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HomeMy WebLinkAbout94-011 ConfidentialI. ISSUE: DATE DECIDED: DATE MAILED: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 OPINION OF THE COMMISSION Before: James M. Howley, Chair Daneen E. Reese, Vice Chair Roy W. Wilt Austin M. Lee Allan M. Kluger John R. Showers 12/16/94 12/28/94 II. FACTUAL BASIS FOR DETERMINATION: 94 -011 Re: Former Public Official; Section 3(g); Executive -Level State Employee; Section 3(i); Secretary; A; Employment, Employer's Clients. This Opinion is issued in response to your confidential advisory request on November 22, 1994. Whether the Public Official and Employee Ethics Law presents any restrictions or prohibition upon the employment of the Secretary of A following termination of service. You seek a Confidential Opinion regarding your plans for employment following completion of your government service. You are an employee in A since 1987. From that date to 1991, you served as an Associate Director of B and, beginning in 1988, as Executive Deputy Secretary of A wherein you oversaw the agency's administrative functions and several of its program areas. In 1991, you were appointed as Secretary of A and as Executive Director of B wherein you continue to serve to date. As Secretary of A you oversee the development in that area Confidential Opinion, 94 -011 December 28, 1994 Page 2 with your department administering programs to provide C. Your department also includes D a unit that E. Other programs in the department include F. As Secretary of A you chair several boards of various authorities administered by A and several boards like G that approve project funding based on staff recommendations. In other cases, like H, the board's function is advisory in nature. The core function of A is to I. You, as Secretary, have been active in participating in such activities, as for example, J to locate a major bank - office operation in Pennsylvania. In many instances, the A provides financing without any active participation on your part. For example, you have oversight responsibilities including signing commitment letters on loans packaged by the A staff and other organizations without any involvement in that process. In addition, you serve as Executive Director of the B and in that capacity you oversee a staff supporting an advisory board that meets quarterly and carries out most of its work through committees or task forces assigned to develop policy recommendations on specific issues. As Secretary of A you are also a board member of various authorities not administered by the department which include K. While other employees of the department have generally represented you at these board meetings, such employees do vote and express your positions. After noting that you have carried out your duties in accord with the Governor's Code of Conduct, you advise that you intend to leave state government for employment in the private sector with L, a private commercial bank. The bank has had no relationship with you as Secretary of A and you are not aware of any contact with that bank during your tenure with the department. You inquire as to what restrictions would apply to your prospective employment with L vis -a -vis contacts with the A, what restrictions would apply to contact with other agencies or authorities of the state government and lastly, what restrictions would apply to dealings with businesses that have received financing or financing offers from the A. You appeared at the executive session and raised various issues as to the applicability of Section 3(i) of the Ethics Law. In particular, you seek guidance not as to your employment by L but with its business clients, given that you may have had relationships with some of those businesses while in the A. You question how the restrictions of Section 3(i) would apply to your dealings with such clients. Since you as Secretary of A have had a wide range of dealings with businesses, you ask whether Section 3(i) is meant to extend to Confidential Opinion, 94 -011 December 28, 1994 Page 3 every business that you have had dealings with during your tenure. You raise this issue because such businesses might be interested in a business relationship with your new employer. Although you would not directly receive compensation from any such client other than your employer, your level of compensation will depend upon the business transactions that you have in your dealings with clients of your employer. As to the Section 3(i) prohibition against acting in a representative capacity, you ask whether the restriction is intended to be limited to scenarios of representing clients of your employer before a governmental agency or is broader so as to encompass activities of working with such clients for your new employer. You acknowledge that if a business approached you directly and retained you to advise them on a matter, such would be prohibited by Section 3(i). However, if that business approached your employer's branch office so that you would have no connection and receive no compensation, you would have no involvement with that business so as to be in compliance with Section 3 (i) . You seek to know the parameters of the allowable scope of your involvement with such business clients of your employer. In your position of Secretary of A, there are many contacts, direct or indirect, with businesses. Although