HomeMy WebLinkAbout1198 GallenIn Re: Michael Gallen
File Docket:
X -ref:
Date Decided:
Date Mailed:
Before: Daneen E. Reese, Chair
Louis W. Fryman, Vice Chair
John J. Bolger
Frank M. Brown
Susan Mosites Bicket
Donald M. McCurdy
98- 059 -C2
Order No. 1198
5/15/01
5/30/01
This is a final adjudication of the State Ethics Commission.
Procedurally, the Investigative Division of the State Ethics Commission conducted
an investigation regarding a possible violation of the Public Official and Employee Ethics
Law, Act 9 of 1989, P.L. 26, 65 P.S. §401 et seq., by the above -named Respondent. At the
commencement of its investigation, the Investigative Division served upon Respondent
written notice of the specific allegation(s). Upon completion of its investigation, the
Investigative Division issued and served upon Respondent a Findings Report identified as
an "Investigative Complaint." An Answer was filed and a hearing was held. The record is
complete.
Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter
11 of Act 93 of 1998, 65 Pa.C.S. §1101 et seq., which essentially repeats Act 9 of 1989
and provides for the completion of pending matters under Act 93 of 1998.
This adjudication of the State Ethics Commission is issued under Act 93 of 1998
and will be made available as a public document thirty days after the mailing date noted
above. However, reconsideration may be requested. Any reconsideration request must be
received at this Commission within thirty days of the mailing date and must include a
detailed explanation of the reasons as to why reconsideration should be granted in
conformity with 51 Pa. Code §21.29(b). A request for reconsideration will not affect the
finality of this adjudication but will defer its public release pending action on the request by
the Commission.
The files in this case will remain confidential in accordance with Chapter 11 of Act
93 of 1998. Any person who violates confidentiality of the Ethics Act is guilty of a
misdemeanor subject to a fine of not more than $1,000 or imprisonment for not more than
one year. Confidentiality does not preclude discussing this case with an attorney at law.
Gallen, 98- 059 -C2
Page 2
I. ALLEGATION:
That Michael Gallen, a public official in his capacity as a Cumru Township
Commissioner, Berks County, violated Section 3(a) of the Ethics Law (Act 9 of 1989) when
he used the authority of his office for the private pecuniary benefit of a member of his
immediate family and /or a business with which a member of his immediate family is
associated by participating in discussions and actions leading to his father's insurance
agency being contracted with to provide insurance for the township.
65 P.S. §403(a).
Section 3. Restricted activities
(a) No public official or public employee shall engage in
conduct that constitutes a conflict of interest.
Section 2. 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. "Conflict" or "conflict of interest" 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.
65 P.S. §402.
II. FINDINGS:
A. Pleadings
1 Michael J. Gallen ( "Gallen ") has served as a Cumru Township, Berks County,
Commissioner from January of 1996 to the present.
a. Gallen has served as Vice President of the Board of Commissioners since
January of 1997.
2. Gallen has served as liaison between the Board of Commissioners and the
township administration since January of 1998.
3. Township Business Manager Shea report[ed] to the entire board of commissioners,
including Commissioner Gallen.
4. Joseph J. Gallen is the father of Cumru Township Commissioner Michael J. Gallen.
5. Gallen Insurance was incorporated in the Commonwealth of Pennsylvania on
November 1, 1976.
6. Ann Moll, Joseph J. Gallen's daughter and Michael J. Gallen's sister, is President of
Gallen, 98- 059 -C2
Page 3
Gallen Insurance, Incorporated.
a. Mark Gallen, David Gallen and Joseph Gallen are brothers of Michael J.
Gallen and are employed by Gallen Insurance, Incorporated.
7 Cumru Township purchased insurance coverage through the Fioravante Insurance
Agency from 1967 to April of 1998.
a. Insurance purchased through Fioravante Agency included municipal liability
and workmen's compensation, vehicle and property insurance.
b. Harleysville Insurance Company provided insurance coverage to the
township through the Fioravante Agency.
8. Cumru Township did not generally seek bids or proposals on an annual basis for
the insurance provided by the Fioravante Agency.
a. The insurance contracts were renewed annually with Fioravante Insurance
Agency.
9. In March of 1997, the Cumru Township Board of Commissioners decided to seek
requests for proposals for the insurance coverage.
10. On April 1, 1997, representatives of the following insurance companies made
presentations to the Board of Commissioners at a commissioners' meeting:
a. Mast and Moyer
b. Hart, Incorporated
c. Gallen Insurance, Incorporated
d. Fioravante Insurance Agency.
11. Joseph J. Gallen made the presentation on behalf of Gallen Insurance,
Incorporated.
12. Joseph J. Gallen, in his presentation to the board of commissioners requested the
board obtain an appraisal of township assets by a professional appraisal service.
a. Chairman Stanziola agreed the township should comply with Joseph J.
Gallen's request.
13. On April 9, 1997, the board of commissioners voted to renew the insurance contract
with the Harleysville Insurance Company through the Fioravante Insurance Agency.
a. Commissioner Gallen excused himself from the board meeting during the
insurance discussions and vote.
14. A Gallen Insurance Agency letter dated February 10, 1998, was directed to
township manager William Shea.
15. [The] February 10, 1998, letter specifically requested the following information from
the township in order to submit a proposal:
a. 1998 - Annual Budget Report
Gallen, 98- 059 -C2
Page 4
b. Current claim report for all lines of coverage, at least 3 years is needed
c. Recent professional property appraisal report
d. Payroll by Workers' Compensation Classification for upcoming policy period
e. Current vehicle and driver schedule.
16. During the week of February 22, 1998, Shea discussed the request with Board of
Commissioners President Ray Henry.
a. Henry informed Shea that the township did not intend to seek proposals for
the township insurance coverage in 1998.
b. Henry directed Shea not to respond to Joseph Gallen's letter and to file the
document in township files.
17. On March 12, 1998, Commissioner Gallen, in a letter faxed to Business Manager
Shea and office secretary Elizabeth Turner from his company's fax machine (Mifflin
Valley Reflective Apparel), stated he needed the following information concerning
the township's insurance as soon as possible:
a.
b.
c.
d.
e.
1998 - Annual Budget Report
Current claim report for all lines of coverage, at least 3 years is needed
Recent professional property appraisal report
Payroll by Workers' Compensation Classification for upcoming policy period
Current vehicle and driver schedule
18. Gallen directed Shea and Turner to contact him by telephone when the information
was ready.
19. Shea delivered the requested documentation to Commissioner Gallen at his place
of business, Mifflin Valley Reflective Apparel, on March 13, 1998.
20. Commissioner Gallen contacted Turner by telephone and asked her to obtain the
cost to the township of the Harleysville Insurance Company's premiums through the
Fioravante Insurance Agency for 1998, as the policy was due to expire on April 13,
1998 (Answer and New Matter to Commission's Investigative Complaint /Findings
Report, Paragraph 36).
21. Prior to the April 13, 1998, Public Meeting, a township administrative staff member
provided Commissioner Gallen with the Fioravante Agency's 1998 premium figures
(Answer and New Matter to Commission's Investigative Complaint/Findings Report,
Paragraph 40).
22. On March 31, 1998, Gallen Insurance forwarded a proposal to Cumru Township for
insurance coverage for the period of April 13, 1998, to April 13, 1999.
23. The proposal presented by Gallen Insurance indicated the premium cost to the
township would be $127,000.00.
a. The cost was subsequently lowered, after the contract was awarded, to
$110,000.00 due to a reduction in the experience modification rate.
Gallen, 98- 059 -C2
Page 5
24. On Wednesday, April 8 [sic], 1998, Commissioner Gallen met with Business
Manager Shea and Township Commissioner Carol Foster at the township building
to review the proposal submitted by the Gallen Agency.
a. Foster also served as a liaison to the township administration.
25. The board of commissioners had not made any decision to review or solicit quotes
for the township insurance coverage.
26. At the April 13, 1998, Special Meeting, Commission Gallen reported to the
Commissioners that the current insurance policy through Fioravante Insurance
Agency had a proposed premium of $197,093.00.
a. Commissioner Rowley noted the premium of $197,093.00 for the policy
through the Fioravante Insurance Agency was an increase of $15,000 over
the previous year's premium.
Commissioner Gallen reported that the Gallen Insurance quotation was in
the amount of $127,000.00.
Coldren also noted that based on the figures presented by Commissioner
Gallen the cost of the policy through the Fioravante Insurance Agency would
amount to a difference of $13,000 or $14,000 more than the proposal
presented by the Gallen Insurance Company.
b.
c.
27. During the April 13, 1998, Special Meeting, Board President Henry suggested the
Gallen Insurance Agency proposal be reviewed and compared to the current policy.
a.
b.
The board voted to accept the proposal from Gallen Insurance by a vote of 3
to 0.
Commissioner Gallen abstained from the vote.
c. Commissioner Rowley did not participate in the vote as he had to leave the
meeting for a previous engagement.
28. The township did not advertise that it was seeking proposals for the 1998 -1999
insurance coverage.
29. David Fioravante appeared before the Cumru Township Board of Commissioners at
their April 21, 1998, regularly scheduled meeting.
a. Fioravante protested the [board's] handling of the insurance matter and of
[sic] the board's failure to give him an opportunity to present a proposal for
the current year.
30. Fioravante submitted a proposal for insurance coverage with Harleysville Insurance
Company containing a premium cost of $146,395 with a potential rebate of
$29,883.00.
31. Fioravante was given the opportunity to present his proposals on May 7, 1998, at a
meeting with Shea, Turner, Board President Henry and Board Member Rowley.
a. At that time, the decision had already been made to award the insurance
contract to Gallen Insurance Agency.
Gallen, 98- 059 -C2
Page 6
32. Gallen Insurance wrote the insurance policy for Cumru Township through the Saint
Paul Insurance Company and the Cincinnati Insurance Company from [which
Gallen Insurance] received $14,373.12 in commissions and fees since 1998.
a. Workmen's Compensation:
1998: $2,620.59
1999: $2,135.69
$4,756.28
b. Package: Property, vehicles
1998: $4,597.12
1999: $4, 575.35
$9,172.47
c. Municipal Liability
1998: $ 95.16
1999: $ 99.91
$195.07
d. EDP
1998:
1999:
$130.80
$119.10
$249.90
[There is a $.60 disparity in the figures above, which disparity is insignificant.]
B. Stipulations
Filed 2/5/01 (Regarding Facts)
33. Michael J. Gallen ( "Gallen ") has served as Cumru Township, Berks County,
Commissioner from January 1996 until the present.
34. Gallen has served as Vice President of the Board of Commissioners since January
1997.
35. In January 1998, Gallen and fellow Commissioner Carol Foster were appointed to
serve as liaison Commissioners between the Board of Commissioners and the
Township's administrative department.
36. Commissioners Gallen's and Foster's responsibility as liaisons to Township
administration included maintaining contact with the Township administrative
employees, including those handling insurance matters.
37. William Shea [was] the Township Manager and report[ed] to the entire Board of
Commissioners.
38. Elizabeth Turner, now retired, at all material times relevant hereto, was employed
by the Township and was supervised by William Shea. Ms. Turner served as
Assistant Secretary.
a. All Commissioners, including Gallen, had ultimate supervisory authority over
township employees.
