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HomeMy WebLinkAbout1227 AkerIn Re: Carl Aker 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 00- 067 -C2 Order No. 1227 2/4/02 2/15/02 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. A Consent Agreement and Stipulation of Findings were submitted by the parties to the Commission for consideration. The Consent Agreement was subsequently approved. The averments in the Stipulation of Findings are quoted verbatim as the Findings in this Order. 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 Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter 11 of Act 93 of 1998, 65 Pa.C.S. §1101 et seq., which essentially repeats Act 9 of 1989 and provides for the completion of pending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. Aker, 00- 067 -C2 Page 2 I. ALLEGATION: That Carl Aker, a public official /public employee, in his capacity as a member of the Gateway School District Board of Directors, Allegheny County, violated Section 3(a)/1103(a) of the Public Official and Employee Ethics Law 65 Pa.C.S. §1103(a) when he used the authority of his office for the private pecuniary benefit of himself and /or a business with which he is associated by participating in discussions and actions of the school district to award a contract for insurance to AXA Financial Inc, a business with which he is associated; and when he used the authority of his position to solicit the Gateway Education Association using school district facilities to sell financial planning services to teachers employed by the school district. II. FINDINGS: 1. Carl Aker has served as a member of the Board of Directors of the Gateway School District, Allegheny County, since December 1997. 2. Aker has been employed as a representative for the Equitable Assurance Society of America since October 1968. a. Aker is licensed to sell the products of EQ Financial Consultants, Inc. (EQFC) a broker /dealer subsidiary of The Equitable Life Assurance Society of the United States. b. In 09/99 EQFC merged with AXA Advisors, LLC. c. On 09/21/99, AXA Advisors, a broker /dealer, was purchased by AXA Distribution Holding Corporation. d. Equitable Life and AXA Distribution are wholly owned subsidiaries of AXA Client Solutions, LLC. e. AXA Client Solutions is a wholly owned subsidiary of AXA Financial, Inc. (formerly known as The Equitable Companies, Inc.). 3. Aker is authorized to sell all financial products offered through The Equitable /AXA Advisors, LLC. a. Aker specializes in selling financial planning products. 4. Aker maintains office space at 300 Penn Center Boulevard, Suite 615, Monroeville, PA. a. Aker shares the suite with Stuart Valen, also an AXA Advisor Representative. 5. Aker's contract with Equitable dated April 27, 1970, provides Aker with the use of office facilities provided by Equitable or its general agency. 6. Gateway School District obtained [a] Group Life, Accident, Death & Disability policy (life insurance) through Cable & Associates from at least 1997 through June 2000. a. The existing policy had been in effect for three years and was to expire June 30, 2000. b. Cable & Associates serving as the district's broker of record, placed the Group Life policy with Sun Life Insurance Company. Aker, 00- 067 -C2 Page 3 7. At the April 3, 2000, School Board Study Session, District Business Manager Harvey Smith advised the Board of a notification received from Cable & Associates that they would no longer be servicing the district property and casualty insurance coverage. a. Seubert & Associates was taking over the clients of Cable & Associates. b. The change would have no impact on the district's coverage. c. Smith informed the board that the Pennsylvania School Board Association (PSBA) required a letter stating that Seubert & Associates was the new Broker of Record. 8. Following Smith's presentation during the April 3, 2000, study session, Aker questioned whether this applied to property and casualty only, how often the district shopped the [sic] insurance policies, and if the board would receive a list of the bids submitted. a. At that time, the Group Life, Accident, Death & Disability policy was not discussed. b. Following additional discussion, a motion was made to approve [that] the administration begin to solicit bids from qualified insurance carriers for property and casualty insurance coverage for the Gateway School District. c. The solicitor noted that the broker would solicit bids. d. Aker stated that another broker would be accessing the same carriers, and that it was not necessary to advertise for brokers. e. The result of the discussion concluded with the board members agreeing to remain with the current broker, who would solicit bids from various carriers. f. No mention was made of the Life, Accident, Death and Disability policy. 9. At the April 13, 2000 Gateway School District Board meeting, a Resolution was passed appointing Seubert & Associates as the district's Broker of Record. a. The change would include the policies covering property and casualty insurance and the Group Life insurance. b. The same agent that handled the district[`]s insurance in the past would continue to do so under Seubert & Associates. c. The Resolution passed 9/0, with all members present, including Aker. 10. During the April 13, 2000 board meeting, District Business Manager Harvey Smith reported that the district requested that the broker (Seibert [sic] & Associates) solicit insurance from other carriers. a. The responsibility for the various district insurance policies had been delegated to Smith in his capacity as the business manager. 