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HomeMy WebLinkAbout530 GerhartMr. William W. Gerhart R.n. #1 Stevens, PA 1757R Re: 86 -022 -C Dear Mr. Gerhart: A. Findings: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 ORDER OF THE C(1MMISSION Order No. 530 DECIDEDOCT 21 1986 MAILEDOCT 86 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 hased are as follows: I. Allegation: That you, a Supervisor for west Cocalico Township, violated Section 3(a) of the Ethics Act which prohibits a puhlic employee's or puhlic official's use of office or confidential information gained through that office to obtain financial gain, when you accepted compensation from the township from January of 197Q to date, without auditor approval for said compensation; and, that you further violated Section 3(c) of the Ethics Act which prohihits a puhlic official, public employee or memher of his immediate family or any husiness in which the person or a memher of the person's immediate family is a director, officer, owner or holder of stock exceeding 5% of the equity at R5nn or more with a governmental holy unless the contract has heen awarded through an open and puhlic process by contracting with your governmental body in excess of 1500 annually, from January of 1979 to date, without an open and puhlic process. 1. You have served as a West Cocalico Township Supervisor since 1961 and as township secretary/treasurer since 1979. 2, You were not appointed to serve as a township roadmaster, superintendent or laborer. Mr. William W. Gerhart Page 2 3. As township secretary /treasurer, you were generally responsible for: receiving all moneys due the township and depositing the same promptly upon receipt thereof in a bank, banking institution, or trust company in the name of the township; keeping distinct and accurate accounts of all sums received from taxes and other sources, which account shall be open to the inspection of the supervisors and taxpayers of the township; paying out all moneys received by him only on orders drawn by the supervisors of the township. The secretary in each township shall be clerk to the board of supervisors. He shall keep a record of the proceedings of said officer in a minute book in which he shall also record all court orders relative to the laying out, opening and vacating of roads. The minute book, account book and other financial records shall be carefully preserved by the secretary and shall be turned over to his successor in office. Miscellaneous records and papers of the township other than the minute book and account book may be destroyed with the consent of the supervisors after the lapse of six years from the date of such records. The secretary shall prepare and write the annual tax duplicate of the township. 4. As the township secretary /treasurer, you co- signed all township checks and payroll sheets. 5. From 1979 through 1982, you held a one -third interest in M. E. Gerhart & Sons, Inc., a general contracting business in West Cocalico Township, Pennsylvania. 6. From 1982 to the present, you held a two - thirds interest in this business enterprise. 7. M. E. Gerhart & Sons, Inc., maintains a service garage in order to repair trucks used in the company's business. 8. M. E. Gerhart was paid by West Cocalico Township from 1979 through 1985 for services performed on township vehicles. Mr. William W. Gerhart Page 3 9. Township records and M. E. Gerhart records were reviewed and indicate that township funds were paid out to your company as follows: Year Township Records M. E. Gerhart Invoices Difference* 1979 $ 651„95 $ 552.07 v, 99.88 1980 $ 3R8.1Q • $ 389.19 $ 1.00 1981 $ 619.02 $ 794.02 S $175.00 1982 $4,203.10 $4,187.75 $ 15.35 1983 $2,001.63 $2,039.62 $ 37.99 1984 $4,587.68 $4,587.02 $ .66 1985 $ 976.88 $ 939.20 $ 37.68 *There are slight differences hetween the figures set forth in the township records and the records of M. F. Gerhart R Sons, Inc. 10. The type of services provided varied and included, changing oil, state inspections, changing light hulhs, tune -ups, replacement of exhaust systems replacement of brakes and replacement of hearings. 11. The types of vehicles on which your company worked included international trucks, spreaders, tractors, graders, 4 x 4's, rollers and police cars. 12. Most M. E. Gerhart & Sons, Inc., hills were made out to West Cocalico Township, c/o William W. Gerhart, Secretary. 13. A review of M. E. Gerhart & Sons, Inc., invoices indicate_ the fnl iowi roc_ in relation to the services performed for the township: Year Parts Labor * Mist. Total 1979 $ 192.82 $ 284.25 $ 70.00 $ 552.07 1980 $ 129.19 $ 260.00 $ 389.19 1981 $ 252.27 $ 503.75 $ 38.00 S 794.02 Mr. William W. Gerhart Page 4 Year Parts Labor * Misc. Total 1982 $2,175.08 $1,813.30 $169.37 $4,187.75 1983 $ 297.86 $1,321.75 $420.01 $2,039.62 1984 $1,594.72 $2,905.51 $ 86.74 $4,587.02 1985 $ 258.59 $ 388.23 $292.38 $ 939.20 * Miscellaneous expenses included repair to lights on township buildings, postage and reproduction costs. 14. As a township Supervisor, you participated in township meetings where the above bills were reviewed and payment authorized. 15. As township secretary /treasurer, you received the above bills from your company and made payment thereof. 16. You have stated that M. E. Gerhart & Sons, Inc., began performing services on township equipment during the mid- 1970's as a result of an emergency. 17. You have stated that there are no other facilities in the immediate area capable of performing the above services on heavy equipment; the type maintained by the township. 