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HomeMy WebLinkAbout98-012 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 Susan Mosites Bicket DATE DECIDED: 12/15/98 DATE MAILED: 12/17/98 98 -012 Re: Conflict; Public Official; Executive -Level State Employee; Section 1103(i); Section 1103(g); Employment; Business. This Opinion is issued in response to your confidential advisory request letters dated November 18 and 23, 1998. I. ISSUE: Whether the Public Official and Employee Ethics Act presents any restrictions upon employment of an executive -level State employee following termination of service with the Commonwealth of Pennsylvania. II. FACTUAL BASIS FOR DETERMINATION: You request an advisory about the propriety of your employment as an interim Chief Executive Officer ( "CEO ") of a proposed for - profit corporation ( "Proposed Company ") following your resignation from Commonwealth service. Although the form and structure of the Proposed Company has not been finalized, it will be headquartered in A. The purpose of the Proposed Company is to AA. You are currently employed as B for C of Office D /Office E. In this capacity you are responsible for F. The objective is to G. As B, you have worked on the following matters: H. You have also participated in some Commonwealth C initiatives outside Office E: I. Additionally, you have participated in the Governor's trade missions to Singapore, Tokyo, Israel, and Ireland. Your role was not of a commercial nature, but was to gain information about C from other governments in the field of J. You have also had involvement with Project K, which developed from the Governor's L agenda, an initiative for a partnership with a private company, Company M, for developing a N industry in Pennsylvania. Company M staff made a presentation to the Governor's action team in February, 1998, that outlined Company M's desire to follow Project 0, a program in P which resulted in the creation of N jobs and a multi - million dollar Confidential Opinion, 98 -012 December 17, 1998 Page 3 investment. Pennsylvania competed with five other states for selection by Company M to conduct a study to design an environment and strategy for attracting N firms to the Commonwealth. Company M selected the Commonwealth for the study phase in April, 1998. With a Commonwealth investment of $3.2 million of Department Q funds, a study was undertaken by BB, a non - governmental economic development organization, in four major areas: multi- university training and degree programs; financial and legal incentives to attract R firms; potential market niches for a N complex in Pennsylvania; and physical /information technology infrastructure to support N. The study phase process was coordinated by Department Q with S, the Governor's Office, and certain Commonwealth staff. A meeting between the Governor and Company M's CEO on October 13, 1998 resulted in a commitment to create a for - profit company by Company M and other private investors. The follow -up on the development of that potential approach, including the consideration of Commonwealth incentives such as grants or loans, was delegated by the Governor to T and Department Q personnel. At present, no other grants or loans have been made by the Commonwealth. Project K originally was contemplated to be a multi -party N complex with Company M as the anchor tenant. The Project K initiative has evolved into the development of a research and design consortium with Company M as one of the investors. The Proposed Company has evolved from the Project K initiative. You became involved with Project K in May, 1998 after attending a public tour of Project 0 in connection with your participation in the Israel /Ireland trade mission. Your role in Project K was to support the efforts of participating Commonwealth officials in your areas of expertise. You were not a member of the Steering Committee, nor of any of the teams created for problem research and solutions as to the development of Project K. Although you were invited to attend a Steering Committee meeting and were listed as a member of the Education Team, you never attended a meeting or participated in any way. You were not a "decision- maker" during your involvement with Project K. However, you made the suggestion that the independent applied research for the project be accomplished by Pennsylvania universities in concert with the research project to be done by the universities as to Project K, attended meetings and conference calls as to the role of Commonwealth colleges and universities in Project K but have no awareness of the work product generated, and attended other meetings and conference calls as an observer in the absence of U of Office D. In June you had notified your supervisor of your intention to resign in November, 1998. On October 20, 1998, you became aware of discussions concerning the creation of the for - profit company related to Project K, and hence the CEO position, at which time you decided to delay your resignation in order to examine that opportunity. You ceased participating in Project K on October 21, 1998 and know of no plans for your future participation. The CEO position for the Proposed Company would be full -time and is expected to exist for approximately 18 to 24 months, or until such time as a permanent CEO is chosen. If selected for the position, you would organize the for - profit company through the staffing of appropriate personnel, develop and implement marketing plans, outfit the physical plant, and complete other activities normally required by a CEO in the start -up of a new company, drawing upon your experience developed prior to Commonwealth employment. You offer your assurance that you will not use your position as B or emoluments of public office or confidential information that you gained therein for your private pecuniary gain or the pecuniary gain of the Proposed