11. In an April 12, 2000, letter from Smith, Seubert & Associates was asked to submit quotes on the district's life and property insurance. 12. On or about February 29, 2000, Aker advised Harvey Smith that the insurance industry had become very competitive, and suggested that the district contact other Aker, 00- 067 -C2 Page 4 brokers, including AXA Advisors, to try and save money. a. Smith was not aware of Aker[`]s association with AXA Advisors. 13. On or about February 29, 2000, Aker provided Smith's name and phone number to AXA Advisor representative Robert Spagiare and informed him that the district's life insurance policy was up for renewal. a. Spagiare is part of the Corporate Products Team with AXA Advisors, and specializes in group benefits. 14. On February 29, 2000, Harvey Smith received a general letter and brochure from AXA Advisor[']s representative Robert Spagiare. a. Spagiare subsequently telephonically contacted Smith and requested the opportunity to bid on the district's Life, Accident, Death & Disability (A, D & D) insurance policy. 15. Spagiare and AXA Advisor representative Stuart Valen met with Smith at Smith's office on April 13, 2000, the same day as the board meeting when Seubert & Associates was named broker of record. a. Aker was not present during the meeting. 16. During the meeting with Spagiare and Valen, Smith provided them with the information necessary to submit a quote on the district's life insurance policy. 17. On June 1, 2000, Smith received a quote from Spagiare and Valen which was less than [what] the district was paying for the existing Life insurance policy through Seubert and Associates. a. The AXA Advisor quote was 16.5/M (161/2 cents per thousand dollars of insurance) from UNUM. 1. The school district was paying 20.0/M through Sun Life Insurance Company. 18. UNUM is not an insurance company affiliated with AXA Advisors. a. Spagiare and Valen's employment relationship with AXA permitted them to seek quotes from outside companies. 19. Smith called Seubert & Associates on or about June 1, 2000, to advise them of the quote received from AXA Advisors of 16.5/M. 20. Seubert & Associates responded with a bid from the Hartford of 16.0/M, $.05 /M less than the AXA quote. a. Seubert & Associates also provided a renewal rate quote from Sun Life, the current carrier, of 33.9/M. b. Other carriers contacted by Seubert & Associates had declined to quote the policy. 21. Based on Seubert's lower quote, Smith intended to recommend the quote from Hartford (16.0/M) through Seubert & Associates to the board for approval at the June 15, 2000, meeting. Aker, 00- 067 -C2 Page 5 22. On June 12, 2000, the Monday before the June 15, 2000, (Thursday) board meeting, Aker contacted Smith and asked for the Seubert & Associates quote. a. Smith told Aker he intended to recommend that the board approve the quote from Seubert & Associates. b. Aker told Smith that AXA Advisors could beat the quote provided by Seubert & Associates. c. Smith provided the quote information to Aker. d. Smith would have released the quote to any board member or to another broker interested in bidding on the district's policy. 1. Smith would not have released the Seubert quote to the general public. 23. On June 13, 2000, two days prior to the board meeting, Smith was contacted by AXA Advisor representative Robert Spagiare with a new quote of 15.0/M through UNUM. a. The quote rate was 13.0/M for the life and 02.0/M for the accident, death & disability. b. Spagiare knew of the 16.0/M quote Smith had received from Seubert & Associates at the time he submitted his revised quote. c. Aker had maintained contact with Spagiare during the bidding to keep updated on Spagiare's dealings with Smith. 24. Spagiare confirmed the revised quote of 15.0/M in a letter dated June 13, 2000. 25. After receiving the 15.0/M bid from AXA Advisors, Smith recontacted Seubert & Associates and informed them of the AXA bid of 15.0/M through UNUM. a. Seubert & Associates declined to submit an additional bid. 26. At the June 15, 2000 regular meeting of the Gateway School District Board meeting, Smith reported that the UNUM rate would save the district $8,500.00 over the current provider Sun Life's rates. a. Smith informed the board of AXA's quote through UNUM of 15.0/M. 27. Based on Smith's information, the board approved a motion on June 15, 2000, appointing Roaber Spagiare and Stuart Valen of AXA Advisors Brokers of Record for the district's Group Life, Accident, Death and Disability and approved the award of the insurance to UNUM at the rate of 15.0/M. a. The resolution passed by a 5 to 4 vote upon motion by Aker with Aker participating. 28. During the meeting of June 15, 2000, and prior to the vote to award the policy to UNUM, questions were raised about Aker's association with Stuart Valen and AXA Advisors, LLC. Aker's statements documented in the meeting minutes are as follows: a. Valen is not his partner, they are independent brokers with AXA Financial. His office is located in the same office, but there is no formal written Aker, 00- 067 -C2 Page 6 agreement. b. When he was running for the board, he "broached the question of himself as a financial consultant who did business with numerous educators and maintenance people in the district and he was told it was totally fine, totally okay, as long as he didn't solicit business directly with the board ". c. He had approached the previous solicitor with this question. 