HomeMy WebLinkAbout663 ShubeckMr. Edward Shubeck
c/o William Z. Scott, Esquire
42 W. Patterson Street
Lansford, Pennsylvania
Re: 87 -181 -C
Dear Mr. Shubeck:
STATE ETHICS COMMISSION
308 FINANCE BUILDING
HARRISBURG, PENNSYLVANIA 17120
ORDER OF THE COMMISSION
ORDER W. 663
DATE DECIDED: Al,g„t 1R, 1988
DATE MAILED: SPp1 -PmhPr 1 1, 1988
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, a member of the Board of Directors of the
Panther Valley School District, Lansford, Carbon County, violated the
following provisions of the State Ethics Act when you received
commissions in 1984 and 1986 from the sale of insurance policies to
the school district:
Section 3 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. §403(a).
(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,
Shnbeck, Edward
Page 2
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 employee or candidate for public office
would be influenced thereby. 65 P.S. S403(b).
(c) No public official or public employee or a
member of his immediate family or any business in
- which the person or a member of the person's
immediate family is a director, officer, owner or
holder of stock exceeding 5% of the equity at fair
market value of the business shall enter into any
contract valued at $500 or more with a
governmental body unless the contract has been
awarded through an open and public process,
including prior public notice and subsequent
public disclosure of all proposals considered acid
contracts awarded. Any contract made in violation
of this subsection shall be voidable by a court of
competent jurisdiction if the suit is commenced
within 90 days of making of the contract. 65 P.S.
§403(c).
A. Findings:
1. You served as an elected member of the Board of Directors for
,nether Valley School District, Carbon County, Pennsylvania.
You have served in this position since January 1984.
s. Ycu Pre also an Insurance Agent licensed to do business in the
C ,;zimonwealth of Pennsylvania.
a. You have been a licensed Insurance Agent for Reliance
Standard Life Insurance Company since October 1983.
3. Panther Valley School District annually obtains student accident
insurance covering injuries to students occurring on school district
property or during school functions.
4. Records of the Panther Valley School District indicate that
requests for proposals were issued in 1983 -1985 regarding the student
activity insurance.
a. The RFP's outlined the specifications and required
submission of proposals by a date certain.
b. Proposa i.s were .-eturnab1.e to either the district
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Page 3
superintendent or business manager.
5. By letter dated July 20, 1983 to you from Susan L. Traeger,
student accident manager for Samuel D. Butz Agency, Inc., Ms. Traeger
thanks you for your interest in the agency's student accident
insurance program.
a. This letter outlines a cost proposal for the student
- accident insurance.
b. The letter notes that the agency wishes to service the
Panther Valley School District account.
c. You were not a member of the school board at this time but
had won the May, 1983 primary election for that post on both
the Republican and Democratic tickets.
d. You received a commission in the amount of $442.05 during
November, 1983 from the Butz Agency for the sale of student
accident insurance to the Panther Valley School District:
6. Records of the Panther Valley School District reflect the
following regarding bids on the student accident insurance.
a. 1982 -83 - Bids were received from three companies.
Academy, Calvert and Pilgrim Insurance Companies. The bid
was awarded to Academy through the Beyrent Insurance Agency.
b. 1983 -84 - Bids were received from two companies: Beyrent
Insurance Agency and Samuel D. Butz Agency. The bid was
awarded to the Butz Agency as low bidder.
c. 1984 -85 - Bids were received from two companies: Insurance
Associates Ltd. and the Beyrent Agency. The bid was awarded
to Insurance Associates Ltd. as low bidder.
d. 1985 -86 - Bids were received from the same two companies as
in the prior year with the same result.
7. Records of the Panther Valley School District indicate that the
student accident insurance was obtained from the following agencies:
Year Agency
1982 -83
1983 -84
1984 -85
Beyrent Agency
Samuel D. Butz Agency
Beyrent Agency
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(Note: This listing appears to be in error as the District minutes
and check ledger indicate that Insurance Associates, Ltd. was the
carrier.)
