HomeMy WebLinkAbout92-637Mr. Ted R. Baranik
51.9 Edwards Street
Johnstown, PA 15905
Dear Mr. Baranik:
STATE ETHICS COMMISSION
309 FINANCE BUILDING
P.Q. BOX 11470
HARRISBURG, PA 17108 -1470
TELEPHONE (717) 783.1810
ADVICE OF COUNSEL
October 26, 1992
92 -637
Re: Conflict, Public Official /Employee, County Commissioner, Use
of Authority of Office, Former Employer, Termination
Agreement, Taxation of Former Employer.
This responds to your letter of September 17, 1992, 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 county commissioner
with regard to taxing hospitals in the county, where one of the
hospitals is his former employer from whom he receives financial
benefits under a termination agreement which requires him to be
loyal to the former employer.
Facts: Having been elected in November, 1991 as one of three
County Commissioners for Cambria County, you request an advisory
from the State Ethics Comission. Prior to announcing your
candidacy in May, 1991, you had served as the President of Mercy
Hospital in Johnstown in Cambria County for more than 16 years.
You resigned from that position on March 31, 1989. At the time you
announced your candidacy, you were continuing to receive salary and
benefits under a Termination Agreement with Mercy Heath System.
Those benefits were based entirely upon work which you had
performed prior to your resignation as President of Mercy Hospital
of Johnstown.
You have submitted a copy of the Termination Agreement which
is incorporated herein by reference. You note that the. Termination
Agreement provides for you to vacate your office on February 24,
1989; resign as President on March 31, 1989; and serve as Senior
Advisor to the President but perform no actual work from March 31,
1989 through July 24, 1989.
You have also submitted copies of the following documents all
Mr. Ted R, Baranik
October 26, 1992
Page 2
of which are incorporated herein by reference: (1) a letter" dated
September 28, 1987 from the President and =Chief Executive Officer
of the Mercy Health Care System, William D. McGuire, detailing year
rights to early reti.reMent benefits; . (2) your letter of resignation
dated July 24, 1989 directed to Mr. (1).4n amendment
to the aforesaid Termination Agreement effective July 28, 1989.
As a further matter of background information, you point out
that your departure from your position : President of Mercy
Hospital of Johnstown was not an entirely amicable departure, You
state that there were differences of opinion concerning the
operation of the hospital and the course of future changes at the
time you resigned your position as President of Mercy Health, Care.
The differences were settled amicably by means of the aforesaid
Termination Agreement. You state that the 'Termination Agreement
was a positive agreement and that the actions of Mercy Health Care
System toward you since February 9, 1989 have been positive.
After noting the economic pressures in Cambria_ County, you
.state that you have become convinced of the necessity to assess and
tax hospitals in a manner .equal to .the taxation imposed upon
private business entities.
Four hospitals currently exist in Cambria Countys Mercy
•Hospital of Johnstown, Conemaugh Valley McMorial Hospital, Lee
Hospital and Miners Hospital of Spangler. Extensive negotiations
took place between County officials and representatives of several
of those hospitals over the course of the last year. The purpose
of those negotiations was to convince the hospitals to volunteer a
share of their revenues in _lieu of taxation. Mercy and Lee
;Hospitals chose not to take part in the negotiations. Agreement
was reached with the other hospitals . in July. Consequently, the
Commissioners unanimously voted to include the property of Lee
Hospital and Mercy Hospital on the tax rolls at the July 14, 1992
Commissioners' meeting. The property of Conemaugh Valley Memorial
Hospital and Miners Hospital of Northern Cambria was not placed on
the tax rolls because both of these hospitals voluntarily agreed to
make payments in lieu of taxes. You state that objections from the
City of Johnstown and its school district will probably cause
Conemaugh Valley Memorial Hospital to withdraw its, , offer--of
payments in lieu of taxes. Miners Hospital of Spangler was not
r Affected by that development " since it is located outside the
geographical boundary of both the City of Johnstown and' its school
district.
Separate .appeals have been takers' •:to ; the assessment of their
property for taxation by Lee Hospital.;` Conemartgh valley memorial
Hospital, and Mercy Iospital. The Cambria County Commissioners are
required by law to decide .those appeals in" the first instance.
Those decisions will be the subject of separate hearings in October
Mr. Ted R. Bara.nik
October 26, 1992
Page 3
of this year.