29. At the August 7, 2000 Study Session of the Gateway School District Board of Directors, Aker commented on the accusations of impropriety leveled against him by calling for the solicitor to conduct an investigation and submit a report to the State Ethics Commission. a. Aker stated that he did not receive benefit from this particular piece of business. 30. Aker was not a licensed agent with UNUM Life Insurance Company of America prior to June 2000. a. Aker completed the interview process for an appointment with UNUM on 06/19/00, four days after he cast the vote to award the district insurance to UNUM. b. Aker did not complete the application process at that time but became a licensed agent for UNUM on March 1, 2001. 31. All commissions on the Gateway School District policy were paid to Stuart Valen, Robert Spagiare and Associated Life Underwriters. a. Valen and Spagiare received commissions of $865.70 each as a result of the sale of the UNUM life, accident, death and disability policy to the school district. b. No commissions or fees were paid by UNUM to Aker. 32. No payments were directly received by AXA from the placement of the Gateway School District policy with UNUM. a. UNUM is not a carrier associated with AXA Advisors, LLC. b. Spagiare and Valen placed the district's business outside of the AXA Advisor network. 1. Spagiare and Valen had non - restrictive agent agreements with AXA/Equitable which allowed them to go outside the AXA Network to place the policy with UNUM. c. AXA only sells life insurance and generally does not deal in accident, group life, death and disability. The following findings relate to the allegation that Carl Aker used the authority of his position to sell financial planning services to employees of the Gateway School District 33. The Gateway School District teachers are represented by the Gateway Education Association. Aker, 00- 067 -C2 Page 7 34. As the local union, the Gateway Education Association acts as the conduit between the Pennsylvania State Education Association and the National Education Association. a. The Gateway Education Association is made up of 335 teachers. b. An Executive Committee is elected by the membership. c. Building Representatives volunteer from each building in the district. d. Executive Committee members and Building Representatives are employed as teachers for the Gateway School District. 35. Equitable, Aker's employer, provided tax - deferred annuities for school district employees. 36. The Gateway School District maintains a list of approved carriers, which includes Equitable. 37. Information from insurance representatives is usually disseminated to the district teachers through the Executive Committee of the Gateway Education Association. a. Teachers could contact representatives on an individual basis, from information provided through the Executive Committee. b. Several companies endorsed by the PSEA (Pennsylvania State Education Association) have given presentations at Executive Committee meetings in the past during which building representatives would be present. 1. Companies endorsed by the PSEA were not given access to the teacher population as a whole. Information was disseminated through the building representatives. 38. AXA Advisors is not one of the companies endorsed by the PSEA to provide annuities for its members. 39. During the fall of 1999, Aker, while serving as a member of the school board, initiated actions with the Gateway Education Association (GEA) to make presentations on the AXA Financial Planning programs. 40. Prior to making presentations at the district facilities, Aker and the other AXA representatives gave a presentation to the Gateway Education Association (GEA) Executive Committee. a. The presentation occurred in January 2000, in a classroom in the Seventh & Eighth grade Middle School. b. The presentation was made at a scheduled meeting of the Executive Committee. c. Executive Committee meetings are held after school hours. 41. The presentation to the GEA Executive Committee was initiated by Aker during a discussion with GEA President Gary Machen in the fall of 1999. a. Aker wanted to offer a presentation on the AXA financial planning Aker, 00- 067 -C2 Page 8 process to the teachers. 42. In July 2000, at the time when Aker participated in board actions to name Valen and Spagiare insurance brokers of record, board member Nemec raised the issue of a potential conflict of interest for Aker. a. Also raised was a potential conflict regarding the solicitation of teachers to purchase financial plans from AXA. 43. During the June 15, 2000, board meeting, board member Nemec requested the motion to appoint Spagiare and Valen of AXA as insurance brokers of records be tabled to discussion [sic] allegations that Stuart Valen of AXA works with Mr. Aker. Minutes of that meeting confirm the following: a. b. c. d. Nemec felt school board directors should not be soliciting retirement plans for employees. Nemec requested the solicitor to look into a potential ethics violation. Aker stated he was not a partner of Valen. Aker claimed that the local education association approached him to present retirement information. 1. Aker stated when he was seeking to become a board member, he broached the fact that he was a financial advisor and was told it was acceptable as long as he didn't solicit business with the board. e. Aker stated the GEA (union) requested information. 1. The union did not request the information. 44. Aker's response to concerns of a potential conflict of interest raised by Nemec was that he believed he was permitted to solicit the teachers, based on a discussion with the previous district solicitor. 