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HomeMy WebLinkAbout630-R Braszos Ms. Marilyn Braszo 317 E. 10th Avenue Homestead, PA 15120 Re: 86 -144 -C Dear Ms. Braszo: STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 ORDER OF THE COMMISSION Order No. 630-R Date Decided: February 22, 1989 Date Mailed: March 7, 1989 The State Ethics Commission has received a complaint regarding you and a possible violation of Act 170 of 1978. The Commission has now completed its investigation. On July 13, 1988, a hearing on the matter was conducted and relevant evidence and testimony was presented. Depositions were also taken on August 16, 1988. The individual allegations, conclusions, and findings on which those conclusions are based are as follows: I. Allegation: That you, a Homestead Borough Councilperson, 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, in that you voted at the June, 1986 council meeting to transfer funds from the Borough General Fund to the Borough Community Development account to help repay monies that you received from a HUD grant that was subsequently disallowed by HUD. A. Findings: 1. The parties have entered into the following Stipulation of Findings which is incorporated and adopted as part of the findings of the Commission: (1). Respondent Marilyn Braszo serve (sic) as an elected councilperson for Homestead Borough, Allegheny County, Pennsylvania. a. Respondent has served in this position since January, 1984. b. Respondent's husband, Ivan Braszo was a public official for Homestead Borough from 1976 until December, 1981. Ms. Marilyn Braszo Page 2 (2). In 1976, Homestead Borough initiated a Grant Participation Program, the Home Loan Improvement Program, for the purpose of allocating property rehabilitation funds to eligible applicants. This program was part of a broader federal program initiated in Homestead Borough in 1975 under the provisions of the Housing and Community Development Act of 1974, P.L. 93 -383. The Program was referred to by various terms (including the more expansive "Hold- Harmless" Community Program, and Community Development Block Grant (CDBG) Program, as well as the Community Preservation Home Improvement Loan Program, "312 Loan Program ", and the Home Improvement and Loan Program). a. Minutes of the Borough Council meeting of May 14, 1976 indicate that a motion to adopt a resolution for the Homestead Community Preservation Home Improvement Loan Program and permitting the Borough to financially assist qualified homeowners, was presented and approved. b. The financial - assistance t o m be `provided - u nde - the ` Program (i.e., grants) was designed to supplement home improvement funds provided by the owner. The funds provided by the owner could be from a loan with a local __ private financial institution or personal savings. c. ItVwas further decided at that meeting + that a special public council meeting would be conducted on May 28 to finalize the loan program and to establish a date for distribution of program applications. d. It was further decided to advertise for the position of loan secretary for the program. e. Members present at this meeting were Hickey, Little, Washington, Sullivan, Ivan Braszo, Harvey, and Mayor Armstrong. Members absent: Koval and Aber. (3). The resolution of council passed on May 14, 1976 provided in part that the borough allocated $150,000 for purposes of the Homeowner Loan Fund and administration in its first year community development budget submitted to the United States Department of Housing and Urban Development, and that such was approved by H.U.D. The First -Year Community Development Budget had been submitted by the Borough to HUD on April 15, 1975, and was thereupon approved by HUD. Ms. Marilyn Braszo Page 3 a. Pursuant to this resolution, the borough manager was authorized to execute agreements with eligible homeowners to supplement home improvement loans secured through a lending source. b. The financial assistance for eligible homeowners was to be in the nature of grants which would supplement home improvement loans secured through a lending source by the homeowners. (4). Minutes of the borough council reflect that on May 28, 1976, a special meeting of council was held to finalize the loan program and establish a date for the distribution of applications. The motion was carried to accept the schedule of major implementation activities for the loan program- regular loans. Members Present: Joseph, Hickey, Aber, Ivan Braszo, Harvey. Absent: Koval, Sullivan, Little, Washington, and Mayor Armstrong. a. At the June 11, 1976 meeting, Nadine Thomas was hired to assist in administering the Hold- Harmless Program. She was to work under the supervision of Henry Smith, coordinator of Better Community Services, Inc., and William Macosky, Jr., Borough Manager. Better - Community Services, Inc. was the original independent consultant involved in administering the Irogrd;,a. (5). Minutes of the borough council reflect that on August 13, 1976, on motion of Mr. Little, Better Community Services Incorporated was assigned the additional work of preparing and submitting 312 loan program applications to H.U.D. on behalf of the Borough, at a cost not to exceed $3,300. a. The motion by Mr. Little was made on the recommendation of Henry Smith, the Community Development consultant, to have Better Community Services, Inc., prepare and submit such loan applications. b. At this meeting, Ivan Braszo was appointed to the Office of Borough Mayor. (6). Records of Homestead Borough reflect the following: a. On June 10, 1976, Ivan Braszo submitted a homeowner's application for a grant through the community Preservation Home Improvement Program. Ms. Marilyn Braszo Page 4 b. As set forth on the application proceeds of proposed private loan and the financial assistance from the Borough were to be used to improve the roof and several windows (at the Braszo house on 330 East Tenth Avenue) at a total estimated cost of $3,000.00. c. The application was received by the Borough on June 15, 1976 and recorded on the financial assistance commitment list on June 21, 1976 for an amount of $3,769.00. d. By letter of August 6, 1976 from Nadine Thomas, the Home Improvement and Loan Program secretary, Ivan Braszo was notified that a Borough representative, John A. Grove, Jr., Registered Architect, had reviewed the possible home improvement work for Mr. Braszo on July 12, 1976 and estimated that the "required work," i.e., improvements needed to meet the Borough's criteria for the Program, and the "desired work," i.e., improvements desired by the homeowner but not considered to be "required work items," ranged in total cost form (sic) $4,150.00 to $5,675.00. The second page of the letter included information about an assumed monthly payment range for the private loan, and also set forth the steps that had to be taken by the homeowner to further the application for the financial assistance -frcm th Borough. It indicated that the next step was for the homeowner to contact a local bank of choice and to make an application for the private loan which was a prerequisite for this work. The repayment period