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HomeMy WebLinkAbout95-003 UnknownI. ISSUE: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 OPINION OF THE COMMISSION Before: Daneen E. Reese, Chair Roy W. Wilt Austin M. Lee Allan M. Kluger John R. Showers Rev. Joseph G. Quinn Boyd E. Wolff DATE DECIDED: 02/23/95 DATE MAILED: 03/10/95 II. FACTUAL BASIS FOR DETERMINATION: 95 -003 Re: Public Official /Employee, Attorney, Executive Branch, Executive -level State Employee, Section 3(i). This Opinion is issued in response to your confidential advisory request on February 8, 1995. Whether Section 3(i) of the Public Official and Employee Ethics Law imposes any prohibition or restrictions upon an attorney seeking to practice law or pursuing endeavors in the private sector when he as an executive -level state employee was involved in recruiting businesses to locate or expand in Pennsylvania and in arranging financing for such relocations and expansions through Commonwealth loan and grant programs. You have served as A from 1987 to 1994. In the foregoing positions you were involved in recruiting businesses to locate or expand in Pennsylvania and in arranging financing of such relocations or expansions through Commonwealth loan and grant programs. Although the extent and nature of your activities varied substantially from case to case, you typically had involvement in telephone calls or meetings with prospective businesses and structured financial packages to ensure that various state agencies Confidential Opinion, 95 -003 March 10, 1995 Page 2 worked together to present high - quality economic development proposals. After resigning from your public position, you now intend to engage in the private practice of law and in other endeavors in the private sector. You seek clarification as to the application of the Ethics Law to your activities as an attorney. After quoting Sections 3(g) and 3(i) of the Ethics Law, you reference Article V, Section 10(c) of the Pennsylvania Constitution regarding the power of the judiciary to supervise the conduct of attorneys in Pennsylvania. As to the Rules of Disciplinary Enforcement and Rules of Professional Conduct of the Pennsylvania Supreme Court, you state that both sets of rules contain provisions regarding conflicts of interest on the part of attorneys. You cite Disciplinary Rule 1.11, "Successive Government and Private Employment" relative to the specific limitations on the conduct of attorneys who enter private practice after leaving government service. The Comment to that Rule is quoted as follows: "This Rule prevents a lawyer from exploiting public office for the advantage of a private client." You state that the Ethics Law rules are different from those of Disciplinary Enforcement and Professional Conduct in that the Ethics Law is more restrictive in some respects while in others the Supreme Court rules are more stringent. Regarding Section 3(g) of the Ethics Law, you argue that the Pennsylvania courts have resolved the issue of the apparent conflict between the Ethics Law and the Supreme Court's disciplinary rules in the case of Pennsylvania Public Utilities Bar Association v. Thornburgh, 62 Pa. Cmwlth. Ct. 88, 434 A.2d 1327, (1981), affirmed 450 A.2d 613, 498 Pa. 589 (1982). After excerpting a portion of the opinion in the above case, you reference Waiert v. State Ethics Commission, 491 Pa. 255, 420 A.2d 439 (1980) wherein the Supreme Court ruled the Ethics Law unconstitutional regarding an application to judges who subsequently entered private practice. You also cite Maunus v. Commonwealth State Ethics Commission, 518 Pa. 592, 544 A.2d 1324 (1988) which upheld the validity of the financial disclosure requirements upon Commonwealth employed attorneys. After stating that neither this Commission nor the courts have construed Section 3(i) of the Ethics Law in the context of its application to the private practice of law, you argue that judicial precedent interpreting Section 3(g) should be equally applicable to Section 3(i) in that both Sections involve conflicts arising as to the succession from public to private employment: both Sections apply to public officials after public service has ended; both Sections impose limitations on the activities of former public officials for a specific time period; both Sections deal with areas where the Supreme Court has acted to regulate the conduct of Confidential Opinion, 95 -003 March 10, 1995 Page 3 attorneys; and both Sections impose a second and possibly contradictory set of regulations upon attorneys who are subject to the disciplinary rules promulgated by the Supreme Court. You do not believe that the question is whether an official who helped recruit economic development prospects for the Commonwealth is exempt from any limitations on the subsequent practice of law, but rather whether any additional rules, other than those promulgated by the Supreme Court, have application. In this regard, you reference that an attorney is subject to the restrictions contained in Disciplinary