HomeMy WebLinkAbout1154 SchubertIn Re: Daniel Schubert
STATE ETHICS COMMISSION
308 FINANCE BUILDING
HARRISBURG, PENNSYLVANIA 17120
File Docket:
X -ref:
Date Decided:
Date Mailed:
Before: Daneen E. Reese, Chair
Julius Uehlein
Louis W. Fryman
John J. Bolger
Frank M. Brown
Susan Mosites Bicket
98- 034 -C2
Order No.1 154
4/12/00
4/28/00
This is a final adjudication of the State Ethics Commission.
Procedurally, the Investigative Division of the State Ethics Commission
conducted an investigation as to the above -named Respondent regarding a possible
violation of the Public Official and Employee Ethics Law, Act 9 of 1989, P.L. 26, 65
P.S. §401 et seg., as codified by the Public Official and Employee Ethics Act, Act 93
of 1998, Chapter 11, 65 Pa.C.S. §1101 et seq., which, inter alia, provides for the
completion of pending matters under that Act. At the commencement of its
investigation, the Investigative Division served upon Respondent written notice of the
specific allegation(s). Upon completion of its investigation, the Investigative Division
issued and served upon Respondent a Findings Report identified as an "Investigative
Complaint." An Answer was filed and a hearing was held. The record is complete.
This adjudication of the State Ethics Commission is issued under Act 93 of
1998 and will be made available as a public document thirty days after the mailing
date noted above. However, reconsideration may be requested. Any reconsideration
request must be received at this Commission within thirty days of the mailing date and
must include a detailed explanation of the reasons as to why reconsideration should
be granted in conformity with 51 Pa. Code §21.29(b). A request for reconsideration
will not affect the finality of this adjudication but will defer its public release pending
action on the request by the Commission.
The files in this case will remain confidential in accordance with the Ethics Act.
Any person who violates confidentiality of the Ethics Act is guilty of a misdemeanor
subject to a fine of not more than $ 1,000 or imprisonment for not more than one year.
Confidentiality does not preclude discussing this case with an attorney at law.
Schubert, 98- 034 -C2
Page 2
I. ALLEGATION:
That Daniel Schubert, a public official /public employee in his capacity as a
member of the West Shore Area School District Board of Directors violated Sections
3(a) and 3(c) of the State Ethics Act (Act 9 of 1989) when he accepted something of
monetary value, a real estate finder's fee, from the school district solicitor in return for
his official action /vote to retain the services of the solicitor.
11. FINDINGS:
A. Pleadings
1. The Investigative Division of the State Ethics Commission received information
alleging that Daniel Schubert violated provisions of the State Ethics Act (Act 93
of 1998).
2. Upon review of the information, the Investigative Division initiated a preliminary
inquiry on April 22, 1998.
3. The preliminary inquiry was completed within sixty days.
4. On June 16, 1998, a letter was forwarded to Daniel L. Schubert, by the
Executive Director of the State Ethics Commission informing him that a
complaint against him was received by the Investigative Division and that a full
investigation was being commenced.
a. Said letter was forwarded by certified mail, no. P 487 031 990.
b. The domestic return receipt bore the signature of Daniel L. Schubert, with
a delivery date of June 17, 1998.
5. On September 8, 1998, the Executive Director of the State Ethics Commission
filed an application for a ninety day extension of time to complete the
Investigation.
6. The Commission issued an order on October 8, 1998, granting the ninety day
extension.
7. On November 19, 1998, the Executive Director of the State Ethics Commission
filed an application for a ninety day extension of time to complete the
Investigation.
8. The Commission issued an order on December 15, 1998, granting the ninety
day extension.
9. Periodic notice letters were forwarded to Daniel L. Schubert in accordance with
the provisions of the Ethics Law advising him of the general status of the
investigation.
10. The Investigative Complaint was mailed to the Respondent on June 7, 1999.
11. Daniel Schubert has served as a member of the West Shore School District
Board of Directors since 1989.
12. Schubert was employed as a real estate agent with the real estate firm of
Rothman, Schubert & Reed from 1974 until December 31, 1994.
Schubert, 98- 034 -C2
Page 3
a. Schubert's father is one of the partners in Rothman, Schubert & Reed.
b. Schubert was employed with Jack Gaughen Real Estate from January 1,
1995, until July, 1997.
c. Since July 1997 Schubert has been self - employed teaching courses in
the fields of real estate; as well as owning various rental properties.
13. Steele & Hoffman specialized in school and labor law.
14. The law firm of Steele & Hoffman was selected by the West Shore School
District to serve as Labor Counsel for the District at the November 15, 1990,
meeting of the Board.
a. Steele & Hoffman was hired based on a recommendation made to the
Board by Superintendent Larry Sayre.
15. The selection of Steele & Hoffman on November 15, 1990, to serve as the
District's Labor Counsel was by an 8 to 0 vote.
a. Schubert was present and participated in the vote.
16. Displeased with the legal services provided by Board Solicitor Richard Stewart,
the West Shore School Board interviewed for his replacement in the spring of
1993.
a. Approximately ten (10) law firms applied for the position.
17. Schubert was present and participated in the interviews.
a. Steele & Hoffman was the last firm interviewed by the Board.
18. At the conclusion of the May 13, 1993, interviews Board Members present,
including Schubert, reached consensus as to the selection of Charles Steele.
19. The law firm of Steele & Hoffman was officially selected by the West Shore
School Board to serve as the District's Solicitor at the Board's May 20, 1993,
meeting by a 5 to 2 vote.
a. Schubert was not present at this meeting.
20. The West Shore School Board merged the positions of Board Solicitor and Labor
Counsel when the firm of Steele & Hoffman was appointed Board Solicitor on
May 20, 1993.
21. Schubert was aware of Steele looking for property because of his position as
a Member of the School Board.
22. Schubert offered to locate properties for Steele to consider.
23. Steele did not enter into any buyer -agent agreement with either Schubert or
Janet Sayre.
a. No verbal representation agreements were discussed between the
aforementioned parties.
Schubert, 98- 034 -C2
Page 4
24. Janet Sayre does not normally handle commercial real estate sales.
a. Janet Sayre refers clients interested in commercial property to William
Gladstone of Commercial Industrial Realty Company (CIR), 1015 Mumma
Road, Wormleysburg, PA 17043.
25. Sayre referred Steele to William Gladstone.
26. With the assistance of William Gladstone /Commercial Industrial Realty
Company, Charles Steele, on behalf of Steele & Hoffman purchased a property
at 107 South Street, Harrisburg, PA 17101.
27. An Agreement of Sale was entered into on September 29, 1993, between the
seller, Johanna L. Seeton, and Steele & Hoffman, a Pennsylvania General
Partnership as buyers for a purchase price of $85,000.00.
a. The buyers (Steele & Hoffman) agreed to be solely responsible for any
commission or other costs due William Gladstone and /or CIR as a result
of this transaction.
28. Daniel Schubert played no role in the preparation of the sales agreement for 107
South Street, Harrisburg, PA.
29. Schubert was not identified as a representative for either the seller or the buyer
in this transaction.
a. No reference to a finder or other intermediary fee due Daniel Schubert
was included as part of the sales agreement.
b. The sales agreement was not amended at any point to include such
language.
30. Abstract Land Associates, Inc., 3915 Market Street, Camp Hill, PA 17011,
handled the closing for 107 South Street, Harrisburg, PA 17108.
a. Closing was held on November 1, 1993.
31. The HUD -1 settlement sheet for the transaction identified $6,000.00 in
commissions which were to be paid to Commercial Industrial Realty
Corporation.
a. No commissions were identified as being due or paid to Daniel Schubert
and /or Rothman, Schubert & Reed.
b. No finders fees were identified as being due or paid to Daniel Schubert
and /or Rothman, Schubert & Reed.
c. The HUD -1 settlement sheet was signed by Matthew Hoffman and
Charles Steele on behalf of Steele & Hoffman (buyers) and Johanna
Seeton (seller).
32. At settlement, Abstract Land Associates, Inc., issued business check no.
102879 in the amount of $5,400 to Commercial Industrial Realty Corporation.
33. No commissions, fees or payments to Daniel Schubert were part of the
settlement.
Schubert, 98- 034 -C2
Page 5
34. Schubert did not recommend the specific property at 107 South Street,
Harrisburg, PA.
35. On December 23, 1993, at the direction of Charles Steele, Julia Rhyner, Office
Manager of Steele & Hoffman forwarded Steele & Hoffman check no. 6079
dated December 22, 1993, in the amount of $ 1,000.00 to William
Gladstone /CIR Company.
a. This check was signed by Charles Steele.
b. Specific instructions in the letter to Gladstone requested that he "please
forward the enclosed funds to the following individual as a finders fee in
connection with our search for real estate in the Harrisburg area: Daniel
L. Schubert, 418 Seventh Street, New Cumberland, PA 17070 - 1925."
c. The letter was signed by Julie (Julia) Rhyner, Office Manager.
36. Rothman, Schubert & Reed was paid $ 1,000.00 by Charles Steele, Esquire,
through William Gladstone.
37. Steele had no contractual relationship with Daniel Schubert or Rothman,
Schubert & Reed which would have required him to pay $1,000.00 at issue.
38. At the time Steele began looking for property, Schubert was a Member of the
Board who had interviewed him.
39. Schubert participated in actions taken to reappoint Steele & Hoffman as
Solicitor to the School District.
40. Minutes of the West Shore School District Board meetings include the following
official actions taken re- appointing the law firm of Steele & Hoffman as the
District's Solicitor:
a. May 19, 1994:
"It was moved by Mrs. lams and seconded by Mr. Delaney that
the Board appoints the law offices of Steele & Hoffman, 107
South Second Street, Harrisburg, PA 17101, as solicitor for the
year beginning July 1, 1994, in accordance with the terms set
forth in their proposal dated May 11, 1994. The motion carried on
a roll call vote 8 -0"
Present: Messick, lams, Sharp, Delaney, Hunter, Schubert, Sharretts,
Sanford
b. May 18, 1995:
"It was moved by Mr. Delaney and seconded by Mrs. lams that
the Board appoints Charles E. Steele of the law offices of Steele
& Hoffman, 107 South Street, Harrisburg, PA 17101, as Solicitor
for the year beginning July 1, 1995, in accordance with the terms
set forth in his proposal dated May 11, 1995. Motion carried on
a roll call vote 9 -0."
Present: Messick, lams, Sanford, Sharp, Smith, Delaney, Hunter,
Schubert, Sharretts.
Schubert, 98- 034 -C2
Page 6
c. May 16, 1996:
"It was moved by Mr. Delaney and seconded by Mr. Schubert that
Charles Steele of the law offices of Steele & Hoffman, 107 South
Street, Harrisburg, PA 17101, be appointed as Solicitor for the
year beginning July 1, 1996, in accordance with the terms set
forth (in) his proposal dated April 30, 1996. Motion carried on a
roll call vote 9 -0."
Present: Messick, lams, Sanford, Sharp, Smith, Delaney, Kambic,
Schubert, Sharretts.
41. In December, 1996 Steele was convicted of mail fraud and Obstruction of
Justice and was sentenced to serve a thirty -three (33) month sentence in
federal prison.
a. Steele's conviction was the result of an over billing scheme resulting in
an estimated loss to thirty -three (33) public education entities of
approximately $ 58,741.00.
b. Steele was convicted of having a mathematical formula to inflate clients'
monthly bills.
B. Testimony
42. Charles Steele ( "Steele ") is a former Labor Counsel and former Solicitor to the
West Shore School District.
a. Steele was convicted of mail fraud on or about December 19, 1996.
(1) Steele's criminal case is currently on appeal.
b. Steele surrendered his license to practice law in Pennsylvania in
December of 1996.
c. In 1990 and thereafter, Steele was a partner in the law firm of "Steele
& Hoffman."
(1) The other partners of the firm were Matthew Hoffman and Nancy
McCann.
(2) There were other attorneys who were associated with the firm,
including Karen Bringe, n /k /a Karen Gokay.
d. Steele & Hoffman specialized in education law.
e. Almost 100 percent of Steele's practice was devoted to school law.
f. In 1990, Steele & Hoffman did not have an office physically located in
Central Pennsylvania.
(1) Steele & Hoffman had its main office in Pittsburgh.
(2) Steele & Hoffman had an office in Quakertown in Bucks County.
Schubert, 98- 034 -C2
Page 7
g-
h. Steele testified that when he interviewed with the West Shore School
District in 1990 for the position of Labor Counsel, he suggested to the
Board that he was thinking of growing in the area, getting more school
districts as clients, and opening an office.
(1) Steele testified that he told other school districts the same thing.
i. Steele's activity in the midstate increased after 1990.
In November of 1990, Steele & Hoffman was appointed as Labor Counsel
to the West Shore School District.
(1) Steele testified that his work as Labor Counsel to the West Shore
School District increased as time went on, such that his presence
in the West Shore School District was required more often.
(2) In approximately 1992, Steele /Steele & Hoffman was appointed
to do labor work for the Harrisburg School District and the
Susquehanna School District, such that Steele was very busy in
the midstate area.
Steele testified that Steele /Steele & Hoffman had an interest in
establishing a midstate office as a place for the firm's attorneys to sleep
and work when traveling across the state and so that the firm's school
law practice could be expanded throughout Pennsylvania.
k.. In or prior to May of 1993, Steele became aware that the Solicitorship
for the West Shore School District was available.
(1) Steele /Steele & Hoffman applied for the position of Solicitor to the
West Shore School District.
(2) In May, 1993, Steele interviewed for the position.
In May of 1993, Steele & Hoffman still did not have an office physically
located in Central Pennsylvania.
m. Steele testified that it was after he /Steele & Hoffman was appointed
Solicitor to the West Shore School District that his "efforts intensified"
and he determined to pursue an office property in the midstate area. (Tr.
at 43; 78).
n. Steele testified that he did not believe that there was a "quid pro quo"
such that if he had the solicitorship with the West Shore School District
he had to get an office in the area.