for the loan was to be mutually determined by the homeowner and the bank. Upon approval of the loan by the bank, the homeowner was to contact the Borough representative so that bids on the work could be obtained and approved, the private loan could then be finalized, the financial assistance could be provided by the borough, and the actual home improvement work could begin. e. Bids for seven new windows, a new door an (sic) a roof were approved in the total amount of $6,690.00, with Shrager's and Tri -State Windows and Construction company (Raymond Gross) being the successful bidders. f. By letter dated October 20, 1976 from William Macosky, Jr., Borough Manager, to Mr. Ivan Braszo confirmation was given that the Borough would provide financial Ms. Marilyn Braszo Page 5 improvements "as determined and /or required by the Borough Architectural Representative" and in line with the actual bids. The financial assistance payment was calculated on the basis of a low bid of $6,690.00 and the repayment period for the private loan was to be eight years. Mr. Braszo was instructed to contact the bank of his choice and make an application for a loan in the amount of $4,459.00, which would represent the difference of the bid price and the subsidy to be provided by the Borough. Mr. Braszo was further instructed to provide Ms. Thomas with evidence of bank approval so that the financial assistance payment could be processed. g. On October 26, 1986 (sic), the financial assistance agreement listing Ivan and Marilyn Braszo as parties was and signed by Ivan Braszo, a borough official William Macosky and a program representative Nadine Thomas. The financial assistance was a grant not subject to_ repayment: (i) Respondent Marilyn Braszo did not sign this agreement. (ii) Both the homeowner and the municipality agree to comply with all HUD requirements. h. On October 29, 1976, Mr. Macosky issued a $2,231 check from CDBG Program account to the "Homestead Home Improvement Loan Program Escrow Account." The check stub was annotated "... Financial Assistance from Borough for Ivan R. Braszo." Said check was deposited into the "Escrow Account" on October 29, 1976 after private loan proceeds from Pittsburgh National Bank in the amount of $4,459 had been deposited into said account on October 27, 1976. i. Thereafter, three checks from said Escrow Account were issued as follows to bring the individual account balance to zero: (i) A November 19, 1976 check in the amount of $3,594, drawn by Mr. Macosky, made payable to "Ivan Braszo and Tri -State Window . . . ," endorsed by same; (ii) A December 14, 1976 check in the amount of $2,396, Tar . to "Ivan R. Ms. Marilyn Braszo Page 6 Braszo and Tri -State Window . . .," and endorsed by same; and (iii) A January 14, 1977 check in the amount of $700, drawn by Mr. Macosky, made payable to "Ivan R. Braszo and Shrager's," and endorsed by Harry Srager. (7). An audit report dated June 6, 1983 prepared by Robert Tomasic relating to the Homestead Community Development Block Grant Program was submitted to the Mayor Steven Simko and borough council. a. Council minutes reflect that the audit underlying the report had commenced in or before early 1980. b. The audit found that unnamed members of council applied for and received grants amounting to $6,159.00 under the program without HUD approval of a request for waiver. c. The audit also found that - "These costs are questioned because the Borough failed to follow HUD guidelines," recommended that - "The Borough should apply for the necessary waivers," and indicated the "Grantee's Response" to the finding and recommendation that - "The Borough appointed consultants to administer the Grant Programs and to comply with all appropriate regulations. (8). A September 11, 1984 letter to Borough Council President, George Buckner, from HUD notes the disallowed costs allocated to the borough officials and requests information on the program. a. The letter specifically seeks to determine if the program is a rehabilitation loan program, a grant program or a loan /grant program. b. This letter reiterated Finding No. 1 of the audit report. Members of Borough Council applied for and received grants amounting to $6,159 under the Borough's Rehabilitation Program without requesting a waiver from HUD. c. The letter sought identification of subject council members and itemization of grant amounts. Ms. Marilyn Braszo Page 7 (9). By letter dated October 26, 1984, from Louis Pastor, Homestead Borough Consultant to John Pisano, HUD, Regional Manager, the Borough responded to the audit findings: a. Finding No. 1: Ivan Braszo, Mayor (Deceased) 317 10th Avenue $2,756 (sic) David Aber, Councilman $3,284 135 East 17th Street Joseph Little, Councilman 126 West 10th Street 119 $6,159 (10). By letter dated November 26, 1984 to Mr. Buckner from HUD, it is noted that the audit report stated that council members received grants while the borough response of September 11, 1984 indicates that the borough officials received rehabilitation loans. a. The letter requests the outstanding balance on each loan. (11). An undated letter to John E. Pisano, Deputy Manager, HUD from Louis Pastor, Borough Consultant, identifies the allocations to the borough officials as a grants (sic) and further suggests that HUD should recover' funds directly from the-officials. (12). By letter dated December 19, 1984 to John E. Pisano, HUD, from Louis Pastor, Borough Consultant, HUD was advised that "the members of council received grants." 13). By letter dated January 15, 1985 to Mr. Buckner, HUD notified the borough that the $6,159 in rehabilitation grants allocated to the Borough officials was an ineligible expenditure which must be payable to HUD from non - federal funds. A check made payable to HUD was requested. a. This letter also notes that a borough letter dated November 24, 1984 also indicates that in addition to the above amounts, the officials also received private loans which did not involve HUD finding. b. The letter further noted that, "With regard to your last statement contained in your letter of December 19, 1984, which states that the individuals responsible for Ms. Marilyn Braszo Page 8 of the Borough, or consultants for the Borough, the CDBG grant was awarded to the Borough of Homestead. Therefore, it is the responsibility of Borough officials (current or future) to resolve the deficiencies contained in the audit report. (14). By correspondence dated March 28, 1985, to Mr. Buckner, HUD noted as follows: a. "We disagree with your position regarding the $6,159 claim established against the Borough. As indicated in our letter of January 15, 1985, the CDBG grant was awarded to the Borough; therefore, it is the responsibility of Borough officials (current or future) to resolve the deficiencies contained in the audit report. To resolve the $6,159 claim, the CD account must be reimbursed $6,159 from non - Federal funds." (15). By letter dated April 8, 1985 to Bruce Crawford, HUD, Director of Community Planning, Louis Pastor requested that Homestead Borough be given credit or be permitted to reimburse its General Fund from the CD fund for