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HomeMy WebLinkAbout669-R SpahrMr. Larry Spahr c/o Robert Ceisler, Esquire 321 Washington Trust Building Washington, PA 15301 Re: 87 -028 -C STATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, P ENNSYLVANIA 17120 ORDER OF THE COMMISSION Order No. 669 - Date Decided: Februar 22 1989 Date Mailed: March 7, 199 Dear Mr. Spahr: The State Ethics Commission has received a complaint regarding you and a possible violation of Act 170 of 1978. On a hearing in the matter was conducted and relevant evidence and 1989 testimony was presented. The Commission has now completed its investigation. The individual allegations, conclusions, and findings on which those conclusions based are as follows: g 1. Allegation: That you, a Union Township Supervisor, violated Section 3(a) of the Ethics Act which prohibits a public employee's public official's use of office or confidential informatio gaie or through that office to obtain financial gain, when you received compensation for duties other than roadmaster, laborer or secretary /treasurer and received township paid insurance, overtime and holiday pay without auditor approval. A. Findings: 1. You served as an elected Township Supervisor in Union Townshi P, Washington County Pennsylvania. a. You served in this position since 1978. b. You were appointed as a township roadmaster. 2 . Minutes of the Union Township Board of Auditors meetings indicate the following regarding compensation for supervisors. a. January 3, 1979 - seven per cent increase for supervisors was voted on and approved. b. January 8, 1980 - increase of six percent for supervisor was voted on and approved. s Mr. Larry Spahr Page 2 c. January 5, 1982 - compensation for supervisors was set at $6.80 per hour. d. January 4, 1983 - compensation for roadmasters was fixed at $6.80 per e. January 4, 1986 - compensation for set at $9.41 per hour. f. January 6, 1987 - compensation was set for roadmaster supervisors who operate equipment at $9.81 per hour and $9.09 for those who do not. (i) It is noted that no other compensation was requested by the supervisors acting as roadmasters and therefore no motion or vote was made on Insurance, paid vacation or paid holidays. g. January 5, 1988 - compensation for supervisor roadmasters set at $10.21 per hour with time and one half fnr work exceeding 8 hours per day or 40 hours per week. ( supervisors acting as hour. roadmaster supervisors George Uremovich and Steve Parrish requested hospitalization insurance for roadmasters /employees working full time or a minimum of 15 hours per week. (ii) The auditors also authorized certain paid holidays for supervisor /employees. 3. Pursuant to a standard procedure the Union Township Auditors would make a notation as the last item on the annual reorganizational meeting minutes indicating the compensation that had been fixed for the township supervisors. a. These notations indicate as follows: (i) January 5, 1981 - wages for supervisor - roadmasters, $6.80 per hour. (ii) January 4, 1982 - wages for supervisor- roadmasters, $6.80 per hour. (iii) January 3, 1983 - wages for supervisor - roadmasters, $6.80 per hour. (iv) January 3, 1984 - wages for supervisor- roadmasters, $7.15 per hour. Mr. Larry Spahr Page 3 (ii) Occupation listed as road supervisor. b. Premium statements (annual) for hospitalization covers you (no. 042381) indicate as follows: ge for (i) (v) January 7, 1985 $9.11 per hour. (vi) January 7, 1986 $9.46 per hour. (vii) January 5, 1987 - wages for supervisor - roadmasters fixed at $9.09 for non-operators and $9.81 for operators. 4 . A review of the minutes of the township supervisor meeting years 1981 through 1987 do not indicate any action or discussion of health medical or hospitalization insurance benefits for township supervisors. ssion 5 . The minutes of a meeting of the township supervisors on Oc 5, 1983 indicate that on motion of Gabi tober secretary /treasurer was authorized to increasenlife insuran eecover age on employees to $20,000 per person. 6. Records obtained from the Trustees Insurance Fund Camp as follows: , p Hill, PA a. State Mutual Life Assurance Company of erica insurance enrollment card for hose talization, lifepand weekly indemnity coverage for Larry, George and Teresa Spahr dated January 3, 1978. (i) Enrollment is for insurance as a Union Township employee and dependents. Statement Date Amount September 1, 1979 $325.00 September 1, 1980 $420.00 September 1, 1981 $1,708.00 September 1, 1982 $ September 15, 1983 $1,505.00 September 14, 1984 $1,505.00 - wages for supervisor- roadmasters, - wages for supervisor- roadmasters, Mr. Larry Spahr Page 4 (ii) The above coverage was cancelled on September 9, 1987. (iii) A refund of $58.70 was received by the township as a result of this cancellation. (iv) The above statements covered a one year period. c. Premium