(1) Steele testified that the Board of the West Shore School District
never expressed any condition that Steele have an office in Central
Pennsylvania or West Shore specifically.
(2) Steele testified that it was his recollection that Dr. Larry Sayre, the
Superintendent of the West Shore School District, thought it
would be a good idea for Steele & Hoffman to obtain a midstate
office.
Schubert, 98- 034 -C2
Page 8
(a) Steele testified that he thought Dr. Sayre wanted Steele &
Hoffman to be located closer to his (Dr. Sayre's) office and
to be a taxpayer in the West Shore School District.
(b) Steele testified that his decision to establish a Central
Pennsylvania presence was independent of Dr. Sayre's
recommendation.
o. Steele's criteria for a midstate office property included a price within
Steele's price range and a geographic location convenient to the
Pennsylvania Turnpike.
At the time of Steele's May, 1993 interview for the position of Solicitor
to the West Shore School District, Steele was aware that the Respondent
worked in the business of commercial real estate.
The Respondent was the first of three Realtors to whom Steele spoke
about obtaining a property in the midstate.
r. But for Steele's contact with the Respondent as a Member of the Board
of the West Shore School District, Steele would not have sought out the
Respondent to look for properties for Steele & Hoffman.
s. Steele testified that he (Steele) approached the Respondent about
purchasing a property in the midstate.
t. Steele provided varying testimony as to the time frame in which he
approached the Respondent about purchasing a property.
(1) Steele initially testified that this occurred some months after he
obtained the solicitorship for the West Shore School District. (Tr.
at 44) .
(2) Steele subsequently testified that the Respondent may have been
providing Steele with packets of materials on properties before
Steele was appointed Solicitor of the West Shore School District.
(Tr. at 77 -78).
u. Steele testified that his conversations with the Respondent as to
purchasing a property in the midstate would have occurred ancillary to or
outside of meetings or other business of the Board of the West Shore
School District.
P.
q •
v. Steele testified that he did not have any type of understanding, contract,
or writing with the Respondent relative to purchasing real estate.
(1) Steele testified that the Respondent did not ask him to sign a
representation agreement.
w. Steele testified that the Respondent did do work in an attempt to find an
office for Steele & Hoffman.
(1) Steele testified that the Respondent interviewed him relative to
purchasing a property.
Schubert, 98- 034 -C2
Page 9
(2) Steele testified that the Respondent supplied Steele with packets
of materials which the Respondent had prepared on properties that
might interest Steele.
(3) Steele testified that the Respondent did extra work with regard to
a particular property in Lemoyne, which Respondent recommended
as an income property with owner financing and room for growth
but which Steele disapproved of because of size.
x. Steele never physically toured any properties with the Respondent.
(1) Steele testified that the Respondent offered to physically show
him a property, but Steele declined because the property was out
of his price range. (Tr. at 76).
(2) Steele subsequently testified that he recalled several such offers
by the Respondent. (Tr. at 80).
y. Steele was not successful in finding a property through the Respondent.
z. Steele testified that the second Realtor to whom he spoke about
obtaining a property in the midstate was Janet Sayre, wife of the
Superintendent of the West Shore School District, Dr. Larry Sayre.
aa. Steele testified that he did not have any type of understanding, contract,
or writing with Janet Sayre relative to purchasing real estate.
bb. Janet Sayre was primarily involved with the sale of residential real estate.
cc. Janet Sayre showed properties to Steele.
(1) Steele physically toured at least one of these properties.
dd. Steele testified that he considered all of the properties proposed by Janet
Sayre to be out of his price range.
ee. Steele was not successful in finding a property through Janet Sayre.
ff. Steele testified that the third Realtor to whom he spoke about obtaining
property in the midstate was William Gladstone ( "Gladstone ").
(1) Janet Sayre referred Steele to Gladstone.
(2) Steele was told that Gladstone focused upon commercial real
estate.
gg. Steele was successful in finding a property through Gladstone.
hh. Steele made offers on two properties through Gladstone.
(1) The first offer was for the purchase of a property at 107 Locust
Street, Harrisburg, Pa., which offer was not accepted.
(2) The second offer was for the property at 107 South Street,
Harrisburg, Pa., which property Steele & Hoffman purchased.
Schubert, 98- 034 -C2
Page 10
ii. Gladstone functioned as the agent of Steele & Hoffman in the purchase
of the property at 107 South Street, Harrisburg, Pa.
(1) Steele & Hoffman paid Gladstone's commission for this
transaction.
1] .
Steele testified that of the three Realtors with whom he dealt in trying to
acquire a midstate office, the Respondent put forth more effort than
Janet Sayre and probably spent more time with Steele than did
Gladstone.
(1) Steele acknowledged that he could not witness the work done by
the Realtors outside of his presence.
(2) Steele confirmed that Gladstone had a particular expertise which
he may have used for swift action in finding a property for Steele
& Hoffman.
kk. Steele testified that it was his recollection that when he was talking to
Gladstone about tendering an offer on property, he (Steele) told
Gladstone, "I have two other people working for me, and I'd like to see
them rewarded in some way, if you don't mind." (Tr. at 56; 87 -88).
(1) Steele testified that Gladstone informed him that Janet Sayre
would be compensated pursuant to an existing arrangement which
Gladstone had with her.
(2) Steele testified that he told Gladstone to give the Respondent
$1,000.
II. Steele testified that after Steele & Hoffman had located the 107 South
Street property through Gladstone, and Steele had decided to buy it,
Steele told the Respondent that he would like to pay the Respondent for
his (Respondent's) efforts.
(1) Steele testified that the Respondent told Steele that it was not
necessary for Steele to give him (the Respondent) a fee.
(2) Steele testified that despite the Respondent's indication that it
was not necessary for Steele to give the Respondent a fee, Steele
insisted upon paying the Respondent.
(3) Steele testified that the Respondent said, "If you're going to do
anything, send it to my company." (Tr. at 64; 89).
(4) Steele testified that he did not think he ever had another
discussion with the Respondent regarding Steele & Hoffman
paying the Respondent.
(5) Steele testified that the Respondent never acknowledged receipt
of the money.
mm. ID -6 includes the sales agreement for the property at 107 South Street,
Harrisburg, Pa. (See, Finding 53).
Schubert, 98- 034 -C2
Page 11
nn. ID -9 is the settlement sheet for the sale of the property at 107 South
Street, Harrisburg, Pa. (See, Finding 54).
oo. ID -10 consists of copies of a letter from Julie (Julia) Rhyner, Office
Manager of Steele & Hoffman, and a check from Steele & Hoffman in the
amount of $1000 made payable to "William Gladstone" (see, Finding 55).
(1) Steele signed the check.
(2) Steele testified that the letter and check (No. 6079) which
comprise ID -10 effectuated Steele's intent to compensate the
Respondent for the efforts the Respondent expended on behalf of
Steele /Steele & Hoffman.
(3) Steele testified that he believed the Respondent deserved to be
compensated for the work that he had done and that the Steele &
Hoffman payment effectuated by check No. 6079 was not a gift.
(4) Steele provided the following testimony regarding the method of
issuance of the documents comprising ID -10.
(a) When Steele was initially asked whether Julia Rhyner's
letter and the Steele & Hoffman check (No. 6079) were
sent at his direction, Steele testified:
Well, the particulars of how Mrs. Rhyner
executed my intent would have been up to
her. I simply said -- And I'm sure she would
have called Mr. Gladstone and arranged
whatever they decided to do.
But yes. I said, Make sure that Mr.
Schubert is paid for his efforts on my behalf
and contact Mr. Gladstone about it.
I'm sure this letter and the check are
the result of that general intent.
(Tr. at 61).
(b) When Steele was subsequently asked whether it was his
testimony that he (Steele) directed Julia Rhyner to send the
check and a letter to Gladstone to forward the money along
to Respondent Schubert, Steele testified:
I think I would have told Ms. Rhyner, I'm
going to compensate Mr. Schubert for the
efforts he expended on my behalf, and I talked
with Mr. Gladstone about it, and just get it
done.
(Tr. at 61).
(c) Upon further questioning as to whether ID -10 was sent to
Gladstone as opposed to Respondent at the direction of
Steele, Steele responded:
Schubert, 98- 034 -C2
Page 12
qq.
I don't recall that. I recall the general intent of
what I wanted to do. I don't specifically recall
saying it had to go in any particular way.
(Tr. at 62).
(d) Later in the direct examination of Steele, Steele testified:
I directed [Julia Rhyner] to make sure that Mr.
Schubert was paid for his services, and she
carried it out.
(Tr. at 64 -65).
(e) On cross examination, Steele testified that the letter was
prepared by Julia Rhyner and was not Steele's verbatim
letter. (Tr. at 89).
(i) Steele testified, "Julie Rhyner crafted the letter and
effectuated my intent." (Tr. at 89).
(f) Subsequently, Steele testified, "Sometime in the middle of
December (1993) I would have said to Julie, Get a check
out to Dan and call Gladstone about it." (Tr. at 96).
(5) Steele denied sending the money through Gladstone and his firm
in order to mask it or hide it.
(a) Steele testified that he did not know why the check would
go to Gladstone with a letter stating the Respondent's
home address, but that he speculated that was how
Gladstone told Julia Rhyner to do it.
(b) Steele testified that he did not know the Respondent's
home address when he directed Julia Rhyner as to the
payment.
(6) Steele denied sending the payment for the purpose of rewarding
the Respondent for any action taken or for influencing future
action.
(a) Steele testified that there was never any agreement in that
regard with the Respondent.
(b) Steele testified that he never implied such before or after
the payment.
pp. ID -16 is a copy of both the front and back of check number 6079.
During the time frame of the real estate transaction involving the
purchase of the property at 107 South Street, Harrisburg, Pa., by Steele
& Hoffman, the Respondent continued in his role on the Board of the
West Shore School District.
rr. During the time frame of the real estate transaction involving the
purchase of the property at 107 South Street, Harrisburg, Pa., by Steele
Schubert, 98- 034 -C2
Page 13
& Hoffman, Steele continued to attend meetings of the Board of the
West Shore School District, and Steele & Hoffman continued to submit
bills to that School District.
ss. Throughout the years from May, 1993 through Steele's ultimate
resignation from the position of Solicitor to the West Shore School
District in 1996, Steele provided legal services and advice to the West
Shore School District.
tt. Steele has a friendship with Dr. Sayre.
uu. Chris Steele, whose name appears on various Exhibits admitted in this
case, is the wife of Steele.
43. Julia "Julie" C. Rhyner ( "Rhyner ") is the former Office Manager of Steele &
Hoffman.
a. Rhyner was indicted by the federal government regarding allegations of
mail fraud involving Steele and was alleged to have been an accomplice
in those matters.
(1) The indictments /charges against Rhyner were dismissed.
b. Rhyner provided testimony with regard to the charges against Steele.
c. Rhyner's employment responsibilities at Steele & Hoffman included doing
the bookkeeping until approximately 1991, at which time the
bookkeeping responsibilities were transferred to Diane Bufalini
( "Bufalini "), n /k /a Diane Maneski.
d. After the bookkeeping responsibilities at Steele & Hoffman had been
transferred to Bufalini, it was Bufalini who wrote the checks for the firm,
and it was Rhyner who balanced the bank statements, entered the
financial information into the computer, and served as the firm's contact
person with its accountants.
(1) Rhyner and Bufalini worked together in a check - and - balance
system.
e. The billings of Steele & Hoffman were handled by Rhyner.
f. The Steele & Hoffman check No. 6079 in the amount of $ 1,000, which
is in evidence as part of ID -10 and as ID -16, was written by Bufalini and
signed by Steele.
g. The letter that is in evidence as part of ID -10 was signed by Rhyner.
(1) Rhyner testified that she (Rhyner) probably wrote the letter.
h. The letter and check that comprise ID -10 were prepared at the direction
of Steele.
(1) Rhyner testified that Steele told Rhyner and Bufalini to send a
$ 1,000 finder's fee to Gladstone, to make it payable to Gladstone,
and to say that it was to be given to Daniel Schubert
(Respondent).
Schubert, 98- 034 -C2
Page 14
(2) Rhyner testified that she asked Steele why the $1,000 finder's fee
was to be sent to the Respondent.
(3) Rhyner n t the i finder's fee response to her expressed
the Respondent, Steele told Rhyner about
rto
just send it.
(a) Rhyner testified that Steele told Rhyner that it was "the
right thing to do." (Tr. at 124).
(4) Rhyner testified that she followed Steele's instructions.
Rhyner did not know anything about efforts by the Respondent to help
Steele find a law office in the Harrisburg area.
Schubert Exhibit B is a Report of Interview of Rhyner by State Ethics
Commission Special Investigator Gregory Curran, dated November 17,
1998 (see, Finding 60).
(1) At page 3, the Report of Interview states, inter alia, the following:
Rhyner denied that Steele ever told her the $1,000
that was given to Schubert was a payoff for voting to
appoint Steele as the solicitor... .
Schubert Exhibit B, at 3 (see, Finding 60).
(2) Rhyner testified that Steele did not use the word "payoff" related
to this $1,000 payment.
(3) Steele characterized the $1,000 payment as a "finder's fee" for
the Respondent.
k. Schubert Exhibit C and Schubert Exhibit D reflect that erroneous
information was provided by Rhyner to Tamara Reed, Special Investigator
for the Commonwealth of Pennsylvania, Department of the Auditor
General, Office of Special Investigations, with regard to the identity of
the recipient of the $1,000 payment from Steele & Hoffman (see,
Findings 61 and 62).
(1) In a discussion on December 24, 1997 and in an interview
approximately two weeks later on January 8, 1998, Rhyner told
Special Investigator Tamara Reed that the $1,000 check was a
finder's fee for Janet Sayre.
(2) These conversations occurred approximately four years after the
check had been issued.
(3) Rhyner testified that on both of these occasions when she spoke
to Special Investigator Reed about the $1,000 payment, she
(Rhyner) had no documentation for reference.
