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HomeMy WebLinkAbout617-R LetcavageRe: 85 -092 -C A. Findings: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 ORDER OF THE COMMISSION ORDER NO. 617 -R Mr. John P. Letcavage c/o Frank J. Tamulonis, Jr., Esquire Zimmerman, Lieberman & Derenzo 111 East Market Street P.O. Box 238 Pottsville, PA 17901 DATE DECIDED: August 18, 1988 DATE MAILED: September 13, 1988 Dear Mr. Letcavage: The Ethics Commission has reviewed the allegation(s) that you have violated the Ethics Act, Act 170 of 1978. The nature of the alleged violation(s) is as follows: I. Allegation: That you, a Township Supervisor in West Mahanoy Township, violated Section 3(a) of the Ethics Act which prohibits a public employee's or Public official's use of office or confidential information gained through that office to obtain financial gain other than compensation allowed by law, because the township is currently paying for your annuity program and group life and hospitalization insurance. 1. You have served as a West Mahanoy Township Supervisor from January, 1982 until the present. a. You were not employed by the township in any capacity until October, 1985. b. In October, 1985, you became a working township employee as a group leader with the township Street Department. The position was approved at a meeting of the township supervisors on December 5, 1985. Mr. John P. Letcavage Page 2 2. Records of the West Mahanoy Township Auditors disclose that a special meeting was held on November 18, 1985. a. The purpose of the meeting was to establish salaries for township supervisors employed full -time. b. Salaries were approved retroactive to October 16, )98 William Griffin, roadmaster, not to exceed $2,400/yet . John Letcavage, group leader, at a rate not to exceec $5.90 /hour. c. The minutes note these positions were approved by the supervisors at a prior meeting. 3. West Mahanoy Township payroll records disclosed that you received compensation as group leader at the rate of $5.92 /hour effective: October 16, 1985. The first pay was October 31, 1985. 4. On March 1, 1982, you were enrolled in a "flexible premium retirement annuity" program as a township supervisor. 5. Records relating to this program indicate a:, follows: a. Life of Maryland, Incorporated, Policy No. 1000569, b. Policy date, March 1, 1982. c. Policy owner, West Mahanoy Township. f. Planned payment period, 10 years. e. Date of maturity, March 1, 1992. f. Planned annual premium, $600.00. g. Guaranteed cash value. Year Amount a. You were paid $2,871.20 in 1985. 1 $ 624.64 2 $1,283.63 3 $1,978.87 4 $2,712.35 5 $3,486.17 Mr. John P. Letcavage Page 3 6 $4,243.56 7 $5,031.24 8 $5,850.43 9 $6,702.39 10 $7,588.43 6. Life of Maryland, Incorporated, premium statements indicated semi - annual billings for the above policy from March 31, 1985 as follows: Statement Date Amount 9- -85 $300.00 3 -21 -86 $300.00 9 -19 -86 $300.00 7. Township records indicate the following in relation to payments paid by the township for the above benefit from 1985 to present: Check Date Number Company Coverage Amount 09/11/85 6918 Life of Annuity $300.00 Maryland 04/24/86 7458 Life of Annuity $300.00 Maryland 10/08/86 7863 Life of Annuity $300.00 Maryland *Payments were also made on your behalf from 1982 through 1984. 8. As of December 31, 1986, the policy was in year five (5) and the cash surrender value equaled $3,486.17. a. The policy was terminated in June, 1987, and you have received benefits in the amount of $6,277.27. 9. You were enrolled in a life insurance program at the township's expense. Mr. John P. Letccva -Te Page 4 10. This insurance was with the Trustee's Insurance Fund and sponsored by the Pennsylvania State Association of Township Supervisors. c. The policy was effective (for you) on December 1, 1983. b. Policy No. 53- 14 -13. 11. Premium statements from the Trustee Insurance Fund to West Yahanoy Township indicate the following billings for your life insurance coverage from 1985 to the present: Statement Date Amount 7- -85 $66.95 8 -15 -86 $308.40 72• Records of West Mahanoy Township indicate the followi ._ 1tgarding the township payment of the above premiums for yt.ur life il surance coverage from 1985 to the present: Date Check No. Payee Coverage Amor 08/29/85 6882 Trustees Life $401.70 Insurance Fund (Payment of $401.70 included payment for you along with (st1ier township employees and officials). 08/27/86 7766 Trustees Life $308.40 Insurance Fund *Payments were also made on your behalf from 1982 to 1985. 13. You were enrolled in a hospitalization and medical program at the township's expense. 14. This insurance was obtained through the Trustee's. Insurance Fund. 15. Premium statements from Trustee's Insurance Fund to West Mahanoy Township indicate the following billings for your hospitalization /medical insurance coverage from 1985 to the present. Statement Date Amount 10- -85 $ 530.00 9 -19 -86 $1,687.00 Mr. John P. Letcavage Page 5 16. Records of West Mahanoy Township indicate the following regarding the township s payment of your hospitalization /medical insurance coverage. Date Check No. Payee Coverage Amount 11/13/85 7087 Trustees Hospital $ 530.00 Insurance Surgical Fund 01/10/86 7901 Trustees Disability $1,687.00 Insurance Indemnity Fund 07/02/86 7687 Trustees Hospital $ 365.40 Insurance Surgical Fund *Payments were also made on your behalf by the township in 1982. 