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HomeMy WebLinkAbout127 FullerMr. Robert A. Fuller c/o James R. Antoniono, Esq. Hudson, Cherellia, Antoniono Kukovich & Tobin 32 West Third Street Greensburg, PA 15602 Re: No. 80 -46 -C Dear Mr. Fuller: II. Findings: A. Procedural: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 ORDER OF THE COMMISSION June 18, 1982 No. 127 The State Ethics Commission has received a complaint regarding you and a possible violation of Act 170 of 1978. The Commission has now completed its investigation into these actions and finds a violation of Act 170. The individual allegations and findings on which our conclusions are based are: I. Allegations: 1. As an elected Supervisor in Allegheny Township, a Township of the Second Class, you participated in the Township insurance program in that you were covered by life insurance policies, whose premiums were paid from public funds of the Township. 2. As an elected Supervisor in Allegheny Township, you were covered by life insurance policies as set forth in No. 1 above with World Life & Health which had a cash surrender value which you secured on or about February 20, 1981 for an amount of approximately $8,723.00 and which money you deposited and accepted for your own personal use. 3. As an elected Supervisor in Allegheny Township, you voted on and /or approved the payment of premiums to secure this policy referenced in No. 2 above. 1. By letter dated December 18, 1980, you were notified that the State Ethics Commission, hereinafter the Commission, had received a complaint and was commencing an investigation into the allegation that you had violated the Ethics Act. Robert A. Fuller June 18, 1982 Page 2 2. On October 15, 1981 a Notice of Hearing was issued scheduling a hearing on this matter for November 5, 1981. You received proper notice of this hearing. 3. This hearing was continued and re- scheduled for December 3, 1981. You received proper notice of this hearing. 4. Evidence and testimony was received on December 3, 1981 and further hearings were conducted on February 18 and 19, 1982. You received proper notice of these further hearings. 5. You presented a Motion to Dismiss following this initial hearing with supporting Brier. Special Counsel for the Commission responded to this Motion. This Motion was denied on February 18, 1982. See N.T. 2/18/82, p. 146. 6. Briefs were received from all participants on or about April 12, 1982 and rebuttal briefs were received on or about May 12, 1982. B. Substantive: 1. You served as an elected Supervisor in Allegheny Township, a Township of the Second Class from at least January, 1974 to January, 1980. See N.T. 12/3/81, p. 9. 2. Allegheny Township, (hereinafter the Township), as a Second Class Township is governed by the provisions of the Second Class Township Code. 53 P.S. 65101 to 67201. See N.T. 12/3/81, p. 9. 3. As stipulated, during all periods relevant to this case, the Township was governed by three Supervisors and the vote of any two was sufficient to transact official business of the Township. Id. 4. On May 19, 1973, at a meeting of the Township Supervisors, the Board approved the entry of the three Township Supervisors into a pension program with World Life & Health Insurance Company of Pennsylvania. SEC Exhibit No. 1. a. The purchase of $600.00 worth of annuities was authorized for each Supervisor /participant. b. Supervisors present at this meeting were Elroy J. Hoak, hereinafter Hoak and Edward J. McCutcheon Jr., hereinafter McCutcheon. c. The motion to authorize this purchase was made by Supervisor Hoak and seconded by Supervisor McCutcheon. Robert A. Fuller June 18, 1982 Page 3 5. A Policy was purchased an issued as authorized and as identified in State Ethics Commission Exhibit No. 18 A as follows: Insured Type Policy Application # Policy # Amount Robert A. Fuller Ten -Pay Life 16693 40630 $10,921.00 6. In order to secure this policy, as set forth in No. 5 above, an application for same was submitted as set forth in SEC Exhibit No. 16 A. 7. On June 11, 1974, at a meeting of the Township Supervisors, the Board approved the increase in the "Supervisors' pension program" to $1,000.00 annually (in premium) for each Board member. See SEC Exhibit No. 7. a. All Supervisors were present at this meeting and at this time, the Supevisors were: Hoak, McCutcheon and Robert A. Fuller, hereinafter Fuller. b. The motion to increase these amounts was made by Mr. Hoak and seconded by Mr. Fuller. 