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HomeMy WebLinkAbout1153 HoltIn Re: Ronald Holt 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- 010 -C2 Order No. 1153 4/12/2000 4/28/2000 This is a final adjudication of the State Ethics Commission. Procedurally, the Investigative Division of the State Ethics Commission conducted an investigation regarding a possible violation of the Public Official and Employee Ethics Law, Act 9 of 1989, P.L. 26, 65 P.S. §401 et seq., by the above -named Respondent. At the commencement of its investigation, the Investigative Division served upon Respondent written notice of the specific allegations. 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. Effective December 15, 1998, Act 9 of 1989 was replaced by the Public Official and Employee Ethics Act ( "Ethics Act "), Act 93 of 1998, Chapter 11, 65 Pa.C.S. §1101 et seq., which codified Act 9 of 1989 and provides for the completion of pending matters under that Act. This adjudication of the State Ethics Commission 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. I. ALLEGATION: That Ronald Holt, a public official /public employee, in his capacity as a Revenue Auditor for the Pennsylvania Department of Revenue, Bureau of Audits, violated Sections 3(a) and 5(b) of the State Ethics Act (Act 9 of 1989) when he used the authority of his office for a private pecuniary benefit by performing auditing services for Farmer's Training Center during his regular work hours for the Department of Revenue; when he failed to Holt, 98- 010 -C2 Page 2 report on Statements of Financial Interests for the 1994, 1995 and 1996 calendar years income received from that company and from his private accounting business; and when he failed to report his ownership of Ronald Holt Accounting. II. FINDINGS: A. Pleadings 1. On March 27, 1998, a letter was forwarded to Ronald Holt, by the Executive Director of the State Ethics Commission informing him that a full investigation was being commenced. a. Said letter was forwarded by certified mail, no. P 487 031 982. b. The domestic return receipt bore the signature of Ronald Holt, with a delivery date of March 31, 1998. 2. Ronald F. Holt was employed as a Revenue Field Auditor with the Pennsylvania Department of Revenue on July 25, 1980, until August 26, 1997. a. Holt was promoted from Revenue Field Auditor 1 to the position of Revenue Field Auditor 11 on February 5, 1982. 3. Holt was assigned to the Department of Revenue's Philadelphia office, located at 1400 Spring Garden Street, from 1980 to 1985. a. Holt was reassigned to the Department of Revenue's Brookhaven office, located at 4600 Edgemont Avenue, from 1985 to 1997. 4. Holt was assigned to work a 37.5 hour work week during his term of employment for the Department of Revenue. a. Holt's daily schedule of work hours were from 8:30 a.m. to 5:00 p.m. with one hour for lunch. 5. Holt's duties as Revenue Field Auditor 11 included the following essential job functions: a. Examines and researches audit information. b. Schedules the audit. c. Travels to the audit site. d. Conducts a pre audit and post audit conference. e. Analyzes books and records. f. Documents the audit findings. g. Prepares a written audit narrative. h. Completes and assembles the audit package and appropriate forms. Provides training. j. Attends training. Holt, 98- 010 -C2 Page 3 k. Interprets tax laws and regulations. Leads a team of auditors. m. Makes work assignments on an audit. n. Coordinates the audit. 6. On September 4, 1996 Holt reported off sick from his Revenue Field Auditor position at the Pennsylvania Department of Revenue. a. Holt used 7.5 hours sick leave on September 4, 1996. 7 On September 27, 1996 Holt reported on his weekly activity report as working from 8:30 a.m. to 5:00 p.m. at his Revenue Field Auditor position with the Department of Revenue. a. Holt reported 3.5 hours at Health Care Services and 4.0 hours at Great Atlantic Health Care. b. Holt was compensated for working 7.5 hours by the Department of Revenue on September 27, 1996. 8. Holt reported compensation in addition to his Commonwealth compensation on his 1995 Pennsylvania State Personal Income Tax Return filed on April 22, 1996, but the amount reported did not correspond to the 1099 Form prepared by Farmers Training Center and did not match the amount of the checks paid to Holt in 1995. a. The amount reported by Holt was $3,000.00 b. The total amount of checks received as income was $2,500.00. c. Holt did not identify FTC as the source of the compensation. 9. Holt filed Code of Conduct forms on 4/18/95, for calendar year 1994; 5/22/96 for calendar year 1995; and 4/25/97 for calendar year 1996. a. The documents contained Ronald Holt's signature along with the date the form was prepared. 10. Holt filed with the Department of Revenue, State Ethics Commission Statements of Financial Interests for the 1994, 1995 and 1996 calendar years. 11. Holt was terminated from his position as Revenue Field Auditor 11. 