Gallen, 98- 059 -C2
Page 7
39. Joseph J. Gallen is the father of Cumru Township Commissioner Michael J. Gallen.
At all times relevant hereto, Joseph Gallen was the majority shareholder of the
Gallen Insurance Agency. Joseph Gallen has been in the business of insurance
since 1957 and the agency incorporated in Pennsylvania on November 1, 1976.
The Gallen Agency is a licensed agency and brokerage that sells both personal and
commercial lines of property and casualty insurance, accident and health, life and
annuity and surety bonds.
40. Ann Moll is the daughter of Joseph J. Gallen and the sister of Michael J. Gallen.
She has held the position of President of Gallen Insurance, Inc., since 1988.
41. At all times relevant for purposes of this proceeding, Donald Moll, Ann's husband,
was the Vice President of the Gallen Agency.
42. It is admitted that Mark Gallen, David Gallen and Joseph Gallen are brothers of
Michael J. Gallen and at all times relevant for purposes of this proceeding were
employed by Gallen Insurance, Inc.
43. Michael J. Gallen is not employed by, nor does he have any ownership interest in
Gallen Insurance, Inc.
44. Cumru Township purchased insurance from the Fioravante Insurance Agency for a
number of years until April 1998. The insurance included municipal liability and
workers' compensation, vehicle and property insurance.
45. Cumru Township did not seek bids on proposals on an annual basis for insurance,
historically provided by the Fioravante Insurance Agency.
46. Competitive bids for insurance were sought approximately three (3) times from 1980
until 1997.
47. In response to the 1997 solicitation for bids, four (4) insurance companies made
presentations to the Board of Commissioners on April 1, 1997. Those four (4)
companies were: Mast & Moyer; Hart, Inc.; Gallen Insurance, Inc.; and Fioravante
Insurance Agency.
48. David Fioravante made the presentation on behalf of Fioravante Insurance Agency.
The Fioravante Agency's 1997 proposal was in the amount of $182,982, with a
potential maximum "dividend" of $54,627 for unused workers' compensation
coverage.
49. At a special meeting of the Board on April 9, 1997, at which meeting the
Commissioners voted to accept the Fioravante Insurance package, Michael J.
Gallen abstained from voting and did not participate in the discussions.
50. Joseph Gallen, in his 1997 presentation to the Board of Commissioners, requested
the Board obtain an appraisal of Township assets from a professional appraisal
service and the Commissioners agreed to do so.
51. Joseph Gallen's February 10, 1998 letter specifically requested the following
information from the Township to assist with submission of a proposal:
a. 1998 Annual Budget Report;
b. Claim Reports for all lines of coverage, for at least three (3) years;
c. Recent professional property appraisal report;
Gallen, 98- 059 -C2
Page 8
d. Payroll by workers' compensation classification for upcoming policy; and
e. Current vehicle and driver's schedules.
52. Michael J. Gallen and Gallen Insurance, Inc. both reside within Cumru Township.
53. On March 12, 1998, Michael Gallen faxed a letter, on his Company's stationary, to
Township Manager Shea and Elizabeth Turner requesting the following information:
a. 1998 Annual Budget Report;
b. Claim Reports for all lines of coverage, for at least three (3) years:
c. Recent professional property appraisal report;
d. Payroll by workers' compensation classification for upcoming policy; and
e. Current vehicle and drivers' schedules.
54. The policies of insurance, which were in effect through the Fioravante Agency, were
due to expire on April 13, 1998.
55. On March 31, 1998, Don Moll of the Gallen Agency submitted a bid for insurance to
Cumru Township Manager William Shea.
56. The premiums for Harleysville's policies which were written by the Fioravante
Agency for the upcoming year were not provided by the Fioravante Agency to
Township Secretary Turner or William Shea until April 6, 1998.
57. At the time that it submitted its proposal, the Gallen Agency did not have access to
the Fioravante Agency's projected premium information for 1998, in the preparation
of the Gallen Agency insurance proposal for Cumru Township for 1998.
58. The March 31, 1998 proposal submitted by the Gallen Agency stated the annual
premium to be $127,000.
59. The premium was subsequently lowered after the contract was awarded to
$110,000 due to a reduction in the experience modification rate.
60. On April 8 [sic], 1998, Commissioners Gallen and Foster, as liaison commissioners
to the administrative department, met with Business Manager Shea at the Township
building to discuss the March 31, 1998, proposal submitted by the Gallen Agency.
61. A special meeting of the Township Commissioners was set for April 13, 1998, to
discuss the insurance coverages.
62. At the April 13, 1998, Special Meeting, Board President Henry asked the Township
Solicitor to compare the proposal from the Gallen Agency with the current policy of
the Fioravante Agency.
63. Township Solicitor Michael Setley compared the proposal with the current policy
and made a detailed oral report to the Board.
64. Attorney Setley concluded that the Gallen Insurance proposal provided
approximately equivalent coverages with the exception of a difference in the
amount of umbrella liability coverage.
Gallen, 98- 059 -C2
Page 9
65. Attorney Setley contacted the Gallen Agency to request a premium quote to raise
the limit on the umbrella policy to equal that of the Fioravante policy. The additional
premium was reported by Attorney Setley to be $1,000, for a total premium of
$128,000 by the Gallen Agency.
66. The Commissioners voted 3 -0 to accept the Gallen Agency proposal for insurance
for the period April 13, 1998, until April 13, 1999.
67. Commissioner Gallen abstained from voting.
68. Commissioner Rowley had to leave the special meeting early and was unable to
vote.
69. David Fioravante appeared before the Township Commissioners at the April 21,
1998, regular meeting and protested the Commissioners' decision.
70. The Gallen Agency insurance policy for Cumru Township was with the St. Paul
Insurance Company and the Cincinnati Insurance Company, from [which] the
Gallen Agency has received $14,373.12 in commissions for the period of April 1998
to October 6, 1999.
71. The Investigative Division of the State Ethics Commission received a signed, sworn
Complaint alleging that Michael Gallen violated provisions of the State Ethics Act
(Act 9 of 1989).
72. Upon review of the Complaint the Investigative Division initiated a preliminary
inquiry on August 27, 1998.
73. The preliminary inquiry was completed within sixty days.
74. On October 21, 1998, a letter was forwarded to Michael Gallen by the Executive
Director of the State Ethics Commission informing him that a Complaint against him
was received by the Investigative Division and that a full investigation was being
commenced.
a. Said letter was forwarded by Certified Mail No. Z 041 456 148.
b. Attempts made to serve the notice by the postal service on 10/23/88 [sic]
and 10/28/98 were unclaimed.
c. The notice was returned to the Investigative Division of the State Ethics
Commission on November 7, 1998.
d. The letter was re -sent by certified mail no. P 487 031 942 on November 13,
1998, to Michael Gallen's business address.
e. The domestic return receipt bore the signature of T. Ernest with a delivery
date of November 16, 1998.
75. On February 12, 1999, the Executive Director of the State Ethics Commission filed
an application for a ninety -day extension of time to complete the Investigation.
76. The Commission issued an order on February 26, 1999, granting the ninety -day
extension.
Gallen, 98- 059 -C2
Page 10
77. On May 8, 1999, the Executive Director of the State Ethics Commission filed an
additional application for a ninety -day extension of time to complete the
Investigation.
78. The Commission issued an order on May 17, 1999, granting the ninety -day
extension.
79. Periodic notice letters were forwarded to Michael Gallen in accordance with the
provisions of the Ethics Law advising him of the general status of the investigation.
80. The Investigative Complaint was mailed to the Respondent on October 15, 1999.
81. The advertisement of the Special Meeting on April 13, 1998, at 8:00 a.m. appeared
in the Reading Eagle Times on Saturday, April 11, 1998.
82. Henry, Coldren and Rowley did not review or see the Gallen Insurance proposal
prior to the April 13, 1998, Special Meeting.
83. After April 21, 1998, Fioravante submitted a proposal for insurance coverage with
Harleysville Insurance Company containing a premium cost of $146,395 with a
maximum potential rebate of $29,883.00.
a. Fioravante also submitted a proposal for insurance coverage with
Employees Mutual Casualty Company containing a premium cost of
$119,958.00 with a maximum potential rebate of $17,107.00.
84. Fioravante was given the opportunity to present his proposals on May 7, 1998, at a
meeting in the township building with Business Manager Shea, Office Supervisor
Turner, Board President Henry and Board Member Rowley.
Filed 2/26/01 (Regarding Testimony)
85. The parties agree that if called to testify at hearing, Timothy Rowley, an adult
individual, would testify as follows:
a. I am currently a Township Commissioner for Cumru Township, Berks
County, Pennsylvania and have been serving as such since 1998.
b. I was first elected Township Commissioner and took office on January 5,
1998, at the Cumru Township Board of Commissioners Reorganization
Meeting.
c. In 1998, Township Commissioner Carol Foster was newly elected and Ray
Henry was re- elected; both took office at the January 5, 1998,
Reorganization Meeting.
d. As a primary effort to save Township dollars, it was my intention and the
stated intention of the newly elected Commissioners to review the existing
contracts and costs for Township professional service providers and replace
the same if it would save money for the Township.
e. As such, at the January 5, 1998, Reorganization Meeting, a new Township
Solicitor, Michael Setley, Esquire and a new Township Engineer, Spotts,
Stevens and McCoy, Inc. were appointed.
f. These new appointments were effectuated to save money for the Township.
Gallen, 98- 059 -C2
Page 11
g.
Because of the size of the Township and as a result of the complexity of the
issues involved in running the Township, Township Commissioners are
appointed to various committees (i.e. public safety, public services and
administration /parks and recreation) to serve as liaisons.
h. Liaison Commissioners act as fact finders, information gatherers and
preliminary investigators with respect to matters arising within the respective
liaison departments. The Liaison Commissioners then report the information
to the full board of Township Commissioners for review and subsequent
action, if any.
Due to the number of departments within the Township, the Liaison
Commission structure is a more efficient means of maintaining contact with
the respective departments and developing facts on which to base decisions;
however, Liaison Commissioners are not empowered to act on behalf of the
Township with respect to any action which requires a vote of the Board of
Commissioners.
J.
k. I did not attend the April 6[sic], 1998, meeting between Commissioners
Gallen, Foster and Township Manager Shea, nor do I have any information
about what transpired at that meeting or how the meeting occurred.
Upon returning home from vacation in the Bahamas on April 11 or April 12,
1998, I received a voice mail message that stated that because the
Township insurance was set to expire on April 13, 1998, a special meeting
had been called on April 13, 1998, to address the issue of Township
insurance.
q.
At the January 5, 1998, Reorganization Meeting, I was appointed to serve as
one of the public safety Liaison Commissioners and I continue to serve in
this role. At the same January 5, 1998, meeting, Carol Foster and Michael
Gallen were appointed as the administration /parks and recreation Liaison
Commissioners.
m. I do not recall whether it was Jeannie Johnston or Carol Foster who left that
voicemail message, but it was one or the other of them.
n. The April 13, 1998, meeting was scheduled for 8 a.m. to accommodate my
schedule because I had previously scheduled trial in Pottsville, Schuylkill
County, Pennsylvania, commencing at 9:30 a.m.
o At the April 13, 1998, meeting, the Gallen insurance proposal was
discussed, and I specifically inquired whether the coverages between the
Gallen Agency and the Fioravante Agency were the same.
p. The Gallen Agency proposal had the potential to save the Township a
minimum of $10,000 per year and quite possibly up to $100,000 a year, if the
coverages were equivalent.