8. A policy was purchased and issued as authorized and as identified in SEC Exhibit No. 18 B as follows: Amount of Monthly Insured Type Policy Application # Policy # Income Robert A. Fuller Annual Prem. 16727 41204 $265.79 Deferred Annuity 9. You submitted a Request for Cash Surrender Value relating to Policy #40630 and Policy #41204 to the World Life & Health Insurance Company dated February 8, 1980. See SEC Exhibit No. 13. a. This Request showed your name as "the insured." b. This Request was countersigned by McCutcheon as "owner." Robert A. Fuller June 18, 1982 Page 4 10. Following the processing of this Request for Cash Surrender Value you received, endorsed and obtained the value of Check No. 58674 issued by World Life & Health Insurance Company to you as payee dated February 15, 1980 in the total amount of $8,723.93. See SEC Exhibit No. 14. 11. The premiums for these policies were paid from Township funds during their terms until you surrendered them (See SEC Exhibit Nos. 6 and 12) and you voted to approve payment of same as set forth in the official minutes of the Township. 12. The premiums were paid as a joint or "group" billing procedure, but these policies were, in fact, individually owned, issued to, and payable to you as an individual (See N.T. 2/18/82, p. 342 - 346) rather than being jointly "owned" by a common individual or entity such as the Township. 13. The Township Supervisors of Second Class Townships could enter the Municipal Employees Retirement System (MERS), but the Supervisors of Allegheny Township did not elect to join this system. 14. Under the MERS, a member whose contributions were paid in whole or in part by the municipality he served, could not request or receive "lump sum" payments except to the extent that he could, after eight years of participation in the System, receive back those contributions he personally made. N.T. 2/18/82, p. 393 and 405 -406. 15. Allegheny Township employees other than the Supervisors of the Township (except for police) were part of MERS (N.T. 2/18/82, p. 238 - 239 and p. 281); but the Supervisors, although eligible to participate in MERS did not elect to do so (N.T. 2/19/82, p. 420 - 421). 16. While serving as Supervisor, each Supervisor in the Township was typically appointed as a Road Superintendent (worker) and you served in this role throughout your tenure in office as indicated in Respondent's Exhibit Nos. 2 - 9; see also Deposition, Key, p. 16. 17. Your salary as Road Superintendent (worker) was set by the Township Auditors in accordance with the applicable provisions of the Second Class Township Code and you were paid for the work performed on the roads. See also N,T. 2/18/82, p. 294 and 305. 18. In addition, you received the statutorily authorized payment for attending meetings of the Supervisors, originally $10.00 per meeting, subsequently raised to $25.00 per meeting. See N.T. 2/18/82, p. 280 - 281. Robert A. Fuller June 18, 1982 Page 5 19. The Auditors of Allegheny Township affirmatively set only the pay to the Supervisors of Allegheny Township as Road Superintendents or Roadmasters and took no action to affirmatively establish a pension plan for Supervisors (Deposition, Key, p. 18 -19); the Supervisors themselves fixed the amount and type of pension /annuity policies they would purchase for themselves. N.T. 2/18/82, p. 305. 20. The Auditors of the Township did not take exception to the payment and purchase of these policies from the date of their purchase to their surrender. N.T. 2/18/82, 241 - 243. 21. You attempted to resolve the question of the legality and propriety of purchase of these policies by referring to the Handbook for Township Officials, 1965, published by the Pennsylvania State Association of Township Supervisors (PSATS), editor, Milton W. DeLancey; by discussing this question at PSATS conventions; requesting information. from Donald Frantz, Agent and Vice - President for Tri- County Insurance Company (who placed the policies here in question); and by requesting advice from your Solicitor, Robert J. Key. 22. The Solicitor never issued a written opinion in response to your inquiry (Deposition, Key, p. 10 - 11) but orally discussed this question. Based upon information relayed to him by the Secretary of the Township as to the PSATS opinion as to the legality of these policies, his review of the data Mr. Frantz had provided, and an analysis of the Township Code, the Solicitor concluded that the Supervisors, as road workers and Township employees could obtain these policies. III. Discussion: Several general objections to these proceedings were raised and should be addressed and answered before proceeding to the substantive issues presented here. These objections were preserved at the hearing of February 8, 1982. See N.T. p. 148 -150 and 152. These objections are as follows: 1. that the