HomeMy WebLinkAbout21-505 Dunn
PHONE: 717-783-1610 STATE ETHICS COMMISSION FACSIMILE: 717-787-0806
TOLL FREE: 1-800-932-0936 FINANCE BUILDING WEBSITE: www.ethics.pa.gov
613 NORTH STREET, ROOM 309
HARRISBURG, PA 17120-0400
ADVICE OF COUNSEL
February 18, 2021
21-505
To the Requester:
Ms. Jacqueline Dunn
City Treasurer
Philadelphia, PA
Dear Ms. Dunn:
This responds to your correspondence dated January 20, 2021, by which you
requested an advisory from the Pennsylvania State Ethics Commission
seeking guidance as to the questions summarized below:
Issue:
1). As City Treasure, can you direct work being performed by businesses that do not
employ your husband, but are subsidiaries of the parent company of which your
husband is employed?
Brief Answer: YES. Pursuant Commission precedent, no conflict would exist as to
parent companies/subsidiaries which are truly a separate corporate entity from the
business with which you and/or member(s) of your immediate family are
associated.
2). As City Treasurer, can you approve payments to businesses that do not employ
your husband, but are subsidiaries of the parent company of which your husband
is employed, upon completion of terms and conditions pursuant a contractual
agreement, which you did not participate in approving/authorizing?
Brief Answer: YES. See, Brief Answer No. 1 above.
Dunn, 21-505
February 18, 2021
Page 2
3). Is implementation of a structure whereby you are removed from any decision-
making and have delegated any authority to subordinate staff and/or to your
superior, sufficient to avoid a Conflict of Interests pursuant the Ethics Act?
Brief Answer: NO. To the extent that delegation would be to a subordinate, a use
of the authority of your office would nonetheless occur.
4). As City Treasurer, can you participate in quarterly informational meetings where
including businesses that do not employ your husband, but are subsidiaries of the
parent company of which your husband is employed, when such meetings are
informational, and no official actions are taken?
Brief Answer: YES. See, Brief Answer No. 1 above.
Facts:
You have requested an advisory from the Commission pursuant the following
submitted facts.
On September 25, 2020, you were appointed Acting City Treasurer for the City of
Philadelphia (City) and as the City Treasurer (permanent) on February 11, 2021. Prior to
that time, you served as First Deputy City Treasurer. As City Treasurer, it is your duty to
safeguard City funds through authorizing the investment of reserves and excess
operating funds, managing debt issuances, and improving and maintaining
credit rating. hierarchy, the City Treasurer reports to the
Public Financial Management, Inc. (PFM) is located in Philadelphia, Pennsylvania,
and is part of the Consulting Services Industry. According to its public website, Public
Financial Management, Inc. has 389 total employees and 44 companies within the PFM
corporate family, each organized as a Limited Liability Corporation (LLC). Each separate
LLC performs specific financial and related services which are defined and provided
pursuant separate agreements, identifying separate scope of services, and receiving
separate fees for such work performed. No less than two of the LLCs housed within the
PFM corporate structure, specifically PFM Financial Advisors LLC and PFM Group
Consulting LLC, are currently providing services to the City. PFM Financial Advisors LLC
is serving as the municipal advisor and PFM Group Consulting LLC is providing workforce
strategy and labor negotiation support.
Your husband, Alexander Goldsmith, is employed by PFM Asset Management LLC
as a Client Services Senior Analyst. Neither Mr. Goldsmith nor PFM Asset Management
LLC engage in any municipal advisory services for the City. However, PFM Asset
Management LLC does act as one of fourteen (14) investment managers that the
Dunn, 21-505
February 18, 2021
Page 3
perform these activities, as City Treasurer, your actions could generate more revenue for
his division which could in turn influence his compensation.
As a PFM employee, your husband is paid a base salary plus a year-end bonus.
The annual bonus is dependent upon profitability, the contribution of each team to the
overall profitability of the organiz
success. The compensation plan is intended to recognize and reward excellent
performance on the part of individuals; however, no employee is compensated on a
commission, investment, or transaction-related basis. Employee compensation decisions
and bonus is not attributable to revenue earned, or the outcome of, services provided to
the City of Philadelphia where you as the City Treasurer, serve as a decision-maker.
ou have
compensation. To memorialize your recusal/disqualification, you have submitted a Public
Disclosure and Disqualification pursuant Philadelphia City Code §20-608. In fact, you
state that since April 2014 when you began employment with the City, you have
disqualified yourself and will continue to disqualify yourself from vendor selection,
including proposal reviews, where you might reasonably expect any PFM LLC to apply,
regardless of whether the LLC employs your husband, as well as recusing yourself from
any resulting contract conformance for a PFM LLC.