You state that you, have been advised by your private attorney
that your continued receipt of more than $5,000.00 per month from
Mercy Health Care Systems does not create a conflict of interest
under the Ethics Act which prevents your voting in October on the
appeal of Mercy Hospital or on the separate appeals of Lee Hospital
and Conemaugh Valley Memorial Hospital. You state that you have
also been advised to seek the opinion of the State Ethics
Commission in this regard and follow that opinion when it is
issued. You state that you plan to accept the advice of this
Commission. Nevertheless, you request that the facts and submitted
documents be carefully considered, and that it not be lightly
concluded that the safer course would be to find a conflict of
interest. You state that it is important to you and to the voters
who elected you that you be permitted to utilize your experience as
a hospital - administrator to help solve the financial problems
encountered by Cambria County. You believe that you can make a
positive impact in this regard and you do not feel that any
conflict of interest is present. Nevertheless,.you state that you
will abide by the advisory and refrain from voting in the event
that the advisory disagrees with you and your counsel.
You have been receiving $3,880.00 per month in separation pay
from Mercy - Health Care System since March 1, 1989. You also have
received during that period an additional amount equivalent 'to 7.5%
of your monthly separation pay and life insurance benefits under
paragraph 9(e) of your Termination Agreement. Those benefits
terminate on October 31, 1992. Since March 1, 1989,you also have
received early retirement benefits in the amount of approximately
$15,800.00 per year And health insurance Premiums-paid under
paragraph 9(c) of your Termination Agreement. =Tbse °benefits will
continue until you reach age 65 on October A, 1995.
You state that your attorney advises you'that; the continued
payment of salary and benefits by Mercy .health System does not
create a conflict of interest which .prevents your ; vdting on the tax
appeal of Mercy Health System ` because the ' -were set and
determined by your Termination Agreement of Febr-uary:9, 1989. They
may not be diminished or increased under that Agreement.
Consequently, you state that you .have been 4dvised that your vote
on their tax appeal reasonably cannot have any pecuniary-impact on
your personal status.
You state that' have been warned that it is theoretically
possible that your early retirement and health insurance benefits
could be diminished in the ,.event Mercy _Health , Caze . System files
bankruptcy, and that it is theoretically possible.that your vote to
impose taxes against Mercy Health -Care = System ,.could serve as one
part in a chain of events leading to the-bankruptcy Mercy Health
M. Ted R. Baranik
October 26, 1992
Page 4
Care System. You state that you cannot believe that such a
theoretical "possibility is a real danger, and that you have been
advised' that= the theoretical. possibility is 'de:` minimis . You state
that the "' basis" of this' advice is the 'relatively small size of the
tax which Cambria Coll ty is permitted to rose under the statutes
of this Commonwealth and the large size and great strength of the
Meroy Health Care S item. That System consists of more than
Sixteen hospitals located throughout Pennsylvania and several other
states `Only one of the $ystere - s - ho spita1s is 'located in Cambria
County.
You note that paragraph 4 of your Termination Agreement sets
forth a duty for you to remain loyal to. Mercy Health Care System
and its subsidiaries. You characterize the intent of that
paragraph as ' to eliminate the danger of adverse publicity
surrounding your resignation as President and eliminate any danger
that you°' might"' publicly .oppose changes implemented in the Mercy
Health Care - Syste m after your departure from office. 'ou state
that the "purpose of that paragraph' was not to limit yau,r futtre
employment or .` political 'action. In this regard, you note that
paragraph 5 speci.fi tally indicated that no actual work was, regeired
of you in yoUr pos; ti on ass -Senior Advisor to the President, of Mercy
Health Care Systeit 'f-tom March - 31, 198'9 until your resi;gnatioo on
July 24, 1'959..- • tiiored.ver., you advise that paragraph 8 specifically
agreed to "yqur. accep.tahce of part - time_ employment, and didt iot
prohibit that employment being. accepted from competitors of My
Health Care System In addition, the. Agreement was amended
effective July - 28, 1989 to permit' full -time employment. Further,.
the language of paragraph 4 liras itself amended prior to its signing
on February 9, 19:8'9.. That earlier amendment added the following-
Words to paragraph 4: .
It is understood- and agreed by- and
between the parties to this Termita:tion
Agreeitient, that such obligation. to be and. to,
remain 'loyal does not impo on T.R. Barani:k
any a fti:rrative obligation to speak pub1ic1
concerning, the matters set forth herein, bait_
that it does require him to speak positively
whe he does speak of these matter.,
You state that you and your counsel believe: that the thrust
and purpose, of the. language -set forth, in paragraph 4 of your
Termination Agreeii e it was to avoid recrimination, , or-= criticLsm by
subsequent 't.o. your resignation. You state that 'a on
your right td vote w$s not considered, by the patties or- intended
when the, pa aph was Written., or the_ Termination, Agreement was
Signed. - Morepver e.} u.
