HomeMy WebLinkAbout92-003 ConfidentialI. ISSUE:
STATE ETHICS COMMISSION
308 FINANCE BUILDING
HARRISBURG, PENNSYLVANIA 17120
OPINION OF THE COMMISSION
Before: James M. Howley, Chair
Daneen E. Reese, Vice Chair
Dennis C. Harrington
Roy W. Wilt
Austin M. Lee
Allan M. Kluger
DATE DECIDED: June 23, 1992
DATE MAILED: June 29, 1992
II. FACTUAL BASIS FOR DETERMINATION:
92 - 003
Re: Conflict, Public Official, Mayor, City, Executive on Loan,
Volunteer, Contract, Open and Public Process, Salary Paid by
Corporate Employer, Business with Which Associated, Financial
Interests, Corporation.
This Opinion is issued in response to your confidential
request of April 13, 1992.
Whether the Public Official and Employee Ethics Law imposes
any prohibition or restrictions upon a corporate executive from
accepting the position of deputy mayor on a purely voluntary basis
wherein the salary would be continued to be paid by his corporate
employer and, if permissible, whether the contracting provision of
the Ethics Law would have application as to contracts that are $500
or more.
The Mayor of A has offered to appoint you to the position of
Deputy Mayor for B, wherein you would have responsibility for
relations between the City, the Federal and Commonwealth
governments. Although your appointment would be for a one year
period, you would not receive any salary from the City. At the
present you are currently employed as the Executive Director of C
of D with duties and responsibilities consisting of relations
between D and the City and between D and Members of the General
Assembly and Members of Congress who are from the City. During .
your tenure as Deputy Mayor, you would continue to be an employee
of D but would receive your salary and benefits from D even though
Confidential Opinion 92 -003
June 29, 1992
Page 2
you would not perform any services for D.
D is a wholly owned subsidiary of E in which you have a
beneficial interest through F consisting of stock held by the
Trustee of the Plan for your account. As of December 31, 1991, the
Trustee held G shares for your account having a market value of $H.
In addition, through I you have an interest in J shares of E having
a market value of $K as of December 31, 1991. Under L you hold
options to purchase M shares of E stock.
Your decision as to whether to accept the position as Deputy
Mayor is purely voluntary on your part in that you have not been
required to take the position by D. Thus, you could elect to
remain in your current position with D and not accept the Deputy
Mayor position. Should you accept employment, you would return to
D upon completion of your employment with the City.
D provides telecommunications service to the City for
approximately $N per year; other E subsidiaries, such as 0, may
from time to time provide products and services to the City.
You do not anticipate that your duties as Deputy Mayor would
require you to participate in City decisions regarding contracting
with D or E involving the procurement of telecommunications
services or other products and services or the grant of any City
concession or franchise or right to use City property. You do not
envision that your duties as Deputy Mayor would require you to
exercise supervisory or overall responsibility for the
implementation or administration of any contract between the City
and D or another E company.
In order to assist you in making the decision as to whether
you would accept the Mayor's offer to be Deputy Mayor, you request
on behalf of yourself, D, E and other subsidiaries and affiliates
an opinion as to how the Ethics Law would impact upon the
following:
1. Your service as Deputy Mayor while remaining as an
employee of D with your compensation continuing to be
paid by D;
2. Your service as Deputy Mayor while holding an interest in
E stock;
3. Your service as a Deputy Mayor while remaining as a
compensated employee of D relative to the creation . or
continuance of contracts between the City and D, E or
their subsidiaries or affiliates; the provision of
services or contracts by D, E or their subsidiaries or
affiliates to the City; the grant by the City to D, E or
Confidential Opinion 92 -003
June 29, 1992
Page 3
their subsidiaries or affiliates of any City concession
or franchise or right to use City property;
4. Your service as Deputy Mayor while holding an interest in
E stock relative to the creation or continuation of
contracts between the City and D, E or their subsidiaries
or affiliates; the provision of services or products by
D, E or their subsidiaries or affiliates to the City or
the grant by the City to D, E or their subsidiaries or
affiliates of any City concession or franchise or right
to use City property;
5. Your service as a Deputy Mayor while remaining as a
compensated employee of D as to contracting under Section
3(f) of the Ethics Law with 'D, E or their subsidiaries or
affiliates for contracts valued at $500 or more with the
City or subcontracts valued at $500 or more with a person
who has been awarded a contract with the City without the
need for said contract to be awarded through an open and
public process including prior public notice and
subsequent public disclosure of all proposals considered
and contracts awarded;
6. Your service as Deputy Mayor while holding an interest in
E stock regarding contracting under Section 3(f) of the
Ethics Law as to D, E or their subsidiaries or affiliates
as to contracts valued at $500 or more with the City or
subcontracts valued at $500 or more with a person who has
been awarded a contract with the City without the need
for said contract to be awarded through an open and
public process including prior public notice and
subsequent public disclosure of all proposals considered
and contracts awarded.
