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HomeMy WebLinkAbout96-505 SaveriDavid J. Ceraul, Esquire 22 Market Street PO Box 19 Bangor, PA 18013 Dear Mr. Ceraul: STATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL January 30, 1996 96 -505 Re: Conflict, Public Official /Employee, Use of Authority of Office, Borough Councilmember, Finance and Insurance Committee, Investment, Police Pension Plan, Agent. This responds to your letter of December 22, 1995 in which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Law presents any prohibition or restrictions upon a borough councilmember and chair of the council's finance and insurance committee from recommending the reinvestment of the borough's police pension plan and non - uniform pension plan where the councilmember is also an agent for the firm being considered for such reinvestment. Fact.: As Solicitor for the Borough of Bangor, Northampton County, you are writing on behalf of Marino C. Saveri (Saveri) who is the Vice President of the Borough Council and Chair of the Council's Finance and Insurance Committee (Committee). One of the issues before Saveri in his capacity as Chair of the Committee is the reinvestment of the Borough's Police Pension Plan and Non - Uniform Pension Plan. Saveri made several inquiries of various investment firms regarding the reinvestment, including the main office of the Principal Financial Group in Philadelphia (Principal). Saveri is also an agent of Principal. The issue you inquire about is whether Saveri, as an agent of Principal, is prohibited from recommending to the Borough Council that the reinvestment of the pension fund be transferred to Principal. You note that Saveri has indicated that he will not vote on the transfer. Saveri, not being a shareholder of Principal, does not have any involvement in the Philadelphia office where the funds would be reinvested. Saveri further indicates that Ceraul, 96 -505 January 30, 1996 Page 2 he has no direct financial interest in the investment and would be willing to furnish a certification in that regard. Discussion: It is initially noted that pursuant to Sections 7(10) and 7(11) of the Ethics Law, 65 P.S. § §407(10), (11), advisories are issued to the requestor based upon the facts which the requestor has submitted. In issuing the advisory based upon the facts which the requestor has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts which have not been submitted. It is the burden of the requestor to truthfully disclose all of the material facts relevant to the inquiry. 65 P.S. § §407(10), (11). An advisory only affords a defense to the extent the requestor has truthfully disclosed all of the material facts. As Vice President of the Bangor Borough Council, Saveri is a public official as that term is defined under the Ethics Law, and hence he is subject to the provisions of that law. Section 3(a) of the Ethics Law provides: Section 3. Restricted Activities. (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. The following terms are defined in the. Ethics Law as follows: Section 2. Definitions. "Conflict or conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. "Conflict" or "conflict of interest" does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. Ceraul, 96 -505 January 30, 1996 Page 3 "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. "Financial interest." Any financial interest in a legal entity engaged in business for profit which comprises more than 5% of the equity of the business or more than 5% of the assets of the economic interest in indebtedness. In addition, Sections 3(b) and 3(c) of the Ethics Law provide in part that no person shall offer to a public official /employee anything of monetary value and no public official /employee shall solicit or accept anything of monetary value based upon the understanding that the vote, official action, or judgement of the public official /employee would be influenced thereby. Reference is made to these provisions of the law not to imply that there has been or will be any transgression thereof but merely to provide a complete response to the question presented. Section 3(f) of the Ethics Law provides as follows: Section 3. 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. Ceraul, 96 -505 January 30, 1996 Page 4 Parenthetically, where contracting is otherwise allowed or where there appears to be no express prohibitions to such contracting, the above particular provision of the law would require that an open and public process must be used in all situations where a public official /employee is otherwise appropriately contracting with his own governmental body, or subcontracting with any person who has been awarded a contract with the governmental body, in an amount of $500.00 or more. This open and public process would require that the following be observed as to the contract with the governmental body: (1) prior public notice of the employment or contracting possibility; (2) sufficient time for a reasonable and prudent competitor/ applicant to be able to prepare and present an application or proposal; (3) public disclosure of all applications or proposals considered and; (4) public disclosure of the contract awarded and offered and accepted. Section 3(f) of the Ethics Law also requires that the public official /employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. Section 3(j) of the Ethics Law provides as follows: $ ection 3. Restricted activities (j) Where voting conflicts are not otherwise addressed by the Constitution of Pennsylvania or by any law, rule, regulation, order or ordinance, the following procedure shall be employed. Any public official or public employee who in the discharge of his official duties would be required to vote on a matter that would result in a conflict of interest shall abstain from voting and, prior to the vote being taken, publicly announce and disclose the nature of his interest, as a public record in a written memorandum filed with the person responsible for recording the minutes of the meeting at which the vote is taken, provided that whenever a governing body would be unable to take any action on a matter before it because the number of members of the Ceraul, 96 -505 January 30, 1996 Page 5 body required to abstain from voting under the provisions of this section makes the majority or other legally required vote of approval unattainable, then such members shall be permitted to vote if disclosures are made as otherwise provided herein. In the case of a three - member governing body of a political subdivision, where one member has abstained from voting as a result of a conflict of interest, and the remaining two members of the governing body have cast opposing votes, the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. If a conflict exists, Section 3(j) requires the public official /employee to abstain and to publicly disclose the abstention and reasons for same, both orally and by filing a written memorandum to that effect with the person recording the minutes or supervisor. In applying the provisions of Section 3(a) of the Ethics Law to the instant matter, it is clear that Saveri in his position as Councilmember and Chair of the Finance and Insurance Committee would be using the authority of office in recommending Principal for the reinvestment of the pension funds. Further, Principal would obtain a private pecuniary benefit if it receives the contract to reinvest the pension funds. The question then becomes whether Principal is a "business with which associated" as that term is defined under the Ethics Law. It has been factually submitted that Saveri is an agent but not a shareholder of Principal with no financial interest in the investment. Therefore, assuming factually that Saveri or an immediate family member is neither a director, officer, owner, employee, nor has a financial interest in Principal, Principal would not be a business with which associated as that term is defined under the Ethics Law and Saveri could participate in recommending Principal to reinvest the pension funds. It is further assumed that Saveri, a member of his immediate family, or business with which associated would not receive any private pecuniary benefit as a result of such action by Saveri in recommending Principal. The propriety of the proposed conduct has only been addressed under the Ethics Law; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Law has not been considered in that they do not involve an interpretation of the Ethics Law. Specifically not addressed herein is the applicability of the respective municipal code. Cerau., 96 -505 January 30, 1996 Page 6 Co11C1uSiOn: As Vice President of the Bangor Borough Council, Saveri is a public official subject to the provisions of the Ethics Law. Under Section 3(a) of the Ethics Law, Saveri would not have a conflict in recommending a firm, for which he is an agent, for reinvesting the Borough pension plans provided the firm is not a business with which associated as that term is defined under the Ethics Law and provided that Saveri, an immediate family member or business with which associated does not receive a private pecuniary benefit as a result of such action by Saveri. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Law. Pursuant to Section 7(11), this Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, providing the requestor has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. such. This letter is a public record and will be made available as Finally, if you disagree with this Advice or if you have any reason to challenge same, you may appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Any such appeal must be in writing and must be actually received at the Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa.Code §13.2(h). The appeal may be received at the Commission by hand delivery, United States mail, delivery service, or by FAX transmission (717- 787 - 0806). Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. cerely, 0 Vincent J. Dopko Chief Counsel