the word "active" in Section 3(i) must be ascribed some meaning, the intention of the Ethics Law is not to be so restrictive that a former executive - level State employee can have no dealings, after termination of governmental service, with businesses "touched by" A. The effect of such an interpretation, you submit, would be to construe "active" to mean any participation with such businesses. You conclude that the modifying word "active" would have no meaning so that the prohibition of Section 3(i) would extend to hundreds of businesses that have had some contact with A. In this regard, you cite the example of G which allows businesses to apply for loans. Although A is Chairman of G, the applying businesses work with staff which makes recommendations that are voted upon by the board without the vote of A who only votes if there is a tie followed by the signing of a commitment letter. In summary, you seek guidance as to the meaning of the term "act in a representative capacity" and "actively participate" in the context of your new employment vis -a -vis employer clients which are businesses that you had involvement while Secretary of A. III. DISCUSSION: As Secretary for A, you are a "public official" within the definition of that term as set forth in the Public Official and Employee Ethics Law and the Regulations of this Commission. 65 Confidential Opinion, 94 -011 December 28, 1994 Page 4 P.S. §402; 51 Pa. Code §11.1. In addition, you are an executive -level state employee as that term is defined under the Ethics Law, and hence you are subject to the requirements of Section 3(i) of the Ethics Law, infra. 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 of 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. "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. Section 3(a) of the Ethics Law provides: Section 3. Restricted Activities. Confidential Opinion, 94 -011 December 28, 1994 Page 5 (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. Under Section 3(a) of the Ethics Law quoted above, a public official /employee may not use the authority of public office/ employment or confidential information received by holding such a public position for the private pecuniary benefit of himself, a member of his immediate family, or business with which he or a member of his immediate family is associated. In applying Section 3(a) of the Ethics Law to the proffered facts, Section 3(a) would prohibit you from using the position or emoluments of your public position or confidential information to advance an opportunity of private employment with L. Once again, it is not suggested that you have engaged in such conduct and the foregoing is provided to give a complete response to your inquiry. 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 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 merely to provide a complete response to the question presented. Upon termination of public service, you would become a "former public official" subject to Section 3(g) of the Public Official and Employee Ethics Law. Section 3(g) of the Ethics Act provides that: 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. Initially, to answer your request the governmental body with which you were associated while working with A must be identified. Then, the scope of the prohibitions associated with the concept and term of "representation" must be reviewed. 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: Confidential Opinion, 94 -011 December 28, 1994 Page 6 Section 2. Definitions. "Governmental body with which a public official or public employee is or has been associated." The governmental body within State government or a political subdivision by which the public official or employee is or has been employed or to which the public official or employee is or has been appointed or elected and subdivisions and offices within that governmental body. In applying the above definition to the instant matter, we must conclude that the governmental body with which you were associated upon termination of public service would be A, B, G, H, K and any other boards or commissions to which you were a member or had involvement, all hereinafter collectively referred to as "the Agencies." 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. Thus, in Sirolli, Opinion 90 -006, we found that a former Division Director of the Department of Public Welfare (DPW) was not merely restricted to the particular Division as was contended but was in fact restricted to all of DPW regarding the one year representation restriction. Similarly in Sharp, Opinion 90- 009 -R, it was determined that a former legislative assistant to a state senator was not merely restricted to that particular senator but to the entire Senate as his former governmental body. Therefore, within the first year after termination of service with A, Section 3(g) of the Ethics Law would apply and restrict representation of persons or new employers vis -a -vis the Agencies. It is noted that Act 9 of 1989 significantly broadened the definition of the term "governmental body with which a public official or public employee is or has been associated." It was the specific intent of the General Assembly to define the above term so that it was not merely limited to the area where a public official /employee had influence or control but extended to the entire governmental body with which the public official /employee was associated. The foregoing intent is reflected in the legislative debate relative to the amendatory language for the above term: We sought to make particularly clear that when we are prohibiting for 1 year that revolving -door kind of conduct, we are dealing not only with a particular subdivision of an agency or a local government but the entire unit..." Legislative Journal of House, 1989 Confidential Opinion, 94 -011 December 28, 1994 Page 7 Session, No. 15 at 290, 291. Therefore, since the Ethics Law must be construed to ascertain and effectuate the intent of the General Assembly under 1 Pa. C.S.A. §1901, it is clear that the governmental body with which you were associated is the Agencies. 