statements (annual) for life insurance coverage for you, (no. 62- 04 -49) indicates as follows: (i) September 16, 1985 September 19, 1986 Statement Date July 1, 1979 July 1, 1980 July 1, 1981 July 1, 1982 July 15, 1983 July 16, 1984 July 15, 1985 July 15, 1986 July 15, 1987 $1,505.00 $712.00 Amount $66.95 $66.95 $66.95 $66.95 $66.95 $45.60 $45.60 $45.60 $73.40 (ii) The township auditors approved this coverage for 1988 and therefore $38.70 of the payment for 7/15/87, (the pro -rated portion covering the period after January 1, 1988) was authorized as part of your compensation. d. Premium statements (annual) for disability insurance coverage for you, (no. 009893) indicates as follows: (i) Statement Date Amount December 1, 1978 $48 December 1, 1979 $48 Mr. Larry Spahr Page 5 December 1, 1980 $48 December 1, 1981 $48 December 1, 1982 $48 December 15, 1983 $41 December 14, 1984 $41 December 16, 1985 $41 December 15, 1986 $41 December 15, 1987 $41 (ii) The township auditors approved this coverage for 1988 and therefore $41.00 of the payment for 1 2/15/87, (the amount for the period after January 1, 1988), was authorized as part of your compensation. 7. A Union Township audited financial statement dated December 3, 1983 to the township board of supervisors from the township board of auditors contained the following comment as an area of concern: a. Insurance coverage for supervisors as a practice under question by PA Ethics Commission. 8. By letter dated March 23, 1983 to the Union Township Board of Supervisors, Township Solicitor Robert L C supervisors that they could participate in the ltownship'ss gre rou insurance policies so long as the policy identifies the supervisors as employees. 9. By memo dated April 13, 1987 to the Union Township Board of Supervisors, Township Solicitor Robert L. supervisors that a su Ceisler advises the receive health insurance benefits butathatatheaaffirmativ e app e a p p r ova to the auditors must be obtained. ivroval of 10. Township records contained an update memo from the Pennsylvania State Association of Township Supervisors dated March 5, 1984 noting a recent Ethics Commission ruling determining that a non - employed receive insurance benefits township supervisor was not eligible to g the township expense. at (i) The memo advises supervisors to consult with the township sp Mr. Larry Spahr Page 6 1.. Records of Union Township indicate the following regarding overtime pay to you. a. Weekly time report for August at $10.73; total $32.19. Weekly time report for August at $10.73; total $10.73. g. g. 6 -10, 1984 - 3 hours overtime 19 -25, 1984 - 1 hour overtime c. Weekly, bi- weekly, or semi- monthly payroll report, August 1985 - 3 hours overtime at $13.67; total $41.01. d. Daily time report for January 27, 1986 - 2 hours overtime $14.19; total $28.38. e. Weekly time report, December 10 -14, 1984 - 8 hours for distribution of cheese and butter 8 hours at $7.15 per hours; total $28.60. f. Daily time report for June 27,.1985 - 8 hours at $9.11 per hour for distribution of cheese and butter; total $72.88. Total of above payments $213.79 12. Michael T. Borne testified as follows: a. He served as an Auditor in Union Township from 1981 to 1986. b. The auditors in their reorganizational meeting approved the applicable hourly rate for supervisors. c. The supervisors never requested the auditors to approve insurance benefits, overtime pay or holiday pay. d. He did not speak to the supervisors about benefits but the auditors made internal comments regarding supervisors' compensation. e. The auditors received a letter from the solicitor questioning the auditors' authority on some of the internal comments. f. After the auditors became aware that the supervisors were receiving insurance benefits, they wrote letters to DCA and to the State Ethics Commission. The auditors received a response from either DCA or the at Mr. Larry Spahr Page 7 • e • After the receiving practice. State Ethics Commission that the supervisors would not be entitled to insurance benefits. h. In the 1983 Audit Statement, the auditors questioned whether the supervisors were full -time entitled to receive paid holidays. employees so as to be i. He did not think any supervisor was a full -time employee. Jack Gabig, as a supervisor, was working 40 hours a week and would be full -time. k. The auditors approved only the hourly rate as compensation for supervisors. 1. The auditors felt that supervisors should be treated comparably to road workers regarding the applicable hourly rate. m• The auditors made several expressions that the supervisors were not entitled to benefits. n. The auditors did not surcharge the supervisors. 