At the April 13, 1998, meeting, I stated, as reflected in the Minutes of the
Meeting, that if the coverages were the same or better, I would vote for the
Gallen Agency proposal because it would save the Township money.
r. I did not vote on the insurance proposal because I had to leave the meeting
before the vote was taken as a result of the aforementioned Court
appearance.
Gallen, 98- 059 -C2
Page 12
s. I had no conversations or discussions with Mike Gallen other than the
discussion which occurred during the April 13, 1998, Special Meeting
regarding or in any way concerning the Gallen Agency insurance proposal.
t. At no time did commissioner Gallen (or anyone else) solicit or lobby me to
change the Township's insurance policies to those proposed by the Gallen
Agency.
u. At no time did Mr. Gallen or anyone else state to me that the change from
the Fioravante Agency to the Gallen Agency was a "done deal."
v. The Board of Commissioners' decision to change insurance companies and
subsequently appoint the Gallen Agency was strictly made, in my opinion, in
an effort to save the township substantial amounts of tax dollars.
86. The parties agree that if called to testify at hearing, Richard Coldren, an adult
individual, would testify as follows:
a. I am currently a township Commissioner for Cumru Township, Berks County,
Pennsylvania, and have been serving as such since 1996.
b. In 1998, Township Commissioners Carol Foster and Timothy Rowley were
newly elected Commissioners and Ray Henry was re- elected; all three being
sworn into office at the January 5, 1998, Board of Commissioners
Reorganization Meeting.
c. Also at the January 5, 1998, Reorganization Meeting, a new Township
Solicitor and new Township Engineer were appointed.
d. The new professional appointments were made in an effort to save the
Township money on its professional service contracts.
e. With the election of the two new Commissioners, it became an overriding
objective of the full Board of Commissioners to take affirmative steps to save
the Township money. One area of concern involved making certain that the
Township's professional service providers were cost effective.
f. In fact, I had previously advocated that the Township insurance contract be
open for bidding in 1997, because I wanted to be sure that the Township
was making good use of taxpayer dollars.
The bids received in 1997 were confusing and I was unable to make an
informed decision as to the various policies because they were difficult to
compare.
g.
h. As a result of this confusion, the Township simply renewed its insurance
contract with the Fioravante Agency in 1997.
Due to the time constraints and number of issues that arise as a Township
Commissioner, the Commissioners are appointed to serve as liaisons with
various departments. These liaisons are appointed to public safety, public
services and administration /parks and recreation. Liaison Commissioners
simply act as fact finders for the various departments. The Liaison
Commissioners then report their findings and information to the full Board of
Commissioners for review and subsequent action, if appropriate.
Gallen, 98- 059 -C2
Page 13
j. Liaison Commissioners are not permitted to officially act on behalf of the
Township, but again, merely serve as preliminary fact finders with respect to
matters of interest to the various departments.
k. At the January 5, 1998, Reorganization Meeting, I was appointed to serve as
one of the Public Services Liaison Commissioners. At the same January 5,
1998, meeting, Carol Foster and Michael Gallen were appointed as the
Administration /Parks and Recreation Liaison Commissioners.
I did not attend the April 6[sic], 1998, meeting between Commissioners
Gallen, Foster and Township Manager Shea, nor do I have any firsthand
information about what transpired at that meeting, who said what to whom, or
how the meeting occurred.
m. I don't recall exactly how I was notified that a meeting had been called for
April 13, 1998, but I believe either Jeannie Johnston or Carol Foster notified
me of the scheduling.
n. I know that the April 13, 1998, Commissioners' meeting was scheduled to
accommodate Commissioner Rowley's schedule because he had to be in
court that morning.
o. Prior to the April 13, 1998, Board of Commissioners meeting, I did not
receive, nor did I review the Gallen Agency proposal, but for purposes of
casting my vote, I relied upon the Township Solicitor, Michael Setley,
Esquire's review of the Gallen Agency proposal and the Fioravante Agency
contract.
P.
q.
At the April 13, 1998, meeting, as reflected in the Meeting Minutes,
questioned whether the difference between the policies reflected the
Fioravante Agency policy that provided a refund based on claims
experience.
At the April 13, 1998, meeting, I voted in favor of changing the insurance
policy from the Fioravante Agency to the Gallen Agency strictly because it
would save the Township a substantial sum of money for basically the same
coverage.
r. I had no conversations or discussions with Mike Gallen, other than the
discussion which occurred during the April 13, 1998, Special Meeting,
regarding or in any way concerning the Gallen Agency proposal. I am also
not aware of any discussions between other Commissioners with regard to
this same subject matter before the April 13, 1998, Special Meeting.
s. At no time did Commissioner Gallen or anyone else (i.e., other
Commissioners or representatives of the Gallen Agency) solicit or lobby me
to change the Township's insurance policies to those provided by the Gallen
Agency.
t. At no time did Mr. Michael Gallen or anyone else state to me that the change
from the Fioravante Agency to the Gallen Agency was a "done deal."
u. It is my opinion that the Board of Commissioners' decision to change
insurance companies from the Fioravante Agency to the Gallen Agency was
made in an effort to save the Township money.
Gallen, 98- 059 -C2
Page 14
v. On December 22, 1998, I was interviewed by James McGrath as to my
knowledge and recollection of the events surrounding the insurance contract
and change from the Fioravante Agency to the Gallen Agency.
w. I was never shown nor provided a copy of my "statement" as prepared by Mr.
McGrath until such time as Kathleen Misturak- Gingrich, Esquire, attorney for
Commissioner Gallen, provided me with a copy of the same.
x. Upon review of my statement, I noticed an error at page 3, paragraph 7,
which reads in pertinent part as follows:
Coldren recalled that he made up his mind on the issued based on what
Commissioner Michael Gallen said at the meeting.
During the interview with Mr. McGrath, I noted that I made up my mind based
on what "Mike" said at the meeting. At the time of giving my statement,
meant that I based my decision upon what Mike Setley, Esquire, the
Township Solicitor, had said at the April 13, 1998, Special Meeting, and not
on what Commissioner Mike Gallen had said at that meeting.
y.
C. Testimon
87. William S. Shea ( "Shea ") served as the township manager of Cumru Township from
1975 to 2000.
a. Cumru Township did not solicit proposals for insurance on an annual basis.
b. Shea worked with Elizabeth Turner ( "Turner "), the township's Assistant
Secretary and Office Supervisor, on township insurance matters.
c. In 1998, it was not Shea's intent to solicit proposals for insurance as the
township had done in 1997.
(1) Shea had not been instructed by the board members to solicit
insurance proposals in 1998.
(2) Shea felt that it was too soon to solicit proposals again.
d. ID -1 is a copy of a Gallen Insurance letter dated February 10, 1998,
addressed to Shea (see, Finding 95).
(1) Shea received ID -1 on or about February 10, 1998.
e. ID -1 requested certain items from the township relative to preparing an
insurance proposal for the 1998 -1999 policy period (see, Finding 95 a).
(1) Shea /the township had not solicited such a letter from Gallen
Insurance.
f. When Shea received ID -1, he set it aside temporarily until he could talk to
Ray Henry, President of the Cumru Township Board of Commissioners.
g.
(2) The township had not given any indication that it was going to solicit
proposals for insurance in 1998.
During the week of February 22, 1998, Shea discussed ID -1 with Henry.
Gallen, 98- 059 -C2
Page 15
h. As a result of his conversation with Board President Henry, Shea filed the
Gallen Insurance letter (ID -1).
The information requested by ID -1 was public information.
j. Regardless of the intention of the commissioners as to insurance proposals,
Gallen Insurance would have been entitled to the information requested in
ID -1.
k. ID -2 is a copy of a FAX from Respondent which was received at the
township office on March 12, 1998 (see, Finding 96).
(1) ID -2 requested the same information that had been requested by ID -1
(see, Finding 96 b).
As a result of receiving ID -2, Shea told Turner to get the requested
information together for Commissioner Gallen (Respondent).
(1) Turner complied with Shea's request.
m. Shea did not ask Respondent whether he (Respondent) was requesting the
information in his official capacity.
n. Shea personally delivered the information requested by ID -2 to Respondent
at Respondent's place of business.
(1) Shea does not normally personally deliver information to a requestor
requesting documents under the Right to Know Law.
o. Shea did not charge Respondent for the copies of the requested information.
(1) Under the township's Right to Know policy, the township would
normally charge private citizens for copies of such information.
Shea testified that the fact that Respondent was a township commissioner
did play a role in Shea's taking action to respond to Respondent's request
for the information (Tr. of 2/6/01 at 78).
(1) On direct examination, Shea testified that had it not been Michael
Gallen (Respondent) requesting the information, Shea would have
responded that the township was not going to supply the information
(Tr. of 2/6/01 at 96).
(2) On cross - examination, Shea testified that if Respondent had not been
a commissioner of Cumru Township, had come to the township
offices, and had handed Shea ID -2, Shea would have provided him
with the requested information (Tr. of 2/6/01 at 114).
p.
(1) Shea told Henry that ID -1 had been received, and that based upon
the fact that proposals had been solicited in 1997, it seemed like it
was too soon to seek proposals again.
(2) Henry responded to Shea that the board of commissioners did not
intend or desire to receive proposals that year.
Shea memorialized Henry's response to Shea by writing it in the
upper right -hand corner of ID -1.
(3)
Gallen, 98- 059 -C2
Page 16
q.
(a) This testimony was given in the context of hindsight as to how
Shea should have responded to such a request for this
publicly available information. (Tr. of 2/6/01 at 113 -114).
After Shea had provided to Respondent the items requested in ID -2, Turner
indicated that Respondent wanted to obtain what the cost would be for the
upcoming insurance from the Fioravante Agency for the period from mid -
April of 1998 to mid -April of 1999.
r. On April 6, 1998, in a telephone conversation with Fioravante, Shea
obtained information regarding the premium for the township insurance
through the Fioravante Agency for the period from mid -April of 1998 to mid -
April of 1999 .
(1) On or about the same day, April 6, 1998, and as a result of that
conversation, Shea created the handwritten note in evidence as ID -5.
(2) Shea addressed the note to Turner.
(3) The note was dated 4/6/98.
(4) The note indicates a total premium of $174,093, with a partial
breakdown of that premium.
Shea gave the note to Turner.
(5)
s. On April 7, 1998, the day after Shea obtained the insurance premium
information from David Fioravante, Respondent and Commissioner Foster
met with Shea in Shea's office in the township building.
(1) The meeting pertained to the township's insurance and the calling of
a meeting relative to the insurance.
(2) Both Respondent and Commissioner Foster actively participated in
the meeting.