45. In January 2000, Aker was cautioned by School Board President Richard Lopiccolo against giving a presentation about financial services to district employees. a. Aker advised Lopiccolo of his plans to make presentations to the teachers at that time. b. Lopiccolo was concerned, at the very least, of an appearance of a conflict of interest. c. He suggested that Aker contact the district solicitor for advice. 46. Lopiccolo was not aware until the June 15, 2000, board meeting that Aker had proceeded with his plans to give the presentations. 47. Aker was present during the January 2000 presentation to the GEA Executive Committee on products and financial planning offered through AXA Advisors. a. AXA representative Don Johnson gave the presentation. b. AXA representatives Stuart Valen and David Schuttig were also present. Aker, 00- 067 -C2 Page 9 c. The presentation was made during a regularly scheduled GEA Executive Committee meeting in the faculty room of the Gateway Middle School. a. b. 1. The meeting was held after school hours. d. Brochures were distributed. 48. Subsequent to the January 2000 informational meeting, Aker informed the Executive Committee of his intention to make similar presentations to the teachers of the district. 49. Aker had flyers announcing the financial planning meetings distributed through Fred Polimida, a teacher at the Gateway High School. a. Polimida also serves as Vice President of the GEA. 1. Polimida was not acting on behalf of the GEA. b. Polimida has been a client of AXA representative Stuart Valen for approximately ten years. c. The flyers had been prepared by Valen, a business associate of Aker. 50. In or about January 2000, during a subsequent meeting at the Palace Inn, Monroeville, PA, with Aker and two other AXA representatives, Polimida expressed concern regarding the potential for [a] conflict of interest due to Aker's position on the board. a. Aker assured Polimida there would be no conflict since the district solicitor had given him approval to approach the teachers. 51. Sometime prior to the January 2000 meeting with GEA Executive Committee, when Polimida approached the Executive Committee with the idea of Valen and Aker holding meetings with the teachers, concerns about [a] conflict of interest were raised by the Executive Committee. Polimida related Aker's comment that the district solicitor had given him approval to approach the teachers. The Executive Committee President did not feel they had the authority to challenge Aker's solicitation of the teachers, due to Aker's position on the board and Aker informing the committee he had legal advice permitting him to solicit the teachers. c. Polimida's discussion with the Executive Committee occurred between Aker's contact with Executive Committee President, Gary Machen and the January 2000 meeting when the presentation was made to the Executive Committee. 52. The Executive Committee put conditions on the AXA Advisor representatives in regard to holding meetings with the teachers. a. Attendance would be voluntary. b. No selling of AXA/Equitable products would take place. Aker, 00- 067 -C2 Page 10 c. The committee would not endorse Aker or his product and would not attend the meetings. d. The committee did not believe they had the authority to stop the presentations. 53. Prior to the presentations, Aker, Valen, Schuttig, and Johnson had agreed to split the commission resulting from any new client(s) or new product(s) sold as a result of the presentations to the Gateway School District teachers. a. The two representatives who met with the client would each receive 30% commission. b. The remaining two representatives would each receive 20% commission. c. Aker did not remove himself from the opportunity to receive commissions. 54. The presentation to the Gateway School District teachers was on the financial planning process, a new service offered by AXA Advisors. a. The intent of the presentation was two -fold: b. Provide information on what AXA offered in regard to financial planning; 1. To obtain new business. 55. Arrangements for the use of the facilities were made by Polimida through contact with the building principals of the Gateway High School, Moss Side Middle School and Gateway Upper Elementary School. a. Polimida's association with the GEA Executive Committee afforded him access to the district facilities. 56. On March 21, 22, and 23, 2000, presentations on financial planning were made by AXA representatives to Gateway School District teachers. a. Three presentations were made, one each at the high school, middle school and Moss Side Elementary School. 1. Because only one person attended the meeting at the High School, the meeting was cancelled. 2. Approximately seven or eight people attended the meeting held at the Elementary School, of which several were already clients. 3. Two or three people attended the meeting at the Middle School. 4. The meetings were for teachers only, no administrators were invited. b. The presentations were given by Johnson and Schuttig. c. Aker and Valen were present. 57. As a result of the presentations, Stuart Valen obtained one new client who bought a tax - deferred annuity (403b) through Equitable. Aker, 00- 067 -C2 Page 11 58. Commissions paid to Aker on this new business, as of August 2001, are $43.06. a. $64.59 has been paid to Valen and Schuttig. 