HomeMy WebLinkAbout414-R HermanMr. Robert Herman
c/o James Blackwood, Esqut
127 W. Sixth Street
Erie, PA 16501
Re: No. 84 -104 -C
Dear Mr. Herman:
STATE ETHICS COMMISSION
308 FINANCE BUILDING
HARRISBURG, PENNSYLVANIA 17120
ORDER OF THE COMMISSION
June 20, 1986
Order No. 414 -R
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. On February 11 and February 25, 1986, a hearing on this matter
was conducted and relevant evidence and testimony was presented. The
individual allegations, conclusions, and findings on which those conclusions
are based are as follows:
I. Allegation: That you, a former Franklin Township Supervisor, violated
Section 3(a) of the Ethics Act, 65 P.S. 403(a), which prohibits the use . of
public office or confidential information gained through that office by
participating in the Township Pension Fund whose entire premiums were paid
from public funds; securing the cash surrender value from those insurance
plans for your personal use; voting on and /or approving payment of premiums
for those plans.
A. Findings:
1. You served as a Franklin Township Supervisor from January, 1980 until you
resigned in May, 1983. As an elected official, you are subject to the
provisions of the Ethics Act.
2. Franklin Township records prior to April, 1978 were destroyed by fire.
3. Township records do not reflect you as being employed by the township as
either roadrnaster, laborer, or in any position except as a supervisor during
the period from 1974 through 1993. You verified this information in your
testimony of Fehruary 25, 1986. You also testified that you road
inspections and such things as taking hydraulic hoses to the did roadmaster and
helping pull a grader from a ditch.
Mr. Robert Herman
June 20, 1986
Page 2
4. Township meeting minutes record the following actions relating to
appointment of a roadmaster:
a. January 2, 1979: Motion by Supervisor Horn, seconded by Ley to
appoint Ley as Road Foreman. The motion passed two to one. Ley
voted for his appointment.
h. Fehruary 13, 197 -9: Supervisor Reck asked Solicitor Rolla whether the
Ethics law prohibits Ley from voting for himself. Solicitor comments
that it is not wrong because the Ethics Act does not cover that
situation.
c. January 7, 1980: Motion by you, second by Horn to appoint Ley
as Roadmaster. Unanimous vote. Ley voted for his appointment.
d. January 5, 1981: No record of any appointment as roadmaster in the
organization minutes of the township supervisors.
e. January 4, 1982: Motion by Sachar, second by you to postpone
appointing a roadmaster until interviews are completed.
5. Minutes of the Franklin Township Auditors' Reorganization meetings record
the following actions relating to compensation for road foreman and
supervisors working in other capacities:
a. January 3, 1979: Supervisors' salary to remain the same - Ley, to
receive $6.00 an hour with one week's paid vacation and the township
to pay for upkeep and running expenses when Ley's truck is used for
township business. Other supervisors were to receive $4.75 an hour.
There was no approval for pensions or other benefits.
h. January 8, 1980: Ley's salary was raises; to $6.50 an hour and he was
given an additional week's vacation. Other supervisors' salaries
were raised from S4.45 an hour to $5.0f an hoar. There was no
approval for pensions or benefits.
March 10, 1980: $25 per month and 17¢ per mile for the use of Ley's
personal vehicle instead of the "upkeep." Daily records were
required for this reimbursement.
d. January 6, 1981: Roadmaster's pay was approved at $7.50 an hour and
a 20Q per mile allowance plus a two -week vacation, $25.00 per month
for vehicle maintenance was allowed to Ley, other supervisors were
paid $5.00 an hour. There was no approval for pensions or henefits.
e. Minutes of the auditors' meetings from 1974 through 1978 also do not
record approval for pensions or henefits.
c .
Mr. Robert Herman
June 20, 1986
Page 3
6. Mr. Gary Gastemire, an auditor for Franklin Township since 1978, testified
that although he was aware the township was paying premiums to Columbia Life
Insurance for a pension fund and the auditors did not question these payments,
they had never approved payments for any supervisor's inclusion in a pension
plan.