13. Donald Bucich provided the following testimony: a. He served as an Auditor in Union Township for six years. b. After a reorganizational meeting, the auditors set the hourly rate for compensation for supervisors. c. Aside from 1988, there was never any request to approve insurance coverage for supervisors. d. There was pay. never any request to approve holiday or vacation auditors learned that the supervisors were insurance benefits, they decided to question the f. The auditors questioned the practice internal comment to the 1983 Audit Sta it in an g. The auditors received a copy of a letter from the solicitor to the supervisors expressing his legal opinion that the practice was legal. Mr. Larry Spahr Page 8 h. After discussions with people in other townships and the DCA, the auditors questioned the practice in the 1984 Audit Statement. i. The supervisors did not request approval in 1986 or 1987 for insurance or holiday pay or vacation pay. The chairman of the Board told him that the auditors had no authority to rule on something to which . the supervisors were entitled. • k. The auditors did not intend to deprive the supervisors of a comparable hourly rate that employees received. 1. The auditors did not surcharge the supervisors. m. The, supervisors participated in the same insurance plan that was provided for all township employees. n. The insurance plan was in existence prior to the time that you became a supervisor. o. Overtime pay had to be approved as compensation. p. The auditors did not approve or surcharge as to overtime. 14. George Uremovich testified as follows: a. He is a supervisor and full -time roadmaster who works a forty hour week and overtime on occasion. b. He voted to pay insurance premiums like all other bills. c. Prior to 1988, he did not request the Board of Auditors to approve insurance, holiday pay or overtime pay as part of your compensation. d. He did not receive vacation, sick or personal days. e. He received holiday pay in 1986 and 1987. 15. You provided the following information in relation to this situation: a. You have been a township supervisor since 1978. b. You began receiving insurance benefits at that time. j . Mr. LarrySpah Page 9 c. You were appointed roadmaster in every year except for a part of 1982. d. The township pays for the insurance benefits. e. The insurance benefits were not approved by the township auditors for 1983 a question arose as to the supervisors participation in the insurance program. f. In 1983 a question arose as to the supervisors participation in the insurance program. g. At that time the supervisors discussed the matter and requested a legal opinion from the solicitor. The solicitor stated it was not necessary for auditors to approve the plan and that the supervisors could participate in the program. h. A subsequent solicitor's opinion was received by the supervisors indicating that the law had changed. i. In 1987 after the solicitor indicated that the auditors had to approve the benefits you were going to cancel your coverage but Township Auditor Bucich told you not to. The auditors finally approved the insurance benefits for supervisors in 1988. k. You were not aware of the auditors ever approving overtime pay, or holiday pay. 1. You were paid for overtime because you were covered by the employee contract. m. The supervisors approved this contract. n. You were never the deciding vote on the award of the contract or the payment of bills or wages. o. You stated that distribution of butter and cheese was traditionally a function of the roadmasters. 16. You provided the following testimony: a. You are a supervisor in Union Township b. The prior Board of Supervisors, before of the Board, provided group insurance employees. since 1978. you became a member to township Mr. Larry Spahr Page 10 c. The township plan provides coverage to all employees. d. The township plan does not treat the supervisors differently then any other members of the plan. e. The plan does not provide the supervisors with the possibility of realizing any cash or divided annuity. f. You had three conversations with Dan Bucich about insurance and recommended that the Board of Auditors seek a legal opinion. A second conversation occurred in Dave Mathies' Office wherein Mr. Gabig was also present. h. The third conversation was among Mr Bucich, Mr. Normberger [sic] and Mr. Gabig regarding a second opinion by the solicitor that contradicted his prior opinion. g • i. Mr. Bucich expressed his concern that if insurance coverage were dropped, the township might incur a liability. In your conversation with•Mr. Bucich, you considered Bucich's statement as one opinion which weighed insurance coverage versus potential liability of the township. k. Holiday and overtime pay were part of the benefit under the road employees' contract. 