18. You have stated that if the township work had not been available, you would have been required to lay off some M. E. Gerhart & Sons, Inc., workers. 19. No open and public process was used to solicit proposals to service the township equipment. a. There were no advertisements of the availability of this work. b. There were no proposals solicited or received by the township. c. There was no action at any public meeting of the township board of supervisors indicating the board's approval of M. E. Gerhart performing this work. 20. The township board of supervisors never took official action authorizing payment of township bills. Mr. William W. Gerhart Page 5 1. At township meetings, a list of all bills was circulated and if there were no quetions on the bills, payment was made. No motions were made or votes taken. 21. A truck service station on Route 272, Fast k:oulico Township has the capacity to service heavy equipment. This facility is within 5 to 10 miles of M. E. Gerhart & Sons, Inc., and is 15 miles from the furt:eeFA point of West Cocalico Township. 22. Records of West Cocalico Township indicate ;;hz.', "ou reedived compensation from the township for servng as secretary/,reasurer as follows: 1979: $5,003,10 1980: $8,220.78 1981: $6,053.01 1982: $7,906.81 1983: $8,155.97 1984: $10,148.49 1985: $7,662.09 Total: $53,150.25 23. Records of the West Cocalice Township Board of Auditors for the years 1978 through 1986 indicate that the compensation to be paid t the townshp supervisor serving as secretary /treasurer was to be three (3) percent of all funds paid out, except loans and c d's. 24. You have indicated that you were pad in January of each year for your service as secretary /treasurer during the preceeaing year. The amount of this payment was based.,upon the report of the auditors regarding the prior year expenditures of the township. Mr. William W. Gerhart Page 6 25. Records of West Cocalico Township indicate that you received compensation from the township for services performed as an employee of the township as follows: 1979: $63.12 1980: $38.08 1981: $31.55 1982: $165.54 1983: $110.83 1984: $43.79 1985: $201.06 Total: $653.97 s 26. Records of the West Cocalico Township Board of Auditors for the years 1978 through 1986 indicate that an hourly rate of compensation was fixed by the auditors in each year for supervisors serving in approved positions of township employment. 27. Records of West Cocalico Township indicate that you received compensation in your position as township supervisor as follows: 1979: $600.00 1980: $550.00 1981: $500.00 1982: $600.00 1983: $850.00 1984: 1985: $600.00 Total: $3,700.00 Mr. William W. Gerhart Page 7 28. This compensation was for attendance at township board of supervisors meetings. 29. Township records indicate miscellaneous township expenditures to you as follows: 1979: $43.59 1980: $41.35 1981: 1982: $60.40 1983: $35.00 1984. $26.28 1985: $35.00 Total: $241.64 30. Total township expenditures to you or your company are as follows. Year M. E. Gerhart William Gerhart Total 1979 $552.07 $5,709.81 $6,261.88 1980 389.19 8,850.21 9,239.40 1981 794.02 6,584.56 7,378.58 1982 4,187.75 8,732.75 12,920.50 1983 2,039.62 9,151.80 11,191.42 1984 4,587.02 10,218.56 14,805.58 1985 939.20 8,498.15 9,437.35 Totals: $13,488.87 $57,745.84 $71,234.71 R. Discussion: As a township supervisor in West Cncalico Township, you are clearly a puhlic official as that term is defined in the State Ethics Act. 55 P.S. &4f12. As such, your conduct must conform to the requirements of that law. Sowers, RO -05f1; Welz, R6-001. The Ethics Act provides as follows: Section 3. Restricted activities. (a) No puhlic official or puhlic employee shall usethis puhlic office or any confidential information received through his holding puhlic office to obtain financial gain other than compensation provided hy law for himself, a memher of his immediate family, or a husiness with which he is associated. FS P.S. 403(a). Mr. William W. Gerhart Page R • The Act further defines husiness with which one is associated as follows: Section 2. Definitions. "Rusiness with which he is associated." Any husiness in which the person or a member of the person's immediate family is a director, officer, owner, employee or holder of stock. 65 P.S. 402. In reviewing the above provision of the State Ethics Act, this Commission must determine in part what the authorized compensation for a particular puhlic official is in order to determine if they have received a financial gain other than the compensation provided for hy law. In the instant situation, we have heen called upon to review your receipt of compensation in several different capacities. Initially, you received compensation for serving in the position of township secretary /treasurer. In addition to that, you received compensation as a township supervisor for attending hoard of supervisor meetings. You also received compensation for performing other miscellaneous services for the township. Finally, your company received payments from the township for services performed on township vehicles. It is these specific expenditures hy the township to ynu or to the business with which you are associated which must he reviewed in this instant situation. In order to determine the authorized compensation for a township supervisor, WP must review the Second Class Township Code. Generally, the compensation of township supervisor is statutorily fixed. 