7. On July 17, 1978, Edwin T. Kosteva, Columbia Life Insurance Company, wrote
to the Franklin Township Board of Supervisors telling them that, "In further
review of your file, we,.find there is - no formal documentation of your pension
plan ... no formal document governing the provisions of your plan. Without
such a formal document, questions can arise ... complicated by litigation
against the township. You should have an ordinance or resolution
establishing the pension plan and a formal document governing the plan." He
said he and agent Frank Gigliotti would work with the solicitor and
supervisors to prepare the documents and a resolution.
8. Franklin Township Supervisors' meeting minutes from May, 1978 through
April, 1982 record the following information about the supervisors' pension
plan:
a. October 10, 1978: Motion by Ley, second by Horn to establish a
Defined Contribution Pension Plan, passed unanimously. Criteria and
guidelines for the plan were also established by this motion. The
plan applied to employees and supervisors but excluded employees
worki ng less than 1,000 hours per year.
(1) The plan provided that full -time employees and supervisors were
eligible to participate but that the employer (township) would
contribute $800.00 per year for "... each eligible employee ".
(emphasis added)
(2) There was no provision for premium payments for supervisors.
(3) Solicitor Lawrence Bolla testified that this was "... probably
a form resolution presented by Columbia, as I recall ".
(4) The effective date of this plan was shown as May 15, 1974. The
insurance company did not have a copy of the resolution
establishing this plan until September, 1981.
(5) There are no signatures on this plan.
(6) Except for the township minutes, there were no documents
presented to show official notice from the township to Columbia
Life Insurance Company authorizing that company to set up the
plan and accept payments from the township. A contract was
agreed to. (See Finding 16).
Mr. Robert Herman
June 20, 1986
Page 4
(7) There is no evidence of township action approving a plan or
township payments prior to this resolution.
(8) There is no evidence that any action was taken to authorize
payment of premiums for supervisors.
b. May 12, 1981: You asked Solicitor Bolla about the legality of the
township paying a pension plan for the supervisors. On motion by
you, second by:,Horn with a unanimous vote; bills, with the exception
of those for the pension plan for supervisors other than the
roadmaster, were approved for payment. In addition, payment of $800
to Columbia Accident and Health Insurance by check No. 1791 was
approved. This payment was not for your premium according to your
attorney.
c. June 9, 1981: Solicitor Bolla reported that only employees of the
township can participate in the pension plan. He states that he has
confirmed this with Ken Greider of the Pennsylvania State Association
of Township Supervisors and the Pennsylvania State Association of
Township Supervisors Legal Counsel. He recommends that a letter to
request repayment be sent to Columbia Insurance. He adds that the
Insurance Commissioner could be asked to help collect the refund if
Columbia Insurance Company does not respond favorably. Motion by
Horn, seconded by you authorizing the solicitor to request repayment
from Columbia Insurance was carried.
de July 14, 1981: Solicitor Bolla reports Columbia Life Insurance will
return the money for people not working for the township if
withdrawal forms are signed. Motion by Ley, seconded by you to table
the issue until Horn is at the meeting. Motion carried.
e. August 11, 1981: Frank Gigliotti, Columbia Insurance Company,
attends and states that the company will refund the money providing
they receive a signed form. They will return the money to the
individual but not the township. Motion by you, second by Horn to
table the issue pending Gigliotti's investigating the files of
Columbia Insurance. Motion passes with a unanimous vote.
(1) On August 19, 1981 Gail Kipp, Columbia Insurance Pension
Department, wrote to Frank Gigliotti as follows:
"Please find attached a copy of the letter and the releases
that were sent to the township's solicitor. If the supervisors
agree to hand the money to the township, then these releases
would be Columbia Insurance's protection against any liability
to these individuals at a later date. If they do not sign
these releases, we can not give the township the money
di rectly."
Mr. Robert Herman
June 20, 1986
Page 5
g.
