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HomeMy WebLinkAbout618-R YanchulisMr. John A. Yanchulis c/o Frank Tamulonis, Jr. Esquire Zimmerman, Lieberman & Derenzo 111 East Market Street P.O. Box 238 Pottsville, PA 17901 Re: 85- 093 -C, 85 -098 -C Dear Mr. Yanchulis. A. Findings: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 ORDER OF THE COMMISSION ORDER NO. 618 -R DATE DECIDED: August 18, 1988 DATE MAILED: September 13, 1988 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, 1978 until the present. a. You have been either Chairman or Vice Chairman of the board of supervisors during your tenure. b. You were not employed by the township in any capacity until a meeting of the township supervisors on December 5, 1985, when the other two supervisors approved your appointment as treasurer. 2. You were enrolled in a retirement annuity program as a township supervisor at the township's expense. Mr. John A. Yanchulis Page 2 3. Records relating to this program indicate as follows. a. The retirement program was originally obtained through Baltimore Life Insurance Company. b. Your policy number at that time was A0687708. c. This coverage was obtained later through Life of Maryland, Incorporated. d. ; This change occurred in 1982. e. Your new policy No. was 01010016620. 4. Baltimore Life Insurance Company and Life of Marl :nd, Incorporated premium statements indicated semi - annual li.11ings for the above policy as follows: Statement Date Amount 06 -14 -85 $300.00 11- -85 $300.00 06 -13 -86 $300.00 12 -12 -86 $300.00 Payments were also made to the plan beginning in March, 1980 and continuing on an annual basis. 5. Township records indicate the following in relation to payments by 'the township for the above benefit: Check Date Number Company 06/12/85 6705 Life of Maryland 12/05/85 7169 Life of Maryland 06/11/86 7591 Life of Maryland 12/17/86 8005 Life of Maryland Coverage Amount Annuity $1,500.00 Annuity $1,500.00 Annuity $1,200.00 Annuity $1.,500.00 Mr. John A. Yanchulis Page 3 *These and subsequent payments represent premiums for various township officials and employees including you. 6. The policy was terminated in June, 1987, and you have received benefits in the amount of $9,054.57. a. This included payments made on your bahalf commencing in June, 1980. 7. You were enrolled in a life insurance program at the township's expense.' 8. This insurance was with the Trustee's Insurance Fund and sponsored by the Pennsylvania State Association of Township Supervisors. a. The policy was effective (for you) on February 1, 1978. b. Policy No. 53- 14 -10. 9. Premium statements from the Trustee's Insurance Fund to West Mahanoy Township indicate the following billings for your life insurance coverage. Statement Date Amount 07- -85 $66.95 08 -15 -86 $45.00 10. Records of West Mahanoy Township indicate the following regarding the township payment of the above premiums for your life insurance coverage. Date Check No. Payee Coverge Amount 08/29/35 6882 Trustees Life $401.70 Insurance Fund a. Payments represent premiums for various township officials and employees including you. 11. You were enrolled in a hospitalization and medical program at the township's expense. 12. This Thsurance was obtained through the Trustee's Insurance Fund. This covercje was effective Februay 1, 1978. Your policy number was 42433. Mr. John A. Yanchulis Page 4 13. Premium statements from TrusteL's Insurance Fund to West Mahanoy Township indicate that payments for your hospitalization/medical insurance coverage were paid by the township from 1979 through 1985. 14. A review of the above indicates that from March 31, 1985 tF present, West Mahanoy Township expended the following for your various benefits. Annuity: $1,200.00 (Cash surrender $9,054.57) Life Insurance: $ 111.95 Hospitalization: $ 0 15. A review of minutes of the meeting of the township board of auditors from 1976 through January, 1987, do not indicate that life, medical or pension coverages were fixed or renewed for t.... Zip supervisors employed by the township. a. Auditor minutes prior to 1976 could not be located and have been missing for many years. 16. 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 po'L icies and procedures previously in effect will continuo. 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. 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 being a reference to the township's life, medical and pension programs. 17. By letter dated May 23, 1985, over signature of Leonard 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. Mr. John A. Yanchulis Page 5 18. Michael Kovalich served as a West Mahanoy Township auditor from 1966. a. Mr. Kovalich indicated that the township auditors approved the anmity, 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. 19. 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. 