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HomeMy WebLinkAbout01-575 BrueningCouncilman Jeff Bruening Stewartstown Borough 64 Poplar Springs Blvd. Stewartstown, PA 17363 ADVICE OF COUNSEL July 25, 2001 Re: Conflict; Public Official /Employee; Consulting Company; Business With Referral Fee; Contract. Dear Councilman Bruening: 01 -575 Borough; Council Member; Computer Which Associated; High -Speed Internet; This responds to your letter of June 15, 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 borough council member who owns a computer consulting company as to: 1) participating in bringing high -speed Internet services to the borough, and receiving referral fees from a company that provides high -speed Internet service to the borough or consulting fees from borough residents who require assistance in the installation of high -speed Internet; 2) referring borough residents to his own computer consulting company; and 3) providing consulting services, hardware or software to the borough or to other boroughs, townships or the Commonwealth. Facts: In 1992, you started a small computer - consulting business of which you are the President and owner. In January 2000, you began your political career as a member of the Stewartstown Borough Council ( "Borough Council"). Shortly after taking office as a Borough Council Member, you learned that many residents were experiencing problems concerning high -speed Internet access. The problems were caused by the lack of low cost high -speed Internet solutions like DSL (Digital Subscriber Line) or Cable Modem Internet access. The only available solutions cost hundreds of dollars for hardware plus monthly fees, which are well beyond the reach of most residential users. You understand the expense of such solutions because you purchased a two -way satellite for $700 and now pay a monthly service fee of $69.95. While you may write off this expense through your business, you state that the residents of Stewartstown do not have this kind of disposable income. Brueninq, 01 -575 July 25, 2001 Page 2 You would like to use your position as a Council Member to put pressure on Verizon and the cable company that serves Stewartstown to provide high -speed Internet to your community. You believe that high -speed Internet service would be good for the community as well as the companies that would provide the service. You feel there is sufficient demand in your area to cover the expenses that these companies would incur if they would bring the service to Stewartstown. You add that the municipal office and the public library would also benefit. Further, you believe that bringing Internet service to the community may help to expand the tax base by attracting more small businesses to Stewartstown. You note that typically, the costs of high -speed Internet service are only passed on to the subscribers, not the non - subscribing residents who would not be impacted by this service. Assuming that a company has decided to provide high -speed Internet service to Stewartstown, and you would have played a role in that decision, you pose the following questions. 1. Given that many companies provide a referral fee when a lead on a potential customer results in an actual customer, whether you or your business may receive compensation for providing leads to Verizon, Clearview Cable, or any other company that may decide to provide the Borough with high -speed Internet; 2. If the answer to the first question is in the negative, whether you should return a referral fee paid to you for providing a lead or donate such fee to the Recreation Board; 3. Whether you could receive compensation if another Council Member other than yourself would be involved in bringing high -speed Internet service to the Borough, and whether it would make a difference if you would receive compensation as a result of your business coming to Stewartstown; 4. Whether you would be permitted to provide consulting services to a resident or a local business that would contact you for assistance with the installation of high -speed Internet, noting that: 1) you advertise in the Yellow Book and at local restaurants, and write a monthly article for the local newspaper; and 2) many of the residents prefer to deal with local businesses; 5. Whether you would be permitted to refer residents to your consulting company if they would ask you whom they should use to assist them with the installation of a high -speed Internet line if you would be the Council Member responsible for bringing high -speed Internet to the Borough; 6. Whether you may provide consulting services, or hardware or software to the Borough and if so, what guidelines you should follow to avoid conflicts of interest; 7. Whether you may provide consulting services, or hardware or software to other townships, boroughs or the Commonwealth and if so, what guidelines you should follow to avoid conflicts of interest; and 8. How would you be able to push for advances in technology that would benefit the community and the Borough without creating a conflict of interest due to your related business. 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 Brueninq, 01 -575 July 25, 2001 Page 3 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 a Council Member for Stewartstown Borough, you are a public official as that term is defined in the Ethics Act, and hence you are 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. "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. 