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HomeMy WebLinkAbout647-R CreehanMr. James E. Creehan c/o James H. Joseph, Esquire 1214 Frick Building Pittsburgh, PA 15219 -6002 Re: 86 -174 -C Dear Mr. Creehan: acrf <[\ STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 ORDER OF THE COMMISSION Order No. 647 =R Date Decided: April 19, 19$9 Date Mailed: April 28, 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. The individual allegations, conclusions, and findings on which those conclusions are based are as follows: I. Allegation: That you, Executive Director of the Allegheny County Sanitary Authority 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, when you used your position to purchase city owned property along Arlington Avenue that was reserved for possible use as greenspace and unavailable for sale from a city department under the jurisdiction of an official with whom you have had a real estate partnership. A. Findings: 1. You served as the Executive Director of the Allegheny County Sanitary Authority, (Alcosan). a. You also served as a member of the Pittsburgh Water and Sewer Authority. 2. During the 1980's, you purchased various parcels of land located on Arlington Avenue, Pittsburgh. a. Some of this land was obtained directly from private owners. b. Several parcels were obtained from the city which was holding the land as an acquisition resulting from delinquent city, county or school taxes. Mr. James E. Creehan Page 2 3. Records of the City of Pittsburgh, Department of City Planning, Real Estate Division, indicate the following regarding vacant lots located on Arlington Avenue. a. Eighty -Three (83) separate parcels of land were delineated in Real Estate Division files. b. Sixty -Nine (69) of these parcels were disapproved for sale due to "Greenway potential ". c. Six (6) were marked as being reviewed for other public use. d. Two (2) were subject to condemnation proceedings. e. One (1) was undergoing guideline preparations. f. Five (5) were sold or approved for sale. g. The "potential buyer" noted relating to the above five (5) parcels was James E. Creehan. h. Forty -Nine (49) interested buyer entries were noted on the 78 properties that were disapproved for sale. 4. The only properties on Arlington Avenue that were sold were the properties in which you were interested. 5. There were no properties for which you were listed as an interested buyer which you did not obtain. 6. The properties that you obtained on Arlington Avenue were the following. Address Sale Price Sale Completed 341 Arlington Avenue $1,500.00 10 -11 -85 339 Arlington Avenue $1,500.00 10 -11 -85 337 Arlington Avenue $1,500.00 10 -11 -85 351 Arlington Avenue $ 250.00 7 -5 -85 353 Arlington Avenue $1,500.00 10 -11 -85 7. Records obtained from the office of the Pittsburgh City Planning Director contained a memo captioned "Chronology and rationale for the sale of Arlington Avenue property to James Creehan". Mr. James E. Creehan Page 3 a. This memorandum was dated July 24, 1987. 8. The above referenced memorandum provides in substance as follows: a. Mr. Creehan had been purchasing properties on Arlington Avenue since 1981 from private_ owners. b. Mr. Creehan, thereafter, approached the City about purchasing six parcels. These parcels had been designated as potential Greenway land in July, 1981 along with 1400 other properties. d. Mr. Creehan contacted the City Planning Department and requested that the Sales and Classification Committee release these properties for sale. c. e. By memo dated July 27, 1982, Bob Lurcott and Ray Reaves of the City Planning Department expressed opposition to the sale. It was also recommended that guidelines be developed for construction on the Arlington site. f. In September, 1982, Mr. Lurcott l ottrecommended properties December, and in P p (5) ertbe removed from the potential Greenway status. On January 3, 1983, the Sales and Classification Committee reclassified seven (7) as suitable for private use. g. h. The memo notes that it was not unusual to release property from potential Greenway designation. i. The deeds to four (4) properties Creehan on November 5, 1985. The title to one (1) parcel was the City. were transferred to James clouded and remained with k. The memo finally notes that the City Department of Public Works has placed a hold on the sale of public property on Arlington Avenue. Department of Public Works has been willing to remove this hold when a sale is conditioned on granting construction easements. The Real Estate Division records, however, still indicates that these properties are on hold. Mr. James E. Creehan Page 4 9. The Pittsburgh Property Management and Maintenance Program (PMMP) of 1979, a 3 -year program to improve the maintenance of publicly held tax delinquent properties, provides for a classification of property as Greenway. a. This designation was for vacant /environmentally sensitive land, which was to be preserved as passive public open space for the purpose of enhancing vistas in the City. b. A PMMP report of January, 1983, indicates that the Sales and Classification Committee has identified over 1400 properties in large tracts located south of the rivers as having Greenway potential. c. The Sales and Classification Committee is comprised of the Director of Planning, the Building Inspector and representatives of the Urban Redevelopment Authority Parks Department, Engineering and Construction and Finance Department. d. The Arlington Avenue properties were in that classification. e. The 1983 PMMP report indicates that formal designation of an area as Greenway must come from city council. 10. By letter dated April 12, 1983, Daryl H. Smith, Director of the Department of Lands and Building's submitted a resolution to city council requesting approval to sell certain property through the filing of a court petition. a. The request consisted of ten (10) properties, including the five (5) Arlington Avenue properties sold to James Creehan. 11. On or about September 18, 1984, a petition for validation of tax title and approval of sale of real estate was filed in the Court of Common Pleas of Allegheny County. 12. On September 25, 1984, the auction of the Arlington Avenue properties was advertised in a paper of general circulation. 13. At a hearing conducted on February 12, 1985, in the Court of Common Pleas, Allegheny County, Pennsylvania, James E. Creehan was awarded the Arlington Avenue property for $8,500.00. a. This order was subsequently re- affirmed by the Court on April 9, 1985. Mr. James E. Creehan Page 5 14. Ronald C. Schmeiser is the Director of the Pittsburgh Department of Finance. a. As a result of a reorganization of City functions effective 1984, the Director of Finance_:is in charge of real estate of the City, and the three taxing bodies, (The City of Pittsburgh, Allegheny County and Pittsburgh School District). b. This reorganization was effective January 4, 1984. c. Prior to this reorganization, the Director of Lands and Buildings for the City was the trustee of the three taxing bodies. 15. Ronald C. Schmeiser was not in charge of this real estate at the time that the Greenway designation was eliminated and at the time city council was requested to approve the filing of a court petition seeking the approval of the sale of the Arlington Avenue lots to you. 16. Ronald C. Schmeiser was in charge of this real estate at the time of the final sale in October, 1985. 17. Records of the City of Pittsburgh indicate the following regarding the duties of the Director of the Finance Department. a. In 1983, the Department was responsible for all financial affairs of the City. The Department bills and receives all revenues due the City and School District and reports to the appropriate controllers. The Department also invests City funds, manages the debt, serves as payroll office and participates in establishing the operating budget. b. In 1984, the duties of the Department were altered and as part of the reorganization, the three taxing bodies section was transferred from the Department of Lands and Buildings to the Finance Department. That Department maintained and disposed of property owned by the City, the County and the School District. c. Prior to 1984, in accordance with Ordinance 46 of 1981, the Finance Director performed no duties in relation to City owned land. d. The reorganization effected by Ordinance No. 40 of 1983 specifically vested responsibility for the acquisition, disposition and maintenance of city controlled property in the Finance Director. Mr. James E. Creehan Page 6 18. You and Ronald C. Schmeiser were the incorporators of Primary Products, Inc. a. This entity was incorporated on December 20, 1982. 