20. You provided the following information in relation to the instant situation: a. You have served as a township supervisor since 1978. b. You were not employed by the township until December, 1985. c. You serve currently as treasurer. d. You acknowledge your participation at the expense of the township in the health, life and retirement programs. e. The auditors approved these programs prior to your election on the board of supervisors. f. You voluntarily terminated June, 1987. g. your township pension plan in You received $9,054.57 from this plan and kept it for your personal use. h. You admit to the amounts paid by the township on your behalf as outlined in Finding No. 15. i. You stated that other township supervisors and employees have terminated their pension plans and received the money for their personal use. Mr. John A. Yanchulis Page 6 You stated that you terminated your township hospitalization /medical coverage on September 15, 1983, because you discovered that you had such coverage with your employer, the Reading Company. k. You related that the township has made no payments for your hospitalization /medical coverage subsequent to September 15, 1983. 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 pans for supervisors of second class townships has been reviewed by t1iic Comission 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 Pennsyiva,Lia. 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. It is now clear that pension /annuity benefits and other insurance such as the type herein question, constitute a financial gain. See McCutcheon v. State Ethics Commission, 466 A.2d 283, at 288. The additional question to be answered is, therefore, whether such benefits are compensation provided by law. A complete analysis of this exact issue has been set forth in the above authorities. See 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.S. 65515. A Supervisor who is also employed by the township in one of the positions authorized in the Second Class Township Code, may Mr. John A. Yanchulis Page 7 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, No. 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 such by the township board of auditors. See Svnoski v. Hazle Township, 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." 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 906, (1979). In this case, you were a non - working supervisor from January, 1978 until December, 1985, at which time you were appointed to the position of township treasurer. Since you were not employed by the township between January, 1978 and December, 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. Mr. John A. Yanchui. y.s Page 8 As to the period from December, 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 11,P, through January, 1987, reflect that there was neither a review nor approval of these types of benefits. Indeed, until November of 1935, 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, violated Section 3(a) of the Ethics Act in that you have obtained a financial gain through the rece.ilt of the benefits which is not compensation as provided for by law. It also should be noted that even if these benefits had be r received in good faith, such would not be controlling.' Good fPit.h receipt of such benefits, even when based upon a solicitor s af`r.ce,, will not alleviate the necessity of a public official reimbursing ; governmental body for the receipt of a financial gain for which he w not entitled. See Allegheny County v. Grier, 179 Pa. 639, 36 A. (1897), McCutcheon v. State Ethics Commission, supra, Kestler AppeLi, 66 Pa. Commw. 1, 444 A. 2d 761, (1982) . As a result, this Commission believes that you must reimburse the township for this financial. The State Ethics Act provides as follows: Section 9. Penalties. (a) Any person who violates the provisions of t7ection 3(a) and (b) is guilty of a felony and shall be fined not more than $10,000 or imprisoned for not more than five years, or be both fined and imprisoned. 65 P.S. 409(a). (c) Any person who obtains financial gain from violating any provision of this act, in addition to any other penalty provided by law, shall pay into the State 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 Mr. John A. Yanchulis Page 9 financial gain received in violation of the State Ethics Act. 65 P.S. 407 9(iii). See also McCutcheon v. State Ethics Commission, supra, the Commission may order restitution of financial gains received in 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 nevertheless secured the full value of the plan. That is you did not "retire" or 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 1988. 