1985 -86
1985 -87
1987 -88
Insurance Associates
Beyrent Agency
A -G Administrators
8. Minutes of the meeting of the Panther Valley School District
Board of provide in rclevant part as follows:
a. August 15, 1984 - motion by Michalik to award cucte for
student accident football and extra curricular activities
insurance to Reliance Standard Life as follows:
Optional Quote
$10,000 Accidental Dental
School Time $9.00/hr
24 hour coverage $35.00/hr
Senior high football and junior varsity football at flat
rate and included all other activities: Includes all
sports, cheerleaders, band and band front, clubs etc., etc.,
at $4,895.00.
Second by Shubeck; motion carried unanimous on roll call
vote.
b. September 13, 1984 - motion to pay bills including $4895.00
to Insurance Associates, Ltd. - all sports package, passed
c. August 15, 1985 - Motion by Gould, second by Shubeck;
resolved that on the recommendation of Charlie Wi- liams,
Athletic Director the Board of Education, approve a renewal
of Insurance Associates, Ltd. for all sports insurance for
the 1985 -86 school year in the amount of $5,539.00 grades 7
to 12 and establish for student insurance a rate of
$1.50 /elementary and $2.50/ Jr. -Sr. high School. Motion
adopted on unanimous roll call vote.
9. Records of Panther Valley School District indicate the following
regarding payment of the above insurance:
a. Panther Valley School District check no. 4044 dated August
16, 1984 payable to Insurance Associates, Ltd., in the
amount of $4,895.00.
b. Panther Valley School District check no. 31463 dated
November 5, 1985 payable to Insurance Associates, Ltd., in
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the amount of $5,539.00.
10. Records of Insurance Associates, Ltd. 1132 Hamilton Street,
Allentown, PA indicate the following regarding payments to you:
a. Check no. 139, dated December 28, 1984 in the amount of
$272.17 payable to Edward Shubeck. The check is drawn on
the Merchants National Bank, Allentown, PA and bears the
- notation "Panther Valley" Vol. $27.40; Spts. $244.75,
$272.15. The check is signed by William C. Fritz.
b. Check no. 373, dated April 14, 1986 in the amount of
$200.00 payable to Edward M. Shubeck. The check is drawn on
the Merchants National Bank, Allentown, PA and bears the
notation "Panther Valley ". The check is signed by William
C. Fritz.
11. Reliance Standard Life Insurance Company applications for
student accident insurance policy indicates as follows:
a. Date of application - 8/15/84
Applicant - Panther Valley School District
Regional Administrator - Insurance Associates, Ltd.
Licensed Agent - Edward Shubeck
b. Date of application - 8/12/85
Applicant - Panther Valley School District
Regional Administrator - Insurance Associates Ltd.
Licensed Agent - Insurance Associates Ltd.
12. You provided a sworn written statement to representatives of the
Pennsylvania Office of Auditor General.
That statement posed various questions and you responded as
follows:
a. Q. Were you ever involved with the purchase of any
insurance at Panther Valley?
A. No.
b. Q. Did you as a school board member vote on any insurance
for Panther Valley?
A. Yes. However, I never voted on any insurance that I
would have provided to the district.
c. Q. Did you ever receive a commission on any insurance
purchased by the Panther Valley School District?
Shubeck, Edward
Page 6
A. No.
d. Q. If yes, how much?
A. N/A
13. Joseph Maxsin, Sr. president of Maxsin Management Corporation
provided the following information in relation to this situation.
a. His firm is the National administrator for Reliance
Standard Life Insurance Company.
b. His firm designs products in the student accident insurance
program area and provides quotes to its agents for the
purpose of securing business.
c. Generally, a regional administrator would receive payment
for a placed policy from an insured, deduct their commission
and remit the remainder to Maxsin Management.
d Insurance Associates Ltd. was under contract with the
Maxsin Company as a regional administrator.
He received a telephone call from you several yea: : Lg
regarding whether you could market Reliance Standard Lifer
Insurance Company policies.