After referencing Rendell /Lillie, Opinion 92 -001, wherein we
opined that employees of private companies could serve in positions
in City government while continuing to be employed and compensated
by their companies provided that such action on the part of the
employees was purely voluntary, you imply that a similar result is
warranted in the instant matter.
Because your duties as Deputy Mayor would not require you to
participate in City decisions regarding contracts with D or E or to
exercise supervisory or overall responsibility for the implemen-
tation or administration of any contract between the City-and those
businesses, you argue that restricting the ability of D or E
companies to contract or do business with the City on account of
your position as Deputy Mayor would serve no useful purpose. You
then conclude that there would be no need to apply Section 3(f) of
the Ethics Law to such contracts between the City and D or other E
Confidential Opinion 92 -003
June 29, 1992
Page 4
companies or to a contract between the City and contractor to whom
D or another E company is a subcontractor where public bidding of
the contract is not otherwise required by law.
At the hearing on this matter, you argued that given the
abstention from matters involving D, there would be no need to
apply the contracting provision because the involvement of one
employee of a large company with the City would be de minimis.
Further, historically, the contract between D and the City has not
been bid based upon an opinion of the city solicitor. Finally, it
is asserted that bidding makes no sense as to the utility services
provided by D.
III. DISCUSSION:
As the Deputy Mayor of A, you would be a public official as
that term is defined under the Ethics Law and hence subject to the
provisions of that law. 65 P.S. S402; 51 Pa. Code S1.1.
The following terms are defined under the Ethics Law:
Section 2. Definitions
"Authority 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.
"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 of his immediate family or
a business with which he or a member of his
immediate family is associated.
"Business with which he is associated."
Confidential Opinion 92 -003
June 29, 1992
Page 5
65 P.S. S402.
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.
"Business." Any corporation, partner-
ship, sole proprietorship, firm, enterprise,
franchise, association, organization, self -
employed individual, holding company, joint
stock company, receivership, trust or any
legal entity organized for profit.
"Financial interest." Any financial
interest in a legal entity engaged in business
for profit which comprises more than 5% of the
equity of the business or more than 5% of the
assets of the economic interest in
indebtedness.
"Confidential information." Information
not obtainable from reviewing a public
document or from making inquiry to a publicly
available source of information.
"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 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.
In reviewing the instant matter it will be necessary for us to
consider the applications of Sections 3(a), (b), (c), (e), (f) and
(j) of Act 9 of 1989.
Section 3(a) of the Ethics Law provides:
Section 3. Restricted Activities
Confidential Opinion 92 -003
June 29, 1992
Page 6
(a) No public official or public
employee shall engage in conduct that
constitutes a conflict of interest.
65 P.S. §403(a). The above Section of the Ethics Law provides that
a public official /employee 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. Thus,
Section 3(a) of Act 9 of 1989 would preclude you as Deputy Mayor
from using the authority of office through official action,
participation or involvement or any confidential information for
the private pecuniary benefit of yourself or a business with which
you are associated.
Our inquiry must focus upon the business(es) with which you
are associated. Given your employment with D, it is clear that
that is a business with which you are associated. The fact that
there are parent and subsidiary corporations of D, does not make
those other corporations, in and of themselves, businesses with
which you are associated since they are separate corporate
entities. However, we do note that you have various financial
interests in some of those corporations and therefore the question
becomes whether you have a "financial interest" as that term is
defined in the Ethics Law. Although you have supplied information
as to stock ownership, stock value and stock options, no
information has been supplied as to whether those respective
interests exceed the 5% requirement as to the equity of the
business or the assets of economic interest in indebtedness. Given
the magnitude of those corporations, we will expressly assume that
your interests are less than 5% in which case you would not have a
"financial interest" in those related corporations; our decision is
therefore expressly conditioned upon that assumption.