53 P.S. £65515. That compensation is to he paid to supervisors for attending township supervisors meetings. In addition to that statutory compensation, township supervisors may also serve in the position of roadmaster, lahorer or township Mr. William W. Gerhart Page 9 superintendent. Their compensation for service in these positions, however, must be fixed by the township board of auditors. 53 P.S. §65515. In addition to the foregoing, township supervisors may also serve as secretary /treasurer for the township. When serving in this capacity, however, the compensation to be provided to the township supervisor must also be fixed by the township board of auditors. E3 P.S. §65531, §65540. This Commission has previously determined that when a township supervisor serves in positions other then those authorized by the.Second Class Township Code or when they receive a financial gain that is not part of the allowed compensation or that has not been fixed by the township board of auditors, such would be i'n violation of the State Ethics Act. McCutcheon, No. 385. In the instant situation, the factual information reveals that you were duly appointed to serve as the township secretary /treasurer. The township board of auditors did in fact, fix a salary for you in that position for each -year in which you served. That salary is duly noted in the township board of auditors minutes and, as such,'we believe that the compensation you received in that position was appropriately fixed according to law. Additionally, we note that you also received compensation for attending township supervisors meetings. There is no indication or no other evidence to indicate that your received this compensation in violation of the Second Class Township Code or in violation of the State Ethics Act. As such, we also believe that this compensation was part of that fixed by law for your service as a township supervisor. In addition to the foregoing, township records revealed that you received township compensation for performing certain services for the township. The services performed appear to he in the nature of working on township property. The total compensation received from 1979 through 1985 totalled $653.97. (See Finding 25). This compensation also appears to have been paid in relation to services that were similar to that of a township laborer. While the township meeting minutes do not indicate your specific appointment as township roadmaster, laborer or superintendent, the auditor minu.tfs do reflect that the township board of auditors did, in fact, fix a compensation to be _aid to supervisors who were employed by the township. Your employment for work as a township laborer would, therefore, be in accordance with the township cods: and because the auditors did, in fact, fix an hourly rate for individuals so employed, we do not believe that your receipt of that compensation way �n violation of the law. As such, we do not believe that there was any violation of the State Ethics Act in relation to your receipt of that compensation, Mr. William W. Gerhart Page 10 In addition to all of the foregoing, however, we must also review the receipt by your company, M. E. Gerhart & Sons, Inc., of township funds during the years 1979 through 1985. This receipt must also be reviewed under Section 3(a) of the State Ethics Act as well as Section 3(c) which will be discussed infra. .Generally, the State Ethics Act, as cited above, would prohibit your use of your position as a public official to obtain financial gain other than the compensation provided for by law. There is no doubt that the receipt of the township funds by your business was the receipt of a financial gain. It is also clear that this was not part of the compensation provided for you by the Second Class Township Code. As noted above, the Second Class Township Code clearly provides statutory compensation for supervisors who serve only in that capacity. Additionally, while a township supervisor, as noted above, who works as a roadmaster, laborer or secretary /treasurer may receive additional compensation, such must be fixed by the township board of auditors. The funds -that your company received from the township in the instant situation for servicing township vehicles was clearly not part of the compensation provided for by law. See McCutcheon v. State Ethics Commission, 77 Pa. Commw. Ct. 529, 466 A.2d 283, (1982); Hendricks v. East Rockhill Township, 1 D & C 3d 763, (1977); Coltar v. Warminster Township, 8 Pa. Commw. Ct. 163, 302 A.2d 859, (1973); Synoski v. Hazle Township, Pa. Commw. Ct. , 508, A.2d 1282, (1985). In addition to the foregoing, it must be noted that not only was the financial gain that you recieved not part of the compensation provided for by law in the Second Class Township Code, but appears to be completely prohibited by that law. In this respect, we note that the Second Class Township Code provides as follows: (f) Except as herein provided, no township official, either elected or appointed, who knows, or who by the exercise of reasonable diligence, could know, shall be interested to any appreciable degree; either directly or indirectly, in any contract for the sale or furnishing of any supplies or materials for the use of the township, or for any,work to be done for such township involving the expenditure by the township of more than three hundred dollars ($300) in any year, but this limitation shall not apply to cases where such officer, or appointee of the township, is an employe of the person, firm or corporation to which the money is to be paid in a capacity with no possible influence on the transaction, and in which he cannot be possibly benefited thereby, either financially or otherwise: Provided, however, That in the case of a Mr. William W. Gerhart Page 11 supervisor, if he knows that he is within the exception just mentioned, he shall so inform the supervisor and shall refrain from voting on the expenditure, or any ordinance relating thereto, and shall in no manner participate therein: Provided, further, That any such official or appointee who shall knowingly violate this provision shall be subject to surcharge to the extent of the damage shown to be thereby sustained by the township, ouster from office, and shall he guilty of a misdemeanor, and upon conviction thereof, shall be sentenced to pay a fine not exceeding five hundred dollars ($500). 