12. The reasons for Holt's termination cited by the Department of Revenue are as follows: a. For engaging in supplementary employment without approval. Our records indicate that you did not request, nor receive, approval to engage in supplementary employment as required by the Standards of Conduct for Employees of the Department of Revenue. It was determined that you served as an Accountant for a Training Center in Philadelphia. You also represented this taxpayer in dealings with the Department of Revenue also a violation of the above referenced standards. Holt, 98- 010 -C2 Page 4 b. For completing Local, State and Federal tax returns for the Training Center which is in violation of the Standards of Conduct for Employes of the Department of Revenue. c. For falsifying work papers by stating that you were working or that you were on sick leave at times you were engaged in your supplementary employment which is in violation of the Standards of Conduct for Employes of the Department of Revenue. d. For failure to properly complete personal income tax returns for tax years 1994 and 1995 and pay valid taxes due. The tax return submitted for 1994 did not include all income received from your supplementary employment. The tax return for 1995 did not include documentation for all income claimed. The Standards of Conduct for Employes of the Department of Revenue require you comply with all tax laws and regulations by filing complete tax returns and promptly paying any valid tax due. e. For falsification of Code of Conduct Statement of Financial Interests and State Ethics Act Statement of Financial Interests forms for 1995, 1996 and for 1997. None of the referenced forms contained information concerning your outside employment. B. Testimon 13. Lillian Johnson Farmer is the Executive Director of Farmer's Training Center (FTC), an employment agency and training program. a. In 1994, FTC was awarded a state funded contract through the Private Industry Council (PIC) to issue readiness /job search skills to people on welfare. b. FTC training consisted of job readiness, retention skills, job search skills, and skills augmentation for typing and computer input. c. Farmer entered into an agreement with Holt for him to provide financial services for FTC. (1) Farmer needed Holt to handle billing, payroll taxes, and quarterly reports. (2) Farmer initially paid Holt $350.00, then later $500.00 per month plus expenses. (3) Holt performed other services for FTC for which he received additional compensation. (4) Several checks written by Farmer to Holt for services had the notation "accounting" or "acct" to designate that Holt was providing accounting services. (5) When Farmer attended PIC meetings involving financial matters, Holt would accompany her. (a) Such meetings were held at PIC offices. (b) Such meetings were scheduled between 9:00 a.m. and 5:00 p.m., Monday through Friday. Holt, 98- 010 -C2 Page 5 g. (6) Holt at times was present during FTC office hours which were 9:00 a.m. to 5:00 p.m., Monday through Friday. (a) Holt did not have set hours to work at FTC. (b) Holt was present at FTC on a weekly basis. (1) The frequency of Holt's weekly attendance was several times a week. For 1994 and 1995, Holt prepared the tax 1099's for FTC. (a) Holt was the only person handling the financial matters of FTC in 1994. (7) 14. Albert E. Taylor is the Chief, Labor Relations Division, Pennsylvania Department of Revenue. a. Taylor is involved in disciplinary action taken against Revenue employees. b. Taylor is knowledgeable about Revenue's practices, procedures, and leave policies. c. The Labor Relations Division administers the supplementary employment program for Revenue. d. Holt acknowledged receiving a copy of Revenue's Standards of Conduct in 1985 and 1997. e. Holt would not sign his job description for February, 1997. (1) Holt signed his other job descriptions: January, 1995; August, 1994; and August, 1997. f. Revenue's Standards of Conduct Manual was not revised between 1985 and 1997. (1) The Manual sets forth the requirement that Revenue employees must obtain prior approval before engaging in supplemental employment. A Revenue employee becomes subject to disciplinary action by engaging in supplemental employment without obtaining approval from Revenue. h. Engaging in certain activities by Revenue employees is prohibited: (1) Appearances on behalf of taxpayers; (2) Investigative or detective work; (3) Use of taxpayer lists, other than for Revenue duties; and (4) Preparation of federal, state, or local tax returns for individuals other than the immediate family members of the Revenue employee. A request by a Revenue employee to do payroll journal and payroll taxes would not be approved. Holt, 98- 010 -C2 Page 6 J. A request by a Revenue Field Auditor 2 to do work as an accounting consultant would not be approved. k. Holt never filed a request to engage in supplementary employment with Revenue. I. In Revenue, blank Financial Interests Statements (FIS) forms are distributed by the Personnel Director to all employees who are required to file. m. As to the FIS forms signed and dated by Holt on April 18, 1995, April 25, 1996, and April 25, 1997, no sources of income, other than Revenue, were reported. n. Taylor sat on a review committee as to FIS's. (1) Filed FIS's are reviewed to ensure completion. (2) FIS's are cross - checked as to income to verify that an employee completed a supplementary employment form. (a) If no supplementary employment form was completed, the employee would be questioned and might be subject to disciplinary action. o. A Weekly Status Report is filed a week in advance by a Revenue Auditor so that the supervisor or office manager knows where to contact the Auditor, if necessary. P. q. (1) A Weekly Report is completed by the Auditors after the fact to show what work was done. In a pre - disciplinary fact - finding conference with Holt on July 24, 1997, Holt admitted that he performed accounting and tax services for FTC. On October 20, 1998, a proceeding was held as to Holt. r. Holt was terminated from employment with Revenue by letter dated August 25, 1997, from the Secretary of Revenue. 15. Michael A. Vasaturo is employed by Revenue as a Revenue Enforcement Collections Agency in the Bureau of Collections and Taxpayer Services. a. Vasaturo worked on FTC as a case involving withholding tax delinquency. b. ID -10 is the Collection History Display for FTC. c. Vasaturo had contact with Lillian Farmer and accountants at FTC. (1) Vasaturo received a call from Holt on September 28 who advised that some payment would be made on the Farmer's account. 