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 on the type of employment in which a person may engage, following departure from their 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 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 restriction against such "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 Popovich, Opinion 89 -005, we 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 by or contain the name of the former public official /employee; Confidential Opinion, 94 -011 December 28, 1994 Page 8 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. We have 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 governmental body constitutes an attempt to influence the former governmental body. In Shay, Opinion 91 -012, we held that Section 3(g) would prohibit the inclusion of the name of a former public official /public employee on invoices submitted by his new employer to the former governmental body, even though the invoices pertained to a contract which existed prior to termination of public service. Therefore, within the first year after termination of service, you should not engage in the type of activity outlined above. You may assist in the preparation of any documents presented to the Agencies. However, you may not be identified on documents submitted to the Agencies. You may also counsel any person regarding that person's appearance before the Agencies. Once again, however, the activity in this respect should not be revealed to the Agencies. Of course, any ban under the Ethics Law would not prohibit or preclude the making of general informational inquiries of the Agencies 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. 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 Confidential Opinion 93 -005, we held that Section 3(g) precludes a former public official /employee from providing consulting services to his former governmental body for a period of one year after termination of service in that the prohibition against representing a person includes the former public official /employee representing himself. Section 3(i) of the Ethics Law provides: Confidential Opinion, 94 -011 December 28, 1994 Page 9 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 or a promise of a grant or loan of money from the Commonwealth to the business or corporation recruited or induced to expand. As to Section 3(i) of the Ethics Law, you are subject to that provision of law since you are an executive -level state employee. However, Section 3(i) would not restrict you from employment with L provided you did not actively participate in recruiting or inducing L to open a new facility or branch in the Commonwealth or actively participate in inducing L to expand an existing plant or facility that was accomplished by a grant or loan of money or a promise of a grant or loan of money from the Commonwealth of Pennsylvania to L. Since you have affirmatively represented that you have not had any involvement with L while serving as Secretary of A, you are advised that Section 3(i) of the Ethics Law does not restrict or prohibit your employment with L. Our decision comports with Confidential Opinion, 91 -002 wherein we held that Section 3(i) did not prohibit a former executive -level State employee similarly situated from proposed employment based upon the submitted facts. Your inquiry extends beyond the employment by L to activities on your part with your employer's clients when those clients are businesses with which you may have had dealings while Secretary of A. This is the first instance that we have been required to interpret Section 3(i) of Act 9 of 1989 (formerly Section 3(g) of Act 170 of 1978) to such a significant degree. We commend you for bringing this important issue before the Commission. Our analysis as to your inquiry shall necessarily be general because your inquiry is primarily generalized. Our general commentary, however, should not be interpreted to imply that you would engage in conduct Confidential Opinion, 94 -011 December 28, 1994 Page 10 violative of Section 3(i). We provide such commentary because it is a function of this Commission to give guidance through advisory opinions as to all public officials and public employees subject to the Ethics Law, 65 P.S. §401. It is for the purpose of guiding executive -level State employees subject to Section 3(i) that we note that according to the legislative debate, Section 3(i) was designed to: "eliminate any strong potential for a conflict of interest by anyone in the high levels of government where they may negotiate deals which profit themselves" and was "aimed at the high -level executive employees prohibiting the post - employment for two years with those large businesses or corporations with which they have had involvement and discretionary power in soliciting the Commonwealth and who stand to gain from a grant or loan . . ." (Comments of the Honorable Representative Pitts, who offered the amendment to House bill No. 198 to include this particular Section in Act 170 of 1978, Legislative Journal - House , April 26, 1977 at 640. Our inquiry must focus upon the key phraseology of Section 3(i) which provides that a former executive -level State employee may not be ". . . employed by, receive compensation from, assist or act in a representative capacity for a business or corporation that he actively participates . . . ". Preliminarily, we note that the Ethics Law is remedial legislation and therefore is to be liberally construed. Phillips v. State Ethics Com'n, 79 Pa. Commw. 491, 470 A.2d 659 (1984). Our analysis must be guided by the rules of statutory construction. The Statutory Construction Act of 1972 provides, in pertinent part: § Words and phrases (a) Words and phrases shall be construed according to rules of grammar and according to their common and approved usage; but technical words and phrases and such others as have acquired a peculiar and appropriate meaning or are defined in this part, shall be construed according to such peculiar and appropriate meaning or definition. (b) General words shall be construed to take their meanings and be restricted by preceding particular words. 1 Pa.C.S. §1903. See also 1 Pa.C.S.A §1921, §1922, §1928(c). We also are mindful of 1 Pa.C.S.A §1939 regarding the use of Confidential Opinion, 94 -011 December 28, 1994 Page 11 (legislative) comments and reports, which we have quoted in part above. We have reviewed the legislative debate and have found no commentary on the novel issues raised in this case. We have the benefit of a definition of the word "represent" in the Ethics Law: "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. 65 P.S. §402. The statute, however, is silent as to definitions of the terms "act," "assist," and "actively participates." In order to interpret the pertinent key words and phrases of Section 3 (i) , we are relegated to utilizing Black's Law Dictionary, (5th Edition) : Act, n. Denotes external manifestation of actor's will. Restatement, Second, Torts § 2. Expression of will or purpose, carries idea of performance; primarily that which is done or doing; exercise of power, or effect of which power exerted is cause; a performance; a deed. In its most general sense, this noun signifies something done voluntarily by a person; the exercise of an individual's power; an effect produced in the external world by an exercise of the power of a person objectively, prompted by intention, and proximately caused by a motion of the will. In a more technical sense, it means something done voluntarily by a person, and of such a nature that certain legal consequences attach to it. . . . Active. That is in action; that demands action; actually subsisting; the opposite of passive. An active debt is one which draws interest. An active trust is a confidence connected with a duty. An active use is a present legal estate. aid; succor; lend countenance or participate in as an auxiliary. To in the complete accomplishment of an intended to be effected by those Assist. To help; encouragement to; contribute effort ultimate purpose engaged. Participate. To receive or have a part or share of; to Confidential Opinion, 94 -011 December 28, 1994 Page 12 partake of; experience in common with others; to have or enjoy a part or share in common with others. To partake, as to "participate" in a discussion, or in a pension or profit sharing plan. To take equal shares and proportions; to share or divide, as to participate in an estate. To take as tenants in common. It is noted that the Black Law's Dictionary (4th edition) definition of "participate" was cited with approval by the Pennsylvania Supreme Court in Schaefer v. Hilton, 473 Pa. 237, 373 A.2d 1350 (1977). In the context of Section 3(i), we conclude that the prohibition against "assist[ing]" such a business or corporation is to be interpreted broadly, and would preclude giving any sort of help or aid to that entity. As for the phrase, "act in a representative capacity," given that the statutory definition of "represent" includes the words, "to act," we see no basis for distinguishing the meaning of this phrase from the term "represent" as defined in the Ethics Law. As for the terms "actively participates" and "actively participated," the word "actively" modifies the words "participates" and "participated," signifying that mere participation in a passive sense would not transgress Section 3 (i) . Thus, the terms "actively participates" and "actively participated" would mean to take part through an actual exercise of power or discretion, and would not include mere presence or passive involvement through the non - discretionary performance of a perfunctory function. We note that in the context of criminal law, in Com. v. Moore, 389 Pa. Super. 