Commonwealth on a declining basis. C did not receive funding from Pennsylvania until it responded to a request for proposal (RFP) process related to the P. As Secretary of the 0, A had ultimate responsibility for the P. Although the Q implemented the program and the RFP's and made the selection process and recommendations, it was A who reviewed and approved the recommendations with consultation of the F. The facts submitted to the Commission indicate that A's responsibilities with regard to C and the commitment of state funds to L were to supervise and review the activities and approve the recommendations of the Director of the Q. 2 Furthermore, it should be noted that A also chairs various boards and commissions within the Department including the V. The V has provided grants to the D which is also a Pennsylvania non - profit corporation and a tax exempt industry association under Section 501(c)(6) of the Internal Revenue Code. C is a supporting organization of D. The board of directors of C are also directors of D and the executive director of D is also the executive director of C, with additional administrative personnel having direct responsibility for C's programs. These grants have come from the regional center with Pennsylvania reviewing them. As Chair of the Board of the V, A does have certain oversight and approval responsibility. C now seeks to hire Secretary A as its president. On February 14, 1991, the Commission expressed an opinion affirming the ethical propriety of Secretary A's proposed employment by C. I dissented only as to the finding that the employment is not prohibited by Section 3(i) of the Ethics Law. Various assurances were provided by Secretary A and C that every effort would be made to comply with the requirements of the Ethics Law, and it is important to note that my dissent is not based upon any doubt with regard to the integrity and good intentions of the Secretary or his prospective employer. Rather, I must dissent from a recognition of the command and control that a public official and executive -level state employee in such a capacity exercises in the discretionary process of awarding such grants. I interpret the Ethics Law as prohibiting this sort of situation where an organization applies for and receives a grant as a result of a grant funding process from a particular department, and may indeed exist largely as a result of that grant, only to have the public official /executive -level state employee leave his official post and accept employment with that very organization. This dissent is based upon an objective standard, and for the reasons which follow. Section 3(i) specifically prohibits a former executive -level state employee from being employed or receiving any compensation or acting in a representative capacity for a business or corporation that the former executive -level state employee participated in recruiting or inducing. The prohibition is for two years after the termination of state employment. This restriction specifically applies where the recruitment or inducement is accomplished by a grant or loan of money or a promise of a grant or loan of money from the Commonwealth to the business or corporation recruited or induced to expand. In the instant matter, I believe that the employment of A by C would be prohibited by Section 3(i) of the Ethics Act because the proffered facts establish that A did actively participate in recruiting or inducing C to open a new facility or branch or expand through a grant or loan of money from the Commonwealth. A as Secretary of the 0 would have certain broad overview responsibilities by the very nature of his position. But furthermore, the submitted facts specifically state that A as Secretary of the 0 had ultimate responsibility for the P, and his actions in fulfilling the responsibilities with regard to C and the commitment of state funds to L were to supervise and review the activities and approve the recommendations of the Director of the Q. The submitted facts do not specifically state that A also had the discretionary responsibility to direct the activities or disapprove the recommendations of the Director of the Q, but given the nature of his office, his ultimate responsibility for the P, and his supervisory and reviewing role over the activities of the Director of the Q who offered those recommendations, it is clear that A had the discretionary responsibility to direct the activities and /or to approve or disapprove such recommendations of the Director. As Secretary of the 0, A had the final say as to which organizations would receive state funding. He was the "captain of the ship" with regard to the commitment of state funds to the interests of the entity which is now his prospective employer. It is my opinion that the exercise by A of his discretionary powers with regard to his above responsibilities was active. He not only participated, but he made the ultimate decisions. Although it was suggested to the Commission that C voluntarily requested to participate in the state program and was not sought after or actively recruited or induced by A, this is the issue to be determined by this Commission. The Ethics Law does not define "recruiting" or inducing." However, the language of Section 3(i) clearly states that a grant or loan of money may accomplish the "recruitment" or inducement ": ...provided that the above prohibition shall be invoked only when the recruitment or inducement is accomplished by a grant or loan of money or a promise of a grant or loan of money from the Commonwealth to the business or corporation recruited or induced to expand. 65 P.S. S403(i) (Emphasis Added). The legislative history would support this conclusion. The proponent of the amendment which included the statutory section at issue stated: The need, again, for this type of law is clear. We hear a lot today about businesses being recruited into Pennsylvania. That is 4 good, but along with that and the millions of dollars of inducement through loans or grants or whatever that are provided, there should be a safeguard....There is a potential for self dealing and the possibility of personally profiting from these negotiating efforts. Legislative Journal of House, 1978 Session, No. 42 at 2995 (Emphasis added). In this case, I believe the submitted facts establish active participation in recruiting or inducement which includes but goes beyond grants. The submitted facts clearly state that although C voluntarily requested to participate in the state program, it was selected from among others as a successful program. Although only one other proposal was submitted for S, which other program may or may not have been of a competitive caliber, a selection was indeed made. Furthermore, A had ultimate responsibility for the P, and his actions in fulfilling the responsibilities with regard to C and the commitment of state funds to L were to supervise and review the activities and approve the recommendations of the Director of the Q. Inherent in his level of responsibility was the discretion to direct those activities or to disapprove such recommendations. His exercise of his discretionary powers included, but was not limited to, decisions regarding the commitment of state funds. I have no difficulty in concluding that A thereby actively participated in either recruiting or inducing C to open a new facility or branch or expand through a grant or loan of money from the Commonwealth. I am therefore of the opinion that A is prohibited under the Ethics Law from accepting the position of employment with C. As previously stated, I do not question the personal integrity or good intentions of the Secretary, but am mindful of the stated purpose of the Ethics Law that a public office is a public trust and the people have a right to be assured that the financial interests of the holders of public office do not conflict with the public trust. For the reasons stated above, I opinion but must respectfully dissen cannot join in Robert W. Brown Vice Chairman the majority