44. Daniel P. Delaney ( "Delaney ") is President of the Board of the West Shore
School District.
1•
Schubert, 98- 034 -C2
Page 15
a. Delaney is presently serving the third year of his third term in office as a
School Director for the West Shore School District.
b. Delaney was elected President of the Board of the West Shore School
District on December 2, 1999.
c. In his private capacity, Delaney is an attorney.
d. As a result of the allegations /indictment of overbilling by Steele, the
administration reviewed the bills of Steele & Hoffman.
(1) The administration reported that it did not find any overbilling by
Steele and that there may have been underbilling.
e. There were at least two executive sessions of the Board of the West
Shore School District in which the Board discussed alleged overbillings
by Steele and potential losses to the School District as a result of such
overbillings.
f. During an executive session near the time of Steele's indictment,
Delaney suggested that the Board escrow a portion of the funds that
would otherwise be paid as fees to Steele for ongoing work Steele was
doing for the District, so that if there would be a later adjudication that
Steele was guilty of having unlawfully billed the District, the District
would not suffer an actual loss.
(1) The Respondent spoke in opposition to Delaney's suggestion that
funds be escrowed from Steele's fees to cover the potential losses
of the District.
(a) The Respondent indicated that he did not believe that it
would be necessary to escrow the money.
(b) Delaney testified that the Respondent indicated that in the
Respondent's profession (real estate) there existed a fund
concerning the actions of real estate professionals, which
fund provided reimbursement, and that he believed that the
similar fund for lawyers (the client security fund of the
Pennsylvania Supreme Court) would reimburse the School
District for any losses should Steele be found guilty.
(i) Delaney did not recall how the Respondent referred
to the fund.
(2) Delaney testified that he was surprised at Respondent's
suggestion that the client security fund would cover this kind of
loss by the School District.
(3) Delaney testified that the Respondent was the only Board Member
who spoke up in response to Delaney's suggestion to escrow
funds from Steele's fees.
(4) Delaney testified that following the Respondent's remarks, he
(Delaney) asked the Board President to put the matter to a vote at
which point Steele said, "I don't want you to vote on it. I will take
care of this in some fashion." (Tr. at 149).
Schubert, 98- 034 -C2
Page 16
g.
h. Steele was ultimately convicted.
Delaney testified that following Steele's conviction, the person who
succeeded Steele as Solicitor to the Board of the West Shore School
District informed the Board that the School District could not make a
claim for monies from the client security fund administered by the
Pennsylvania Supreme Court.
In discussions of the Board following Steele's conviction, the Respondent
did not object to the School District obtaining restitution from Steele.
k. The West Shore School District directed Superintendent Larry Sayre to
file a Victim Impact Statement with the District Court for the Western
District of Pennsylvania related to overcharging of the West Shore School
District by Steele.
When Delaney was shown the Victim Impact Statement which was filed
by the West Shore School District (Schubert Exhibit E), was asked
whether he recognized it, and was questioned about it, Delaney stated
that he had not seen the document before.
45. William M. Gladstone ( "Gladstone ") is employed as a Realtor with Commercial -
Industrial Realty Company.
a. Commercial real estate has been Gladstone's exclusive area of business
for the past 13 years.
b. In 1993, Janet Sayre referred Steele to Gladstone with regard to Steele's
search for commercial real estate for a midstate office.
(1) Gladstone had an agreement with Janet Sayre as to referrals,
which agreement was in existence before this particular referral
occurred.
(2) Janet Sayre's referral of Steele to Gladstone formed the basis for
a referral fee to Janet Sayre, even though she did no specific work
with regard to the property which Steele & Hoffman purchased
through Gladstone.
(3) The pre- existing agreement between Gladstone and Janet Sayre
governed the amount of Janet Sayre's referral fee as to the
purchase of property by Steele & Hoffman through Gladstone.
(4) At or about the time she referred Steele to Gladstone, Janet Sayre
mentioned to Gladstone that the Respondent was involved in the
search for a commercial office property for Steele & Hoffman.
c. Gladstone compiled his own list of prospective properties, reviewed them
with Steele, and spent a couple of hours driving around with Steele and
showing Steele properties.
j.
(5) Delaney testified that his proposal to escrow a portion of Steele's
fees was not put to a vote.
No arrangement was made to escrow monies for the School District.
Schubert, 98- 034 -C2
Page 17
d. Gladstone expended additional time in accomplishing a real estate
transaction for Steele.
e. Gladstone handled an unsuccessful attempt by Steele & Hoffman to
purchase a property at 107 Locust Street, Harrisburg Pa.
f. Gladstone subsequently handled the purchase by Steele & Hoffman of
the property at 107 South Street, Harrisburg, Pa.
(1) Gladstone located the property at 107 South Street, Harrisburg,
Pa., for Steele & Hoffman.
Steele told Gladstone that the Respondent did work for Steele, and that
Steele thought it fair to pay the Respondent.
h. On or about September 20, 1993 Gladstone wrote a letter to Steele,
which letter is in evidence as ID -2 (see, Finding 52).
(1) The letter pertains to the prospective purchase by Steele &
Hoffman of the property at 107 South Street, Harrisburg, Pa.
(2) The letter indicates that the Steele & Hoffman acquisition price for
the property is $92,000, consisting of a purchase price of
$85,000, a commission to Commercial - Industrial Realty Company
(CIR) of $6,000, and a commission to another unspecified agency
of $1,000 (see, Finding 52).
(3) The $6000 commission to CIR included the referral fee to Janet
Sayre.
(4) The words, "$1,000 commission to other agency," referred to the
$1,000 that Steele told Gladstone he (Steele) wanted to be paid
to the Respondent at RSR Realtors for services previously
rendered.
g.
(2) The Respondent did not play any role in securing the property at
107 South Street, Harrisburg, Pa., for Steele & Hoffman.
(a) The amount of that payment was determined by Steele.
On September 29, 1993, the Sales Agreement in evidence as ID -6 was
executed for the property at 107 South Street, Harrisburg, Pa. (See,
Findings 27 and 53).
After the Sales Agreement had been executed, Gladstone coordinated the
satisfaction of various code requirements that needed to be met in order
for the purchase of the property at 107 South Street, Harrisburg, Pa., to
be accomplished.
k. On November 1, 1993, settlement on the property at 107 South Street,
Harrisburg, Pa., was completed (see, Finding 30).
(1) Gladstone assisted at the settlement.
(2) The Respondent was not at the closing.
Schubert, 98- 034 -C2
Page 18
I. ID -9 is the Settlement Statement from the closing (see, Finding 54).
(1) The Settlement Statement was prepared by the title company,
Abstract Land Associates, Inc.
(2) The title company contacted Gladstone for the
information for the Settlement Statement.
m. ID -1 is a copy of a "sale-invoicing information &
disbursement form" from the closing (see, Finding 51).
(1) ID -1 reflects a total commission in the amount of $6,000, of
which $5400 was for Gladstone's agency, CIR, and $600 was for
Century 21 as a referral fee.
(2) ID -1 reflects that $200 was paid to "MAA for help."
(a) "MAA" was "Michael Alderman," whom Gladstone paid to
handle anything that might come up on this transaction
while Gladstone was out of town.
n. ID -14 is the check issued by the title company to CIR at the settlement,
which check is in the amount of $5400.
(1) ID -13 documents Gladstone's receipt of his share of that
commission.
o. Gladstone testified that at the time the transaction as to 107 South
Street Harrisburg, Pa., was closing or just after it had closed, a $1,000
payment from Steele & Hoffman for the Respondent showed up.
ID -10 consists of a letter dated December 23, 1993 from Julia (Julie)
Rhyner, Office Manager of Steele & Hoffman, to Gladstone, and check
No. 6079 from Steele & Hoffman payable to William Gladstone in the
amount of $1,000.00 (see, Finding 55).
(1) The letter bears the designation, "Re: Finder's Fee," and states:
p.
Dear Bill:
Please forward the enclosed funds to the
following individual as a finder's fee in connection
with our search for real estate in the Harrisburg area:
commission
commission
Daniel L. Schubert
418 Seventh Street
New Cumberland, PA 17170 -1925
If you have any questions, please call me.
Best regards this holiday season,
Julie Rhyner
Office Manager
(See, Finding 55).
Schubert, 98- 034 -C2
Page 19
(2) The check was made payable to Gladstone rather than to
Gladstone's broker.
Gladstone's recollection of his conversation with Steele was that the
payment was for services rendered.
r. Gladstone testified that he handled the payment to the Respondent as if
it was a normal adjunct to the real estate sale that he had handled.
s. Gladstone testified that pursuant to real estate law, he (Gladstone) was
required to sign the Steele & Hoffman check over to his own broker.
(1) Gladstone endorsed the Steele & Hoffman check with the words,
"Make payable to CIR, William M. Gladstone." (ID -16).
(2) Check No. 6079 from Steele & Hoffman was deposited into a CIR
account.
q.
t. Gladstone testified that pursuant to real estate law, the payment had to
be sent to the Respondent's broker rather than to the Respondent
himself.
u. A CIR check in the amount of $1,000 was forwarded to the
Respondent's broker, Rothman, Schubert & Reed (RSR), together with a
handwritten note from Gladstone to the Respondent (ID -11) (see, Finding
57).
(1) The CIR check stub bears a handwritten notation, "Finders Fee
from Steele & Hoffman."
(a) Gladstone was not certain but testified that he believed that
the notation may have been on the original document
forwarded to the Respondent.
(2) The note from Gladstone to the Respondent states as follows:
Dan-
Charlie Steele asked that this be sent to RSR for the
efforts you provided in helping him to find a place in this
area.
Best wishes for a pleasant New Year.
Sincerely,
Bill Gladstone
(see, Finding 57 b).
(3) The information set forth in the note as to why the check was
being sent was consistent with the instructions Gladstone received
from Steele.
Schubert, 98- 034 -C2
Page 20
(4) The information set forth in the note consists of everything
Gladstone told the Respondent about the check.
(5) At no time before or after Gladstone sent the $1,000 check to the
Respondent's broker did Gladstone discuss anything about the
transaction with the Respondent.
v. Gladstone would not have forwarded $1,000 to the Respondent had
Steele not provided Gladstone with those funds and asked Gladstone to
do so.
(1) The only reason that Gladstone was involved in the conveyance of
the $1,000 fee to the Respondent was that Steele instructed that
it be done.
(2) Gladstone did not initiate the conveyance of the $1,000 fee from
Steele & Hoffman to the Respondent.
w. The $1,000 payment to the Respondent was not paid at the closing.
x. Gladstone testified that the forwarding of a finder's fee after closing on
a property is not typical in a commercial real estate transaction.
y. Ordinarily, fees show up on the settlement sheet, but this does not
happen all of the time.
z. There are two Realtors besides the Respondent who received fees
relative to the purchase by Steele & Hoffman of the property at 107
South Street, Harrisburg, Pa., whose names do not appear on the
Settlement Statement at ID -9.
(1) Although there is reference to a $600 referral fee to Century 21
Brenneman on ID -1 (see, Finding 51), there is no mention of a fee
to Janet Sayre or Century 21 on the Settlement Statement (see,
Finding 54 b).
(2) The $200 payment from Gladstone to Alderman does not appear
on the Settlement Statement.
aa. Gladstone did not consider the characterization of the $1,000 payment
to the Respondent as a "finder's fee" to be inappropriate.
bb. Although the term "finder's fee" would ordinarily deal with a specific
transaction in which the recipient of the finder's fee would actually have
had some role in finding something, the term "finder's fee" or "consulting
fee" is sometimes used loosely where there is no way to classify a
payment.
cc. To a real estate agent or broker, the term "finder's fee" would have a
meaning that would not be limited to someone who finds property but
would include someone who might be tangentially involved in a property
sale.
dd. Gladstone testified that his transfer of the $1,000 from Steele &
Hoffman to the Respondent was not the first time that he (Gladstone)
Schubert, 98- 034 -C2
Page 21
had been involved in helping to get a referral fee to someone else, either
as a recipient or as a conduit through which the money was paid.
ee. Gladstone testified that the reason that Janet Sayre's referral fee was
Tess than the finder's fee paid to Schubert was that Janet Sayre's fee
was governed by a pre- existing agreement between her and Gladstone,
while the payment to Schubert was whatever Steele wanted it to be.
46. Tamara Reed ( "Reed ") is employed as a Special Investigator for the
Pennsylvania Department of the Auditor General.
a. Reed has been employed by the Pennsylvania Department of the Auditor
General for approximately 12 years.
b. On March 9, 1998, Reed conducted an interview of the Respondent for
the purpose of obtaining the Respondent's explanation of a $ 1,000
payment which Reed had found in Gladstone's files.
c. During Reed's interview of Respondent on March 9, 1998, Reed showed
the Respondent the December 23, 1993 letter from Julia Rhyner to
Gladstone, which letter is in evidence as part of ID -10 (see, Findings 55
and 64 c).
(1) Upon being shown the letter, Respondent stated that he was not
aware that the $ 1,000 had come from Steele (see, Finding 64 c).
d. During Reed's interview of Respondent on March 9, 1998, Respondent
indicated that the issue of the 107 South Street property transaction was
not discussed at any Board meetings and that he had not brought it up.
e. Schubert Exhibit F is a memorandum which Reed prepared documenting
her interview of the Respondent on March 9, 1998 (see, Finding 64).
(1) The memorandum was typed on the day the interview occurred.
(2) Reed testified that the memorandum is accurate except for a
typographical error in the second sentence of the third paragraph,
where it is stated, "He said he did he socialize ...." (Tr. at 261).
(a) Reed testified that the sentence should read, "He said he
did not socialize ...." (Tr. at 261).
(3) Reed testified that the memorandum reflects both her recollection
and notes.
47. Dr. Larry A. Sayre ( "Sayre ") is employed as the Superintendent of the West
Shore School District, and has served in that capacity since January, 1982.
a. The Board of the West Shore School District holds the following types of
meetings: (1) formal public meetings; and (2) study sessions.