1. The provisions for holiday and overtime had been in all contracts beginning at a point in time prior to him becoming a supervisor. j• m. You received holiday and overtime pay on occasion. n. The benefits received by the supervisors are no different than those received by the road crew under the collective bargaining agreement. o. You were paid for surplus food distribution on two occasions. p. The roadmasters in Union Township have been traditionally employed to do the food distribution. q. Overtime occurred for either resurfacing of roads or state CP -2 jobs. Mr. Larry Spahr Page 11 r. Snow removal would also warrant working s. Township insurance benefits were billed you voted to pay those premiums as part t. You voted for payment of insurance premiums overtime. to the township and of a list of bills. u. You admitted that the auditors never approved compensation for the supervisors. v. The supervisors received an opinion from the solicitor that the s upervisors /employees had the right to participate in the program. w. The supervisors never formally requested the auditors to include insurance as part of their compensation. X• After the solicitor issued a second opinion, you informed Mr. Gabig that the auditors would be contacted regarding dropping the insurance. Since you work full -time as Director of Elections, your position in the township is part -time, B. Discussion: As a township supervisor, you are a public official as that term is defined in the State Ethics Act. 65 P.S. 5402; Sowers, Opinion 80 -050. As such, you are subject to the provisions of the Ethics Act and the restrictions therein are applicable to you. Generally, the State Ethics Act provides as follows: Section 3. Restricted Activities. (a) No public official or public employee shall use his public office or any confidential information received through his holding public office to obtain financial gain other than compensation provided by law for himself, a member of his immediate family, or a business with which he is associated. 65 P.S. §403(a). The first matter for consideration involves your receipt of i paid township paid insurance benefits. p to h pion insurance determined Within the above provision of law, may not receive at theetownship'se pense, hospit lization, sor medical and life insurance benefits when such supervisor acts onlin the capacity of a supervisor. Krane Opinion 84 -001; Cowie, Opinion 84 -010. Additionally, even if such a y supervisor is employed by the township as a superintendent, secretary /treasurer, roadmaster or Y- Mr. Larry Spahr Page 12 laborer in accordance with the Second Class Township Code, such benefits are considered compensation and must, therefore, be fixed as such by the township board of auditors. See Svnoski v. Hazle Township, 93 Pa. Commw. 168 500 A.2d 1282, (1985); In re: Appeal of the Auditors Report of Muncv Creek Township, Pa. Commw. Ct. , 520 A.2d 1241, (1987); Hunt, Order 348 -R. The foregoing principle was recently reaffirmed by Pennsylvania Commonwealth Court in Yocabet v. State Ethics Commission, Pa..Commw. Ct. , 531 A.2d 536 (1987) filed at 834 C.D. 1986 on September 18, 1987. In the cited case, the Court held inter alia that a township supervisor violated Section 3(a) of the Ethics Act when he received a salary for the position secretary /treasurer which had not been set by the auditors. The Court, in affirming the Order of the Ethics Commission which required a restitution of the financial gain, noted on page 539 of its Opinion: "Section 7 of the Ethics Act instructs the Commission to investigate situations where there is a reasonable belief that financial conflict nay exist, and if conflict is found, to require the offender to remove himself from the conflict without gain." _(Fnmhasis supplied). Any benefits received other than as provided for above, would constitute a financial gain obtained in violation of the State Ethics Act. See McCutcheon v. State Ethics Commission, 77 Pa. Cmwlth. 529 466 A.2d 283 (1983); Conrad v. Exeter Township, 27 D & C 3d 253, (1983). These principles of law are now well settled and constitute the law under which this situation must be reviewed. See In re: Report of Audit of South Union Township, 47 Pa. Commw. 1, 407 A.2d 906, (1979). In the instant matter, you were the township supervisor/ roadmaster. The record reflects that you have received township paid benefits since 1978. It is clear from the above analysis that a employee supervisor may only receive these paid township insurance benefits only if the requisite auditor approval was given. No such approval (prior to 1988) was given in this case as can be verified from the auditor's minutes. Further, your township solicitor specifically noted in a April 13, 1987 memo that the auditors would have to approve these benefits. Under these circumstances, you received insurance benefits without the requisite auditor approval and hence you received a financial gain which is not part of your authorized compensation. See McCutcheon v. State Ethics Commission, supra. It should also be noted that even if these benefits had been received in good faith, such would not be controlling. Good faith receipt of such benefits, even when based upon a solicitor's advice, will not alleviate the necessity of a public official reimbursing his Mr. Larry Spahr Page 13 governmental body for the receipt of a financial gain for which he was not entitled. See Allegheny County v. Grier, 179 Pa. 639, 36 A. 353, (1987); McCutcheon v. State Ethics Commission, supra; Kestler Appeal, 66 Pa. Commw. 