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HomeMy WebLinkAbout98-009 ConfidentialOPINION OF THE COMMISSION Before: Daneen E. Reese, Chair Austin M. Lee, Vice Chair Julius Uehlein Louis W. Fryman John J. Bolger Frank M. Brown DATE DECIDED: 10/8/98 DATE MAILED: 10/20/98 98 -009 Re: Conflict; A of Office B; Director; C. This Confidential Opinion is issued in response to your letters dated September 1, 1998, by which you requested a confidential advisory from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Law presents any prohibition or restrictions upon the A of Office B with regard to serving on the board of directors of a new C to be started in Pennsylvania. Facts: As the A of Office B, you request a confidential advisory from the State Ethics ommission. The facts which you have submitted are as follows. Office B oversees D, E, and F matters for G under the H's jurisdiction. You are a member of the H's L. In your capacity as A, you also serve on: the I; the J (as a designee); and the K. The specific matter which you bring before this Commission regards your prospective service on the Board of Directors of C, a new Pennsylvania -based institution that will be state - chartered, M, and headquartered in City N, County 0, Pennsylvania. It is your intention to be an initial investor in C. You would own less than three percent of the voting shares. You would receive no fees or other compensation for serving on the Board, with the possible exception of options for additional shares in C. You state that you have been in business in the City N area for your entire career, and that your participation on C's Board would include offering advice based upon your experiences, as well as development of commercial and personal P business among the many contacts which you have developed during your career. You assure this Commission as to the following: 1) Your participation will be subject to all applicable restrictions upon the activities of a Q and member of the H's L; Confidential Opinion, 98 -009 October 20, 1998 Page 2 2) You will not be involved in any way in the application for a state charter or in C's relationships with Department R or any other state agency that regulates the activities of C; 3) While you are serving on the Board and as A, C will not enter into a P relationship with the Commonwealth agencies under the H's jurisdiction or with any of the authorities or agencies on whose boards you serve; 4) You will not use Commonwealth resources in furtherance of your activities for C; 5) You will not solicit business for C from any person or enterprise, whether for- profit or non - profit, which has any decision or application pending before Office B or before any of the agency or authority boards of which you are a member by reason of your position; 6) In soliciting any business for C, you will identify yourself only as a member of the Board of C and not as A of Office B, and you will use only C's letterhead stationery and business cards when acting in furtherance of C's interests. 7) Your efforts for C will not diminish your work as A of Office B; and 8) In any situation in which the Board of C would consider an action that would have even an appearance of a conflict with the Commonwealth, you would recuse yourself from participation in the consideration and voting for such an action. Since the organizers would like to submit a list of the proposed Board members to Department R, you ask that a confidential advisory be issued by this Commission as quickly as is reasonable and possible. By letter dated September 10, 1998, you were notified of the date, time and location of the executive session at which your request for a confidential advisory was to be considered. Discussion: It is initially noted that pursuant to Sections 7(10) and 7(11) of the Ethics Law, 65 P.S. § §407(10), (11), advisories are issued to the requestor based upon the facts which the requestor has submitted. In issuing the advisory based upon the facts which the requestor has submitted, this Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts which have not been submitted. It is the burden of the requestor to truthfully disclose all of the material facts relevant to the inquiry. 65 P.S. § §407(10), (11). An advisory only affords a defense to the extent the requestor has truthfully disclosed all of the material facts. As A of Office B and as a member of the H's L, you are a public official and an executive- level state employee as defined in the Public Official and Employee Ethics Law ( "Ethics Law "), and hence you are subject to the provisions of that law. See, Confidential Opinion, No. 97 -002; Confidential Opinion, No. 98 -005. Additionally, in your respective capacities with the I; the J; and the K, you are a public official subject to the Ethics Law. Some pertinent provisions of the Ethics Law shall initially be set forth. Section 3(a) of the Ethics Law provides: Confidential Opinion, 98 -009 October 20, 1998 Page 3 Section 3. Restricted Activities. (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. The following terms are defined in the Ethics Law as follows: 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. "Conflict" or "conflict of interest" 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. "Authority of office or employment." The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. "Business." Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self - employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit. "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. "Financial interest." Any financial interest in a legal entity engaged in business for profit which comprises more than 5% of the equity of the business or more than 5% of the assets of the economic interest in indebtedness. "Contract." An agreement or arrangement for the acquisition, use or disposal by the Commonwealth or a political subdivision of consulting or other services or of supplies, materials, equipment, land or other personal or real property. "Contract" shall not mean an agreement or arrangement between the State or political subdivision as one party and a public official or public employee as the other party, concerning his expense, reimbursement, salary, wage, retirement or other benefit, tenure or other matters in consideration of his current public employment with the Commonwealth or a political subdivision. Confidential Opinion, 98 -009 October 20, 1998 Page 4 "Person." A business, governmental body, individual, corporation, union, association, firm, partnership, committee, club or other organization or group of persons. 65 P.S. §402. Section 3(f) of the Ethics Law provides as follows: Section 3. Restricted activities (f) No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official or public employee is associated or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the public official or public employee is associated, unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the public official or public employee shall not have any supervisory or overall responsibility for the implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of the making of the contract or subcontract. Parenthetically, where contracting /subcontracting is otherwise allowed or where there appears to be no express prohibitions to same, the above particular provision of the law would require that an open and public process must be used in all situations where a public official /public employee or a business with which he is associated is otherwise appropriately contracting with his own governmental body, or subcontracting with any "person" who has been awarded a contract with the governmental body, in an amount of $500.00 or more. This open and public process would require that the following be observed as to the contract with the governmental body: (1) prior public notice of the employment or contracting possibility; (2) sufficient time for a reasonable and prudent competitor /applicant to be able to prepare and present an application or proposal; (3) public disclosure of all applications or proposals considered; and (4) public disclosure of the contract awarded and offered and accepted. Section 3(f) of the Ethics Law also requires that the public official /employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. Section 3(g) of the Ethics Law provides: Section 3. Restricted activities (g) No former public official or public employee shall represent a person, with promised or actual compensation, on Confidential Opinion, 98 -009 October 20, 1998 Page 5 any matter before the governmental body with which he has been associated for one year after he leaves that body. Section 3(i) of the Ethics Law provides: Section 3. Restricted Activities (i) No former executive -level State employee may for a period of two years from the time that he terminates his State employment be employed by, receive compensation from, assist or act in a representative capacity for a business or corporation that he actively participates in recruiting to the Commonwealth of Pennsylvania or that he actively participated in inducing to open a new plant, facility or branch in the Commonwealth or that he actively participated in inducing to expand an existent plant or facility within the Commonwealth, provided that the above prohibition shall be invoked only when the recruitment or inducement is accomplished by a grant or loan of money or a promise of a grant or loan of money from the Commonwealth to the business or corporation recruited or induced to expand. Section 3(j) of the Ethics Law provides as follows: Section 3. Restricted activities (j) Where voting conflicts are not otherwise addressed by the Constitution of Pennsylvania or by any law, rule, regulation, order or ordinance, the following procedure shall be employed. Any public official or public employee who in the discharge of his official duties would be required to vote on a matter that would result in a conflict of interest shall abstain from voting and, prior to the vote being taken, publicly announce and disclose the nature of his interest, as a public record in a written memorandum filed with the person responsible for recording the minutes of the meeting at which the vote is taken, provided that whenever a governing body would be unable to take any action on a matter before it because the number of members of the body required to abstain from voting under the provisions of this section makes the majority or other legally required vote of approval unattainable, then such members shall be permitted to vote if disclosures are made as otherwise provided herein. In the case of a three - member governing body of a political subdivision, where one member has abstained from voting as a result of a conflict of interest, and the remaining two members of the governing body have cast opposing votes, the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. In applying the above provisions of the Ethics Law to the facts which you have submitted, pursuant to Section 3(a) of the Ethics Law, a public official /public employee is prohibited 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. Confidential Opinion, 98 -009 October 20, 1998 Page 6 Section 3(a) would not operate to preclude your acceptance of the directorship with C. However, upon your acceptance of the