17. A review of the above indicates that from March 31, 1985 to present West Mahanoy Township expended the following for your various benefits. Annuity: $ 900.00 (Cash surrender $6,277.27) Life Insurance: $ 375.35 Hospitalization: $2,582.40 18. A review of minutes of the meetings of the township board of auditors from 1976 through January, 1987, do not indicate that any life, medical or pension coverages were fixed or renewed for township supervisors employed by the township. a. Auditor minutes prior to 1976 could not be located and have been missing for many years. 19. Minutes of the township board of supervisors from January, 1979, to December, 1986, indicate as follows. a. January 3, 1984 - Minutes reflect a paragraph that all policies and procedures previously in effect will continue. b. January 7, 1985 - Minutes reflect a paragraph that unanimous approval by the Board of Supervisors was given to continue all past policies and procedures that are currently in effect. c. Both of these recordings were made at reorganization meetings. Mr. John P. Letcavage Page 6 d. Minutes from January, 1979 through December, 1986 do not reflect that any life, medical or pension coverages were specifically fixed or renewed for township supervisors employed by the township. e. The township secretary /manager advised that the township supervisors wanted the paragraphs mentioned in a and b above to include a reference to the township's life, medical and pension programs. 20. By fetter dated May 23, 1985, over signature of Teonard J. Tragus, Township Secretary /Manager, to Peter Sarno, Jr., it is verified that township supervisors are enrolled in life and health insurance programs and are also enrolled in a retirement program. 21. Michael Kovalich served as a West Mahanoy Township auditor from 1966. a. Mr. Kovalich indicated that the township auditors approved the annuity, life and medical plans for supervisors in 1971. b. Kovalich could not provide auditor's minutes prior to January, 1976. c. Kovalich advised that former auditor Anthony Domarotsky was the last person to have the auditor's minutes prior to January, 1976 in his possession. 22. Anthony Domarotsky served as a township auditor from 1970 to 1976. a. He indicated that the auditors did nothing other than the annual audit. b. Domarotsky stated that he never voted on any motion to give auditor's approval for insurance benefits to the township supervisors. 23. You provided the following information in relation to the instant situation. a. You have served as a township supervisor since 1982. b. You were not employed by the township until October, 1985. c. You serve currently as a working foreman. d. You acknowledge your participation at the expense of the township in the health, life and retirement programs. Mr. John P. Letcavage Page 7 e. The auditors, in f. You voluntarily June, 1987. g. 1971, approved these programs. terminated your township pension plan in You received $6,277.27 from this plan and kept it for your personal use. h. You stated that you voluntarily terminated your medical _ insurance coverage provided by the township on October 15, - 1983, because you were then covered by the Purolater Company, a previous employer. i. You related that your township medical insurance was renewed in October, 1985, because your previous coverage was no longer in effect. j. You admit to amounts paid by the township on your behalf as outlined in finding No. 17. 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, you are subject to the provisions of the Ethics Act and the restrictions therein are applicable to you. 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 have been reviewed by this Commission on many occasions. McCutcheon, No. 127, Hoak No. 128, Marcello, 85 -003. The Commission determinations in these matters have been reviewed and affirmed by the Commonwealth Court of Pennsylyvania. McCutcheon v. State Ethics Commission, 77 Pa. Commw. Ct. 529, 466 A.2d 283, (1982). Generally, in situations such as the instant matter, it must be determined whether the official used his position to obtain or secure financial gain other than the compensation that is authorized by law. Ma:. John P . 141tcavaga Page 8 It is now clear thr.t pension or annuity benefits such as the type herein question, constitute a financial gain. See McCutchaoh v. State Ethics Commission, 466 A.2d 283, at 288. The additional question to be answered is, therefcre, whethe:: -uc- benefits are compensation provided by law. A complate analysi; of this exact issue has been set forth in the above authorities. Sc also 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.;. 65515. 'A Supervisor who is also employed by the township in one of the positions authorized in the Second Class Township Code, may receive additional compensation. Such compensation, however, in order to be authorized by law, must be affirmatively fixed by the Township Board of Auditors. 