HomeMy WebLinkAbout1222 BilletdeauxIn Re: Kenneth Billetdeaux
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
Michael Healey
00- 050 -C2
Order No. 1222
11/15/01
11/30/01
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
Act, Act 9 of 1989, P.L. 26, 65 P.S. §401 et seq., as codified by Act 93 of 1998, Chapter 11,
65 Pa.C.S. §1101 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 waived. The record is complete. A
Consent Agreement and Stipulation of Findings were submitted by the parties to the
Commission for consideration. The Consent Agreement was subsequently approved.
Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter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.
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Page 2
I. ALLEGATION:
That Kenneth Billetdeaux, a public official in his capacity as Treasurer for Kilbuck
Township, Allegheny County, violated Sections 3(a)/1103(a) and 3(f)/ 1103(f) of the Ethics
Act (Act 93 of 1998) 65 Pa. C. S. § §3(a)/1103(a) and 3(f)/1103(f), when he used the
authority of his office for a private pecuniary benefit of himself and /or a business with
which he is associated by participating in township actions, discussions, and decisions
which resulted in his appointment as the township's police pension plan administrator
and /or his selection to serve as the township's pension investment advisor for which
service he was compensated; and when he participated in township actions regarding the
payment of township funds to himself for service as the township police pension plan
administrator and /or the township to provide pension advisory services in excess of $500
without an open and public process during the time when he served as treasurer and
pension plan administrator.
II. FINDINGS:
1. Kenneth Billetdeaux has served as the Treasurer of Kilbuck Township, Allegheny
County, since May 1993.
2. Billetdeaux also serves as the Administrator for the Kilbuck Township Police
Pension fund, as a trustee of the police pension fund and as the financial advisor to
the police pension fund.
a. Billetdeaux has held the position of administrator for police pension fund
since November 15, 1994.
1. Billetdeaux was appointed to this position by a vote of the board of
supervisors.
b. Billetdeaux has also served as pension financial advisor as of May 12, 1997.
3. In addition to the positions of Treasurer, Pension Fund Administrator and Pension
Financial Advisor, Billetdeaux also served as one of three Trustees of the Kilbuck
Township Police Pension Fund.
4. No delineation of duties for the position of Trustee exists in the Kilbuck Township
records.
5. The positions of treasurer and pension administrator were previously held by
Township Supervisor Dorothy Anderson, who also served as township secretary.
a. Anderson did not serve as the Pension Financial Advisor.
6. Billetdeaux is a Certified Public Accountant and is the sole owner of a CPA
business which he operates from his residence, 274 Orchard Drive, Pittsburgh, PA
15228.
a. Billetdeaux is also a Certified Financial Planner (CFP), Personal Financial
Specialist (PFS) and Certified Government Financial Manager (CGFM).
1. Billetdeaux has been a Certified Financial Planner since 1994, CGFM
since April 1, 1996, and PFS (1996).
7 Billetdeaux is compensated as the township treasurer at an hourly rate set by the
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Board of Supervisors.
a. In 1999 and 2000, the rate was set at $25.00 per hour.
b. Prior to 1999, the rate was set at $20.00 per hour.
8. The duties of a Second Class Township Treasurer are defined in the Second Class
Township Code, Article VII, Section 704, and include the following:
a. Receive all monies due the township and deposit them promptly in a
designated depository in the name of the township.
b. Keep distinct and accurate accounts of all sums received from taxes and
other sources, which accounts shall be open to the inspection of the board of
supervisors and any citizen of this Commonwealth.
c. Pay out all monies of the township only on direction by the board of
supervisors.
d. Annually state the accounts and make them available to the board of
auditors for settlement.
9. Kilbuck Township established and maintains a Pension Plan for the full time
uniformed police personnel.
a. The plan provides retirement, disability and death benefits to plan members
and their beneficiaries.
b. The plan includes three active employees and one beneficiary receiving
benefits.
10. Prior to May 1995, the Kilbuck Township Board of Supervisors utilized the services
of Wheat, First, Butcher & Singer investment firm for management of the pension
fund.
a. The investment philosophy of Wheat First was to fund the plan through the
purchase of certificates of deposit.
11. During the board of supervisors meeting of November 15, 1994, as township
treasurer, Billetdeaux proposed a new philosophy for police pension investing.
a. Billetdeaux's proposal was made at about the time he became a Certified
Financial Planner.
b. Billetdeaux announced at the meeting that he will [sic] discuss the proposed
changes with the police and report back to the supervisors.