J. •
(2) Mr. Frank Gigliotti testified that he was not aware that the
supervisors wanted to terminate their pension plans and that he
did not remember this memorandum or the August 11, 1981 motion
to return to meet with the supervisors after "investigating"
the company's files.
On September 4, 1981, Ms. Kipp again wrote to Mr. Gigliotti
stati ng
(3)
"Many thanks for the copy of the resolution. They seemed
to have followed Ed's rough draft that he had sent them. I
noticed on Section 11 that they have a #1 and #2 schedules.
They should have had a box before each number and one of the
boxes checked. This could be a source of ambiguity; though our
copies of federal and state reports support the 100 percent
Immediate Vesting Schedule. It would only affect Robert Herman
in any case, since he started employment in 1980 whereas Horn
and Ley have been there over six years."
(4) There is no evidence that you ever received information from
Mr. Gigliotti's investigation of the Columbia Insurance files
or the above correspondence.
f. September 8, 1981: Issue tabled because Mr. Gigliotti was not able
to attend the meeting.
October 13, 1981: Solicitor Bolla said he would attempt to have the
question of insurance put on the agenda of the Erie County
Association of Township Officials. He adds that other townships
recognize they have the same problem. Mr. Gigliotti did not attend
the meeting and the minutes give no reason for his absence.
h. January 4, 1982: you requested that the solicitor notify Columbia
Life Insurance to close out the pension fund and to forward checks.
Supervisor Sachar supported this request.
i. February 10, 1982: Solicitor Bolla presented forms to the
supervisors to be signed to terminate the pension plan. Motion by
you, second by Horn to expedite the forms for the supervisors to
terminate the pension plan. Unanimous approval.
March 10, 1982: Solicitor Bolla reports that the forms for
termination of the pension plan had been forwarded to the Columbia
Li fe Insurance and the plan will be terminated by the end of the
month.
k. April 14, 1982: Solicitor Bolla reports that the pension fund is now
tenni nated.
Mr. Robert Herman
June 20, 1986
Page 6
9. Franklin Township auditor records for the past nine years do not record a
supervisor's request for the approval of a pension plan.
a. Minutes of the township auditors' reorganization meetings from 1974
through 1985 record approval compensation for supervisors employed by
the township only for hourly wages, vacation leave, and expenses for
use of personal vehicles while on township business.
10. Columbia Life Insurance Company, - Bloomsburg, Pennsylvania, records
disclose the following information about the Franklin Township pension plan:
a. The plan was administered under a Group Annuity Contract No. DA -164.
b. The effective date of the plan was May 14, 1974.
c. Eligible participants were defined as full -time employees and
supervisors; persons working less than 1,000 hours annually were
excluded.
d. 100% immediate vesting was included.
e. The employer contributed 100% of the premium which was $800 per
employee per year.
f. Supervisors Beck, Ley, Horn and Township Secretary /Treasurer Diane
Horn are listed as the only participants.
g. Yearly statements and employee census for 1980 through 1982 list the
participants as you and Supervisors Ley, Beck, Horn and Township
Secretary /Treasurer Diane Horn.
h. This record was not in the insurance company file until September,
1981.
11. Correspondence between the Franklin Township Solicitor and Columbia Life
Insurance Company discloses the followi ng:
a. June 30, 1981: Letter from Solicitor Bolla to Columbia Life
Insurance Company; "I have reviewed the Pennsylvania Second Class
Township Code regarding the payment of insurance and annuity benefits
to supervisors. 53 P.S. §65713 is the relevant statute governing
Franklin Township's contract with your company. That section clearly
provides that a second class township may only provide this type of
coverage for employees of the township. The supervisors themselves,
if they are not employees of the township, are not entitled to any
benefits under this section. Please refer to the case of
Hendricks v. East Rockhill Township, 1 D. & C. 3rd 763 (1977) for a
most recent interpretation of the relevant statute." He added that
he had been directed by the township supervisors to demand repayment
Mr. Robert Herman
June 20, 1986
Page 7
of all funds currently in the pension fund attributed to Robert Beck,
Ley, and Horn. He noted that, in Ley's case, they were not
requesting return of the amount paid for him as a full -time employee
of the township. He also asked for an accounting of all funds paid
into the purchase payment fund from the registered date and the
interest paid on those funds.