You were advised of Maxsin's exclusive contract with
Insurance Associates, Ltd..
g. He stated that anytime a payment is made to an insurance
agent regarding work in presenting or preparing a policy
such is considered a commission.
h. He was not aware of the fact that you were a school
director at Panther Valley.
i. He never advised you that the compensation you received
from Insurance Associates, Ltd. was a finder's fee as
opposed to a commission.
He has never heard of a finder's fee being paid under such
circumstances.
K. Lou never mentioned to him that you were being paid a
ahy type in r to the Panther Valley insurance.
Shubeck, Edward
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14. William C. Fritz, former president of Insurance Associates,
Ltd., provided the following information:
a. He served as president of Insurance Associates, Ltd. from
1982 to 1986.
b. He had also been associated with the Samuel Butz Agency.
c. : Regarding the 1985 -86 school year bid he was unable to
locate you and he therefore prepared a bid proposal for the
Panther Valley School District student accident insurance
and mailed it directly to the district.
d. He paid you commissions for the 1984 -85 and 1985 -86 school
year contracts.
e. The payment for the 1984 -85 year was for your efforts to
secure the contract. He advised that you 'made the pitch"
and whatever work you did resulted in Insurance Associates,
Ltd. receiving the contract.
f. You performed no service regarding, claims processing or
collection of premiums regarding the insurance with the
district.
g.
He was not aware of exactly what you did to place the
business.
h. He was contacted by you sometime after the award of the
second years contract and you requested to be compensated
for your efforts. He indicated that at that time you
attempted to demonstrate your connections at the school
district.
t. You subsequently contacted him after the second year
contract was awarded and advised that you did the same
thing that you did in the prior year and should be
compensated.
(i)
At the time of this contract, you specifically
requested your commission.
j, He decided to give you $200.00 as a commission for the
placement of business.
15. Doris N. Rice, former student accident insurance coordinator for
insurance Associates, Ltd., provided the following information:
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Page 8
a. She served as student accident coordia for with Insurance
Associates, Ltd., Allentown, PA from 1983 to 1986.
b. William Fritz was the owner of this company.
c. You were licensed with Reliance Standard Life Insurance
Company and were involved in the placement of the student
accident insurance for Panther Valley School District.
c. - During the early Fall, 1985 she attempted to contact you
regarding submission of the 1985 -86 bid proposal. She was
unable to contact you and Mr. Fritz prepared and delivered
the proposal.
e. During the Spring, 1986 you contacted her and complained
that you had not received your commission for the 1985 -86
contract.
f. You advised her that you had delivered the proposal.
g.
You implied to her that Insurance Associates, Ltd. would
never do business with the district again.
h. Shortly after your conversation with her she discussed the
matter with Mr. Fritz and he decided that they would comply
with your request for a commission. .
i. The amount of the commission paid to you, $200, was based
upon a percentage of the insurance placed.
You thereafter requested additional funds.
k. She stated that you did nothing to earn these funds.
16. Statements of financial interests on file for you with the
Panther Valley School District indicate as follows regarding direct
and indirect sources of income in excess of $500.
a. Statement dated 3/7/83 - Combined Insurance Company, !x60 St.
Johns Drive, Camp Hill, PA; Insurance Company of North
America, Arch Street, Philadelphia, PA.
b. Statement dated 5/30/84 - Ed Shubeck Agency, 361 Pat :erson
Street, Lansford, PA.
d. Statement dated 3/12/85 - Insurance Company of North
America, Philadelphia, PA; American Income Life, Waco, TX;
Union Bankers Insurance Company- Dallas, TX; I.:H Company,
Der. ve, CO.
d. Statement dated 4/10/86
e. Statement dated 4/3/87
1501 Cedar Crest Blvd.,
17. You provided the following information in relation to this
situation:
a. You have been a member of the Panther Valley School Board
since January 1984.
b. You have been a licensed Insurance Agent for about 20
years.
c. You are a licensed agent for Reliance Standard Life
Insurance Company.
d. You acknowledge that you received two payments from
Insurance Associates, Ltd. relating to the placement of the
Panther Valley School District student accident insurance.