Rule 1.11 and other relevant Rules of Disciplinary Enforcement and Professional Conduct. Since the courts have held that Section 3(g) does not apply to attorneys after they leave government service, you express your belief that the same reasoning should apply to Section 3(i) of the Ethics Law. You appeared at the executive session on February 23, 1995 and proffered the following additional information. You have actively been involved in inducing companies to come into Pennsylvania since 1987 with your involvement varying from minimal to close personal involvement. If you become "of counsel" to a law firm, you question which set of rules applies to your conduct. Since you are a partner in a venture capital firm, you do not question that the Ethics Law would apply to that particular conduct. The Pennsylvania Supreme Court, pursuant to the Judiciary Article of the Pennsylvania Constitution, has promulgated rules as to the conduct of attorneys. You believe that Sections 3(g) and 3(i) of the Ethics Law are inconsistent with the judicial rules in some respects. For example, there is a judicial rule that a lawyer serving as a public official shall not negotiate for private employment with any person involved as an attorney or party in a matter in which the lawyer is participating personally and substantially. A matter includes a contract. In your governmental office, you construed the above judicial rule to mean that no lawyer may negotiate with a law firm while he was still working for the state. The above is a rule regulating the conduct of a lawyer through the Rules of Professional Conduct; a parallel rule does not appear in the Ethics Law. The rules of the Ethics Law, like Section 3(i), seem to be in conflict with the Pennsylvania Supreme Court Rules. Those court rules deal with actual conflicts or matters that the lawyer as a governmental official participated in rather than the entity as a whole. Further, the Pennsylvania Supreme Court Rules permit for screening in a law firm so that the attorney with the conflict may work for the law firm but not on the specific matter. As an example, you were quite involved in bringing 3 to Pennsylvania by contacting DER for permit issuance, PIDA as to Confidential Opinion, 95 -003 March 10, 1995 Page 4 financial proposals, etc. If you were to work with an international law firm, you ask whether you may work for the firm. If the court rules apply, you would only be concerned with the specific transaction as to which you were involved regarding B. If Section 3(i) of the Ethics Law applies, you believe you would have to list everyone you were involved with in the past and compare that list with the list of every client in the law firm. You state that the PUC Bar Association case, which applied to the predecessor Section of 3(g) of the Ethics Law, did not address the prohibition contained in Section 3(i). After expressing your belief that Section 3(i) of the Ethics Law is incompatible in some respects with the Pennsylvania Supreme Court Rules, you seek a legal opinion as to whether the holding in the above case extends to Section 3(i) of the Ethics Law. III. DISCUSSION: As A, you were a public official /employee within the definition of those terms as set forth in the Public Official and Employee Ethics Law and the Regulations of this Commission. 65 P.S. §402; 51 Pa. Code §11.1. In addition, since you were an executive -level state employee as that term is defined under the Ethics Law, you are subject to the requirements of Section 3(i) of the Ethics Law, infra. Because you have posed a very narrow question as to the applicability of Section 3(i) to your conduct, the focus of our inquiry will be specifically limited to only that question. 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 Confidential Opinion, 95 -003 March 10, 1995 Page 5 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. Generally, Section 3(i) does not restrict a former executive - level state employee from either employment, the receipt of compensation or representation as to a business or corporation provided h did not actively participate in recruiting or inducing that busin ss or corporation to open a new facility or branch in the Common ealth or participate in inducing that business or corporation to expand an existing plant or facility when accomplished by a grant or loan of money or a promise of a grant or loan of money from the Commonwealth of Pennsylvania. Excluding your status as an attorney, the applicability of Section 3(i) turns upon whether you actively participated in recruiting or inducing a business /corporation to open a new facility or branch or to expand via a grant or loan of money or a promise of a grant or loan of money from the Commonwealth. Since you have stated that you were involved in recruiting businesses to locate or expand in Pennsylvania and in arranging financing of such relocations or expansions through Commonwealth loan and grant programs, Section 3(i) would prohibit employment, the receipt of compensation or acting in