Shea indicated to Respondent and Commissioner Foster that the
commissioners had received proposals in 1997, and that Shea had
not planned on doing anything more and had no indication that the
board of commissioners was interested in receiving a proposal.
(4) Respondent and Commissioner Foster responded that they thought
that there should be a special meeting because they wanted to talk to
the rest of the commissioners about insurance.
(3)
Respondent and Commissioner Foster directed Shea to arrange for a
special meeting.
(6) Had Respondent and Commissioner Foster been private citizens
rather than commissioners, Shea would not have scheduled a special
meeting without first speaking with the board president who would
then have consulted with the other commissioners on the matter.
(5)
t. As a result of the April 7, 1998, meeting among Shea, Respondent, and
Commissioner Foster, Shea worked with the board secretary, Jeanne
Johnston, to schedule a special meeting for April 13, 1998.
Gallen, 98- 059 -C2
Page 17
u. ID -4 is an insurance proposal which was received by Cumru Township from
Gallen Insurance for the period 4/13/98 to 4/13/99 (see, Finding 98).
(1) Shea did not review or analyze the Gallen Insurance proposal prior to
the April 13, 1998, Special Meeting.
v. ID -13 consists of the official minutes of the April 13, 1998, Special Meeting
of the Cumru Township Board of Commissioners (see, Findings 89 h, 92 c,
and 100).
(1) Respondent reported an amount for the Fioravante premium
($197,093) which was different from the actual amount conveyed to
Shea by Fioravante ($174,093) (see, Findings 87 r and 100 d).
(2) Respondent also responded to questions posed by other
commissioners regarding the Gallen Insurance proposal.
The public meeting recessed, and Solicitor Setley was given an
opportunity to review and compare the Gallen Insurance proposal and
the Fioravante coverage, while the Board met in executive session.
(4) When the public meeting reconvened, Setley reported to the board
regarding his comparison.
The majority of the board then voted to accept the insurance proposal
of Gallen Insurance.
(3)
(5)
(6) Respondent abstained from the vote.
w. The first time Shea heard of the inaccurate figure ($197,093) for the
Fioravante premium was when Respondent reported it at the April 13, 1998,
Special Meeting.
(1) Shea was not responsible for coming up with the higher, inaccurate
figure.
(2) Shea asked Turner if she knew where the figure reported by
Respondent ($197,093) came from, and Turner indicated that she did
not know.
x. As a result of the April 13, 1998, Special Meeting, the township changed
insurance carriers from the Fioravante Agency to Gallen Insurance.
88. Elizabeth A. Turner ( "Turner ") was previously employed by Cumru Township as
Assistant Secretary and Office Supervisor.
a. Turner retired from the township in September 1998.
b. For years in which the township did not solicit proposals for insurance,
Turner was involved in the annual renewal of the insurance with the
Fioravante Agency.
c. In the normal course of business between the township and the Fioravante
Agency, it was very close to the township policy expiration date or
sometimes beyond the policy expiration date when Turner would find out
what the renewal premium would be.
Gallen, 98- 059 -C2
Page 18
g.
J.
(1) Turner received assurances that the township had coverage, no
matter what.
d. In 1997, the township solicited proposals for the insuran
(1) Turner gathered the information for the insurance
going to submit proposals.
e. ID -11 consists of the official minutes of the April 1, 1997,
the Cumru Township Board of Commissioners.
(1) Prior to presentations being made by various insurance carriers
submitting proposals for the township insurance, then Board
Chairman Carmen F. Stanziola asked that since one of the insurance
companies, Gallen Insurance, was related to one of the
commissioners, Commissioner Gallen (Respondent) step down and
not engage in any conversation with the public (ID -11 at 1).
(a) Respondent agreed (ID -11 at 2).
(2) The township chose Fioravante Agency to provide insurance in 1997.
f. In 1997, the Cumru Township Commissioners stated that they did not want
to solicit insurance proposals every year.
In 1998, the township did not solicit insurance proposals.
ce.
agencies that were
Regular Meeting of
h. The information requested by Gallen Insurance on ID -1 was updated but was
otherwise similar to the information Turner had gathered in 1997 for the
insurance carriers which submitted proposals at that time.
Respondent's letter in evidence as ID -2 was received by Turner at the
township office.
(1) When Turner received ID -2, she discussed it with Shea.
(2) Per Shea's instructions, Turner gathered the information requested by
Respondent in ID -2.
Respondent Gallen contacted Turner at the township office and asked
Turner what the cost of the insurance through the Fioravante Agency would
be.
(1) It was Turner's understanding that Respondent was asking what the
cost for the insurance through the Fioravante Agency would be for the
coming year (1998- 1999).
k. ID -3 is a memo of a telephone call by which Respondent attempted to
contact Turner at the township office regarding the township insurance
premium (see, Finding 97).
(1) The memo was provided to Turner by a township employee who had
received the call.
(2) The memo indicates that Mike Gallen (Respondent) had called Turner
and that his suggestion was for Turner to call the insurance agent and
get the figures.
Gallen, 98- 059 -C2
Page 19
Turner discussed Respondent's request for the Fioravante Agency premium
information with Shea.
m. Turner contacted David Fioravante of the Fioravante Agency and told him
that Commissioner Gallen said that she (Turner) needed to get the figures.
(1) Turner told Fioravante to give the figures to Shea if Turner was not in
the office.
n. ID -5 is a memo from Shea to Turner (see, Finding 87 r).
(1) Shea gave ID -5 to Turner.
o. When Turner received ID -5, she telephoned Respondent Gallen and gave
him amount(s) as the township's insurance premiums through the Fioravante
Agency.
p. The amount reported by Respondent at the April 13, 1998, special meeting
as the insurance premium with Fioravante ($197, 093) was different than the
figure on Shea's note to Turner as to what the Fioravante premium would be
($174,093). (ID -5; ID -13 at 2).
q.
Turner was not certain where the $197,093 figure came from or whether she
provided that figure to Respondent.
89. Carol Foster ( "Foster ") is a Cumru Township Commissioner, having served in that
capacity since January 1998.
a. At the January 5, 1998, Cumru Township Reorganization Meeting, Foster
and Gallen were appointed to serve as the board's liaisons to the
administrative department of the township.
(1) Foster testified that liaison commissioners had no greater ability to
affect policy or take official action than any other commissioner in an
individual capacity.
b. In 1998, the primary staff contact for the administrative liaisons was
Township Manager Shea.
c. Gallen, Foster, and Shea met in early April 1998.
d. Prior to the Gallen- Foster -Shea meeting in early April 1998, Foster had no
involvement as a township commissioner in researching the township's
insurance policies with the Fioravante Agency or in taking any action to seek
proposals or quotes from other insurance providers.
e. During the course of the Gallen- Foster -Shea meeting in early April 1998,
Foster became aware for the first time that one of the issues to be discussed
was the cost of the township's insurance.
(1) Gallen, Foster, and Shea all actively participated in a discussion
regarding the cost of the township's insurance.
(2) It was at this meeting that Foster first learned what the various
insurance cost proposals would be.
Gallen, 98- 059 -C2
Page 20
(3)
(a) Foster was not the source of this information.
It was determined that the cost of the Gallen Insurance proposal in
evidence as ID -4 was less than the cost of the township's insurance
through the Fioravante Agency.
(4) There was discussion regarding informing the rest of the
commissioners about the insurance information.
(5)
(6) It was Foster's understanding that if the township did not take action
by April 13, 1998, with respect to the insurance, the township would
not have insurance.
(7)
Foster learned during the meeting that the township's insurance with
the Fioravante Agency would expire within a few days, on April 13,
1998.
A decision was made to go forward with trying to set up a meeting of
the board of commissioners.
f. As the result of the Gallen- Foster -Shea meeting in early April 1998, a
special meeting of the Cumru Township Board of Commissioners was held
the following week on April 13, 1998.
Between the Gallen- Foster -Shea meeting in early April 1998 and the special
meeting of the Cumru Township Board of Commissioners on April 13, 1998,
Foster did not do any research or analysis of the Gallen Insurance proposal
(ID -4) or the cost figures discussed at the Gallen- Foster -Shea meeting in
early April 1998.
h. ID -13 consists of the official minutes of the April 13, 1998, Special Meeting
of the Cumru Township Board of Commissioners (see, Findings 87 v, 92 c,
and 100).
(1) The references in the minutes to "Mr. Gallen" are to Commissioner
Michael Gallen (Respondent).
(2) The board decided to change insurance carriers to Gallen Insurance.
Foster testified that Gallen did not speak to her about insurance prior to the
Gallen- Foster -Shea meeting in early April 1998.
g.
J.
Foster testified that Gallen never lobbied her on behalf of Gallen Insurance
or asked her to vote on behalf of Gallen Insurance.
90. Ray Henry ( "Henry ") is President of the Cumru Township Board of Commissioners,
having served in that officer position since August of 1997.
a. Liaison commissioners were given the task of gathering information and
making recommendations to the board regarding their assigned areas.
b. The board was not required to accept the information or recommendations
submitted by the liaison commissioners.
c. The township's insurance was renewable on an annual basis.
d. The township did not solicit insurance proposals every year.
Gallen, 98- 059 -C2
Page 21
e. The township did solicit insurance proposals in 1997.
f. Henry discussed with Shea the February 10, 1998, letter from Gallen
Insurance that is in evidence as ID -1.
(1) Henry expressed to Shea his (Henry's) opinion that the township did
not intend or desire to seek proposals for insurance.
(2) Henry did not discuss the matter with other commissioners to see
whether they were interested in pursuing it.
g. Henry did not do any research or comparisons regarding any proposals from
Gallen Insurance and coverage through Fioravante for 1998.
h. The April 13, 1998, meeting was a special meeting called to discuss the
township insurance.
(1) The township changed its insurance provider to Gallen Insurance.
Prior to the April 13, 1998, Special Meeting, Respondent Gallen did not
solicit Henry to support the Gallen Insurance proposal.
91. David Fioravante ( "Fioravante ") is president of Fioravante Group, Inc. (also
referred to herein as the Fioravante Agency).
a. The Fioravante Agency provided various insurance to Cumru Township for
31 years.
b. Cumru Township typically did not solicit insurance proposals on an annual
basis.
c. Most years, the township simply renewed its insurance through the
Fioravante Agency.
d. The bulk of the township's insurance policies came due for renewal on April
13 of each year.
(1) Two auxiliary policies came due at other times.
e. Prior to the April 13 policy expiration /renewal date, Fioravante would work
with Cumru Township staff to update the insurance - related information and
determine any necessary increases in coverage.
f. Fioravante would typically have the new premium information for Cumru
Township on or after the April 13 renewal date.
Fioravante testified that even though the township's new premium might not
be determined by April 13, the township would not be without insurance on
April 13.
g.
h. Absent any instruction from the township to the contrary, the expiring Cumru
Township policies would automatically be renewed on April 13.
In 1997, Cumru Township solicited insurance proposals.
Gallen, 98- 059 -C2
Page 22
j. In 1997, Fioravante submitted to Cumru Township the two insurance
proposals which are in evidence as ID -9.
(1) The proposal for insurance through Harleysville provided for a
potential "dividend" to be returned to the insured depending upon
claims submitted.
k. In 1997, the Fioravante Agency was awarded the township's insurance
business.
