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HomeMy WebLinkAbout01-588 HarrellEdgar C. Harrell Executive Director Murata Business Center 453 Lincoln Street Carlisle, PA 17013 Re: Conflict; Public Official /Employee; Independent Contractor; Executive Director; Murata Business Center; Incubator; Incubator Tenant; Investment. Dear Mr. Harrell: ADVICE OF COUNSEL August 29, 2001 01 -588 This responds to your letter of July 27, 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 an individual who is currently under contract with a private non - profit corporation to serve as executive director of an incubator for start -up companies with regard to his prospective conduct of assisting an incubator tenant in organizing an equity offering and investing in such equity offering. Facts: As Executive Director of the Murata Business Center, you seek an advisory from the State Ethics Commission. You have submitted facts which may be fairly summarized as follows. The Murata Business Center is an incubator for start -up companies owned by the Capital Region Economic Development Corporation ( "CREDC' ). You serve as Executive Director of the Murata Business Center pursuant to a contract with the Harrisburg Regional Chamber ( "Chamber "). You are not an employee of the Chamber. You manage the Murata Business Center under the guidance of an advisory board. As Executive Director, you make many of the day -to -day operating decisions within the limits of an approved annual budget and established criteria for screening new tenants. The aforesaid advisory board is headed by a Cumberland County Commissioner. In addition to the advisory board, there are two committees, the "Property Committee" and "Tenant Committee," which committees review your recommendations as to expenditures or tenants. The advisory board and Tenant Committee have formally approved a tenant application for a new incubator tenant, "SaferSite, Inc." You state that SaferSite, Inc. Harrell, 01 -588 August 29, 2001 Page 2 ( "SaferSite ") meets the criteria for a new tenant. You further state that SaferSite was not given any preferential treatment as to rent and service charges or allowances for renovations. SaferSite has asked you to assist it in organizing a $500,000 equity offering targeted at "angel investors" in the Tri- County region and to invest in the equity offering, both personally and through Harrell Partners, LLC, of which you hold 25% of the assets. You state that the maximum that you would invest in SaferSite would not exceed 1`)/0 of SaferSite's authorized shares. Additionally, assuming the majority of partners of Harrell Partners, LLC would approve an investment, the maximum that it would invest in SaferSite would not exceed 1/2% of SaferSite's authorized shares. You further state that your decision to personally invest in SaferSite has nothing to do with your position at the Murata Business Center, as you have a history of investing in start -up companies which pre -dates your association with the Murata Business Center. You state: "I assist other (all) tenants in the incubator in accessing financing. On the other hand I would be very selective in making a personal investment in a tenant company." (Harrell Letter of July 27, 2001, at 2). You state that the National Business Incubator Association ( "NBIA "), of which you and the Murata Business Center are members, does not prohibit incubator managers from investing in incubator tenant companies. You further state that the President and CEO of the Chamber and his immediate predecessor do not see a problem with the proposed investment(s) by you /Harrell Partners, LLC in a tenant company. However, it has been suggested that you seek guidance from the State Ethics Commission as to whether you would have a conflict of interest under the Ethics Act with regard to investing personally or through Harrell Partners, LLC in SaferSite, given your position as Executive Director of the Murata Business Center. 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. Sections 1103(a) and 1103(j) of the Ethics Act provide: §1103. Restricted activities (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. (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 Harrell, 01 -588 August 29, 2001 Page 3 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(a), (j). The following terms pertaining to conflict of interest 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. 65 Pa.C.S. §1102. In applying the above provisions of the Ethics Act to the facts which you have submitted, an initial determination must be made as to whether you are a "public official" or "public employee" subject to Sections 1103(a) and 1103(j) of the Ethics Act. The Ethics Act defines the terms "public employee" and "public official" as follows: §1102. Definitions "Public employee." Any individual employed by the Commonwealth or a political subdivision who is responsible for taking or recommendng official action of a nonministerial nature with regard to: (1) contracting or procurement; (2) administering or monitoring grants or subsidies; (3) planning or zoning; (4) inspecting, licensing, regulating or auditing any person; or Harrell, 01 -588 August 29, 2001 Page 4 (5) any other activity where the official action has an economic impact of greater than a de minimis nature on the interests of any person. The term shall not include individuals who are employed by this Commonwealth or any political subdivision thereof in teaching as distinguished from administrative duties. "Public official." Any person elected by the public or elected or appointed by a governmental body or an appointed official in the executive, legislative or judicial branch of this Commonwealth or any political subdivision thereof, provided that it shall not include members of advisory boards that have no authority to expend public funds other than reimbursement for personal expense or to otherwise exercise the power of the State or any political subdivision thereof. 65 Pa.C.S. § 1102. Under the facts which you have submitted, in your capacity as Executive Director of the Murata Business Center, you are not an employee of the Chamber, but rather, are an independent contractor under contract with the Chamber. The facts which you have submitted do not delineate the nature of the Chamber. However, administrative notice is taken of official records maintained by the Pennsylvania Department of State which reflect that the Chamber is a private non - profit corporation. Conditioned upon the assumption that the Chamber is a private non - profit corporation, you are advised that in your capacity as Executive Director of the Murata Business Center, you are neither a "public employee" nor a "public official." You are not a "public employee, " because you are not employed by the Commonwealth or a political subdivision. You are not a 'public official," because you have not been elected by the public or elected or appointed by a governmental body nor are you an appointed official in the executive, legislative or judicial branch of the Commonwealth or any political subdivision thereof. Sections 1103(a) and 1103(j) of the Ethics Act apply to restrict public employees and public officials as to conflicts of interest. Since you are neither a "public employee' nor a "public official" as those terms are defined in the Ethics Act, you are not subject to Sections 1103(a) and 1103(j) of the Ethics Act. The only provisions of the Ethics Act that apply to you are Sections 1103(b) and 1103(c), which apply to everyone. For your information, Sections 1103(b) and 1103(c) of the Ethics Act provide in part that no person shall offer to a public official /public employee anything of monetary value and no public official /public employee shall solicit or accept anything of monetary value based upon the understanding that the vote, official action, or judgment of the public official /public 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 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. Conclusion: As an individual under contract with the Harrisburg Regional Chamber to serve as Executive Director of the Murata Business Center, an incubator for start -up companies, you are not a "public official" or "public employee" subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. §1101 et seq. Harrell, 01 -588 August 29, 2001 Page 5 Accordingly, in your capacity as Executive Director of the Murata Business Center, you are not subject to Sections 1103(a) and 1103(j) of the Ethics Act. Sections 1103(b) and 1103(c) of the Ethics Act apply to everyone. This Advice is conditioned upon the assumption that the Harrisburg Regional Chamber is a private non - profit corporation. 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