1, 444 A.2d 761, (1982). As a result reimburse the township for this financial gain. You must The State Ethics Act provides as follows: 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. §409(c). In addition to the above, the State Ethics Act provides that the Commission may forward the results of any investigation to the appropriate prosecuting authority unless the alleged offender removes himself from the conflict of interest by divesting himself of any financial gain received in violation of the State Ethics Act. 65 P.S. S407 9(iii). See also McCutcheon v. State Ethics Commission, supra, the Commission may order restitution of financial gains received in violation of the law. The last matter relating to insurance benefits which must be addressed by this Commission concerns House Bill 1577 of 1987 which was signed into law on March 30, 1988 as Act 41 of 1988. Although Section C of Act 41 addresses the question of amnesty as to insurance benefits that were received by non - employee supervisors and hence does not address the question of insurance benefits that were received by employee supervisors who did not get auditor approval, it is noted that Section 2 of the Act provides for a blanket amnesty to "elected officials, except township supervisors who are provided for in Section 525, [Section C] and appointed township officials who are not employees of the township." Since working employee supervisors are elected officials and since this category of supervisors was not provided for in Section 515, Section 2 is then applicable and provides: Mr. Larry Spahr Page 14 "Any such insurance coverage contract entered into by a township between January 1, 1959, and March 31, 1985, that includes or provides coverage for elected officials, except as provided in section 515, or appointed township officials who are not employes of the township, shall not be void or unlawful solely because such inclusion of such officials was subsequently found to be without lawful authority. No penalty, assessment, surcharge, forfeiture or disciplinary action of any kind may occur as a result of participation by such officials." Therefore, under the above provision of law, any insurance benefit that you received between January 1, 1959 and March 31, 1985 would be implicated by Section 3(a) of the Ethics Act but no penalty or assessment will occur because of the above amnesty provision. The receipt of said insurance benefits after March 31, 1985 would transgress Section 3(a). In this case, you received a financial gain of $3,097.28 for the period of April 1, 1985 forward. The foregoing amount must be returned to. your governmental body, Union Township. Turning to the matter of your receipt of pay or overtime overtime pay, Section 515 of the township code sets forth when supervisors may receive compensation. Generally, township supervisors may be employed by the township as a roadmaster, laborer, or secretary /treasurer as noted above. 53 P.S. 565515;.65531; 65540. Township supervisors may not receive any other compensation except as provided above. This concept has been upheld by various courts in the Commonwealth. In Coltar v. Warminster Township, 8 Pa. Commw. Ct. 163, 302 A.2d 859, (1973), the Commonwealth Court of Pennsylvania held that a second class township supervisor may not appoint himself to positions other than those set forth in the township code ( roadmaster, laborer, or secretary /treasurer), and receive compensation therefore. See also Conrad v. Exeter Township, supra. It is clear, therefore, that the duties for which a township supervisor may be compensated are strictly regulated by the township code; the supervisor's pay must be specifically set forth by the township board of auditors. While you, as roadmaster, were eligible to be compensated for services rendered in that position, the pay and overtime pay for which you were compensated were not related to your roadmaster position but were related to the office supervisor. You, thus, received compensation that was not part of that provided for by law. Further, this Commission has already held that township cudiaors have no authority to fix compensation for township supervisors who are performing duties outside of those fixed by law or for working in Mr. Larry Spahr Page 15 positions not established in the township code. Nanovic, 85 -005. The auditors have indicated they did not approve this a ;" the auditors did not have the power to fix a compensation