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 anm ity 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 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...." Mr. John A. Yanchulis Page 10 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 $1,311.95. The foregoing 'mount must be returned to your governmental body, West Mahanoy Township. II. Allegation: That you, a Supervisor in West Mahanoy Township', violated Section 3(a) of the Ethics Act which prohibits a public official s use of office or confidential information gained through that office for financial gain other than compensation provided by law or Section 3(c) of the Ethics Act which prohibits a public official or a member of his immediate family from entering into a contract valued $500 or more with his governmental body unless the contract Las been awarded through an open and public process when you authorized preparation of a 1984 Community Development Application by your wife and Helen Monices Tragus at a cost not to exceed $3000. A. Findings. 21. Findings 1 through 21 are incorporated herein by reference. 22. The minutes of the township board of supervisors meeti:' s indicate as follows: a. January 7, 1985 - Chairman John Yanchulis reported that for 1984, West Mahanoy Township is anticipating applying far: a Community Development Block grant. Vice- Chairman John Letcavage announced that a public hearing to receive citizens input as to the possible uses of grant monies will !e conducted in the near future. In closing, the West Mahanoy Township Board of Supervisors authorized the preparation of a 1984 Community Development application by Helen Monices and Marianne Yanchulis with a total cost not to exceed $3000. Voting in favor, William Griffin and John Letcavage. b. January 15, 1985 - A special meeting was conducted to receive citizen input on the block grant application. c. February 11, 1985 - A special meeting was held to adopt a resolution authorizing the submission of the 1984 Community Development Block Grant application. d. December 5, 1985 - A motion was made by John P. Letcavage and seconded by William Griffin Sr. to have Helen Monices Tragus share the duties of Community Development Director Mr. John A. Yanchulis Page 11 and Administrative Assistant to the Board of Supervisor. This was approved unanimously. A motion was made by William Griffin, Sr. and seconded by John Letcavage to appoint as Treasurer and employ on a full basis Mr. John A. Yanchulis. Mr. Yanchulis abstained from voting. 23. Your wife was paid as a township employee in the Community Development Program as follows. Year Gross Net 1980 $ 6,000.02 $ 4,599.27 1981 $13,076.92 $ 9,930.36 1982 $14,329.66 $11,578.34 1983 $14,899.82 $11,578.34 1984 $ 8,596.05 $ 6,705.09 *1985 $ 2,500.00 $ 2,030.70 1986 $15,499.92 $12,109.04 *During 1985, your wife received $1,500 of this $2,500 for helping to prepare an application for 1984 Community Development funds. This was half of the $3,000 spent for preparation of the application. a. She reviewed prospective applicants for the program. b. She documented the income of the applicants. c. She verified that all program requirements were met. d. She provided a determination as to whether or not the applicant was eligible for the program. 24. Department of Community Affairs, Small Community Program Contract, No. S- 85 -54 -7 in the amount of $379,940.00 was affirmed November 15, 1985 and forwarded to you as township chairman. a. Article VII of the contract provided as follows. The CONTRACTOR covenants that it and its employees presently have no interest and shall not acquire any interest, direct or indirect, which would conflict in anv manner or degree with the performance of its activities Mr. John A. Yanchulis Page 12 hereunder. Ale CONTRACTOR further covenants that in the performance of this CONTRACT, it wild. not knowingly onpl.:y any person having any such interest. The CONTRACTOR will establish safeguards to prohibit employes from using position for a purpose that is or crives the appearance of being motivated by a desire for pivate gain for themselves or others, particularly those with who:... they have a family, business or other ties. b. :Article VIII of the contract provided as follows. No officer, member or employe of the COMMONWEALTH and nc member of its governing body who exercises any functions responsibilities in the review or approval of services being performed under this CONTRACT shall participate in any decision relating to this CONTRACT, which affects his personal interest or the interest of any corporation, partnership, or association in which he is directly or indirectly interested; nor shall any such officer, member or employee of the COMMONWEALTH and no member of its gov body have any interest, direct or indirect, in this C1NTR?ICT or the proceeds thereof. 