(1) Study sessions are always divided into two parts: a public part,
and an executive part which is to discuss those things allowable
under the Sunshine Law.
Schubert, 98- 034 -C2
Page 22
b. Sayre testified that the Respondent's reputation for character traits is
"outstanding," and that "He's looked on as a very principled individual
that does his job as a board member and does his homework and is a
very thoughtful person in those deliberations." (Tr. at 269).
c. Sayre testified to the Respondent's reputation for honesty and
truthfulness as follows: "I don't know anyone who doesn't believe that
he is an honest man." (Tr. at 270).
d. In November of 1990, Steele /Steele & Hoffman was appointed Labor
Counsel for the West Shore School District.
e. In 1990, when Steele /Steele & Hoffman was appointed Labor Counsel for
the West Shore School District, Steele & Hoffman had offices in
Pittsburgh and Quakertown but not in the Harrisburg area.
f. Sayre testified that beginning in approximately 1991, he had a number
of discussions with Steele about Steele's interest in establishing a
"presence" (office) in the area.
(1) Sayre testified that he (Sayre) indicated to Steele his expectation
that if Steele would establish an office in the area, it would be
located in the West Shore School District.
(a) Sayre testified that he wanted the firm's tax dollars for the
West Shore School District.
Sayre testified that Steele was trying to make a decision as to whether
to come to the Central Pennsylvania area based upon the ability to attract
clients in the area.
h. Sayre testified that he (Sayre) often indicated to other superintendents
that Steele was interested in moving into the area, and asked them
whether they would be interested in Steele's services.
Sayre testified that within the three year period following Steele's
appointment as Labor Counsel for the West Shore School District, Steele
was doing work for the Susquehanna School District, the Harrisburg
School District, the Middletown Area School District, and an Intermediate
Unit, in addition to doing some work at Lewistown and Selinsgrove.
In 1993, the Board of the West Shore School District interviewed
applicants for the position of Solicitor.
(1) Four applicants including Steele /Steele & Hoffman were
interviewed.
(2) The Respondent was present and participated in the interviews of
the applicants.
(3) Sayre testified that in conducting the interviews, the Board used
scripted questions.
(4) Sayre testified that although the Board Members, including the
Respondent, often departed from scripted questions, that was not
the case as to the interviews for Solicitor in 1993.
g.
j•
Schubert, 98- 034 -C2
Page 23
(5) Sayre testified that he did not remember any non - scripted
questions "standing out" that the Respondent or any other Board
Member asked.
(6) The Respondent participated in the Board's deliberation as to
which applicant would be recommended for the job.
(7) The Respondent was supportive of Steele /Steele & Hoffman as the
successful candidate.
k. On May 20, 1993, Steele /Steele & Hoffman was appointed Solicitor to
the West Shore School District.
The Respondent was not present at the meeting of the West Shore
School Board on May 20, 1993, when Steele /Steele & Hoffman was
appointed Solicitor.
m. The May 20, 1993 vote to appoint Steele /Steele & Hoffman Solicitor was
unusual because it was not a unanimous vote.
(1) The Board typically builds a consensus at its study sessions.
(2) Sayre testified that during his tenure with the West Shore School
District from 1982 forward, the May 20, 1993 vote was the only
vote of the Board as to appointing /reappointing a Solicitor which
was not a unanimous vote.
(3) There were two Board Members who voted in opposition to the
motion to hire Steele as Solicitor.
n. Sayre testified that Steele started actively pursuing and looking at
properties soon after he got the solicitorship at the West Shore School
District.
o. Sayre testified that neither the West Shore School Board nor Sayre
required Steele to establish an office in the area.
(1) Sayre testified that in 1993, it was not a requirement of the West
Shore School Board that a Solicitor would have to locate an office
in Central Pennsylvania.
(2) Sayre testified that none of the scripted questions used in 1993
for the interviews for the Solicitor position suggested, stated or
implied that the successful firm was required to have an office
presence in Central Pennsylvania.
P. Sayre testified that the Respondent did not disclose in any Board
proceeding his involvement in assisting Steele in searching for a property
for a midstate office.
Sayre testified that at some point, he (Sayre) discussed with the
Respondent the details of the 107 South Street property.
r. Although the Respondent did not participate in the May 20, 1993 vote
to appoint Steele /Steele & Hoffman as Solicitor for the West Shore
School District, the Respondent did participate in all subsequent votes of
q.
Schubert, 98- 034 -C2
Page 24
the Board to reappoint Steele /Steele & Hoffman as Solicitor, which votes
were unanimous.
s. Sayre testified that he never saw any difference in the way the
Respondent operated prior to Steele becoming the Solicitor or receiving
payment from Steele, or after.
(1) Sayre testified that the Respondent was always very consistent in
supporting the consensus of the Board.
t. The issue of overbilling by Steele & Hoffman came before the West
Shore School Board on numerous occasions.
u. Sayre testified that at the first study session held by the West Shore
School Board following Steele's indictment, the Board discussed the
possibility of escrowing in some manner moneys from Steele's fees.
(1) Sayre testified that Steele was not present at that meeting.
(2) Sayre recalled that Delaney was the Board Member who made the
suggestion.
(3) Sayre testified that he thought all of the Board Members spoke up
and indicated that Sayre should discuss the matter of escrowing
funds with Steele.
(4) Sayre testified that nothing stood out in his mind as to anything
that the Respondent may have said at that meeting.
(a) Sayre testified that he did not recall the Respondent
mentioning the possibility that a client fund would cover
any potential losses suffered by the School District.
(5) Sayre testified that he did not recall anyone calling for a vote on
the issue of escrowing funds, and that he does not know of any
instance where a Board Member has called for a vote but a vote
has not been taken.
v. Sayre testified that the matter of Steele's indictment was also discussed
at the next study session one week later, when Steele was present.
(1) Delaney was also present at that study session.
w. Sayre testified that the West Shore School Board, including the
Respondent, acted to determine the accuracy of the claim of overbilling.
x. Sayre testified that the Respondent was supportive of the audits that
were conducted as to the alleged overbilling.
y. Steele was convicted with regard to overbilling the West Shore School
District.
z. After Steele's conviction, Sayre completed a Victim Impact Statement for
the federal government.
Schubert, 98- 034 -C2
Page 25
(1) Schubert Exhibit E is the Victim Impact Statement which Sayre
prepared and submitted (see, Finding 63).
aa. Sayre testified that the Victim Impact Statement form was received by
the West Shore School District in early January (1997).
bb. Sayre testified that he presented the Victim Impact Statement form to
the Board at a study session and indicated to the Board that he would
prepare a draft and share it with the Board.
cc. Sayre testified that Delaney was involved with the Board's discussion of
the Victim Impact Statement at the study session.
dd. Sayre testified that he (Sayre) drafted the Victim Impact Statement based
upon suggestions of the Board.
ee. Sayre testified that after he drafted the Victim Impact Statement, he
faxed it to Delaney, Delaney made suggestions for changes, and Sayre
made those changes.
ff. Sayre testified that he sent a copy of the Victim Impact Statement to the
entire Board after it had been submitted.
Sayre testified that the Victim Impact Statement as submitted to the
federal government was endorsed by the Board.
hh. Sayre testified that no one on the Board, including the Respondent,
resisted submitting the Victim Impact Statement.
ii. Sayre testified that the Respondent did not in any instance obstruct,
object to, or otherwise act to thwart the action seeking restitution from
Steele.
gg.
jj
Sayre testified that Schubert Exhibits L and M are letters prepared by
Sayre which include summaries of the West Shore School Board's
actions as to obtaining restitution for any amounts lost due to overbilling
by Steele & Hoffman (see, Finding 65).
kk. Sayre described his relationship with the Respondent as "friendly."
II. Sayre and Steele are friends.
mm. Sayre has accepted hospitality from Steele /Steele & Hoffman.
(1) Sayre attended a hospitality room at the Rivers Club hosted by
Steele & Hoffman.
(2) Sayre and another Board Member attended an All -Star game in
Pittsburgh at Three Rivers Stadium through complimentary tickets
supplied by Steele.
(3) Sayre and his son attended some Pittsburgh Pirates baseball
games with complimentary tickets from Steele & Hoffman.
nn. Steele /Steele's firm provided informal advice on legal matters to Sayre
without charge.
Schubert, 98- 034 -C2
Page 26
(1) Such advice involved two brief discussions.
48. Arthur D. Campbell ( "Campbell ") is a commercial real estate broker.
a. Campbell has been a real estate salesman and /or broker for approximately
24 years.
b. In the last 15 years, Campbell's experience in real estate has been almost
exclusively in commercial transactions as a broker of his own firm.
c. The term "finder's fee" is a broad term in the real estate business.
d. Finder's fees can be paid in lease transactions or sales.
e. In 1993 and 1994, the term "finder's fee" did not have a single, clear
meaning in the real estate business.
(1) A "finder's fee" could be paid to a Realtor who was involved in
any part of the transaction, including finding the buyer, the tenant,
or the property.
(2) The term "finder's fee" could have referred to a situation in which
an agent was paid for work even when he or she did not find the
real estate which ultimately was purchased.
f. Campbell himself has been paid such fees where no transaction has taken
place.
g. Campbell testified that from his own experience, such payments are
made with or without any service having been provided by the recipient.
(1) Campbell testified that it is very common in the real estate
business for a buyer or seller to tell the Realtor, after the
transaction has been completed, that he or she has a relative or
friend who is licensed and that he or she would like the Realtor to
give that friend or relative part of the Realtor's commission.
h. It is not unusual for a finder's fee to be paid without there being any
specific written contract.
i. Where there is no agreement in place, the payment of a separate finder's
fee by the Buyer to someone who did not find the real estate ultimately
purchased would be permitted but not required under real estate law.
Real estate commissions for sales of real estate are typically but not
always paid at the closing.
k. A "Settlement Statement" is the same thing as a "Closing Sheet" or
"Closing Statement."
I. A finder's fee is not required to be disclosed on the Settlement
Statement.
49. Karen Bringe Gokay ( "Gokay ") is the Director of Human Relations and Public
Relations for the Berks County Intermediate Unit.
J•
Schubert, 98- 034 -C2
Page 27
a. Gokay is licensed to practice law.
b. Commencing August, 1992, Gokay worked as a law clerk with Steele &
Hoffman while she attended law school.
c. Gokay became an associate attorney with Steele & Hoffman in
November, 1993.
d. Gokay worked in the Pittsburgh office of Steele & Hoffman until
approximately October of 1994, at which time she transferred to the
firm's Quakertown office.
e. From the time that Gokay first interviewed for a clerkship with the firm
in the spring of 1992, Gokay was told of the plans of Steele & Hoffman
to expand the firm's practice.
(1) The plans for expansion of Steele & Hoffman included increasing
the number of lawyers in the firm and expanding the geographic
location of clients.
(2) The firm's plans for expanding the geographic location of clients
particularly included the Central Pennsylvania area.
f. The plans of Steele & Hoffman to acquire an office in Central
Pennsylvania were widely discussed among the firm's attorneys and staff
and were also discussed with officials from various school districts.
Gokay and Steele had frequent discussions about the prospect of a
Central Pennsylvania office.
h. Gokay's work for Steele & Hoffman included providing legal services to
the West Shore School District, the Harrisburg School District, and the
Capital Area Intermediate Unit.
i. Gokay testified that before Steele & Hoffman acquired a Harrisburg
office, the difficulties of traveling and working in Central Pennsylvania
were "brutal." (Tr. at 395).
(1) Gokay estimated that there were one or two attorneys from the
firm working in Central Pennsylvania every week.
(2) Gokay stayed in a hotel when she worked in the Central
Pennsylvania area.
(3) Gokay testified that the attorneys were getting tired of the
difficulties of traveling and working in Central Pennsylvania.
50. Daniel L. Schubert ( "Respondent ") served as a Member of the Board of the
West Shore School District from the Spring of 1989 until December 2, 1999.
a. Respondent was active in the real estate business for approximately 24
years, beginning in 1974.
(1) Respondent's real estate license is currently inactive
b. Respondent is currently self - employed managing rental properties.
g.
Schubert, 98- 034 -C2
Page 28
c. Respondent teaches real estate courses for various schools including
Elizabethtown College, The Institute of Real Estate Studies, and the
Realtors Association of York and Adams Counties.
d. Respondent testified that when the West Shore School Board interviewed
Steele for Labor Counsel in 1990, the issue of accessibility arose because
Steele's offices were in Pittsburgh and Quakertown.
(1) Respondent testified that when Steele /Steele & Hoffman applied
for the position of Labor Counsel, he (Respondent) had never heard
of Steele.
e. Respondent testified that by 1993, there was no question that it was
Steele's eventual intent to have a Central Pennsylvania law office.
f. In 1993 and 1994, Respondent was a Realtor with Rothman, Schubert
& Reed (RSR) Realtors.
Respondent testified that he made efforts to locate a property for Steele
before Steele /Steele & Hoffman was appointed Solicitor.
h. Respondent provided varying testimony as to who initiated the first
contact between Respondent and Steele about searching for a property.
(1) Respondent initially testified on direct examination that he
approached Steele about finding Steele a property.
(2) Respondent subsequently testified on cross examination that he
did not recall whether he contacted Steele first or Steele contacted
him first.
g-
J-
(2) Steele impressed the Board with his accessibility, particularly
through his use of technology to stay in touch.
(3) Respondent testified that during the 1990 interview process,
Steele also indicated that he intended to open a third office in the
Central Pennsylvania area.
Respondent testified that there was never any formal agreement between
Steele and the Respondent with regard to the Respondent finding
property for Steele.
(1) Respondent testified that he did not ask Steele to sign a "buyer -
agency contract" because he thought it was important for Steele
to be allowed to negotiate and purchase properties through anyone
of his choosing.
In 1993, after having served three years as Labor Counsel to the West
Shore School District, Steele & Hoffman was invited to compete for the
consolidated Solicitor position.
(1) The West Shore School Board interviewed the applicants.
