HomeMy WebLinkAbout01-005 ConfidentialOPINION OF THE COMMISSION
Before: Daneen E. Reese, Chair
Louis W. Fryman, Vice Chair
John J. Bolger
Frank M. Brown
Susan Mosites Bicket
Donald M. McCurdy
DATE DECIDED: 8/23/01
DATE MAILED: 9/7/01
01 -005
Re: Conflict; Simultaneous Service; Public Official /Public Employee; Executive -Level
State Employee; A of Department B; A of Department C; Acting A of Department D;
Director; Non-Profit Corporation; Public- Private Partnership; Merger; E; F.
This responds to letters of May 14, 2001, May 29, 2001, June 7, 2001, June 8,
2001, June 13, 2001, and June 14, 2001, by which you requested a confidential advisory
opinion from the State Ethics Commission.
I. ISSUE:
Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S.
§1101 et seq., presents any prohibition or restrictions upon the A of Department B, the A of
!Department C, or the Acting A of Department D, all of whom are currently designated as
Members of the Board of E, a component within Department B, and as Members of the
Board of F, a non - profit corporation, with regard to simultaneous service on the Board of F
following its merger with E.
II. FACTUAL BASIS FOR DETERMINATION:
In your capacity as G of E, you seek a confidential opinion from this Commission on
behalf of the A of Department B, the A of Department C, and the Acting A of Department
D, all of whom currently serve as Members of the Board of E, a component within
Department B, and as Members of the Board of F, a non - profit corporation, with regard to
prospective service on the Board of F following its merger with the Board of E.
You have submitted the following factual background regarding F and E.
F was incorporated as a non - profit corporation in [date], with the approval of
Department B. You state that the F has constituted the "private sector component" of a
public - private partnership among the Commonwealth, local Hs, and Is within the
Confidential Opinion, 01 -005
September 7, 2001
Page 2
Commonwealth. Its goals are to: J. The F has received grants from the Commonwealth
of Pennsylvania in the past, and it expects to solicit such grants in the future. At least
some such grant monies have been received from the Commonwealth acting by and
through Department B, on a limited basis, for distinct programs.
E has been the "public sector component" of the public - private partnership
described above. E was initially created by a K within the L's M of [date]. E has been a
component within Department B. Its goals and missions have complemented those of the
F and have been directed toward an identical outcome. The F has provided resources to
and support for the N activities of E.
You state that the merger of the Boards of the F and E is a result of the evolution of
the F and E and an understanding that the goals and objectives of each shall be better
served by the unification of the entities.
Following the merger, the F will continue to function under new Bylaws. The F may
continue to receive grants from the Commonwealth, acting by and through Department B,
on a limited basis, for distinct programs. However, E will no longer receive 0 within the L's
M. The programs within E will continue in the F.
In furtherance of the merger, the Board of the F has already adopted the new
Bylaws, which Bylaws you have submitted and are incorporated herein by reference. Per
the new Bylaws, the F's mission is stated as follows:
[Quote].
Bylaws, Article [number], Section [number].
The same Section of the Bylaws further states:
[Quote].
Id.
Per the new Bylaws, the F will be managed by an Executive Director who will report
to the F Board. You state that the Executive Director shall serve at the pleasure of the
Board as neither a public official nor public employee. Neither the Executive Director nor
the F staff will be Commonwealth employees.
Under the new Bylaws, the F Board will include four categories of directors as
follows: [number] directors from the private sector; number] directors from the public
sector; [number] P sector directors; and [number] Q sector directors. The [number]
directors from the public sector will include the As and Acting A as to whom you have
inquired; the L; and [number] Rs. Each of the public sector directors will serve as long as
he or she remains in such public position.
The F Board shall be co- chaired by the L and a private sector director. While an A
or Acting A as to whom you have inquired could not serve as Co- Chair, he or she could be
elected to the office of Secretary or Treasurer.
The F Bylaws create various committees. The work of the committees is
coordinated within the F Board. The Bylaws name the A of Department B to Committee S
and Committee T. The others on whose behalf you inquire are eligible to serve but are not
specifically named to any F Board committee. Pursuant to the Bylaws, individuals holding
the positions as to which you inquire may not serve as chair of Committee S.
You state that the new F Bylaws purposefully establish the structure of the F, the F
Board, and the F committees to ensure an equitable representation of both the public and
private sectors.
Confidential Opinion, 01 -005
September 7, 2001
Page 3
You further state that the As and Acting A on whose behalf you inquire have
reviewed the Ethics Act, recognize that they may not engage in conduct that would
constitute a conflict of interest, and further recognize the restrictions of Section 1103(f) of
the Ethics Act pertaining to contracting /subcontracting.
