Loading...
HomeMy WebLinkAbout98-563 NevelsSTATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 TELEPHONE (717) 783 -1610 ADVICE OF COUNSEL May 28, 1998 Donna L. Kreiser, Deputy General Counsel Commonwealth of Pennsylvania Office of General Counsel P.O. Box 11775 Harrisburg, PA 17108 98 -563 Re: Conflict, Public Official /Employee, State Employee's Retirement Board, SERS, Board, Member, Investment Firm, CEO, Contract, Commonwealth Agency. Dear Ms. Kreiser: This responds to your letter of April 30, 1998 by which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Law presents any prohibition or restrictions upon an appointed member of the Board of the State Employees Retirement System (SERS) when the member is president and CEO of an independent non - public investment advisory firm which has a contract with an agency of the Commonwealth of Pennsylvania. Facts: As Deputy General Counsel for the Commonwealth of Pennsylvania Office of General Counsel, you request an advisory on behalf of Mr. James E. Nevels (Nevels). Nevels was nominated by Governor Ridge to serve on the SERS Board, which nomination was confirmed on April 21, 1998 with a term expiration of April 20, 2002. The SERS Board is an independent administrative board, the duties of which are set forth in the State Employees' Retirement Code. The eleven members of the Board serve as trustees to the fund and have the exclusive power to invest the fund subject to the guidelines set forth in the Code. Specifically, the Board contracts for the services of an actuary, investment advisors and counselors, and such other professional personnel it deems advisable with regard to the management of the fund and its various accounts for the benefit of its members. Nevels is also Chairman of the Board, President and Chief Executive Officer, as well as a co- founder, of The Swarthmore Group, Inc. (Group). The Group is an independent, non - public investment advisory firm registered under the Investment Advisory Act of 1940 and a Subchapter S corporation in the state of Delaware. It is described by Nevels as an "equity only" asset management firm with equity assets under management totaling approximately $250,000,000 in market value. The Group also provides financial advisory services to governmental, public and private issuers of securities. Kreiser, 98 -563 May 28, 1998 Page 2 The Group is currently under contract with the State Workers' Insurance Fund (SWIF), Department of Labor and Industry, as an investment advisor. SWIF maintains contracts with other such investment advisory firms. You state that neither Nevels individually, nor the Group has contractual relationships with SERS and Nevels indicates that neither he nor the Group will seek or hold a contractual relationship with SERS while he serves as a Board Member. You request an advisory as to Nevels' restrictions and duties under the Ethics Law regarding serving as a member of the SERS Board while simultaneously sitting on the Board of the Group. Discussion: It is initially noted that pursuant to Sections 7(10) and 7(1 1) 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 a Board Member for SERS, Nevels is a public official as that term is defined in the Public Official and Employee Ethics Law ( "Ethics Law "), and hence Nevels 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. "Authority of office or employment." The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. Kreiser, 98 -563 May 28, 1998 Page 3 "Business." Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self - employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit. "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. 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. Section 3(f) does not operate to make contracting with the governmental body permissible where it is otherwise prohibited. Rather, where a public official /public employee, his spouse or child, or a business with which he, his spouse or child is associated, is otherwise appropriately contracting with the 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, Section 3(f) requires that an "open and public process" be observed as to the contract with the governmental body. Pursuant to Section 3(f), an "open and public process" includes: (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; Kreiser, 98 -563 May 28, 1998 Page 4 (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: Section 3. Restricted activities (3) 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 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. In each instance of a conflict, 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, the Group is a business with which Nevels is associated as that term is defined under the Ethics Law since Nevels is president and CEO of the Group. Accordingly, Nevels would have a conflict, could not participate and must observe the disclosure requirements of Section 3(g) whenever the Group has a matter before SERS. Although you have stated that the Group will have no involvement with SERS, the conflict would extend to any Group clients having matters before SERS. See, Miller, Opinion 89 -024; Kannebecker, Opinion 92 -010., The Ethics Law would not preclude the Group from having contracts with other governmental bodies, such as SWIF. However, Nevels could not use the authority of his office to obtain or facilitate such financial gains or pecuniary benefits for the Group. Again, it is not suggested that Nevels would engage in such conduct. This Advice merely provides a full response to the question posed. Kreiser, 98 -563 May 28, 1998 Page 5 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. Conclusion: As Board Member for SERS, Nevels is a public official subject to the provisions of the Ethics Law. Although the Swarthmore Group, which is a business with which Nevels is associated, is not precluded from having contracts with Commonwealth agencies, Nevels would have a conflict if the Swarthmore Group or any of its clients came before the SERS Board. In such instances, Nevels must abstain and observe the disclosure requirements of Section 3(j) of the Ethics Law. 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. This letter is a public record and will be made available as such. 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 1. 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. erely, ncent opko Chief Counsel