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HomeMy WebLinkAbout01-009 SchwartzDear Mr. Schwartz: I. ISSUE: OPINION 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 Michael J. Healey DATE DECIDED: November 16, 2001 DATE MAILED: November 30, 2001 01 -009 Robert J. Schwartz, Chief Counsel Office of the Treasurer Commonwealth of Pennsylvania 127 Finance Building Harrisburg, PA 17120 -0018 Re: Conflict; Public Official /Employee; State Treasurer; Business with which Associated; Director; Compensation; FIS Disclosure. This responds to your letter of October 22, 2001, by which you requested advice from the State Ethics Commission. Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq., presents any prohibitions, restrictions, or requirements upon the Pennsylvania State Treasurer with regard to serving on the boards of directors of for - profit business organizations and receiving compensation for such service. II. FACTUAL BASIS FOR DETERMINATION: As Chief Counsel for the Treasury Department, you have requested an advisory from this Commission on behalf of State Treasurer Barbara Hafer. You have submitted the following facts. Treasurer Hafer is considering serving on the boards of directors of for - profit business organizations. Treasurer Hafer may receive compensation from these business entities for such service. Although you do not identify the business entities, you state that Schwartz /Hafer, 01 -009 November 30, 2001 Page 2 they are not among those which Treasurer Hafer serves as a director in her ex- officio capacity. Additionally, Treasurer Hafer will not accept invitations to serve on the boards of directors of any organizations that do business with the Treasury Department or with the retirement boards on which she already serves in her official capacity. Based upon the above facts, you have posed three specific questions: (1) whether Treasurer Hafer may serve on such boards of directors; (2) whether Treasurer Hafer may receive compensation from the business entities for her service as a board member; and (3) what information relating to such service must be reported on Treasurer Hafer's annual Statements of Financial Interests. By letter dated October 30, 2001, you were notified of the date, time and location of the public meeting at which your request would be considered. At the public meeting on November 16, 2001, you appeared together with Ms. Kathleen Peterson, Assistant Director for the Treasury Department's Bureau of Human Resources, as representatives of Treasurer Hafer. During the course of the public meeting, Ms. Peterson posed an additional question on behalf of Treasurer Hafer: whether there would be any problem /conflict under the Ethics Act with regard to Treasurer Hafer receiving compensation for the time she serves on a board as well as the time she's being paid as Treasurer, such as through her attendance at a private board meeting during normal Commonwealth working hours. Since you have submitted an inquiry limited to the above specific questions, this Opinion will be narrow in scope and shall address only the questions posed. III. DISCUSSION: It is initially noted that ursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §§ 1107(10), (111), 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. As State Treasurer for the Commonwealth of Pennsylvania, Barbara Hafer is a public official subject to the provisions of the Ethics Act. 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 Schwartz /Hafer, 01 -009 November 30, 2001 Page 3 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), (j). The following terms that pertain to conflicts of interest under the Ethics Act are defined 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. 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 Schwartz /Hafer, 01 -009 November 30, 2001 Page 4 which he or a member of his immediate family is associated. 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. 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). In addressing the four questions that you have posed, we note that the preamble of the Ethics Act specifically recognizes that public officials are not to be discouraged from maintaining contacts with the community through their occupations and professions. 65 Pa.C.S. § 1101.1(b). Thus, the Ethics Act does not prohibit public officials from engaging in private business activities within the parameters of Sections 1103(a), (f), and (j) of the Ethics Act. 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 not use the authority of his public position - or confidential information obtained by being in that position - for the private pecuniary benefit of himself, a business with which he is associated, Pancoe, Opinion 89-011, or the client(s) of such a business. Miller, Opinion 89 -024; Kannebecker, Opinion 92 -010. 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 would have a matter pending before the governmental body, the public official /public employee would have a conflict of interest as to such matter. 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). Schwartz /Hafer, 01 -009 November 30, 2001 Page 5 In response to your first, second, and fourth questions, you are advised that Section 1103(a) of the Ethics Act would not prohibit Treasurer Hafer from engaging in the proposed service on the boards of directors of for - profit business organizations, either for or without compensation, subject to conformity with the requirements of Sections 1103(a) and 1103(1) of the Ethics Act as set forth herein. Generally, the Ethics Act would not preclude Treasurer Hafer from receiving compensation for the time she serves on a board as well as the time she's being paid as Treasurer, such as through her attendance at a private board meeting during normal Commonwealth working hours, because "persons serving in highly elected positions are not confined to specific work hours but are generally on duty as the need arises." Hafer, Opinion 90 -013 at 7. However, such general principle is tempered by the fact that public office is a public trust and the performance of public duties must be paramount to any considerations of a personal, political, or business nature. Id. In response to your third question, pertaining to the related disclosure that would be required on Treasurer Hafer's annual Statements of Financial Interests, you are advised as follows. Treasurer Hafer would be required to disclose the directorships on her Statements of Financial Interests pursuant to Section 1105(b)(8). On the current version of the form, such disclosure would be made in Block 13. To the extent a given business entity would provide income to Treasurer Hafer in the amount of $1300 or more during a calendar year, the business entity would have to be identified on Treasurer Hafer's Statement of Financial Interests form as a "direct or indirect source of income," as required by Section 1105(b)(5) of the Ethics Act. Such disclosure would be made in Block 10 on the current version of the form. Additional disclosure could be required depending upon the circumstances pertaining to a given business entity. Although we cannot, within this Opinion, foresee and address every possible scenario which could occur, we would note as one example that to the extent Treasurer Hafer would have a "financial interest" as defined in the Ethics Act in any legal entity engaged in business for profit, that financial interest would have to be disclosed on Treasurer Hafer's Statement of Financial Interests form pursuant to Section 1105(b)(9) of the Ethics Act (Block 14 on the current version of the form). The term "financial interest" is defined in the Ethics Act as "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." 65 Pa.C.S. § 1102. Should there be specific circumstances requiring further guidance, Treasurer Hafer would be welcome to seek additional advice from this Commission. Finally, we commend Treasurer Hafer for seeking an advisory in this matter prior to accepting the proposed directorships. 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. IV. CONCLUSION: The State Treasurer for the Commonwealth of Pennsylvania is a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. The Ethics Act does not prohibit public officials from engaging in private business activities within the parameters of Sections 1103(a), (f), and (j) of the Ethics Act. Schwartz /Hafer, 01 -009 November 30, 2001 Page 6 Where the State Treasurer is considering serving on boards of directors of for - profit business organizations, and where the State Treasurer does not serve as a director of such business organizations in an ex- officio capacity and such business organizations do not do business with the Treasury Department or with the retirement boards on which the State Treasurer already serves in her official capacity, Section 1103(a) of the Ethics Act would not prohibit the State Treasurer from engaging in such service as a director, either for or without compensation, subject to conformity with the requirements of Sections 1103(a) and 1103) of the Ethics Act as set forth above. The State Treasurer would be required to disclose the directorships on her Statements of Financial Interests pursuant to Section 1105(b)(8) of the Ethics Act. To the extent a given business entity would provide income to the State Treasurer in the amount of $1300 or more during a calendar year, the business entity would have to be identified on the State Treasurers Statement of Financial Interests form as a "direct or indirect source of income," as required by Section 1105(b)(5) of the Ethics Act. To the extent the State Treasurer would have a "financial interest' as defined in the Ethics Act in any legal entity engaged in business for profit, that financial interest would have to be disclosed on the State Treasurer's Statement of Financial Interests form pursuant to Section 1105(b)(9) of the Ethics Act. Additional disclosure could be required depending upon the circumstances pertaining to a given business entity. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. 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