16. Anthony Triolo is employed as the Director of Account Management of the Philadelphia Work Force Development Corporation, formerly known as Private Industry Council (PIC) of Philadelphia. Holt, 98- 010 -C2 Page 7 a. Between 1994 and 1996 Triolo was the PIC Controller responsible for the books and accounting of the organization with oversight as to payments to vendors /subcontractors. b. PIC subcontracts for training that it seeks to have performed. (1) Training providers make program and financial submissions to PIC. (2) Audits were performed on the records of providers. (3) FTC was one of the providers that did training for PIC. c. A vendor contracting with PIC is required to submit a list of the training people and employees. d. Triolo became familiar with Holt who presented himself as the accountant for FTC. (1) Holt attended meetings between PIC and FTC. e. Meetings occurred at PIC, attended by Holt on behalf of FTC. (1) A meeting attended by Holt, lasting about one hour, occurred on September 7, 1994. (2) A meeting occurred on May 26, 1995, with Holt, Lillian Farmer, and Mike McCray from FTC, lasting one and half hours, concerning a contract modification and invoice review. A meeting occurred on September 4, 1996, with Holt which lasted approximately one hour. (4) An audit meeting transpired on September 27, 1996 with Holt that lasted approximately two hours. (3) 17. Louis A. Camagna is employed by Revenue as a Regional Manager, Bureau of Audits in the Philadelphia Region. a. Holt was employed in the Revenue Bureau of Audits since 1980 and at the Brookhaven office from 1985. b. A Revenue employee is not permitted to use sick leave for supplemental employment. (1) Revenue employees are paid for sick leave. c. The Weekly Status Report for Auditors reflects their location by time and place. (1) Holt's Weekly Status Report for September 6, 1995, reflects his working a full day as an Auditor at a specified location, Sturdee Ornamental. (a) Holt was listed at that same location on September 26, 1995, and September 28, 1995. Holt, 98- 010 -C2 Page 8 d. The Weekly Report of an auditor reflects time spent in the field, in the office, or on leave. (1) Holt's Weekly Report reflects on September 27, 1996, that he worked .5 hours at Health Care Services and 4 hours at Qual Med. (a) The Revenue Office Daily Attendance Record reflects that Holt was in the field the entire day on September 27, 1996. e. Holt called in sick for a full day, 7.5 hours, on September 4, 1996. 18. Holt performed at least some of his accounting work for FTC during Revenue work hours for which he also received compensation from the Commonwealth. 19. Robert P. Caruso is Deputy Executive Director and Director of Investigations of the State Ethics Commission. a. A preliminary inquiry was initiated against Holt by the Executive Director on January 26, 1998. b. On March 27, 1998, the Executive Director authorized the opening of a full investigation as to Holt. c. A certified letter was sent to Holt dated March 27, 1998, by the Executive Director advising Holt that an investigation was being commenced and specifying the allegations against him. d. By application of the Executive Director dated July 7, 1998, the Investigative Division applied for a 90 day extension as to the investigation of Holt. (1) The Commission granted a 90 day extension by Order of July 23, 1998. e. A second 90 day extension of September 21, 1998, was submitted by the Executive Director which was approved by the Commission in an Order of October 8, 1998. f. Due to information that was received, the Investigative Division recommended to the Executive Director that an amended notice be sent to Holt so that the allegations would be more inclusive. (1) An allegation was included that Holt was performing auditing services for FTC during Revenue work hours. (2) An allegation was included that Holt failed to report his ownership of Ronald Holt Accounting on his FIS. Amended allegations were sent to Holt in care of his attorney by letter of March 12, 1999. g. h. Letters as to the status of the investigation are sent to a complainant and a respondent on or within 90 day periods to comply with the Ethics Act. (1) Letters in the ninety day time frames were issued as to Holt. The Investigative Division received a letter from the Secretary of Revenue dated August 6, 1997, advising inter alia that Holt received income from Holt, 98- 010 -C2 Page 9 J. outside employment that was not reported on Holt's 1995, 1996, and 1997 FIS's. (1) The letter was received at the Commission on August 8, 1997. (2) Caruso discussed the letter with the Executive Director on or about August 9, 1997. (3) The next discussion by Caruso occurred on or about January 26, 1998. The letter from Revenue Secretary Judge was kept in Caruso's in- basket until January 26, 1998. k. Caruso talked to Taylor sometime after Judge's letter was received and then expected to receive documents that would enable the Investigative Division to make a determination as to what action to take. (1) No information was received from Revenue. (2) Matters involving FIS's in some cases are handled administratively as non - filings or deficient filings. (3) Matters involving FIS's may be opened as investigations if the failure to file or deficient filings were intentional acts. As to Holt, aside from the receipt of the letter from Revenue Secretary Judge, no representative of the SEC obtained any information or performed any investigative work prior to January 26, 1998. m. Information was received by the Investigative Division from Revenue between January 26, 1998, and March 27, 1998, concerning the preliminary inquiry of Holt. n. In conducting an investigation, the Investigative Division does not use documents that may be voluntarily supplied but obtains originals or certified copies on its own. 20. James McGrath is a Supervising