We must conclude that you would have a conflict under Section
3(a) of the Ethics Law as to matters involving D, the business with
which you are associated; you would not have any conflict as to E
or any other subsidiaries or affiliates provided those affiliates
are separate corporate entities and provided that your interests
would be less than the threshold as set forth in the definition of
"financial interest ".
As to Sections 3(b) and 3(c) of the Ethics Law, these
provisions 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 anything of monetary
value based upon the understanding that the vote, official action,
or judgement of the public official /employee would be influenced
thereby. Reference is made to these provisions of the law not to
imply that there has been or will be any transgression thereof but
Confidential Opinion 92 -003
June 29, 1992
Page 7
merely to provide a complete response to the question presented.
Section 3(e) of the Ethics Law provides:
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.
65 P.S. S403(e)(1).
The above provision of law restricts an individual from either
soliciting or accepting a severance payment or anything of value
contingent upon the acceptance of public employment. In
Confidential Opinion 91- 005 -R, we opined that Section 3(e)(1) would
not preclude associate attorneys in a private law firm from being
utilized by the city solicitor or district attorney or other public
entity where their salaries would be paid by the law firm in that
the acceptance or assumption of public employment was not
contingent upon the solicitation or acceptance of anything of
value. In accord, see Rendell /Lillie Opinion 92 -001, wherein we
held that Section 3(e) would not prohibit the mayor from utilizing
executives on loan from private employers on a voluntary basis
where their salaries would be continued to be paid by their private
employers since there was nothing in the proffered facts that the
solicitation or acceptance of public employment was contingent upon
the solicitation or acceptance of anything of value. We reached a
contrary holding in Confidential Opinion 90 -014 where the operative
facts were substantially different.
We believe that Confidential Opinion 91 -005 -R and Rendell/
Lillie are controlling on the instant matter. It is specifically
stated as a fact in the advisory request that the acceptance of the
position of Deputy Mayor is on a purely voluntary basis without any
requirement on your part from D to take the position. Since you
have stated that you could elect to remain in your current job with
D and not accept the position of Deputy Mayor, we find, based upon
your factual representation, that the contingency element of
Section 3(e) is not present in this case. Therefore, Section 3(e)
of the Ethics Law would not preclude you from voluntarily accepting
the position of Deputy Mayor.
Section 3(f) of the Ethics Law provides:
Section 3. Restricted activities
(f) No public official or public
employee or his spouse or child or any
Confidential Opinion 92 -003
June 29, 1992
Page 8
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 responsi-
bility for the implementation or adminis-
tration 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.
65 P.S. $403(f) .
Section 3(f) quoted above specifically prohibits a public
official /employee, or spouse or child or any business in which the
public official /employee or spouse or child is associated from
entering into a contract valued at $500 or more with the
governmental body or as to a subcontract valued at $500 or more
with a person who has been awarded a contract with the governmental
body 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.
The above provision of the Ethics Law would require that an
open and public process must be used in all situations where a
public official /employee is otherwise appropriately contracting
with his own governmental body in an amount of $500.00 or more.
This open and public process would require:
(1) prior public notice of the employment or contracting
possibility;
(2) sufficient time for a reasonable and prudent
competitor /applicant to be able to prepare and present an
application or proposal;
(3) public disclosure of all applications or proposals
Confidential Opinion 92 -003
June 29, 1992
Page 9
considered and;
(4) public disclosure of the contract awarded and offered and
accepted.
Section 3(f) of the Ethics Law also requires that the public
official /employee may not have any supervisory or overall
responsibility as to the implementation or administration of the
contract.
Although it is argued that the foregoing provision should not
have application because you do not exercise supervisory or overall
responsibility for the implementation or administration of any such
contracts, the language of Section 3(f) does not carve out any such
type of exception. Since our function is to apply the Law as
enacted by the General Assembly, we must conclude that Section 3(f )
of Act 9 of 1989 would apply to any such City contracts or
subcontracts.
It is, however, asserted that since there is only one employee
on loan from a large corporation to a large municipality, such
circumstances are de minimis which do not warrant an application of
Section 3(f). In addition, it is argued that historically there
has been no bidding based upon an opinion of the city solicitor.
In this regard, it is noted that the service is a utility service
as to which bidding makes no sense. While we appreciate the
practical arguments that have been espoused, we are nevertheless
required to follow the requirements of Section 3(f) since we have
no discretion in waiving the requirements of this Section.