59. The Gateway School District Policy #707 relating to the use of school facilities includes a Rental Fee Schedule and Regulations detailing the following requirements (in part): a. An application (Request to Use District Facilities form) must be signed by an authorized representative of the group requesting the rental, and that individual will be personally responsible for the enforcement of the regulations. b. A 25% security deposit is required before the issuance of a permit to resident, private interest groups (category B), and non - resident and private interest groups (category C). c. Organizations using the facilities must carry liability coverage and include a copy of the policy with the application. d. Fees shall be charged according to the schedule of rental rates, and the rates are for a three -hour period. e. Approval of the Board of Directors is required. f. Facilities will be provided to school related organizations first; then to non - school related community activities; and finally to private interest groups. Question[s] regarding facility usage are to be directed to the Athletic Director or Maintenance Department. g. 60. The AXA Advisor office of Aker and Valen is located outside the Gateway School District area, which includes Monroeville and Pitcairn. 61. AXA Advisors would have been considered a private interest non - resident group as defined under District Policy #707. 62. Rental fees charged for use of the district facilities by Aker and AXA Advisors, as a non - resident private interest group would have been as follows: High School Classroom $ 200.00 Middle School Auditorium $ 1,200.00 Elementary School Classroom $ 200.00 Total $ 1,600.00 a. A $400.00 security deposit (25 %) was required. b. The security deposit is applied to the balance of the fees owed. 63. Use of district facilities by a private company or individual required adherence to the Facility Use Policy ( #707). 64. Application for use of district facilities by a group, individual or private company required approval of the Gateway School District Board of Directors. a. First time applicants required board approval. Aker, 00- 067 -C2 Page 12 1. March 2000 was the first time that AXA Advisors had used district facilities. b. Applicants with a previous history of using district facilities did not require subsequent board approval. c. Applicants with a previous history of using district facilities were still required to submit a Request for Use of Facilities form each year. 65. Request to Use Facilities forms were not submitted for the use of the district facilities by Aker or AXA Advisors for the presentations held at three of the district buildings in March 2000. 66. Use of district facilities by the GEA did not require that a Request to Use Facilities from [sic] be completed. a. An application would be required if a meeting was held unrelated to district business. b. The GEA did not invite Aker or AXA Advisors to make presentations to the teachers. c. The GEA did not facilitate or approve of the presentations by AXA Advisors. d. The GEA only provides access to the teachers if the vendor or service provider is sanctioned by the PSEA (Pennsylvania State Education Association). 1. Access to the teachers is by way of distribution of information from the Executive Board and Building Representatives. 2. AXA Advisors is not sanctioned by the PSEA. 67. During a discussion with Victor Maccarelli, Principal of the Gateway Seventh and Eighth Grade Middle School, Aker told Maccarelli that his company was planning to meet with a group of teachers. 68. Aker and his company utilized the auditorium in the Middle School. 69. Richard Lazzari, Principal of the Gateway High School, was not aware of the meeting held by Aker and AXA Advisors. a. Lazzari was not contacted by the GEA Building Representatives about a presentation by AXA Advisors. 70. Cleveland Stewart, former Principal of the Fifth and Sixth Grade Moss Side Middle School was aware of a meeting held by AXA Advisors for the teachers in his building. a. He was not contacted for his permission to hold the meeting, which related to retirement planning. b. He assumed arrangements were made through the GEA or one of the Building Representatives. 1. He was not aware of any other circumstance when the GEA brought an outside vendor in to hold a meeting in his building. Aker, 00- 067 -C2 Page 13 c. Typically flyers are not distributed in the teachers' mailboxes without the approval of the building principal, including distributions by the GEA. d. Use of district facilities by an outside company would definitely require the filing of the Request to Use District Facilities form. 71. One thousand six hundred ($1,600) in fees would have been required to be paid to the school district for use of the meeting rooms. III. DISCUSSION: At all times relevant to this matter, the Respondent, Carl Aker, hereinafter Aker, has been 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 referred to herein as the "Ethics Act." The allegation is that Aker, as a director on the Gateway School District Board, violated Section 3(a)/1103(a) of the Ethics Act when he participated in discussions and actions of the school district to award a contract for insurance to AXA Financial Inc, a business with which he is associated; and when he solicited the Gateway Education Association using school district facilities to sell financial planning services to teachers employed by the school district. 