expenditures made previously that would be considered Community Development Program activities. If this was not possible, Pastor's letter also requested an opportunity to submit prospective CD activities for expending these monies. a. By letter dated May 10, 1985 to HUD, George Buckner advised that at an executive session council of May 7, 1985 eligible CDBG activities were discussed. If approved, the Borough would place manholes in key locations to update the borough sewer systems. b. By letter dated May 29, 1985, HUD responded by stating that use of local funds to update borough's sewer system is an eligible CDBG activity and can be substituted for the disallowed costs. (16). By letter dated August 2, 1985, to HUD, Charles McCullough, Homestead Borough Solicitor inter alia requested information regarding a public official receiving a grant and whether some form of waiver was required to be submitted to HUD. a. The letter sought information that if a waiver would have corrected the grants, how such a waiver could have been obtained from HUD. Ms. Marilyn Braszo Page 9 b. The letter asked if it is now too late for waivers to be submitted to HUD. (17). By letter dated August 20, 1985, HUD responded to McCullough's August 2, 1985 inquiry. The letter advised as follows: a. "The grants received by the public officials were ineligible because they violated the terms and conditions of the Grant Agreement which prohibits members, officers, employees of the grantee, members of the local governing body, or other public officials of the locality in which the program is situated, and any other public officials of the locality in which the program is situated, and any other public official of such locality or localities who exercise any functions or responsibilities with respect to the program during his /her tenure or for one year thereafter, from having any interest, direct or indirect, in any contract or subcontract, or the proceeds thereof, for work to be performed in connection with the program assisted under the Agreement." b. "The above officials were not eligible to benefit in the Community Development Program without obtaining a waiver from HUD prior to participating in the CD program. Depending on the circumstances, had they applied, their request would have been accepted or denied. The requirements for requesting a waiver are outlined under Section 570.611(d) and (e) of the Community Development Block Grant regulations. There is no provision for approving a waiver after participation in the rehabilitation program." c. "The Borough of Homestead was responsible for insuring that the program and activities were carried out in accordance with the Community Development Block Grant regulations and the Terms and conditions of the Grant Agreement. The regulations were made available to all communities who participated in the HUD programs. The Grant Agreement was signed by the Officials of the Borough of Homestead and our Office. A copy of this Grant Agreement was sent to the Borough." (18). In an opinion dated August 27, 1985, McCullough responded to Council person Marcella Shultz's request for his opinion on: 1. reimbursing HUD with monies from the general fund, 2. elected officials receiving ineligible grants, and 3. those same Ms. Marilyn Braszo Page 10 elected officials voting on the motion to reimburse HUD. The opinion dated August 27, 1985 noted inter alia: a. Council would not reimburse HUD, but rather would expend an amount on borough projects equal to the disallowed costs. b. Benefiting the borough in this manner would satisfy any obligation to HUD. c. The HUD audit had identified the funds allocated to the three borough officials as ineligible. d. The fact that these officials received funds in contrast to federal regulations is a breach of the contract between HUD and the municipality. e. HUD identified the grants to the three individuals as ineligible because of their status as public officials of the borough at the time they received the grants. The Code of Federal Regulations (CFR) paragraph (b) of Section 570.611 prohibits certain persons who have been decreed by HUD to be in a conflict of interest situations from receiving CDBG grants. Paragraph (c) clarifies any ambiguity in (b) by expressly stating that elected officials_may not receive_ CDBG._grants. (i) These provisions were expressly incorporated into Homestead's CDBG agreement with HUD. (ii) The typical legal remedy for a breach of contract, which clearly has occurred, is to return the amount of funds not properly used. Hence, the Department ordered Homestead to reimburse the funds. f. "It should be noted that notwithstanding the foregoing regulations regarding public official conflict of interest, the subsequent paragraphs of the same section permit the Department to "waive" said conflict of interest provisions upon application by the recipient. Hence, had the Borough of Homestead requested that Mayor Braszo, Councilman Aber and Councilman Little be excepted, it is quite possible that the grants to these individuals would have been accepted by HUD and not treated as disallowable costs subject to reimbursement. Ms. Marilyn Braszo Page 11 7 g (i) "Neither of the two steps necessary to obtain HUD considerations of a waiver in the matter of the three grants to Homestead officials was ever undertaken by the Borough. Again it was the Borough's responsibility to do so. Further, Homestead never submitted a written request to HUD for consideration of a waiver. Clearly the foregoing steps could have been undertaken. Prior to the award of the grants to the aforenamed public officials, the Borough should have disclosed the intention to award grants to them at a public meeting, several of which were conducted by the Borough in this matter." (ii) The borough never requested the waivers from HUD. It was the borough's responsibility to obtain such a waiver. He indicated that the recipient (borough) and the recipient's attorney (solicitor) were responsible to obtain necessary waivers - pursuant to the pertinent CFR regulations. h. The State Ethics Act would not prohibit such a grant provided that the public officials were not given special _ considerations. i . The borough was in clear violation of t_.:. applicable regulations. PP,. ami HUD advised the borough that it was responsible for reimbursement of disallowed costs. k. "The borough did not, by approving the expenditure of June 13, 1985, forego its right to file suit against those it believes were in some manner responsible for this matter. Further, it did not, by this act, lose the opportunity to commence proceedings against the recipients of these grants. However, unless some culpability against these individuals exists, the Borough would be trying to impose liability for actions of its own doing. To date the only charge made against the three individuals is that they received grants while public officials. Had the borough properly processed the request for waivers, HUD may have found these grants to be acceptable. No evidence has been produced to show that these persons were responsible for the processing of the applications for waivers or that they had any control over the Ms. Marilyn Braszo Page 12 administration of the CDBG program. Evidence suggests that the borough had other persons in its employ who administered or assisted in the administration of this program. It is not a sufficient legal basis for suit that persons must return grants they may have been entitled to had the Borough administered its program properly. 