b. July 7, 1981: Edwin T. Kosteva, Pension Administrator, wrote to
Solicitor Bolla stating that Robert Beck is no longer a supervisor
and received his vested benefits February 28, 1980. Kosteva had
enclosed authorization for withdrawal of fund forms to be completed
and signed and stated that they needed specific information on which
of the contributions the township had made for Ley while he was a
worki rig supervisor and when Ley was a non - working supervisor.
(1) You testified that you were never aware of this letter or its
contents.
c. July 10, 1981: Solicitor Bolla wrote to Mr. Kosteva stating that one
half of the existing contributions were made by the township as a
result of Ley's employment as roadmaster with the township. He
stated the township intended that this amount would remain in Ley's
fund, the balance was to be refunded.
(1) You testified that you were unaware of this letter or its
contents.
d. August 7, 1981: Gail S. Kipp, Pension Manager, Columbia Life
Insurance Company, wrote to Mr. Ed Springer, Springer & Perry, asking
him to respond to a question raised by Solicitor Bolla by telephone.
Solicitor Bolla asked whether there was legal authority for the
township to terminate the funds and collect the money if the
supervisors do not agree to relinquish the money. Solicitor Bolla
had stated that the supervisors were not eligible to participate in
the plan. The amounts involved were Horn, $7,318.23; you, $630.00;
and Ley $7,718.33. She also noted that former Supervisor Robert Beck
had received his vested benefits of $5,843.13 on March 5, 1980. You
stated you were never given this letter or a copy of it during your
tenure as a supervisor or that you were made aware of it contents.
e. August 17, 1981: A. J. Carden, Vice President, Columbia Life
Insurance Company, wrote to Lawrence C. Bolla. Columbia Life
Insurance had been advised by their legal counsel that the most
practical manner in which to resolve the Franklin Township pension
question would be to have supervisors sign release forms to allow the
company to refund the money to the township. He enclosed release
forms. You stated you were never given this letter or a copy of it
during your tenure as a supervisor or that you were made aware of it
contents.
_ YEAR
BEGINNING
BALANCE
AMOUNT OF
CONTRIBUTION
INTERESTS &
MISC. CREDITS
FEES
WITHDRAWALS
BALANCE
M $22.50
1980
-0-
$800.00
I 35.20
$22.50
-0-
$835.20
1981
$835.20
-0-
I $70.05
-0-
-0-
$905.25
1982
$905.25
I 8.58
-0-
$913.83
-0-
$800.00
$136.33
$22.50
-0-
Mr. Robert Herman
June 20, 1986
Page 8
f. January 20, 1982: Solicitor Bolla wrote a letter to Gail S. Kipp
confirming a telephone conversation of that day stating his
understandi ng that any of the present or former supervi sors who wi sh
to withdraw their assets from the pension plan need only sign the
"Authorization for Withdrawal of Funds" form which had been provided.
He added the form was to be signed by both the withdrawing employee
and by the appropriate township official. The appropriate township
official was not identified. _ He noted that he thought the forms
could be prepared and signed at the regular township meeting on
February 10, 1982.
g. March 4, 1982: Gail S. Kipp wrote a letter to Solicitor Bolla
enclosing copies of the letter sent tc Horn, you and
Secretary /Treasurer Diane Horn, noting that these accounts had been
closed and the people paid in full. She also asked for a copy of any
resolution that was passed at the February 10, 1982 meeting. You
stated you were never given this letter or a copy of it during your
tenure as a supervisor or that you were made aware of it contents.
12. Yearly Policy Statements and Plan Account ledgers obtained from Columbia
Life Insurance confirmed the fol1owi ng information regardi ng contributions
made on your behalf by Franklin Township:
a. The plan was effective on May 15, 1974. Your participation began in
1980.