Investigator of the State Ethics Commission. a. McGrath was the original investigator assigned to the Holt case on January 26, 1998. (1) McGrath had no information concerning Holt prior to January 26, 1998. (2) McGrath prepared a demonstrative chart from the exhibits of the Investigative Division. b. On February 16 or February 17, 1998, McGrath talked to Taylor to obtain information for the preliminary inquiry. (1) McGrath also had a phone conversation with Jullia Sheridan in Revenue on or about that date wherein he advised that the Investigative Division opened a preliminary inquiry on Holt. Holt, 98- 010 -C2 Page 10 21. Ronald Holt (Holt) was a Revenue Field Auditor 2 until his termination in August, 1997. a. Holt graduated from Temple University in 1995 with a degree in business. (1) Holt majored in accounting. (2) Holt attended graduate school. b. Holt, as a Revenue employee, did tax audits of people who owed taxes to the Commonwealth. c. Holt was dismissed from Revenue based upon Revenue's claim of five violations of its Standards of Conduct. d. Holt states that he did not do tax preparation work for FTC. (1) Holt testified that he did billing for PIC and some other accounting type work for Farmer. e. The miscellaneous income Holt received in 1994, 1995, and 1996 came from FTC. g. J. (1) Holt states that he did not receive a 1099 tax form from Farmer in either 1994, 1995, or 1996. f. Holt testified that he did not include miscellaneous income from FTC on his FIS because of confidentially in his position as an accountant. Holt states he did work for FTC as a consultant. h. Holt testified that he did not consider himself to be an accountant for FTC. (1) Holt admitted that as to a letter he sent concerning FTC Training Center, he used his letterhead as "Ron Holt Accountant" and held himself out as an accountant for FTC in that instance. Holt acknowledges that as to the FIS's that he filed for calendar years 1994 through 1996, he was aware that he received compensation from FTC but did not include the income on the FIS's. Holt admits including the $2,000 from FTC in his Pennsylvania Income Tax Return and Federal Income Tax Return as an item of 1099 income for the year 1996. k. Holt acknowledges signing for the Revenue Standards of Conduct but states that he was unaware of supplementary employment procedures. (1) Holt admits that he did not submit a request to Revenue for work at FTC. 22. Holt is not a credible witness. a. In cross examination, Holt was dilatory, evasive, non - responsive, and inconsistent in his responses. C. Stipulations Holt, 98- 010 -C2 Page 11 23. Check numbers 1469 for $500 on September 11, 1995; 1487 for $500 on September 22, 1995; 1564 for $125 on December 5, 1998; and 1579 for $100 on December 22, 1995 are four checks issued to Holt from FTC. a. Other exhibits are photocopies of checks where originals were not able to be obtained. D. Documents 24. ID -1, page 1 is the initiation of a preliminary inquiry as to Holt on January 26, 1998. a. Page 2 is the authorization to initiate an investigation as to Holt on March 27, 1998. b. Pages 8 through 12 are an application for a 90 day extension as to the investigation of Holt dated July 7, 1998. (1) Page 13 is the grant of a 90 day extension by the Commission by Order of July 23, 1998. c. Pages 14 through 18 are an application for a second 90 day extension as to the investigation of Holt dated September 21, 1998. (1) Page 19 is the grant of a 90 day extension by the Commission by Order of October 8, 1998. 25. ID -2 are photocopies of 90 day status letters as to the Holt investigation. 26. The Investigative Division complied with all the timing deadlines and notice requirements under the Ethics Act in this case. 27. ID -3 are photocopies of Holt's acknowledgments of receipt of the Revenue Standards of Conduct Manual on December 20, 1985, and February 26, 1997. a. The document includes in part the following cautionary: . . . to read and become familiar with the contents of this manual since violations may result in disciplinary action, including suspensions, dismissal, or criminal prosecution, if warranted. 28. ID -7 are photocopies of Holt's FIS's. a. Holt's FIS is dated April 18, 1995, and filed with Revenue on April 21, 1995, for the calendar year 1994. (1) For direct or indirect sources of income, only Revenue is listed. b. Holt's 1995 calendar year FIS is dated April 25, 1996. (1) Only Revenue is listed as a source of direct or indirect income by Holt. c. Holt's 1996 calendar year FIS is dated April 25, 1997. Holt, 98- 010 -C2 Page 12 (1) Under sources of direct or indirect income, only Revenue is listed. 29. Holt did not list FTC as a source of income of $1,000 or more on his FIS's for the calendar years 1994, 1995, and 1996. 30. ID -8 is, in part, a photocopy of a letter of Holt delineating duties he performed at FTC from August 1, 1994, to June 30, 1995, which included preparation of payroll journal, payroll tax returns, and the preparation of billing to PIC. 31. ID -10 is a photocopy of a Revenue Collector History Display as to FTC. a. Page 2 includes a reference to a call received from Ron Holt stating that some payment will be made. 32. ID -11 are photocopies of portions of the transcript as to the proceeding involving Holt before the Pennsylvania Civil Service Commission. a. Holt admits that he was required to file a Supplemental Employment Request with Revenue for outside work. b. Holt admits not having filed a Supplemental Employment Request with Revenue. 33. ID -12 are photocopies of several documents relating to FTC. a. Page 9 is a letter of Holt, with a return address of "Ron Holt Accountant" dated October 21, 1991. 