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Home My WebLink About415 BeckMr. Robert P. Beck 10605 Silverthorn Road Edinboro, PA 16412 Re: No. 84 -105 -C Dear Mr. Beck: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 ORDER OF THE COMMISSION September 17, 1985 Order No. 415 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. 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 at least 1974 until your term of office expired at the end of 1979. 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 roadmaster, laborer, or in any position except as a supervisor during the period from 1974 through 1979. 4. Township meeting minutes record the following actions relating to appointment of a roadmaster: Mr. Robert P. Beck Page 2 September 17, 1985 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. b. February 13, 1979: Supervisor Beck asked Solicitor Bolla 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. There is no record of you being appointed as township roadmaster or township secretary /treasurer during your term of office. 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. b. Minutes of the Auditors' meetings from 1974 through 1978 also do not record approval for pensions or benefits. 6. 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. 7. 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 working less than 1,000 hours per year. Mr. Robert P. Beck Page 3 - September 17, 1985 bo May 12, 1981: Supervisor Herman asked Solicitor Bo lla about the legality of the township paying a pension plan for the supervisors. On motion by Herman, 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. 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 Supervisor Herman authorizing the solicitor to request repayment from Columbia Insurance was carried. d. 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 Herman to table the issue until you are 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 Herman, second by Horn to table the issue pending Gigliotti's investigating the files of Columbia Insurance. Motion passes with a unanimous vote. f. September 8, 1981: Issued tabled because Mr. Gigliotti was not able to attend the meeting. g. 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: Supervisor Herman 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 Herman, second by Horn to expedite the forms for the supervisors to terminate the pension plan. Unanimous approval. Mr. Robert P. Beck Page 4 September 17, 1985 j. March 10, 1982: Solicitor Bolla reports that the forms for termination of the pension plan had been forwarded to the Columbia Life 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 terminated. 8. Franklin Township auditor records for the past nine years do not record a supervisor's request for the approval of a pension plan. a. Auditors were unaware of the existence of the pension plan until it was made public in 1981 by a group of township residents. b. 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. 9. 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 to 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. Horn, Ley, Township Secretary /Treasurer Diane Horn and you 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, Herman and Township Secretary /Treasurer Diane Horn. 10. Correspondence between the Franklin Township Solicitor and Columbia Life Insurance Company discloses the following: 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 Mr. Robert P. Beck Page 5 September 17, 1985 to supervisors. 53 P.S. §65713 is the relevant statute governing Franklin Township's contract with Ley's 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 of all funds currently in the purchase pension fund attributed to Henry Horn, Ley, and you. 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 working supervisor and when Ley was a non - working supervisor. 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. 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 Ole 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; Robert Herman, $630.00; and Ley $7,718.33. She also noted that you had received your vested benefits of $5,843.13 on March 5, 1980. 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. YEAR BEGINNING BALANCE AMOUNT OF CONTRIBUTION INTERESTS & MISC. CREDITS FEES WITHDRAWALS BALANCE 1974 -0- $800.00 $ 27.79 -0- -0- $827.79 1975 $827.79 $800.00 $77.71 -0- -0- $1,705.50 1976 $1,705.50 $800.00 $136.41 -0- -0- $2,641,91 1977 $2,641.91 $800.00 $186.18 -0- -0- $3,628.09 1978 $3,628.09 $800.00 $255.56 -0- -0- $4,683.65 1979 $4,683.65 $800.00 M 22.56 22.50 -0- $5,812.55 I 328.90 1980 $5,812.55 -0- I 30.58 $5,843.13 -0- 1981 - - - - - - 1982 - - - - -° - $4,800 $1043.13 $22.50 $5,843.13 -0- Mr. Robert P. Beck Page 6 TOTAL CREDITS TOTAL DEDUCTIONS September 17, 1985 f. January 20, 1982: Solicitor Bolla wrote a letter to Gail S. Kipp confirming a telephone conversation of that day stating his understanding that any of the present or former supervisors who wish 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 to Horn, Herman 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. 11. Yearly Policy Statements and Plan Account ledgers obtained from Columbia Life Insurance confirmed the following ;nformation regarding contributions made on your behalf by Franklin Township: a. The plan was effective on May 15, 1974. Your participation date was at that time. Mr. Robert P. Beck Page 7 September 17, 1985 12. Records confirm you endorsed check No. 6376 in an amount of $5,843.13 that was cashed on March 12, 1980. None of that money was returned to the township. 13. Attorney Bolla, former Township Solicitor, provided the following information: 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. c. He attempted to have the policies changed but Columbia refused to do so without a release form signed by supervisors. Ley refused to sign such a release. d. No payments for your pension plan were made by the township after 1979. 