12. Following the Billetdeaux proposal regarding the change in investment philosophy,
the supervisors appointed Billetdeaux, at the November 15, 1994, public meeting,
as township administrator of the police pension fund to work in conjunction with the
police chief.
13. Subsequent to his appointment as pension administrator on November 15, 1994,
Billetdeaux recommended changing the investment strategy of the pension funds by
hiring a pension financial advisor.
a. Billetdeaux's recommendation included cashing in certificates of deposit and
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reinvesting those funds in mutual funds and money markets.
14. Billetdeaux's duties as administrator of the police pension plan are as follows:
a. Pay death benefits; payroll taxes; and actuarial invoices
b. Record receipts and expenditures, and reconcile bank statements
c. Prepare Form 945
d. Prepare financial statements
e. Provide actuary with information requested (AG 385, MMO, Act 205
Valuation Report)
f. Provide Pennsylvania Auditor General with information requested
g. Withhold plan contributions from employee paychecks (general fund)
h. Remit plan contributions to pension plan bank account
Relay information from actuary to the township supervisors and police.
15. Billetdeaux is compensated at a fixed salary of $1,000.00 per year as township
pension administrator.
a. Payments to Billetdeaux are made quarterly from the Police Pension Fund
Account.
b. The Police Pension Fund Account checks require two signatures including
that of the pension administrator.
c. The township supervisors and police chief have signature authority on the
account, in addition to Billetdeaux.
16. Billetdeaux submits quarterly invoices to the township in an amount of $250.00 for
plan administrator services.
a. Between June 1995 and December 1996, payments were made from police
pension accounts by Lincoln Financial Group as pension plan advisor.
b. Beginning in 1997, Billetdeaux prepared check payments for himself from a
police pension money market account, which checks were then signed by
two township officials.
17. During the May 17, 1995, Board of Supervisors meeting, Billetdeaux reported that
he and Chief John Lennon were looking into ways to reinvest the police pension
fund to make a greater return.
a. No decision had been made at that time on Billetdeaux's prior
recommendations for reinvesting the pension funds.
18. Between May 1995 and June 1995, Billetdeaux, Township Police Chief Lennon,
and two full -time township police officers participated in reviewing proposals from
investment firms seeking to serve as the township's police pension fund advisor.
19. Lincoln Financial Group was chosen as financial advisor to the police pension fund
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Page 5
following a selection process which included interviews with three companies
conducted by the Police Chief, the two full -time police officers and Billetdeaux.
a. The selection of Lincoln was not authorized by formal vote of the board of
supervisors.
20. The Kilbuck Police Pension Fund Trustees entered into Group Annuity Contract
No. 68745 with the Lincoln Financial Group, effective June 1, 1995.
a The Pension Funds were to be invested into eight designated accounts.
b The contract authorized automatic withdrawals which included quarterly
payments to Billetdeaux as plan administrator; monthly payments to the one
plan participant; and annual payments to W &W Actuarial Services.
21. Billetdeaux as Township Treasurer, Plan Trustee and Administrator, signed
Contract No. 68745 on behalf of the township on June 5, 1995, with the Lincoln
Financial Group.
a. The contract identified Billetdeaux and Police Chief John Lennon as having
signature authority on the account.
1. Billetdeaux's title is listed as Treasurer /Pension Plan Administrator.
b. Billetdeaux's signature on the form is township plan fiduciary /trustee.
c. Billetdeaux indicated on the form that the township was declining plan
administration services offered by Lincoln.
22. As part of the application process for Contract No. 68745, Billetdeaux signed a
Request for Director Group Annuity Contract form.
a. This form identified Billetdeaux as the township official responsible for
making payments.
23. An initial deposit with Lincoln Financial was made on June 16, 1995, in an amount
of $60,000.
a. The initial deposit came from accounts closed at Wheat First.
24. During the board of supervisors' meeting of August 15, 1995, Billetdeaux reported
that certificates of deposit had been cashed and reinvested with Lincoln Financial.
25. Additional deposits were made with Lincoln Financial as certificates of deposit with
Wheat, First, Butcher & Signer were sold.
a. 08/21/95: $235,000.00
b. 10/16/95: $ 46,779.48
26. As of October 1995, pension contributions to the Lincoln Financial Group totaled
$341,779.48.