19. You and Ronald C. Schmeiser operated a real estate business entity under the name Bay Tree Associates. a. The application to acquire or operate under a fictitious name was filed on April 20, 1981. 20. As the Executive Director of Alcosan, you had no duties, responsibilities or authority over the sale of land or property owned by the City of Pittsburgh. 21. An unsuccessful bidder on the Arlington Avenue properties that you purchased advised that he pulled out of the bidding because he could not finance the acquisition. a. He further advised that you owned most of the adjoining property and it is customary for the court to award the sale to such adjoining owners. b. The sale had been advertised and was public knowledge. 22. Robert Lurcott, Director of the City Planning Commission advised as follows. a . b. The proposal for the purchase was submitted by Daryl Smith, the Director of Lands and Buildings. Mr. Schmeiser never approached him about the properties. He did discuss the matter with Mr. Schmeiser after various news articles were published about the purchase. Councilmember Eugene DePasquale contacted him and requested that he meet with you. f. At said meeting, Mr. Lurcott was purchasing property on Arlington eventually as a primary residenc g. Originally, all Arlington Avenue hold status. c . d. e . Your purchase of the Arlington Avenue properties was discussed at one meeting of the Sales and Classification Committee. advised of your interest in Avenue to be used e . properties were placed on a Mr. James E. Creehan Page 7 h. After numerous staff discussions and the preparation of guidelines, it was decided to release the properties in which you were interested. i. The zoning could not be changed and you would be required to build within the parameters of the developed guidelines and restrictions. Mr. Lurcott advised that you were successful in acquiring the property because you were familiar with the system and were persistent. k. Mr. Lurcott advised that normally a private citizen could not get in to see him and that he did not meet with any of the other individuals interested in the Arlington Avenue properties. 23. Councilman Eugene DePasquale, and a member of the Alcosan Board advised that he contacted Paul Evers from the City Real Estate Division and Robert Lurcott. a. He further stated that he did not attempt to influence the sale of the Arlington Avenue properties. b. Mr. DePasquale's son is an employee of Alcosan. c. He was hired prior to his obtaining his position as a board member. J 24. Mr. Evers confirmed that he was contacted by Mr. DePasquale and that he met with you on several occasions. a. He was surprised when your proposal was accepted by the planning commission. 25. Paul J. McDermott, Director of the City Department of Engineering and Construction advised that he had received numerous telephone calls from individuals interested in the Arlington Avenue properties. a. These properties were on a hold status and not to be sold. 26. Jane Downing, Assistant Director for City Planning advised as follows: Mr. James E. Creehan Page 8 a. In 1980 or 1981, a property classification plan was initiated and the Arlington Avenue properties were placed on a hold status until a decision as to classification could be made. b. Staff was of the opinion that all these properties should be on hold. c. The director, Mr. Lurcott, wanted selective development which would not destroy aesthetic value, in effect, overruling staff. d. The Creehan request was presented to the Sales and Classification Committee pursuant to established procedure. e. Other interested individuals probably never requested a change from the committee. f. The zoning on the property was restrictive and most individuals would be unable to afford to build a single unit thereon and remain in compliance. 27. Ronald C. Schmeiser, Finance Director for the City of Pittsburgh provided the following information in relation to this situation: a. The Director of Lands and Buildings for the City Daryl Smith forwarded the request to City Council to allow a court petition to be filed to initiate the sale of the property. b. He was not involved with the initial activities in this matter, was not responsible for the sale of the property and had no participation whatsoever in the sale. c. The property was available for sale to the public. The matter was conducted through a court supervised sale with prior public advertisement. d. City Council never designated the property as Greenway. While the property was studied for Greenway potential, the Planning Commission released these properties for sale because there was no public need for retention. 28. You provided the following information in relation to this situation. a. Ronald C. Schmeiser played no role in your acquisition of the Arlington Avenue properties. Mr. James E. Creehan Page 9 b. You never requested the help of Mr. Schmeiser in obtaining these properties. c. You purchased several properties on Arlington Avenue from private parties. d. The properties purchased from city were done so under court order. e. The properties that you purchased were not designated Greenway in that they were owned by private parties. B. Discussion: As Executive Director of the Allegheny County Sewer Authority, ( Alcosan) you are a "public employee" as that term is defined in the Ethics Act. 65 P.S. §402; 51 Pa. Code 1.1. As such, your conduct is subject to the provisions of the Ethics Act. 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 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. S403(a). Section 3(a) of the Ethics Act basically provides that no public employee may use his public office or confidential information received through his holding public office to obtain financial in for himself or business with which he is associated. 65 P.S. S403(a). In the instant matter, you purchased the Arlington Avenue properties while you served as Executive Director of Alcosan. Mr. Ronald C. Schmeiser, your partner in Bay Tree Associates and Primary Products Incorporated, served as the Finance Director of the City of Pittsburgh and in that latter capacity had the responsibility for both the acquisition and disposition of City owned property. As to the five properties which you purchased from the City on Arlington Avenue, it is noted that they were originally designated as having "greenway potential" and hence, were not subject to sale. In this situation, your conduct must now be scrutinized to determine whether you used your position to purchase these five properties from the City. The facts reflect that you contacted the City Planning Department with a request that the properties be released for sale by the Sales and Classification Committee, however Messrs. Lurcott and Reeves, from that Department, initially expressed opposition to the sale. After Mr. James E. Creehan Page 10 guidelines were established regarding removal of properties from greenway status, it is noted that Mr. Lurcott recommended the properties in question be removed from that status. Shortly thereafter, seven properties were classified as suitable for private use by the Sales and Classification Committee and four of those properties were transferred to you while the 5th parcel had a cloud on title and remained with the City. As to the five Arlington properties, it is further noted that Mr. Daryl Smith, the Director of the Department of Lands and Buildings, submitted a. resolution to City Council to sell ten properties through the filing of a court petition, five of the properties were the Arlington properties sold to you. Thereafter, the Arlington Avenue properties were listed for auction in a paper of general circulation and you were awarded those properties after a hearing in the Court of Common Pleas of Allegheny County. In this regard, an