In 1998, Fioravante was not asked to submit any insurance proposals to
Cumru Township.
m. Approximately one week to ten days prior to the April 13, 1998, expiration/
renewal date, Fioravante received a telephone call from Turner asking for
the amount of the renewal premiums.
(1) Fioravante did not have the renewal premium information at that time.
(2) Fioravante asked Turner why she needed the premium information at
that time, and Turner responded that she was asked by Michael
Gallen (Respondent) to provide these figures.
n. As a result of Fioravante's telephone conversation with Turner, Fioravante
telephoned his underwriter and obtained an approximate premium figure of
$174,093.
(1) Fioravante and the underwriter did not discuss the potential dividend
to the township based upon submitted claims.
o. Fioravante provided the premium information which he obtained from the
underwriter to Cumru Township Manager Shea.
On April 13, 1998, Fioravante received a telephone call from Shea informing
him that per a meeting that day, Cumru Township was going to place its
insurance with Gallen Insurance.
p.
q.
(1) One or two days later, Fioravante received a letter from the township
to the same effect.
The following week, Fioravante attended the April 21, 1998, meeting of the
Cumru Township Board of Commissioners.
(1) Fioravante presented comments to the board regarding the
township's change of insurance carriers.
r. Fioravante was subsequently given an opportunity to submit an insurance
proposal to the township.
s. ID -7 and ID -8 are the proposals submitted by Fioravante to Cumru Township
for 1998 -1999.
t. The township did not accept the Fioravante proposals.
92. Michael Setley ( "Setley ") is the solicitor of Cumru Township, having served in that
capacity since approximately January of 1998.
Gallen, 98- 059 -C2
Page 23
a. It is Setley's opinion that at all times relevant to this case, Cumru Township
was not required to seek competitive bids for insurance contracts.
b. It is Setley's opinion that the April 13, 1998, Special Meeting of the Cumru
Township Board of Commissioners was properly noticed.
c. ID -13 consists of the official minutes of the April 13, 1998, Special Meeting
of the Cumru Township Board of Commissioners (see, Findings 87 v, 89 h,
and 100).
(1) Setley testified that the minutes at 2 -3 pertaining to township
insurance coverage accurately reflect what occurred during the
meeting.
d. During the April 13, 1998, Special Meeting, Henry proposed a review and
comparison of the Gallen Insurance proposal and the then existing township
insurance policies with the Fioravante Agency.
(1) Setley conducted a review based upon the declaration sheets that
were provided to him for the then existing coverage through the
Fioravante Agency and the proposed coverage through Gallen
Insurance.
e. Setley testified that other than in the context of the April 13, 1998, Special
Meeting, Respondent never spoke with Setley regarding the Gallen
Insurance proposal.
f. Setley testified that the documents requested by the Gallen letter in
evidence as ID -1 would have been publicly available in 1998 under the
Pennsylvania Right to Know Law except for any identifying information about
individual employees, such as Social Security Numbers.
Setley testified that in his professional opinion, Cumru Township was
obligated to provide the information requested by ID -1 to Gallen Insurance in
1998.
g.
h. Setley testified that it would be easier for a Cumru Township commissioner
to obtain information from a township employee than for a "person off the
street" to do so.
J.
Prior to April 13, 1998, Setley played no role in reviewing Cumru Township's
commercial insurance policies.
Prior to April 13, 1998, Setley was not asked by anyone at the Cumru
Township Board to review insurance proposals from Gallen Insurance, the
Fioravante Agency, or any other agency.
k. Prior to April 13, 1998, Setley did not play any role in bringing the matter of
the township insurance before the commissioners.
I. The first time Setley saw the Gallen Insurance proposal dated March 31,
1998, in evidence as ID -4 was April 13, 1998.
m. Setley has no personal knowledge of how the Gallen Insurance proposal
dated March 31, 1998 (ID -4) was brought before the Cumru Township Board.
Gallen, 98- 059 -C2
Page 24
93. Donald H. Moll, Jr. ( "Moll ") was formerly employed by Gallen Insurance from
approximately 1987 until February 1, 1999.
a. Moll had sole responsibility for preparing the Gallen Insurance proposal that
was submitted to Cumru Township in 1997.
b. Moll testified that he made the decision to submit an insurance proposal to
Cumru Township in 1998.
(1) Moll testified that he never personally discussed this decision with
Respondent.
c. Moll authored and typed the Gallen Insurance letter in evidence as ID -1.
(1) The letter was signed by Joseph Gallen.
d. When Gallen Insurance did not receive a response from Cumru Township
with respect to ID -1, Joseph Gallen told Moll that he (Joseph Gallen) would
try to get the information.
e. Moll subsequently received a telephone call from Respondent indicating that
Respondent had the information that had been requested by ID -1.
(1) Respondent provided the information to Moll.
f. Moll prepared the Gallen Insurance proposal that is in evidence as ID -4.
(1) In preparing the proposal, Moll used the township information that
had been requested by ID -1 and provided to Moll by the Respondent.
g. Moll submitted the proposal that is in evidence as ID -4 to Cumru Township.
h. Moll testified that following the submission of the proposal to Cumru
Township, he did not speak with Respondent regarding the proposal.
Setley telephoned Moll regarding the specifics of the Gallen Insurance
coverage as outlined in ID -4.
(1) Setley asked Moll whether the Gallen Insurance coverage could
provide a $10 million umbrella.
(2) Moll told Setley that a $10 million umbrella could be provided for an
additional $1,000.
In 1998, Gallen Insurance would have received commissions directly from
the Cincinnati Insurance Company, but the commissions for the St. Paul
insurance program would have been paid through and shared with Sedgwick
of Pennsylvania, Inc. ( "Sedgwick ").
(1) At that time, Sedgwick was the managing general agent for the St.
Paul Insurance program.
(2) Gallen Insurance was a broker as to the insurance through the St.
Paul Insurance Company.
94. Jeanne E. Johnston ( "Johnston ") is the township secretary for Cumru Township,
having served in that capacity since August 4, 1997.
J.
Gallen, 98- 059 -C2
Page 25
a. Johnston testified that on April 1, 1998, or April 2, 1998, she observed
Board President Henry and Shea talking in the township office.
(1) Johnston testified that Henry and Shea had the Gallen Insurance
proposal (ID -4) with them.
(2) Johnston testified that she stated, "I know what you're looking at,"
because she could see it upside down, and that Henry replied, "I
guess we got to look at it, the price is right." (Tr. of 2/26/01 at 149).
(a) Johnston testified, "I remember that specifically him saying
that." (Tr. of 2/26/01 at 149).
b. Johnston's testimony as set forth in Finding 94 a above is not credible.
(1) Johnston's testimony is contradicted by the Stipulation of the parties
that Henry did not review or see the Gallen Insurance proposal prior
to the April 13, 1998, Special Meeting (see, Finding 82).
(2) Johnston's testimony is contradicted by the testimony of Shea that
Shea did not review or analyze the Gallen Insurance proposal prior to
the April 13, 1998, Special Meeting (see, Finding 87 u).
c. Johnston's testimony is not credible.
D. Documents
95. ID -1 is a copy of a Gallen Insurance letter dated February 10, 1998, addressed to
Shea (see, Findings 87 d and 93 c).
a. The letter requests the following information to assist with submitting
a proposal to Cumru Township for the policy period of 4/13/98 to
4/13/99: (1) 1998- Annual Budget Report; (2) Current claim report for
all lines of coverage, for at least 3 years; (3) Recent professional
property appraisal report; (4) Payroll by Workers Compensation
Classification for upcoming policy period; and (5) Current vehicle and
driver schedule.
b. The letter is signed "Joseph J. Gallen."
c. In the upper right -hand corner of ID -1 is the following handwritten notation:
Week of 22 Feb 98
Discussed with Ray Henry
Twp does not intend /desire to seek proposals for insurance.
(ID -1).
96. ID -2 is a copy of a FAX from Respondent to Cumru Township which was received at
the township office on March 12, 1998 (see, Finding 87 k).
a. The letter is directed to "Bill or Betty."
b. The letter requests the same information that was requested by ID -1.
Gallen, 98- 059 -C2
Page 26
c. The letter indicates that Respondent needs the information as soon
as possible, and it directs Shea and Turner to contact Respondent by
telephone when the information is ready (see, Findings 17 -18).
97. ID -3 is a memo of a telephone call from Respondent to Turner at the township
office regarding the township insurance premium (see, Finding 88 k).
a. The time and date indicated on the memo of the call is "3.31 12:18."
b. The memo states:
Bette
Mike Gallen
His suggestion is to call INS. Agent & get figures
Becky
(ID -3).
98. ID -4 is a copy of a 10 -page insurance proposal dated March 31, 1998, which was
received by Cumru Township from Gallen Insurance (see, Finding 87 u).
a. The policy term is designated 4 -13 -1998 to 4 -13 -1999.
b. The proposal is for the following types of coverage: (1) a "Commercial
Package" including commercial property, contractor equipment, underground
sewer line, boiler and machinery, crime, and commercial general liability
insurances; (2) commercial automobile insurance; (3) workers' compensation
insurance; and (4) a commercial umbrella.
c. The total annual premium is stated to be $127,000.
99. ID -12 consists of the official minutes of the April 9, 1997, Special Joint Meeting of
the Cumru Township Board of Commissioners, Park and Recreation Board and
Shade Tree Commission.
a. Regarding the township insurance coverage, the minutes provide as follows:
Mr. Gallen excused himself from the Board during insurance
discussions.
ON MOTION OF MR. HENRY, SECOND OF MR. COLDREN, A
UNANIMOUS VOTE TO RENEW THE INSURANCE POLICY WITH
HARLEYSVILLE INSURANCE COMPANIES.
(ID -12 at 2).
100. ID -13 consists of the official minutes of the April 13, 1998, Special Meeting of the
Cumru Township Board of Commissioners (see, Findings 87 v, 89 h, and 92 c).
a. The stated purpose of the meeting was to review township insurance
coverage and any other business that might have come before the board.
Gallen, 98- 059 -C2
Page 27
b. Five Commissioners were in attendance, specifically, President Ray Henry,
Vice President Michael Gallen (Respondent), and Commissioners Coldren,
Foster, and Rowley.
c. The minutes indicate that no members of the public were present.
d. Regarding the matter of the township insurance coverage, the minutes
provide as follows:
NEW BUSINESS
A) Township Insurance Coverage
1) Letter and Insurance Summary from Donald H. Moll, Jr., of
Gallen Insurance, dated 3/31/98
Mr. Gallen reported that the current insurance through
Fioravante Insurance Agency had a proposed premium for this year
of $197,093.00. He reported that an agent within Cumru Township,
Gallen Insurance, submitted a proposal for this year at $127,000.00
for slightly better coverage, a savings to the taxpayers of $70,000.
Mr. Rowley asked if the coverage was the same. Mr. Shea indicated
that he had not had a chance to compare the Gallen Insurance
proposal against what the Township currently has. Mr. Rowley noted
that the Fioravante premium increased by $15,000 from last year.