statute creating the State Ethics Commission and the Ethics Act is so vague that any attempt to enforce its provisions would violate constitutional principles of due process and equal protection; 2. that the Ethics Act constitutes an unlawful delegation of legislative authority; 3. that these proceedings violate constitutional protections relating to a speedy trial and statutes of limitations; 4. that these proceedings violate equal protection guarantees in that this Respondent has been subjected to question while other similarly situated persons are not so accused; and Robert A. Fuller June 18, 1982 Page 6 5, That the provisions of the Ethics Act cannot be applied retroactively, in an unconstitutional ex post facto, manner, to address these alleged violations. Initially, we note the limited extent to which any agency may adjudicate the constitutionality of the statute it administers. Thus, in relation to the first and second objections noted above, we merely refer to the court decisions that have upheld the constitutionality of the Ethics Act in face of similar general attack. See Pa. State Association of Township Supervisors v. Thornburgh, Pa. , 437 A.2d 1 (1981). Objection No. 3 above is dismissed simply because noo vial" is involved in the present proceeding and any rights or limitations applicable to criminal proceedings may be asserted or raised as defenses if any of these activities are prosecuted by the appropriate law enforcement officials. Likewise we observe that there has been no attempt, beyond rhetoric or argument, to establish a discriminatory design or malicious, intentional attempt .on the part of the State Ethics Commission in processing the complaint against the named Respondent. Thus, the question o' equal protection and due process relating to "selective enforcement" of the Ethics Act (Objection 4 above) should be rejected. See Medusa Corp. v. Commonwealth, Department of Environmental Resources, 51 Pa. Cmwlth. Ct. 520, 415 A.2d 105 (1980) and Commonwealth v. Lewis, X43 Pa. 305, 279 A.2d 26 (1971). Respondent, having the burden of showing that he was somehow wrongfully singled out for prosecution, has failed to show how these proceedings violate equal protection of the laws guaranteed by the state and federal constitutions. Commonwealth v. Barnes & Tucker, 455 Pa. 392, 319 A. 2d 871 (1974). The final preliminary objection relates to the alleged improper attempt to apply the Ethics Act retroactively in an ex post facto manner to activities which were not "criminal" when initiated. Specifically, Respondent asserts that the purchase of these policies was begun, and he argues, vested, prior to January 1, 1979, the effective date of the Ethics Act. We note that the activity in question here mainly involves the actual "gain" - -the conversion of the policies to funds for private accounts - -which surely took place after January 1, 1979. Without the countersigning (See Finding No. 9) this conversion would have been restricted. See N.T. 12/3/81, p. 66 - 67. In this case, the final act to secure the "gain" as well as the gain, clearly occurred after January 1, 1979. Thus, no retroactive application of law exists here. We also note that a la': is not said to be applied retroactively simply because it is applied to a condition which existed on the law's effective date, even though the condition results from events which occurred prior to the Act's effective date. Hargreaves v. Mid Valley School District, 40 Pa. Cmwlth. Ct. 110, 396 A.2d 894 (1979) citing Creighton v. City of Pittsburgh, 389 Pa. 569, 132 A.2d 867 (1957). An act is not retroactively applied simply because some facts upon which its application depends came into existence prior to the enactment of the law. Gehris v. Dept. of Transportation, 471 Pa. 210, 369 A.2d 1271 (1977). The Commission, in our analysis, is not precluded from reviewing Robert A. Fuller June 18, 1982 Page 7 these questions even though some of the acts discussed here came into existence prior to January 1, 1979, especially where the actual gain in question was consummated after the effective date of the Ethics Act. Having disposed of these preliminary objections, we move to an analysis of the merits of this case. The Ethics Act is clearly applicable to Respondent as an elected Supervisor. 65 P.S. 402. The Ethics Act, Section 3(a), clearly states that: No public official or public employee shall use his public office or any confidential information received through his holding public office to obtain financial gain other than compensation provided by law for himself, a member of his immediate family, or a business with which he is associated. 