You have further provided that as an employee of PFM Asset Management LLC,
your
historically has served on thboard as a designee of the Finance Director,
you were not appointed to that board when you were named Acting City Treasurer given
the potential conflict. As such, you have no connection to the work of that board.
In the event a decision is required by your office regarding PFM Asset
Management LLC or another PFM LLC, you have set up a structure to remove yourself
from any decision-making. In such an event, your staff will not take direction from you on
such decisions, but will instead provide a recommendation to your
Finance Director.
You have also stated that the City selects several firms to act as financial advisors
on bond transactions, and in most cases, the approved firm(s) then conduct any
transaction related work that arises during their contract term. In some cases, the City
approves multiple firms to serve in a pool of financial advisors, and as needs arise, selects
among those pre-approved vendors for specific transactions. Where the potential exists
to select among pre-approved advisors to work on a transaction, you state that you will
recuse yourself from any action, as outlined in the paragraph above.
Dunn, 21-505
February 18, 2021
Page 4
Lastly, you have stated that your office is required to hold quarterly meetings to
, which would
include PFM LLCs. This review is part of your role as City Treasurer. These meetings
are informational in nature and no official actions are taken at these meetings.
Discussion:
It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics
Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based upon the
facts that the requester has submitted. In issuing the advisory based upon the facts that
the requester has submitted, the Commission does not engage in an independent
investigation of the facts, nor does it speculate as to facts that have not been submitted.
It is the burden of the requester to truthfully disclose all the material facts relevant to the
inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent
the requester has truthfully disclosed all the material facts.
The Pennsylvania Public Official and Employee Ethics Act (Act)(65 Pa.C.S.§ 1101
et seq.) provides:
§ 1103. Restricted activities
(a) Conflict of interest.--No public official or public
employee shall engage in conduct that constitutes a conflict
of interest.
(f) Contract.--No public official or public employee or
his spouse or child or any business in which the person or his
spouse or child is associated shall enter into any contract
valued at $500 or more with the governmental body with which
the public official or public employee is associated or any
subcontract valued at $500 or more with any person who has
been awarded a contract with the governmental body with
which the public official or public employee is associated,
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. In such a case, the public official or public employee
shall not have any supervisory or overall responsibility for the
implementation or administration of the contract. Any contract
or subcontract made in violation of this subsection shall be
voidable by a court of competent jurisdiction if the suit is
commenced within 90 days of the making of the contract or
subcontract.
65 Pa.C.S. §§ 1103(a),(f).
Dunn, 21-505
February 18, 2021
Page 5
The following terms are defined in the Ethics Act as follows:
§ 1102. Definitions
"Conflict" or "conflict of interest." Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate
family or a business with which he or a member of his
immediate family is associated. The term does not include an
action having a de minimis economic impact or which affects
to the same degree a class consisting of the general public or
a subclass consisting of an industry, occupation or other
group which includes the public official or public employee, a
member of his immediate family or a business with which he
or a member of his immediate family is associated.
"Authority of office or employment." The actual
power provided by law, the exercise of which is necessary to
the performance of duties and responsibilities unique to a
particular public office or position of public employment.
"Business." Any corporation, partnership, sole
proprietorship, firm, enterprise, franchise, association,
organization, self-employed individual, holding company, joint
stock company, receivership, trust or any legal entity
organized for profit.
"Business with which he is associated." Any
business in which the person or a member of the person's
immediate family is a director, officer, owner, employee or has
a financial interest.
"Contract." An agreement or arrangement for the
acquisition, use or disposal by the Commonwealth or a
political subdivision of consulting or other services or of
supplies, materials, equipment, land or other personal or real
property. The term shall not mean an agreement or
arrangement between the State or political subdivision as one
party and a public official or public employee as the other
party, concerning his expense, reimbursement, salary, wage,
retirement or other benefit, tenure or other matters in
consideration of his current public employment with the
Commonwealth or a political subdivision.
Dunn, 21-505
February 18, 2021
Page 6
"Financial interest." Any financial interest in a legal
entity engaged in business for profit which comprises more
than 5% of the equity of the business or more than 5% of the
assets of the economic interest in indebtedness.
"Immediate family." A parent, spouse, child, brother
or sister.
65 Pa.C.S. § 1102.
As the Treasurer for the City of Philadelphia (City Treasurer), you are a public
official/public employee subject to the provisions of the Ethics Act. Furthermore, pursuant
the above cited definitions of the Act, your husband, Mr. Alexander Goldsmith, is a
member of your immediate family and PFM Asset Management LLC is a business with
which you and a member of your immediate family are associated.