Mr. Coldren pointed out that the stated difference did not
reflect the current policy that gave a refund based on claims; last
year's refund was around $40,000. "Even assuming the rebate, there
is still a substantial difference of $13,000 - $14,000." He asked if, with
the Gallen proposal, the Township would be assessed if a number of
claims got filed. Mr. Gallen said, "No, it's a flat rate." When Mr.
Rowley asked if the Gallen proposal assumes the risk up front, Mr.
Gallen said, "Yes."
Mr. Henry stated that the proposal should be reviewed and
compared against the current policy. Mr. Gallen said that today was
the due date. Mr. Setley offered to compare the coverages during a
recess. Indicating the Gallen proposal, Mr. Rowley stated, "If
everything is the same or better, I would vote for it."
8:18 a.m. — Mr. Rowley stated a need to leave the meeting and was
excused by the Board
8:20 a.m. — The meeting recessed.
8:33 a.m. — The meeting reconvened.
8:34 a.m. — The Board went into Executive Session. Mr. Henry stated
that the Board would discuss a personnel matter.
9:34 a.m. — The meeting reconvened. Mr. Henry stated that the
Board discussed a personnel matter in Executive Session that
is still pending.
Gallen, 98- 059 -C2
Page 28
Mr. Setley stated that he reviewed the Fioravante coverage
and the Gallen proposal. He reported that there were a couple of
minor differences, but only two significant differences:
1) Commercial Property Blanket Coverage
Gallen proposal — over $3,000,00 [sic]
Fioravante coverage — under $2,500,000
Mr. Setley stated that Gallen provided broader
coverage on property.
2) Umbrella Liability Coverage
Gallen proposal - $5,000,000 with $10,000 retainage
Fioravante coverage - $10,000,000 with $10,000
retainage
Mr. Setley reported he had already checked with
Gallen Insurance to find out the difference if the
proposal was changed to a $10 million umbrella:
it is $1,000 a year. He suggested that the Board
of Commissioners could accept the Gallen
proposal as presented or, if the Board wanted
the $10 million umbrella to make it equal with the
existing coverage, it could be accepted for
$1,000 additional premium.
In summary, Mr. Setley stated that, based on his review this
morning, they were approximately equivalent coverages with the one
exception of the umbrella liability; it clearly appeared to be a cost
savings to go with the proposal.
ON MOTION OF MR. COLDREN, SECOND OF MRS. FOSTER, A
MAJORITY VOTE ACCEPTING THE INSURANCE PROPOSAL
FROM GALLEN INSURANCE AS OF THIS DATE FOR A PREMIUM
OF $127,000. ROLL CALL: MR. GALLEN — ABSTAIN; MR.
COLDREN — YES; MRS. FOSTER — YES; MR. HENRY — YES.
ON MOTION OF MR. COLDREN, SECOND OF MRS. FOSTER, A
MAJORITY VOTE AUTHORIZING AN INCREASE IN THE
UMBRELLA LIABILITY COVERAGE THROUGH GALLEN
INSURANCE FROM $5,000,000 TO $10,000,000 FOR AN
ADDITIONAL COST OF $1,000. ROLL CALL: MR. GALLEN —
ABSTAIN; MR. COLDREN — YES; MRS. FOSTER — YES; MR.
HENRY — YES.
(ID -13 at 2 -3).
101. ID -16 consists of invoices for various Cumru Township insurance policies through
the St. Paul Insurance Company.
a. With respect to the policy period 4/13/98 through 4/13/99, the invoices
reflect commissions to Gallen Insurance in the total amount of $7311.36.
b. With respect to the policy period of 4/13/99 through 4/13/00, the invoices
reflect commissions to Gallen Insurance in the total amount of $6011.82.
102. R -3 is an endorsement to Cumru Township Policy # SMP OU 50 83 through
Fioravante Agency.
Gallen, 98- 059 -C2
Page 29
a. The policy expiration date is stated to be 4/13/98.
103. R -4 is a Notice pertaining to Cumru Township's workers' compensation insurance
Policy # OU 50 83 through Fioravante Agency.
a. The policy expiration date is stated to be 04/13/98.
III. DISCUSSION:
Respondent Michael Gallen (also referred to herein as "Respondent" or "Gallen "),
has at all times relevant to these proceedings been a public official subject to the
provisions of the Public Official and Employee Ethics Law ( "Ethics Law "), Act 9 of 1989,
Pamphlet Law 26, 65 P.S. §401 et seq., as codified by the Public Official and Employee
Ethics Act, Act 93 of 1998, Chapter 11, 65 Pa.C.S. §1101 et seq., which Acts are
collectively referred to herein as the "Ethics Act."
Section 3(a)/1103(a) of the Ethics Act prohibits a public official /public employee
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.
The issue before us is whether Gallen violated Section 3(a)/1103(a) of the Ethics
Act when he used the authority of his office for the private pecuniary benefit of a member
of his immediate family and /or a business with which a member of his immediate family is
associated by participating in discussions and actions leading to his father's insurance
agency being contracted with to provide insurance for the township.
We shall now summarize the relevant facts.
Respondent has served as a Cumru Township Commissioner from January 1996 to
the present. Respondent has served as vice president of the Cumru Township Board of
Commissioners since January 1997.
When Respondent took office in 1996 as a Cumru Township Commissioner, the
township had a long history of purchasing its insurance through the "Fioravante Group,
Inc." (also referred to herein as the "Fioravante Insurance Agency" and the "Fioravante
Agency "). For approximately 30 years, specifically, since 1967, Cumru Township had
purchased its insurance exclusively through the Fioravante Agency.
The township's insurance was renewable on an annual basis. However, the
township did not solicit proposals for insurance on an annual basis. Most years, the
township simply renewed its insurance through the Fioravante Agency. In fact, competitive
bids for insurance were sought only about three (3) times from 1980 to 1997.
In April of 1998, the year after Respondent Gallen took office, the township switched
insurance carriers to the "Gallen Insurance Agency" (also referred to herein as "Gallen
Insurance" or "Gallen Insurance, Inc. "). The events surrounding the change in the
township's insurance carriers form the basis of this matter now before us.
Gallen Insurance is a business with which various of Respondent's immediate family
members are associated. Respondent's father, Joseph Gallen, was at all times relevant to
these proceedings the majority shareholder of Gallen Insurance. Respondent's sister, Ann
Moll, was President of Gallen Insurance, having held that position since 1988. At all times
relevant to this case, Respondent's brothers were employed by Gallen Insurance.
Gallen, 98- 059 -C2
Page 30
Though not an immediate family member of Respondent, Donald Moll,
Respondent's brother -in -law, was Vice President of Gallen Insurance during the time
period under review in this case.
Respondent himself is not employed by Gallen Insurance, and he does not have
any ownership interest in it.
The actions of Respondent which are to be reviewed by this Commission occurred
in 1998 but have been contrasted to events which took place in 1997, shortly after
Respondent assumed office.
In March of 1997, the Cumru Township Board of Commissioners decided to seek
requests for proposals for the township's insurance coverage. In response to the 1997
solicitation for bids, four (4) insurance companies made presentations to the board of
commissioners at the board's April 1, 1997, Regular Meeting. The four (4) companies
were: Mast & Moyer; Hart, Inc.; Gallen Insurance, Inc.; and the Fioravante Agency. The
minutes of the April 1, 1997, meeting are in evidence as ID -11. Prior to the insurance
presentations, then Board Chairman Carmen F. Stanziola noted that one of the insurance
companies, Gallen Insurance, was related to one of the commissioners, and asked
Respondent to step down and not engage in any conversation with the public (ID -11 at 1).
Respondent agreed (ID -11 at 2). At a subsequent meeting held shortly thereafter, the
board of commissioners voted to renew the insurance contract through the Fioravante
Agency. Respondent abstained from voting and did not participate in the discussions.
In 1998, the make -up of the board of commissioners had changed. There was
testimony that in 1998, with the election of two new commissioners (Carol Foster and
Timothy Rowley), and the re- election of Ray Henry, who had taken over as board president
in August of 1997, it became an overriding objective of the full board of commissioners to
take affirmative steps to save the township money. One area of concern was making
certain that the township's professional service providers were cost effective.
However, the township did not solicit insurance proposals for the 1998 -1999
insurance coverage. As noted above, the township had rarely solicited insurance
proposals in the past, and proposals had just been solicited the prior year.
William S. Shea ( "Shea "), who served as the township manager of Cumru Township
from 1975 to 2000, and who worked on township insurance matters with Elizabeth Turner
( "Turner "), then the assistant secretary of the township, testified that in 1998, it was not his
intent to solicit proposals for insurance as the township had done in 1997. Shea had not
been instructed by the board members to solicit insurance proposals in 1998, and Shea
felt that it was too soon to solicit proposals again. It is also noteworthy that in 1997, the
commissioners had stated that they did not want to solicit insurance proposals every year.
The bulk of the township's insurance policies which were in effect through the
Fioravante Agency were due to expire on April 13, 1998. Absent any instructions to the
contrary from the township, those policies would have been renewed automatically.
On or about February 10, 1998, Shea received a letter from Gallen Insurance. The
letter was signed by Joseph Gallen and requested certain items from the township relative
to preparing an insurance proposal for the 1998 -1999 policy period. The letter is in
evidence as ID -1. The information requested by ID -1 was updated but was otherwise
similar to the information that had been gathered in 1997 for the insurance carriers
(including Gallen Insurance) which had submitted proposals at that time.
The Gallen Insurance letter was unsolicited, and the township had not given any
indication that it was going to solicit proposals for insurance in 1998. When Shea received
Gallen, 98- 059 -C2
Page 31
the Gallen Insurance letter, he set it aside temporarily until he could talk to Ray Henry,
president of the board of commissioners.
The evidence establishes that during the week of February 22, 1998, Shea
discussed the letter with Henry and was directed by Henry not to respond to the letter.
The evidence on this point consists of the testimony of Shea and Henry (the parties to the
conversation), a note which Shea wrote on ID -1 to memorialize the conversation, and a
deemed admission from the pleadings which appears as Finding 16 b above (see, Answer
and New Matter to Commission's Investigative Complaint /Findings Report, Paragraph 28).
Shea testified that he told Henry that the Gallen Insurance letter (ID -1) had been
received, and that based upon the fact that proposals had been solicited in 1997, it
seemed like it was too soon to seek proposals again. Shea testified that Henry responded
that the township did not intend or desire to receive proposals for the township insurance
coverage in 1998. Shea testified that he (Shea) memorialized Henry's response by writing
it in the upper right -hand corner of the letter. There is in fact a handwritten notation in the
upper right -hand corner of ID -1, which notation states:
(ID -1).
Week of 22 Feb 98
Discussed with Ray Henry
Twp does not intend /desire to seek proposals for insurance.
Per Finding 16 b, Henry directed Shea not to respond to Joseph Gallen's letter and
to file the document in township files. Shea similarly testified that as a result of his
conversation with Henry, he (Shea) filed the Gallen Insurance letter.
Henry's testimony is consistent with Shea's testimony and Finding 16 b. Henry
testified that he discussed the February 10, 1998, Gallen Insurance letter (ID -1) with Shea.