1. The councilpersons had no personal interest in the vote to expend $24,274.00 on the manhole project rather than reimburse HUD because it was the borough's responsibility to reimburse HUD for the disallowed costs. As such these officials had no personal interest in the matter. m. Council made a prudent decision to allocate funds to complete a borough project rather than just forward funds to HUD and obtain nothing in return. (19). By letter dated September 13, 1985, solicitor Charles McCullough expanded on his letter of August 29, 1985. The letter provided inter alia in regards to the council meeting on September 12, 1985: a. In light of the action taken by Council at the last .v V` :iS rir�w�:�i�r�:4�7' 1. J 11 paragraph of page ten of the opinion are all the more significant. Since Council has directed a meeting be conducted on the issue of the entire $24,274.00 element of disallowed costs as determined by HUD, the following matters will be examined as to both items which comprised this element: (i) The extent of any negligence or other culpability by persons in the employ of the Borough of Homestead which resulted in the identification of said items of disallowed costs; and prospects for recoupment; (ii) The extent the Borough of Homestead may establish a legal basis for recoupment of these monies against the beneficiaries of these expenditures; (iii) The issue of statute of limitations and laches by the Borough; Ms. Marilyn Braszo Page 13 (iv) Negligence by subsequent Homestead officials and employees to either detect or properly deal with the detection of these disallowed costs; and (v) The rationale behind the Borough Consultant's decision to recommend the undertaking of a HUD approved expenditure in the amount of the disallowed costs rather than at least discuss the alternatives with the other Homestead officials as set forth in the August 27, 1985 opinion. b. As a result of the foregoing, Lou Pastor has been directed to instruct Terri Hemminger to prepare a list of all Homestead officials from 1975 to the present, and all Homestead employees since 1975 who may have any knowledge of information relevant to the foregoing examination. Their addresses are also to be compiled. (20). By letter of September 18, 1985 from Mr. McCullough to Louis J. Pastor, consultant to the borough, Mr. McCullough confirms a meeting held on that date. a. The letter indicates that at this meeting Mr. Pastor informed those present that the borough was aware of the "HUD" problems as early as 1980. b. lette7 "You in analysis that a statute of limitations problem would preclude such litigation against Mr. Smith and the three subject awardees in this matter in light of such knowledge by Mr. Schultz and others on Council. You suggested in lieu of litigation that perhaps the three awardees be asked to make a voluntary repayment of the amount of their grants to the Borough, since there is no doubt as to the fact these grants were ineligible since waivers were not obtained. You seemed however, to fully recognize that it was the responsibility of those vested with the administration of the program at the time to procure the necessary waivers." c. Mr. Pastor had contacted HUD and was informed that the borough must reimburse HUD for disallowed costs or the borough could suffer later in its dealings with HUD. d. Mr. Pastor believed it best to satisfy HUD by expending an amount equal to the disallowed costs on a specific project to the benefit of the borough in lieu of direct reimbursement to HUD as HUD had already agreed. Ms. Marilyn Braszo Page 14 e. Mr. Pastor did not discuss this option with the solicitor. (i) Minutes of the June 13, 1985 council meeting reflect that McCullough was in attendance when Mr. Pastor's alternate plans for reimbursement were discussed. (21). Minutes of the Borough Council meetings reflect the following regarding the disallowed costs: a. June 13, 1985, a motion was made and vote taken to reimburse HUD for the disallowed costs totaling $24,274.00. The motion was passed with the following vote: Yes - Little, M. Braszo, Pachuta, Purifoy, Buckner; No - Esper, Kasiorek, O'Hare, Schultz (5 yes - 4 no). (i) The vote was taken on the advice of Louis Pastor, consultant to initiate a program which involved work on man holes within the borough. (ii) Motion by Little, seconded by Marilyn Braszo to authorize the borough engineer and borough .. consultant ,to advertise for manhole bids, total � $24,274.00 . The motion passed with the following vote: yes - M. Braszo, B. Esper, Kasiorek, Little, O'Hare, Pachuta and Buckner. No. - M. Shultz. (iii)The June 13, 1985 minutes were corrected to read catch basins not man holes at a July 11, 1985 council meeting. (iv) The Catch Basin Project was approved for bidding at a July 30, 1985 council meeting. b. August 8, 1985, motion to satisfy the HUD disallowed costs is rescinded due to an error regarding CD money and the reimbursement to HUD. All members present voted in favor of the motion: Buckner, Esper, O'Hare, Pachuta, Purifoy, Schultz and Little. Motion by Buckner, seconded by Purifoy that the Borough Consultant Pastor was in error in the meeting of July 30, 1985, when he said that catch basins would be coming from Community Development money, it should read Ms. Marilyn Braszo Page 15 that its (sic) to be reimbursed from the General Fund in regard to HUD findings. Buckner, Pachuta, Purifoy and Little voted yes, B. Esper, O'Hare, M. Schultz voted no, Motion carried. Marilyn Braszo was absent. c. September 12, 1985 - A motion is passed to put the matter of the disallowed costs up for a public hearing. Those who voted in favor: Buckner, Pachuta, Purifoy; Abstaining: Braszo, Little, Kasiorek, Esper, O'Hare, Schultz. M. Shultz said to file suit against Little, Aber and the estate of Ivan Braszo. (No action taken) d. October 8, 1985: Public hearing held in regard to the Community Development Block Grant Program. Mr. McCullough handled the questioning of witnesses, who were also subject to questioning by Borough councilpersons and others thereafter. The witnesses who testified at this proceeding were John Mancini of John Mancini Construction (the successful bidder on the catch basin project), David Aber, former Borough councilman, and Henry Smith, the former Borough consultant for the CDBG Program during pertinent times. Mr. Aber testified that Henry Smith and the former Solicitor, Mr. McLean, never advised him when he applied for the grant that he was ineligible and Henry Smith testified that he had gotten approval from the former Solicitor, James McLean, to disburse the funds to the.Boropah officials after_HUD failed respond to Mr. Mclean's request for formal waivers. (See Finding #25 for Henry Smith testimony). e. October 28, 1985 (special to satisfy the HUD audit. tie vote: For the motion Little; Against - O'Hare, (i) meeting) - a motion is made The motion is tabled on a - Braszo, Pachuta, Purifoy, Schultz, Esper, Kasiorek. A motion then passed Basin Project. By letter dated October 30, 1985 to HUD, solicitor McCullough advised that at the meeting Council considered two methods of resolving the findings of disallowed costs. He further stated that Counsel had decided that subject to HUD approval to use a combination of two methods in order to resolve the matter. One method involved the $3,700 payment regarding the catch basin project and the other dealt with how the remaining $20,574 to pay $3,700 for the Catch Ms. Marilyn Braszo Page 16 was to be transferred to the borough CDBG account or future borough projects. f. November 6, 1985, Special Meeting - Motion to satisfy the HUD audit is passed on a roll call vote: In favor - Braszo, Buckner, Pachuta, Purifoy, Little; Against - Esper, Kasiorek. g. June 19, 1986 (special meeting) - motions were made to allocate funds from the Community Development Program account to companies to perform work under the HUD approved program to satisfy the disallowed costs: (i) Motion to declare an emergency for the demolition of property located at 132 E. 12th Avenue. In favor: I. Braszo, M. Braszo, Pachuta, Purifoy, Little. Against: Schultz. Abstain: Kasiorek. (ii) Motion to open bids for 3 catch basins. In favor: I. Braszo, M. Braszo, Pachuta, Purifoy, Little. Against: Schultz, Kasiorek. (iii) Motion to open bids for demolition. Against: -t Little. �^ ^ •,� ��_'�- + - Purifoy, Aq : Schultz, Kasiorek. (iv) Motion to accept and award the bid of $4,200.00 to Port Vue Plumbing. In favor: I. Braszo, M. Braszo, Pachuta, Purifoy, Little. Against: Kasiorek. Abstain: Schultz. (v) Motion to accept and award the bid of $11,432.00 to J. Karis. In favor: I. Braszo, M. Braszo, Pachuta, Purifoy, Little. Against: Kasiorek. Abstain: Schultz. (vi) Motion to accept the contract of Chernco Cleaning Company for $1,250.00. In favor: I. Braszo, M. Braszo, Pachuta, Purifoy, Little. Against: Kasiorek. Abstain: Schultz. Ms. Marilyn Braszo Page 17 (vii) Discussion: If money is not spent by June 30, 1986, Borough will have to return money to HUD. HUD has approved all the projects that have been paid out of the Homestead CD program 1986 account. (22). Correspondence between the Homestead Borough and HUD from November, 1985 to December 9, 1985 disclosed the following in regards to repayment of disallowed costs: a. November 25, 1985: b. November 29, 1985: HUD letter to Little, Council President permitting the Borough to undertake an eligible CDBG activity with local funds to substitute for disallowed costs. Work to be completed before June 30, 1986. McCullough letter to HUD requesting approval of proposed payment of $3,700 to a contractor for installation of concrete inlets. c. December 9, 1985: HUD response to McCullough - = acce tin --pa e P 9 � ymnt -to the- -- contractor. All substitute activities to be completed before June 30, 1986. (23). A borough check ledger, February 1986 entry indicates the issuance of check No. J 9146 in the amount of $24,274.00 transferred to the Borough of Homestead Community Development Program Account. a. The motion to satisfy the HUD audit was approved at the special meeting of November 6, 1985. (24). By letter dated December 9, 1985 from Mr. McCullough to councilperson Marcella Schultz, Mr. McCullough states that after investigation and a hearing it was determined that there was no basis for commencement of litigation in this matter. McCullough found no basis for a lawsuit against the three public officials under scrutiny and stated that council had chosen to discontinue further investigation of the matter. He, therefore, had no authority to commence such a suit. The letter noted inter alia: Ms. Marilyn Braszo Page 18 a. Any litigation against persons responsible for the proper administration of the CDBG program is clearly bared by the statute of limitations, since these matters occurred in the mid to late 1970s, and Council knew and expressed its dissatisfaction with the administrator of the program in January, 1980. Any litigation against him should have been pursued at that time. b. The borough may purge itself of its disallowed costs by undertaking a project. c. If the Department of HUD would be requiring Homestead to repay the amount of disallowed costs, or would be compelling the Borough to spend an equivalent sum on projects which would not be within the ordinary course of operation of the Borough, then the borough would have incurred some legally recognizable harm. Whether this would justify suit against the three public officials is another matter since the evidence received to date indicates they did not do anything to receive their grants other than submit an application. Their defense would be the negligence of the Borough's administrator in failing to obtain the waivers necessary to validate their grants. borough testified u _ _-.•. -I. • :_ _ - g during a public hearing on October 8, 1985 to this matter inter alia: a. He was aware of the HUD conflict of interest provisions. b. These provisions prohibited a public official from being directly or indirectly interested in the grant programs. c. He made these provisions known at public meetings of council. d. This was done prior to the award of grants to Mr. Aber, Braszo and Little. e. The matter of their participation was referred to the solicitor for legal opinion. Ms. Marilyn Braszo Page 19 f. The solicitor, Mr. McLean issued an opinion indicating that the public officials could participate in the program if they conformed to the regulations. The solicitor questioned HUD on the issue but received no response. g. h. Council voted to accept the legal opinion of McLean, and to go ahead with the grants on the legal opinion of McClean and the non - response from HUD. (26). Original tape recording of the Borough Council meetings reveal the following regarding the disallowed costs: a. The Minutes of the August 8, 1985, October 28, 1985, November 6, 1985, and June 19, 1986 Borough Council meetings are accurate insofar as they reflect that the pertinent discussions and votes concerned the issue of whether the Borough should satisfy the HUD audit findings regarding disallowed costs by reimbursing HUD. b. As to the September 12, 1985 meeting, a vote was taken on motion by M. Schultz, seconded by O'Hare, on the issue of whether the Borough should commence with proceedings to recoup the money that the public officials had received. This motion resulted in an S L �. 1 T c -y i _, ;:7 `s=11 o: _ cEitmn -61 _ and abstentions by Marilyn Braszo and four other members of council. While the minutes of the meeting reflect the motion, they fail to reflect the vote taken thereon. c. Thereafter, also at the September 12, 1985 meeting, all members of council present voted to set the date for the public hearing as October 8, 1985. This motion and vote is not reflected in the minutes. (27). No tape recording is available in regard to the June 13, 1985 Council meeting. 