(2) Respondent testified that the administration supplied the Board
Members with information that each law firm had submitted,
Schubert, 98- 034 -C2
Page 29
together with a list of potential questions that the Board Members
could ask during the interviews.
(3) Respondent attended the interviews for the Solicitor position.
(4) Respondent testified that he did not recall any questions being
asked that were not in the packet supplied to the Board Members
by the administration.
(5) Respondent testified that he did not recall asking any questions
during the interviews.
(a) Respondent stated that any of the questions in the packet
that he was interested in were asked by other members of
the Board.
(6) Respondent testified that he did not recall providing any input as
to the relative merits of the firms.
k. On May 20, 1993, the West Shore School Board voted to appoint
Steele /Steele & Hoffman as Solicitor (see, Finding 19).
(1) Respondent did not participate in that vote or that meeting.
(2) Respondent knew prior to the meeting of May 20, 1993 that the
Board Members were not all in agreement as to who the Solicitor
should be.
(3) On May 20, 1993, Respondent telephoned the Secretary of the
School Board and determined that there would be a quorum at the
meeting.
(4) Respondent played softball on the evening of May 20, 1993, and
he did not attend the Board meeting.
Respondent testified that at the time of the vote in May, 1993 to appoint
Steele /Steele & Hoffman as Solicitor, he (Respondent) had already
researched and produced information for Steele on potential office sites.
(1) Respondent testified that Steele was not interested in any of those
properties.
(2) Respondent testified that neither he nor his broker, RSR, have
records from the work that he did for Steele.
(a) Respondent testified that RSR keeps records for the length
of time required by law and then purges them.
(b) Respondent testified that he has not maintained extensive
records as to any of the transactions that he was involved
in as a Realtor.
m. Respondent stated that he visited numerous sites in his search for
property for Steele, but that Steele never went with him to any of these
properties.
Schubert, 98- 034 -C2
Page 30
n. Respondent testified that there was one particular property which he
believed to be an ideal opportunity for Steele.
(1) Respondent testified that he contacted the property owner and
determined that the owner would assist with financing.
(2) Respondent testified that he discussed the property with Steele
and provided Steele with an extensive information packet including
a potential financing package.
o. Respondent testified that in late 1993, Steele indicated to the
Respondent that he (Steele) thought that he had found a property but
that he wanted to pay Respondent for Respondent's efforts.
(1) Respondent testified that he told Steele that it was not necessary
for Steele to pay him.
(2) Respondent stated that Steele then responded that he (Steele) still
wanted to pay the Respondent, and Respondent again stated that
was not necessary and that he (Respondent) did not want Steele
to do that.
P.
On direct examination, Respondent stated that there was a follow -up
conversation, where Steele insisted that he was going to compensate
Respondent for the efforts that Respondent had performed on his behalf,
and inquired as to how he would do that.
(1) Respondent stated that there was a brief discussion that while it
was not necessary, if Steele was going to make such a payment,
it would have to go to the Respondent's broker.
(2) Respondent testified that he did not indicate to Steele that
Gladstone or CIR ought to be involved.
(3) Respondent testified that if the payment had come directly to his
own broker, RSR, rather than through CIR, such would have been
proper under real estate practices.
On cross - examination, Respondent testified that he could not recall
whether the exchange set forth in Finding 52 p immediately above
occurred in a subsequent conversation or during the same conversation
as set forth in Finding 52 o. (Tr. at 465).
r. Respondent testified that he had no further discussions with Steele
regarding such a payment.
s. Respondent did not refer Steele to Gladstone.
t. Respondent did not show Steele the property at 107 South Street,
Harrisburg, Pa., nor did Respondent participate in the closing on that
property.
u. Respondent's firm (RSR) received the $ 1,000 payment in evidence as
part of ID -11.
q.
Schubert, 98- 034 -C2
Page 31
v. Respondent provided varying testimony as to whether he received the
note in ID -1 1.
(1) On direct examination, Respondent testified that the note in ID -11
was all of the information that he got from Gladstone.
(2) On cross - examination, Respondent testified that he could not
testify whether he did or did not receive the note in ID -11, but that
it was highly unlikely that it was not forwarded to him.
w. Respondent testified that until he received ID -1 1, he did not know that
a closing had occurred.
x. Respondent testified that he understood ID -1 1 to mean that at Steele's
request, Gladstone had agreed to pay a portion of the commission paid
to CIR on this transaction to Rothman, Schubert & Reed as a finder's fee.
(1) Respondent testified that neither Steele, Gladstone, nor anyone
else told him otherwise.
(2) Respondent testified that the standard practice in the real estate
industry would be for the firm receiving the commission to pay out
any such portions of it to other cooperating brokers.
(3) The check was a CIR check drawn from a CIR account and made
payable to Rothman, Schubert & Reed.
(4) Respondent testified that he did not know the funds had come
from Steele & Hoffman.
(5) Respondent testified that although it would not be typical for an
agent to receive such a finder's fee without finding the particular
property purchased, it would not be unusual.
(6) Respondent testified that he remembered thinking what a great
guy Gladstone was for sharing his commission.
y. Respondent testified that at the time he received ID -1 1, he believed that
he had done professional work for Steele and Steele & Hoffman.
z. Respondent testified that based upon the information on ID -11, he
considered that a normal payment for professional work.
(1) Respondent stated that he believes the same to be true now.
(2) Respondent testified that he never considered that payment to be
a gift.
(3) Respondent testified that his broker did not treat the payment as
a gift to the Respondent, but rather, took its share of the payment.
aa. Respondent testified that after May, 1993, when he participated in the
retention votes for Steele & Hoffman, his continuing understanding of the
source of the funds that he had received early in 1994 was that
Gladstone and CIR Realty had shared their fees with Rothman, Schubert
& Reed.
Schubert, 98- 034 -C2
Page 32
(1) Respondent testified that such continued to be his understanding
until March 9, 1998.
bb. On March 9, 1998, Tamara Reed, Special Investigator for the
Pennsylvania Department of the Auditor General, showed the Respondent
the letter in evidence at ID -10.
cc. Respondent testified that he never saw nor had access to ID -10 until
March 9, 1998 when Tamara Reed showed it to him.
(1) Respondent testified that he was "somewhat surprised" when
Tamara Reed showed him ID -10 and thought that maybe
Gladstone was not "that great of a guy." (Tr. at 433).
dd. Respondent testified that when he was interviewed by Tamara Reed, he
did not remember that he had received the note at ID -11.
ee. Respondent testified that the $ 1,000 payment received from
CIR /Gladstone in early 1994 - -which went through Respondent's broker
and then to Respondent - -for the Respondent's help to Steele in finding
an office, never influenced him.
(1) Respondent testified that at no time before or after the payment
did Steele ever ask for or imply any desire for any special action by
the Respondent as a West Shore School Board Member.
(2) Respondent testified that he (Respondent) never hinted, inferred
or suggested that he was acting out of consideration of the
payment.
(3) Respondent specifically testified that the payment never
influenced: Respondent's deliberation, decision, or vote relating
to retention of Steele /Steele & Hoffman; any decision to pay
Steele /Steele & Hoffman; or Respondent's actions regarding
protecting or seeking restitution for West Shore School Board
funds.
ff. Respondent testified that he supported the School District's internal
efforts to determine whether there had been any overbilling by
Steele /Steele & Hoffman.
Respondent testified that he also took independent action by approaching
Dr. Sayre and the treasurer for the School District to inquire as to what
they knew about the billing practices, whether they had scrutinized the
bills from Steele & Hoffman, and whether they were satisfied that the
bills were accurate and no overbillling had occurred.
(1) Respondent testified that he took these independent actions
because of his obligation as a Board Member and, his concern as
a multiple taxpayer in the District.
hh. Respondent testified that there was more than one West Shore School
Board executive session concerning the escrowing of fees that had been
billed and were payable to Steele & Hoffman.
ii. Respondent argued against requiring the escrow of Steele's fees.
99
Schubert, 98- 034 -C2
Page 34
ss. Respondent testified that when the final draft of the Victim Impact
Statement was prepared, there was an informal polling of the Board with
the Members unanimously in favor of directing Dr. Sayre to submit it.
tt. Respondent testified that Tamara Reed's testimony as to what transpired
during her interview of Respondent was incomplete, but that what she
said was consistent with his own recollection of the interview.
(1) Respondent testified that the statement which he made about
being singled out as a Steele supporter was referring to the West
Shore School District being singled out and being investigated a lot
more than was necessary, rather than to the Respondent being
singled out as an individual.
uu. Respondent testified that he reported to the Board on more than one
occasion about his real estate dealings with Steele.
(1) Respondent testified that it would be impossible for him to say
when he reported his real estate dealings to the Board with relation
to Steele's conviction because he (Respondent) does not keep
such records.
(2) Respondent testified that he told the Board in a meeting about his
dealings with Steele in terms of Steele's real estate search.
(a) Respondent testified that Sayre may not have been present,
may not have heard, or may not recall that Respondent
made such disclosure to the Board.
(3) Respondent testified that he disclosed to the Board that a fee was
paid to the Respondent's firm as the result of a real estate
transaction involving Steele.
C. Documents
51. ID -1 is a copy of a document identified as a "sale- invoicing information &
commission disbursement form" that was used for the transaction involving the
purchase of the property at 107 South Street, Harrisburg, Pa., by Steele &
Hoffman (see, Finding 45 m).
a. ID -1 includes an entry in the blank labeled "Commission."
(1) The entry is handwritten.
(2) The entry consists of the amount of $6000 which is stricken, and
the amount of $5400 which is handwritten immediately above.
(3) Immediately below the entry is the handwritten notation, "(Paid by
Buyer)."
b. ID -1 also bears a notation, "$600 referral already sent to Century 21-
Brenneman ...."
c. In a block on the form labeled "Agent(s)' Base Commission Split," is a
handwritten notation, "$200 -to MAA for help."
Schubert, 98- 034 -C2
Page 35
52. ID -2 is a two page letter dated September 20, 1993 from William Gladstone,
Realtor, Commercial - Industrial Realty Company, to Charles Steele, Esquire,
Steele & Hoffman.
a. The letter pertains to the prospective purchase by Steele & Hoffman of
the property at 107 South Street, Harrisburg, Pa.
b. The letter indicates that the Steele & Hoffman acquisition price for the
property is $92,000, consisting of a purchase price of $85,000, a
commission to Commercial - Industrial Realty Company of $6,000, and a
commission to another unspecified agency of $1,000.
53. ID -6 consists of a one -page cover letter dated October 1, 1993 from Alvin H.
Blitz, Esquire, to Bill Gladstone, with a copy of an Agreement for Sale of Real
Estate between Johnna Seeton as Seller and Steele & Hoffman as Buyer for the
property at 107 South Street, Harrisburg, Pa.
a. The Agreement is dated September 29, 1993.
54. ID -9 is the settlement sheet for the sale of the property at 107 South Street,
Harrisburg, Pa., by Johnna L. Seeton, Seller, to Steele & Hoffman (see, Finding
45 I).
a. The settlement sheet lists the contract sales price as $85,000.
b. The settlement sheet lists only one commission, that being in the amount
of $6,000 to CIR paid from the Borrowers' funds at settlement.
55. ID -10 consists of a letter dated December 23, 1993 from Julie (Julia) Rhyner,
Office Manager of Steele & Hoffman to Mr. William Gladstone, Commercial -
Industrial Realty Company, and a check numbered 6079 from Steele & Hoffman
payable to William Gladstone in the amount of $1,000.00 (see, Finding 45 p).
a. The letter bears the designation, "Re: Finder's Fee," and states:
Dear Bill:
Please forward the enclosed funds to the following
individual as a finder's fee in connection with our search for real
estate in the Harrisburg area:
Daniel L. Schubert
418 Seventh Street
New Cumberland, PA 17170 -1925
If you have any questions, please call me.
Best regards this holiday season,
Julie Rhyner
Office Manager
b. Check number 6079 was signed by Steele (see, Findings 42 0o and 43
f)
c. Check number 6079 bears the description, "Harrisburg office."
Schubert, 98- 034 -C2
Page 36
56. ID -16 is a copy of both the front and back of Steele & Hoffman check number
6079.
57. ID -11 consists of check No. 30836 dated December 30, 1993, issued by
Commercial - Industrial Realty Company payable to Rothman, Schubert & Reed
in the amount of $1000, together with the check stub and a handwritten note
from Gladstone to the Respondent (see, Finding 45 u).
a. The check stub bears a handwritten notation, "Finders Fee from Steele
& Hoffman."
b. The handwritten note is undated, and states as follows:
Dan-
Charlie Steele asked that this be sent to RSR for the
efforts you provided in helping him to find a place in this
area.
Best wishes for a pleasant New Year.
Sincerely,
Schubert Exhibit B, at 3.
Bill Gladstone
58. ID -20 consists of the minutes of the West Shore School District which relate to:
the appointment of the firm Steele & Hoffman as Labor Counsel on November
15, 1990; the appointment and reappointment of Steele /Steele & Hoffman as
Solicitor on May 20, 1993, May 19, 1994, May 18, 1995, and May 16, 1996;
the Board's acceptance of the resignation of Steele and appointment of Timothy
J. Finkelston as Solicitor /Labor Counsel on January 16, 1997; and the Board's
reappointment of Timothy J. Finkelston as Solicitor /Labor Counsel on May 15,
1997 and May 21, 1998.
59. Schubert Exhibit A is a copy of the Indictment against Steele and Rhyner.
60. Schubert Exhibit B is a Report of Interview of Rhyner by State Ethics
Commission Special Investigator Gregory Curran, dated November 17, 1998
(see, Finding 43 j).
a. At page 3, the Report of Interview states, inter alia, the following:
Rhyner denied that Steele ever told her the $1,000
that was given to Schubert was a payoff for voting to
appoint Steele as the solicitor. Rhyner added she
questioned Steele on why Schubert was getting the money
because she did not believe he did anything to deserve it.
