HomeMy WebLinkAbout413-R LeyMr. Cyril Ley
Franklin Township Supervisor
11084 Rte. 98
Edinboro, PA 16412
STATE ETHICS COMMISSION
308 FINANCE BUILDING
HARRISBURG, PENNSYLVANIA 17120
ORDER OF THE COMMISSION
June 20, 1986
Order No. 413 -R
Re: No. 84 -103 -C
Dear Mr. Ley:
The State Ethics Commission has received a complaint regarding you and a
possible violation of Act 170 of 1978. The Commission has now completed its
investigation. On February 11 and February 25, 1986, hearing on this matter
was conducted and relevant evidence and testimony was presented. The
individual allegations, conclusions, and findings on which those conclusions
are based are as follows:
I. Allegation: That you, a former Franklin Township Supervisor, violated
Section 3(a) of the Ethics Act, 65 P.S. 403(a), which prohibits the use of
public office or confidential information gained through that office by
participating in the Township Pension Fund whose entire premiums were paid
from public funds; securing the cash surrender value from those insurance
plans for your personal use; voting on and /or approving payment of .premiums
for those plans.
A. Findings:
1. You have served as a Franklin Township Supervisor for approximately 18
years, you left office at the end of 1981. As an elected puhlic official,
you are subject to the provisions of the State Ethics Act.
2. Franklin Township records prior to April, 1978 were destroyed by fire.
3. Available township meeting minutes record the following actions relating
to your appointment as a roadmaster:
Mr. Cyril Ley
June 20, 1986
Page 2
a. January 2, 197q: Motion by Supervisor Horn, seconded by you to
appoint you as Road Foreman. The motion passed two to one. You
voted for your appointment.
h. Fehruary 13, 1979: Supervisor Beck asked Solicitor Rolla whether the
Ethics law prohihits you from voting for yourself. Solicitor
comments that it is not wrong because the Ethics Act does not cover
that situation.
c. January 7, 1980: Motion by Herman, second by Horn to appoint you
as Roadmaster. Unanimous vote. You voted for your appointment.
d. January 5, 1981: No record of your appointment as roadmaster in the
organization minutes of the township supervisors.
4. Minutes of the Franklin Township Auditors' Reorganization meetings record
the following actions relating to compensation for road foreman and
supervisors working in other capacities:
a. January 3, 1979: Supervisors salary to remain the same - you to
receive $6.00 an hour with one week's paid vacation and the township
to pay for upkeep and running expenses when your truck is used for
township business. Other supervisors were to receive $4.75 an hour.
There was no approval for pensions or other benefits.
h. January 8, 1980: Your salary was raised to $6.50 an hour and you
were given an additional week's vacation. Other supervisors'
salaries were raised from $4.45 an hour to $5.00 an hour. There was
no approval for pensions or benefits.
c. March 10, 1980: $25 per month and 17¢ per mile for the use of
your personal vehicle instead of the "upkeep." Daily records were
required for this reimbursement.
d. January 6, 1981: Roadmaster's pay was approved at $7.50 an hour and
a 20¢ per mile allowance plus a two -week vacation, $25.00 per month
for vehicle maintenance was allowed to you, other supervisors were
paid $5.00 an hour. There was no approval for pensions or benefits.
e. Minutes of the auditors' meetings from 1974 through 1978 also do not
record approval for pensions or benefits.
5. Mr. Gary Gastemire, an auditor for Franklin Township since 1978, testified
that although he was aware the township was paying premiums to Columbia Life
Insurance for a pension fund and the auditors did not question these payments,
they had never approved payments for any supervisor's inclusion in a pension
plan.
Mr. Cyril Ley
June 20, 1986
Page 3
6. You testified that on at least two occasions you asked the auditors why
they had not approved a raise for you as roadmaster and they replied it was
because the township was also paying for your pension plan.
a. A July 10, 1981 letter from Lawrence C. Rolla, Franklin Township
Solicitor, to Columbia Life Insurance Company stated that, "Also,
with regard to Mr. Cyril Ley, please he advised that one -half of the
existing contributions were made by the Township as a result of Mr.
Ley's employment- as Road Master with the Township. It is our
intention that this amount would remain in your -fund. The other half
of the contributions were made solely hecause of Mr. Ley's position
as a Supervisor. This amount we would want to have refunded."
•
h. There is no evidence that the auditors were aware of these
distinctions in township payments.