You deny that these payments were commissions but rather
assert that such represented finder's fees.
f. You were not aware of the fact that you were listed as the
agent of record on the policy application.
You assert that Joseph Maxsin, Sr. told you that you would
be receiving a finder's fee and no one could question this.
h. Insurance Associates, Ltd. was low bidder for the insurance
and the vote to award the contract was unanimous.
i. You did not assist Mr. Fritz in preforming the bid.
e.,
g.
j•
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Page 9
- No sources of income listed.
- State Mutual Insurance Company,
Allentown, PA.
You assert that the 1985 -86 bid proposal had been mailed to
you by Insurance Associates, Ltd. and you presented it to
the school board.
k. You assert that the $200 you received was less than you were
entitled to. You thus called Insurance Associates, Ltd. to
find out why. You eventually let the matter drop.
1. You admit voting on the Insurance Associates, Ltd.
contracts and on the motion to pay the Insurance
Associates, Ltd. invoices for the contracts:
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Page 10
m. You denied receiving a commission to the Office of Auditor
General because you received a finder's fee not a
commission.
n. You denied being involved in the insurance purchased to the
Office of Auditor General because you assert that you merely
delivered the proposal and were not the sales agent.
o. You deny exerting any pressure on Insurance Associates,
Ltd. as a school board member in order to obtain the money
that you were paid.
p. You deny lobbying the school board on behalf of Insurance
Associates, Ltd..
B. Discussion: As a member of the Board of Directors for the
'anther Valley School District, you are a public official as that
term is defined under the Ethics Act, 65 P.S. Section 402; 51 Pa.
Code Section 1.1; Weaver Opinion 85 -014. As such, your conduct is
:u±ect to the provisions of the Ethics Act and the restrictions
therein are applicable to you.
As quoted above, Sections 3(a) and 3(b) of the Ethics Act
provide that no public official may use his public office or
confidential information received through holding public offs to
obtain a financial gain for himself or a business with which ie iv
associated and no public official may receive anything of value on the
understanding that his official conduct will be influenced thereby.
65 P.S. §403a) and (b).
Under Section 3(c), quoted above, no public official or any
business in which the official is a director, officer, owner or
holder of stock exceeding 5% of the equity at fair market value of the
business shall enter into a contract valued at $500 or more with his
governmental body unless the contract has been awarded through an open
and public process. As to Section 3(c) of the Ethics Act, this
Commission has determined that the above provision is a procedure to
be used when a public official contracts with his own governmental
body in excess of $500. Brian, Opinion 80 -014; Lvnch, Opinion 79 -047.
However, this Commission has also determined that the above provision
of law is not a general authorization for a public official to
contract with his governmental body where such is otherwise prohibited
by law. Such a provision in law does exist and is found in Section
324 of the Public School Code which provides:
No school director shall, during the term of
which he was elected or appointed, as a private
person engage in any business transaction with
the school district in which he is elected or
Shubeck, Edward
Page 11
appointed, be employed in any capacity by the
school district in which he is elected or
appointed, or receive from such school district
any pay for services rendered to the district
except as provided in this act. 24 P.S. §3 -324.