65 P.S. 403(a). There is no doubt that Respondent "gained" the proceeds of these policies -- $8,723.93. There is no doubt that Respondent voted to pay for these policies at various times as demonstrated by the official records of the Township. The question essentially reduces to one of law -- do these actions constitute a "use of office" to obtain financial gain other than compensation provided by law. More precisely, are these policy proceeds 'compensation" provided to Respondent by law? If not, then surely Respondent's votes constitute a use of his office to secure "gain" in violation of the Ethics Act. Our analysis of this question leads us to conclude that such proceeds are not "compensation" authorized by law. Therefore, Respondent's actions and acquisition of these proceeds violate the provisions of the Ethics Act. It is axiomatic that a political subdivision has only the power delegated it by the Legislature. St. Joseph Lead Co. v. Potter Twp., 398 Pa. 361, 157 A.2d 638 (1960). These powers include the authorization, in this case, to pay the Township Supervisors for each meeting attended. This compensation is fixed at $25.00 per meeting attended. 53 P.S. 65515. This is compensation provided by law which the record clearly indicates was properly paid to Respondent. In addition, the Supervisors of a Second Class Township may serve and be compensated, as was done here, as Road Superintendents. In this event, the compensation provided "by law" is set by the Township Auditors pursuant to the Second Class Township Code, hereinafter the Code. Their compensation is to be fixed by the Auditors on an hourly, daily, weekly, semi - monthly or monthly basis. The Auditors have no authority to select alternative compensation -- to substitute insurance policy proceeds for road -work payments -- to be paid to Supervisors. Thus, the only "compensation" provided by law for such Supervisors is meeting and road -work payments. These payments were made to this Respondent. Robert A. Fuller June 18. 1982 Page 8 Respondent, however, collected the insurance policy proceeds as well. He asserts that the Code allows the purchase of annuities or pensions for "employees ", and therefore, these policies are permitted and their conversion into cash is "compensation" permitted by law. It is not logical to assume that this section dealing with the Township's authority to purchase insurance was intended to alter or amend the basic provisions of the Code as to the "compensation" allowed Supervisors by law. This provision has been specifically and we believe, correctly interpreted to apply only to "employees." The Supervisors were entitled to purchase annuity or pension policies for employees but not for themselves. Hendricks v. East Rockhill Twp., 1 D. & C. 3d. 763 (1977T It is clear that although elected or appointed officials may be defined as "employees" for inclusion in group policies of accident and sickness insurance, there is no similar specific provision including Supervisors within the category of "employees" for purposes of authorizing purchase of pensions and annuities. Compare 40 P.S. 756.2(a). Absent a clear expression of the intent of the Legislature to similarly authorize Supervisors to be included as "employees" for pension /annuity policy purchases or to place such policies in the category of "compensation" provided by law, we cannot agree that the cash value of those policies obtained by Respondent was properly secured. Respondent argues that to arrive at this conclusion is to challenge the expenditures of the Township and that the exclusive procedure for such challenges rests with the Auditors, a surcharge or an appeal from an audit report. See 53 P.S. 65547. Respondents urge that the audit - appeal procedure is also limited in time. See 53 P.S. 65553. We do not believe the audit - appeal procedure is either exclusive or otherwise prevents the Commission's inquiry here for several reasons. First, the provisions of the Code cited allow such appeals only by the Township, a registered elector or taxpayer or by an officer whose account has been settled by the audit. Thus, appeal proceedings are not even available to the State Ethics Commission and therefore, these cannot be deemed to preclude this inquiry. Second, as Special Counsel to the Commission points out in his Rebuttal Brief, this is simply not the same type of inquiry as would be challenged by an audit. While the payment of Township funds is in question, the main challenge here is to the Supervisor's receipt of monies itself. Third, we believe the only statute of limitations to be logically applied here would be that which might apply to any criminal