7. On July 17, 1978, Edwin T. Kosteva, Columbia Life Insurance Company, wrote
to the Franklin Township Roard of Supervisors telling them that, "In further
review of your file, we find there is no formal documentation of your pension
plan... no formal document governing the provisions of
your plan. Without
such a formal document
questions can arise... complicated hy litigation
against the township. You should have an ordinance or resolution establishing
the pension plan and a formal document governing the plan." He said he and
agent Frank Gigliotti would work with the solicitor and supervisors to prepare
the documents and a resolution.
8. Franklin Township Supervisors' meeting minutes from May, 1978 through
April, 1982 record the following information about the supervisors pension
plan:
a. October 10, 1978: Motion by you, second by Supervisor Horn to
estahlish a Defined Contribution Pension Plan, passed unanimously.
Criteria and guidelines for the plan were also established hy this
motion. The plan applied to employees and supervisors but excluded
employees working less than 1,000 hours per year.
(1) The plan provided that full -time employees and supervisors were
eligible to participate but that the employer (township) would
contrihute 4800.00 per year for "... each eligible employee."
(emphasis added)
(2) There was no provision for premium payments for supervisors.
(3) Solicitor Lawrence Rolla testified that this was "... probably
a for„i resolution presented hy Columhia, as I recall."
Mr. Cyril Ley
June 20, 1986
Page 4
(4) The effective date of this plan was shown as May 15, 1974. The
insurance company did not have a copy of the resolution
establishing this plan until September, 1981.
(5) There are no signatures on this plan.
(6) Except for the township minutes, there were no documents
presented to show official notice from the township to Columbia
Life Insurance Company authorizing that company to set up the
plan and accept payments from the township. A contract was
agreed to. (See Finding 16).
There is no evidence of township action approving a plan or
township payments prior to this resolution.
(8) There is no evidence that any action was taken to authorize
payment of premiums for supervisor's.
b. May 12, 1981: Supervisor Herman asked Solicitor Bolla about the
legality of the township's paying a pension plan for the supervisors.
On motion by Herman, second by Horn with a unanimous vote; bills with
the exception of those for the pension plan for supervisors other
than the roadmaster were approved for payment. In addition, payment
of $800 to Columbia Accident and Health Insurance by check No. 1791
was approved.
c. June 9, 1981: Solicitor Bolla reported that only employees of the
township can participate in the pension plan. He states that he has
confirmed this with Ken Greider of the Pennsylvania State Association
of Township Supervisors and the Pennsylvnia State Association of
Township Supervisors Legal Counsel. He recommends that a letter to
request repayment be sent to Columbia Insurance. He adds that the
Insurance Commissioner could be asked to help collect the refund if
Columbia Insurance Company does not respond favorably. Motion by
Supervisor Horn, seconded by Supervisor Herman authorizing the
solicitor to request repayment from Columbia Insurance was carried.
d. July 14, 1981: Solicitor Bolla reports Columbia Life Insurance will
return the money for people not working for the township if
withdrawal forms are signed. Motion by you, seconded by Herman to
table the issue until Supervisor Horn is at the meeting. Motion
carri ed.
(7)
e. August 11, 1981: Frank Gigliotti, Columbia Insurance Company,
attends and states that the company will refund the money providing
they receive a signed form. They will return the money to the
individual but not the township. Motion by Herman, second by Horn to
table the issue pending Gigliotti's investigating the files of
Columbia Insurance. Motion passes with a unanimous vote.
Mr. Cyril Ley
June 20, 1986
Page 5
"Many thanks for the copy of the resolution. They to have followed Ed's rough draft that he had sent them.
noticed on Section 11 that they have a #1 and #2 schedules.
They should have had a box hefore each number and one of the
hoxes checked. This could he a source of ambiguity; though our
copies of federal and state reports support the 100 percent
Immediate Vesting Schedule. It would only affect Robert Herman
in any case, since he started employment in 1980 whereas Horn
and Ley have been there over six years."
(4) There is no evidence that you ever received information from
Mr. Gigliotti's investigation of the Columbia Insurance files
or the above correspondence.
f. September 8, 1981: Issue tabled because Mr. Gigliotti was not able
to attend the meeting.
October 13, 1981: Solicitor Rolla said he would attempt to have the
question of insurance put on the agenda of the Erie County
Association of Township Officials. He adds that other townships
recognize they have the same problem. Mr. Gigliotti did not attend
the meeting and the minutes give no reason for his absence.
h. January 4, 1982: Supervisor Herman requested that the solicitor
notify Columbia Life Insurance to close out the pension fund and to
forward checks. Supervisor Sachar supported this request.
g.