473, 567 A.2d 701 (1989) and cases cited therein, the Pennsylvania Courts have ruled that for a public defender to take an "active part" at a line -up -- thereby meeting the suspect's right to counsel even though the public defender does not actually represent him -- the public defender must do more than merely be present at the line -up, for example: receive copies of witness descriptions; consult with the suspect; voice objections and require substitutions for the line -up; interview participants in the line -up and designate their positions; and make notes during the line -up. It is clear to us that although Section 3(i) is intended to apply to a very small group consisting of individual, former executive -level State employees, it has a very broad application as to the conduct which it prohibits when such individuals actively participate in recruiting or inducing a business /corporation to open or expand via a grant /loan from the Commonwealth to such business /corporation. This is in sharp contrast to Section 3(g) which broadly applies to all former public officials /employees but Confidential Opinion, 94 -011 December 28, 1994 Page 13 narrowly restricts them to representation only before their former governmental body. We shall now consider the novel issue which you have raised, concerning the applicability of Section 3(i) as to your work for your prospective private employer vis -a -vis business clients with which you had dealings while Secretary of A. We conclude that insofar as all of the other conditions for applying Section 3(i) are met, its applicability is unaffected by the status of such a business as a client or customer of the former executive -level State employee's private employer. The very services which, pursuant to Section 3(i), indisputably cannot be provided directly to such a business previously recruited or induced via Commonwealth funds, also cannot be provided indirectly through the veil of a separate entity. Any other interpretation would exalt form over substance and would completely defeat the purpose of Section 3(i). Contrary to the stated purpose of the Ethics Law, such an interpretation we believe would not "strengthen the faith and confidence of the people of the State in their government," but would convey an impression that the clear intent and purpose of this Section has been circumvented and undermined. In reaching our holding on this issue, we do not question your personal integrity or the integrity of those involved in your particular circumstances. Nevertheless, we are cognizant that our decision on this issue will set a precedent which will be invoked by others. As to your inquiry concerning a business which would approach your employer's branch office so that you would have no connection with that business and receive no compensation, you are correct that you would,have no current involvement with that business and hence would be in compliance with Section 3(i). To the extent that you did actively participate in your capacity as Secretary of A to recruit /induce via Commonwealth funds within the parameters of Section 3(i), such involvement would be- prohibited. Thus, the prohibition of Section 3(i) is not limited to mere employment or representation before some other entity but would extend to your dealings with those businesses as a client of your new employer since such activity would be "assist[ance]." However, we restate that this prohibition, while being all - encompassing, is limited to only those companies from which there was (1) an executive -level State employee who (2) actively participated in (3) recruiting /inducing to open or expand in Pennsylvania with (4) a grant /loan of Commonwealth funds or the promise of same. All of the above four conditions must be met in order for the prohibition of Section 3(i) to apply. You are advised that Section 3(i) would not prohibit your Confidential Opinion, 94 -011 December 28, 1994 Page 14 involvement with businesses that received G loans because you were not active in your participation as to loans that were approved by the board without your vote. However, if the board were deadlocked on any application with you voting to break the tie, such action would be active participation in that the loan would not be approved but for your action. As to those businesses, you would be prohibited by Section 3(i) in being employed, receiving compensation, assisting or acting in a representative capacity. 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 is the applicability of the Governor's Code of Conduct. IV. CONCLUSION: A cabinet secretary is to be considered a "public official" and an 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 private employment based upon the assumption that he did not actively participate in inducing or recruiting said company to open or expand a facility or branch through a grant or loan of money or a promise of a grant or loan of money from the Commonwealth of Pennsylvania. The interpretation and application of Section 3(i) of the Ethics Law as noted above must be followed. Upon termination of service the secretary would become a "former public official" subject to Section 3(g) of the Ethics Law. The former governmental body is the Department and all other boards and commissions with which the secretary served or had involvement. The restrictions as to representation outlined above must be observed. 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. such. This letter is a public record and will be made available as Finally, any person may request the Commission to reconsider Confidential Opinion, 94 -011 December 28, 1994 Page 15 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 Commission, lHw� James M. Chair