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 employee himself, any member of his immediate family, or a business with which he or a member of his immediate family is associated. Aker, 00- 067 -C2 Page 14 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. Aker has served as a member of the Board of Directors of the Gateway School District (School District) since 1997. In a private capacity, Aker specializes in selling financial planning products and has employment with the Equitable Assurance Society of America (Equitable). Aker is licensed to sell products of Equitable Financial Consultants, Inc., which merged with AXA Advisors, LLC, which was then purchased by AXA Distribution Holding Corporation. AXA Distribution Holding Corporation along with Equitable Life Assurance Society of the United States are subsidiaries of AXA Client Solutions, LLC, a wholly owned subsidiary of AXA Financial, Inc. Aker is authorized to sell all financial products offered through the Equitable /AXA Advisors LLC. Fact Findings 2, 3. In February of 2000, Aker advised the school district manager that the insurance industry was becoming very competitive and that other brokers including AXA Advisors should be contacted in an effort to save the School District money. On that same date, AXA Advisors contacted the manager and requested the opportunity to bid on the School District's insurance. At an April 2000, board meeting, after the business manager advised that the School District's broker would no longer service its property and casualty insurance and that a new broker was taking over, Aker inquired about the extent of School District insurance coverage and the existence of a list of bids. At the subsequent meeting of the board, a resolution was passed appointing Seubert & Associates (Seubert) as the new agent broker of record. The manager of the School District then requested Seubert to solicit insurance from other carriers. On June 1, 2000, the manager received a quote from AXA Advisors for insurance at the rate of $0.165 per $1,000 of insurance from UNUM, which was less than the $0.20 per $1,000 from the existing provider. After the manager then informed Seubert of AXA Advisor's quote, Seubert submitted a bid from Hartford at $0.16 per $1,000. On June 12, 2000, Aker contacted the manager and asked for the amount of Seubert's quote. After Aker was advised of the quote, he informed the manager that AXA Advisors could offer a lower quote than Hartford. On June 13, 2000, the manager was contacted by an AXA Advisor representative with a revised quote of $0.15 per $1,000 through UNUM. At a June 15, 2000, board meeting, after the manager informed the board of AXA Advisors' quote through UNUM of $0.15 per $1,000, the board approved a motion appointing AXA Advisors as broker for handling the School District's group life, accident, and death and disability insurance. The motion, which was made by Aker, passed on a 5- 4 vote with Aker casting the deciding vote. At that meeting, questions were raised about Aker's association with AXA Advisors. Aker responded that he was an independent broker with AXA Financial. See, Fact Finding 28. Although Aker was not a licensed agent with UNUM prior to June 2000, he did complete his application process and became a licensed agent for UNUM on March 1, 2001. Aker did not receive any commissions or fees paid by UNUM relative to the School District insurance. In addition, AXA Advisors did not receive any direct payments from the placement of the School Districts policy with UNUM, which is not a carrier associated with AXA Advisors. The second financial scenario in this case involves Aker's actions in selling financial planning services to School District employees. In the School District, the teachers are represented by the Gateway Education Association (Association). There is an Executive Committee of the Association which is comprised of elected members of the Association. The School District provides to its Aker, 00- 067 -C2 Page 15 employees a list of approved carriers for providing tax deferred annuities. The Pennsylvania State Employees Association (PSEA) has a list of companies that it endorses to provide annuities for its members. AXA Advisors is not one of the companies with a PSEA endorsement. In the fall of 1999, Aker contacted the Association representatives for the purpose of making presentations as to AXA Financial Planning programs. Initially, Aker and other AXA representatives made a presentation to the Association's Executive Committee which occurred after hours in a classroom in the School District's Middle School. A School District board member raised an issue of conflict by Aker relative to his solicitation of teachers to purchase financial plans from AXA. Although Aker responded that it was the Association that approached him to present retirement information, the Association in fact did not request such information from Aker. Aker also claimed that he could solicit the School District teachers based on a discussion he had with a prior school district solicitor. At a January 2000, School District board meeting, the school board president cautioned Aker against making a presentation about financial services to district employees. The school board president learned several months later that Aker nevertheless proceeded with his plans and gave such presentations. The vice president of the Association also expressed concern to Aker about a conflict of interest due to his position on the board. Aker responded that there was no conflict because the School District solicitor had given him approval to approach the teachers. The Executive Committee of the Association then agreed to allow AXA Advisors to hold meetings with teachers. Prior to the presentations, Aker and three AXA representatives agreed to split any commissions received from new business