27. Initial withdrawals from the pension account at Lincoln Financial included a $250.00
payment to Billetdeaux as plan administrator.
a. This payment is based on a statement Billetdeaux submitted to Kilbuck
Township, marked "approved for payment" signed and dated 06/05/95.
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Page 6
1. Billetdeaux marked the invoice approved for payment.
b. Billetdeaux subsequently submitted quarterly statements for plan services
and forwarded same to Lincoln for payment.
c. Billetdeaux received quarterly payments as plan administrator from Lincoln
from the first quarter of 1995 through 1996.
d. Payments to Billetdeaux totaled $2,000.00 during the time period that
Lincoln Financial handled the Kilbuck Township Police Pension Plan.
28. By letter dated July 27, 1995, to Howard Fisher, Wheat, First, Butcher, [and] Singer,
Billetdeaux directed that all certificates of deposit in the Kilbuck Township Police
Pension Plan be sold with the exception of these [sic] due in September 1995.
a. Billetdeaux directed the proceeds be rolled into the money market account
where he will [sic] then write a check to withdraw the funds.
b. On August 1, 1995, Howard Fisher, Senior Vice President for Butcher Singer
informed Billetdeaux that funds could be released only upon instruction from
the trustees, John Graber, Tim Frew and Dorothy Anderson.
1. Anderson, Frew and Graber were all township supervisors.
2. Anderson gave a verbal authorization to Fisher on August 16, 1995.
29. Billetdeaux, as treasurer and police pension fund administrator, served as the
liaison between the township and Lincoln Financial Group.
a. He was involved in reviewing the pension fund settlements and meeting with
Lincoln Financial Group regarding problems with the fund and investment
strategy.
b. Billetdeaux would provide the board of supervisors with periodic summaries
of the plan.
30. During the March 19, 1996, meeting of the board of supervisors, a discussion took
place concerning the pension fund during Billetdeaux's presentation of the township
financial report.
a. The discussion focused on Billetdeaux's report of the inability of Lincoln
Financial to make timely monthly payments.
1. This included payments to Billetdeaux for services as the plan
administrator. (See Finding No. 46).
b. Billetdeaux also was concerned about erroneous documents and
documentation that was difficult to interpret.
c. Chairman Frew is reported as stating Lincoln must make payments within
thirty (30) days or the township would begin looking for another investment
broker.
31. Between October 1996 and February 1997, Billetdeaux discussed with Lincoln
Financial personnel his perceived problems with Lincoln's performance in relation
to the pension plan.
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Page 7
a. Billetdeaux's concerns were Lincoln's failure to provide statements that
accurately reflected payments from the account; inability to timely pay the
plan participant; and the use of funds from accounts other than those
designated by contract, to make automatic withdrawals.
b. Chief Lennon participated in some of the meetings with Billetdeaux and
Lincoln personnel.
1. Lennon also had private discussions with Billetdeaux regarding
Lincoln Financial's performance.
32. During the October 15, 1996, board of supervisors meeting, a discussion took place
that a new pension plan trustee was needed due to the poor performance of the
current trustee (Lincoln).
a. Billetdeaux provided this information to the board of supervisors during the
meeting.
33. In 1996, Billetdeaux became certified as a Government Financial Manager and
Personal Financial Specialist.
34. By February 1997, Billetdeaux participated in the township's discussions regarding
the removal of the police pension plan for [sic] Lincoln.
a. There was no formal vote of the board of supervisors authorizing a change
of pension investors.
35. Once the decision had been reached that a change of investment companies
needed to be made, Billetdeaux participated in the township's discussions with the
board of supervisors that he provide the investment services.
a. This recommendation was made by Billetdeaux as a result of his
participation in the pension plan as plan administrator and trustee.
36. Sometime prior to February 12, 1997, Billetdeaux advised the board of supervisors
and Chief of Police Lennon of what services he would provide.
a. Billetdeaux advised that he could provide timely check service and clearer
administrative and financial reports than those provided by Lincoln and
advised that he could provide better administration to the Plan than that
being provided by Lincoln Financial.
b. Billetdeaux made this proposal to Chief Lennon.
1. He also discussed the matter with Supervisor Graber and advised
that he could provide better administration to the plan than that being
provided by Lincoln.
c. Public announcement of the township's desire to secure a pension advisor
was made and no other investment companies were actually contacted to
provide proposals.