25. Township records reflect that the following amounts were paid ..o consultant Bernard Tatcher, 422 Pheasant Lane, Lafayette Hill, Pennsylvania for professional services related to community development application prior to 1984. a. 1980 - $16,000.00 b. 1981 - $ 8,500.00 c. 1983 - $12,000.00 26. You provided the following information in relation to the instant situation: a. In 1985, the township board of supervisors authorized your wife and Helen Monices to develop and prepare a 1984 Community Developemnt application. b. The cost of the application was not to exceed $3,000. c. You stated that you did not participate in this decision„ Mr. John A. Yanchulis Page 13 d. You stated that a consultant who filed similar application in prior years charged much more than $3,000 for his services. e. You stated that your wife and Helene Monices met the qualifications for preparing such applications. f. Your wife was paid $1,500 from the township general fund which was later reimbursed with federal funds. g. . Your wife and Helene Monices were rehired as township employees to prepare the grant application as either Rehabilitation Specialist or Community Development Specialist. B. Discussion: As previously noted above, you are a public official subject to the provisions of the Ethics Act. Section 3(c) of the Ethics Act provides. 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). Section 3(c) of the Ethics Act, which deals with contracting restrictions as to a public official's contracting with his governmental body in excess of $500, not only applies to public officials but also to their immediate family (or business) which would include your wife in this case. However, since the allegation has been filed against you and not your wife, this Commission must scrutinize your conduct in this matter to determine whether any of your activities were prohibited by Section 3(c). Mr. John A. Yanchulis Page 14 In the instant situation, it is noted that when the township board of supervisors authorized the preparation of the application by Helene Monices and your wife, you did not vote in this matter. You also abstained from voting when a motion was made to appoint you as treasurer on a full -time basis. As to the community development application, although it is clear that Helene Monices and your wife did get township authorization for the preparation of the application, there was no official action on your part because you did not participate in the voting of the award of that contract, amounting to $3,000, to your wife and Helene Monices. Based upon the foregoing factors and circumstances, this Commission finds that you did not violate Section 3(c) of the Ethics Act because you did not vote to authorize the preparation of the community development application by your wife and Helene Monices. It must be noted, however, that this Commission has not addressed the question as to whether any other provisions of law, aside from the Ethics Act, or contract such as the Department of Community Lffairs, Small Community Program Grant No. S- 85 -54 -7, has been violated or breached. C. Conclusion and Order: 1. As a Township Supervisor in West 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 . lou received a gain through public office consisting o1 annuity, group life and hospitalization insurance at the township s expense between January, 1978 and March 31, 98; but no penalty or assessment will be imposed in :Light of Act 41 of 1988 which provides amnesty as to the receipt of tY'.ese benefits. J. You violated Section 3(a) of the State Ethics hct when you received at township expense amnesty, groups life insurance 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 $1,311.95. 5. You are hereby ordered.to remit to the State Ethics Comission, within thirty (30) days of the date of this order, the amount of $1,311.95 made payable to West Mahanoy Township as restitution for the financial gain that you received. Mr. John A. Yanchulis Page 15 6. There is insufficient evidence to establish that you violated Section 3(c) of the State Ethics Act. 7. Failure to comply with the provisions of this order will result in a referral of this matter to the appropriate law enforcement authority with a recommendation that both civil and criminal proceedings be initiated. 8. This matter will be referred to the Department of Community Affairs for review as to whether there was a breach of program contract No. S- 85 -54 -7. 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 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. 409(e). The confidentiality provision does not restrict respondents consultation with legal counsel. By the Commission, /l�lw4rA, Joseph W. Marshall, III Chairman Mr. John Yanchulis 411 East Oak Street Frackville, PA 17931 ATE ETHICS COMMIS`. 308 FINANCE BUILDINC P.O. BOX 11470 HARRISBURG, PA 17108 -14 " >: TELEPHONE (717) 783-161 October 5, 198 Re: Order No 618 -R, File No. 85 -093 -C Dear Mr. Yanchulis: The State Ethics Commission received your payment for reimbursing West Mahanoy Township as requireC by Order No. 518 -•R. We have forwarded your check No. 753 dated September 27, 1988 in the amount of $1,311.95 to West Mahanoy Township. such. JJC /na This letter will be part of the Order and a public racord as cc: rqblic Binder Sinc IA' Execw ve Director