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HomeMy WebLinkAbout02-525 Murphy (2)Raymond F. Sekula, Esquire 900 Locust Street Pittsburgh, PA 15282 Dear Mr. Sekula: ADVICE OF COUNSEL February 28, 2002 02 -525 Re: Conflict; Public Official /Employee; County; Recorder of Deeds; Business With Which Associated; Immediate Family; Spouse; Reasonable and Legitimate Anticipation of Financial Relationship. This responds to your letter of January 25, 2002, by which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq., presents any prohibition or restrictions upon a county recorder of deeds as to becoming a majority shareholder in a private corporation, which would provide consulting services to second corporation, which could potentially provide similar services to a third corporation, which would, in turn, provide certain products and services to the recorder of deeds office. Facts: You represent Tom Murphy ( "Murphy "), the Recorder of Deeds for Westmoreland County. Murphy intends to become the majority shareholder of a closed corporation known as the M & M Corporation. The only other shareholder in M & M Corporation will be Murphy's spouse. M & M Corporation intends to provide consulting services to an unnamed "A" Corporation. You state that the services that M & M Corporation will provide to A Corporation will not, in any way, be connected with the Office of the Recorder of Deeds in Westmoreland County. You further state that A Corporation will, in turn, provide similar types of consulting services to customers in general. One of the potential customers of A Corporation will be another unidentified "B" Corporation. You state that B Corporation provides certain products and services to the Office of the Recorder of Deeds of Westmoreland County. You seek guidance as to the propriety of the above described arrangement. Sekula /Murphy, 02 -525 February 28, 2002 Page 2 Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. § §1107(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 Pa.C.S. § §1107(10), (11). An advisory only affords a defense to the extent the requestor has truthfully disclosed all of the material facts. As the Recorder of Deeds for Westmoreland County, Tom Murphy ( "Murphy ") is a public official as that term is defined in the Ethics Act, and hence Murphy is subject to the provisions of that Act. Section 1103(a) of the Ethics Act provides: § 1103. Restricted activities (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 Pa.C.S. § 1103(a). The following terms are defined in the Ethics Act as follows: § 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. The term 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. "Immediate family." A parent, spouse, child, brother or sister. "Business." Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self - employed individual, holding company, stock company, receivership, trust or any legal entity organized for profit. Sekula /Murphy, 02 -525 February 28, 2002 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. "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. The term shall not mean an agreement or arrangement between the State or political subdivision as 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. 65 Pa.C.S. § 1102. In addition, Sections 1103(b) and 1103(c) of the Ethics Act 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 judgment of the public official /employee would be influenced thereby: § 1103. Restricted activities (b) Seeking improper influence. —No person shall offer or give to a public official, public employee or nominee or candidate for public office or a member of his immediate family or a business with which he is associated, anything of monetary value, including a gift, loan, political contribution, reward or promise of future employment based on the offeror's or donor's understanding that the vote, official action or judgment of the public official or public employee or nominee or candidate for public office would be influenced thereby. (c) Accepting improper influence. -No public official, public employee or nominee or candidate for public office shall solicit or accept anything of monetary value, including a gift, loan, political contribution, reward or promise of future employment, based on any understanding of that public official, public employee or nominee that the vote, official action or judgment of the public official or public employee or nominee or candidate for public office would be influenced thereby. 65 Pa.C.S. §§ 1103(b), (c). Section 1103(j) of the Ethics Act provides as follows: §1103. Restricted activities Sekula /Murphy, 02 -525 February 28, 2002 Page 4 (j) Voting conflict. - -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. 65 Pa.C.S. § 1103(j). In each instance of a conflict, Section 1103(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 Act, 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 Act to your inquiry, you are advised that Section 1103(a) of the Ethics Act does not prohibit public officials /public employees from having outside business activities or employment; however, the public official /public employee may not use the authority of his public position or confidential information obtained by being in that position for the advancement of his own private pecuniary benefit or that of a business with which he is associated. Pancoe, Opinion 89- 011. Examples of conduct that would be prohibited under Section 1103 a) would include: (1) the pursuit of a private business opportunity in the course of pubic action, Metrick, Order No. 1037; (2) the use of governmental facilities, such as governmental telephones, postage, staff, equipment, research materials, or other property, or the