Rhyner related when she questioned Steele about the fee,
he told her it was the politically correct thing to do for the
school district. Rhyner stated nothing more was mentioned
about the matter.
Schubert, 98- 034 -C2
Page 37
61. Schubert Exhibit C is a portion of a Memorandum dated January 13, 1998 from
Tamara Reed, Special Investigator for the Commonwealth of Pennsylvania,
Department of the Auditor General, Office of Special Investigations, to Peter
Smith, Director, regarding an interview of Rhyner by Special Investigator Reed,
which interview is stated to have occurred on January 8, 1998 (see, Finding
43 k) .
a. At page 3, the Memorandum states, inter alia, the following:
Rhyner said Steele instructed her to send a $ 1000 check to
Sayre's wife as a "finder's fee ". Rhyner said, "Why? She
didn't do anything!" Rhyner said she thought this was
particularly unfair because Steele & Hoffman employees had
just been told they were not getting Christmas bonuses.
Steele said something like, "I know, but I want to keep
Larry happy." Either Rhyner or Diane Bufalini Maneski
wrote the check to Janet Sayre and mailed it... .
Schubert Exhibit C at 3.
62. Schubert Exhibit D is a portion of a Memorandum dated December 24, 1997
from Tamara Reed, Special Investigator for the Commonwealth of Pennsylvania,
Department of the Auditor General, Office of Special Investigations, to Peter
Smith, Director, regarding a discussion between Special Investigator Reed and
Rhyner, which discussion is stated to have occurred on December 23, 1997
(see, Finding 43 k).
a. At page 2, the Memorandum states, inter alia, the following:
Rhyner stated Superintendent Sayre's wife, Janet Green
Sayre, received a "finder's fee" from Steele & Hoffman for
the 107 South Street, Harrisburg, property purchase.
Rhyner could not remember the exact amount, but said it
was over $ 1,000. Rhyner said she remembered questioning
Steele about the check. Rhyner said she thought it was
"stupid" to call it a "finder's fee."
Schubert Exhibit D at 2.
63. Schubert Exhibit E is a Victim Impact Statement for the West Shore School
District which was filed with the District Court for the Western District of
Pennsylvania, related to overcharging of the West Shore School District by
Steele (see, Finding 47 z).
a. The Victim Impact Statement indicates that it was prepared by Dr. Larry
A. Sayre in the matter of United States v. Steele, Case No. 96 -67.
b. In response to the question, "How has your company /business been
affected by this crime ?" the Victim Impact Statement provides:
The defendant, Charles E. Steele, represented the West
Shore School District as Labor Counsel since November
1990 and Solicitor since July 1993. While under contract
to the District, Mr. Steele provided professional and
competent service. He proved to be an exceptionally
Schubert, 98- 034 -C2
Page 38
talented and skilled legal advisor who provided the District
with valuable advice and opinions.
As for his legal bills, such bills were reviewed monthly by
District administrative staff and approved by the Board of
School Directors at subsequent meetings. At no time,
including the period for which overbilling was alleged, did
the District notice any irregularities. On numerous
occasions, it appeared Mr. Steele did not charge the District
for all the services he provided in the period, and two
billings during the eight month time period in question
reflect a discount.
The Board of School Directors expressed satisfaction with
Mr. Steele's product and would likely have approved a pay
increase if requested and recommended by the
administration. Based on the processes and procedures in
dealing with Mr. Steele and without the benefit of having
heard all of the evidence presented to the jury, the West
Shore School District does not consider itself a victim of a
crime perpetrated by Mr. Steele. To the extent, however,
that the evidence proved the District was overbilled, it has
a duty to its taxpayers to recover those monies and take the
necessary steps to achieve this end.
The West Shore School District has lost a valuable resource;
yet, it has complied with the American system of
jurisprudence in that it both continued to employ Mr. Steele
after his indictment, based upon the belief in his innocence
until proven guilty, and accepted his resignation upon his
conviction. Ultimately, the District's primary obligation to
its taxpayers is to recover any proven overbillings. Based
on the evidence presented and Mr. Steele's conviction, the
District accepts the Court's conclusion that it was overbilled
as stated in the indictment and requests that it be permitted
to recover that amount in whatever manner the Court may
decide.
c. The Victim Impact Statement does not reference any specific
amount as having been lost by the School District. (Tr. at 152).
d. The Victim Impact Statement indicates that no civil action was
initiated by or on behalf of the West Shore School District with
relation to overbilling by Steele; that no income was lost as a
result of this crime; and that no additional taxes, penalties or
interest had been assessed against the School District as the result
of this crime.
e. The Victim Impact Statement bears the signature of the name
"Larry A. Sayre" and is dated January 28, 1997.
64. Schubert Exhibit F is a memorandum prepared by Tamara Reed ( "Reed "), Special
Investigator for the Commonwealth of Pennsylvania, Department of the Auditor
General, Office of Special Investigations, documenting her interview of the
Respondent on March 9, 1998 (see, Finding 46 e).
Schubert, 98- 034 -C2
Page 39
a. The memorandum is dated March 9, 1998.
b. The memorandum is from Reed to Peter Smith, Director.
c. The memorandum provides as follows:
This afternoon I interviewed West Shore School Director
Daniel Schubert at the District Administration Building. At
Schubert's request, Business Manager Gary Smith attended
our meeting and took notes.
Schubert said he has been on the school board since 1989.
He is currently "self- employed" teaching real estate at
private schools, and owns rental properties. He worked as
a real estate agent for Rothman, Schubert & Reed (RSR)
from 1974 to 12/31/94, and for Jack Gaughen's Cedar Cliff
Office from 1/1/95 to 7/97. His father, Charles Schubert,
is part owner of RSR. Gaughen handles all types of real
estate, while RSR predominantly handles commercial
properties.
Schubert said he did not know Charles Steele before
Steele's hiring as labor counsel. He said, "I never even
heard of him before that." He said he did he (sic) socialize
with Steele, nor did he ever receive tickets to sporting
events or anything else from Steele.
Schubert said he heard Steele was planning to open an
office in Harrisburg, so he called Steele to see if he could
help locate a property. Schubert worked for RSR at the
time. Schubert said, "I want to emphasize that I was not
his agent." He also said, "We had no agreement."
Schubert said he suggested several properties to Steele.
At some point, William Gladstone, of Commercial - Industrial
Realty Company (CIR), became involved. Schubert said he
"backed off" when it became apparent "Gladstone had
developed a relationship with Steele" and was handling the
matter. Schubert claimed he did not know how Gladstone
became involved, but admitted there was a referral fee.
Schubert said he never spoke to Gladstone, Janet Green
Sayre, or Chris Steele about the property transaction.
When asked how he became aware of the referral fee if he
had not been in contact with Gladstone, Schubert said he
did not remember. When asked if he had charged Steele a
fee for the work he had done, Schubert said he had not. He
said he never asked Steele for any money pursuant to this
deal. He said CIR paid RSR a referral fee. He could not
remember the amount or his percentage of it. When shown
a copy of the note from Gladstone to "Dan" at RSR,
Schubert claimed he did not remember receiving it.
Schubert said in a typical property transaction such as this,
there would be a 50/50 split of the referral fee between
RSR and the RSR agent. He also said referral fees are
usually not listed on Settlement Statements. When asked
Schubert, 98- 034 -C2
Page 40
why Janet Sayre's referral fee was included in the $6,000
commission listed on the Settlement Statement, but RSR's
was not, Schubert said, "You can't tell by looking at the
Settlement Statement that anything went to her." I agreed,
and explained there were other sources of information that
told us she had also received a referral fee. Schubert said
he never saw this particular Settlement Statement. He also
said even though there was a referral fee to RSR, there
probably would not be any 107 South Street file at RSR.
When asked again about the source of the referral fee,
Schubert said it went from Gladstone (CIR) to RSR. He said
either Gladstone or CIR would have decided to send a
referral fee, as well as the amount to send. When shown
a copy of the 12/23/93 letter from Julia Rhyner to
Gladstone, Schubert said he was riot aware the $1,000 had
come from Steele.
Schubert said he would have claimed his share of the
referral fee as income on his 1099. He said to his
knowledge, the 107 South Street property transaction was
not discussed at any board meetings; he admitted he never
brought it up. He said he thought it was ironic that after 23
problem -free years in real estate, he is now being
questioned about an old real estate transaction. He also
said we were taking up too much of their time with this,
and that we should just "get it overwith [sic] and let them
get on with the business of teaching their kids." He said he
wondered how long we knew of his involvement before we
asked to meet with him. I explained since he had not
volunteered the information, I only learned of his
involvement last Friday. With regard to Gary Smith's
"wasted time," I said, "With all due respect, you asked him
to be here and I consented. / did not ask him to be here."
At the conclusion of our discussion, Schubert said he
believed we were singling him out for an interview because
we were persecuting Steele's supporters. I informed him
that, until that moment, I was unaware he was a Steele
supporter. I also informed him it would now be duly noted
in my file - -along with his concerns.
65. Schubert Exhibits L and M are letters prepared by Sayre to the Victim/Witness
Coordinator at the United States Attorney's Office and to the Office of Special
Investigations at the Department of Auditor General respectively, which include
summaries of the West Shore School Board's actions as to obtaining restitution
for any amounts lost due to overbilling by Steele & Hoffman (see, Finding 47
in -
a. Schubert Exhibit L directed to the Victim /Witness Coordinator at the
United States Attorney's Office indicates that a copy of the West Shore
School District's Victim Impact Statement was attached.
b. Both letters reflect that copies were provided to the Board.
Schu 98- 034 -C2
Page 41
c. There is no indication on Schubert Exhibit L as to whether the attachment
was also provided to the Board.
III. DISCUSSION:
At all times relevant to this matter, the Respondent, Daniel Schubert (hereinafter
"Respondent" or "Schubert") has been a public official subject to the provisions of the
Public Official and Employee Ethics Law, Act 9 of 1989, Pamphlet Law 26, 65 P.S.
§401 et seq., as codified by the Public Official and Employee Ethics Act, Act 93 of
1998, Chapter 11, 65 Pa.C.S. §1101, et sea., which Acts are referred to herein as
the "Ethics Act."
The issue before us is whether Schubert violated Sections 3(a)/1 103(a) and
3(c)/1 103(c) of the Ethics Act as to the allegation that he accepted something of
monetary value, a real estate finder's fee, from the West Shore School District Solicitor
in return for his official action /vote to retain the services of the Solicitor.
Pursuant to Section 3(a)/1103(a) of the Ethics Act, a public official /public
employee is prohibited from engaging in conduct that constitutes a conflict of interest:
Section 1103. Restricted activities.
(a) Conflict of interest. - -No public official or public
employee shall engage in conduct that constitutes a conflict
of interest.
65 Pa.C.S. §1103(a).
The term "conflict of interest" is defined under the Ethics Act as follows:
Section 1102. Definitions.
"Conflict" or "conflict of interest." Use by a public
official or public employee of the authority of his office or
employment or any confidential information received
through his holding public office or employment for the
private pecuniary benefit of himself, a member of his
immediate family or a business with which he or a member
of his immediate family is associated. The term does not
include an action having a de minimis economic impact or
which affects to the same degree a class consisting of the
general public or a subclass consisting of an industry,
occupation or other group which includes the public official
or public employee, a member of his immediate family or a
business with which he or a member of his immediate
family is associated.
65 Pa.C.S. §1102.
Section 1103(a) of the Ethics Act prohibits a public official /public employee
from using the authority of public office /employment or confidential information
received by holding such a public position for the private pecuniary benefit of the
public official /public employee himself, any member of his immediate family, or a
business with which he or a member of his immediate family is associated.
Schubert, 98- 034 -C2
Page 42
Section 1103(c) of the Ethics Act provides, inter alia, that a public official /public
employee shall not solicit or accept anything of monetary value based upon any
understanding that his vote, official action or judgment would be influenced thereby:
65 Pa.C.S. §1103(c).
facts.
Section 1 103. Restricted activities.
(c) Accepting improper influence. - -No public official,
public employee or nominee or candidate for public office
shall solicit or accept anything of monetary value, including
a gift, loan, political contribution, reward or promise of
future employment, based on any understanding of that
public official, public employee or nominee that the vote,
official action or judgment of the public official or public
employee or nominee or candidate for public office would
be influenced thereby.
Having noted the issue and applicable law, we shall now summarize the relevant
The Respondent served as a Member of the Board of the West Shore School
District from the Spring of 1989 until December 2, 1999. In his private capacity,
Respondent was at all times relevant to these proceedings a real estate agent.
Respondent was active in the real estate business for approximately 24 years,
beginning in 1974. Respondent is currently self - employed managing rental properties,
and he also teaches real estate courses for various schools.
The "real estate finder's fee" that is at issue in this case was paid to the
Respondent during his tenure on the Board by the School District's Solicitor, the law
firm of "Steele & Hoffman."
The law firm of Steele & Hoffman first became involved with the West Shore
School District in 1990 when the firm was appointed Labor Counsel to the School
District. At that time, Steele & Hoffman had its main office in Pittsburgh,
Pennsylvania, and another office in Quakertown which is in Bucks County,
Pennsylvania. The firm did not have an office in Central Pennsylvania.
The Respondent testified that when the Board interviewed Charles Steele
( "Steele "), a partner of Steele & Hoffman, as to the position of Labor Counsel, the
issue of accessibility arose because of the locations of the Steele & Hoffman offices.
Respondent testified that Steele impressed the Board with his accessibility, particularly
through his use of technology to stay in touch. Respondent also testified that during
the 1990 interview process, Steele indicated that he intended to open a third office
in the Central Pennsylvania area.