unsuccessful bidder has stated that it was customary for the court to award such properties to adjoining owners and you did own adjoining properties. Mr. Lurcott has indicated that although the Arlington Avenue properties were discussed at a meeting of the Sales and Classification Committee, your partner, Ronald C. Schmeiser, never approached or discussed the matter with him although he did talk to Mr. Schmeiser about it after various news articles appeared. Jane Downing, Assistant Director of City Planning, stated that your request was submitted to the Sales and Classification Committee pursuant to established procedure. Your partner, Ronald C. Schmeiser, stated that he had no involvement with these properties which were released for sale to the public by the Planning Commission because there was no public need for retention. You stated that Mr. Schmeiser played no role in purchasing these properties which was done under court order. At the time when you finally acquired these properties your business associate, Ronald C. Schmeiser, was in a position of authority and responsibility over these properties and while you were the only individual of all the interested parties who was able to secure the purchase of the properties, the evidence elicited fails to indicate that you used your public office or confidential information to obtain these Properties. II. Allegation: That you, Executive Director of the Allegheny County Sanitary Authority, violated Section 3(b) of the Ethics Act which prohibits a public employee, public official or candidate from offering, soliciting or accepting anything of value based on the understanding that the vote, official action or judgment of the public official, public employee or candidate will be influenced when you, as a member of the Pittsburgh Water and Sewer Authority, voted to award contracts to Spinello Construction Company while, at the same time, Mr. James E. Creehan Page 11 this company was putting "fill material" on the properties you own on Arlington Avenue. A. Findings: 29. Findings No. 1 through 28 are incorporated herein by reference. 30. Paul Imhoff, Chief Building Inspector for the City of Pittsburgh provided the following information: a. He first learned that you were allowing the dumping of material on your Arlington Avenue properties from a citizens group. b. As a result, a landfill specialist was dispatched to the site and reported that the allegations appeared to be true. c. No land fill permit was required when filling foundation voids involving fill material comprising less than 50 cubic yards per lot. d. You did not have a landfill permit. e. You were subsequently notified to cease dumping operations. f. Charles DiNardo of Spinello Construction contacted the office of the Building Inspector and advised that he would obtain a permit and resolve any existing problems. g. Mr. Imhoff met with Mr. DiNardo and decided what steps were required. h. Mr. DiNardo, thereafter, "benched" the side of the hill at the property site so as to stabilize the slope, planted seed and covered the seed with hay. He also erected a fence that replaced an unsightly fence on the property. i. He never dealt with you directly. 31. Records of the Office of the City Building Inspector contained the following information. a. On November 7, 1985, you were forwarded a Stop Work Notice by certified mail advising that you were to stop all dumping and remove what had already been dumped. b. This notice was returned as undeliverable. Mr. James E. Creehan Page 12 c. By letter dated March 7, 1986 to Paul Imhoff from Robert Kress, (Allentown Civic Association), the Building Inspector was advised of the dumping on your property. d. By letter dated May 29, 1986 from the Office of the Building Inspector, you were directed to cease all dumping on the Arlington Avenue properties. e. Letter dated September 10, 1986 to you from Paul Imhoff advises of 3 prior notifications and further confirms that Spinello Construction Company would cut trees, remove stone and fill, and bench the property. The letter advises that such must be initiated within thirty (30) days. f. By memorandum dated December 18, 1986 from Paul Imhoff to Paul McDermott, Director, Department of Engineering and Construction, it is advised that the Creehan site has been completed. 32. Minutes of the Pittsburgh Water and Sewer Authority indicate the following regarding contracts awarded to Spinello Construction Company by that Authority. a. February 19, 1985 - Contracts were awarded to Spinello Construction for Grant Street, Phase I, $163,400.00 (alternate), change order for additional 36" valve Spinello Construction, $45,000.00. The contracts were unanimously approved and you were present. b. May 10, 1985 - Contracts were awarded to Spinello Construction for replacement of valves, $477,000.00 and to clean and cement line 50" steel main at Negley Avenue and 30" steel main at Ross pumping station, $397,675.00. The contracts were unanimously adopted and you were present. c. June 14, 1985 - Changes to prior contracts were approved regarding Grant Street Phase I in amounts of $12,750.00 and $3,874.00. You moved for the approval of said change order and the vote was unanimous. d. September 13, 1985 - change orders were presented regarding the clean and cement line projects in the amount of $18,000.00. The change order was approved unanimously and you were present. e. November 8, 1985 - change order was presented regarding the valve replacement project in the amount of $3,200.00. You moved for approval of this change order and such was unanimously approved. Mr. James E. Creehan Page 13 f. January 10, 1986 - change order were presented for the cement line 30" Ross fuel pumping station line and 50" South Negley line in the amount of $38,759.70 and Liberty Avenue waterline in the amount of $6,331.38. The changes were unanimously approved and you were present. g. February 18, 1986 - change orders were presented regarding the Smithfield Waterline project in the amounts of $268,480.00 and $350.50 and regarding the valve replacement protect in amounts of $7,876.56 and $89,500.00. The change order were unanimously approved and you were present. h. April 11, 1986 - contracts were awarded to Spinello regarding the Ohio River Crossing in the amount of $2,375,000.00, and to clean and cement line - Smallman and Butler Streets waterline in the amount of $2,060,425.00. You moved for the approval of these contracts and the vote was unanimous. i. May 9, 1986 - change orders were presented regarding the Second Avenue project in the amount of $10,872.00 and $14,484.00 and the valve replacement project in amounts of $21,547.36, and $90,882.45. You seconded the motion for approval and the vote was unanimous. June 13, 1986 - change orders were presented regarding the valve replacement Phase I in amounts of $5,000.00 and $102,000.00 and the Second Avenue project in the amount of $14,000.00. You moved for approval of the change order and the vote was unanimous. k. July 11, 1986 - a contract was awarded to Spinello regarding the water system annual contract and emergency line repair in the amount of $7,646,988.35. The vote to award this contract was unanimous and you were present. At the same meeting, change order were presented regarding the Second Avenue project in amounts of $13,854.00 and $42,940.00 and the valve replacement project in the amount of $27,900.00. You seconded the motion and the vote was unanimous. 