In applying the above provisions of the Ethics Act to the facts
of this case, it is noted that you have been an elected member of the
Panther Valley School District, hereinafter, District, since 1984 and
that you'are also a licensed Insurance Agent in Pennsylvania. The
District did issue RFPs for the period 1983 -1985 regarding student
activity insurance. A letter of Mrs. Traeger of the Butz (insurance)
Agency dated July 20, 1983, a point in time after you won the primary
election for District Board Member, acknowledges your interest in the
Student Accident Insurance program. The records of the District for
1983 -84 reflect that the Butz Agency was awarded the bid for which you
received a $442.05 Commission immediately prior to assuming your
position with the District; in the 1984 -85 and 1985 -86 years, the
Insurance Associates Ltd. was awarded the bids. The minutes of the
District reflect, in August 15, 1984, that you seconded and voted in
favor of a motion to award insurance contracts relative to student
activities to Reliance Standard Life Insurance Company. Thereafter,
in September 13, 1984, you voted in favor of the motion to pay these
bills including a $4,895 bill to Insurance Associates Ltd. Also on
August 15, 1985, you seconded and voted in favor of a motion to
approve the renewal of sports insurance for the 1985 -1986 school year
which amounted to $5,539. Thereafter, two checks were issued to you
by Insurance Associates Ltd: one in the amount of $200 and the other
in the amount of $272.17, both bearing a notation relative to "Panther
Valley" and signed by William C. Fritz who was the President of
Insurance Associates Ltd. between 1982 and 1986. The applications for
the Insurance from Reliance Standard Life Insurance Company reflect
the District as the applicant with the Insurance Associates Ltd. as
the regional administrator with you as the Licensed Agent for the 1984
policy but with the Insurance Associates Ltd. as the License Agent for
the 1985 policy. Mr. Fritz, who admitted paying you commissions for
these two contracts, indicated that you advised him that it was
through your efforts that Insurance Associates Ltd. received these
contracts. Mr. Fritz stated that after you attempted to show the
connections you had with the District, he paid you $200 which you
solicited from him in the second year when the contract was once again
awarded to Insurance Associates Ltd. Mr. Fritz's statements are
corroborated by Donna Rice who was the Insurance Coordinator for
Insurance Associates Ltd. She stated that you contacted her and
complained that you had not received your commission after the second
contract was awarded. She states that after you indicated to her that
the company would not do business with the District again, she
discussed the matter with Mr. Fritz and the $200 was thereafter paid
to you.
Shubeck, Edward
Page 12
Two other factual matters are noteworthy in this case. first,
you provided a sworn statement to the Pennsylvania Auditor General
wherein you swear that you were not involved in the purchase of any
insurance with the District and that the only insurance you voted on
did not involve insurance that you provided to the District and that
you did not receive any commission on insurance purchased by the
District. Secondly, your annual Statements of Financial Interests
for the calendar years 1984 and 1986, do not list Insurance Associates
Ltd. as a source of income in excess of $500.
In applying the above quoted provisions of the Ethics Act, it is
clear that you violated Section 3(a) of the Ethics Act regarding the
award of the student insurance contracts to Insurance Associates Ltd.
which resulted in your total receipt of $472.15. You seconded motions
ard voted in favor of those motions which awarded these contracts to
Insurance Associates Ltd.; you received $272.15 in one year and $200
in the following year resulting from the awards of those contracts.
Thus, all the component elements of Section 3(a) of the Ethics Act
have been established: use of office through your seconding and
voting in favor of motions, a financial gain consisting of the
commissions, a financial gain to your benefit and lastly, a gain which
-zs not compensation provided for by law.
Similarly, the facts of this case established that you have
violated Section 3(b) of the Ethics Act. The statements of Mr, Fritz
and Ms. Rice establish that you received something of value, namely
$472.15 based upon an understanding that your actions as a District
board member would be influenced thereby in terms of your voting in
favor of the award of these insurance contracts to Insurance
Associates Ltd.
Further, under Section 3(c) of the Ethics Act, although these
contracts were put out on bid, it is clear that you could not
contract with your district under Section 3(c) because such
contracting is precluded by law, namely Section 324 of the Public
School Code. In particular, that provision of the school code
prohibits a school director from engaging as a private person
(licensed insurance agent) in a business transaction with the school
district; however, this is precisely what occurred when you obtained a
commission for the award of an insurance contract in 1984 and 1986 to
Insurance Associates Ltd. for which you received a $472.15. Such
activity is prohibited under the Public School Code and therefore,
would be prohibited under Section 3(c) of the Ethics Act. See Weaver,
supra. Therefore, you violated Section 3(c) of the Ethics Act by your
:.evolvement in the business transaction with the District relative to
the award of the school activity insurance contract to Insurance
Associate -: Ltd.
