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HomeMy WebLinkAbout01-533 TooheyJohn S. Toohey, Esquire Attorney at Law 749 North Church Street Mount Pleasant, PA 15666 ADVICE OF COUNSEL 01 -533 Dear Mr. Toohey: March 29, 2001 Re: Conflict; Public Official /Employee; School Director; School District; Business With Which Associated; Partnership; Contract; Sales; Promotional Products. This responds to your letter of February 22, 2001, by which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa. .S. §1101 et seq., presents any prohibition or restrictions upon a school director as to conducting business with the school district, other political subdivisions, municipal authorities, public officials, public employees, candidates, and youth athletic groups that may or may not receive benefits from the school district or a recreation authority formed by the school district and the city, through a partnership in which the school director holds a 1/3 interest. Facts: As Solicitor for the School District of the City of Monessen ( "School District "), you seek an advisory on behalf of Bernard A. Sarra, Jr., ( "Sarra ") a School Director. Sarra's duties as School Director include voting as a member of the School Board to take action on items such as setting the School District's curriculum and extra- curricular activities, adopting the School District's budget, and expending the School District's funds. In a private capacity, Sarra has a 1/3 interest in "Stitches R Us," a partnership that was formed in the second half of 2000. The other owners, their positions in the community, and their respective ownership interests are as follows: OWNERSHIP OWNER POSITION INTEREST Bernard A. Sarra, Jr. School Director, 1/3 Monessen School District Joseph Dalfonso District Justice in the PA 1/3 Minor Judiciary System Toohey /Sarra, 01 -533 March 29, 2001 Page 2 Martin St. John Professor at Westmoreland 1/3 County Community College You state that no partnership agreement exists as to the above individuals. Stitches R Us is primarily engaged in selling promotional products, including, but not limited to the following: • T- shirts with athletic, promotional or other screen printed or embroidered messages; • Signs, including general, promotional and political signs and signs for election campaigns; • Golf outing signs for political persons and other promotional and fund - raising type signs for political uses; • Engraved or embroidered sporting apparel, including jackets, hats, t- shirts, and sweatshirts; and • Engraved or embroidered pens, finger files, umbrellas, and similar items with political names or other names and messages or names of athletic teams or leagues. You state that the business also does screen printing and embroidery generally. Stitches R Us does not own any equipment or machinery to perform the above described work. You state that any work would be subcontracted out to three or four vendors, none of whom would be an elected or appointed public official or a public employee. Although Stitches R Us does not own any production equipment, it does maintain an inventory of some products. Stitches R Us desires to sell its products to school districts, cities, boroughs, townships, and other municipalities, as well as municipal authorities and other authorities, public officials, public employees, and candidates. Stitches R Us also desires to sell its products to youth groups, youth athletic leagues and similar groups within and outside of Monessen City. You state that the School District and the City, which have the same geographic boundaries, have jointly formed a Recreation Authority, funded in part by the School District. Certain groups with which Stitches R Us would like to do business, such as the youth soccer and athletic leagues, receive benefits provided by the Recreation Authority. Sometimes, such groups are permitted to use gyms and fields owned by the School District or Recreation Authority without rental fees or liability insurance. You state that Stitches R Us does not currently have any contracts with the School District or the City. Given the above facts, you seek an advisory under the Ethics Act and all other relevant laws and statutes including the Pennsylvania Public School Code," as to the following questions. 1. May Stitches R Us do business with the School District of the City of Monessen or other school districts? 2. May Stitches R Us do business with the City of Monessen, any of the City's municipal authorities, or other authorities? Toohey /Sarra, 01 -533 March 29, 2001 Page 3 3. May Stitches R Us do business with other cities, boroughs, townships or other municipalities, any of their municipal authorities, or other authorities? 4. May Stitches R Us do business with youth groups such as soccer and football leagues and teams in the City that receive benefits from the School District or the Recreation Authority, given the fact that the Authority is funded in part by the School District? 5. May Stitches R Us do business with organizations within the City of Monessen that do not directly receive benefits from the School District or the Recreation Authority? 6. May Stitches R Us do business with youth groups, teams, leagues, or other organizations outside of the City of Monessen that do not have direct connections with the School District or the City of Monessen? 7. May Stitches R Us do business with political candidates, elected or appointed officials or other public official and public employees? Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. § §1107(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, the 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 Pa.C.S. §1107(10), (11). An advisory only affords a defense to the extent the requestor has truthfully disclosed all of the material facts. As School Director for the School District of the City of Monessen ( "School District "), Bernard A. Sarra, Jr., ( "Sarra ") is a public official as that term is defined in the Ethics Act, and hence Sarra is subject to the provisions of that Act. Section 1103(a) of the Ethics Act provides: $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 following terms are defined in the Ethics Act as follows: $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. Toohey /Sarra, 01 -533 March 29, 2001 Page 4 "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. The term 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. 65 Pa.C.S. §1102. In addition, Sections 1103(b) and 1103(c) of the Ethics Act provide in part that no person shall offer to a public official /employee anything of monetary value 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. Section 1103(f) of the Ethics Act provides as follows: $1103. Restricted activities. (f) Contract. - -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 Toohey /Sarra, 01 -533 March 29, 2001 Page 5 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. 65 Pa.C.S. §1103(f). Section 1103(f) does not operate to make contracting with the governmental body permissible where it is otherwise prohibited. Rather, where a public official /public employee, his spouse or child, or a business with which he, his spouse or child is associated, is otherwise appropriately contracting with the 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, Section 1103(f) requires that an "open and public process" be observed as to the contract with the governmental body. Pursuant to Section 1103(f), an "open and public process" includes: (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 1103(f) of the Ethics Act 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 1103(j) of the Ethics Act provides as follows: $1103. Restricted activities. (j) Voting conflict. - -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. 65 Pa.C.S. §1103(j). Toohey /Sarra, 01 -533 March 29, 2001 Page 6 In each instance of a conflict, Section 1103(j) requires the public official /employee to abstain and to publicly disclose the abstention and reasons for same, both orally and by filing a written memorandum to that effect with the person recording the minutes or supervisor. In the event that the required abstention results in the inability of the governmental body to take action because a majority is unattainable due to the abstention(s) from conflict under the Ethics Act, then voting is permissible provided the disclosure requirements noted above are followed. See, Mlakar, Advice 91- 523 -S. It is initially noted that Stitches R Us, of which Sarra is a partner, is a business with which Sarra is associated. The Commission has held that a public official /public employee may not use the authority of his public position or confidential information for the advancement of his own private pecuniary benefit or that of a business with which he is associated. Pancoe, Opinion 89 -011. Examples of conduct that would be prohibited under Section 1103(a) would include: (1) the pursuit of a private business opportunity in the course of public action, Metrick, Order No. 1037; (2) the use of governmental facilities, such as governmental telephones, postage, staff, equipment, research materials, or other property, or the use of governmental personnel, to conduct private business activities, Freind, Order No. 800; Pancoe, supra; and (3) the participation in an official capacity as to matters involving the business with which the public official /public employee is associated in his private capacity, such as the review /selection of its bids or proposals, Gorman, Order No. 1041. If the private employer or business with which the public official /public employee is associated or clients of the business would have a matter pending before the governmental body, the public official /public employee would have a conflict of interest as to such matter. Kannebecker, Opinion 92 -010; Miller, Opinion No. 89 -024. In each instance of a conflict of interest, the public official /public employee would be required to abstain from participation and to satisfy the disclosure requirements of Section 1103(j). Having established the above, your specific inquiry shall now be addressed. As to any of the individuals, entities, organizations, authorities, or political subdivisions delineated above other than the Monessen City School District, Section 1103(a) of the Ethics Act would not prohibit Stitches R Us from forming a business relationship with such parties. In this regard, the Commission has, in the past, considered the extent to which a public official would have a conflict where a business relationship would exist between the public official and another party. In Miller, Opinion 89 -024, the Commission addressed the issue of whether a township zoning officer was restricted by the Ethics Law from working for a consulting firm when that firm provided services to private clients whose plans could be brought before the township zoning commission for approval. The Commission first determined that the consulting firm was a business with which the township zoning officer was associated. Next, the Commission concluded that the zoning officer had a conflict as to approving, recommending, or playing any role in the approval of permits or in relation to any township action involving a client, plan or project involving the consulting firm. Id. The concern in Miller, was that the township zoning officer would look favorably on a matter submitted for township action by private clients so as to engender a continued private business relationship with those clients. In Kannebecker, Opinion 92 -010, the Commission considered whether the Ethics Law would impose any restrictions upon a township supervisor as to individuals who had matters pending before the township when the supervisor was an