53 P.S. 65542. Similarly, this Commission has also ruled in accordance with the above, that a non - working township supervisor may not receive health, medical and life or other insurance benefits without violating the provisions of the State Ethics Act. Krane, No. 84 -001; Glova, N . 326. Additionally, even if such a supervisor is employed by the township as a superintendent, secretary /treasurer, roadmaster, or laborer in accordance with the Second Class Township Code, such benefits are considered compensation and must, therefore, be fixed as : :uch by the township board of auditors. See Svnoski v. Hazle Township, 93 Pa. Commw. 168, 500 A.2d 1282, (1985), In re. Appeal of the Auditors Report of Muncv Creek Township, Pa. Commw. Ct. 520 A.2d 1241, (1987), Hunt, No. 348 -R. The foregoing principle was recently reaffirmed by Pennsylvania Commonwealth Court in Yocabet v. State Ethics Commission, — Pa. Commw. Ct. , 531 A.2d 536 (1987). In the cited case, the Court held inter alia that a township supervisor violated Section 3(a) of the Ethics Act when he received a salary for the position of secretary /treasurer which had not been set by the auditors. The Court, in affirming the Order of the Ethics Commission which required a restitution of the financial gain, noted on page 539 of its Opinion: "Section 7 of the Ethics Act instructs the Commission to investigate situations where there is a reasonable belief that financial conflict may exist .. and if conflict is found, to require the offender to remove himself from the conflict without gain." Mr. John P. Letcavage Page 9 Any benefits received other than as provided for above, would constitute a financial gain obtained in violation of the State Ethics Act. See, McCutcheon v. State Ethics Commission, supra, Conrad v. Exeter Township, 27 D & C 3d 253, (1983). These principles of law are now well settled and constitute the law under which this situation must be reviewed. See, In Re: Report of Audit or South Union Township, 47 Pa. Commw. 1, 407 A.2d 9ub, (19/9). In this case, you were a non - working supervisor from January, 1982 until October, 1985, at which time you were appointed to the position of township employee as group leader. Since you were not employed by the township between January, 1982 and October, 1985, you were not entitled to the annuity, group life and hospitalization insurance benefits that were paid at the township s expense. As stated above, a non - working supervisor is not entitled to these benefits under the Ethics Act, the Second Class Township Code or under decisional law. As to the period from October, 1985, forward, you were a working supervisor, however, you still would not be entitled to the above benefits because of the absence of the requisite auditor approval. The minutes of the meetings of township auditors from 1976 through January, 1987, reflect that there was neither a review nor approval of these types of benefits. Indeed, until November of 1985, there was no auditor approval of any compensation for working supervisors. Parenthetically, there are contradicting statements from two auditors concerning whether there was auditor approval for these benefits in 1971. However, it is noted in this regard that the auditor's minutes are unavailable for the period prior to January, 1976. Since it appears that auditor approval was never given for these benefits, you were not entitled to the receipt of same at the township's expense. You, as a public official, have violated Section 3(a) of the Ethics Act in that you have obtained a financial gain through the receipt of the benefits which is not compensation as provided for by law. It also should be noted that even if these benefits had been received in good faith, such would not be controlling. Good faith receipt of such benefits, even when based upon a solicitor s advice, will not alleviate the necessity of a public official reimbursing his governmental body for the receipt of a financial gain for which he was not entitled. See Allegheny County v. Grier, 179 Pa. 639, 36 A. 353, (1897): McCutcheon v. State Ethics Commission, supra: Kestler Appeal, 66 Pa. Commw. 1, 444 A.2d 761, (1982). As a result, this Commission believes that you must reimburse the township for this financial gain. Mr.. John P. Letcavage Page 10 The State Ethics Act provides as follows. Section 9. Penalties. (a) Any person who violates the provisions of Sectior.. 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 fired 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 Treasury a sum of money equal to three times the financial gain resulting from such violation. 