the Tnatn. io Agreement contains, a, provis -ion
in paragraph 15 Which' regii res, it` to be construed and enforced in
accordance with the laws of. the'Cammonwealth of Pennsylvania. You
Mr. Ted R. Baranik
October 26, 1992
Page 5
further note that Paragraph 13 contains 'ah additional provision
which requires that the invalidity or unenforceabiiity of any
particular provision of the contract shall not affect its other
provisions and the contract shall be construed in all respects as
if the offending provision had been omitted. You state that your
attorney advises that the presence of those provisions make it
impossible fot Mercy Health Care System to successfully terminate
its payments under the Termination Agreement by alleging that your
vote against Mercy's tax appeal is an act of disloyalty. You state
that your attorney advises you that such an interpretation would be
contrary to the provision of Section 3 of the Ethics Act, which
prohibits the offering or acceptance of anything of monetary value
in return for the vote or official action of a public official.
Based upom all of the above, you request an advisory as to
whether your voting on the tax appeal of Mercy Hospital is a
conflict of interest, in view of your continued rights under the
Termination Agreement. If a conflict of interest is present, you
additionally ask whether your voting on the separate appeals of Lee
Hospital and Conemaugh Valley Memorial Hospital constitute a
;conflict of interest,
Discussion: It is initially noted that this advisory is issned
with regard to prospective conduct only. Past conduct is beyond
the scope of an advisory and may not be addressed.
As a County Commissioner for Cambria County, you, are -a public
official as that term is defined under the Ethics Law, "and hence
you are subject to the provisions of that law... t
Section 3(a) of the Ethics Law provides:.
Section 3. Restricted. Activities.
(a) No public of f = or public
shall engage in conduct that
constitutes a conflict of _interest.
The following terms are defined in, the Et tics Law ai follows:
Section 2. Definitions.
"Conflict or conflict of , „. Use
by a public official public;emp1Qyee f 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
r. Ted R. Baranik
October 26, 1992
Page 6
Section 3- Restricted AdtivitieS
is associated, 'Conflict" or "conflict of
interest" does not include an action having a'
de minimis economie-impact or which affects to
the same degree' a cleSs consisting of the
general public dr a stbclaes cdnsisting of an
industry, occupation Or other gkoup which
includes the pubiia, official or - public
ethploYee, a member- Of his: immediate family or
a bus with which he or a member of his
immediate' fatiiify is asSOtiated.
"Author-it:I of: ol'fideOk emploYment." The
actual power' prdvided by law, the exercise of
Which is neoesdaryto the performance of
duties and responsibilities unique to a
Particular publid ox position of public
enpioyment
"Business with which he is associated."
Any business in Which the person or a,member
of the peridn'S itmediate family is a
dire officer, owner, etployee or a
financial interedt.
In addition:, Sectiofis j(b) and 3(o) of the 2thics Law provide
in part theit no person shall offer to a pUbliC official/employee
anything of monetary value and no publid dfficiii/eMployee shall
solicit or acdept anything of monetary value based upon the
understanding that the vote, official adtiOn,_Or judgement of the
public official/emploYeewoUld 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 predented.
Section 3(j) of the Ethics Law provides as followst
(j) Where voting conflicts are not
otherwise addressed by the Constitution of
Pennsylvania or by any law, rule, et/Illation,
order or ordinanoe the 'following procedure
shall be employe:el. kny public official or
pUblig_eMplOyee, Whit) Lit the ditchatge e his
ofia1 a4t1"* wolild be recNited to vote, on
a matter that weuld result in a tohfriCt of
interest than abstain froth Voting and; prior
to the Vote bein4 taken, publicly atnounCe and
discroSe the nature of his interest as a
public record in a written memorandum filed
Mr. Ted R. Baranik
October 26, 1992
Page 7
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.
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 this case, you would have a conflict of interest as to the
matter of the proposed taxation of Mercy Hospital of Johnstown.
This conclusion is based upon the loyalty provision of the
Termination Agreement under which you continue to receive pecuniary
benefits:
4. Loyalty and Good Will
T.R. Baranik agrees to be and to remain loyal
to Mercy Health Care System, Mercy Health
Care, Inc. and its subsidiaries, including,
but not limited to, the Mercy Hospital of
Johnstown; to speak positively about the
agreement reached between T.R. Baranik and
Mercy Health Care System; to speak positively
about our ongoing relationship; and to speak
positively about whatever actions Mercy Health
Care System may take relative to Mercy Health
Care, Inc. and its subsidiaries, including,
but not limited to, the Mercy Hospital of
Johnstown. It is understood and agreed by and
between the parties to this Termination
Agreement that such obligation to be and to
remain loyal does not impose on T.R. Baranik
Mr. Ted R. Baranik
October 26, 1992
Page 8
any affirmative obligation to speak publicly
concerning the matters set forth herein, but
that it does require him to speak positively
whenever he does speak of these matters. The
Provisions of this . paragraph shall be binding
upon T.R. Baranik during the entire term of
this Agreement and his failure to abide by
these provisions shall constitute a material
breach of this Agreement and shall excuse any
subsequent non- performance by Mercy Health
Care System of its obligations under this
Agreement -
Termination Agreement at paragraph 4 (Emphasis added).