On behalf of the aforesaid As and Acting A, you assure this Commission as follows:
1. To the extent the F Board has received grant money from the
Commonwealth, acting by and through Department B, the A of Department B
acknowledges that a conflict of interest would exist as to matters involving
such grants if such matters would financially impact the F. In each such
instance, the A of Department B will abstain from participation and will satisfy
the disclosure requirements of Section 1103(j) of the Ethics Act.
2. The remaining A and Acting A on whose behalf you inquire
acknowledge the potential existence of conflicts of interest should their
respective Departments have granted money to the F. In each instance of a
conflict of interest, the A or Acting A will abstain from participation and will
satisfy the disclosure requirements of Section 1103(j) of the Ethics Act.
3. With regard to prospective grants to the F, the As and Acting A on
whose behalf you inquire shall undertake all appropriate actions as required
to avoid a conflict of interest, including but not limited to: playing no role in
the grant application process; playing no role in determining how the grant
money will be utilized; using no confidential information acquired during the
holding of public employment for the private pecuniary benefit of the F or the
F Board; and satisfying the disclosure requirements of Section 1103(j) of the
Ethics Act. Additionally, they shall satisfy all applicable requirements of
Section 1103(f) of the Ethics Act.
4. In all respects, including but not limited to those specifically delineated
above, the As and Acting A on whose behalf you inquire will not use their
public positions, or confidential information obtained therefrom, for the private
pecuniary benefit of themselves or the F Board.
III. 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, 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 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.
It is further initially noted that, pursuant to the same aforesaid Sections of the Ethics
Act, an opinion /advice may be given only as to prospective (future) conduct. Past conduct
may not be addressed in the context of an advisory opinion. However, to the extent you
have inquired as to future service on the F Board, your inquiry may, and shall be
addressed.
The A of Department B, the A of Department C, and the Acting A of Department D
are all public officials /public employees and executive -level State employees subject to the
Ethics Act.
Sections 1103(a), 1103(f), and 1103(j) of the Ethics Act provide:
§ 1103. Restricted activities
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September 7, 2001
Page 4
(a) Conflict of interest. - -No public official or public
employee shall engage in conduct that constitutes a conflict of
interest.
(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.
(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(a), (f), (j).
The following terms pertaining to the above provisions 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
Confidential Opinion, 01 -005
September 7, 2001
Page 5
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.
"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
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.
65 Pa. C. S. § 1102.
Pursuant to Section 1103(a) of the Ethics Act, 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.
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September 7, 2001
Page 6
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.
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.
In applying the above provisions of the Ethics Act to your inquiry, there are primarily
two questions to be addressed: (1) whether simultaneous service as an A or Acting A and
as a director of the F would be prohibited by the Ethics Act due to a statutorily - declared
incompatibility or an inherent conflict; and (2) if not, whether such simultaneous service
would present other (non- inherent) conflicts of interest under the Ethics Act.
As to the first question, the General Assembly has the constitutional power to
declare by law which offices are incompatible. Pa. Const. Art. 6, §2. However, even where
there is no statutorily - declared incompatibility precluding simultaneous service, if
simultaneous service would place the public official /public employee in a continual state of
conflict under Section 1103(a) of the Ethics Act, such as where in one position he would be
accounting to himself in another position on a continual basis, an "inherent conflict" would
exist (See, Johnson, Opinion 86 -004), and it would be impossible, as a practical matter, for
the public official /public employee to function in the conflicting positions without running
afoul of Section 1103(a).
Absent a statutorily - declared incompatibility or an inherent conflict under Section
1103(a), the Ethics Act would not prohibit simultaneous service in multiple public positions,
but in each instance of a conflict of interest, the individual would be required to abstain and
to satisfy the disclosure requirements of Section 1103(j) as set forth above.
In addressing the first question, as discussed more fully below, it is not clear
whether an F directorship would be considered a public position, but in any event, there is
no statutorily - declared incompatibility that would preclude simultaneous service as A or
Acting A of one of the aforesaid Departments (Department B, Department C, or
Department D) and as a Director of the F. Furthermore, there would be no "inherent
conflict" to preclude the proposed simultaneous service. In their capacities as As and
Acting A, the individuals on whose behalf you inquire would be reviewing, administering,
and acting upon a multitude of issues; matters involving the F would form only a fraction of
the work of their respective Departments. Consequently, simultaneous service as an A or
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September 7, 2001
Page 7
Acting A of one of the aforesaid Departments and as a director of the F would be permitted
within the parameters of Sections 1103(a) and 1103(j) of the Ethics Act, pertaining to
conflicts of interest.