37. Chief Lennon and one of the other full -time officers participating in the pension plan
discussed Billetdeaux's offer and decided they were comfortable with Billetdeaux
handling the investment of the funds.
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Page 8
38. On February 12, 1997, Billetdeaux addressed a letter to Jeanette McBride of the
Lincoln Financial Group requesting withdrawal of all funds in the Kilbuck Township
police pension fund.
a. Billetdeaux requested a redemption check be forwarded to the township c/o
Kenneth Billetdeaux, Trustee.
b. There was no official action taken by the board of supervisors directing
Billetdeaux to close the account with Lincoln Financial.
39. On March 27, 1997, check No. A 06312273 in the amount of $369,313.98 was
issued by Lincoln Financial to Kenneth Billetdeaux Trustee, Kilbuck Township
Police Pension Plan.
a. A 2% withdrawal charge totaling $7,537.02 was assessed because the funds
were withdrawn prior to the end of the contract.
40. Billetdeaux reinvested the proceeds of the police pension fund payout from Lincoln
with the Jack White Company.
41. On May 13, 1997, Billetdeaux issued check no. 105 from the police pension money
market account in the amount of $370,000 to the Jack White Company.
a. The check is signed by Kenneth Billetdeaux.
42. A Financial Advisory Agreement was entered into between Billetdeaux and Kilbuck
Township on May 12, 1997, one day prior to Billetdeaux issuing payments to the
Jack White Company.
a. The agreement is signed by Police Chief John Lennon.
b. The township supervisors did not sign the agreement.
1. The board of supervisors did not formally vote to approve the
agreement.
c. Billetdeaux did not sign the agreement.
d. The agreement is a standardized form between a depositor and a Personal
Financial Advisor.
43. The Kilbuck Township Police Pension Fund Account became the second client of
Billetdeaux's investment business.
a. The township pension fund was Billetdeaux's largest account.
44. The Financial Advisory Agreement outlined the services Billetdeaux would provide
and the fees he would be paid for those services.
a. The agreement provided that Billetdeaux would not take discretionary
actions, execute documents on behalf of the township, or take possession of
funds or securities of the township.
b. The agreement did not include payments be made to Billetdeaux for serving
as the plan's administrator.
45. The agreement provided the following regarding the investment advisory services,
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Page 9
and assistance Billetdeaux would offer:
a. Choosing appropriate investment objectives and setting the special
instructions for the management of the assets in the account.
b. Understanding the investment management process, investment objectives,
and the investment strategies undertaken as part of the service.
c. Monitoring reports, statements and performance results.
d. Monitoring the ongoing needs and financial situation to help in changing
investment objectives and special instructions when appropriate.
e. Answering questions about the service.
f. Meet with township representatives for the purpose of setting or changing
investment objectives and special instructions when appropriate.
46. The position of Pension Financial Advisor was not publicly advertised and bid by
the township prior to entering into an agreement with Billetdeaux.
47. There is no formal vote recorded in the Board of Supervisor's meeting minutes
approving the agreement with Billetdeaux to act as the Police Pension Fund
Advisor.
48. Billetdeaux continued to serve and be compensated as plan administrator after
assuming the position of investment advisor.
49. The police pension fund remained with the Jack White Company until January
1999.
a. In January 1999, the funds were transferred to TD Waterhouse Institutional
Services.
1. TD Waterhouse had purchased Jack White and Company.
50. Billetdeaux's registered investment advisor /broker is Chapel Hill Capital
Management.
a. Billetdeaux has been affiliated with Chapel Hill since December 1997.
b. Prior to Chapel Hill and Capital Management, Billetdeaux was affiliated with
Codnick Financial Group, Inc. (CFG).
1. CFG was the predecessor of Chapel Hill Capital Management, Inc.
c. Fees paid to Billetdeaux for investment services, including the Kilbuck
Township Police Pension Fund are made through Chapel Hill.
d. Billetdeaux signed an Independent Sales Contract Agreement with CFG,
Inc., on January 1, 1999.
1. This contract was a renewal of a contract previously entered into
between Billetdeaux and CFG.
c. There are no direct agreements between Billetdeaux and Chapel Hill Capital
Management, Inc.
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Page 10
51. Billetdeaux's compensation as the pension financial advisor is based on the value
of the pension fund.
a. Billetdeaux's compensation is based on 1`)/0 per year (paid quarterly) of the
Net Asset Value of the combined total of the pension plan plus the money
market account.