65 P.S. 409(c). In addition to the above, the State Ethics Act provides that the Commission may forward the results of any investigation to the appropriate prosecuting authority unless the alleged offender removes himself from the conflict of interest by divesting himself of any financial gain received in violation of the State Ethics Act. 65 P,S. 407 9(iii). See also McCutcheon v. State Ethics Commission, sut ra, the Commission may order restitution of of financial gains received iii violation of the law. It appears to be more than mere coincidence that you converted the full pension plan in June, 1987. You were well aware of this investigation of that plan. It is further clear that while you continue to serve in your public position, you nevertheleF.s secured the full value of the plan. That is you did not "retire" •r otherwise leave office yet cashed in the plan. This Commission views such action as an attempt to preclude the township from recovering these funds. This action merely evidences an actual intent to use your office to obtain a financial gain in violation of the law. The last matter which must be addressed by this Commission concerns House Bill 1577 of 1987 which was signed into law on March 30, 1988 as Act 41 of As to pension benefits that are received by a non - employee supervisor between January 1, 1959 and March 31, 1985, Act 41 provides, in part, in Section 1(b)(7). "Township supervisors who are not employes of the township shall not be eligible for participation in any pension or annuity contract paid in whole or in part by the township. No township supervisor who was not an employe of the township but was included in a township -paid Mr. John P. Letcavage Page 11 pension or annuity plan or entered into by a township between January 1, 1959, and March 31, 1985, shall be subject to any penalty, assessment, surcharge, forfeiture or disciplinary action of any kind as a result of said participation...." Life Insurance and hospitalization benefit received by a non - employee supervisor between January 1, 1959 and March 31, 1985 are provided.for, in part, in Section 1(c)(2) of Act 41, supra. "Any life, health, hospitalization, medical service or accident insurance coverage contract entered into by a township between January 1, 1959, and March 31, 1985, that includes or provides coverage for non - employe surpervisors shall not be void or unlawful solely because such inclusion of non - employe supervisors was SUBSEQUENTLY FOUND TO BE WITHOUT LAWFUL AUTHORITY, No penalty, assessment, surcharge, forfeiture or disciplinary action of any kind may occur as a result of participation by non - employe surpervisors...." Therefore, the annuity, life and hospitalization insurance benefits that you received between January, 1982 and March 31, 1985 would be implicated by Section 3(a) of the Ethics Act, however, no penalty or assessment may be imposed in light of above quoted provisions of the amnesty provisions of Act 41, supra. The receipt of said benefits after March 31, 1985 would transgress Section 3(a). In this case, you received financial gain of $3,857.75. The foregoing amount must be returned to your governmental body, West Mahanoy Township. C. Conclusion and Order: 1. As a Township Supervisor in West Mahanoy Township, you are a "public official" and, as such, are subject to the provisions of the Ethics Act. 2. Section 3(a) of the Ethics Act was implicated when you received a gain through public office consisting of annuity, group life and hospitalization insurance at the township's expense between January, 1982 and March 31, 1985 but no penalty or assessment will be imposed in light of Act 41 of 1988 which provides amnesty as to the receipt of these benefits. 3. You violated Section 3(a) of the State Ethics Act when you received at township expense amnesty, groups life insurance Mx:. John P. Letcava ge Page 12 and hospitalization benefits for the period April 1, 1985 forward since such gain is not compensation provided for by law. 4. The financial gain which you received and which was not part of the compensation provided for by law amounts to $3,857.75. 5. You are hereby ordered to remit to the State Ethics Commission, within thirty (30) days of the date of 'order, the amount of $3,857.75 made payable to Wr .hanoy Township as restitution for the financial gait. received. 6. Failure to comply with the provisions of this ordrIr will result in a referral of this matter to the appropriate 1w enforcement authority with a recommendation that both ci;*il and criminal proceedings be initiated. Our files in this case will remain confidential in accordance with Section 8(a) of the Ethics Act, 65 P.S. 408(a). Howe-,er, this Order is final and will be made available as a public do -ument 5 business days after service (defined as mailing). 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. 40I(e). The confidentiality provision does not restrict respondents , :�%.sultation with legal counsel. By the Commission, eflid: Joseph W. Marshall, III. Chairman Mr. John P. Letcavage 211 Indiana Avenue Shenandoah, PA 17976 JJC /na cc: Public Binder STATE ETHICS COMMISSION 308 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 September 21, 1988 Re: Order No. 617 -R, File No. 85 -092 -C Dear Mr. Letcavage: On September 20, 1988, the State Ethics Commission received your payment for reimbursing the West Mahanoy Township as required by Order No. 617 -R. We have forwarded your check No. 327 dated September 16, 1988, in the amount of $3,857.75 to West Mahanoy Township. This letter will be made part of the Order and a public record as such. S i Contino tive Director