following the presentation to School District teachers. From March 21 to 23rd, 2000, presentations on financial planning were made by AXA representatives to School District teachers. Aker and an AXA representative made one presentation on each day at the high school, middle school, and at an elementary school. One new client was obtained as a result of the presentations from which Aker received a commission of $43.06. The School District has a written policy regarding requests by private groups to use school facilities. The policy requires an application together with a 25% security deposit, proof of liability coverage, the payment of a rental fee for use of the facilities, and approval by the School District board. Although the application process was required for any private group, the Association did not have to apply as long as the meeting was related to School District business. An application for use of the School District facilities was not submitted by Aker for the AXA Advisor presentations. Nevertheless, Aker and company representatives made presentations utilizing School District facilities. Thus, even though School District policy requires the filing of the application to use district facilities by a private company, this was not done. The total cost for utilizing the School District facilities for those meetings would have been $1,600. Since no application was filed by Aker, no fees were paid. 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 have filed a Consent Agreement which sets forth a proposed resolution of the allegations: "a. No violation of Section 3(a)/1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1103(a) regarding Aker's participation in discussions and actions of the school board to award a contract for insurance to AXA Financial, Incorporated, a business with which he was associated in that said business did not receive any financial gain as the result of the placement of the school district's insurance. Aker, 00- 067 -C2 Page 16 b. Aker violated Section 3(a)/1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1103(a) when he utilized school district facilities to solicit the Gateway Education Association members to purchase insurance from businesses with which he was affiliated without reimbursing the school district for the use of such facilities in accord with the school district's standard practice. c. Aker did not violate Section 3(a)/1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1103(a) when he used the authority of his office to sell insurance/ financial planning services to teachers employed by the school district in that the financial gain obtained through the sale of said insurance was de minimis in nature ($43.06)." In addition, Aker agrees to make payment of $1,600 through this Commission to the Commonwealth of Pennsylvania within 30 days of the date of mailing of this Order. The payment represents the fees that would have been paid to the School District for use of its facilities. Aker further agrees in the future to abstain as to matters involving any business with which he is associated. In applying the Sections of 3(a)/1103(a) to the first allegation regarding of the School District insurance with a business with which Aker is associated, the record reflects that there were several instances of uses of authority of office on the part of Aker as a school director. In particular at the April 2000, School District Board meeting, Aker initiated an insurance review process when he raised questions about insurance and bidding. Aker also communicated to the business manager that the School District should contact other brokers including AXA Advisors in an effort to save money. When the insurance bidding process started and Aker learned from the School District manager that another company had submitted a lower quote, Aker requested and obtained the amount of that quote. Aker advised that a lower quote could be obtained. After a lower quote was submitted, Aker made a motion and cast the deciding vote (5 -4) to adopt a resolution of the School District Board regarding the group life, accident, death and disability insurance. The resolution appointed representatives of AXA Advisors as brokers of record and approved insurance from UNUM. Such actions were uses of authority of office. See, Juliante, Order 809. Such uses of authority of office resulted in a private pecuniary benefit resulting from the insurance coverage that was obtained in the School District contract. However, we do not find that the private pecuniary benefit inured to either Aker or business with which he is associated. In this regard, Fact Finding 31.b. of the Stipulation of Findings reflects that no commissions or fees were paid by UNUM to Aker. Further, the Fact Findings reflect that the payments for the insurance went to UNUM which is a carrier not associated with AXA Advisors. The insurance contract for the School District was placed outside of the AXA network. See, Fact Finding 32.b. No payments were directly received by AXA as to the School District insurance policy with UNUM. See, Fact Finding 32. Finally, it appears from the record that the only business with which Aker is associated is Equitable Assurance Society of America by which Aker is employed. The stipulated findings do not establish that Aker is employed by either UNUM or AXA Advisors. Accordingly, since there was no private pecuniary benefit to either Aker or a business with which he is associated, we find no violation of Section 3(a)/1103(a) regarding Aker's participations and actions as to the award