Steele provided a similar account of the 1990 interview. Before we review
Steele's testimony, however, we would parenthetically note that in December of
1996, Steele was convicted of mail fraud and obstruction of justice. Steele's
conviction was related to an overbilling scheme as to clients which included the West
Shore School District. Steele's conviction has relevance in this case for certain limited
purposes. Obviously, it may impact upon Steele's credibility, and it also lays a
necessary foundation for various actions by the West Shore School Board and
administration, as set forth in the Findings. However, due to concerns raised by the
Respondent as to perceptions of "guilt by association" (see, e.q., Post - Hearing Brief
of Respondent Schubert at 11 -12), and so that there will be no misunderstanding, we
Schubert, 98- 034 -C2
Page 43
shall state as directly and emphatically as possible that Steele's conviction in no way
reflects upon the Respondent. Having so stated, we shall resume our recitation of the
facts
Steele testified that in 1990, when he interviewed with the West Shore School
District for the position of Labor Counsel, he suggested to the Board that he was
thinking of growing in the area, getting more school districts as clients, and opening
an office. Steele testified that he told other school districts the same thing.
On November 15, 1990, Steele & Hoffman was selected by the West Shore
School Board to serve as the School District's Labor Counsel. The vote was 8 to 0,
with the Respondent present and participating in the vote.
Dr. Larry A. Sayre, Superintendent of the West Shore School District and a
friend of Steele's, testified that beginning in approximately 1991, he had a number of
discussions with Steele about Steele's interest in establishing an office in the area.
Sayre testified that Steele was trying to make a decision as to whether to come to the
Central Pennsylvania area based upon the ability to attract clients in the area. Sayre
testified that within the three year period following Steele's appointment as Labor
Counsel for the West Shore School District, Steele was doing work for the
Susquehanna School District, the Harrisburg School District, the Middletown Area
School District, and an Intermediate Unit, in addition to doing some work at Lewistown
and Selinsgrove.
Karen Bringe Gokay ( "Gokay "), a former associate attorney with Steele &
Hoffman, testified that from the time that she first interviewed with the firm in the
spring of 1992 for a clerkship, she was informed of the plans of Steele & Hoffman to
expand its practice. Gokay testified that the firm's plans for expansion included not
only increasing the number of lawyers in the firm, but also expanding the geographic
location of the firm's clients, particularly with regard to the Central Pennsylvania area.
Gokay testified that the firm's plans to acquire an office in Central Pennsylvania were
not only discussed among the firm's attorneys and staff, but were also discussed with
officials from various school districts.
The testimony before this Commission establishes that after 1990, Steele &
Hoffman's work in the midstate increased, and the firm's attorneys found the
difficulties of traveling and working in the midstate without a midstate office to be
increasingly burdensome. Gokay testified that before Steele & Hoffman acquired a
Harrisburg office, the difficulties of traveling and working in Central Pennsylvania were
"brutal." (Tr. at 395).
In the Spring of 1993, the West Shore School Board decided to consolidate the
positions of Labor Counsel and Solicitor. After having served three years as Labor
Counsel to the West Shore School District, Steele & Hoffman was invited to compete
for the consolidated Solicitor position.
Steele & Hoffman applied for the consolidated Solicitor position with the West
Shore School District. Four applicants, including Steele /Steele & Hoffman, were
interviewed. The Respondent was present and participated in the interviews of the
applicants.
Sayre testified that in conducting the interviews, the Board used scripted
questions. Sayre testified that he did not remember any non - scripted questions
"standing out" that the Respondent or any other Board Member asked.
Schubert, 98- 034 -C2
Page 44
Respondent similarly testified that the administration supplied the Board
Members with a packet of information which included a list of potential questions that
the Board Members could ask during the interviews. Respondent testified that he did
not recall any questions being asked that were not in the packet supplied to the Board
Members by the administration. Respondent testified that he did not recall asking any
questions during the interviews and that any of the questions in the packet that he
was interested in were asked by other Board Members.
At the conclusion of the interviews, the Board Members who were present,
including the Respondent, reached consensus as to the selection of Steele /Steele &
Hoffman.
On May 20, 1993, Steele /Steele & Hoffman was appointed Solicitor to the West
Shore School District by a 5 to 2 vote. The Respondent did not attend that Board
meeting, and he did not participate in that vote to appoint Steele /Steele & Hoffman as
Solicitor. It was emphasized during Respondent's side of the case that Respondent
did not attend this meeting despite the fact that he knew that the vote was not going
to be a unanimous vote for Steele /Steele & Hoffman.
Both Steele and Dr. Sayre testified that it was after the appointment of
Steele /Steele & Hoffman as Solicitor to the West Shore School District that Steele
started actively pursuing and looking at properties for an office in the midstate.
Steele testified that the Board never expressed any condition that Steele have
an office in Central Pennsylvania or West Shore specifically.
Sayre testified that neither the West Shore School Board nor Sayre required
Steele to establish an office in the area.
Steele testified that he spoke to three different Realtors with regard to seeking
an office property for Steele & Hoffman, specifically: the Respondent; Janet Sayre,
wife of Dr. Sayre; and William Gladstone ( "Gladstone "), a commercial Realtor with
Commercial - Industrial Realty Company ( "CIR "), who located the property which Steele
& Hoffman ultimately purchased.
Steele acknowledged that but for his contact with the Respondent as a Member
of the West Shore School Board, he would not have sought out the Respondent to
look for properties for Steele & Hoffman. Steele testified that he (Steele) approached
the Respondent about purchasing a property in the mid - state. Initially, Steele testified
that this occurred some months after he obtained the solicitorship for the West Shore
School District. Steele subsequently testified that the Respondent may have been
providing him with packets of materials and properties before the appointment to the
solicitorship.
Respondent provided varying testimony as to who initiated the first contact
between Respondent and Steele about searching for a property. Respondent initially
testified on direct examination that it was he (Respondent) who approached Steele
about finding Steele a property. Respondent subsequently testified on cross -
examination that he did not recall whether he contacted Steele first or Steele
contacted him first. Respondent testified that he began efforts to locate a property
for Steele before Steele /Steele & Hoffman was appointed Solicitor to the West Shore
School District.
It is undisputed that there was no "buyer- agent" agreement between the
Respondent and Steele as to the property search.
Schubert, 98- 034 -C2
Page 45
Steele testified that the Respondent did do work in an attempt to find an office
for Steele & Hoffman. Steele testified that the Respondent interviewed him relative
to purchasing a property, supplied him with packets of materials on various properties,
and did extra work with regard to one particular property which Respondent
recommended as an income property with owner financing and room for growth, but
which Steele disapproved of because of size. The Respondent never physically toured
any properties with Steele, although Steele testified that the Respondent offered to do
so.
Respondent's testimony as to the nature of the efforts that he made is similar
to the description provided by Steele. It is undisputed that Steele /Steele & Hoffman
did not successfully locate a property through the Respondent.
The second Realtor identified as having been involved in the search for property
for Steele & Hoffman was Janet Sayre. Steele did not enter into any buyer -agent
agreement with Janet Sayre. As a Realtor, Janet Sayre was primarily involved with
the sale of residential real estate. Janet Sayre showed some properties to Steele, and
Steele physically toured at least one of those properties. But Steele testified that he
considered all of the properties proposed by Janet Sayre to be out of his price range.
Janet Sayre referred Steele to William Gladstone, who deals exclusively with
commercial real estate. During direct examination, Gladstone testified that at or about
the time Janet Sayre referred Steele to Gladstone, she mentioned to Gladstone that
the Respondent was involved in the search for a commercial office property for Steele
& Hoffman.
Gladstone quickly found a property for Steele & Hoffman. Gladstone testified
that he compiled a list of prospective properties, reviewed them with Steele, and spent
a couple of hours driving around with Steele and showing him properties. Gladstone
initially handled an unsuccessful attempt by Steele & Hoffman to purchase a property
at 107 Locust Street, Harrisburg, Pennsylvania. When that attempt proved
unsuccessful, Gladstone subsequently handled the purchase by Steele & Hoffman of
the property at 107 South Street, Harrisburg, Pennsylvania.
It is clear from the testimony of all concerned that the property at 107 South
Street was located by Gladstone, that the work related to accomplishing the
transaction was accomplished by Gladstone, and that Respondent had no involvement
whatsoever as to that particular property.
Steele testified that when he was talking to Gladstone about tendering an offer
through Gladstone, he told Gladstone, "I have two other people working for me, and
I'd like to see them rewarded in some way, if you don't mind." (Tr. at 56; 87 -88).
Steele testified that Gladstone informed him that Janet Sayre would be compensated
pursuant to an existing arrangement which Gladstone had with her. Steele testified
that he told Gladstone to give the Respondent $1,000.
Gladstone testified that Steele told him that the Respondent did work for Steele,
and that Steele thought it fair to pay the Respondent. Gladstone testified that the
$ 1,000 figure was determined by Steele.
On or about September 20, 1993, Gladstone wrote a letter to Steele (ID -2)
regarding the prospective purchase of the 107 South Street property. The letter
indicated that the Steele & Hoffman acquisition price would be $92,000, consisting
of a purchase price of $85,000, a commission to CIR of $6,000, and a commission
to another unspecified agency of $1,000. Gladstone testified that the $6,000
commission to CIR included a referral fee to Janet Sayre. Gladstone confirmed that
Schubert, 98- 034 -C2
Page 46
the referral fee, in the amount of $600, was governed by a pre- existing arrangement
between Gladstone and Sayre as to referrals. Gladstone further testified that the
words "$1,000 commission to other agency" referred to the $1,000 that Steele told
Gladstone he (Steele) wanted to be paid to the Respondent at Rothman Schubert &
Reed (RSR) Realtors for services previously rendered.
In addition to talking to Gladstone about paying the Respondent, Steele had one
or more conversations to that effect with the Respondent himself. Steele testified that
after Steele & Hoffman had located the 107 South Street property through Gladstone,
and a decision had been made to buy it, Steele told the Respondent that he (Steele)
would like to pay the Respondent for his (Respondent's) efforts. Similarly, Respondent
testified that in late 1993, Steele indicated to the Respondent that he (Steele) thought
that he had found a property but that he wanted to pay Respondent for Respondent's
efforts.
Steele testified that the Respondent told Steele that it was not necessary for
Steele to give him (the Respondent) a fee. Steele testified that despite the
Respondent's indication that it was not necessary for Steele to give the Respondent
a fee, Steele insisted upon paying the Respondent. Steele testified that the
Respondent said, "If you're going to do anything, send it to my company." (Tr. at 64;
89). Steele testified that he did not think he ever had another discussion with the
Respondent regarding Steele & Hoffman paying the Respondent.
Respondent also testified that he told Steele that it was not necessary for
Steele to pay him. Respondent stated that Steele then responded that he (Steele) still
wanted to pay the Respondent, and Respondent again stated that was not necessary
and that he (Respondent) did not want Steele to do that.
On direct examination, Respondent stated that there was a follow -up
conversation, where Steele insisted that he was going to compensate Respondent for
the efforts that Respondent had performed on his behalf, and inquired as to how he
would do that. Respondent stated that there was a brief discussion that while a
payment was not necessary, if Steele was going to make such a payment, it would
have to go to the Respondent's broker. On cross - examination, Respondent testified
that he could not recall whether there was such a subsequent conversation or only one
conversation.
Settlement on the 107 South Street property was completed on November 1,
1993. The closing documents (ID -1; ID -9) reflect a $5,400 commission to CIR, a
$600 referral fee to Century 21 Brenneman, and $200 paid by Gladstone to a fellow
agent who assisted Gladstone when Gladstone had to be out of town. None of the
closing documents reflect any payment to the Respondent or RSR.
Approximately seven weeks after the closing on the 107 South Street property,
Gladstone received a letter dated December 23, 1993 from Julia Rhyner, who at that
time was the Office Manager of Steele & Hoffman. Enclosed with the letter was a
Steele & Hoffman check. These documents are in evidence as ID -10 and ID -16.
The letter, which was signed by Julia Rhyner, bore the designation, "Re:
Finder's Fee," and stated as follows:
Dear Bill:
Please forward the enclosed funds to the following individual as a
finder's fee in connection with our search for real estate in the Harrisburg
area:
Schubert, 98- 034 -C2
Page 47
Dan-
Daniel L. Schubert
418 Seventh Street
New Cumberland, PA 1 71 70 -1 925
If you have any questions, please call me.
Best regards this holiday season,
Julie Rhyner
Office Manager
The check which was included with the letter was a Steele & Hoffman check.
It was dated December 22, 1993, was payable to William Gladstone in the amount of
$1,000, and was signed by Steele.
Respondent testified that in his discussions with Steele as to such a payment,
he did not indicate to Steele that Gladstone or CIR ought to be involved. Respondent
testified that if the payment had come directly to his own broker, RSR, rather than
through CIR, such would have been proper under real estate practices. Steele denied
sending the money through Gladstone and his firm in order to mask or hide it.
There is no question that the note and check at ID -10 were issued as the result
of a direction from Steele. Rhyner's testimony as to the specific direction that was
given by Steele ( Finding 45 j) is at odds with Steele's testimony (Finding 44 oo(4)).
Gladstone testified that he handled the payment to the Respondent as if it was
a "normal adjunct" to the real estate sale that he had handled. Gladstone testified that
in accordance with real estate law, he signed the check over to his own broker, CIR,
and CIR then issued a check in the amount of $1,000 to the Respondent's broker,
Rothman, Schubert & Reed (RSR).
The CIR check was dated December 30, 1993. It was forwarded to RSR
together with a handwritten note from Gladstone to the Respondent. The note and
check are in evidence as ID -1 1. The check stub bears a handwritten notation, "Finders
Fee from Steele & Hoffman." Gladstone was not certain but testified that he believed
that the notation may have been on the original document forwarded to the
Respondent. Gladstone's note to the Respondent stated as follows:
Charlie Steele asked that this be sent to RSR for the efforts you
provided in helping him to find a place in this area.
Best wishes for a pleasant New Year.
Sincerely,
Bill Gladstone
Respondent provided varying testimony as to whether he received Gladstone's
note at ID -1 1. On direct examination, Respondent testified that the note was all of the
information that he got from Gladstone. On cross - examination, Respondent testified
that he could not testify whether he did or did not receive the note in ID -1 1, but that
it was highly unlikely that it was not forwarded to him.