2. Mary Albert, Investigator, provided the following testimony: a. That she met with you, discussed the allegations and inquired about your voting and your husband's participation in the program. b. You stated that you offered to repay the money but someone in authority like HUD would have to tell you to repay. Ms. Marilyn Braszo Page 20 d. You indicated that you never would have voted to reimburse the HUD audit if you knew that the money was coming from the borough general fund. 3. Louis J. Pastor, former assistant borough manager and former borough consultant, testified as follows: a. He was involved with HUD as to the receipt and disbursement by the borough of funds from the "312" program. j c. That she found no evidence that a request for a waiver was made. b. That Robert Tomasic, C.P.A., was appointed by HUD to audit the 312 grants from 1976 through 1979. c. Robert Tomasic questioned two items in his audit, one of which related to grants received by three public officials: Ivan Braszo, David Eber and Joseph Little. d. Subsequent to the audit, HUD wrote to the borough seeking repayment of the "illegal contracts." e. He talked to Mr. Johnson and Mr. Crawford from HUD who indicated-°that L f <:the^ o:.:; � .. -:. uI money, then the borough would not receive any more HUD money. f. An executive session of borough council was held after the audit was out and he recommended that HUD, which disbursed the money, should initiate the action against the officials. g • He prepared and sent a letter to HUD after he read it to the president of council who raised no objection. h. In order to satisfy HUD, the borough would take money from the general fund to pay for different projects, like catch basins. i. He reviewed the records of Braszo, found that there were no waivers t In a June, 1985 meeting, you voted to four vote, whereby the Borough, Little and Eber and herein. in favor of a five would perform some Ms. Marilyn Braszo Page 21 k. 1. m. 4. You a . b. c . d. You heard the borough solicitor give his opinion on the matter at a public hearing and you believe he was right. e. You clarified your statement with Ms. Albert that you would not have voted borough money if you benefitted illegally. f. You don't feel you did anything wrong because the money was used for the purpose of fixing up your home and not for any other purpose. You don't believe that you were benefitting by your voting in June, 1985 and June, 1986. g. municipal project so as to satisfy the two disallowed HUD items. There was a meeting in July wherein council voted to rescind the action taken in June. He did not state that the HUD audit could be satisfied by HUD funds because there were no HUD funds available, only funds from the general borough fund. That in the five /four vote, the four that voted against the borough action said that the public officials should make repayment. provided the following testimony: As to the federally sponsored program, you recall your husband mentioning that people would be coming to look at the house to determine if your house plans would be okay. You were not aware of a problem until it came up at council. You never felt that you had a responsibility to repay because nobody from HUD wrote or indicated to you that h. You never i. You agree asked HUD whether you should repay the money. that the HUD money was a benefit to you. Ms. Marilyn Braszo Page 22 5. Bruce D. Crawford, testified as follows: a. He has been employed by HUD since 1961 and has been stationed in the Pittsburgh office since 1970 holding positions as Program Manager and Deputy Director. b. As to the Community Development Block Grant (CDBG) Program for Homestead Borough, he was involved in the paperwork from the beginning in 1975 up until the close out in 1986. g• It was the borough's responsibility to perform audits of the program expenditures but Homestead Borough lagged in performing only two audits in the ten -year period of the program. h. The second audit occurred and was received by HUD in the fall of 1983 and covered 99% of the expenditures but not additional expenditures for audit exceptions. J c. CDBG is a "delegated program" which allows local officials to choose the activities subject to compliance with federal rules and regulations. d. There was periodic monitoring of certain areas of the program but generally whether a public official benefited from the program would not normally be an area of monitoring. e. The standard grant agreement prohibited, in part, any member of the borough from having a direct or indirect interest in any contract or expenditure. f. To the best of his knowledge, no public officials. from Homestead Borough requested a waiver of the prohibition referenced in subparagraph (e) and no waives appeared in the files. i. The first exception listed $6,179 in questioned costs on three grants to local officials who were not identified in the initial audit. Ivan Braszo was subsequently identified as one of the officials who received a grant. k. HUD took steps to disallow, as ineligible costs, the grants received by the public officials. Ms. Marilyn Braszo Page 23 1. The Borough had the responsibility to repay the costs to HUD from non - federal sources. m. Borough Solicitor McCullough asked if waivers could be obtained after the fact but HUD responded that waivers had to be obtained before the fact. n. HUD had no prior knowledge of the audit report that Homestead Borough public officials received the grant monies. o. The determination by HUD that these grants to the public officials were disallowed occurred probably in 1985. p. The audit report reflects that Homestead Borough appointed consultants to administer the grant programs. q. HUD had recourse against the Borough which had the choice of proceeding after HUD was repaid. r. The grant agreement between HUD and Homestead Borough does not give guidance regarding waivers but contains a flat prohibition. 6. Lynn Daniels provided the following testimony: a. n8 iiaa ' been i an° e plo eta of HUD fOr approx =a to — _ eighteen years in the Pittsburgh Office. b. He did not get assigned to the Homestead Borough Program until after the Borough began receiving HUD funds. c. He had the responsibility of reviewing the Homestead Borough audit when the program concluded. d. As a result of the audit, costs were disallowed as to grants made to three public officials: Braszo, Little and a third individual. e. A meeting occurred on October 10, 1985, in the HUD Pittsburgh Office at the request of the Borough to discuss audit contents and resolve all disallowed costs including those to the public officials. He indicated that the disallowed costs could be satisfied by the repayment of non - federal funds. Ms. Marilyn Braszo Page 24 f. When costs are disallowed, HUD'S relationship under the grant agreement is with the municipality- grantee. g. HUD's contact is with the recipient (municipality) which has recourse against sub - recipients. 