53 P.S. §5802(f). While the above provision of law clearly prohibits your direct interests `in an expenditure of township funds in excess of $300.00 per year, your use of your township position in order to secure funds in violation of the above orovision of law would also appear to occasion a violation of the State Ethics Ac. Specifically, you were the township secretary /treasurer responsible for all of the township expenditures. In this capacity, you clearly had knowledge- that your company, M. E. Gerhart & Sons, Inc., was doing business with the :township. Invoices from that company were forwarded to you as township secretary/treasurer. You approved the payment of those bills to this company and, in fact, made those expenditures. While you have indicated that M. E. Gerhart & Sons, Inc., began to do business with the township because of an emergency situation, there is no reason why this business should have continued over a period of seven years in violation of the law. A public official is not entitled to benefit from his public position in violation of the law even if that official believes that performing in a manner such as here in question, would be beneficial to the township. See, Op. Atty. Gen. No. 45, (1971), (public service by its very nature precludes its use by an official for personal gain even though the services may be rendered to the governmental body at a cost less than normal charges). Your use of your own facilities, to repair township vehicles was transacted without determination as to whether any other facilities were available that performed similar services. This is so even though facilities were available nearby that rendered such services. The unilateral decision by a public official that township funds may be expended to benefit himself or a business with which he is associated, is clearly not in accordance with the Ethics Act. A decision by you, that your business could perfonn these services best, is a clear conflict of interests. You stated that but for the township business you would have had to release some M. E. Gerhart & Sons, Inc. employees. This statement clearly evidences your intent to benefit your Mr. William W. Gerhart Page 12 company. In addition, it appears as though your receipt of these funds are in direct violation of the Second Class Township Code. As a result, we believe that your receipt of a financial gain in excess of that permitted by the Second Class Township Code, i.e, $300.00, and the fact that you, .s secretary /treasurer were responsible for these disbursements and expenditures violates Section 3(a) of the State Ethics Act. In addition to the foregoing, we note that Section 3(c) of the State Ethics Act provides as follows: Section 3. Restricted activities. (c) No public official or public employee or a member of his immediate family or any business in which the person or a member of the person's immediate family is a director, officer, owner or holder of stock exceeding 5% of the equity at fair'market value of the business shall enter into any contract valued at $500 or more with a governmental body unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. Any contract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of making of the contract. 65 P.S. 403(c). This Commission has generally determined that the above provision of law is a procedure to be used when a public official or employee contracts with his own governmental body in excess of $500. See Bryan, 80 -014, Lynch, 79 -047 Martzall, 528. We do not believe, however, that the above provision of law is a general authorization for a public official to contract with his governmental body where such is otherwise prohibited by law, such as, in the Second Class Township Code. The above provision of law clearly is intended to be a procedure to be utilized where such contracting is otherwise allowed. If said contract had.been allowed under the Second Class Township Code in excess of $500, then you would have been required to use the above procedure. This procedure would have required prior public notice of the contracting possibility, in sufficient time for a reasonable and prudent competitor /applicant to prepare or present an application or proposal; public disclosure of all applications presented and considered, and public disclosure of contracts awarded or offered and accepted. Cantor, 82 -004. In the instant situation, it is clear that even if said contract had been allowed in excess of $300, the township expenditures to M. E. Gerhart & Sons, Inc. without adherence to the above procedure would not be in accord with the State Ethics Act. As such, we believe that there would have been a violation of the open and public process provisions of Section 3(c) of the State Ethics Act. Mr. William W. Gerhart Page 13 Generally, the penalties for violating the State Ethics Act are 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( ?). (b) Any person who violates the provisions of Section 4 is guilty of a misdemeanor and shall be fined not more than $1,000 or imprisoned for not more than one year, or be both fined and imprisoned. 