On its face, the Termination Agreement provides_ that your
failure to abide by -the above provision would constitute a material
breach of the Termination Agreement such as would excuse subsequent
non - performance by Mercy Health Care System of its obligations
under the Agreement -- which would appear to include its obligation
to continue to make the agreed payments you and on your behalf.
Although you have proffered your own interpretation of the intent
and effect of this provision and the severability clause in
paragraph 13 of the Termination Agreement, this Commission does not
have the express statutory jurisdiction to interpret contracts.
Without a judicial interpretation -of the contract, your theory is
speculative.
Pursuant to the - Ethics. Law;_ it is the public trust which is
paramount:
Section 1. Purpose
(a) The legislature hereby declares that
public office is a public trust and that any
effort to realize personal financial gain
,through public office other than compensation
provided by law is a violation of ;that trust.
In order to strengthen the faith and
confidence of the people of the State in their
government, the . Legislature further deCl;ares
that the people have a right . to be assured
that the financial interests of holders of or
nominees or candidates for public office
not conflict with the public trust. Because
public confidence in government can, 4 best .be
sustained by assuring the people of the
impartiality and honesty of public officials,
this act shall be liberally construed to
promote complete financial disclosure as
Mr. Ted R. Baranik
October 26, 1992
Page 9
specified in this act. Furthermore, it is
recognized that clear guidelines are needed in
order to guide' public 'officials and employees
in their actions. Thus, the General Assembly
by this act intends to define as clearly as
possible those areas which represent conflict
with the public trust.
65 P.S. S401(a).
Thus, this advisory must necessarily conclude that you would
have a conflict of interest in the matter of the proposed taxation
of Mercy Hospital of Johnstown because you are subject to a
contractual provision which on its face requires you to be loyal to
that hospital and which, if breached, could terminate your receipt
of various private pecuniary benefits pursuant to the Termination
Agreement.
In each instance of a conflict of interest, you would be
required to abstain from any participation of any nature
whatsoever, including but not limited to participating in
discussion's, voting, lobbying for a particular result, or any other
use of authority of office. In each instance of a conflict of
interest, you would further be required to observe the disclosure
requirements of Section 3(j) as set forth above.
However, it is noted that you area Member of a three- member
Board. If after you abstain and fully comply with the disclosure
provisions as set forth in Section 3(j) above, the remaining
Commissioners should cast opposing votes, you would be permitted to
vote to break the tie.
Finally, you have posed the additional question of whether
your voting on the separate appeals of Lee Hospital and Conemaugh
Valley Memorial Hospital would constitute a conflict of interest.
It is difficult to provide a definitive answer based on the facts
which you have presented. Although your Termination Agreement is
with Mercy Hospital rather than with those other hospitals, to the
extent the outcome of such appeals may impact upon Mercy Hospital,
a conflict of interest could possibly be present as to those
matters as well -- even if by merely effectuating a detriment to
competitors -of Mercy Hospital. See, Pepper, Opinion No. 87 -008.
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 County Code.
Mr. Ted R. Baranik
October 26, 1992
Page 10
Conclusion: As a County Commissioner for Cambria County, you are
a public official subject to the provisions of the Ethics Law. You
would have a conflict 'of interest in the matter of the proposed
taxation of Mercy Hospital of Johnstown. In each instance of a
conflict of interest, you are required to abstain from any
participation of any nature whatsoever and to fully satisfy the
disclosure provisions of Section. 3(j) as set forth above. If after
you have first abstained and fully observed the disclosure
requirements of Section 3(j), the remaining two County
Commissioners should cast opposing votes, you may ; vote to break the
tie. To the extent the separate appeals of other hospitals may
impact upon Mercy Hospital, a conflict of interest could also
present as to such matters. 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
proce providing the requester 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 avaiiable_as
Finally, if you disagree with this Advice or if you have any
reason to challenge same, you may request that the full Commission
review this Advice. A personal appearance before the Commission
will be scheduled and a formal Opinion from the Commission will be
issued. Any such appeal must be in writing and must be.received at
the Commission within 15 days of the date of this Advice pursuant
to 51 Pa. Code 52.12.
'Sincerely,
1 1 ( 0/C . 4. 4 d
vincent J. Dopko
Chief Counsel