It is clear that Section 3(f) of the Ethics Law applies to
those contracts between your current employer, D, a business with
which you are associated vis -a -vis any City contracts or
subcontracts. However, the above provision of law would not have
any application to E or any other separate and related corporations
as to which you do not meet the definitional requirement of
"financial interest ". Parenthetically, the provisions of Section
3(f) do not impose a low bid requirement but merely a public notice
requirement when a public official /public employee, member of the
immediate family, or business with which associated is involved in
the process.
Section 3(j) of Act 9 of 1989 provides:
Section 3. Restricted activities
(j) Where voting conflicts are not
otherwise addressed by the Constitution of
Pennsylvania or by any law, rule, regulation,
order or ordinance, the following procedure
Confidential Opinion 92 -003
June 29, 1992
Page 10
shall be employed. Any public official or
public employee who in the discharge of his
official duties would be required to vote on a
matter that would result in a conflict of
interest shall abstain from voting and, prior
to the vote being taken, publicly announce and
disclose the nature of his interest, as a
public record in a written memorandum filed
with the person responsible for recording the
minutes of the meeting at which the vote is
taken, provided that whenever a governing body
would be unable to take any action on a matter
before it because the number of members of the
body required to abstain from voting under the
provisions of this section makes the majority
or other legally required vote of approval
unattainable, then such members shall be
permitted to vote if disclosures are made as
otherwise provided herein. In the case of a
three - member governing body of a political
subdivision, where one member has abstained
from voting as a result of a conflict of
interest, and the remaining two members of the
governing body have cast opposing votes, the
member who has abstained shall be permitted to
vote to break the tie vote if disclosure is
made as otherwise provided herein.
65 P.S. §403(j).
Where a conflict exists, Section 3(j) requires the public
official /employee to remove himself from the matter without any
participation or involvement whatsoever and file the required
written memorandum as well make the requisite disclosure to his
supervisor which in this case would be the Mayor.
Turning to the six specific inquiries, we believe that the
first four inquiries have generally been addressed in our
discussion as to the applicability of Section 3(a) of Act 9 of
1989, supra. Therefore, in your position as Deputy Mayor, while
remaining a compensated employee of D, you would have a conflict as
to D but not as to E or other separate corporate subsidiaries or
affiliates, subject to the factual assumption noted above,
involving contracts with the City, the provision of products of
services to the City or the grant by the City of any concession or
franchises or right to use City property.
We likewise believe that the fifth and sixth inquiries have
been addressed in the context of Section 3(f) of Act 9 of 1989,
supra. However, we will reiterate that since D, but not B or any
Confidential Opinion 92 -003
June 29, 1992
Page 11
other corporate affiliate or subsidiary, is a business with which
you are associated, the provisions of Section 3(f) would apply as
to any City contract or subcontract and the business with which
associated where the consideration is $500 or more. Such contracts
must be through an open and public process which would include
prior public notice and subsequent public disclosure of all
proposals considered and contracts awarded.
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. Specifically not
addressed herein is P.
IV. CONCLUSION:
A Deputy Mayor would be a public official subject to the
provisions of the Ethics Law. Section 3(a) of Act 9 of 1989 would
prohibit a Deputy Mayor and a business with which he is associated
from using the authority of office or confidential information to
obtain a private pecuniary benefit for himself or the business with
which he is associated. The Deputy Mayor would be required to
abstain and have no official involvement or participation in
matters involving the business with which he is associated. The
acceptance of the position of Deputy Mayor wherein he would not
accept a City salary but would continue to accept his corporate
salary from the business with which he is associated would not be
precluded by Section 3(e) of Act 9 of 1989 in that the acceptance
of employment is on a purely voluntary basis. As to any
contracting between the business with which the Deputy Mayor is
associated and the City, the provisions of Section 3(f) require
that as to all contracts /subcontracts of $500 or more, there must
be an open and public process including prior public notice and
subsequent disclosure of all proposals considered and contracts
awarded. In addition, the disclosure requirements of Section 3(j)
outlined above must be followed. 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.
Confidential Opinion 92 -003
June 29, 1992
Page 12
The person requesting reconsideration should present a detailed
explanation setting forth the reasons why the Opinion requires
reconsideration.
By the Commission,
James M. Howley
Chair