Pursuant to Section 1103(a) of the Ethics Act, a public official/public employee is
prohibited from using the authority of public office/public employment or confidential
information received by holding such a public position for the private pecuniary benefit of
the public official/public employee herself/himself, any member of her/his immediate
family, or a business with which she/he or a member of her/his immediate family is
associated. Furthermore, the use of authority of office extends to any use of authority of
office including, but not limited to, discussing, conferring with others, and lobbying for a
particular result. Juliante, Order 809.
Question 1 Directing Work of Subsidiary Companies:
The question posed is as City Treasure, can you direct work being performed by
businesses that do not employ your husband, but are subsidiaries of the parent company
of which your husband is employed? The question hinges on the factual conclusion of
whether the subsidiaries are businesses with which you or your husband are associated.
Since your husband is employed by PFM Asset Management LLC, that is a business with
which you and your husband (a member of your immediate family) are associated.
However, with PFM LLC, as the parent corporation, and PFM Financial Advisors LLC and
PFM Group Consulting LLC, as subsidiary corporations, none of these (PFM LLC; PFM
Financial Advisors LLC; PFM Group Consulting LLC) would be businesses with which
you/your immediate family are associated, provided they are in fact separate corporate
entities. See, Confidential Opinion, 92-003, at p. 6.
In Confidential Opinion, 92-003, the Commission opined as follows:
Our inquiry must focus upon the business(es) with which you
are associated. Given your employment with D, it is clear that
that is a business with which you are associated. The fact that
there are parent and subsidiary corporations of D, does not
make those other corporations, in and of themselves,
Dunn, 21-505
February 18, 2021
Page 7
businesses with which you are associated since they are
separate corporate entities.
. . . We must conclude that you would have a conflict under
Section \[1103(a)\] of the Ethics \[Act\] as to matters involving D,
the business with which you are associated; you would not
have any conflict as to E or any other subsidiaries or affiliates
provided those affiliates are separate corporate entities and
provided that your interests would be less than the threshold
as set forth in the definition of financial interest.
Confidential Opinion, 92-003, at p. 6.
In as much as the Commission opined that a conflict of interests would not occur
as to subsidiaries or affiliates of a parent corporation, you are advised that a conflict would
not occur if you were to direct work being performed by businesses that do not employ
your husband, but are subsidiaries of PFM LLC, the parent company of which your
husband is employed.
Question 2 Approval of Payments to Subsidiary Companies:
You have additionally sought an advisory questioning as City Treasurer, can you
approve payments to businesses that do not employ your husband, but are subsidiaries
of the parent company of which your husband is employed, upon completion of terms and
conditions pursuant a contractual agreement, which you did not participate in
above, there does not appear to be a conflict provided the subsidiaries are separate
corporate entities.
Question 3 Conflict Structure:
Noting a potential for a conflict of interests, you have implemented a structure
whereby you are removed from any decision-making and have delegated any authority
to subordinate staff and/or to your superior. You have sought an advisory as to whether
such action is sufficient to avoid a conflict of interests pursuant the Ethics Act. To the
extent you have inquired as to conduct which has already occurred, such past conduct
may not be addressed in the context of an advisory opinion. However, to the extent you
have posed an inquiry as to future conduct, your inquiry may, and shall be addressed.
You are first advised that Section 1103(f) does not operate to make contracting
with the governmental body permissible where it is otherwise prohibited. Rather, where a
public official /public employee, her/his spouse or child, or a business with which she/he,
her/his spouse or child is associated, is otherwise appropriately contracting with the
governmental body, or subcontracting with any person who has been awarded a contract
with the governmental body, in an amount of $500.00 or more, Section 1103(f) requires
that an open and public process be observed as to the contract with the governmental
body.
Dunn, 21-505
February 18, 2021
Page 8
Section 1103(f) of the Ethics Act also requires that the public official /public
employee may not have any supervisory or overall responsibility as to the implementation
or administration of the contract with the governmental body. It is noted that the
restrictions and requirements of Section 1103(f) of the Ethics Act would have to be
observed as to any contract between PFM Asset Management LLC and the City that
would be entered into during your tenure as the City Treasurer that would be valued at
$500 or more. (See, Kistler v. State Ethics Commission, 610 Pa. 516, 22 A.3d 223 (2011),
As to the implementation of a delegation, you are advised that if you would
delegate to a subordinate employee the full authority that you have as public official/public
e
compensation, the Ethics Act would nevertheless be transgressed as the result of such
appointment.