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 Brueninq, 01 -575 July 25, 2001 Page 4 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, which pertains to contracting /subcontracting, 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 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). The following terms that pertain to Section 1103(f) are defined in the Ethics Act as follows: $1102. Definitions. "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. "Governmental body." Any department, authority, commission, committee, council, board, bureau, division, service, office, officer, administration, legislative body, or other establishment in the Executive, Legislative or Judicial Branch of a state, a nation or a political subdivision thereof or any agency performing a governmental function. "Governmental body with which a public official or public employee is or has been associated." The governmental body within State government or a political Brueninq, 01 -575 July 25, 2001 Page 5 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 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). 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 applying the above provisions of the Ethics Act to the instant matter, you are advised that Section 1103(a) of the Ethics Act does not prohibit public officials /public employees from having outside business activities or employment; however, the public official /public employee may employee use the authority of his public position - or confidential information obtained by being in that position - 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. Your computer consulting business is clearly a business with which you, as its owner and President, are associated. Pursuant to Section 1103(a) of the Ethics Act, you Brueninq, 01 -575 July 25, 2001 Page 6 would have a conflict of interest as to matters before Borough Council that would result in a financial gain to you or your computer consulting business. In each instance of a conflict, you would be required to abstain and observe the disclosure requirements of Section 1103(j) of the Ethics Act. Having established the above general principles, your specific inquiries shall now be addressed. Because your first and fourth questions are similar, they shall be addressed together. Your first question asks whether you or your computer consulting business may receive referral fees from a company that would decide to bring high -speed Internet services to the Borough, assuming you would play a role in that company's decision. Your fourth question asks whether, based upon the same assumption, you or your business may receive compensation for providing consulting services to individuals who would request your assistance in installing high -speed Internet. It is initially noted that in questions 1 and 4, all of the elements for a conflict of interest would appear to be present, in that there would be: 1) use of authority of office by virtue of your involvement as a Council Member in bringing high -speed Internet services to the Borough; for a 2) a private pecuniary benefit, that is, referral or consulting fees; of 3) yourself or a business with which you are associated, your computer consulting business. However, the Commission in Amato, Opinion 89 -002, held that a public official would not have a conflict as to participating in matters submitted by project developers, when the public official was employed by a company that sold supplies to subcontractors who, in turn, did business with the contractor who bid on the contract, provided that the public official could not reasonably and legitimately anticipate that his employer would receive subcontract work as to the project. Based upon Amato, supra, the question becomes whether you have a reasonable and legitimate anticipation of receiving referral fees or consulting fees. This is a factual question, which cannot be addressed herein; however, it is parenthetically noted that you may have a reasonable and legitimate expectation, given that you appear to contemplate receiving such fees. If such an expectation exists, you would have a conflict and could not play any role in bringing high- speed Internet service to the Borough. Further, you would be required to observe the disclosure requirements of Section 1103(j) of the Ethics Act. If such an expectation does not exist, you would not have a conflict and could participate in bringing high -speed Internet service to the Borough. Even assuming that you would have a conflict of interest, Section 1103(a) provides two exclusions from conflicts: the de minimis exclusion and the class /subclass exclusion. The de minimis exclusion would not apply since any referral or consulting fee would not have an economic consequence that would be insignificant. In order for the class /subclass exclusion to apply, you, a member of your immediate family, or a business with which you or a member of your immediate family is associated would have to be in a class /subclass consisting of more than one person and be affected to the same degree as other members of the class /subclass. Assuming these two conditions would be met, that is, assuming you /your business would belong to a class /subclass consisting of more than just one person who would financially benefit as a result of bringing high -speed Internet to the Borough, and would be affected to the same degree as the other members of the class /subclass, you would be permitted to participate in bringing high -speed Internet service to the Borough. See, Laser, Opinion 93 -002. Your second question asks whether you should return a referral fee paid to you or donate such fee to the Recreation Board, assuming you would be precluded from receiving such fees. The