Schubert, 98- 034 -C2
Page 48
There is no question that Respondent's broker, RSR, received the $ 1,000
payment and that Respondent received at.least a portion of it.
Respondent testified that until the payment from CIR was received, he did not
know that a closing had occurred. Respondent testified that he understood ID -1 1 to
mean that at Steele's request, Gladstone had agreed to pay a portion of the
commission paid to CIR to Rothman, Schubert & Reed as a finder's fee. Respondent
pointed out that the check was a CIR check, drawn from a CIR account, and made
payable to Rothman, Schubert & Reed. Respondent testified that the standard practice
in the real estate industry would be for the firm receiving the commission to pay out
any such amounts to other cooperating brokers. Respondent testified that he
remembered thinking what a "great guy" Gladstone was for sharing his commission.
It is clear that Steele had no contractual duty to pay the $1,000 which is in
question. However, the Respondent testified that he considered the payment to be
a normal payment for professional work and that he never considered it to be a gift.
Respondent testified that his broker did not treat the payment as a gift, but rather took
its share of the payment.
Steele testified that he believed that the Respondent deserved to be
compensated for the work that he had done and that the Steele & Hoffman payment
effectuated by check No. 6079 was not a gift.
Both Gladstone and Arthur D. Campbell, a commercial real estate broker who
testified as an expert witness, testified to the loose usage of the term "finder's fee"
in the real estate industry. The term may refer to a payment to someone tangentially
involved in a real estate transaction, or to someone who provides no services
whatsoever as to the transaction. Gladstone testified that he did not consider the
characterization of the $1,000 payment to the Respondent as a "finder's fee" to be
inappropriate.
Campbell testified that where there is no agreement in place, the payment of a
separate finder's fee by the Buyer to someone who did not find the real estate
ultimately purchased would be permitted but not required under real estate law.
Campbell further testified that real estate commissions are not always paid at the
closing and finder's fees are not required to be listed on Settlement Statements.
On May 19, 1994, May 18, 1995, and May 16, 1996, Respondent voted in
favor of re- appointing Steele /Steele & Hoffman as the School District's Solicitor.
Respondent testified that when he participated in these votes to retain Steele &
Hoffman, his continuing understanding was that the source of the funds that he had
received was Gladstone and CIR. Respondent testified that such continued to be his
understanding until March 9, 1998, when he was interviewed by Tamara Reed, a
Special Investigator for the Pennsylvania Department of the Auditor General.
Respondent testified that it was on March 9, 1998, that he was shown, for the
first time, the letter in evidence at ID -10. Respondent testified that he never saw nor
had access to ID -10 until that date, and that he was somewhat surprised when
Tamara Reed showed it to him. Tamara Reed testified that after being shown the
letter, Respondent stated that he was not aware that the $1,000 had come from
Steele.
Respondent and Steele have denied that the $1,000 payment in question was
intended to influence or reward the Respondent for his official actions, or actually did
such.
Schubert, 98- 034 -C2
Page 49
There was conflicting testimony by Sayre and the Respondent as to whether the
Respondent disclosed in any Board proceeding his involvement in searching for a
property for Steele & Hoffman or his receipt of a payment as the result of a transaction
involving Steele.
Additional evidence was presented through the testimony of Respondent, Dr.
Sayre, and Daniel Delaney, a Member and the current President of the West Shore
School Board, regarding Respondent's actions when issues were discussed by the
Board as to the alleged overbilling by Steele. Evidence was produced, and indeed the
Respondent does not deny, that he opposed a proposal by Delaney to escrow a portion
of Steele's fees to cover any alleged losses by the West Shore School District. This
occurred before the charges against Steele had been proven, and at a time when
various audits and internal checks at the School District had failed to produce any
evidence of overbilling.
Respondent did not oppose the submission of a Victim Impact Statement
(Schubert Exhibit E) after Steele's conviction.
Finally, we would note that character evidence was introduced through Dr.
Sayre who testified that the Respondent's reputation for character traits is
"outstanding" and that "He's looked on as a very principled individual that does his job
as a board member and does his homework and is a very thoughtful person in those
deliberations." (Tr. at 269). Sayre testified to the Respondent's reputation for
honesty and truthfulness as follows: "I don't know anyone who doesn't believe that
he is an honest man." (Tr. at 270).
Having summarized the above relevant facts, we must now determine whether
the actions of Schubert violated Sections 3(a)/1103(a) and 3(c)/1 103(c) of the Ethics
Act.
We initially note that at the close of the Investigative Division's case, there was
commentary by Respondent's Counsel as to whether he would be inclined to make a
motion in the nature of a motion for a directed verdict or a motion to dismiss. (Tr. at
263 -265). Counsel for Respondent appeared to recognize, and the Hearing Officer
confirmed, that a hearing officer for this Commission would not have the authority to
rule upon such a motion. Id. See, 51 Pa. Code §21.23(d) (regarding motions for
dismissal); 51 Pa. Code §21.26(c) (a motion that is filed immediately prior to or at
hearing which would involve a final determination is deferred and submitted to the
Commission as part of the record for final disposition of the case). Respondent did not
actually make the motion, and there is no need for this Commission to rule upon a
motion that has not been made. However, we would note that in this case, had the
motion been made at the hearing, we would have been inclined to review the entire
record in this matter.
In applying the evidence to the allegation that the Respondent violated Sections
3(a)/1103(a) and 3(c)/1103(c) by accepting a real estate finder's fee from
Steele /Steele & Hoffman in return for his official action /vote to retain the services of
Steele /Steele & Hoffman, we find a lack of clear and convincing evidence to support
a violation.
Clear and convincing evidence is "testimony that is so 'clear, direct, weighty,
and convincing as to enable the trier of fact to come to a clear conviction, without
hesitance, of the truth of the precise facts in issue. "' In Re: Charles E.D.M., 550 Pa.
595, 601, 708 A.2d 88, 91 (Pa. 1998) (Citation omitted).
Schubert, 98- 034 -C2
Page 50
There is, of course, no question that Steele directed that the $1,000 finder's fee
be paid to the Respondent, and that the payment was in fact tendered by Steele /Steele
& Hoffman through Gladstone and CIR, designated for the Respondent. Likewise,
there is no question that Respondent received at least a portion of that payment, and
that in the years that followed, the Respondent participated in his capacity as a West
Shore School Board Member in reappointing Steele /Steele & Hoffman as the School
District's Solicitor. However, the inquiry does not end there.
The allegation is that the payment was in return for Respondent's official
action /vote to retain the services of Steele /Steele & Hoffman as Solicitor. The
allegation is narrowly drawn, and due process requires that we not depart from the
allegation. Pennsy v. Department of State, 594 A.2d 845 (1991). Regardless of
whether the payment was earned, as the Respondent contends, or was not, as the
Investigative Division contends, there is insufficient evidence, circumstantial or
otherwise, to support a violation under the allegation that this payment was in return
for Respondent's official action /vote to retain the services of Steele /Steele & Hoffman
as Solicitor.
Even though Steele /Steele & Hoffman was not legally required to pay the
$1,000 "finder's fee," it is entirely plausible based upon the testimony before us that
the payment was made in recognition of work that Respondent had performed as a real
estate agent, rather than in return for his official action /votes as a West Shore School
Board Member. It is equally plausible that the Respondent perceived the payment as
being in recognition of his work as a real estate agent.
The comparison of the amount of Respondent's payment ($1,000) to that
received by Janet Sayre ($600) is of no consequence, since Janet Sayre's referral fee
was fixed by a pre- existing arrangement with Gladstone.
Did the Respondent know that the funds emanated from a separate payment
from Steele & Hoffman, or did he believe that it was a sharing of the commission
received by CIR? If there was evidence to establish that the payment was in return
for the Respondent's official action /vote, it really would make no difference how the
funds were provided. Even a shared commission at the direction of Steele would be
sufficient to support a violation. But the evidence is not so "clear, direct, weighty, and
convincing" as to enable this Commission to come to a "clear conviction, without
hesitance," that the payment was in return for Respondent's official action /vote, or
that the Respondent understood it to be such. (See, In Re: Charles E.D.M., supra).
The characterization of the payment as a "finder's fee," and the absence of any
mention of such a fee in the closing documents, has been adequately explained by the
testimony of Gladstone and Campbell.
As for the Respondent's votes to pay Steele & Hoffman bills, or his objections
to escrowing Steele & Hoffman fees to cover possible overbilling by Steele & Hoffman
at a time when such overbilling had not yet been proven to have occurred, such
circumstances do not constitute clear and convincing evidence as to the allegation that
the finder's fee paid to the Respondent in 1993 was in return for Respondent's official
action /vote to retain the services of Steele /Steele & Hoffman as Solicitor. Moreover,
there is no evidence that Respondent attempted to thwart audits or reviews as to the
overbilling issue, or the submission of a Victim Impact Statement following Steele's
conviction which, though worded in such a way as to show appreciation for Steele,
nevertheless accepts the conclusion that the School District was overbilled and
requests that the School District be permitted to recover that amount.
Schubert, 98- 034 -C2
Page 51
Based upon all of the above, we find a lack of clear and convincing evidence to
support a violation of Section 3(a)/1103(a) or 3(c)/1103(c) of the Ethics Act with
regard to the allegation that the Respondent accepted the $ 1,000 "finder's fee" from
Steele /Steele & Hoffman in return for the Respondent's official action /vote to retain
the services of Steele /Steele & Hoffman as Solicitor.
The Respondent has asked this Commission to initiate an investigation into
Respondent's claim, raised in his Answer to the Investigative Complaint, that the
charges against him were initiated in bad faith. See, Post - Hearing Brief of Respondent
Schubert, at 19. We do not find any bad faith on the part of the Investigative Division
in investigating and prosecuting this matter. The circumstances surrounding the
payment in question suggested improper conduct by the Respondent. The fact that
following a full hearing in the matter, a violation has not been found does not mean
that the Investigative Division acted in bad faith in pursuing the matter.
Accordingly, this Commission shall not initiate an investigation into
Respondent's claim that the charges against him were initiated in bad faith.
CONCLUSIONS OF LAW:
1. Daniel Schubert ( "Schubert"), as a Member of the Board of the West Shore
School District, was at all times relevant to this case a public official subject to
the provisions of the Public Official and Employee Ethics Law, Act 9 of 1989,
Pamphlet Law 26, 65 P.S. §401 et seq., as codified by the Public Official and
Employee Ethics Act, Act 93 of 1998, Chapter 11, 65 Pa.C.S. §1101, a sea.,
which Acts are referred to herein as the "Ethics Act."
2. Based upon a lack of clear and convincing evidence, Schubert did not violate
Section 3(a)/1103(a) of the Ethics Act with regard to the allegation that he
accepted a real estate finder's fee from the School District Solicitor in return for
his official action /vote to retain the services of the Solicitor.
3. Based upon a lack of clear and convincing evidence, Schubert did not violate
Section 3(c)/1103(c) of the Ethics Act with regard to the allegation that he
accepted a real estate finder's fee from the School District Solicitor in return for
his official action /vote to retain the services of the Solicitor.
In Re: Daniel Schubert
File Docket: 98- 034 -C2
Date Decided: 4/12/00
Date Mailed: 4/28/00
ORDER NO. 1154
1. Daniel Schubert ( "Schubert"), as a Member of the Board of the West Shore
School District, did not violate Section 3(a)/1103(a) of the Public Official and
Employee Ethics Law, Act 9 of 1989, as codified by the Public Official and
Employee Ethics Act, Act 93 of 1998, Chapter 11, which Acts are referred to
herein as the "Ethics Act," with regard to the allegation that he accepted a real
estate finder's fee from the School District Solicitor in return for his official
action /vote to retain the services of the Solicitor, based upon a lack of clear and
convincing evidence.
2. Schubert did not violate Section 3(c)/1103(c) of the Ethics Act with regard to
the allegation that he accepted a real estate finder's fee from the School District
Solicitor in return for his official action /vote to retain the services of the
Solicitor, based upon a lack of clear and convincing evidence.
BY THE COMMISSION,
un w u etw
DANEEN E. REESE, CHAIR
Schubert, 98- 034 -C2
Page 33
JJ
Respondent stated that he posed two reasons opposing the escrow of
funds: (1) that internal checks and external audits produced no evidence
of overbilling; and (2) that the Board owed Steele the right of due
process.
kk. Respondent testified that the internal checks performed by the West
Shore School District indicated that not only was the District not
overbilled, but in some cases, it was underbilled.
II. Respondent testified that audits by the Auditor General's office and by
a private auditor failed to produce evidence of any overbilling in West
Shore School District.
mm. Respondent testified that he may have talked at the Board's executive
session(s) about the concept of a recovery fund.
(1) Respondent stated that he is very familiar with and teaches his
students about the Real Estate Recovery Fund, which is a fund
that compensates members of the public who have suffered losses
at the hands of real estate licensees, but who are unable to
collect.
nn. Respondent testified that it was the consensus of the Board that it would
be improper to require an escrow of funds.
(1) Respondent testified that his recollection is that other Board
Members agreed with him.
oo. Respondent testified that Steele was present for some discussions on the
escrow issue and was not present for others, but that he (Respondent)
could not recall for which discussions Steele was present.
pp. Respondent testified that he did not recall there being any demand for a
vote at the time of the discussion of the escrowing of the fees.
(1) Respondent testified that he did not remember anytime during his
tenure on the Board when a vote was called for and the Board
Member asking for it was not given the courtesy of the vote.
(2) Respondent testified that he had no recollection of Steele asking
the Board not to take a vote and stating that he would take care
of the issue other ways.
Respondent testified that he supported the submission of the West Shore
School District's Victim Impact Statement (Schubert Exhibit E) and Dr.
Sayre's letters in evidence as Schubert Exhibits L and M.
rr. Respondent testified that the Victim Impact Statement was discussed
extensively at more than one meeting of the Board.
q q.
(2) Respondent testified that he could have discussed with the West
Shore School Board whether the legal profession has a similar fund
that would be available to the School District.