of a School District contract for insurance. Turning to the allegation concerning the utilization of School District facilities to solicit business from Association members by Aker, we find a violation of Section 3(a)/1103(a). There were uses of authority of office by Aker as a public official. Aker was able, by virtue of his position of a school board member, to use School District buildings for a presentation to the Association Executive Committee. In addition, Aker used School District facilities to solicit financial planning annuities from teachers of the School District. Although private groups or entities may apply to the school board for permission to utilize School District facilities provided they pay a 25% security deposit, show proof of liability Aker, 00- 067 -C2 Page 17 coverage, and pay fees on a rental rate schedule, this was not done by Aker. Aker, again by virtue of his position as school director, was able to use School District facilities at no charge in contravention of School District policy. Such actions were uses of authority of office. The uses of authority of office by Aker resulted in private pecuniary benefits in two respects. First, Aker did not pay the $1,600 in fees that any other private group or entity would have to pay for using School District facilities. By avoiding such out of pocket expenses, there was a private pecuniary benefit of $1,600. Second, the commission that was received as a result of a School District employee purchasing a tax deferred annuity constituted a private pecuniary benefit. Accordingly, Aker violated Section 3(a)/1103(a) of the Ethics Act when he utilized School District facilities to solicit and obtain business from the Gateway Education Association members to purchase an annuity. See, Metrick, Order No. 1037. However, we find no violation of Section 3(a)/1103(a) of the Ethics Act when Aker used his position to sell tax deferred annuities to teachers in the School District in that the financial gain that he received only totaled $43.06 which is de minimis. Under the Ethics Act, actions of a public official which would otherwise constitute a conflict are excluded if the financial gain is de minimis. In this case, since the financial gain was only $43.06, the actions of Aker are excluded as a conflict and are not in violation of Section 3(a)/1103(a). See, Schweinsberq, Order No. 900. 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, Aker is directed to make payment in the amount of $1,600 within 30 days of the date of mailing of this Order to the Commonwealth of Pennsylvania through this Commission which represents the amount of funds that would have been paid to the school district for rental or use of the school district facilities. 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. Finally, Aker is reminded that public office is a public trust. Consequently, Aker must comport his future conduct to ensure compliance with the Ethics Act, both in letter and in spirit. In this regard, Aker, in the Consent Agreement, has stipulated that he will abstain as to matters that come before the School District involving any business with which he is associated. IV. CONCLUSIONS OF LAW: 1. Aker, as a member of the Gateway School District Board of Directors, is a public official subject to the provisions of Act 9 of 1989 as codified by Act 93 of 1998. 2. Aker did not violate Section 3(a)/1103(a) of the Ethics Act when he participated in discussions and actions of the school board to award a contract for insurance in that neither Aker nor the business with which he was associated received any financial gain as a result of the placement of the School District's insurance. 3. Aker violated Section 3(a)/1103(a) of the Ethics Act when he utilized School District facilities to solicit Gateway Education Association members to purchase insurance without reimbursing the School District for the use of such facilities. 4. Aker did not violate Section 3(a)/1103(a) of the Ethics Act when he used the authority of his office to sell planning services to teachers employed by the school district in that the financial gain obtained through the sale of said insurance was $43.06 and de minimis. In Re: Carl Aker ORDER NO. 1227 File Docket: 00- 067 -C2 Date Decided: 2/4/02 Date Mailed: 2/15/02 1 Aker, as a member of the Gateway School District Board of Directors, did not violate Section 3(a)/1103(a) of the Ethics Act when he participated in discussions and actions of the school board to award a contract in that neither Aker nor the business insurance with which he was associated received any financial gain as a result of the placement of the School District's insurance. 2. Aker violated Section 3(a)/1103(a) of the Ethics Act when he utilized School District facilities to solicit Gateway Education Association members to purchase insurance without reimbursing the School District for the use of such facilities. 3. Aker did not violate Section 3(a)/1103(a) of the Ethics Act when he used the authority of his office to sell planning services to teachers employed by the school district in that the financial gain obtained through the sale of said insurance was $43.06 and de minimis. 4. Per the Consent Agreement of the parties, Aker agrees to make payment in the amount of $1,600 within 30 days of the mailing of this Order to the Commonwealth of Pennsylvania through this Commission which represents the amount of funds that would have been paid to the school district for rental or use of the school district rooms. 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