TOTAL CREDITS
TOTAL DEDUCTIONS
13. Records confirm you endorsed check No. 872 in an amount of $913.83
that was cashed on March 3, 1982. None of that money was returned to the
township.
14. You testified that you had decided to turn the proceeds from your pension
fund (Finding 13) over to the fire department and took the fol1owi ng actions:
Mr. Robert Herman
June 20, 1986
Page 9
a. You purchased two portable radios for the use of the fire department.
The cost of the radios was $906.50.
b. Portable radios are the only communication system for the fire
department. These radios are speci al i zed equipment and of little
value to the average person.
c. That your purchase of the radios for the fire department was
confirmed by the minutes of a department meeting on February 4,
1982.
(1) Those minutes record the following: "Motion by Dave
Bernahardt, second by Bob Laycock to pay bills including
Pennsylvania Fire Equipment for C I's (Chief Bob Herman) radio
(he will pay for it)."
d. You used the radios from their purchase in 1982 until January 1,
1986; when you gave them to the department because you were no longer
the fire chief. At the hearing you introduced a letter signed by
George McLaughlin, President, and Joyce Berry, Chief of the fire
department, stating the followi ng: "On behalf of the Frankli n
Township Volunteer Fire Department, thank you for your donation of
the Ritron RT -50 S/N 12629 and the Regency BTL -30 4 S/N 216 -B29 587
that you purchased for the department in January, 1982 and returned
on January 1, 1986 as out going chief."
e. The fire department is a private organization and was not part of the
township government.
f. Part of the reason that you ran for township supervisor was to have
the fire department officially recognized by the township.
15. The Township did not approve the use of your pension proceeds to purchase
the radio's for the fire department.
16. You also testified that you began questioning the expenditure for the
pension payments when you reviewed preparation of the 1981 township budget.
17. Attorney Bolla, former Township Solicitor, provided the following
i nformation:
a. You and the other supervisors were coaxed into purchasing the
insurance by the Columbia representative.
b. He researched the pension issue and found a lower court case in Bucks
County. Based on a court ruling, he advised the board of supervisors
that the plan obtained from Columbia was inappropriate.
Mr. Robert Herman
June 20, 1986
Page 10
c. He attempted to have the policies changed but Columbia refused to do
so without a release form signed by supervisors.
d. No payments for your pension plan were made by the township after
1980.
e. You deny the statements in a and c above.
18. The record of the township pension plan and your participation is as
follows :
A. May 14, 1974, Contract DA -164 entered into by the township and
Columbia Life Insurance Company.
(1) Ley and Supervisor Beck signed as appli cant. Franklin Township
was identified as the applicant.
(2) The name of the plan was "Franklin Township Pension Fund ".
(3) Other than the signatures of Ley and Supervisor Beck, there
is no record of township authorization of this plan.
B. On October 10, 1978, the township supervisors approved a "Defined
Contribution Plan" at the suggestion of Mr. Edwin T. Kosteva,
Columbia Life Insurance Company. (See Finding 7).
(1) The Columbia Life Insurance Company copy of this plan was the
only one presented.
(a) It was not signed or dated.
(b) It was not received by the insurance company until
September 3, 1981. (See Fi ndi ng 8e (3)).
(c) The effective date was shown as May 15, 1974 but there was
no explanation for the back dating.
(d) The township had not identified the vesting option they
were choosing. The options were 1: "100% immediate
vesting "; 2: "O% for three years. 25% after 3 years
employment, with 25% each year thereafter until 6 years ".
(See Finding 8e (3)).
(1) There was no record as to whether the period for considering
either option was May 15, 1974, October 10, 1978 or September,
1981.
Mr. Robert Herman
June 20, 1986
Page 11
(2) This designation would have affected your vested interest. If
option 2 was selected and effective October 10, 1978, you would
not have been eligible for full vesting until 1986.
C. On February 10, 1982, you signed an "Authorization for Withdrawal
of Funds" requesting "... withdrawal and return of all vested assets"
for you. The reason for withdrawal was recorded as "Termination of
Plan" Supervisor Horn signed as the township official.