34. ID -13 is a statement of the rate of pay of Holt as a Revenue employee which increased on specified dates as follows: Date Hourly Rate 01/01/94 $20.17 07/01/94 $20.88 01/14/95 $21.34 07/01/95 $22.09 01/13/96 $22.58 07/01/96 $23.03 35. ID -14 are photocopies of the Weekly Status Reports of Holt for the weeks of September 4, 1995; September 25, 1995; and September 2, 1996. a. For Wednesday, September 4, 1996, the Report reflects that Holt listed himself as sick for the entire day. 36. ID -15 are photocopies of the Revenue leave records of Holt for the calendar years 1994, 1995, and 1996. a. For Wednesday, September 7, 1994, Holt took no leave time from Revenue. b. For Friday, May 26, 1995, Holt took no leave time from Revenue. c. For Wednesday, September 4, 1996, Holt took leave consisting of 7.5 hours of sick time. Holt, 98- 010 -C2 Page 13 d. For Friday, September 27, 1996, Holt took no leave time from Revenue. 37. ID -16 are photocopies of the Auditor's Weekly Report and Status Report of Holt for the week of September 23, 1995. a. On Friday, September 27, 1996, Holt listed himself as at Health Care Services in the a.m. and at Great Atlantic Health Care in the p.m. 38. ID -19 is a document reflecting the compensation Holt received from FTC for 1994 and 1995. a. Holt received $2,650 in 1994 from FTC. b. Holt received $4,385 from FTC in 1995. 39. ID -20 is a photocopy of the calendar of Anthony Triolo of PIC for September, 1994; May, 1995; and September, 1996. a. For Wednesday, September 7, 1994, the calendar reflects a meeting with Holt tentatively at 2:30. b. For Friday, May 26, 1995, the calendar reflects a meeting with Holt tentatively at 3:00. c. For Wednesday, September 4, 1996, the calendar reflects a meeting with Holt tentatively at 3:00. d. For Friday, September 27, 1996, the calendar reflects a meeting with Holt at 3:00. 40. R -1 is a photocopy of a letter from Jared G. Melson to Attorney Page stating that he was engaged by FTC from June to December, 1995, to prepare quarterly payroll tax returns and monthly statements for PIDC. a. Melson did not prepare any 1099's for FTC during his association with that business. 41. R -3 is a photocopy of a letter from Stanley B. Smith to Attorney Page dated January 9, 2000. a. Smith performed accounting services for FTC during the second quarter of 1996, but did not do any tax services such as preparing 1099's. 42. R -6 are photocopies inter alia of a letter from Revenue Deputy Chief Counsel Jullia Sheridan to James McGraff [sic] which attached the formal termination of Holt from Revenue. 43. R -7 is a photocopy of an Internal Revenue Service 1099 for Holt from FTC in the amount of $1,400 for the year 1994. 44. R -8 is a photocopy of an Internal Revenue Service 1099 for Holt from FTC in the amount of $2,000 for the year 1995. 45. Holt at times performed work for FTC when he reported off sick at Revenue or when he reported that he was working in the field for Revenue. Holt, 98- 010 -C2 Page 14 III. DISCUSSION: At all times relevant to this matter, the Respondent, Ronald Holt, hereinafter Holt, was a public employee subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), Act 9 of 1989, Pamphlet Law 26, 65 P.S. §401, et seq. as now codified by Act 93 of 1998, Chapter 11, 65 Pa. C. S. §1101, et seq. The issue is whether Holt violated Sections 3(a) and 5(b) of the Ethics Act as to the allegations that he used the authority of his office for a private pecuniary benefit by performing auditing services for FTC Training Center during his regular work hours for the Department of Revenue; when he failed to report on Statements of Financial Interests (FIS's) for the 1994, 1995 and 1996 calendar years income received from that company and from his private accounting business; and when he failed to report his ownership of Ronald Holt Accounting. Section 3. Restricted activities. (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 P.S. §403(a). Section 2. 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 P.S. §402. Section 3(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. Section 5. Statement of financial interests. (b) Required information. - -The statement shall include the following information for the prior calendar year with regard to the person required to file the statement. (1) Name, address and public position. (2) Occupation or profession. Holt, 98- 010 -C2 Page 15 facts. (5) The name and address of any direct or indirect source of income totaling in the aggregate $1,000 or more. However, this provision shall not be construed to require the divulgence of confidential information protected by statute or existing professional codes of ethics or common law privileges. * ** (9) Any financial interest in any legal entity engaged in business for profit. 65 P.S. §405(b). Section 5(b)(5) of the Ethics Act requires that every public official /public employee and candidate list the name and address of any direct or indirect source of income totaling in the aggregate of $1,000 or more. In addition, Section 5(b)(9) requires the reporting of any financial interest in any legal entity engaged in business for profit. Having noted the issues and applicable law, we shall now summarize the relevant Holt worked as a Field Auditor in the Pennsylvania Department of Revenue (Revenue) from 1980 until his dismissal on August 26, 1997. Holt, who has a degree in business (accounting major) with some attendance at graduate school, was hired by Revenue to conduct audits, analyze books and records, in order to determine whether certain individuals or entities owe taxes to the Commonwealth. Holt, who was later assigned to Revenue's Philadelphia Office, had a 37.5 work week with hours from 8:30 to 5:00 and one hour for lunch. Due to Holt's job duties, much of his time was spent in the field performing audits. In 1994, Lillian Farmer (Farmer) who is the Executive Director of Farmer's Training Center (FTC), entered into an agreement with Holt whereby he would