proceedings possible or contemplated under Section 9 of the Ethics Act, 65 P.S. 409. Using this logic, the Commission would be capable of reviewing activities to exercise their power of referral for prosecution under Section 7 (11) of the Ethics Act, 65 P.S. 407 (11) at least so long as that prosecution is not barred, ie. the statute of limitations for the particular violation has not run. Here, the applicable statute of limitations is five years. See 42 Pa. C.S.A. 5552(c)(2). Finally, if any dispute exists as to any provision of another statute conflicting with the Ethics Act, the provisions of the Ethics Act are declared to control. See Section 12 of the Ethics Act, 65 P.S. 412. Thus, a provision of the Code which arguably would preclude our inquiry here would Robert A. Fuller June 18, 1982 Page 9 be given less credibility in light of our duty to investigate and resolve this complaint under the Ethics Act. We believe that our conclusions in this matter are specifically supported by the evidence in this record, by the applicable law and by the general concepts that public officials may not act in their official capacity on matters in which they are directly and personally interested. Coltar v. Warminster 8 Pa. Cmwlth. Ct. 163, 302 A.2d 859 (1973); Ross Township v. McDonald, Pa. Cmwlth. Ct. , 431 A.2d 385 (1981); City Council Members v. Consumers Educ. & Protection Assoc, Pa. , 428 A.2d 711 (1981) and Genkinger v. New Castle, 368 Pa. 547, 551 -52, 84 A.2d 303, 306. This general law is well - established and well- reasoned. It is our duty to insure that the public trust which is conferred upon public officers is not violated. See Section 1 of the Ethics Act, 65 P.S. 401. In light of the general law and our specific statute, which so clearly condemns the votes of Respondent which were to his personal and direct benefit we are bound to conclude the Ethics Act has been violated here. We turn next to the question of the penalty or sanction to be imposed. We note Respondent offers several explanations for his conduct which are suggested to ameliorate or justify his action. We will address these individually. First, he asserts that the inadequacy of the compensation provided to him as Supervisor should form a basis for justifying the conversion of these policy proceeds. We find the following quotation sufficient response to this "logic ": It is well - settled that a person accepting a public office, with a fixed salary, is bound to perform the duties of the office for the salary. He cannot legally claim additional compensation for the discharge of those duties, even though the salary may be very inadequate remuneration for the services..." Warminster Township Appeal, 56 D. & C.2d 99, 143 (1971) The compensation provided by law may well be inadequate for the services rendered by Respondent. However, for Respondent to assume the right and responsibility to supplement this salary through these policies' proceeds is to arrogate to himself the authority that rests solely with the Legislature. In this same vein, Respondent points to the existence and availability of the MERS (Municipal Employees Retirement System) as evidence that "pension: plans were authorized for Township Supervisors. Respondent reasons from the existence of MERS that the annuity -cash value plan from which he benefitted is a mere "substitute" for MERS and therefore equally, legally authorized. It is true that Supervisors can participate in MERS. This does not "legalize" any alternative plan Supervisors may choose, however. Indeed, the existence and availability of MERS, which permits Supervisors to establish and opt into the Township's pension system appears to us to be a carefully drawn exception to Robert A. Fuller June 18, 1982 Page 10 the general rule discussed above that public officials may not vote or act for their own interests. See N.T. 2/19/82, p. 426 -429 for discussion on how and when Supervisors may enter MERS. Indeed the fact that the MERS would produce significantly lower payments than were generated by the policies purchased by Respondent in proportion to Respondent's "wage" as Supervisor indicates the rationale of the Legislature in allowing Supervisors to participate in MERS only. It is not logical to assume the Legislature would permit the type of policy- purchases present here, which produce an exceptionally high pay -out in proportion to the "employee" - Supervisor's compensation, while basing the legally approved MERS payout dependent upon Respondent's wages alone. The fact is that policies in question here bear little, if no relationship to the Supervisor's wages. This destroys the argument that these policies are