1. August 8, 1986 - change orders were presented regarding the Ohio River Crossing project in the amount of $8,008.73. You moved the approval of the order and the vote was unanimous. At this meeting, the board also approved 10 work orders and emergency work orders regarding the annual contact and Mr. James E. Creehan Page 14 m. September 12, 1986 - a contract was awarded to Spinello Construction in an amount of $4,832.675.00 to clean and reline waterlines at Larimer Avenue, Penn Avenue, Greenwood Street, Washington Boulevard, -and North Negley Avenue. (You were not present at this meeting). Two change orders in the amounts of $15,661.19 and $21,450.00 on the Second Avenue project were also approved as was a change order regarding the Sarah Street project in the amount of $148.000.00. n. October 10, 1986 - Five change orders regarding various Spinello projects were approved in amounts of $4,060.00, $20,200.00, - ($148,901.00), $275,997.00 and $74,543.47. You abstained from the vote advising the board that until you finally resolved your personal dealings with Spinello Construction, you would abstain. You noted that Spinello Construction has not yet completely stabilized the fill on your property on Arlington Avenue. o. November 14, 1986 - six change orders were presented and approved regarding projects in which Spinello was involved. You abstained. December 12, 1986 - two change order were presented and approved regarding Spinello projects. You abstained. January 9, 1987 - two Change orders were presented and approved regarding projects in which Spinello was involved. The vote was unanimous and you were present. A work order in the amount of $228,397.50 under the annual water system contract was also approved. You moved this work order and the vote was unanimous. r. February 20, 1987 - Five change orders were presented and approved regarding projects in which Spinello was involved. You were present and the vote was unanimous. s. March 17, 1987 - Four change orders were presented and approved regarding projects in which Spinello was involved. You seconded the motion for approval and the vote was unanimous. P• q. emergency line repair in the amount of $4,077,107.00. The vote was unanimous. A work order in the amount of $1,582,610.00 under the annual water system contract was also approved. You moved the approval thereof and the vote was unanimous. Mr. James E. Creehan Page 15 33. By lease agreement dated May 30, 1986, Spinello Construction Company leased a parcel of ground from ALCOSAN located at Tracey Street, which property would be used in connection with the Ohio River Crossing project that Spinello was completing for the Pittsburgh Sewer and Water Authority. (a) The rent for said property was $200 per month. (b) The lease commenced on June 1, 1986, on a month to month basis. (c) The lease was terminated on October 16, 1986. 34. Charles DiNardo, Vice - President of Spinello Construction Company provided the following information: a. He was working on a sewer project in the vicinity of Arlington Avenue and needed a location to dump fill. b. He saw the lots and made inquiries and learned that you were the owner. c. He normally would pay to dump fill. d. He did not know you at that time. e. He offered to pay you to dump the fill but you refused any payment. f. You requested that the dumping take place in a certain area of your property. The City Building Inspector reviewed the site and requested that certain steps be taken to avoid a landslide. g. h. He hauled in more dirt, benched the dirt into steps, seeded the area and covered it with hay. i. You were billed $3,200.00 for the work and paid in full on January 27, 1987. j There was no connection between Spinello's bidding on Alcosan projects and his work for you. 35. Documents received from Spinello Construction Company indicate as follows. Mr. James E. Creehan Page 16 a. By letter dated December 30, 1986, you forwarded a check in the amount of $3,200 for costs associated with Arlington Avenue site. b. Payment was tendered via check No. 626, dated December 30, 1986 payable to Spinello Construction Company from the account of James E. Creehan, Squibank. c. Account statement for Spinello Construction Company at the Midlantic National Bank indicates a deposit of $3,272.79 on January 23, 1987 which included your payment. d. You had been billed for said services on your Arlington Avenue property on September 2, 1986. 36. You provided the following information in relation to this situation. a. Shortly after purchasing the Arlington Avenue properties you discovered foundation voids, i.e., unfilled foundations remaining after demolition of the structure supported thereby, and which are required by ordinance to be filled. b. You made application for a fill permit and were informed by the City of Pittsburgh that if the proposed filling operation is for foundation voids involving less than 50 cubic yards of fill material, no permit was necessar°r. c. You cut a gate in the wrought iron fence bordering Arlington Avenue and permitted a small amount of fill material to be dumped in the foundation voids. d. After the gate was cut and some fill material placed on the site, you were contacted by Charles DiNardo of Spinello who inquired about permission to dump a small amount of dirt from a valve replacement job he was doing in the area. Mr. DiNardo offered to pay you for the permission to dump the dirt, which offer you refused because of your position with the Pittsburgh Water & Sewer Authority. e. Sometime after you gave Spinello permission to dump dirt in the foundation voids, the gate securing the Arlington Avenue properties was broken by a number of persons who trespassed upon the properties to dump. This unlawful dumping was not limited to foundation voids, nor to your properties. Some of the dumping occurred on adjacent property of the City of Pittsburgh, and at least one of the trespassing dumpers was Equitable Gas Co. Mr. James E. Creehan Page 17 f. You did not rely upon Mr. DiNardo to resolve matters with the City of Pittsburgh, but met with City officials on a number of occasions. Spinello Construction Company admitted responsibility for the unstable fill conditions and agreed to correct the problem. g• You would not accept services from Spinello Construction Company which exceeded filling foundation voids without payment therefor, and entered into an agreement with Spinello to pay Spinello $3,200 to stabilize the filled areas. h. From the time the contractual relationship with Spinello Construction Company commenced until the work was complete you abstained from voting as a member of the Pittsburgh Water and Sewer Authority on any contract involving Spinello. i• Spinello never bid on any ALCOSAN contracts. B. Discussion: As noted above, you as Executive Director of ALCOSAN are a public employee subject to the provisions of the State Ethics Act. Section 3(b) of the Ethics Act provides: Section 3. Restricted activities. (b) No person shall offer or give to a public official or public employee or candidate for public office or a member of his immediate family or a business with which he is associated, and no public official or public employee or candidate for public office shall solicit or accept, anything of value, including a gift, loan, political contribution, reward, or promise of future employment based on any understanding that the vote, official action, or judgment of the public official or public employee or candidate for public office would be influenced thereby. 65 P.S. 403(b). Section 3(b) of the Ethics Act basically provides that no public employee may receive anything of value based on the understanding that his official conduct will be influenced thereby. 65 P.S. S403(b). Mr. James E. Creehan Page 18 In this situation, Spinello Construction Company was dumping fill material on your Arlington Avenue properties until a citizen's group notified the Chief Building Inspector for the City of Pittsburgh concerning the matter. Since you did not have a landfill permit, you were notified to cease dumping operations, at that time Spinello Construction Company contacted the building inspector and advised that the permit would be obtained and that all existing problems would be resolved. During the period of this activity, which began at a point in time not later than November of 1985 and continued through December of 1986, Spinello Construction Company had several contracts and change orders before the Pittsburgh Water and Sewer Authority of which you were a Director. The records reflect that for the period from February of 1985 through August of 1986 and for the period January of 1987 through March of 1987, several contracts or change orders between the authority and Spinello Construction Company were approved. It is further noted that you were either present when these contracts or change orders were unanimously approved or that you made motions for their approval. From the period of October of 1986 through December of 1986, you abstained in matters concerning