52. The value of the Kilbuck Township Pension Fund between 1995 and 2000 was as
follows:
Year Value
1995 $344,574.15
1996 $378,675.85
1997 $401,238.62
1998 $444,853.31
1999 $527,726.00
2000 $456,953.95
increase /decrease
9.9
5.9
10.8
18.6
(13.4)
a. Gains and losses followed investment market trends.
53. Billetdeaux invoices TD Waterhouse Institutional Services or Jack White Company
at the end of each quarter for his services as pension advisor.
a. Jack White Company and /or TD Waterhouse have issued payments to
Chapel Hill Capital Management, Billetdeaux's registered investment
advisor /broker - dealer.
b. Billetdeaux receives 70% of the fee and Chapel Hill Capital Management
retains 30 %.
c. Payments by Chapel Hill Capital Management to Billetdeaux relating to the
police pension fund are included with fees from other clients of Billetdeaux.
54. Total fees paid from the Kilbuck Township Pension Fund for investment advisor
services were $19,246.35 during the period from May 1997 through March 2001.
a. Of this total, 30% or $5,773.91 was paid to Chapel Hill Capital Management
and 70% or $13,472.44 was paid to Billetdeaux.
55. Fees paid to Billetdeaux as investment advisor of the Kilbuck Township Police
Pension Plan in May 1997 through March 2001 comprised 38.5% of the income
from his investment advisor business.
56. All decisions regarding changing investments were made by Billetdeaux and Jack
Lennon without a formal vote of the board of the supervisors.
57. No formal meetings of the Police Pension Fund Trustee's were held, and no records
of decisions (if any) made by the Trustees were maintained.
58. Billetdeaux made all decisions regarding the pension plan investments without
seeking authorization of the board of supervisors.
a. Billetdeaux discussed investment strategies with Police Chief Lennon.
1. Lennon was not skilled or experienced with these types of
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Page 11
investments.
2. Lennon deferred to Billetdeaux regarding the investment choices and
strategies.
59. From November 15, 1994, to the present, in his capacity as township treasurer and
pension administrator, Billetdeaux has been the sole contact between Kilbuck
Township and the various companies utilized to invest pension funds.
a. The board of supervisors relied on recommendations made by Billetdeaux in
his capacity as pension plan administrator.
III. DISCUSSION:
At all times relevant to this matter, the Respondent, Kenneth Billetdeaux, hereinafter
Billetdeaux, has been a public official /employee 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 referred to herein as the "Ethics Act."
The allegations are that Billetdeaux, in his capacity as Treasurer for Kilbuck
Township, Allegheny County, violated Sections 3(a)/1103(a) and 3(f)/1103(f) of the Ethics
Act when he participated in township actions, discussions, and decisions which resulted in
his appointment as the township's police pension plan administrator and his selection as
the township's pension investment advisor for which he was compensated; and when he
participated in township actions regarding the payment of township funds to himself for
service as the township police pension plan administrator and pension advisor where such
services were in excess of $500 and were awarded without an open and public process.
Pursuant to Section 3(a)/1103(a) of the Ethics Act, a public official /public employee
is prohibited from engaging in conduct that constitutes a conflict of interest.
The term "conflict of interest" is defined under Act 9 of 1989/Act 93 of 1998 as
follows:
Section 2/1102. Definitions
"Conflict" or "conflict of interest." Use by a public
official or public employee of the authority of his office or
employment or any confidential information received through
his holding public office or employment for the private
pecuniary benefit of himself, a member of his immediate family
or a business with which he or a member of his immediate
family is associated. "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. §402/65 Pa.C.S. §1102.
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
Billetdeaux, 00- 050 -C2
Page 12
employee himself, any member of his immediate family, or a business with which he or a
member of his immediate family is associated.
Section 3(f)/1103(f) of the Ethics Act imposes certain restrictions as to contracting.
Section 3(f)/1103(f) of the Ethics Act provides:
Section 3/1103. Restricted activities
(f) No public official or public employee or his
spouse or child or any business in which the person or his
spouse or child is associated shall enter into any contract
valued at $500 or more with the governmental body with which
the public official or public employee is associated or any
subcontract valued at $500 or more with any person who has
been awarded a contract with the governmental body with
which the public official or public employee is associated,
unless the contract has been awarded through an open and
public process, including prior public notice and subsequent
public disclosure of all proposals considered and contracts
awarded. In such a case, the public official or public employee
shall not have any supervisory or overall responsibility for the
implementation or administration of the contract. Any contract
or subcontract made in violation of this subsection shall be
voidable by a court of competent jurisdiction if the suit is
commenced within 90 days of the making of the contract or
subcontract.