directorship, C would be deemed a business with which you would be associated, so as to present the potential for conflicts of interest for you in your various public capacities in matters which would financially impact C or its customers. In applying Section 3(a) in contexts involving business interests, this Commission has held that a private pecuniary benefit to the business or to a business client may afford a basis for a conflict of interest. Miller, Opinion No. 89 -024; Kannebecker, Opinion No. 92- 010. A reasonable and legitimate expectation that a business relationship will form may also support a finding of a conflict of interest. Amato, Opinion No. 89 -002; Garner, Opinion No. 93 -004; Snyder, Order No. 979 -2, affirmed Snyder v. SEC, 686 A. 2d 843 (Pa. Commw. Ct. 1996), allocatur den., No. 0029 M.D. Allocatur Docket 1997 (Pa. December 22, 1997). This Commission has also held that it is a conflict of interest under Section 3(a) for a public official /public employee to pursue a private business opportunity in the course of public action. Metrick, Order No. 1037. In each instance of a conflict of interest, the public official must abstain from participation as a public official. The abstention requirement is not limited to mere voting, but extends to any use of authority of office. In Juliante, Order No. 809, this Commission recognized that the use of authority of office as defined in the Ethics Law includes, for example, discussing, conferring with others, and lobbying for a particular result. In each instance of a conflict of interest, the public official must also satisfy the disclosure requirements of Section 3(j) set forth above. It would appear that if you would become a Director of C, there could be many instances where conflicts of interest would exist for you in your public capacities. We note that you have represented and assured this Commission that you would abide by certain principles which you have submitted and which are set forth in the facts above. However, should you serve as a Board member for C, you would have to be vigilant to avoid potential conflicts of interest in your public positions. You would have to be watchful to ensure that in your public capacities, you would abstain and fully satisfy the disclosure requirements of the Ethics Law as to matters financially impacting C and /or its customers. Moreover, a conflict of interest could potentially exist as to official action that would effectuate a detriment to competitors of C. See, Pepper, Opinion No. 87 -008. Thus, while Section 3(a) of the Ethics Law would not preclude your acceptance of the directorship with C, you would have a conflict of interest in the instances noted above. In each instance of a conflict of interest, you would be required to abstain fully and to satisfy the disclosure requirements of Section 3(j). As for Section 3(f), the restrictions of that provision would have to be observed if and when applicable. Sections 3(g) and 3(i) would apply to restrict you upon termination of public service. The restrictions of these particular provisions are discussed fully in Confidential Opinion, No. 94 -011; Singel, Opinion No. 94 -012; and Confidential Opinion, No. 95 -003, and are incorporated herein by reference. The above provisions, precedents, and principles have been set forth to provide guidance as to your prospective directorship with C. Reference has been made to the above restrictions not to imply that there would be any transgression thereof, but merely to provide a thorough analysis as to your inquiry. In providing this Opinion, we have not addressed every possible issue or potential pitfall that may arise for you. Rather, we have given the overall parameters of the applicable provisions of the Ethics Law. We encourage you to seek further advice from this Commission as circumstances require, and we Confidential Opinion, 98 -009 October 20, 1998 Page 7 commend you for coming before this Commission at this time, prior to acceptance of the directorship with C. The propriety of the proposed conduct has only been addressed under the Ethics Law; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Law has not been considered in that they do not involve an interpretation of the Ethics Law. Specifically not addressed herein is the applicability of the S. IV. CONCLUSION: The A of Office B who also serves as a member of the H's L is a public official and executive -level state employee subject to the provisions of the Ethics Law. Additionally, in each of his capacities with the I; the J; and the K, the A is a public official subject to the Ethics Law. Section 3(a) of the Ethics Law would not preclude the A's acceptance of a directorship with a new C in Pennsylvania. However, the restrictions of the Ethics Law as set forth above must be observed. In each instance of a conflict of interest, the Ethics Law requires full abstention as well as disclosure in conformity with Section 3(j). Pursuant to Section 7(10), the person who acts in good faith on this opinion issued to him shall not be subject to criminal or civil penalties for so acting provided the material facts are as stated in the request. This letter is a public record and will be made available as such. Finally, a party may request the Commission to reconsider its Opinion. The reconsideration request must be received at this Commission within thirty days of the mailing date of this Opinion. The party requesting reconsideration must include a detailed explanation of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code §21.29(b). By the Commission, Daneen E. Reese Chair Commissioner John J. Bolger did not participate in this matter.