Spinello Construction Company because of the fill operation that was being done on your Arlington Avenue properties. Charles DiNardo, who is Vice President of Spinello Construction Company, advised that the fill operation on your Arlington properties arose because he was working on a project in the vicinity and needed a location to dump fill. He then stated that he made inquiries, learned that you were the owner and offered to pay you to dump the fill which offer you refused. Mr. DiNardo then stated that you requested that the dumping be done in a certain location. After the building inspector advised that certain steps had to be taken, Spinello Construction Company complied and completed the fill for which the company was paid $3,200 by you. Payment for the work that was done by Spinello Construction Company on your property is verified by a check written on your account in Equibank. Under these facts and circumstances, we believe that the evidence elicited fails to indicate that you violated Section 3(b) of the State Ethics Act. While we do not find a violation of the State Ethics Act, we do feel compelled to note that the underlying purpose of the law is to insure the public that the holders of public employment do not have private financial interests or transactions that conflict with the public trust. In the instant situation, you should have been more sensitive to the potential public perceptions of engaging in private transactions with an individual or entity that is also transacting business with your governmental body. In the future, you should remain more aware of such concerns. Mr. James E. Creehan Page 19 III. Allegation: That you, Executive Director of the Allegheny County Sanitary Authority violated Section 5(b)(3) and (4) of the Ethics Act which require that Statements of Financial Interests shall include, for the prior calendar year, with regard to the person required to file the statement and the member of his immediate family any direct or indirect interest in a real estate which was sold or leased to the Commonwealth, any of its agencies or political subdivisions purchased or leased from the Commonwealth, any of its agencies or political subdivisions or which was the subject of any condemnation proceedings by the Commonwealth, and of its agencies or political subdivisions, in that you failed to report, on Statements of Financial interests, your real estate interests in property located on Arlington Avenue in the City of Pittsburgh and an unused school building in Hopewell, Beaver County, Pennsylvania. A. Findings: 37. Findings 1 through 28 are incorporated herein by reference. 38. Records on file with the Pennsylvania Department of State, Bureau of Corporations, indicates that an application to conduct business under an assumed or fictitious name was filed on April 20, 1981. a. The names of the individuals owning or interested in the business were James E. Creehan, 1649 Forestview Drive, Bethel Pennsylvania, and Ronald C. Schmeiser, 5612 Aylesboro Avenue, Pittsburgh, Pennsylvania. b. The business name was Bay Tree Associates. c. The nature of the business was real estate. d. The application was signed by James E. Creehan. 39. Records of the Hopewell Area School District contained the following information regarding the sale of the Johnson Street School. a. 1/79 - An item in the Hopewell Area School District Bulletin indicates that the Johnson Street School will close at the end of the present school term. b. 12/4/79 - Application from the school district to re -zone the property at the Johnson Street School to better enable the school district to sell the property. Interested buyers at that time were the Wildwood Chapel, who offered $100,000., J & L Steel, Pappans Restaurant. Mr. James E. Creehan Page 20 c. 12/9/79 - The Planning Commission denied changes to the R -3 area where the school is located. d. 12/14/79 - The Beaver County Planning Commission also denied the zoning change request. Robert F. Amalia, 712 -15th Street, Beaver Falls, PA, (412 -843- 7330), appraised the fair market value of the school at. Present allowable uses - $100,000. If Business & Professional uses - $250,000. If Multi- family uses - $275,000. e. 5/15/80 - Memorandum - Eugene Morris, Esq., to School Board members: Charles Scalise, 218 E. 11th Street, Erie, offered $10,000 for an 18- months option for conversion to apartments for the elderly. f. 5/15/80 - Richard Greco, Housing Group, Inc., 846 Beaver Grade Road, Coroapolis, wanted to purchase the property as an investment. g. 6/18/80 - Eugene Morris, puts out bid announcement for the sale of the school property. Bids were advertised in the area paper. 7/15/80 - Ronald Schmeiser and James Creehan responded with a bid of $222,222. for one bedroom high - income rental units and remainder of property in residential units or condominiums - thus needing a zoning change. That was the only bid received. h. 7/24/80 - The bid was accepted via Resolution No. 24 -1980, by the School Board. i. 7/30/80 - Ronald Schmeiser and James Creehan, 410 Manor Building, 564 Forbes Avenue, Pittsburgh, responded that they were engaging Dominick Palombo Associates as site planners and Architect John Kauper, to prepare preliminary plans. j. 7/15/80 - Letter, Schmeiser & Creehan to Eugene Morris, Esq. k. 7/30/80 - Letter, Schmeiser & Creehan to Eugene Morris, Esq. 1. 8/5/80 - Suit was filed to block the sale of the property for the uses intended by Creehan and Schmeiser. The suit claimed that the bid was received after the 8:15 PM deadline. Mr. James E. Creehan Page 21 m. 10/17/80 - Patrick McFall, Esq., same address as Creehan and Schmeiser, filed for a zoning amendment. n. 10/28/80 - By Resolution No. 33 -1980, The School Board approved the sale of property to James Creehan and Ronald Schmeiser for $222,222. o. 12/4/80 - The Township Planning Commission denied the request for a zoning change. p. 12/5/80 - Beaver County Planning Commission denied the zoning change request. 2/2/81 - The closing date for the purchase of the property was extended. q. r. 3/27/81 - The Beaver County Planning Commission again rules against the zoning change request. s. 4/5/- Neighborhood meeting regarding the sale of the property. t. 4/8/81 - The planning Commission recommends the Creehan plan to the Supervisor. 40. On April 27, 1981, the Board of Directors of the Hopewell Area School District, Beaver County, Pennsylvania, passed Resolution 4 -1981 providing, in part, as follows: a. The request of James E. Creehan and Ronald C. Schmeiser co- partners, trading as Bay Tree Associates, to close the sale of the Johnson Street Elementary School property was approved. b. The above partie were to proceed in good faith to obtain previously agree to zoning changes. c. That the Hopewell- Independence- Raccoon Joint School Building Authority are requested to convey said property to the aforementioned parties. d. Total sale price to be $222,222. e. The building to be leased by the purchase to Duquesne Light Company as a training facility during the period that the zoning requests are made. 41. You provided the following information in relation to this situation: Mr. James E. Creehan Page 22 a. The Hopewell school property was owned by Bay Tree Associates and not by you. b. You were not trying to hide your interest in this property. c. Failure to report your interest was deminimis. 42. A Statement of Financial Interests on file at Alcosan for you dated February 2, 1983 regarding your financial interests for calendar year 1982 indicates as follows: a. Real estate interests - none. b. Creditor - Equibank, FED Land Bank. c. Income - Alcosan; John Costanza, Larry Williams, Bay Tree Associates. d. Gifts - none. e. Office in Business - Bay Tree Associates - partner. f. Financial Interest in legal entity - none. 43. A Statement of Financial Interests on file at Alcosan for you dated March 30, 1984 regarding your financial interests for calendar year 1983 indicates as follows: a. Same as no. 42(a) above. b. Same as no. 42(b) above with Pittsburgh National added. c. Same as no. 42(c) above with Iron & Glass Bank and Equibank added. d. All other items were the same as the prior year. 44. A Statement of Financial Interests on file at Alcosan for you dated April 19, 1985 regarding your financial interests for calendar year 1984 indicates as follows: a. Same as prior year. b. Same as no. 43(b) above. c. Same as no. 42(c) above with Primary Products added. d. Gifts and Honoraria - none. Mr. James E. Creehan Page 23 e. Office or Directorship in as business - Primary Products. f. Financial interest in legal entity - "See source of income." 