Loading...
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