7. Charles P. McCullough provided the following testimony: a. He has been the Solicitor of Homestead Borough since January, 1984, with a private practice primarily in the area of civil contract law. b. The disallowance of certain costs involving the Borough's CDBG program came to his attention at a June 13, 1985 council meeting. c. Mr. Pastor prepared an agenda for the meeting outlining various motions he recommended, one of which related to the disallowed costs. d. Mr. Pastor worked out an arrangement whereby the Borough would undertake a catch basin improvement as a means of satisfying the disallowed costs by HUD and Marilyn Braszo voted in favor of Mr. Pastor's recommen- dation. e. The Borough of Homestead was obligated and solely responsible to HUD to = costs. f. At a September 12, 1985 meeting, a motion was made to commence legal proceedings against the people who received it and the motion failed with Marilyn Braszo being one of the abstentions on that vote. He issued an opinion that the people who administered the HUD project did not do so properly and that there should be a hearing on the matter. h. Aside from the September 12 meeting, the votes for projects had the dual effect of spending money on improvements and resolving the problem with HUD. i. After doing some legal research, he believed that the people who administered the Homestead Borough project, but not the council officials, were at fault as to the disallowed costs for the grants to the Borough officials. g. Ms. Marilyn Braszo Page 25 j He expressed his opinion that the three public officials had not acted wrongly in receiving the grants and conveyed that opinion at the September 12, 1985 Council meeting. k. That if the Borough instituted suit against a sub - grantee for the disallowed costs, he believed a general two -year statute of limitation would apply. 1. If the borough sued the public officials who received the grants, laches and unclean hands would be a defense to such an action in his opinion. m. He expressed his view that the prior votes taken by Council would not subsequently preclude a suit, if there were sufficient votes to carry such a motion, against the public officials who received the grants. n. In an October 10, 1985 meeting attended by HUD officials Lynn Daniels and others, he broached the waiver issue with Mr. Daniels but Mr. Daniels indicated it was too late. o. At the June 13, 1985 meeting, he had not given an opinion to the Borough as to the disallowed costs. His - opinion of the Section of the Borough Code which prohibits council members from voting on matters of even indirect personal interest was not applicable on the theory that the councilmembers were not taking advantage of the fact of being public officials. q. He reviewed some cases but did not cite any case in his opinion. P• r. There are a series of letters between HUD and the Borough beginning in September, 1984, identifying the borough officials who received these grants and a letter of January 15, 1985 by HUD which identifies the three individuals who received the disallowed costs. s. In his August 12, 1985 opinion, he expressed his view that Marilyn Braszo could vote on satisfying the HUD audit on the theory that her vote was for the benefit of Homestead Borough. t. As to the HUD grant, Mr. Braszo filled out the application which was reviewed by Borough personnel. Ms. Marilyn Braszo Page 26 u. His view was that there had to be a legally recognized harm before a cause of a action could exist and the Borough suffered no monetary loss because the expendi- ture would be made anyway. B. Discussion: As councilperson for Homestead Borough, you are a "public official" as that term is defined under the Ethics Act. 65 P.S. 402; 51 Pa. Code Section 1.1; As such, your conduct is subject to the provisions of the Ethics Act and the restrictions therein are applicable to you. Section 3(a) of the Ethics Act provides: Section 3. Restricted Activities. (a) No public official or public employee shall use his public office or any confiden- tial 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). Under Section 3(a) quoted above, this Commission has determined that use of office by a public official to obtain a financial gain for himself or a member of his ; m ay; ate f nily or a business with which he is associated which is not provided for in law transgresses the above provision of law. Thus, use of office by a public official to obtain a financial gain which is not authorized as part of his compensation is prohibited by Section 3(a): Hoak /McCutcheon, Orders No. 128, 129, affirmed McCutcheon v. State Ethics Commission, 77 Pa. Commw. Ct. 529, 466 A.2d 283 (1983); Yacobet, Order No. 412 -R, affirmed Yacobet v. State Ethics Commission, 109 Pa. Commw. Ct. 432, 531 A.2d 536 (1987). Similarly, Section 3(a) of the Ethics Act would prohibit a public official /employee from using public office to advance his own interests; Koslow, Order 458 -R, affirmed Koslow v. State Ethics Commission, Pa. Commw. Ct. , 540 A.2d 1374 (1988). Likewise, a public official /employee may not use the status or position of public office for his own personal advantage; Huff, Opinion 84 -015. In the instant situation, you and your now deceased husband received a grant of $2,231.00 from the CDBG Program account to the Homestead Home Improvement Loan Program Escrow Account, resulting from the adoption by borough council of the resolution Ms. Marilyn Braszo Page 27 in May of 1976 for Homestead Preservation Home Improvement Program. Although that joint application was in your and your husband's names, only he signed the financial assistance agreement for a grant to be utilized for new windows, a door and a roof as to your home. Since HUD has certain requirements to insure that public officials do not use their position to obtain a gain or benefit for themselves at the expense of other individuals, it would have been necessary for the members of council who were interested in applying for and receiving these grants to request a waiver from HUD. Such a request for a waiver from HUD was not sought; nevertheless, you participated in this program with your now deceased husband and received the above stated grant. Parenthetically, the funds received were grant and not loan monies. It is also noted that Community Development Consultant, Henry Smith, in the October 8, 1985 public meeting stated that he made known the HUD provisions that public officials could not receive grants at council meetings prior to the award of grants. In the June, 1983 audit, Robert Tomasic specifically found that the grants received by unnamed members of council under the program were obtained without the required HUD waiver. HUD, by letter of September 1, 1984, wrote to Borough Council President Bucker seeking to learn, in part, the identity of the Council members who received the grants. Borough Consultant, Louis Pastor responded by letter of October 26, 1984 identifying Ivan Braszo, David Aber and_Joseph Little_as_the councilmembers. who received the grants': - ' a sub undated fetter-to HUD,-Mr. Pastor suggests that HUD should proceed directly against the officials to recover the grants. Thereafter on January 15, 1985, HUD notified the Borough that the grants received by these officials were ineligible expenditures and must be returned to HUD from non - federal funds. In response to