14. You declined to be interviewed. B. Discussion: As a Township Supervisor you are a public official as that term is defined in the State Ethics Act. 65 P.S. §402. As such, your conduct is subject to the requirements thereof. Sowers, 80 -050. 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 263, (1Yz T. 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 compensation that is authorized by law. Mr. Robert P. Beck Page 8 September 17, 1985 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. ?_d 283, at 288. The additional question to be answered, therefore, is whether such benefits are compensation provided by law. A complete analysis of this exact issue has been set forth in the above authorities. Se a1 o; Hendricks v. East Rockhill Township, 1 D & C 3d 763, (1977). 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 authroized 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. Clearly in light of the foregoing, you were not entitled to participate at the township's expense in this plan. You served only as a supervisor. You were not employed in any other capacity by the township and you were not entitled to receive any additional compensation. Additionally, even if you had been so employed, the auditors never fixed or otherwise approved this benefit as part of your compensation. Indeed, the auditors were not even aware of the pension program until it was made public in 1981 by a group of township residents. (See finding 8A). Thus, the financial gain that you received was not compensation provided by law. We note that you were on the township board of supervisors in October, 1978 when the pension plan was officially initiated. We also note that you received benefits since 1974 but there was no official action, even by the supervisors until 1978. You in fact voted in 1978 to obtain this plan for yourself and the other supervisors. (See finding 7(a). This is a use of your public office as defined in the Ethics Act. See McCutcheon v. State Ethics Commission, Supra. Also, in 1981, after you left office, the propriety of the plan was questioned and the supervisors were, in fact, informed that the plan was not authorized by law. (See finding 7). Questions along this line had also been raised as early as 1978 when you were still in office. (See finding 6). The Supervisors were, thus, informed by the Solicitor that the plan should be terminated. (See Finding 7(c). Mr. Robert P. Beck Page 9 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 you had received your benefits prior to this time on March 12, 1980, when you cashed a refund check in the amount of $5843.13 and retained the proceeds. Not only did you vote on the implementation of this pension plan in 1978, you also had been receiving township coverage from 1974 without any official approval. Additionally, there is no doubt that you clearly accepted and retained the proceeds obtained from the pension plan. We have ruled that such an acceptance of gain or compensation to which one is not entitled is also 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. While you did leave office prior to the determination by the solicitor that the plan was, in fact, not authorized by law, the fact that these monies may have been 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 you "gained" these proceeds. See In the Matter of the Act of October 7, 1976, etc (Kestler), Pan Cmwlth. Ct. , A.2d (No. 2479 C.D. 1979, filed April 5, 1982) for example where pay ncreases accepted by officials were delcared unconstitutional and ordered to be returned despite good faith and non - fraudulent intent of recipients. See also McCutcheon v. State Ethics Commission, supra; and Domalakes, 85 -010. We, therefore, find that you have vioraed the State Ethics Act. The Act provides that: 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 law, shall pay into the State Treasurey a sum of money equal to three times the financial gain resulting from such violation. 65 P.S. 409(c). The Act also provides that: Section 7. Duties of the commission. September 17, 1985 Mr. Robert P. Beck Page 10 The Commission regulations also set forth; that the Commission may in determining to recommend prosecution; may decide not to so recommend if: (iii) Initiate an inquiry where an opinion has not been requested but where there is a reasonable belief that a conflict may exist. Such inquiry shall be conducted in privacy with full respect to the confidentiality of all the parties inolved in the alleged conflict. If the commission finds that there is a conflict, the information shall be provided for criminal proceedings unless the alleged offender removes himself from the conflict with receiving financial gain. 65 P.S. 407(iii). 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 (4) The Supervisor, if gain has already 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). September 17, 1985 We believe that this result should be reached in the instant matter. See McCutcheon v. State Ethics Commission. Supra. 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 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 $7777.20, ($5,843.13 plus 10% interest for three years), we will refer this matter to the office of the Attorney General of Pennsylvania for further review and disposition. Upon receipt of said check, we will take no further action in this matter. Mr. Robert P. Beck Page 11 September 17, 1985 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 15 days after service (defined as mailing) unless you file documentation with the Commission which justifies reconsideration and /or challenges pertinent factual findings. See 51 Pa. Code 2.38. During this 15 -day period, no one, including 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 proceeding 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). JJC /sfb B the Commission er• rt ' . Conner Chai rman