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HomeMy WebLinkAbout98-583 HeadleyJonathan P. Foster, Esquire 407 S. Main St. Athens, PA 18810 Dear Mr. Foster: STATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 (717) 783 -1610 1- 800- 932 -0936 ADVICE OF COUNSEL July 24, 1998 FAX : (717) 787 -0806 • Web Site: www.ethics.state.pa.us • e -mail: sec @state.pa.us 98 -583 Re: Conflict; Public Official /Employee; Joint Municipal Authority; Executive Director; Non - Profit Corporation; Incubator Board; Board Member; Loan /Grant Program. This responds to your letter of June 28, 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 the executive director of a joint municipal authority with regard to joining the board of a non - profit corporation, where the authority has already extended loans to the non - profit corporation and expects to be solicited by it for additional loans. Facts: As Solicitor for the Northern Bradford Authority ( "the Authority "), you have been authorized by Ronald Headley ( "Headley "), the Executive Director of the Authority, to request an advisory from the State Ethics Commission on his behalf. The Authority is a joint municipal authority formed for the purpose of economic development within four municipalities, specifically, Sayre Borough, South Waverly Borough, Athens Borough, and Athens Township. The Authority has extended loans to the "Sayre Incubator Board," a non - profit corporation which operates an Incubator Building. It is expected that the Sayre Incubator Board will request additional loans from the Authority in the future. The Sayre Incubator Board has asked Headley to join its Board. You ask whether such would constitute a conflict of interest under the Ethics Law. 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 Foster 98 -583 July 24, 1998 Page 2 affords a defense to the extent the requestor has truthfully disclosed all of the material facts. As the Executive Director of the Northern Bradford Authority ( "the Authority "), Ronald Headley ( "Headley ") is a public official /public employee subject to the provisions of the Public Official and Employee Ethics Law ( "Ethics Law "). Section 3(a) of the Ethics Law provides: (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. "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. "Contract." An agreement or arrangement for the acquisition, use or disposal by the Commonwealth or a political subdivision of consulting or other services or of supplies, materials, equipment, land or other personal or real property. "Contract" shall not mean an agreement or arrangement between the State or political subdivision as Foster, 98 -583 July 24, 1998 Page 3 one party and a public official or public employee as the other party, concerning his expense, reimbursement, salary, wage, retirement or other benefit, tenure or other matters in consideration of his current public employment with the Commonwealth or a political subdivision. 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 (1) 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; (3) public disclosure of all applications or proposals considered; and (4) public disclosure of the contract awarded and offered and accepted. Foster 98 -583 July 24, 1998 Page 4 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 (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 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 the event that the required abstention results in the inability of the governmental body to take action because a majority is unattainable due to 'the abstention(s) from conflict under the Ethics Law, then voting is permissible provided the disclosure requirements noted above are followed. See, Mlakar, Advice 91- 523 -S. In applying the above provisions of the Ethics Law to the specific facts which you have submitted, Section 3(a) of the Ethics Law 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. If Headley would serve as a Board Member for the Sayre Incubator Board, it would be deemed a business with which he would be associated as defined in the Ethics Law. This conclusion is supported by the following analysis. The definition of the term "business" as set forth in the Ethics Law is very broad. Novak, Opinion No. 91 -009. As a corporation, the Sayre Incubator Board is Foster, 98 -583 July 24, 1998 Page 5 clearly within that definition. Moreover, the fact that the Sayre Incubator Board is a non - profit corporation would not disqualify it as a "business." The word "or" toward the end of the definition of "business" is disjunctive, and the repeated use of the word "any" precludes any interpretation that the final phrase "legal entity organized for profit" modifies the initial word "corporation ": "Any corporation, ... Q any legal entity organized for profit." The clear and unambiguous statutory language is that any corporation, including a non - profit corporation, is a "business." Soltis- Soarano, Order No. 1045 at 31 (Citing, Confidential Ooinion, No. 89 -007; McConahy, Opinion No. 96- 006). Since the Sayre Incubator Board is a "business" as that term is defined in the Ethics Law, it would clearly be a business with which Headley would be associated if he would become a Member of its Board. The facts which you have submitted indicate that the Authority has already extended loans to the Sayre Incubator Board, and that it is expected that the Sayre Incubator Board will seek additional loans from the Authority. Where a loan has been extended by the Authority to the Sayre Incubator