D. Columbia Insurance Company issued check #00872 dated March 3, 1982,
in the amount of $913.83. You endorsed this check on or about April
8, 1982.
E. There is no record of official township action to terminate the
plan.
B. Discussion: As a township supervisor you are a public official as that
tens is defined in the State Ethics Act. 65 P.S. §402. As such, your conduct
is subject to the requirements thereof. Sowers, 80 -050; Glova, No. 326; Hunt,
No. 384 -R.
Generally the Ethics Act provides that:
Section 3. Restricted activities.
(a) 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).
The question of the propriety of pension and annuity plans for
supervisors of second class townships has been reviewed by this Commission on
many occasions. McCutcheon, No. 127; Hoak, No. 128, Marcello, 85 -003. The
Commission determinations in these matters has been reviewed and affirmed by
the Commonwealth Court of Pennsylvania. McCutcheon v. State Ethics
Commission, 77 Pa. Comm. 529, 466 A.2d 283, (1982).
Generally, in situations such as the instant matter, it must be
determined whether the official used his position to obtain or secure
financial gain other than the canpensation that is authorized by law.
It is now clear that pension benefits such as the type of question
herein, constitute a financial gain. See, McCutcheon v. State Ethics
Commission, 466 A.2d 283, at 288.
Mr. Robert Herman
June 20, 1986
Page 12
The additional question to be answered is whether such benefits are
compensation provided by law. A complete analysis of this exact issue has
been set forth in the above authorities. See also; Hendricks v. East Rockhill
Township, 1 D & C 3d 763, (1977), Synoski v. Hazel Township, Pa. Commw.
, 500 A.2d 1282, (1985). Generally, the compensation to be paid to a
township supervisor who serves only in that position is specifically set by
Statute. 53 P.S. §65515. A Supervisor who is also employed by the township
in one of the positions authorized in the Second Class Township Code, may
receive additional compensation. Such compensation, however, in order to be
authorized by law, must be affirmatively fixed by the Township Board of
Auditors. 53 P.S. §65542.
We have reviewed the instant matter in light of these now established
concepts of law as well as under the policy pronouncement of the Commission.
51 Pa. Code §7.1.
If you had been employed by the township as a roadmaster or laborer you
would have been eligible, subject to auditor approval, to participate in the
pension program. With relation to your participation in the plan as a
non - working township supervisor, clearly in light of the foregoing, you were
not entitled to participate in the plan at the township's expense only in your
capacity as a supervisor.
In addition to the foregoing, we note that you became a township
supervisor after the pension program had been initiated. You, therefore, did
not technically vote on establishing said plan. In 1981, however, shortly
after you took office you questioned the legality of the program. (See
Finding 8b). You were advised in June of 1981 by the township solicitor that
the plan was not legal for non - working supervisors and you were informed by
the township solicitor that the plan should be terminated. See Finding 8c).
Eventually, on April 14, 1982, the plan was terminated. When the plan
was terminated, the Insurance Company requested that each supervisor execute
an authorization for withdrawal of funds in order to receive the cash value of
the plan. The refunds were then forwarded to each individual supervisor.
Records reflect that on March 3, 1982, you cashed a refund check in the amount
of $913.83 and retained the proceeds.
It may be argued that by not voting for the pension plan and your
inclusion therein, that you did not use your office in violation of the Ethics
Act. There is no doubt, however, that after you realized said plan was, in
fact, not authorized, you clearly accepted and retained the proceeds obtained
therefrom. We have ruled that such an acceptance of compensation to which one
is not entitled is a use of one's public office in violation of Section 3(a)
of the Ethics Act. Huff, 84 -015; Domalakes, 85 -010; Weaver, 85 -014; Blumling,
No. 388.