a representative capacity provided the participation was active. We do not have sufficient facts of record to determine whether your involvement in any one or more transactions was implicated by Section 3(i). A very detailed review of Section 3(i), both in terms of analysis and application of the phrase "actively participated," is set forth in Confidential Opinion 94 -011. We must now consider how the additional factor of your status as an attorney impacts upon the application of Section 3(i). Pennsylvania Public Utility Bar Association v. Thornburgh, supra, dealt with the applicability of Section 3(e) of the Ethics Act of 1978 to former Commonwealth attorneys in the practice of law following termination of public employment. In the cited case, Commonwealth Court held that Section 3(e) of Act 170 of 1978, the predecessor to Section 3(g) of Act 9 of 1989, was an impermissible intrusion upon the authority of the Supreme Court to regulate the conduct of attorneys: We conclude that Section 3(e) of the Ethics Law is an impermissible intrusion by the legislature into an area reserved by the Constitution to the Supreme Court and one where the Supreme Court has acted to regulate the conduct of attorneys. . . . What is clear is that the Supreme Court has acted pursuant to its exclusive authority and Confidential Opinion, 95 -003 March 10, 1995 Page 6 that action effectively annuls the legislature's attempt to regulate the same conduct as it pertains to lawyers. Id. at 1331. This Commission has interpreted the above decision to mean that there are no prohibitions under Section 3(g) of the current Ethics Law upon the conduct of former publicly employed attorneys insofar as their conduct constitutes the practice of law. Spataro, Opinion 89 -009. Subsequent to the above decision, the Pennsylvania Supreme Court in Maunus v. State Ethics Commission, supra, considered the issue of whether publicly employed attorneys could be required to file Financial Interest Statements (FIS). The Court ruled that such a reporting requirement was permissible noting that the Ethics Law provision did not conflict with any court rule as to the conduct of attorneys: Employers in the private sector may properly adopt professional and ethical standards and in pursuit thereof, may require certain conduct of its employees, including attorneys, without running afoul of this Court's supervisory authority over the bar of this Commonwealth. Any intrusion upon the power of this Court to prescribe general rules governing the practice procedure and conduct of judicial proceedings is viewed with the greatest of skepticism. Our conclusion is buttressed by the fact that the financial disclosure requirement imposed by the Ethics Act is not incompatible with any of the rules applicable to attorneys in this Commonwealth. Id. at 1326, 1328. * * * Therefore, to the extent that there is judicial regulation, Section 3(i) of the Ethics Law cannot be applied to restrict an attorney in the practice of law as to his employment, his receipt of compensation or his representation of clients. It is clear from the PUC Bar Association case that the restriction of Section 3(i) as to an attorney vis -a -vis representing clients is inapplicable. The only other restriction imposed by Section 3(i) relates to employment or the receipt of compensation. Under the principles of the PUC Bar Association and Maunus cases, such employment as an attorney or the receipt of compensation (fee) as an attorney are matters on which the Supreme Court has promulgated rules of conduct. Accordingly, the restrictions of Section 3(i) are not Confidential Opinion, 95 -003 March 10, 1995 Page 7 applicable to attorneys in the practice of law. If, however, the activities intended to be undertaken do not fall within the category of the "practice of law ", the prohibitions of Section 3(i) of the Ethics Law would be applicable. An activity which would not constitute the "practice of law" would be employment by a business /corporation as a non - lawyer and acting in a non - lawyer capacity, as for example a lobbyist. However, assuming that the activities intended to be undertaken are in the capacity of an attorney, such activities would constitute the practice of law and the provisions of Section 3(i) of the Ethics Law, pursuant to the mandate of the Supreme Court's ruling, would not be applicable. Andrews, Opinion 90 -018. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Law; the propriety of any other statute, code, regulation or ordinance other than the Ethics Law has not been considered. Specifically not addressed is the applicability of the Rules of Professional Conduct. IV. CONCLUSION: Section 3(i) of the Ethics Law does not restrict a former Executive -level state employee who is an attorney as to employment, the receipt of compensation or representation to the extent that such activities constitute the practice of law. 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 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, Daneen E. Reese Chair