Board, Headley would have a conflict of interest in matters involving such loans if such matters would financially impact the Sayre Incubator Board. In each instance of a conflict of interest, Headley would be required to abstain from participation and to fully satisfy the disclosure requirements of Section 3(j) as set forth above. With regard to prospective loans to the Sayre Incubator Board, the Commission recognizes that public concern and criticism may arise if a public official /public employee, or a business with which he is associated, receives benefits under the very program administered by the governmental body that he serves. On the other hand, as a general rule, the Ethics Law was not enacted nor should it be interpreted to preclude public officials /public employees, or businesses with which they are associated, from participating in programs which might otherwise be available to them. Wolff, Opinion 89 -030; Woodrinq, Opinion 90 -001. Where the Sayre Incubator Board expects to apply for or has applied for a loan, in order to avoid such a conflict of interest, Headley must: 1. play no role in establishing the criteria under which the laon program is to operate, particularly with reference to the structure or administration of the program; 2. play no role in establishing or implementing the criteria by which selections for loan program participation are to be made; 3. play no role in - the process of selecting and reviewing applicants or in awarding loans; 4. use no confidential information acquired during the holding of public employment for the private pecuniary benefit of the Sayre Incubator Board; and 5. abstain from involvement and satisfy the disclosure requirements of Section 3(j) as to loan applications of the Sayre Incubator Board as well as individuals /entities competing for available funds. As for Section 3(f), it is noted that this sort of program may require participants to enter into contracts and /or subcontracts. If the Sayre Incubator Board, as a participant in this Program, would enter into a contract with the Authority, or would enter into a subcontract with any "person" (as defined above) who has a contract with Foster 98 -583 July 24, 1998 Page 6 the Authority, Section 3(f) of the Ethics Law would impose the following requirements if the contract or sub - contract would be valued at $500 or more: 1. prior public notice of the contract possibility; 2. public disclosure of applications and contracts considered; 3. public disclosure of the award of the contracts; and 4. no supervisory or overall responsibility for the implementation or administration of the contract or sub - contract by Headley. Subject to the conditions, restrictions, and qualifications noted above, the Ethics Law would not preclude Headley's service as Executive Director of the Authority while serving as a Member of the Sayre Incubator Board. This Advice is limited to addressing the applicability of Sections 3(a) and 3(f) of the Ethics Law. It is expressly assumed that there has been no use of authority of office for a private pecuniary benefit as prohibited by Section 3(a) of the Ethics Law. Further, you are advised that Sections 3(b) and 3(c) of the Ethics Law provide in part that no person shall offer to a public official /employee and no public official /employee shall solicit or accept anything of monetary value based upon the understanding that the vote, official action, or judgment 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. 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 Code of Federal Regulations or the respective municipal code. Conclusion: As the Executive Director of the Northern Bradford Authority ( "The Authority "), Ronald Headley ( "Headley ") is a public official /public employee subject to the provisions of the Ethics Law. If Headley would serve as a Board Member for the "Sayre Incubator Board," it would be deemed a business with which he would be associated as defined in the Ethics Law. Where a loan has been extended by the Authority to the Sayre Incubator Board, Headley would have a conflict of interest in matters involving such loans if such matters .would financially impact the Sayre Incubator Board. In each instance of a conflict of interest, Headley would be required to abstain from participation and to fully satisfy the disclosure requirements of Section 3(j) as set forth above. With regard to prospective loans, where the Sayre Incubator Board expects to apply for or has applied for a loan, in order to avoid a conflict of interest, Headley must play no role in establishing the criteria under which the program would operate, play no role in implementing the criteria for selecting applicants, play no role in selecting or reviewing applicants, use no confidential information for the private pecuniary benefit of the Sayre Incubator Board, and abstain from involvement and satisfy the disclosure requirements of Section 3(j). The requirements of Section 3(f) of the Ethics Law noted above, to the extent applicable, must be observed. Subject to the conditions, restrictions, and qualifications noted above, the Ethics Law would not preclude Headley's service as Executive Director of the Authority while serving as a Board Member for the Sayre Incubator Board. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Law. Foster, 98 -583 July 24, 1998 Page 7 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). 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. Si rely, t;csfr n Vincent J. Dopko Chief Counsel TAto