Mr. Robert Herman
June 20, 1986
Page 13
Some questions have been raised as to whether the township board of
supervisors were informed as to the procedure offered by Columbia Life
Insurance Company for the termination of the policy. Attorney Bolla testified
that two methods of termination were offered. Under the first method, the
supervisors would be required to sign a release after which the funds would be
transmitted directly to the township. Under the second termination program,
the supervisors would sign authorization for withdrawal forms where after the
funds would be disbursed directly to the township supervisor. The township
board supervisors signed the authorization for withdrawal forms rather than
the official releases. However, each member of the township board of
supervisors testified that Attorney Bol1a never informed them of the procedure
whereby the township would have directly received the money. In any event,
even if we, for the sake of this order assume that Attorney Bolla, in fact,
never informed the township board of supervisors as to the alternative
termination procedure, this nevertheless does not alleviate the fact that you
accepted and retained the funds that were received for your own benefit.
There is no reason why, even after the funds were released to you as an
individual, that you could have not turned over to the township that portion
of funds which were paid for your participation in the program as a
non - working supervisor. Your acceptance of these funds, after substantial
questions as to the legality of the program had been raised, was clearly a
violation of the State Ethics Act.
It is also important to note, in relation to the foregoing situation,
that even prior to the questions that had been raised by you regarding the
propriety of the plan, in 1978 the supervisors approved a defined contribution
plan at the suggestion of the Columbia Life Insurance representative.
Specifically, set forth in that defined contribution plan, was the requirement
that the plan was for full -time employees and the township was to contribute
$800.00 per year for each eligible employee. While the plan indicated that
supervisors were eligible to participate, there was no provision in the plan
for premium payments for supervisors who were not emloyees. Thus, as early as
1978, the board of supervisors should have known that the payment for this
program by the township, regarding non - working supervisors was questionable.
The funds that you received as a result of the termination of the pension plan
were used to purchase radio's for the volunteer fire department. While this
may indeed be a laudable use of funds, that department was a private
organization not part of the township. At the time of this donation, the
department was not even recognized by the board of supervisors as the official
volunteer fire department.
A township supervisor may not, on his own, commit township funds in such
a manner. Any expenditure of township funds, i n such a manner, woul d require
the approval of a majority of the board of supervisors. Other individuals who
made donations to this entity did not use public funds but would rather have
had to use private funds for such purpose. Your donation of radios, to the
fire department, purchased with township funds, is equivalent to your use of
such funds to support any entity in which you had an interest. As noticed,
while we do not question that such donation was occasioned by good faith, it
Mr. Robert Herman
June 20, 1986
Page 14
does not alleviate the fact that you received funds to which you were not
entitled and thereafter used them for other than township purchases. As such,
we believe that your receipt of those funds to which you were not entitled
violates the State Ethics Act. Such an acceptance of a gain or of
compensation to which an employee is not entitled is a use of one's public
office not in accord with the State Ethics Act. Huff, 84 -015, Bomalakes,
85 -010, Weaver, 85 -014, Bl uml i ng , No. 388.
Generally, the State Ethics Act provides as follows:
Section 9. Penalties.
(a) Any person who violates the provisions of Section 3(a)
and (b) is guilty of a felony and shall be fined not more
than $10,000 or imprisoned for not more than five years,
or be both fined and imprisoned. 65 P.S. 409(a).
(c) Any person who obtains financial gain from violating
any provision of this act, in addition to any other
penalty provided by 1 aw, shall pay into the State
Treasury a sum of money equal to three times the
financial gain resulting from such violation. 65 P.S.
409(c).
In addition to the above, the Act provides that the Commission may forward the
results of any investigation to the appropriate prosecuting authority, unless
the alleged offender removes himself in the conflict of interest by divesting
himself of any financial gain received in violation of the State Ethics Act.
65 P.S. §4079(iii). This principle has been upheld by the Commonwealth Court
of Pennsylvania in McCutcheon v. State Ethics Commission, supra. In addi.tion
to the following, the Commission regulations also set forth that the
Commission may, in determining to recommend a prosecution, decide not to
recommend such prosecution if:
§7.17. Extenuating or mitigating circumstances.