Pursuant to Section 1103(a), where there is no pre-existing mechanism in place
specifying how and by whom a public officials authority is to be exercised in the event of
a conflict, the public official's delegation of such authority to a subordinate is itself a use
of authority of office. (See, Edwards, Opinion 91 -003 at 6.) Although a mechanism for
delegation in the event of a conflict has been implemented, same does not appear to be
pursuant any statutory authority or directive. To the extent that delegation has been made
to a subordinate, as a public official/public employee you would still be utilizing the
(See, Confidential Opinion, 02-004).
The above IS NOT to suggest that there would be any improper influence exerted
as to this delegation, but merely to explain why the delegation to a subordinate would fail
to avoid a conflict of interest.
However, in the event a superior within your chain of command, for example the
not be subordinates within your chain of command; and there would be no means by
which you could use the authority of the office of City Treasurer or confidential information
accessed as a result of being in that position for the private pecuniary benefit of yourself,
your immediate family members, or any business with which you or your immediate family
members would be associated, a conflict of interests would be avoided. See,
Dobrowolski, 07-002.
Question 4 Informational Meetings:
Lastly you have inquired whether as City Treasurer, can you participate in quarterly
investment managers, including businesses that do not employ your husband, but are
subsidiaries of the parent company of which your husband is employed, when such
meetings are informational, and no official actions are taken?
Dunn, 21-505
February 18, 2021
Page 9
In as much as the Commission has opined that no conflict would occur as to parent
companies/subsidiaries which are truly a separate corporate entity, as noted in Question
1 and 2 above, there does not appear to be a conflict provided the subsidiaries are in fact
separate corporate entities.
The Ethics Act would not prohibit you from attending informational meetings of the
City that would involve discussions, informational items, or other actions/matters
pertaining to the subsidiaries of the parent company of which your husband is employed.
However, you are advised that you would violate Section 1103(a) of the Ethics Act if you
would use the authority of your public position as the City Treasurer, or confidential
information accessed or received as a result of being in your public position, for a
prohibited private pecuniary benefit to you, a member of your immediate family, or a
business with which you or a member of your immediate family is associated. (See,
Confidential Advisory, 20-515).
Conclusion:
In your capacity as the Treasure for the City of Philadelphia,
official/public employee
et seq., and the Regulations of the State Ethics Commission
, 51 Pa. Code § 11.1 et seq. Accordingly, based upon the facts provided
within the request for an advisory, the following conclusions are set forth:
1). As City Treasure, it would not be a conflict of interests for you to direct work being
performed by businesses that do not employ your husband, but are subsidiaries of
the parent company of which your husband is employed, provided the subsidiary
companies are truly a separate corporate entity from a business with which
you/immediate family are associated.
2). As City Treasurer, you can approve payments to businesses that do not employ
your husband, but are subsidiaries of the parent company of which your husband
is employed, provided those entities are truly a separate corporate entity from a
business with which you/immediate family are associated.
3). The implementation of a structure whereby you have delegated authority to
subordinate staff is insufficient to avoid a Conflict of Interests pursuant the Ethics
Act, in that by delegation to a subordinate, a use of the authority of your office
would nonetheless occur.
4). As City Treasurer, your participation in quarterly informational meetings where the
including subsidiaries of the parent company of which your husband is employed,
would not transgress the conflicts provisions of the Ethics Act, provided those
entities are truly a separate corporate entity from a business with which
you/immediate family are associated and you do not utilize your office or
confidential information accessed or received as a result of being in your public
Dunn, 21-505
February 18, 2021
Page 10
position for the pecuniary benefit of yourself, an immediate family member, or
business with which you or your immediate family are associated.
The propriety of the proposed conduct has only been addressed under the Ethics
Act.
Pursuant to Section 1107(11) of the Ethics Act, an Advice is a complete defense
in any enforcement proceeding initiated by the Commission, and evidence of good faith
conduct in any other civil or criminal proceeding, provided the requester has disclosed
truthfully all the material facts and committed the acts complained of in reliance on the
Advice given.
Finally, if you disagree with this Advice or if you have any reason to
challenge same, you may appeal the Advice to the full Commission. A personal
appearance before the Commission will be scheduled and a formal Opinion will be
issued by the Commission.
Any such appeal must be in writing and must be actually received at the
Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa.
Code § 13.2(h). The appeal may be received at the Commission by hand delivery,
United States mail, delivery service, or by FAX transmission (717-787-0806).
Failure to file such an appeal at the Commission within thirty (30) days may result
in the dismissal of the appeal.
Respectfully,
Brian D. Jacisin
Chief Counsel