Henry testified that he expressed to Shea his (Henry's) opinion that the township did not
intend or desire to seek proposals for insurance. Henry did not discuss the matter with any
other commissioners to see whether they were interested in pursuing the matter.
Henry's testimony, Shea's testimony, the notation on ID -1, and Finding 16 b are
consistent. We find that evidence to be credible.
However, the evidence also establishes that the information requested by ID -1 was
public information, and that regardless of the intention of the commissioners as to
insurance proposals, Gallen Insurance would have been entitled to the information
requested by ID -1. Among others who testified on this point, Cumru Township Solicitor
Setley testified that in his professional opinion, Cumru Township was obligated to provide
the information requested by ID -1 to Gallen Insurance in 1998. Setley acknowledged that
it would nevertheless be easier for a Cumru Township commissioner to obtain information
from a township employee than for a "person off the street" to do so.
When Gallen Insurance did not receive a response from Cumru Township with
respect to ID -1, Joseph Gallen told Donald Moll that he (Joseph Gallen) would try to get
the information. According to the evidence before us, it was at this point that Respondent
became involved in assisting Gallen Insurance as it sought to prepare an insurance
proposal for Cumru Township.
On March 12, 1998, Respondent faxed a letter from his company's fax machine, on
his company's stationary, directed to Shea and Turner requesting the same information
Gallen, 98- 059 -C2
Page 32
that had been requested by Gallen Insurance in ID -1. Respondent's letter is in evidence
as ID -2. The letter indicated that Respondent needed the information as soon as possible.
The letter directed Shea and Turner to contact Respondent by telephone when the
information was ready. The letter did not state in what capacity Respondent was
requesting the information from Cumru Township, and Shea did not ask Respondent
whether he was requesting the information in his official capacity.
The Investigative Division has emphasized that in 1998, Respondent was not only a
commissioner and vice president of the board of commissioners, but he was also one of
the two designated "Liaison Commissioners" between the board of commissioners and the
township's administrative department. The other Liaison Commissioner to the
administrative department was Commissioner Carol Foster ( "Foster ").
As Liaison Commissioners assigned to the township's administrative department,
Respondent's and Foster's responsibilities included maintaining contact with the township
administrative employees, including Shea and Turner who handled insurance matters.
However, all Commissioners, including Respondent, had ultimate supervisory authority
over these and other township employees.
As a result of receiving ID -2, Shea told Turner to get the requested information
together for Respondent. Turner complied with Shea's request.
On March 13, 1998, the day after receiving Respondent's FAX, Shea personally
delivered the information to Respondent at Respondent's place of business. Shea does
not normally personally deliver information to a requestor who requests documents under
the Right to Know Law. Shea did not charge Respondent for the copies of the requested
information. Under the township's Right to Know policy, the township would normally
charge private citizens for copies of such information.
Shea testified that the fact that Respondent was a township commissioner did play a
role in Shea's taking action to respond to the request for the information (see, Finding 87
p). Respondent has argued that his request was made on behalf of his father as an
individual in Cumru Township to get publicly available information that should have been
provided to Gallen Insurance in response to ID -1; that his request was not made in his
official capacity; and that he is not responsible for assumptions that may have been made
by the employees of the township's administrative department (see, Tr. of 2/6/01 at 32, 35-
36, 38 -39; Michael Gallen's Post - Hearing Memorandum of Law, at 10 -11, 22 -23).
After Shea delivered the information to Respondent, Respondent provided the
information to his brother -in -law, Donald Moll of Gallen Insurance, who used the
information to prepare an insurance proposal for Cumru Township. The Gallen Insurance
proposal was submitted to the township on March 31, 1998, and is in evidence as ID -4.
Meanwhile, Respondent contacted Turner at the township office and asked her to
find out what the township's premiums would be through the Fioravante Agency for 1998,
as the policy was due to expire on April 13, 1998. One such contact is documented by ID-
3. ID -3 is a memo of a telephone call from Respondent to Turner at the township office.
The memo was provided to Turner by a township employee who had received the call.
The memo indicates that Mike Gallen (Respondent) had called Turner and that his
suggestion was for Turner to call the insurance agent and get the figures. The date of this
particular contact, March 31, 1998, was the very date that Gallen Insurance submitted its
insurance proposal for 1998 -1999 to Cumru Township.
The premiums for 1998 -1999 were not provided by the Fioravante Agency to Turner
or Shea until April 6, 1998. Fioravante testified that approximately one week to ten days
prior to the April 13, 1998, expiration /renewal date, he received a telephone call from
Turner asking for the amount of the township's renewal premiums. Fioravante did not yet
Gallen, 98- 059 -C2
Page 33
have the renewal premium information. Fioravante asked Turner why she needed the
premium information at that time, and Turner indicated that she was asked by Michael
Gallen (Respondent) to provide these figures. Turner told Fioravante to give the figures to
Shea if Turner was not in the office.
Fioravante telephoned his underwriter and obtained an approximate premium figure
of $174,093 for the period from mid -April of 1998 to mid -April of 1999. Fioravante and the
underwriter did not discuss the potential dividend to the township based upon submitted
claims.
On April 6, 1998, Fioravante provided the premium information which he obtained
from his underwriter to Cumru Township Manager Shea. On or about the same day, April
6, 1998, and as a result of that conversation, Shea created the handwritten note in
evidence as ID -5. Shea addressed the note to Turner. The note is dated 4/6/98. The
note indicates a total premium of $174,093, with a partial breakdown of that premium.
When Turner received ID -5, she telephoned Respondent and gave him amount(s)
as the township's insurance premiums through the Fioravante Agency.
Respondent then took action in his official capacity to bring the matter of the Gallen
Insurance proposal before the board of commissioners for consideration. Respondent has
attempted, through the testimony of Jeanne E. Johnston, the township secretary, to
suggest that the Gallen Insurance proposal was reviewed by Henry and Shea on April 1 or
April 2 and would have come before the board regardless of Respondent's actions detailed
herein. Ms. Johnston's testimony is not credible for the reasons set forth in Finding 94. It
was the Respondent who effectuated bringing the Gallen Insurance proposal before the
Cumru Township Board of Commissioners.
On April 7, Respondent and Foster, as liaison commissioners to the administrative
department, met with Shea at the Township building. The Gallen Insurance proposal was
discussed at this meeting. Respondent was the participant responsible for causing the
insurance discussions to occur, which discussions resulted in the scheduling of a Special
Meeting of the board to review the Gallen Insurance proposal.
Foster did not even know prior to the April 7, 1998, meeting that the township's
insurance was going to be discussed at it. Foster had no involvement prior to the April 7,
1998, meeting in researching the township's insurance policies with the Fioravante Agency
or in taking any action to seek proposals or quotes from other insurance providers. It was
at the April 7, 1998, meeting that Foster learned for the first time that the township's
insurance with the Fioravante Agency would expire within a few days, on April 13, 1998.
Foster also learned for the first time what the various insurance cost proposals would be.
Foster was not the source of this information.
Shea's testimony clearly established that he had no intention of pursuing a change
in the township's insurance. In fact, Shea had already been instructed by Board President
Henry that the board did not intend or desire to receive insurance proposals that year.
During the April 7, 1998, meeting, Shea indicated to Respondent and Foster that the
commissioners had received proposals in 1997, and that Shea had not planned on doing
anything more and had no indication that the board of commissioners was interested in
receiving a proposal. Clearly it was not Shea who was advancing the insurance issue.
Since neither Foster nor Shea initially advanced the insurance issue at the April 7,
1998, meeting, the necessary conclusion is that the only remaining participant —the
Respondent —was the one pursuing the insurance issue in order to secure a review by the
full board of the Gallen Insurance proposal.
Gallen, 98- 059 -C2
Page 34
Of course, once Respondent initiated the process, Foster did join with him in
advocating a review by the board. Both Respondent and Foster directed Shea to arrange
for a special meeting.
An ordinary citizen, as opposed to a township commissioner, could not have simply
directed the township manager to schedule a special meeting of the board of
commissioners. As a direct result of the April 7, 1998, meeting among Respondent,
Foster, and Shea, a special meeting of the Cumru Township Board of Commissioners was
scheduled and held the following week on April 13, 1998. The stated purpose of the
meeting was to review township insurance coverage and any other business that might
have come before the board.
Although various witnesses testified that they believed the township would be
without insurance on April 13, 1998, unless the board took action by that date, there was in
fact no basis for any such fear. Absent any instruction from the township to the contrary,
the expiring Cumru Township policies with the Fioravante Agency would have been
automatically renewed on April 13.
The official minutes of the April 13, 1998, Special Meeting of the Cumru Township
Board of Commissioners are in evidence as ID -13 (see, Finding 100).
Five Commissioners were in attendance, specifically, President Ray Henry, Vice
President Michael Gallen (Respondent), and Commissioners Coldren, Foster, and Rowley
(ID -13 at 1). The parties have stipulated that Board President Henry and Commissioners
Coldren and Rowley did not review or see the Gallen Insurance proposal prior to the April
13, 1998, Special Meeting.
As set forth in the minutes, Respondent led the discussions regarding insurance.
The minutes provide, in part, as follows:
NEW BUSINESS
A) Township Insurance Coverage
1) Letter and Insurance Summary from Donald H. Moll, Jr., of Gallen
Insurance, dated 3/31/98
Mr. Gallen reported that the current insurance through Fioravante
Insurance Agency had a proposed premium for this year of $197,093.00. He
reported that an agent within Cumru Township, Gallen Insurance, submitted
a proposal for this year at $127,000.00 for slightly better coverage, a savings
to the taxpayers of $70,000. Mr. Rowley asked if the coverage was the
same. Mr. Shea indicated that he had not had a chance to compare the
Gallen Insurance proposal against what the Township currently has. Mr.
Rowley noted that the Fioravante premium increased by $15,000 from last
year.
Mr. Coldren pointed out that the stated difference did not reflect the
current policy that gave a refund based on claims; last year's refund was
around $40,000. "Even assuming the rebate, there is still a substantial
difference of $13,000 - $14,000." He asked if, with the Gallen proposal, the
Township would be assessed if a number of claims got filed. Mr. Gallen
said, "No, it's a flat rate." When Mr. Rowley asked if the Gallen proposal
assumes the risk up front, Mr. Gallen said, "Yes."
Mr. Henry stated that the proposal should be reviewed and compared
against the current policy. Mr. Gallen said that today was the due date. Mr.
Gallen, 98- 059 -C2
Page 35
Setley offered to compare the coverages during a recess. Indicating the
Gallen proposal, Mr. Rowley stated, "If everything is the same or better,
would vote for it."
8:18 a.m. — Mr. Rowley stated a need to leave the meeting and was excused
by the Board
8:20 a.m. — The meeting recessed.
8:33 a.m. — The meeting reconvened.
(ID -13 at 2).
As set forth in the above quoted excerpt from the minutes, Respondent not only led
the insurance discussions but he reported an amount for the Fioravante premium
($197,093) which was higher than the actual amount conveyed to Shea by Fioravante and
recorded by Shea on ID -5 ($174,093). It is not clear whether Respondent was responsible
for the inaccuracy of the figure. Shea testified that he was not responsible for coming up
with the higher, inaccurate figure. However, Turner testified that she was not certain
where the $197,093 figure came from or whether she may have provided that figure to
Respondent.