(a) The Commission may, in deciding whether to
recommend prosecution as set forth in §7.16 (relating to
options available to the Commission) decide not to refer a
matter for prosecution if any of the following events
occur:
(3) The Supervisor, if gain has already been
secured as a result of inclusion in a plan, remits
and refunds the gain, as determined by the
Commission, to the plan, the township or the State
Treasury as appropriate; or
Mr. Robert Herman
June 20, 1986
Page 15
(4) The Supervisor, i f gain has al ready been
secured as set forth in paragraph (3) refunds, in
addition to the amount determined thereunder, an
additional 10% thereof per annum so that any benefit
derived from the gain associated with the plan is
negated. 51 Pa. Code 7.17(a).
As a result of the foregoing, the_ Commission may offer a person who has
obtained financial gain -in violation of the State Ethics Act, the opportunity
to divest himself of that financial gain.
In addition to the following, we note, that even if you were to have
received your pension program and the financial gain resulting therefrom, in
good faith and based upon the advice that you had received from others
including your solicitor, such good faith receipt of benefits or financial
gain to which you are not entitled, would not alleviate you from the duty of
returning such gain to the governmental body from which it was received. Good
faith reliance upon a solicitor, has been held not to constitute just cause
for retention of a financial gain to which one was not entitled. See,
Allegheny County v. Grier, 179 Pa. 639, 368. 353, (1897); McCutcheon v. State
Ethics Commission, 77 Pa. Commw. 529, 466 A.2d 283, (1983); Kestler Appeal, 66
Pa. Commw. 1, 444 A.2d 761 (1981). We believe that this result is appropriate
and, therefore, we will offer you the opportunity to divest yourself of the
financial gain that was received in violation of the State Ethics Act. We
will also impose the 10% interest requirement as set forth in the regulations
of the State Ethics Act. 51 Pa. Code 7.17(a), (4). The amount of financial
gain which we have determined to have been obtained in violation of the State
Ethics Act, would be the amount of funds expended by the township on your
behalf in your capacity as supervisor. The total amount expended by the
township, on your behalf, was $800.00, with accrued credits and interest.
obtained through the pension program a total amount which you received as a
result of your termination of the program was $913.83. This amount plus the
10% penalty equals $1,005.21.
C. Conclusion: You violated the State Ethics Act when you, as a township
supervisor, received, accepted and retained the proceeds from a
township - provided pension plan to which you knew you were not entitled.
Unless, within thirty (30) days of the date of this order you remit to the
State Ethics Commission a check made payable to Franklin Township in the
amount of $1,005.21. In the event that you do not make such restitution, we
will refer this matter to the appropriate law enforcement authorities for
further review.
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 be made available as a public document 5 days after service (defined
as mailing) unless you file documentation with the Commission which justifies
Mr. Robert Herman
June 20, 1986
Page 16
reconsideration and /or challenges pertinent factual findings. See 51 Pa. Code
2.38. During this 5 -day period, no one, i ncludi ng the Respondent unless he
waives his right to challenge this Order, may violate this confidentiality by
releasing, discussing or circulating this Order.
Any person who violates the confidentiality of a Commission proceedi ng
is guilty of a misdemeanor and shall be fined not more than $1,000 or
imprisoned for not more than one year or both, see 65 P.S. 409(e).
Ly the Commission,
G. Sieber Pancoast
Chairman
Mr. Robert L. Herman
10738 Eureka Road
Edinboro, PA 16412
EMSJna
cc: Public Binder
STATE ETHICS COMMISSION
308 FINANCE BUILDING
P.O. BOX 11470
HARRISBURG, PA 17108 -1470
TELEPHONE (717) 783 -1610
July 15, 1986
Re: Order No. -R
Dear Mr. Herman:
On July 9, 1986, the State Ethics Commission received your payment
reimbursing Franklin Township as required by Order No. 414.
We have forwarded your check in the amount of $1,005.21 to the township.
This letter will be part of the Order and a public record as such.
Si ncerely,
Edwar M. Seladones
Executive Director