(1) On August 19, 1981 Gail Kipp, Columbia Insurance Pension
Department, wrote to Frank Gigliotti as follows:
"Please find attached a copy of the letter and the releases
that were sent to the township's solicitor. If the supervisors
agree to hand the money to the township, then these releases
would he Columbia Insurance's protection against any liability
to these individuals at a later date. If they do not sign
these releases, we can not give the township the money
directly."
(2) Mr. Frank Gigliotti testified that he was not aware that the
supervisors wanted to terminate their pension plans and that he
did not remember this memorandum or the August 11, 1981 motion
to return to meet with the supervisors after "investigating"
the company's files.
(3) On September 4, 1981, Ms. Kipp again wrote to Mr. Gigliotti
stating:
Mr. Cyril Ley
June 20, 1986
Page 6
J•
i . February 10, 1982: Solicitor Bo lla presented forms to the
supervisors to be signed to terminate the pension plan. Motion by
Herman, second by Horn to expedite the forms for the supervisors to
terminate the pension plan. Unanimous approval.
March 10, 1982: Solicitor Bolla reports that the forms for
termination of the pension plan had been forwarded to the Columbia
Life Insurance and the plan will be terminated by the end of the
month.
k. April 14, 1982: Solicitor Bolla reports that the pension fund is now
terminated.
9. Franklin Township auditor records for the past nine years do not record a
supervisors request for the approval of a pension plan.
a. Minutes of the township auditors' reorganization meetings from 1974
through 1985 record approval of compensation for supervisors employed
by the township only for hourly wages, vacation leave, and expenses
for use of personal vehicles while on township business.
10. Columbia Life Insurance Company, Bloomsburg, Pennsylvania, records
disclose the following information about the Franklin Township pension plan:
a. The plan was administered under a Group Annuity Contract No. DA -164.
b. The effective date of the plan was May 14, 1974.
c. Eligible participants were defined as full -time employees and
supervisors; persons working less than 1,000 hours annually were
excluded.
d. 100% immediate vesting was included.
e. The employer contributed 100% of the premium which was $800 per
employee per year.
f. Supervisors Horn, Beck, you and Township Secretary /Treasurer Diane
Horn were listed as the only participants.
g. Yearly statements and employee census for 1980 through 1982 list the
participants as you, Supervisors Horn, Beck, Herman and Township
Secretary /Treasurer Diane Horn.
h. This record was not in the insurance company file until September,
1981.
Mr. Cyril Ley
June 20, 1986
Page 7
11. Correspondence between the Franklin Township Solicitor and Columbia Life
Insurance Company discloses the following:
a. June 30, 1981: Letter from Solicitor Bolla to Columbia Life
Insurance Company; "I have reviewed the Pennsylvania Second Class
Township Code regarding the payment of insurance and annuity benefits
to supervisors. 53 P.S. §65713 is the relevant statute governing
Franklin Township's contract with your company. That section clearly
provides that a second class township may only provide this type of
coverage for employees of the township. The supervisors themselves,
if they are not employees of the township, are not entitled to any
benefits under this section. Please refer to the case of Hendricks
v. East Rockhill Township, 1 D. & C. 3rd 763 (1977) for a most recent
interpretation of the relevant statute." He added that he had been
directed by the township supervisors to demand repayment of all funds
currently in the pension fund attributed to Robert Beck, Henry Horn,
and you. He noted that, in your case, they were not requesting
return of the amount paid for you as a full-:time employee of the
township. He also asked for an accounting of all funds paid into the
purchase payment fund from the registered date and the interest paid
on those funds.
b. July 7, 1981: Edwin T. Kosteva, Pension Administrator, wrote to
Solicitor Bolla stating that Robert Beck is no longer a supervisor
and received his vested benefits February 28, 1980. Kosteva had
enclosed authorization for withdrawal of fund forms to be completed
and signed and stated that they needed specific information on which
of the contributions the township had made for you while you were a
working supervisor and which when you were a non - working supervisor.
There was a "cc: Frank Gigliotti" notation on this letter.
c. July 10, 1981: Solicitor Bolla wrote to Mr. Kosteva stating that
one -half of the existing contributions were made by the township as a
result of your employment as roadmaster with the township. He stated
the township intended that this amount would remain in your fund, the
balance was to be refunded.
d. August 7, 1981: Gail S. Kipp, Pension Manager, Columbia Life
Insurance Company, wrote to Mr. Ed Springer, Springer & Perry, asking
him to respond to a question raised by Solicitor Bolla by telephone.