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Page 13
Your conduct in this case reflects a deliberate and purposeful
course of action to use or rather misuse public office for your own
personal financial gain. You have used public office and your status
as a Board member of the District as a means to profit in your private
capacity as a licensed insurance agent.
Section 9. Penalties.
• (a) Any person who violates the provisions of
Section 3(a) and 3(b) is guilty of a felony and
shall be fined not more than $10,000 or
imprisoned for not more than five years, or be
both fined and imprisoned.
65 P.S. §409(a).
(c) Any person who obtains financial gain from
violating any provision of this act, in addition
to any other penalty provided by law, shall pay
into the State Treasury a sum of money equal to
three times the financial gain resulting from such
violation.
65 P.S. S409(c).
You have obtained a financial gain of $472.15 through use of
office which is other than compensation provided by law. Because of
the above circumstances wherein you have used public office as a
school board member for your own personal gain, a treble penalty is
appropriate. Therefore, you are directed to forward a check to the
State Ethics Commission payable to the order of the State Treasury of
the Commonwealth of Pennsylvania in the amount of $1,416.45 within
thirty days of the date of this order.
In addition to the above, it is noted that you have not listed
Insurance Associates Ltd. as a source of income on your financial
interests statements for the calendar years 1984 through 1986. This
Commission can not definitively state that there is a violation of the
reporting provisions since the evidence only establishes that you
received $272.15 in one year and $200 in the other year from Insurance
Associates Ltd. relative to receiving the Commission on the school
district insurance. However, if you received additional income from
Insurance Associates Ltd. in either of these two years which would
equal in aggregate $500 or more, than you must file an amended
Statement of Financial Interests for those two years which would
identify Insurance Associates Ltd. as a source of income.
Finally, this Commission must express its grave concern
regarding a sworn statement that you filed with the Pennsylvania
Office of the Auditor General wherein you state that you have not
been involved in the purchase of any insurance with the District,
Shubeck, Edwar'.
Page 14
that you have not voted on any insurance contract that you provided to
the District and that you have not received any commission on such
insurance. Your statement that you did not receive a commission but
merely a finders fee is not supported by any evidence in law or fact
and is unavailing. Consequently, this Commission must refer this
matter to the appropriate law enforcement authority for review both as
to the violations of Sections 3(a) and (b) and (c) of the Ethics Act
but also as to the possible violation of the law for false swearing.
C. Conclusion:
As a member of the Board of Directors of the Panther Valley
School District, you are a public official subject to the provisions
of the Ethics Act.
2. You violated Section 3(a) of the Ethics Act when you seconded
motions and voted in favor of motions to award insurance to Insurance
Associates Ltd. whereby you received $472.15 in commissions from that
firm resulting in the award of the contract.
3, You violated Section 3(b) of the Ethics Act when you received
5472.15 in commissions from Insurance Associates Ltd. based on the
u.z:erstanding that it would influence your action in voting to the
award of insurance contracts to that firm.
4. You violated Section 3(c) of the Ethics Act when you engaged in a
?_:usiness transaction with the school district which resulted in the
pP.yment of $472.15 in commissions to you for the awarding of that
contract to the firm of Insurance Associates Ltd.
a- You are directed to forward a check in the amount of $1,416.45,
which is treble the financial gain of $472.15 you received, to the
State Ethics Commission payable to the State Treasury of the
Commonwealth of Pennsylvania within thirty days of the date of this
order.
6. This matter will be referred to the appropriate law enforcemen'.
authority for review and appropriate action both as to the violations
of Section 3(a), (b) and (c) of the Ethics Act but also as to a
possible criminal violation for perjury or false swearing.
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 15 days
after service (defined as mailing) unless you file documentation with
the Commission which justifies reconsideration and /or challenges
pertinent factual findings. See 51 Pa. Code 2.38. During this 15 -day
period, no one, including the respondent unless he waives his right to
Shubeck, Edward
Page 15
challenge this Order, may violate this confidentiality by releasing,
discussing or circulating this Order.
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).
By the Commission,
Uk)LL.Z,(3
Joseph W. Marshall, III
Chairman