a letter from the Borough Solicitor to HUD dated August 2, 1985 which sought information as to waivers, HUD responded by letter of August 20, 1985 advising in part: that the grants received by the officials were ineligible as they violated the conditionsuoflthe Grant Agreement which prohibits public officials from having a direct /indirect interest in any contract or proceeds; that the public officials were not eligible without obtaining a HUD waiver and that the Borough was responsible for insuring that the program and pct? : ri }i in an August 27, 1985 response � from y an a inquiry u from T a e councilmem- ber opined: the Borough should not reimburse HUD but expend funds on projects equal to the disallowed costs; the receipt of these funds by public officials breached the contract between the Borough and HUD, citing the Code of Federal Regulations which declares a conflict as to certain individuals receiving CDBG Ms. Marilyn Braszo Page 28 grants; that waivers from HUD might have been obtained if requested by the Borough; that the Borough, in approving the expenditures did not forego its right to file suit against those responsible and that the councilmembers had no personal interest in the vote to expend borough funds on a project in lieu of reimbursing HUD. In a June 13, 1985 Borough meeting, you voted in favor of a motion which would reimburse HUD for the disallowed costs. After the foregoing motion was rescinded, a September 12, 1985 motion was passed which would put the matter of disallowed costs up for a public hearing on which you abstained. On October 28, 1985, you voted in favor of a motion which would satisfy the HUD audit. Although the October 28, 1985 motion was tabled, it was passed on November 6, 1985 wherein you voted in favor of said motion. In the special meeting of June 19, 1986, you voted in favor of motions to allocate funds for the purpose of performing work under HUD approved programs so as to satisfy the disallowed costs. Following the foregoing actions, the borough records reflect that a check in the amount of $24,274.00 was transferred in furtherance of the foregoing action. In reviewing your conduct to determine whether you violated Section 3(a) of the Ethics Act, it is necessary to discern whether your participation and voting, regarding the disallowed grants by HUD, resulted in a financial gain to you which was not compensation provided for by law. There is no question that the Borough Code does not allow grants for public officials; to the contrary, Section 1404 of the Borough Code specifically prohibits any borough official from having any direct or indirect interest in a contract. Thus, since the Borough Code does not authorize the receipt of grants as part of a councilmember's compensation, it is not provided for by law. The grant which you and your now deceased husband received was not authorized by the Borough Code and in fact, was prohibited under federal law on the same conflict of interest rationale: public officials were not entitled to apply for participation in the HUD program unless a waiver was obtained. Of course, the gain that you received at the time of the award of the grant could not be a violation of the Ethics Act for two reasons: such action predated the Ethics Act and you were not a member of council. The precise issue becomes limited to the question of whether any of your actions as councilmember resulted in this financial gain which is not authorized in law. This Commission must thus determine if any of your actions as a councilmember relate to thwarting or eliminating an action against you to repay the ineligible grant that you received from HUD. Further analysis is Ms. Marilyn Braszo Page 29 necessary to determine whether the Borough or HUD would have a cause of action against you. The testimony of all parties indicates that the CDGB program was a contract solely between HUD and the Borough. Although HUD determined that your grant (and the grants to the other two public officials) was ineligible and disallowed, HUD sought reimbursement from the Borough but not from you or the other two public officials. Therefore, your action in participating and voting as to the satisfaction of the HUD disallowed costs did not, of itself, create a financial gain to you because any action that you took as to HUD could not inure directly to your benefit. However, the Borough would have a cause of action for the ineligible grant which you received and which the Borough was required to satisfy. The minutes of the Borough reflect that the action taken by you vis -a -vis a possible Borough action against you and the other two officials involved a September 12, 1985 motion to put the matter of the disallowed costs up for a public hearing. You abstained on that vote. Thus, this Commission is unable to find that you violated Section 3(a) of the Ethics Act based upon the evidence. A postscript is to the above determination so that the decision of this Commission will not be misconstrued. The foregoing conclusion was reached because HUD had no direct recourse against you and hence, your actions as to satisfying the disallowed costs could not insulate you from any action that the Borough might initiate. You did not vote on the motion at the September 12, 1985 meeting concerning the issue of whether the Borough should commence proceedings to recoup the money the public officials received. Based upon the evidence, the Commission is unable to find a violation of the Ethics Act. This Commission must note that this decision should not be construed as a condonation of your actions. To the contrary, this Commission must express its reprehension as to the receipt of this grant by you and your husband when such was expressly contrary to the CDBG Program and the Borough Code. The Preamble of the Ethics Act provides in part: ..that public office is a public trust and that . the people have a right to be assured that the financial interests of holders of - public office present neither a conflict nor the appearance of a conflict with the public trust. 65 P.S. 401. Although this Commission is unable to find a violation of Section 3(a) of the Ethics Act based upon the evidence, your actions in receiving this grant to which you were ineligible Ms. Marilyn Braszo Page 30 coupled with your voting to satisfy the disallowed costs by HUD is certainly violative of the spirit of the Ethics law. The Ethics Act was enacted "...to strengthen the faith and confidence of the people of the State in their government ..." 65 P.S. 401. Your actions have fallen far short in that regard. C. Conclusion and Order: 1. As an elected borough councilmember in Homestead Borough, you are a public official subject to the provisions of the Ethics Act. 2. Based upon the evidence, this Commission is unable to find a violation of Section 3(a) of the Ethics Act regarding your voting to transfer Borough funds to satisfy an ineligible grant that was received by you and your husband which was disallowed by HUD. Our files in this case will remain confidential in accor- dance 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, Joseph W. Marshall, III Chairman