was allowed by law and that was regulated by statute (compensation as a supervisor). You, however, argue that there should be no violation on a "philosophical basis" because the supervisors have acted ethically and have done nothing for which they should be criticized. The difficulty with this argument is that this Commission must apply the Ethics Act and may not decide cases on some amorphous concept of ethics. Snyder vim. Thornburgh 496 Pa. 324, 437 A.2d 1 (1981). It is then suggested that the McCutcheon case is distinguishable because the supervisors, in the cited case, only took insurance for themselves. This argument fails by virtue of the decisions in the Synoski and Muncv Creek Township cases, supra. As to the assertion that these benefits which were received were comparable to other employees, the crucial element is that working supervisors must obtain auditor approval for these benefits and that was not done. Your argument that your solicitors opinion is a good faith defence has been discussed and rejected, supra. You then argue that Act 41 of 1988 warrants a dismissal of the complaint on the theory that working supervisors did not need auditor approval effective March 30, 1988. You assert that Act 41 indicates a legislative intent that this coverage was proper without auditor approval. The argument is fatally flawed because the General Assembly only provided amnesty for the period between January 1, 1959 and March 31, 1985; the legislative intent is clear that the amnesty ends as of March 31, 1985. Since restitution is ordered for the period after March 31, 1985, this order is consonant with Act 41 and the legislative intent therein. As for the holiday pay and overtime pay, the fact that the requisite auditor approval was lacking defeats that argument. As a result, this Commission finds that you received compensation in the form of pay and overtime pay that was not in accordance with that set forth by law. The gain which you received for this type of pay amounts to $213.79. Lastly, you question the accuracy of the restitution computation as to the benefits. In this regard, ou hearing, y presented no evidence at the g, aside from claiming in your closing argument that the figure is inaccurate. Subsequently, differs from the computation submitted lbyethe Invepstigative which Since your computation incorrectly excludes the coverage for your wife Mr. Larry Spahr Page 16 e:tich was also provided by the township and since it attempts to take a double credit of $41.00, the correct amount is $3,097.28 as determined by the Investigative Division. C. Conclusion and Order: 1. As a township supervisor in Union Township, you are a "public official" and, as such, are subject to the provisions of the Ethics Act." 2. Section 3(a) of the Ethics Act is implicated when you received various insurance benefits at township expense for the period up to March 31, 1985; however, since House Bill 1577 of 1988, which was signed into law as Act 41 of 1988, provides amnesty as to the receipt of those benefits, no penalty or assessment will occur for that period. 3. You violated Section 3(a) of the Ethics Act when you received a gain through public office consisting of township paid insurance benefits which gain is not compensation provided for by law in that such benefits had not been fixed and approved by the township auditors as part of your lawful and authorized compensation during the period between April 1, 1985 and 1988 when you received auditor approval, which gain amounts to $3,097.28. 4. You violated Section 3(a) of the Ethics Act when you received pay and overtime pay as a supervisor which was not within the compensation provided in the Second Class Township Code, which gain amounts to $213.79. 5. The total financial gain which you received from insurance benefits and pay and overtime pay which was not part of the compensation provided by law amounts to $3,311.07. 6. You are hereby ordered to remit to the State Ethics Commission, within thirty (30) days of the date of this order, the amount of $3,311.07, made payable to Union Township as restitution for the financial gain that you received. 7. Failure to comply with the provisions of this order will result in a referral of this matter to the appropriate law enforcement authority for further civil or criminal proceedings. 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 Mr. Larry Spahr Page 17 Order is final and will be made available as a public document 5 business days after service (defined as mailing). Any person who violates the confidentiality of a Commission proceeding is guilty of a misdemeanor and shall be fined not more than $1,000 or imprisoned for not more than one year or both, see 65 P.S. 409(e). The confidentiality provision does not restrict respondents consultation with legal counsel. By the Commission, Joseph W. Marshall, III Chairman