65 P.S. §403(f)/65 Pa. C. S. §1103(f).
Section 3(f)/1103(f) of the Ethics Act specifically provides in part that no public
official /public employee or spouse or child or business with which he or the spouse or child
is associated may enter into a contract with his governmental body valued at five hundred
dollars or more or any subcontract valued at five hundred dollars or more with any person
who has been awarded a contract with the governmental body with which the public
official /public employee is associated unless the contract is awarded through an open and
public process including prior public notice and subsequent public disclosure.
As noted above, the parties have submitted a Consent Agreement and Stipulation of
Findings. The parties' Stipulated Findings are reproduced above as the Findings of this
Commission. We shall now summarize the relevant facts as contained therein.
Billetdeaux has served as Kilbuck Township Treasurer since 1993. In addition, he
has served as the police pension administrator since November 15, 1994, and as the
pension financial advisor since May 12, 1997. Finally, Billetdeaux also serves as one of
the trustees of the police pension fund. In a private capacity, Billetdeaux is a CPA and
sole owner of his CPA business.
For its full -time uniform police personnel, Kilbuck Township has a police pension
plan which provides retirement, disability, and death benefits to plan members and their
beneficiaries. Until May of 1995, the township utilized the services of a private investment
firm to manage the police pension fund. However, at a board of supervisors meeting on
November 15, 1994, Billetdeaux, as township treasurer, proposed a change as to the
investment of the police pension fund. At that meeting, the supervisors appointed
Billetdeaux as township administrator of the police pension fund. This occurred at about
the same time that Billetdeaux became a certified financial planner. Billetdeaux received
compensation of $1,000 per year as the township pension fund administrator. Subsequent
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Page 13
to his appointment, Billetdeaux recommended that the police pension fund hire a pension
financial advisor.
At the May 17, 1995, board of supervisors meeting, Billetdeaux and the police chief
indicated that they were reviewing ways to invest the police pension fund for a greater
return. Proposals from investment firms to serve as the township police pension fund
advisor were reviewed by Billetdeaux, the police chief, and others. Subsequently, without
any board action, the Lincoln Financial Group, was chosen as the financial advisor,
effective June 1, 1995. Billetdeaux, as the township treasurer, police pension fund trustee,
and administrator signed a contract with the Lincoln Financial Group on June 5, 1995.
Billetdeaux, as the township treasurer and police pension fund administrator, served as a
liaison between the township and the Lincoln Financial Group.
After the pension funds were liquidated and transferred to Lincoln Financial Group,
a payment in the amount of $250 from the fund was made to Billetdeaux as police pension
plan administrator. Billetdeaux approved his own invoice for payment. Billetdeaux
continued to submit invoices to the Lincoln Financial Group on a quarterly basis.
Billetdeaux received $2,000 during the period that the Lincoln Financial Group handled the
police pension plan.
At a March 19, 1996, meeting of the board of supervisors, Billetdeaux made a
presentation about problems he perceived with Lincoln Financial Group's performance in
relation to the pension plan. In particular, Billetdeaux expressed concern about the
Lincoln Financial Group's failure to provide statements that accurately reflected payments
and its inability to make timely payments to plan participants. Thereafter, at the October
15, 1996, board of supervisors meeting, a discussion took place about replacing the
Lincoln Financial Group due to its poor performance. At about this time, Billetdeaux
became a certified government financial manager and personal financial specialist.
In February of 1997, Billetdeaux participated in discussions to remove the police
pension plan from the Lincoln Financial Group. Subsequently, Billetdeaux participated in a
discussion with the board of supervisors regarding his own appointment to provide such
investment services for the police pension fund. The police chief and other full-time police
officers who participated in the pension plan discussions were comfortable with Billetdeaux
handling the investment of the police pension funds.
Without any official action by the board of supervisors, Billetdeaux notified the
Lincoln Financial Group of the township's withdrawal of the police pension fund. In March
of 1997, the Lincoln Financial Group sent the funds to Billetdeaux, less a two percent
charge due to the fund withdrawal prior to the end of the contract. Billetdeaux then
transferred the funds via a check to the Jack White Company right after he, on behalf of
Kilbuck Township, entered into a financial advisory agreement with that company. At that
time, the police pension fund was the second client of Billetdeaux's investment business
and was the larger account.