This brings us to the second question to be addressed, which is whether such
simultaneous service would present other (non- inherent) conflicts of interest under the
Ethics Act. In addressing that question, we must apply the statutory elements of a conflict
of interest.
Pursuant to Section 1102 of the Ethics Act, the elements of a conflict of interest are
the use of 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, a member of his immediate family, or a business with which he or a
member of his immediate family is associated. In order for a conflict of interest to be found
under Section 1103(a) of the Ethics Act, each of these essential elements must exist.
In applying these elements to the facts which you have submitted, there does not
appear to be any potential basis for a conflict of interest except as to actions resulting in
private pecuniary benefit(s) to the F. The focus of our attention shall therefore be directed
to potential actions by the As and Acting A which would financially benefit the F, such as
with regard to awarding Commonwealth grants to the F. We note that our analysis is
intended to provide a thorough reply to your inquiry and is not intended to suggest that the
As or Acting A would actually engage in conduct constituting a conflict of interest. To the
contrary, you have assured us that they would not do so.
For purposes of a thorough analysis, there is no doubt that the F would financially
benefit from matters such as grants by or through Department B, Department C, or
Department D. It is also clear that as Directors of the F, the As and Acting A on whose
behalf you inquire would be deemed to be "associated" with the F. However, the issue
reduces to whether the F is a "business" or a "governmental body" as those terms are
defined by the Ethics Act.
The issue is significant, because if the F would be a "governmental body" and not a
"business," the use of the authority of the public position as an A or Acting A for a
pecuniary benefit to such "governmental body" would not in and of itself constitute a
conflict of interest under the Ethics Act. The elements of a conflict of interest do not
encompass a pecuniary benefit which flows solely to a governmental body rather than a
business.
The fact that the F is a non - profit corporation is not dispositive of its status.
Although non - profit corporations certainly may fall within the Ethics Act's definition of
"business" (Soltis - Sparano, Order No. 1045 at 31; see, also, Confidential Opinion, 89 -007;
McConahy, Opinion 96 -006), depending upon the circumstances, a non - profit corporation
could conceivably qualify as a governmental body as an "agency performing a
governmental function." 65 Pa.C.S. §1102. The F is arguably performing a governmental
function in light of its stated goals /mission.
However, neither you nor the Board of the F has inquired as to the F's status.
Moreover, we are not aware of any judicial determination of the status of the F as either a
business or governmental body. Therefore, this Opinion must necessarily be limited to
providing guidance under each of the two possible scenarios.
As noted above, if the F is a "governmental body" and not a "business," the use of
the authority of the public position as an A or Acting A for a pecuniary benefit to such
"governmental body" would not in and of itself constitute a conflict of interest under the
Ethics Act. However, if the F is a "business," the aforesaid As and Acting A on whose
behalf you inquire would have conflicts of interest in matters before their respective
Departments —and any other governmental bodies which they may serve —where such
matters would financially benefit the F, such that the restrictions and requirements of
Sections 1103(a) and 1103(j) would have to be observed, and to the extent contracting
Confidential Opinion, 01 -005
September 7, 2001
Page 8
would occur between their governmental body(ies) and the F, Section 1103(f) could be
implicated as well.
We commend you and the As and Acting A for submitting these important issues for
our review and for providing the representations and assurances to this Commission as to
the full intent to comply with the Ethics Act.
Lastly, the propriety of the proposed conduct has only been addressed under the
Ethics Act. Specifically not addressed herein is the applicability of the U.
IV. CONCLUSION:
The A of Department B, the A of Department C, and the Acting A of Department D,
are all public officials /public employees and executive -level State employees subject to the
Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. §1101 et seq. Subject
to the restrictions, conditions and qualifications set forth above, the aforesaid As and
Acting A may, consistent with Section 1103(a) of the Ethics Act, simultaneously serve as
Directors of F following its merger with E.
To the extent the F would be a "governmental body" and not a "business" as
defined by the Ethics Act, the use of the authority of the public position as an A or Acting A
for a pecuniary benefit to such "governmental body" would not in and of itself constitute a
conflict of interest under the Ethics Act. However, to the extent the F would be a
"business," the aforesaid As and Acting A would have conflicts of interest in matters
before their respective Departments —and any other governmental bodies which they may
serve —where such matters would financially benefit the F, such that the restrictions and
requirements of Sections 1103(a) and 1103) set forth above would have to be observed,
and to the extent contracting would occur between the governmental body(ies) and the F,
Section 1103(f) could be implicated as well.
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