45. A Statement of Financial Interests on file at Alcosan for you dated April 4, 1986 regarding calendar year 1985 indicates as follows: a. Same as prior years. b. Creditor - Equibank; PNB, Iron & Glass Bank, FED Land Bank. c. Sources of Income - Alcosan: John Costansa, Larry Williams, Bay Tree Associates, Primary Products. d. Office or Directorship - Bay Tree Associates, Primary Products. 46. A Statement of Financial Interests on file at Alcosan for you dated April 30, 1987 regarding your financial interests for calendar year 1986 indicates as follows: a. Real Estate interests - lots in City of Pittsburgh and the property in Hopewell Township owned by Bay Tree Associates is listed. b. Creditors - Equibank (3 loans), Pittsburgh National Bank, Brentwood Federal Savings and Loan Association., Federal Land Bank of Baltimore, Iron & Glass Bank,' Slovak Savings & Loan Association. c. Bay Tree Associates and Primary Products are also listed as entities in which you hold office or have a business interest. 47. By addendum dated September 15, 1986 from you, your Statements of Financial Interests as identified in Findings No. 42 to 46 above were amended. a. The addendum notes that Bay Tree Associates held an interest in property purchased from the Hopewell, Raccoon, Independence School District. b. The addendum also notes your interest in the Arlington Avenue lots which had been acquired from the City of Pittsburgh. Mr. James E. Creehan Page 24 c. Your interest in property on Woods Run Avenue and a mortgage held by Slovak Savings & Loan Association are noted. B. Discussion: As noted above, you are a "public employee" subject to the provisions of the State Ethics Act. Section 5(b)(3) and (4) of the Ethics Act provides: Section 5. Statement of financial interests. (b) The statement shall include the following information for the prior calendar year with regard to the person required to file the statement and the members of his immediate family: (3) Any direct or indirect interest in any real estate which was sold or leased to the Commonwealth, any of its agencies or political subdivisions; purchased or leased from the Commonwealth, any of its agencies or political subdivisions; or which was the subject of any condemnation proceedings by the Commonwealth, any of its agencies or political subdivisions. Factually you purchased five Arlington Avenue properties from the City of Pittsburgh. Further, you and your co- partner Ronald C. Schmeiser in Bay Tree Associates, purchased the Johnson Street Elementary School property from the school district, which is a political subdivision of the Commonwealth of Pennsylvania. The sale of this property was consummated in April of 1981, after several related matters such as zoning problems were resolved. Turning to an examination of your Statement of Financial Interests for the calendar years 1982 forward, it is noted that neither the Hopewell School property nor the Arlington Avenue properties were listed on your 1982 through 1985 calendar year Statements of Financial Interests. The foregoing interests were listed on your 1986 calendar year Statement of Financial Interests. While you have filed amended Statements of Financial Interests for calendar years 1982 through 1985 which included these interests, this Commission finds that you violated Section 5(b)(3) and (4) of the Ethics Act. Mr. James E. Creehan Page 25 IV. Allegation: That you, Executive Director of the Allegheny County Sanitary Authority violated Section 5(b)(4) of the Ethics Act which requires disclosure of the name and address of each creditor to whom is owed in excess of $5,000 and the interest rate thereon and 5.5(a)(2) and 5.6 of State Ethics Commission Regulations which requires disclosure of any real estate purchased or leased from the Commonwealth or any of its agencies or political subdivisions, every creditor to whom the person, his spouse, or minor dependent children owed an excess of $5,000, when you failed to report, on Statements of Financial Interests, an $80,000 loan from Slovak Savings Association for the purchase of an industrial building at 1415 Woods Run Avenue, Pittsburgh, Pennsylvania and a $10,000 loan obtained from Dominic Palombo, a landscape architect to whom you have awarded ALCOSAN contracts. A. Findings: 48.- Findings No. 1 through 47 are incorporated herein by reference. 49. Dominick Palombo, a landscape architect is president and owner of D. Palombo Associates. a. This firm operates as landscape architects, site planners and golf course architects. 50. Documents of ALCOSAN regarding services performed by D. Palombo provide as follows: a. By letter dated April 23, 1980 for Dominic Palombo, Jr. to you, D. Palombo submitted a bid to perform professional services regarding a site analysis and master plan study for the Mazarro property. (i) That bid was for a total not to exceed $4,500. b. Minutes of the ALCOSAN meeting of May 14, 1980, reflect that the Board considered a proposal from D. Palombo Associates for Professional Planning Services, site analysis and master plan study for the Mazzaro property. After discussion and upon motion of Mr. Bulls, seconded by Mr. Stanek, the board approved the proposal. You were present at the meeting. c. By letter dated May 16, 1980, you informed Mr. Palombo of the above action of the board. 51. ALCOSAN representatives indicated that because the work of D. Palombo Associates related to professional services, bids were not required. Mr. James E. Creehan Page 26 52. Records on file with ALCOSAN contained invoices from D. Palombo Associates, as follows: Date Amount Comments June 1, 1979 $112.60 May 2, 1979 $259.40 March 3, 1980 $840.00 (Designed layout and amounts of plants (flowers)necessary for garden this summer). April 1, 1980 $1,575.00 July 1, 1980 $1,855.00 Professional services for Mazzaroproperty - Findlay Township. September 26, 1980 $1,505.00 Professional Services. Regarding Robinson Township site. October 21, 1980 $1,120.00 Regarding Robinson Township site. December 1, 1980 $852.00 Dominic Palombo worked on the site study of consolidation coal property. December 30, 1980 $945.00 Regarding consolidation site - Mr. Dominic Palombo made the changes and revisions to the site plan as per the instructions of Mr. James Creehan. May 1, 1981 $1,470.00 Regarding consolidation washer site and Bologna Coal site. Preparation of preliminary master planting plan for consolidation washer site and restudy and redesign of the Bologna Coal site. June 1, 1981 $910.00 Regarding Washer site, Bologna Coal site and landscape architectural services for new facilities. August 6, 1981 $1,680.00 Regarding Bologna site. December 8, 1981 $2,450.00 Regarding Bologna site. December 8, 1981 $1,610.00 Regarding Slope study. July 18, 1983 $385.00 Regarding Arden Landfill. Mr. James E. Creehan Page 27 July 18, 1983 July 18, 1983 September 19, 1983 January 18, 1985 $245.00 Regarding Aloe site. $595.00 Regarding Brochure. $1,645.00 Arden Landfill. $1,960.00 Regarding employee parking lot, planting plan and specifications. $735.00 Regarding employee parking lot, planting plan and specifications. $735.00 Employee parking lot area. $23,484 All of the above cited invoices were addressed to the attention of James Creehan and were marked "approved for payment." 53. On February 16, 1984, you and Dominic Palombo purchased a condominium Unit No. 201 at 1700 Grandview Avenue, Pittsburgh, Pennsylvania. a. The purchase price for this $125.000.00. b. The total amount due from the buyer, including all settlement charges was $135,009.09. May 13, 1985 October 1, 1985 Total: c. You and Mr. Palombo made a down payment on this property in the amount of $33,670.53. d. Your portion of this down payment, $16,835.27 was tendered to Jones, Gregg, Creehan and Gerace (settlement agents) via check No. 865, account No. 311 2841 in the name of James E. Creehan at the Iron and Glass Bank. e. You and Mr. Palombo purchased this property as tenants -in- common. 