provide financial services for FTC: billing, payroll taxes, and quarterly reports. Farmer initially paid Holt $350 then $500 per month plus expenses. Holt worked at FTC on a weekly basis and appeared at FTC several times a week during its office hours which were 9:00 a.m. to 5:00 p.m., Monday through Friday. Holt began working for FTC in 1994 and continued until approximately the middle of 1996. Although the times that Holt worked at FTC are not documented, there are four instances where Holt was at a meeting of the Private Industry Council (PIC) on behalf of Farmer. On one of those occasions, September 4, 1996, Holt took a full 7.5 hours sick leave from the Commonwealth of Pennsylvania. On three other dates, September 7, 1994; May 26, 1995; and September 27, 1996; Holt was at meetings at PIC on behalf of Farmer while Revenue personnel records reflect that Holt worked the full day for the Commonwealth. As to any supplementary employment, Revenue requires its employees to apply through a request process. There are certain areas of supplemental employment which are strictly prohibited by Revenue, two of which are providing accounting services or doing tax preparation work for individuals or entities other than one's own family. Holt admitted Holt, 98- 010 -C2 Page 16 that he did not make any request to Revenue for permission to engage in private supplementary employment. In July, 1997, Revenue conducted a pre - disciplinary fact - finding conference with Holt wherein he admitted that he performed accounting and tax services for FTC. Subsequently, Holt was dismissed by the Secretary of Revenue in a letter dated August 25, 1997. The reasons for Holt's termination were as follows: a. For engaging in supplementary employment without approval. b. For completing Local, State and Federal tax returns for FTC in violation of the Standards of Conduct for Employes of Revenue. c. For falsifying work papers by stating that he was working or on sick leave at times when he engaged in supplementary employment in violation of the Standards of Conduct for Employes of Revenue. d. For failure to properly complete personal income tax returns for tax years 1994 and 1995 and pay valid taxes due. e. For falsification of Code of Conduct Statement of Financial Interests and State Ethics Act Statement of Financial Interests forms for 1995, 1996 and for 1997. As to the above facts, both parties have filed briefs in support of their respective interpretations, positions, and conclusions. The Investigative Division argues that a violation of Section 5(b) of the Ethics Act occurred by virtue of Holt's own admission that he received compensation from FTC which he did not report on his calendar year FIS's for 1994 -96. It is argued that such non disclosure was intentional because Holt knew that his failure to request supplementary employment and his outside work in a prohibited area of employment would have been discovered by Revenue through its routine reviews of employee FIS's. It is argued that Holt's claim of accountant privilege against non disclosure is fallacious, given that he is neither a CPA nor a public accountant and given that the mere disclosure of FTC as a source of income would not be subject to a rule of confidentiality. The Investigative Division charges that Holt's work at FTC, while he was listed as working or on sick time at Revenue, establishes a violation of Section 3(a) of the Ethics Act. Finally, the Investigative Division argues that restitution plus a treble penalty totaling $964.56 coupled with a referral for prosecution is warranted, given the intentional nature of Holt's actions. Holt argues that there was no intent to conceal as to his FIS filings and the non disclosure occurred because of his concerns about accountant confidentiality. It is argued that the investigation in this case began before January 26, 1998 and, even with that date as the date of docketing, the investigation failed to be concluded within 360 days. Holt also asserts that the Investigative Division obtained critical evidence months before the docketing date so that the investigation was not completed in the mandatory time limits under the Ethics Act. Holt argues that he did not do any tax preparation work and that he reported the income from FTC on his federal and state income tax returns. Finally, Holt asserts that any infraction of the Ethics that he may have committed is de minimis and not a violation. Having highlighted the facts, issues and arguments of the parties, we preliminarily must address a procedural issue raised by Holt, namely that the Investigative Division failed to comply with the deadlines of the Ethics Act as to its investigation. Holt, 98- 010 -C2 Page 17 Our analysis of the procedural issue will be made in two parts: the events before and after January 26, 1998. Prior to January 26, 1998, Robert P. Caruso (Caruso), the Deputy Executive Director and Director of Investigations, received a letter from Revenue concerning Holt. Aside from talking to the Commission's Executive Director the day after the letter was received and calling and talking to Albert Taylor in Revenue about the letter, nothing occurred at the Commission. Caruso held the letter in anticipation that information would be forthcoming from Revenue. No information was received. Thereafter, on or about January 26, 1998, Caruso discussed the matter with the Executive Director who on that date authorized the initiation of a preliminary inquiry as to Holt. Such actions prior to January 26, 1998 were neither in the nature of a preliminary inquiry nor an investigation. The mere receipt of an unsolicited letter and two conversations about the letter in order to figure out what should be done do not constitute a preliminary inquiry /investigation. After January 26, 1998, a preliminary inquiry was authorized