When the April 13, 1998, Special Meeting reconvened, Respondent did not
participate further. Township Solicitor Setley compared the Gallen Insurance proposal
with the then current policy through the Fioravante Agency and made an oral report to the
Board. Setley concluded that the Gallen Insurance proposal provided approximately
equivalent coverages with the exception of a difference in the amount of umbrella liability
coverage. Setley had contacted Gallen Insurance to request a premium quote for raising
the limit on the umbrella policy to equal that of the Fioravante policy. The additional
premium was reported by Setley to be $1,000, for a total premium of $128,000 for
insurance through Gallen Insurance.
The board of commissioners voted 3 -0 to accept the insurance proposal from Gallen
Insurance. Respondent abstained from the vote. Rowley did not participate in the vote as
he had left for a previous engagement. Various commissioners testified that they voted in
favor of changing the insurance carrier from the Fioravante Agency to Gallen Insurance in
order to save the township money.
The Gallen Insurance coverage for Cumru Township was with the St. Paul
Insurance Company and the Cincinnati Insurance Company, from which the parties have
stipulated that Gallen Insurance has received $14,373.12 in commissions for the period of
April 1998 to October 6, 1999.
Having highlighted the facts and issues, we preliminarily note that Respondent has
raised a Motion to Dismiss alleging a lack of clear and convincing evidence to support a
violation of Section 3(a)/1103(a) of the Ethics Act (Tr. of 2/6/01 at 282; Tr. of 2/26/01 at
177 -178). We deny Respondent's Motion to Dismiss, based upon the disposition below.
In applying the facts to the allegation, based upon our review of the record, we find
that there is clear and convincing evidence that Respondent violated Section 3(a)/1103(a)
of the Ethics Act when he used the authority of his office for the private pecuniary benefit
of a member of his immediate family and /or Gallen Insurance, a business with which
Respondent's father and various other members of Respondent's immediate family are
associated, by participating in discussions and actions leading to Gallen Insurance being
contracted with to provide insurance for Cumru Township. Absent Respondent's actions in
1998 in the matter of the township's insurance, the township would not have changed
insurance carriers from the Fioravante Agency to Gallen Insurance.
Gallen, 98- 059 -C2
Page 36
The uses of authority of office which support the violation certainly include: (1)
Respondent's participation at the April 7, 1998, meeting among Respondent, Foster and
Shea, in which Respondent advanced a review of the township's insurance and, together
with Foster, directed Shea to schedule a special meeting of the board of commissioners to
review the township's insurance coverage; and (2) Respondent's participation in the
board's discussions regarding the insurance and the Gallen Insurance proposal
specifically at the Special Meeting on April 13, 1998, as reflected in the minutes.
As for the former, but for Respondent's actions as a commissioner /Liaison
Commissioner at the April 7, 1998, meeting, no special meeting of the board would have
been scheduled, and the township would have continued to purchase its insurance from
the Fioravante Agency rather than from Gallen Insurance.
With regard to the latter, in reviewing the substance of Respondent's commentary at
the Special Meeting, we find that Respondent's participation amounted to advancing and
advocating in favor of the Gallen Insurance proposal, in contrast to the nondescript
participation of the public official in Yarnall, Order 996, cited by Respondent. See, Michael
Gallen's Post - Hearing Memorandum of Law, at 31 -33.
As for the remaining alleged uses of authority of office, we shall address them,
given that the parties have expended a great deal of time and effort on them, but we
emphasize that they are not necessary to support the violation of Section 3(a)/1103(a) of
the Ethics Act by Respondent in this matter. The element of use of authority of office has
already been fully established by the above.
For the record, we determine that Respondent did not use the authority of office in
obtaining the township records requested by ID -2 for Gallen Insurance because the
records were public documents, Respondent (and anybody else) was entitled to them in a
private capacity, Respondent did nothing to indicate that he was requesting the documents
in an official capacity, and Respondent is not accountable for the assumptions of township
staff in that regard.
However, we conclude that Respondent did use the authority of office in directing
Turner to get the Fioravante premium information for the township for 1998. Regardless of
the fact that the information was not obtained until after the Gallen Insurance proposal had
been submitted, it was obtained and used by Respondent — albeit inaccurately —at the
April 13, 1998, Special Meeting of the board. The use of the inaccurate figure may not
have been Respondent's doing. Nevertheless, directing Turner to obtain a premium figure
from Fioravante and using such a figure — accurately or inaccurately —for comparison to
the Gallen Insurance proposal was a use of the authority of Respondent's public office and
provides additional support for our finding of a violation of Section 3(a)/1103(a) of the
Ethics Act by Respondent.
We would note that it is not significant to our analysis whether the insurance
through Gallen Insurance or through the Fioravante Agency was a "better deal" for the
township. See, Zangrilli, Order 949 at 143 ( "A 'good' illegal deal is still an illegal deal. ")
What is significant is that Respondent used the authority of his public office for the private
pecuniary benefit of a member of his immediate family and /or Gallen Insurance, a business
with which Respondent's father and other immediate family members are associated.
Similarly, testimony that commissioners voted for the Gallen Insurance proposal to
save the township money does not affect the outcome of this case. But for Respondent's
intercessions, the matter of changing insurance carriers would not have come before the
board for a vote. Moreover, while it is clear to us that Respondent's actions taken in his
official capacity did affect the outcome of the township's choice of insurance carriers, we
would parenthetically note that the case law is clear that the participation of a public
Gallen, 98- 059 -C2
Page 37
official with a private pecuniary interest need not affect the outcome of his board's vote in
order to violate the Ethics Act. Snyder v. State Ethics Commission, 686 A.2d 843 (Pa.
Cmwlth. 1996), alloc. den., 0029 M.D. Allocatur Docket 1997 (Pa. December 22, 1997).
Finally, we would note that Respondent's abstention from the board's vote on April
13, 1998, does not shield him from the obvious conclusion that he violated Section
3(a)/1103(a) of the Ethics Act. Use of authority of office is more than the mere mechanics
of voting and encompasses all of the tasks needed to perform the functions of a given
position. See, Juliante, Order No.809. Use of authority of office includes, for example,
discussing, conferring with others, and lobbying for a particular result. Respondent
engaged in all of these. By the time of the vote, Respondent had already "used the
authority of office" sufficiently to support a violation of Section 3(a)/1103(a) of the Ethics
Act.
Respondent's uses of the authority of his office were for the private pecuniary
benefit of one or more members of his immediate family and /or for Gallen Insurance, a
business with which Respondent's father and various other members of Respondent's
immediate family are associated. The resulting private pecuniary benefit consists of the
commissions to Gallen Insurance relative to the Cumru Township insurance coverage,
which the parties have stipulated total $14,373.12 for the period of April 1998 to October 6,
1999.
Based upon all of the above, we find that there is clear and convincing evidence to
support each element of a violation by the Respondent of Section 3(a)/1103(a) of the
Ethics Act with regard to the allegation before us.
Section 407(13)/1107(13) of the Ethics Act empowers this Commission to impose
restitution in instances where a public official /public employee has obtained a financial
gain in violation of the Ethics Act. Restitution in the amount of the commissions which
have been received by Gallen Insurance is warranted. See, Kurtz, Order 1116.
Accordingly, Respondent shall be ordered to pay restitution in the amount of $14,373.12 to
Cumru Township through this Commission within 30 days of the mailing date of this Order.
Non - compliance will result in the institution of an order enforcement action.
Gallen, 98- 059 -C2
Page 38
IV. CONCLUSIONS OF LAW:
1. Michael Gallen ( "Gallen "), as a Commissioner for Cumru Township, was at all times
relevant to this case a public official subject to the provisions of the Public Official
and Employee Ethics Law, Act 9 of 1989, Pamphlet Law 26, 65 P.S. §401 et seq.,
as codified by the Public Official and Employee Ethics Act, Act 93 of 1998, Chapter
11, 65 Pa.C.S. §1101 et seq., which Acts are collectively referred to herein as the
"Ethics Act."
2. Gallen violated Section 3(a)/1103(a) of the Ethics Act when in 1998, he used the
authority of his office for the private pecuniary benefit of a member of his immediate
family and /or Gallen Insurance, a business with which Respondent's father and
other members of Respondent's immediate family are associated, by participating in
discussions and actions leading to Gallen Insurance being contracted with to
provide insurance for Cumru Township.
3. The above violation is fully supported by the following uses of authority of office:
(1) Respondent's participation at the April 7, 1998, meeting among Respondent,
Foster and Shea, in which Respondent advanced a review of the township's
insurance and, together with Foster, directed Shea to schedule a special meeting of
the board of commissioners to review the township's insurance coverage; and (2)
Respondent's participation in the board's discussions regarding the insurance and
the Gallen Insurance proposal specifically at the board's Special Meeting on April
13, 1998, as reflected in the minutes.
4. An additional use of authority of office supporting the above violation consists of
Respondent's direction to Cumru Township Assistant Secretary Turner to obtain a
premium figure from the then carrying insurance agent for 1998, which information
Respondent subsequently used — albeit inaccurately —for comparison to the Gallen
Insurance proposal at the April 13, 1998, Special Meeting of the Cumru Township
Board of Commissioners.
5. Respondent did not use the authority of office in obtaining the township records
requested by ID -2 for Gallen Insurance, where the records were public documents,
Respondent was entitled to them in a private capacity, Respondent did nothing to
indicate that he was requesting the documents in an official capacity, and
Respondent is not accountable for the assumptions of township staff in that regard.
6. The private pecuniary benefit element of Respondent's above violation of Section
3(a)/1103(a) of the Ethics Act consists of the resulting commissions to Gallen
Insurance from the insurance coverage provided to Cumru Township, which
commissions totaled $14,373.12 for the period of April 1998 to October 6, 1999.
7 Restitution is warranted in this case.
In Re: Michael Gallen
: File Docket: 98- 059 -C2
: Date Decided: 5/15/01
: Date Mailed: 5/30/01
ORDER NO. 1198
1 Michael Gallen ( "Gallen "), as a Commissioner for Cumru Township, Berks County,
Pennsylvania, violated Section 3(a)/1103(a) of the Public Official and Employee
Ethics Law, Act 9 of 1989, Pamphlet Law 26, 65 P.S. §401 et seq., as codified by
the Public Official and Employee Ethics Act, Act 93 of 1998, Chapter 11, 65 Pa.C.S.
§1101 et seq., which Acts are collectively referred to herein as the "Ethics Act,"
when in 1998, he used the authority of his office for the private pecuniary benefit of
a member of his immediate family and /or Gallen Insurance (also referred to herein
as "Gallen Insurance Agency" or "Gallen Insurance, Inc. "), a business with which
Respondent's father and other members of Respondent's immediate family are
associated, by participating in discussions and actions leading to Gallen Insurance
being contracted with to provide insurance for Cumru Township.
2. Respondent is ordered to pay restitution in the amount of $14,373.12 to Cumru
Township through this Commission within 30 days of the mailing date of this Order.
a. Non - compliance will result in the institution of an order enforcement action.
BY THE COMMISSION,
DANEEN E. REESE, CHAIR