attorney for those individuals in unrelated matters. Although the Commission followed Miller in principle, it refined the Miller holding: We believe that you would have indeed have a conflict as to an ongoing client or a client who is on a retainer even if you Toohey /Sarra, 01 -533 March 29, 2001 Page 7 would not represent the client as to a matter pending before the Township. However, as to former or past clients, we do not believe as a general rule that you would have a conflict. Under certain circumstances, a conflict could exist as to past clients; such would depend upon factors like the number of prior representations of any given client and the period of time over which that occurred. Kannebecker, at 5 (Emphasis added). Based upon Miller, supra and Kannebecker, supra, if Sarra, through the partnership, would have an ongoing business relationship with any of the individuals, entities, organizations, authorities, or political subdivisions delineated above, he would have a conflict as to any matter before the School District that would involve those parties. In each instance of a conflict, Sarra would have to abstain and observe the disclosure requirements of Section 1103(j) of the Ethics Act. See, Dettra, Opinion 89- 021; Mihalik, Opinion 90 -002. See, also, Snyder v. SEC, 686 A. 2d 843 (Pa. Commw. Ct. 1996). Finally, the Ethics Act would not prohibit Stitches R Us from doing business with Monessen City School District. Sarra would have a conflict as to matters involving Stitches R Us, could not participate and would be required to observe the disclosure requirements of Section 1103(j) of the Ethics Act. If the products sold by Stitches R Us to the School District would be $500 or more, the requirements of Section 1103(f) of the Ethics Act would have to be strictly observed. Under Section 1103(f), Sarra could not have any supervisory or overall responsibility as to the implementation or administration of the contract with the School District. Parenthetically, although the contracting in question would not be prohibited under the Ethics Act provided the requirements of Sections 1103(a), 1103(f) and 1103(j) are satisfied, a problem may exist as to such contracting under the Public School Code. In the instant situation, the Public School Code of 1949, as amended, provides as follows: §3 -324. Not to be employed by or do business with district; exceptions. No school director shall, during the term for which he was elected or appointed, as a private person engage in any business transaction with the school district in which he is elected or appointed, be employed in any capacity by the school district in which he is elected or appointed, or receive from such school district any pay for services rendered to the district except as provided in this act... . 24 P.S. §3 -324. Since such contracting may be prohibited by the above quoted provision, it is suggested that Sarra seek legal advice in that regard. The propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Specifically not addressed herein is the applicability of the Public School Code or any other laws or statutes" in that the Commission does not have the power to enforce, administer or interpret such laws. Conclusion: As School Director for Monessen School District, Bernard A. Sarra, Jr., ( "Sarra ") is a public official subject to the provisions of the Public Official and Toohey /Sarra, 01 -533 March 29, 2001 Page 8 Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. §1101 et seq. Stitches R Us, a partnership in which Sarra holds a 1/3 interest, is a business with which Sarra is associated. As to any of the individuals, entities, organizations, authorities, or political subdivisions delineated above other than the Monessen City School District, Section 1103(a) of the Ethics Act would not prohibit Stitches R Us from forming a business relationship with such parties. If Sarra's business would have an ongoing business relationship with any of the individuals, entities, organizations, authorities, or political subdivisions delineated above, he would have a conflict as to any matter before the School District that would involve those parties. In each instance of a conflict, Sarra would have to abstain and observe the disclosure requirements of Section 1103(j) of the Ethics Act. The Ethics Act would not prohibit Stitches R Us from doing business with Monessen City School District. Sarra would have a conflict as to matters involving Stitches R Us, could not participate and would be required to observe the disclosure requirements of Section 1103(j) of the Ethics Act. If the products sold to the School District would be $500 or more, the requirements of Section 1103(f) of the Ethics Act would have to be strictly observed. Under Section 1103(f), Sarra could not have any supervisory or overall responsibility as to the implementation or administration of the contract with the School District. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. It is suggested that legal advice be obtained with regard to the possible applicability of the Public School Code or any other laws or statutes. Pursuant to Section 1107(11), an Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, provided the requestor has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. This letter is a public record and will be made available as such. Finally, if you disagree with this Advice or if you have any reason to challenge same, you may appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Any such appeal must be in writing and must be actually received at the Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa. Code §13.20. The appeal may be received at the Commission by hand delivery, United States mail, delivery service, or by FAX transmission (717 -787- 0806). Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. Sincerely, Vincent J. Dopko Chief Counsel