which concluded within 60 days followed by an investigation that concluded within 360 days, based upon two grants of 90 day extensions. Given the mailings of the 90 day notice letters to Holt and the issuance of the Investigative Complaint on March 19, 1999, all of the time and notice deadlines were met by the Investigative Division. Holt nevertheless argues that the investigation was not completed within 360 days of January 26, 1998, and should be dismissed. Holt misperceives the time limitations under the Ethics Act. A 60 day period is allowed for conducting a preliminary inquiry. That occurred from January 26, 1998, until March 27, 1998, when an investigation was commenced. It is from that latter date that the 180 day period, or 360 days in this case, given the two 90 day extensions, runs. The investigation was completed within 360 days which was followed by the issuance of an Investigative Complaint on March 19, 1999. Since the procedural issues raised by Holt have no merit, we reject the arguments. We must now determine whether the actions of Holt violated Sections 3(a) and 5(b) of the Ethics Act. Initially, we find that Holt is not a credible witness. During direct and redirect examination, Holt generally gave quick definitive answers to questions of varying length and complexity by his counsel. However, during cross - examination, even when simple, direct questions were asked, Holt typically would delay making a response which would be then followed by a statement that may only be characterized as evasive. Particularly telling are the non - responses by Holt to uncomplicated questions, even in financial areas, given that Holt holds a business degree in accounting. Of course, Holt's responses came from one who is a self denominated accountant, or accountant consultant or consultant, depending upon the circumstance. In short, Holt was dilatory, non - responsive, and evasive. We find Holt to be totally lacking in credibility. As to Section 3(a) of the Ethics Act, Holt used the authority of his office as a Revenue Auditor. But for the fact that the Holt was a Commonwealth employee, he could have not been in the position of receiving compensation from Revenue for purportedly working in the field or taking off sick time when he in fact was working at FTC. See, Juliante, Order 809. The uses of authority of office by Holt resulted in private pecuniary benefits to him. In particular, Holt worked at FTC while at the same time he received compensation from Revenue for being listed as working or off sick. Such compensation from the Commonwealth is unauthorized and, in fact, illegal. Since the office hours of FTC were Monday through Friday between 9 AM and 5 PM, and since Holt appeared several Holt, 98- 010 -C2 Page 18 times a week to work at FTC, it is clear that he did such private work on Commonwealth time. In addition to the above, there are four specific documented instances where Holt appeared on behalf of FTC at PIC meetings. The appearances by Holt at those meetings were established and corresponded to times when Holt listed himself as working in the field or took sick time from the Commonwealth. Accordingly, we find that Holt violated Section 3(a) of the Ethics Act when he used the authority of office for private pecuniary benefits to himself consisting of the compensation that he received as being listed as working for Revenue or as being listed as sick while working for FTC. The above determination follows our decision in Williams, Order 734 -R. In that case, we held that a former field inspector supervisor for the Pennsylvania Department of Labor and Industry violated Section 3(a) of the Ethics Act when he used his public office to obtain a financial gain when he worked as a security guard at a hospital while also being compensated by the Commonwealth. We found that Williams also violated the financial interests filing requirements of the Ethics Act by failing to list the hospital as a source of income during the years 1985 and 1986. See also, Metrick, Order 1037; Catone, Order 994. As to section 5(b)(5) of the Ethics Act, we find that Holt failed to list sources of income from FTC on his FIS's from 1994 through 1996. Although Holt readily admits that he failed to list such sources of income, he argues that he did so based upon accountant confidentiality provisions. It is clear to us to that Holt failed to disclose such sources of income because he knew that if he did so, Revenue would become aware that he engaged in supplementary employment without having sought authorization to do so and engaged in employment which in fact was prohibited. The actions of a Holt reflect a conscious decision on his part not to disclose sources of income from prohibited outside employment. Accordingly, we find that Holt intentionally violated Section 5(b)(5) of the Ethics Act when he failed to disclose sources of income of $1000 or more from FTC on his FIS's for the calendar years 1994, 1995 and 1996. As to the allegations that Holt failed to disclose his ownership in Ron Holt Accounting and sources of income from the business, we find no violation based upon an insufficiency of evidence. Holt argues that he is not in violation of Section 5(b)(5) of the Ethics Act because he did not intend to conceal his income from FTC based upon accountant confidentiality. Aside from the fact that Holt is neither a C.P.A. nor a public accountant, there is no confidentiality as to the mere listing of the identity of FTC. This argument is totally fallacious. Holt also argues that any infraction of the Ethics Act would be de minimis so that no violation occurred. To the contrary, the four documented days that Holt was at PIC on behalf of Farmer are clearly not the only days that Holt was at FTC when he was listed as working or on paid leave at Revenue. The financial gain received by Holt was anything but de minimis; the restitution plus treble penalty is based upon only that portion of Holt's time which is quantifiable through documentation in the record. It is also argued by Holt that he did not do tax preparation work for FTC and reported the FTC income for tax purposes. What Holt reported for tax purposes is irrelevant to the issues before us and, as such, need not and will not be discussed. Regarding Holt's claim that he did not do tax work for FTC, his current assertion is contrary to his admission to Taylor (N.T. at 194, Fact Finding 14p.) who is the Chief of the Labor Relations Division in Revenue, is contrary to the testimony of Farmer (N.T. at 62, Fact Finding 13c.