underlying assumption to the question you pose is that you would have participated when you would have had a conflict. Such participation constitutes past action, which cannot be addressed in the context of an advisory. For Brueninq, 01 -575 July 25, 2001 Page 7 your information, the State Ethics Commission has held that a public official /public who has violated the Ethics Act cannot, through subsequent acts, nullify or negate such violation. See, Dovidio, Order 00 -021. Based upon Dovidio, supra, the donation of a prohibited private pecuniary benefit would not operate to cancel or undo a Section 1103(a) violation. Your third inquiry consists of three parts. First, you ask whether you could receive compensation if you, in your official capacity, would have no involvement in bringing high -speed Internet service to the Borough. Second, you ask whether you could receive compensation if another Borough Council Member were pushing to bring high -speed Internet service to the Borough. Third, you ask whether it would make a difference if you would receive compensation as a result of your own business coming to Stewartstown. As to the first and second parts of your question, assuming there would be no use of authority of office on your part, you /your business could receive compensation without transgressing Section 1103(a) of the Ethics Act. As to the third part of your question, assuming you would not be using your public position to facilitate the relocation of your business to the Borough, such compensation would not be prohibited. Your eighth question asks how you should "push" for advances in technology that would benefit your community and the Borough. Generally speaking, you would not be precluded from engaging in such activity assuming, of course, that you would not have a conflict as per the discussion in questions 1 and 4. Your fourth question has been fully addressed above. Your fifth inquiry relates to whether you would be permitted to refer residents to your consulting company assuming you would be the Council Member responsible for bringing high -speed Internet service to the Borough. The Ethics Act would not prohibit you from making referrals to your consulting company in your private capacity. However, you would be prohibited from making such referrals in your public capacity where you would be using the authority of your office, as for example, by using governmental time, facilities, equipment or staff, or confidential information to further your private business activities. Metrick, supra. Your sixth question asks whether you may provide consulting services or hardware or software to the Borough. As stated above, your consultin company is a business with which you are associated. Therefore, under Section 1103 a) of the Ethics Act, you could not use the authority of your public position as a Borough ouncil Member to solicit or promote business activity between the Borough and your computer consulting company. Furthermore, to the extent you would, in your public capacity, have involvement as to your computer consulting company, a conflict of interest would exist. In each instance of a conflict of interest, you would be required to abstain and to satisfy the disclosure requirements of Section 1103(j) set forth above. As for Section 1103(f), you are advised that Section 1103(f) of the Ethics Act 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; Brueninq, 01 -575 July 25, 2001 Page 8 (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 /public employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. Where Section 1103(f) applies, its requirements must be strictly observed. Under the facts which you have submitted, the governmental body with which you are associated is the Borough of Stewartstown. Accordingly, a contract between you /your computer consulting business and the Borough would be subject to the restrictions of Section 1103(f). 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) would be satisfied, a problem may exist as to such contracting under the Borough Code. In the instant situation, the Borough Code provides as follows: §46404. Penalty for personal interest in contracts or purchases Except as otherwise provided in this act, no borough official either elected or appointed, who knows or who by the exercise of reasonable diligence could know, shall be interested to any appreciable degree either directly or indirectly in any purchase made or contract entered into or expenditure of money made by the borough or relating to the business of the borough, involving the expenditure by the borough of more than one thousand dollars ($1000) in any calendar year, but this limitation shall not apply to cases where such officer or appointee of the borough is an employe of the person, firm or corporation to which the money is to be paid in a capacity with no possible influence on the transaction, and in which he cannot be possibly benefited thereby either financially or otherwise. But in the case of a councilman or mayor, if he knows that he is within the exception just mentioned he shall so inform council and shall refrain from voting on the expenditure or any ordinance relating thereto, and shall in no manner participate therein. Any official or appointee who shall knowingly violate the provisions of this section shall be subject to surcharge to the extent of the damage shown to be thereby sustained by the borough and to ouster from office, and shall be guilty of a misdemeanor, and upon conviction thereof shall be sentenced to pay a fine not exceeding one thousand dollars ($1000), or not exceeding one hundred eighty days' imprisonment, or both. 53 P.S. §46404. Since contracting may be prohibited by the above quoted provision, it is suggested that you seek legal advice in that regard. Your seventh inquiry asks whether you may provide consulting services, or hardware or software to other townships, boroughs or the Commonwealth. Such activity Brueninq, 01 -575 July 25, 2001 Page 9 would not be prohibited under the Ethics Act because there would be no use of authority of your office as a Council Member in your Borough for a private pecuniary benefit. Your eighth question asks how you should "push" for advances in technology that would benefit your community and the Borough. Generally speaking, you would not be precluded from engaging in such activity assuming, of course, that you would not have a conflict as per the discussion in questions 1 and 4. 