Billetdeaux's position of pension financial advisor was not publicly advertised or bid
prior to the entry of the agreement. In addition, there was no formal vote by the board of
supervisors approving the agreement. Billetdeaux continued to serve and receive
compensation as the plan administrator even after he assumed the position of investment
advisor. As the pension financial advisor, Billetdeaux's compensation is dependent upon
the value of the pension fund, being one percent of the annual net asset value. For his
services as pension advisor, Billetdeaux sent invoices to T. D. Waterhouse Institutional
Services which had purchased Jack White Company. Billetdeaux's investment advisor
service fees for the police pension fund from May of 1997 to March of 2001 totaled
$19,246.35.
Billetdeaux, 00- 050 -C2
Page 14
Finally, all decisions regarding changing investments were made by Billetdeaux and
the police chief without seeking authorization or obtaining a formal vote by the board of
supervisors.
Having highlighted the Stipulated Findings and issues before us, we shall now apply
the Ethics Act to determine the proper disposition of this case.
The parties' Consent Agreement sets forth a proposed resolution of the allegations:
"a. That no violation of the Ethics Act occurred in relation to the appointment of
Kenneth Billetdeaux as the township's police pension plan administrator in that said
appointment occurred in November 1994 and as such is more than five years prior
to the initiation of the investigation in the instant matter.
b. That a violation of Section 3(a)/1103(a) of the Ethics Act occurred when Kenneth
Billetdeaux, in his position as treasurer for Kilbuck Township and plan administrator
for the township's police pension fund, participated in the township's discussions,
actions and payments relating to his appointment as the township's pension
investment advisor, for which service he was compensated.
c. That a technical violation of Section 3(f)/1103(f) of the Ethics Act occurred in
relation to the township's selection of Kenneth Billetdeaux as the township's
pension investment advisor when such services were provided through a contract
with the township, which contract was in excess of $500 and awarded without an
open and public process.
d. That no violation of the Ethics Act occurred in relation to Billetdeaux's actions as
township treasurer in relation to the payment of funds to himself as the township's
police pension plan administrator in light of the finding in Section 3(a)/1103(a)
above."
Billetdeaux has also agreed to make payment of $8,000 through this Commission to
the Commonwealth of Pennsylvania. The payment shall be made over a period of 30
months consisting of 29 payments in the amount of $266 and a final payment of $286, with
the first payment due within 30 days of the issuance of this Order.
Regarding the allegations against Billetdeaux as to his participation in his own
appointment as the police pension plan administrator as well as his receipt of funds in
such position, we must find no violation of the Ethics Act. The Ethics Act contains a statute
of limitations which precludes any investigation of activities that occurred beyond the five
year period. See, 65 Pa.C.S. §1108(m); 51 Pa. Code §11.3. In that Billetdeaux's
appointment occurred in November of 1994 which is beyond the five year statute of
limitations, we find no violation of Section 3(a)/1103(a) of the Ethics Act as to these two
particular allegations.
Turning to the matter of Billetdeaux's appointment as the police pension plan
advisor, the record initially reflects that he assumed this position in 1997. Since the
activity of Billetdeaux occurred within the five year period of the statute of limitations, we
shall now proceed to analyze his conduct under the Ethics Act. Billetdeaux obtained this
position as a result of his participation with the board of supervisors in discussions
concerning the police pension fund. In addition, Billetdeaux participated as to his receipt
of funds for acting as police pension fund advisor. Such actions by Billetdeaux were uses
of authority of office. See, Juliante, Order 809. But for the fact that Billetdeaux was the
township treasurer as well as the pension fund administrator, he would not have been in a
position to advocate for and promote himself for the position of pension fund advisor.
Such uses of authority of office on the part of Billetdeaux resulted in private pecuniary
benefits to himself consisting of the fees that he received as the police pension fund
Billetdeaux, 00- 050 -C2
Page 15
advisor. Accordingly, Billetdeaux violated Section 3(a)/1103(a) of the Ethics Act when he,
as the township treasurer and pension plan administrator, participated in discussions,
actions, and payments relative to his compensated position of township police pension
investment advisor. See, Gorman, Order 1041; Summers, Order 1174.