Solicitor Bolla asked whether there was legal authority for the
township to terminate the funds and collect the money if the
supervisors do not agree to relinquish the money. Solicitor Bolla
had stated that the supervisors were not eligible to participate in
the plan. The amounts involved were Henry Horn, $7,318.23; Robert
Herman, $630.00; and you $7,718.33. She also noted that former
Supervisor Robert Beck had received his vested benefits of $5,843.13
on March 5, 1980.
YEAR
BEGINNING
BALANCE
AMOUNT OF
CONTRIBUTION
INTERESTS &
MISC. CREDITS
FEES
WITHDRAWALS
BALANCE
1974
-0-
$1,600.00
$ 47.51
-0-
-0-
$1,647.51
1975
$1,647.:51
$1,600.00
$146.88
-0-
-0-
$3,394.40
1976
$3,344.40
$1,600.00
$261.80
-0-
-0-
$5,256,20
1977
$5,256.50
$1,600.00
$364,58
-0-
-0-
$7,221.08
Mr. Cyril Ley
June 20, 1986
Page 8
e. August 17, 1981: A. J. Carden, Vice President, Columbia Life
Insurance Company, wrote to Lawrence C. Bolla. Columbia Life
Insurance had been advised by their legal counsel that the most
pratical manner in which to resolve the Franklin Township pension
question would be to have supervisors sign release forms to allow the
company to refund the money to the township. He enclosed release
forms.
9.
TOTAL CREDITS
f. January 20, 1982: Solicitor Bolla wrote a letter to Gail S. Kipp
confirming a telephone conversation of that day stating his
understanding that any of the present or former supervisors who wish
to withdraw their assets from the pension plan need only sign the
"Authorization for Withdrawal of Funds" form which had been provided.
He added the form was to be signed by both the withdrawing employee
and by the appropriate township official. The appropriate township
official was not identified. He noted that he thought the forms
could be prepared and signed at the regular township meeting on
February 10, 1982.
March 4, 1982: Gail S. Kipp wrote a letter to Solicitor Bolla
enclosing cop es of the letter sent to Supervisors Horn, Herman and
Secretary /Treasurer Diane Horn noting that these accounts had been
closed and the people paid in full. She also asked for a copy of any
resolution that was passed at the February 10, 1982 meeting.
12. Columbia Life Insurance Company records show the following:
a. The plan was effective May 15, 1974 and you began your participation
on that date.
b. Contributions, interests and the balance of the plan at the end of
each year is shown in the following table:
TOTAL DEDUCTIONS
Mr. Cyril Ley
June 20, 1986
Page 9
1978
1979
1980
1981
1982
$7,221.08
$9,367.36
$11,625.22
$14,081.59
$16,106.21
$1,600.00
$1,600.00
$1,600.00
$ 800.00
-0-
$12,000
$546.28
M $ 22.50
I $657.86
M $ 22.50
I $856.37
I $1,224.62
I $307.09
$4,413.30
-0-
22.50
22.50
-0-
- 0 -
- 0-
- o-
- 0-
$16,413.30
$45.00 $16,413.30
$9,367.36
$11,625.22
$14,081.59
$16,106.21
-0-
-0-
c. The $1,600 contribution made each year from 1974 through 1980 for
payments made on your behalf for both your supervisor and road
foreman positions.
13. You converted $16,413.30 to your own use. Columbia Check No. 00180 in an
amount of $16,413.30 was sent to you on March 26, 1982. Your signature
appears on the back of that draft. There was no money returned to the
township.
14. You were represented by Jay Alberstadt, former Franklin Township
Solicitor. Mr. Alberstadt withdrew as your attorney, and at the hearing you
represented yourself.
15. Attorney Bolla provided the following information:
a. You and the other supervisors were coaxed into purchasing the
insurance by the Columbia representative.
b. He researched the pension issue and found a lower court case in Bucks
County. Based on a court ruling, he advised the board of supervisors
that the plan obtained from Columbia was inappropriate.
c. He attempted to have the policies changed but Columbia refused to do
so without a release form signed by supervisors. You refused to sign
such a release. You state that you were never aware of this option.
d. No payments for your pension plan were made by the township after
1981.
16. The record of the township pension plan and your participation is as
follows:
A. May 14, 1974, Contract DA -164 entered into by the township and
Columbia Life Insurance Company.,
Mr. Cyril Ley
June 20, 1986
Page 10
(1) You and Supervisor Beck signed as applicant. Franklin Township
was identified as the applicant.
(2) The name of the plan was "Franklin Township Pension Fund ".
(3) Other than the signatures of you and Supervisor Beck, there
is no record of township authorization of this plan.