54. On December 30, 1986, you and your wife, Ann H. Creehan, purchased the Grandview Avenue property from Dominic Palombo. a. The sale price of this $66,000. b. This represented Mr. Palombo's undivided 1/2 interest in the property. Mr. James E. Creehan Page 28 c. The settlement sheet indicated a new mortgage in the amount of $70,000 and hand money of $15,000. d. Balance due from seller $41,547. e. The settlement sheet also indicated $52,310.16 to Meritor Mortgage Corporation, representing 1/2 balance of mortgage and interest. f. Total due seller $2,205.32. 55. Records provided by you regarding the above transaction indicate the following payments to Dominic Palombo: a. Check No. 1150, account No. 3112841 James E. Creehan, date January 26, 1986, Iron and Glass Bank in the amount of $10,285.26. b. Check No. 167, Account No. 373661918 Equibank James E. Creehan, dated January 28, 1985 in the amount of $5,000. c. Check No. 5357 from the Jones, Gregg Creehan and Gerace settlement account dated December 30, 1986 in the amount of $2,205.32. 56. Records provided by the accountant for Mr. Palombo indicate as follows regarding your payments to Mr. Palombo: Date Amount January 29, 1985 $5,000 April 19, 1985 $4,000 January 28, 1986 $10,285.26 Total: $19,285.00 Due: $1,000 Total: $20,285.26 57. Interest due by Creehan was: a. $11,285,26 at 10 %. Total $1,128.93 for January 29, 1985 through January 26, 1986. b. $1,000 at 10 %.Total $76.39. Mr. James E. Creehan Page 29 c. Due as of January 5, 1987 - $2,205.32. 58. You provided the following information relating to this situation. a. You and Mr. Palombo purchased the Grandview Avenue property on February 16, 1984 as tenants -in- common. b. This was purchased as an investment property. c. You were to reside in this property until you completed the Arlington Avenue properties and then Mr. Palombo was to purchase the unit from you. d. The Arlington Avenue properties could not be purchased and you decided to stay in the Grandview Avenue Condominium unit. e. You re- financed the property and bought out Mr. Palombo paying 10% interest for you for the year and eleven months that the jointly owned. f. The services of Palombo were requested and assigned, and performance monitored by the ALCOSAN Chief Engineer. Your approval of payment of invoices is purely ministerial and required of all vendors and surveyors of services to ALCOSAN. 59. Dominick Palombo provided the following information in relation to this situation: a. He has known you for 25 years. b. You and he purchased the Grandview Avenue property as an investment. c. You moved into the unit and paid rent thereon until you could build on lots located on Arlington Avenue. d. You later purchased his share of the unit. e. He never loaned any funds to you. f. His son, David Palombo was hired by ALCOSAN as a bio- chemist. g Mr. Palombo has informed you that his son was in that field. Mr. James E. Creehan Page 30 h. You told Mr. Palombo to have your son talk to the ALCOSAN chief engineer. 60. Minutes of the April 9, 1986 ALCOSAN meeting, indicate that the board ratified the action of the Executive Director in authorizing the employment of David L. Palombo as assistant to the Chief of Industrial Waste at a salary of $21,000 per year. a. David Palombo was hired by ALCOSAN as a bio- chemist, for which technical position David Palombo was qualified. Palombo possesses a B.S. degree in Bio- Chemistry from Virginia Tech University. 61. Records of Slovak Savings and Loan Association indicate as follows regarding the property on Woods Run Avenue: a. Residential loan application dated January 17, 1985 regarding the property at 1415 Woods Run Avenue identifies William Doerr as the borrower. (i) Amount of Loan - $80,000. (ii) Property Value - $110,000. b. Residential loan application identifies James E. Creehan, 1700 Grandview Avenue as co- borrower on the above loan. (i) The application indicates that title will be held by William Doerr and James E. Creehan. c. Promissory note dated April 8, 1985 in the amount of $80,000 at an interest rate of 14% payable by May 1, 1990. (i) The note was executed by James E. Creehan, Ann H. Creehan and William Doerr. d. Mortgage dated April 8, 1985 between Slovak Savings and Loan Association and James E. Creehan, Ann H. Creehan and William Doerr in the amount of $80,000. (i) The note was secured by property at 1415 Woods Run Avenue. e. By lease dated January 1, 1985 through December 31, 1989, William F. Doerr rented 1415 Woods Run Road to Mary Woods, Rivell Industrial Contracting for $600 monthly. (Warehouse and storage area and parking lot). Mr. James E. Creehan Page 31 f. By lease dated January 1, 1985, Equibank through December 31, 1989, William F. Doerr rented 1415 Woods Run Road to Ron Faber B &C Equipment Rental and Supply Company. For $350 monthly. (Storeroom and loading dock). g. By letter dated April 30, 1987, you advise Slovak Savings and Loan that you had agreed to be a "DeFacto Guarantor" of the loan because William Doerr was unable to obtain the loan on his own. You requested to have your name removed from the mortgage because Mr. Doerr proved his creditworthiness. h. Insurance on the subject originally in the name of Primary Products, Incorporated. i. As of March 2, 1988, the loan balance was $78,249.92. 62. The property on Woods Run Road was originally the subject of a land sale contract dated January 25, 1984. a. Primary Products, Incorporated agreed to purchase the property from Lois Y. Geissler. b. The sale price was $83,500 with $10,000 down, $500 per month for 12 months, unpaid balance of principal due on January 1, 1985. c. The contract, as well as the promissory note were signed by you and Ronald C. Schmeiser. 63. Records of ALCOSAN reflect the following regarding the transactions with the Slovak Savings and Loan Associates. - a. Minutes of the ALCOSAN Board meeting of April 10, 1985 indicates that the board considered the request of the Slovak Savings and Loan Association that they be considered as a depository for authority funds. Following discussion and upon motion of Mr. Stanek, second by Mr. O'Malley, the Board approved the request and authorized the deficit of $100,000 you were present at this meeting. b. By memo of April 11, 1985, the Secretary to the board advised the comptroller of the board's action. c. On April 12, 1985, ALCOSAN check No. 112 was issued to the Slovak Savings and Loan Association in the amount of $100,000. d. By letter dated April 15, 1985 to the Secretary of Slovak the ALCOSAN Controller forwarded check No. 112 with Mr. James E. Creehan Page 32 instructions that said funds were to be invested in a one year Certificate of Deposit. e. Minutes of a meeting of the ALCOSAN Board on April 8, 1987 indicate that the Board approved the deposit of $100,000 in a non - renewable certificate of deposit with Siovak Savings and Loan Association. Mr. Creehan made it known that he was grantor of a loan at Slovak, however, the solicitor advised the Board that there was no violation in making deposits in financial institutions where board members or the staff have loans. 64. You provided the following information in connection with the Woods Run Property and mortgage loan for Slovak Savings and Loan Association. a. You personal Federal income tax returns for the years during which you were a co -owner of the Woods Run property showing that you did not claim a deduction for depreciation of this investment property, that you did not claim a deduction for any expenses in connection with the operation of the property, that you did not claim any income from the rental of the property, and that you did not claim a deduction for any interest paid to Slovak Savings and Loan Association. b. You did not receive any income from the Woods Run Property, and that you became a co- borrower with respect to the mortgage loan from Siovak Savings and Loan Association because Mr. Doerr was not sufficiently creditworthy to obtain such a loan himself, that Slovak Savings and Loan Association required you to be a co- borrower, and that the sale of the important to you because Primary Products, Inc. was required to close the purchase of the property under its land sale contract but had no use for the property but had accumulated equity in the property which could only be realized if the property were sold to another buyer. 