Turning to the contracting issue, the record reflects that Billetdeaux was appointed
to the position of police pension investment advisor without any advertisement for bids or
public process. Although Section 3(f)/1103(f) of the Ethics Act allows a public official to
contract with his governmental body, such process must be through an open and public
one when the contract is $500 or more. In this case, Billetdeaux contracted with his
governmental body, Kilbuck Township, to provide services as the police pension fund
advisor. In addition, the fees that Billetdeaux received for providing such services to the
township exceeded $500. Accordingly, we find that Billetdeaux technically violated Section
3(f)/1103(f) of the Ethics Act when he contracted with his governmental body, Kilbuck
Township, to provide services as the pension fund advisor when such contract services
were in excess of $500 and not awarded through an open and public process.
In Crisci, Opinion 89 -013, we held that whenever a public official's public and
private interests are in conflict, the private interest must yield to the public interest which is
paramount. In this case, Billetdeaux's actions reflect conduct that was totally contrary to
our holding in Crisci. A review of the stipulated findings reflects a continuous pattern on
the part of Billetdeaux to further his own private financial interests through fees received as
to the township police pension fund. Such actions on the part of Billetdeaux contravened
both the spirit and letter of the Ethics Act.
We determine that the Consent Agreement submitted by the parties sets forth the
proper disposition for this case, based upon our review as reflected in the above analysis
and the totality of the facts and circumstances. Accordingly, Billetdeaux is directed to
make payment in the amount of $8,000 in settlement of this matter to the Commonwealth of
Pennsylvania through this Commission. Said payment shall be made over a period of 30
months consisting of 29 payments in the amount of $266 and a final payment of $286. The
first payment shall be forwarded within 30 days of the mailing date of this Order with
subsequent payments no later than each 30 day period thereafter. Compliance with the
foregoing will result in the closing of this case with no further action by this Commission.
Noncompliance will result in the institution of an order enforcement action.
IV. CONCLUSIONS OF LAW:
1. Billetdeaux, as Treasurer for Kilbuck Township, is a public official subject to the
provisions of Act 9 of 1989 as codified by Act 93 of 1998.
2. In that Billetdeaux's appointment as police pension fund administrator occurred in
November of 1994 which is beyond the five year statute of limitations, we find no
violation of Section 3(a)/1103(a) of the Ethics Act as to Billetdeaux's participation as
to his own appointment and the payment of funds to himself in such position.
3. Billetdeaux violated Section 3(a)/1103(a) of the Ethics Act when he, as the township
treasurer and pension plan administrator, participated in discussions, actions, and
payments relative to his appointment to compensated position of township pension
investment advisor.
4. Billetdeaux technically violated Section 3(f)/1103(f) of the Ethics Act when he
contracted with his governmental body, Kilbuck Township, to provide services as
the pension fund advisor when the contract services were in excess of $500 and not
awarded through an open and public process.
Billetdeaux, 00- 050 -C2
Page 16
In Re: Kenneth Billetdeaux
ORDER NO. 1222
File Docket: 00- 050 -C2
Date Decided: 11/15/01
Date Mailed: 11/30/01
1 Billetdeaux, as Treasurer for Kilbuck Township, did not violate Section 3(a)/1103(a)
of the Ethics Act as to his participation in his own appointment and receipt of
compensation as police pension fund administrator when such activities occurred
beyond the five year statute of limitations.
2. Billetdeaux violated Section 3(a)/1103(a) of the Ethics Act when he, as the township
treasurer and pension plan administrator, participated in discussions, actions, and
payments relative to his appointment to compensated position of township pension
investment advisor.
3. Billetdeaux technically violated Section 3(f)/1103(f) of the Ethics Act when he
contracted with his governmental body, Kilbuck Township, to provide services as
the pension fund advisor when the contract services were in excess of $500 and not
awarded through an open and public process.
5. Per the Consent Agreement of the parties, Billetdeaux is directed to make payment
in the amount of $8,000 in settlement of this matter to the Commonwealth of
Pennsylvania through this Commission. Said payment shall be made over a period
of 30 months consisting of 29 payments in the amount of $266 and a final payment
of $286. The first payment shall be forwarded within 30 days of the mailing date of
this Order with subsequent payments no later than each 30 day period thereafter.
Compliance with the foregoing will result in the closing of this case with no further
action by this Commission.
a. Compliance with the foregoing will result in the closing of this case with no
further action by this Commission.
b. Non - compliance will result in the institution of an order enforcement action.
BY THE COMMISSION,
DANEEN E. REESE, CHAIR