Company; will resign [as B] immediately upon your acceptance of the interim CEO position of the Proposed Company; [and] will not Confidential Opinion, 98 -012 December 17, 1998 Page 3 represent a person, with promised or actual compensation, on any matter before Office D for one year after you leave Office D. You have also made the following representations about your conduct: "I did not in any way grant or loan money or promise to grant or loan money from the Commonwealth, or participate in any decision to do so, in order to induce or recruit [Company M] or the Proposed Company to locate, expand, or begin doing business in the Commonwealth." Lastly, you state: The Proposed Company will not be providing services to the Commonwealth." In a supplemental memo dated November 23, 1998 you provide additional information as to your interaction with other agencies and departments under the Governor's jurisdiction. As the head of Office E, you concentrate on C initiatives affecting state government such as developing the Commonwealth's V; setting standards for computer networks and software for sharing information and communicating among agencies; and ensuring that C investments meet the Administration's C priorities. You have direct responsibility for Center X which is accountable for Y. Finally, Office E is responsible for managing Z for all 18 affected Commonwealth agencies. By letter dated November 30, 1998, you were notified of the date, time, and location of the executive meeting at which your request for an advisory Opinion was to be considered. At the executive session meeting on December 15, 1998, you did not appear and offer commentary, but made yourself and others available by telephone for questions. III. DISCUSSION: As B for C, Office D /Office E, you would be considered a public official /public employee and an "executive -level State employee" subject to the Public Official and Employee Ethics Act ("Ethics Law ") and the Regulations of the State Ethics Commission. See, Section 1102, Chapter 11, Act 93 of 1998; 51 Pa.Code §11.1. Consequently, upon termination of public service, you would become a former public official /public employee and a former executive -level State employee subject to the restrictions of Section 1103(g) and Section 1103(i) of the Ethics Law. Section 1103(i) restricts former executive -level State employees as follows: Section 1103. 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 1103(i) restricts the ability of a former executive -level State employee to accept employment or otherwise engage in business relationships following termination of State service, under certain narrow conditions. The restrictions of Section 1103(i) apply even where the business relationship is indirect, such as where the business in question is Confidential Opinion, 98 -012 December 17, 1998 Page 3 a client of the new employer, rather than the new employer itself. See, Confidential Opinion No. 94 -011. However, Section 1103(i) would not restrict you from being employed by, receiving compensation from, assisting, or acting in a representative capacity for a business provided and conditioned upon the assumptions that you did not actively participate in recruiting the business to Pennsylvania, and that you did not actively participate in recruiting or inducing the business to open or expand a plant, facility, or branch in Pennsylvania, through a grant or loan of money or a promise of a grant or loan of money from the Commonwealth of Pennsylvania to the business. Unlike Section 1103(i), Section 1103(g) does not prohibit a former public official /public employee from accepting a position of employment. However, it does restrict the former public official /public employee with regard to "representing" a "person" before the governmental body with which he has been associated ": Section 1103. Restricted activities. (g) No former public official or public employee shall represent a person, with promised or actual compensation, on any matter before the governmental body with which he has been associated for one year after he leaves that body. Section 1103(g), Chapter 11, Act 93 of 1998 (Emphasis added). The terms "represent," "person," and "governmental body with which a public official or public employee is or has been associated" are specifically defined in the Ethics Law as follows: Section 1102. Definitions. "Represent." To act on behalf of any other person in any activity which includes, but is not limited to, the following: personal appearances, negotiations, lobbying and submitting bid or contract proposals which are signed by or contain the name of a former public official or public employee. "Person." A business, governmental body, individual, corporation, union, association, firm, partnership, committee, club or other organization or group of persons. "Governmental body with which a public official or public employee is or has been associated." The governmental body within State government or a political subdivision by which the public official or employee is or has been employed or to which the public official or employee is or has been appointed or elected and subdivisions and offices within that governmental body. Section 1102, Chapter 11, Act 93 of 1998. The term "Person" is very broadly defined. It includes, inter alia, corporations and other businesses. It also includes the former public employee himself, Confidential Opinion 93 -005, as well as a new governmental employer. Ledebur, Opinion 95 -007. Confidential Opinion, 98 -012 December 17, 1998 Page 3 The term "representation" is also broadly defined to prohibit acting on behalf of any person in any activity. Examples of prohibited representation include: (1) personal appearances before the former governmental body or bodies; (2) attempts to influence; (3) submission of bid or contract proposals which are signed by or contain the name of the former public