65. Your Statements of Financial Interests are outlined in Findings 42 to 47. B. Discussion: Once again, you as Executive Director of ALCOSAN, are a public employee subject to the provisions of the Ethics Act. Ms. Connie Smetanka Page 6 Because Koslow never had a lawful appointment as an authority member, he was not entitled to collect the monthly salary allocated by law for such members. Hence, by receiving financial compensation for a public office which he did not lawfully hold, Koslow violated section 403(a) of the State Ethics Act, in that he used his township office to obtain compensation for which he had no lawful entitlement." Koslow v. State Ethics Commission, at page 4. The gain which you received for a member of your immediate family which was compensation other than as provided for by law amounts to $2,800.00. In Yocabet v. State Ethics Commission, Pa. Commw. , 531 A.2d 536 1987, Commonwealth Court held that a township supervisor violated Section 3(a) of the Ethics Act when he received a salary for the position of secretary /treasurer which has not been set by the auditors. The court, affirming the Order of the Ethics Commission which required a restitution of the financial gain, noted on page 536 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." (Emphasis supplied.) See also McCutcheon v. State Ethics Commission, 77 Pa. Cmwlth. 529 466 A.2d 283 (1983). Accordingly, this Commission directs you to make restitution by mailing a check to this Commission within thirty (30) days of the date of this order payable to the Ambridge Water Authority in the amount of $2,800.00. Failure to remit the foregoing amount will result in the referral of this matter to the appropriate law enforcement authorities for civil or criminal proceedings. C. Conclusion and Order: 1. As the President of Ambridge Borough Council, you are a public official subject to the provisions of the State Ethics Act. 2. You violated Section 3(a) of the Ethics Act when you voted in favor of appointing your husband John Smetanka to a salaried position with the Ambridge Water Authority. 3. You are hereby directed within thirty (30) days to remit a check in the amount of $2,800.00 to this Commission payable to Ambridge Water Authority which equals the Mr. James E. Creehan Page 34 (c) No dollar amounts are required. 51 Pa. Code 55.6(c). As to the matter of the property located at 1415 Woods Run Road, you were a co- borrower for a loan on that property amounting to $80,000 from the Slovak Savings and Loan Association. The foregoing loan application was made in January of 1985 and you also executed a promissory note in April of 1985 in the amount of $80,000 in connection with a mortgage loan made by the Slovak Savings and Loan Association in that amount. Although Slovak Savings and Loan Association was thus your creditor in the 1985 calendar year, your Statement of Financial Interests for that period did not list Slovak Savings and Loan Association as a creditor to which you owed an amount in excess of $5,000. You did file an amended Statement of Financial Interests which now lists Slovak Savings and Loan Association as a creditor. While you have filed an amended Statement of Financial Interests for calendar year 1985, this Commission finds that you violated Section 5(b)(4) of the Ethics Act in that you failed to include Slovak Savings and Loan Association as a creditor for your calendar year 1985 Statement of Financial Interests. As to the matter of whether Dominick Palombo should also be listed as a creditor whom you owed $10,000, it is noted that you and Mr. Palombo originally purchased property at 1700 Grandview Avenue in Pittsburgh as tenants in common, 'at which property you established your personal residence while you constructed a new home on the Arlington Avenue property referred to above. When the Arlington Avenue project became delayed or unfeasible, you agreed to buy Mr. Palombo's undivided one -half interest in that property in order to maintain the property as your permanent residence. Pursuant thereto, you made several payments to Mr. Palombo during which time Mr. Palombo retained title to his undivided on -half interest in the condominium unit, until you then obtained a mortgage loan so that his interest could be purchased completely, at which time he would conveyed title to his interest in the property to you and your wife. Although Mr. Palombo was your creditor and the amount which you owned him exceeded $5,000, this Commission finds that 1700 Grandview Avenue was by then your principal residence, and that the device by which Mr. Palombo held title to his undivided on -half interest until he was paid in full by you for the purchase thereof has been recognized by Pennsylvania courts as having the characteristics of a "residential mortgage." Anderson Contracting Co. v. Daugherty, 274 Pa. Super. 13, 417 A.2d 1227 (1978). Accordingly, both Section 5(b) of the Ethics Act, and the Regulations of this Commission, exempt you from reporting any indebtedness to Mr. Palombo under the circumstances of the aforesaid transaction. Mr. James E. Creehan Page 35 In relation to the situation with Mr. Palombo, while we do not find a violation of the State Ethics Act, we do feel compelled to once again note that the underlying purpose of the law is to insure the public that the holders of public employment do not have private financial interests or transactions that should have been more sensitive to the potential public perceptions of engaging in private transactions with an individual or entity that is also transacting business with your governmental body. In the future, you should remain more aware of such concerns. C. Conclusion and Order: 1. As Executive Director of ALCOSAN, you are a public employee subject to the provisions of the Ethics Act. 2. The evidence elicited does not indicate that you violated Section 3(a) of the Ethics Act regarding your acquisition of the Arlington Avenue properties from the City of Pittsburgh. 3. The evidence elicited does not indicate that you violated Section 3(b) of the Ethics Act in connection with the award of contracts to Spinello Construction Company. 4. You violated Section 5(b)(3) and (4) of the Ethics Act by your failure to include on your Statement of Financial Interests for your Real Estate interests in the Arlington Avenue properties which you purchased from the City of Pittsburgh, and as to the school building which you and your partner, trading as Bay Tree Associates, purchased from the Hopewell Area School District. In that you have now filed amended Statements of Financial Interests, we will take no further action in relation to this situation. 5. You violated Section 5(b)(4) of the Ethics Act by your failure to list Slovak Savings and Loan Association as a creditor on your 1985 calendar year Statement of Financial Interests. In that you have now filed amended Statements of Financial Interests, we will take no further action in relation to this situation. 6. The evidence elicited does not indicate that you violated Section 5(b)(4) of the Ethics Act in connection with your purchase of the other undivided one -half interest of your residence at Grandview Avenue, even though Dominic Palombo Mr. James E. Creehan Page 36 was your creditor and the amount exceeded $5,000, inasmuch as the Grandview Avenue property was your principal residence and Dominic Palombo retained his one -half interest in the property for the time during which you made payments to him, which title retention device as a installment purchase transaction has been .held by Pennsylvania Courts to fall within the definition of a "mortgage," and which transaction is thereby not required to be included on your Statement of Financial Interests. 7. As previously noted, you should have been more sensitive to public perceptions that result when a public employee engages in private business transactions with an entity or individual that is doing business with his governmental body. 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 th Commission, Helena G. Hughes Chair