use of governmental personnel, to conduct private business activities, Freind, Order No. 800; Pancoe, supra; and (3) the participation in an official capacity as to matters involving the business with which the public official /public employee is associated in his private capacity, such as the review /selection of its bids or proposals, Gorman, Order No. 1041. If a business with which the public official /public employee is associated or its client(s) would have matter(s) pending before the governmental body, the public official /public employee would have a conflict of interest as to such matter(s). Miller, Opinion No. 89 -024; see also, Kannebecker, Opinion 92 -010. In each instance of a Sekula/Murphy, 02 -525 February 28, 2002 Page 5 conflict of interest, the public official /public employee would be required to abstain from participation and satisfy the disclosure requirements of Section 1103(j) set forth above. Having established the above general principles, your inquiry shall now be addressed. It is clear that M & M Corporation would be a business with which Murphy as majority shareholder would be associated. Thus, pursuant to Section 1103(a) of the Ethics Act, Murphy would have a conflict of interest as to matters that would come before him in his capacity as Recorder of Deeds that would financially impact himself, his spouse, M & M Corporation, or those doing business with M & M Corporation such as A Corporation. Under the facts which you have submitted, neither M & M Corporation nor its client, A Corporation, would provide services directly to, or receive payment from, the Office of Recorder of Deeds. However, M & M Corporation would get paid for providing consulting services to A Corporation, A Corporation would in turn get paid for providing consulting services to B Corporation, and finally B Corporation would get paid for providing products and services to the Recorder of Deeds Office. This type of arrangement is, on its face, circuitous and suspect. There would be limited circumstances under which such an arrangement would not transgress the Ethics Act. The key factors would relate to whether there would be any improper understandings in violation of Section 1103(b) or Section 1103(c) of the Ethics Act, and whether there would be any nexus between the products and services provided to the Recorder of Deeds Office and a private pecuniary benefit to M & M Corporation. Obviously, this type of arrangement would be subject to close scrutiny by the Commission if it would come before the Commission in an investigative context. Where a conflict would exist under the above factors, such that Murphy as Recorder of Deeds would be prohibited from having any involvement whatsoever as to B Corporation and would be required to satisfy the disclosure requirements of Section 11030) of the Ethics Act, the situation could prove further problematic to the extent any person acting in Murphy's stead would be his subordinate in the Office of the Recorder of Deeds. Since no details have been provided as to A Corporation, B Corporation, the products and services provided by the various corporations, or any understandings among the various corporations and Murphy, this Advice must necessarily be limited to providing general guidance as set forth above. The propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Specifically not addressed herein is the applicability of the County Code. Conclusion: As the Recorder of Deeds for Westmoreland County, Tom Murphy Murphy ") is a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. M & M Corporation would be a business with which Murphy as majority shareholder would be associated. Pursuant to Section 1103(a) of the Ethics Act, Murphy would have a conflict of interest as to matters that would come before him in his capacity as Recorder of Deeds that would financially impact himself, his spouse, M & M Corporation, or those doing business with M & M Corporation such as A Corporation. An arrangement whereby M & M Corporation would get paid for providing consulting services to A Corporation, A Corporation would in turn get paid for providing consulting services to B Corporation, and finally B Corporation would get paid for providing products and services to the Sekula /Murphy, 02 -525 February 28, 2002 Page 6 Recorder of Deeds Office, would be, on its face, circuitous and suspect. There would be limited circumstances under which such an arrangement would not transgress the Ethics Act. The key factors would relate to whether there would be any improper understandings in violation of Section 1103(b) or Section 1103(c) of the Ethics Act, and whether there would be any nexus between the products and services provided to the Recorder of Deeds Office and a private pecuniary benefit to M & M Corporation. Where a conflict would exist under the above factors, such that Murphy as Recorder of Deeds would be prohibited from having any involvement whatsoever as to B Corporation and would be required to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act, the situation could prove further problematic to the extent any person acting in Murphy's stead would be his subordinate in the Office of Recorder of Deeds. Given the lack of certain details in the submitted facts as to A Corporation, B Corporation, the products and services provided by the various corporations, or any understandings among the various corporations and Murphy, this Advice is necessarily be limited to providing general guidance. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11), an 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, provided 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. Sincerely, Vincent J. Dopko Chief Counsel