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 Borough Code. Conclusion: As a Council Member for Stewartstown Borough, you are a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. §1101 et seq. Your computer consulting business is a business with which, you as its President and owner, are associated. Pursuant to Section 1103(a) of the Ethics Act, you would have a conflict of interest as to matters before Borough Council that would result in a financial gain to you or your computer consulting business. In each instance of a conflict, you would be required to abstain and observe the disclosure requirements of Section 1103(j) of the Ethics Act. As to your first and fourth questions relating to whether you or your computer consulting business may receive referral fees or consulting fees assuming you would participate in bringing high -speed Internet to the Borough, you would have a conflict as to such participation if you would have a reasonable and legitimate expectation of receiving referral fees or consulting fees. In such a case, you would be required to observe the disclosure requirements of Section 1103(j) of the Ethics Act. No conflict would exist if you would not have a reasonable and legitimate expectation of receiving such fees. Even assuming that you would have a conflict, you would be permitted to participate if the class /subclass exclusion would apply. In order for that exclusion to apply, you, a member of your immediate family, or a business with which you or a member of your immediate family is associated would have to be in a class /subclass consisting of more than one person and be affected to the same degree as other members of the class /subclass. Assuming these two conditions would be met, that is, assuming you /your business would belong to a class /subclass consisting of more than just one person who would financially benefit as a result of bringing high -speed Internet to the Borough, and would be affected to the same degree as the other members of the class /subclass, you would be permitted to participate in bringing high -speed Internet service to the Borough. As to your second inquiry involving whether you should return a referral fee paid to your or donate such fee assuming you would be precluded by the Ethics Act from receiving such fee, subsequent measures would not operate to cancel or undo a Section 1103(a) violation. Your third inquiry asks whether you could receive compensation if: 1) you, in your official capacity, would have no involvement in bringing high -speed Internet service to the Borough; 2) another Borough Council Member were pushing to bring high -speed Internet service to the Borough; or 3) your own business would locate to Stewartstown. As to the first and second parts of your question, assuming there would be no use of authority of office on your part, you /your business could receive compensation without transgressing Section 1103(a) of the Ethics Act. As to the third part of your question, assuming you would not be using your public position to facilitate the relocation of your business to the Borough, such compensation would not be prohibited. Brueninq, 01 -575 July 25, 2001 Page 10 Your fourth question has been fully addressed above. As to your fifth question which asks whether you would be permitted to refer residents to your consulting company assuming you would be the Council Member responsible for bringing high -speed Internet to the Borough, the Ethics Act would not prohibit you from making referrals to your consulting company in your private capacity. However, you would be prohibited from making such referrals in your public capacity where you would be using the authority of your office, as for example, by using governmental time, facilities, equipment or staff, or confidential information to further your private business activities. As to your sixth inquiry involving whether you may provide consulting services or hardware or software to the Borough, the restrictions of Sections 1103(a) and 1103(f) noted above must be observed. As to your seventh question relating to whether you may provide consulting services or hardware or software to other townships, boroughs or the Commonwealth, such activity would not be prohibited under the Ethics Act because there would be no use of authority of your office as a Borough Council Member for a private pecuniary benefit. As to your eighth question regarding how you should "push" for advances in technology that would benefit your community and the Borough, you would not be precluded from engaging in such activity assuming, of course, that you would not have a conflict as per the discussion in questions 1 and 4. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. 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