(1), (7)) who is a credible and disinterested witness, and is contrary to Holt's own letter (ID -8, p1) in which he outlined the services he performed for FTC. Holt, 98- 010 -C2 Page 19 The Ethics Act specifically empowers this Commission to impose restitution in instances of financial gain plus a treble penalty. Section 7. Powers and duties of the commission (13) ... Any order resulting from a finding that a public official or public employee has obtained a financial gain in violation of this act may require the restitution plus interest of that gain to the appropriate governmental body. The commission or the Office of Attorney General shall have standing to apply to the Commonwealth Court to seek enforcement of an order requiring such restitution. This restitution requirement shall be in addition to any other penalties provided for in this act. Section 9. Penalties (c) Any person who obtains financial gain from violating any provision of this act, in addition to any other penalty provided by law, shall pay a sum of money equal to three times the amount of the financial gain resulting from such violation into the State Treasury or the treasury of the political subdivision. Treble damages shall not be assessed against a person who acted in good faith reliance on the advice of legal counsel. 65 P.S. § §407(13), 409(c). In this case, given the intentional conduct on the part of Holt to conceal financial information, restitution plus treble penalty is warranted. The record in this case establishes that on September 7, 1994, May 26 1995, and September 271996, Holt was at PIC on behalf of FTC for 1 hour, 1.5 hours, and 2 hours respectively, during Revenue work hours. On September 4, 1996, Holt was at PIC while he claimed 7.5 hours sick leave from Revenue. Based upon the per hour compensation that Holt received during those times, he obtained a private pecuniary benefit of $264.17. Treble that amount equals $792.51. Therefore, restitution plus treble penalty in this case is $1056.68. Accordingly, we direct Holt within 30 days of the date of issuance (mailing) of this order to make payment through this Commission to the Commonwealth of Pennsylvania in the amount of $1056.68. Failure to comply with the foregoing will result in the institution of an order enforcement action. Given the intentional nature of the conduct of Holt, we will refer this matter to the appropriate law- enforcement authority with our recommendation that a criminal prosecution be instituted against Holt. IV. CONCLUSIONS OF LAW: 1. Ronald Holt, as a Revenue Auditor for the Pennsylvania Department of Revenue, Bureau of Audits, was a public employee subject to the provisions of Act 9 of 1989 as now codified by Act 93 of 1998, Chapter 11. Holt, 98- 010 -C2 Page 20 2. Holt violated Section 3(a) of Act 9 of 1989 when he performed and received compensation for providing accounting services to Farmer's Training Center at times when he listed himself as working or took paid sick leave for which he received compensation from the Commonwealth. 3. Holt intentionally violated Section 5(b)(5) of Act 9 of 1989 by failing to list Farmer's Training Center as a source of income in excess of $1,000 on his Financial Interests Statements forms for calendar years 1994, 1995, and 1996. 4. Holt did not violate Section 5(b)(5) or (9) of Act 9 of 1989 as to ownership or income received from Ronald Holt Accounting on his Financial Interests Statements forms for calendar years 1994, 1995, and 1996, based upon an insufficiency of evidence. In Re: Ronald Holt ORDER NO. 1153 File Docket: 98- 010 -C2 Date Decided: 4/12/2000 Date Mailed: 4/28/2000 1 Ronald Holt, as a Revenue Auditor for the Pennsylvania Department of Revenue, Bureau of Audits, violated Section 3(a) of Act 9 of 1989 when he performed and received compensation for providing accounting services to Farmer's Training Center at times when he listed himself as working or took paid sick leave for which he received compensation from the Commonwealth. 2. Holt intentionally violated Section 5(b)(5) of Act 9 of 1989 by failing to list Farmer's Training Center as a source of income in excess of $1,000 on his Financial Interests Statements forms for calendar years 1994, 1995, and 1996. 3. Holt did not violate Section 5(b)(5) or (9) of Act 9 of 1989 as to ownership or income received from Ronald Holt Accounting on his Financial Interests Statements forms for calendar years 1994, 1995, and 1996, based upon an insufficiency of evidence. 4. Holt is directed within thirty (30) days of the date of issuance (mailing) of this order to make payment through this Commission to the Commonwealth of Pennsylvania in the amount of $1,056.68, consisting of restitution of $264.17 and a treble penalty in the amount of $792.51. Failure to comply with the foregoing will result in the institution of an order enforcement action. 5. Given the intentional nature of the violations by Holt, this matter will be referred to the appropriate law enforcement authority with the Commission's recommendation for the institution of a criminal prosecution. BY THE COMMISSION, DANEEN E. REESE, CHAIR