even a logical or legal substitute for MERS participation. See Rossman testimony, in general. Third, Respondent asserts that he acted in good faith and in reliance upon the sources set forth in Finding No. 21 above. There is no doubt that attempts were made to clarify the availability and legality of these purchases. These efforts however, do not dispel the fact that Respondent gained $8,723.93 in the process. That these monies were obtained in good faith or without fraudulent intent or that the Respondent's votes to pay for and secure these policies were taken in public meetings is irrelevant to the fact that Respondent "gained" these proceeds. See In the Matter of the Act of October 7, 1976, etc (Kestler), Pa. Cmwlth. Ct. , A.2d (No. 2479 C.D. 1979, filed April 5, 1982) for example where pay increases accepted by officials were declared unconstitutional and ordered to be returned despite good faith and non - fraudulent intent of recipients. Thus, here at least we must require Respondent to remit the amount he wrongfully received. Accordingly, we make the following conclusions and enter the Order below. IV. Conclusion and Order: 1. Respondent Robert A. Fuller has used his public office to obtain financial gain other than compensation provided by law for himself in violation of Section 3(a) of the Ethics Act. 2. In the actions as found and discussed above, Respondent has contravened the Ethics Act as set forth in Section 1, in that these actions, culminating in the receipt of the proceeds /cash value of insurance policies described above, constitute a realization of personal financial gain through the holding of and use of public office. Robert A. Fuller June 18, 1982 Page 11 3. Respondent's receipt of the total of $8,723.93 as found above constitutes financial gain obtained from violating these provisions of the Ethics Act. 4. Respondent is not entitled to retain this sum and these findings and conclusions will be referred to the Office of the District Attorney of Westmoreland County, Pennsylvania in accordance with 65 P.S. 407(11) for review for prosecution unless, within 30 days of this Order, Respondent remits the sum of $8,723.93 with interest of 10% per annum from the date of payment relating to surrender of his policy on February 15, 1980 through June, 1982 for the sum of $2,035.58 and a total of $10,759.51 to the Treasurer of the Commonwealth of Pennsylvania as required by Section 9(c) of the Ethics Act, 65 P.S. 409(c). This total will be subject to recalculation if payment is not made within this 30 -day period. Our files in this case will remain confidential in accordance with Section 8(a) of the Ethics Act, 65 P.S. 408(a). However, this Order is final and will become available as a public document within 15 days unless you file documentation with the Commission which justifies reconsideration and /or challenges pertinent factual findings. During this 15 -day period, no one, including the Respondent unless he waives his right to challenge this Under, may violate this confidentiality by releasing, discussing or circulating this Order. Any person who violates the confidentiality of a Commission proceeding is guilty of a misdemeanor and shall be fined not more than $1000 or imprisoned for not more than one year or both, see 65 P.S. 409(e). By Order of the Commission, � �1 `Paul J. Smith, Chairman (Commissioner R. Wilkinson did not participate in this decision.) PJS /jc Honorable John Driscoll District Attorney Westmoreland County 201 Courthouse Square Greensburg, PA 15601 SSC /rdp Mailing Address: STATE ETHICS COMMISSION P.O. BOX 1179 HARRISBURG, PA 17108 TELEPHONE: (717) 783 -1610 December 6, 1983 RE: Robert A. Fuller Dear District Attorney Driscoll: The State Ethics Commission has received a check in the amount of $11,995.39 from the above - referenced individual. This represents payment in accordance with the Order of the State Ethics Commission issued to this individual, Order No. 127. Having received this amount and as set forth in our Order, we would, therefore, recommend that no criminal proceedings be considered or prosecution initiated with respect to Robert A. Fuller. A copy of this letter will be placed with the Order of the Commission referred to above and will be available as a public document and distributed as this Order is distributed. Thank you for your attention to these matters to date. On behalf of the Commission, -Paul J. :S / mith, Chairman • cc: Richard Guida, Esquire Robert Keuch, Esquire The Honorable Leroy Zimmerman, Attorney General Thomas J. Godlewski, Esquire James Antoniono, Esquire State Ethics Commission • 308 Finance Building • Harrisburg, Pennsylvania