65 P.S. 409(b). The Ethics Act also provides as follows: Section 9. Penalties. (c) Any person who obtains financial gain from violating any provision of this act, in addition to any other penalty provided b,' law, 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). The State Ethics Commission also has the power and authority to recommend to appropriate law enforcement authorities, the prosecution of individuals who are in violation of the Act or the dismissal of charges against individuals. 65 P.S. Section 407(11). The State Ethics Commission has also been permitted to offer an individual who has received a financial gain in violation of the State Ethics Act, the opportunity to divest himself of the gain received. Upon such divestiture, action in the matter. McCutcheon v. State Ethics Commission, 7 7 Pa. Commw. Ct. 529, 466 A.2d,283, (1982). In the instant situation, we believe that this is an appropriate result. As such, we will offer you the opportunity to divest yourself of the financial gain that you have obtained in violation of the State Ethics Act. Upon the divestiture of this financial gain, we will close our files in this matter and we will not impose treble damages and we will not recommend that the matter be purFued by any other agency. In calculating the amount of the financial gain that you have received in violation of the Act, we do have the authority to use some discretion in reviewing the appropriate factual findings. In the instant situation, we Mr. William W. Gerhart Page 14 believe that the amount of money received in violation of the Act would be the amount of the financial gain received in excess of the statutory language. Clearly, the Second Class Township Code appears to allow a township supervisor to be interested in a township expenditure up to $300. We do no* believe that in making this calculation, we should include the prices that were paid to the township for the purchase of automobile parts. In this respect, as long as there is no evidence to indicate that the prices for parts were more than that which you had paid for them. The township, in receiving the part, merely reimbursed you for its purchase. Mead, No. 442. Thus, we will base our calculations upon the figures as set forth in Finding 13 insofar as they are based upon labor and miscellaneous township expenditures to your company. Total labor and miscellaneous expenditures are as follows: (See Finding 13). 1979: $ 359.25 1980: $ 260.00 1981: $ 541.75 1982: $1,982.67 1983: $1,741.76 1984: $2,992.25 1985: $ 680.61 From the above amount, we must subtract $300 for each year as such would have been allowed by the Second Class Township Code and, thus, would have been provided for by law. Thus, financial gain that you received in violation of the State Ethics Act would be as follows: 1979: $ 59.25 1980: 1981: $ 241.75 1982: $1,682.67 1983: $1,441.76 1984: $2,692.25 1985: $ 380.61 Total : 6498.29 Mr. William W. Gerhart Page 15 As, a result of the foregoing, the amount of money received in violation of the State Ethics Act in addition to a 10% interest charge which we believe should be assessed, should be returned to the governmental body from which it was received. The total to be returned to the township is $7,148 12. C. Conclusion: You violated Section 3(a) and 3(c) of the State Ethics Act when you, as a townshi p ,supervi sor and secretary- treasurer for the township with power to expend township funds, made payments to your own company for services performed on township vehicles. The receipt of these funds from the township are strictly prohibited by the Second Class Township Code and as such was a financial gain that was not part of the compensation provided for by law. In addition to the above, the award of this work was accomplished without an open and public process as set forth in Section 3(c) of the State Ethics Act. As such, we believe a violation of the State Ethics Act has occurred. We believe that you should refund to the township the amount of money received in violation of the State Ethics Act plus 10% interest. This would equal the amount set forth above, $7,148.12. Payment of this amount should be forwarded° to the State Ethics Commission made payable to West Cocalico Township. Upon the receipt of that payment by you, we will close our files in this matter and take no further action. Failure to comply with this order will result in our referral of this matter to the appropriate law enforcement authorities with a recommendation that they take appropriate action in accordance herewith. 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 circuleting 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). By the Commission, G. Sieber Pancoast Chairman Note: The shove payment should he made within 30 days from the date of this Order. Mr. William W. Gerhart R.n. #1 Stevens, PA 1757R Re: Order No. 530, File No. R6-022 -C EMS /na cc: Public Rinder • Mailing Address. State Ethics Commission 308 Finance Building P. 0. Box 11470 Harrisburg, Pa. 17108 -1470 Novemher 17, 1986 near Mr. Gerhart: Oh Novemher 10, 1986, the State Ethics Commission received your payment For reimbursing West Cocalico Township as required by Order No. 530. We have 'Forwarded your check in the amount of $7,148.19 to the township. This letter will he part of the order and a puhlic record as such. Sincerely, Edward M. Sel adones Executive Director State Ethics Commission 308 Finance Building 0 Harrisburg, Pennsylvania