official /employee; (4) participating in any matters before the former governmental body as to acting on behalf of a person; and (5) lobbying. Popovich, Opinion 89 -005. Listing one's name as the person who will provide technical assistance on a proposal, document, or bid, if submitted to or reviewed by the former governmental body, constitutes an attempt to influence the former governmental body. Section 1103(g) also generally prohibits the inclusion of the name of a former public official /public employee on invoices submitted by his new employer to the former governmental body, even though the invoices pertain to a contract that existed prior to termination of public service, Shay, Opinion 91 -012. However, if such a pre- existing contract does not involve the unit where the former public employee worked, the name of the former public employee may appear on routine invoices if required by the regulations of the agency to which the billing is being submitted. Abrams /Webster, Opinion 95 -011. A former public official /public employee may assist in the preparation of any documents presented to his former governmental body. However, the public official /public employee may not be identified on documents submitted to the former governmental body. The public official /public employee may also counsel any person regarding that person's appearance before his former governmental body. Once again, however, the activity in this respect should not be revealed to the former governmental body. The Ethics Law would not prohibit or preclude making general informational inquiries to the former governmental body to secure information which is available to the general public, but this must not be done in an effort to indirectly influence the former governmental body or to otherwise make known to that body the representation of, or work for the new employer. Section 1103(g) only restricts the former public official /public employee with regard to representation before his former governmental body. The former public official /public employee is not restricted as to representation before other agencies or entities. However, the Agovernmental body with which a public official /public employee is or has been associated@ is not limited to the particular subdivision of the agency or other governmental body where the public official /employee had influence or control but extends to the entire body. See, Legislative Journal of House, 1989 Session, No. 15 at 290, 291; Sirolli, Opinion No. 90 -006; Sharp, Opinion 90- 009 -R. The governmental body with which you would be associated upon termination of public service is Office D in its entirety and Center X. Therefore, for the first year after termination of your service with Office D, Section 1103(g) of the Ethics Law would apply and restrict "representation" of "persons" before Office D in its entirety and Center X. Given the above representations and assurances that you have made, Section 1103(i) of the Ethics Law would not prohibit your employment as the CEO of the Proposed Company. Since the Proposed Company does not exist at this point, you could not have actively participated in any recruitment /inducement of the Proposed Company vis -a -vis a grant, loan, or the promise of same. Second, no grant, or loan has been made to Company M, only to BB. As to Section 1103(g) of the Ethics Law, no prohibition would exist provided you would not engage in any representation of the Proposed Company before your former governmental body. In this regard, you have stated that the Proposed Company will not be providing services to the Commonwealth. Based upon the facts which have been submitted, this Advice has addressed the applicability of Sections 1103(g) and 1103(i) only. It is expressly assumed that there has been no use of authority of office for a private pecuniary benefit as prohibited by Section Confidential Opinion, 98 -012 December 17, 1998 Page 3 1103(a) of the Ethics Law. Further, you are advised that Sections 1103(b) and 1103(c) of the Ethics Law provide in part that no person shall offer to a public official /employee and no public official /employee shall solicit or accept anything of monetary value based upon the understanding that the vote, official action, or judgment of the public official /employee would be influenced thereby. Reference is made to these provisions of the law not to imply that there has been or will be any transgression thereof but merely to provide a complete response to the question presented. Lastly, 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. IV. CONCLUSION: Upon termination of service, the B of Office D /Office E would become a former public official /public employee and a former executive -level State employee subject to the restrictions of Section 1103(g) and Section 1103(i) of the Ethics Law. Section 1103(i) of the Ethics Law would not prohibit the employment or the receipt of compensation by the B from a for - profit company based upon the assumptions that he did not actively participate in recruiting the for - profit company to Pennsylvania, and that he did not actively participate in recruiting or inducing it to open or expand a plant, facility, or branch in Pennsylvania through a grant or loan of money or a promise of a grant or loan of money from the Commonwealth of Pennsylvania. Section 1103(g) of the Ethics Law would not prohibit such employment, provided that there would be no representation of the Proposed Company before the former governmental bodies, which are Office D and Center X. The propriety of the proposed conduct has only been addressed under the Ethics Law. Further, should service be terminated, as outlined above, the Ethics Law would require that a Statement of Financial Interests be filed by no later than May 1 of the year after termination of service. Pursuant to Section 1107(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