B. On October 10 ;1.978, the township supervisors approved a "Defined
Contribution Plan" at the suggestion of Mr. Edwin T. Kosteva,
Columbia Life Insurance Company. (See Finding 7)
(1) The Columbia Life Insurance Company copy of this plan was the
only one presented.
(a) It vas not signed or dated.
(b) It was not received by the insurance company until
September 3, 1981. (See Finding 8e (3)).
(c) The effective date was shown as May 15, 1971 but there was
no explanation for the back dating.
(d) The township had not identified the vesting option they
were choosing. The options were 1: "100% immediate
vesting "; 2: "0/n for three years. 25% after 3 years
employment, with 25% each year thereafter until 6 years
(See Finding 8e(3)).
(1) There was no record as to whether the period for considering
either option was May 15, 1974, October 10, 1978 or September,
1981.
(2) This designation would have affected your vested interest. If
option 2 was selected and effective October 10, 1978, you would
not have been eligible for full vesting until 1984.
C. On February 22, 1982, you signed an "Authorization for Withdrawal
of Funds" requesting "... withdrawal and return of all vested assets"
for you. The reason for withdrawal was recorded as "Termi nation of
Plan" Supervisor Horn signed as the township official.
D. Columbia Insurance Company issued check #01180 dated March 25, 1982,
in the amount of $16,413.30. You endorsed this check on or about
April 8, 1982.
E. There is no record of official township action to terminate the
plan
Mr. Cyril Ley
June 20, 1986
Page 11
17. a. You testified that Mr. Bolla represented you in a private matter.
b. The fee for services rendered by Mr. Bolla in this matter was
approximately $10,000.
c. You testified that you paid Mr. Bolla this fee with the funds that
you received from the surrender of the pension program.
B. Discussion: As a Township Supervisor you are a public official as that
term is defined in the State Ethics Act. 65 P.S. §402. As such, your conduct
is subject to the requirements thereof. Sowers, 80 -050; Glova, No. 326; Hunt,
No. 384 -R.
Generally the Ethics Act provides that:
Section 3. Restricted activities.
(a) No public official or public employee shall use his
public office or any confidential information received
through his holding public office to obtain financial gain
other than compensation provided by law for himself, a
member of his immediate family, or a business with which
he is associated. 65 P.S. 403(a).
The question of the propriety of pension and annuity plans for
supervisors of second class townships has been reviewed by this Commission on
many occasions. McCutcheon, No. 127; Hoak, No. 128, Marcello, 85 -003. The
Commission determinations in these matters has been reviewed and affirmed by
the Commonwealth Court of Pennsylvania. McCutcheon v. State Ethics
Commission, 77 Pa. Comm. 529, 466 A.2d 283, (1982).
Generally, in situations such as the instant matter, it must be
determined whether the official used his position to obtain or secure
financial gain other than the compensation that is authorized by law.
It is now clear that pension benefits such as the type of question
herein, constitute a financial gain. See McCutcheon v. State Ethics
Commission, 466 A.2d 283, at 288.
The additional question to be answered is whether such benefits are
compensation provided by law. A complete analysis of this exact issue has
been set forth in the above authorities. See also; Hendricks v. East Rockhill
Township, 1 D & C 3d 763, (1977), Synoski v. Hazel Township, Pa. Commw.
, 500 A.2d 1282, (1985). Generally, the compensation to be paid to a
township supervisor who serves only in that position is specifically set by
Statute. 53 P.S. §65515. A Supervisor who is also employed by the township
Mr. Cyril Ley
June 20, 1986
Page 12
in one of the positions authorized in the Second Class Township Code, may
receive additional compensation. Such compensation, however, in order to he
authorized hy law, must he affirmatively fixed by the Township Board of
Auditors. 53 P.S. 565542.
We have reviewed the instant matter in light of these now established
concepts of law as well as under the policy pronouncement of the Commission.
51 Pa. Code 57.1.
While you were in fact appointed to the position of-.roadmaster and were
qualified to receive additional compensation, in order for such compensation
to he authorized by law it required auditor approval. Although the minutes of
the township hoard of auditors, from 1974 through 1984, indicate that the
auditors never fixed, as part of your compensation, the in question pension
program, some evidence has been submitted hy you that when you initially began
your position with the township you, in fact questioned the auditors as to
your participation in this program. The auditors, at that time, according to
the evidence received, refused to raise your salary as township roadmaster in
light of the fact that they were letting you participate in the program.
Thus, we believe that while the auditors did not specifically set forth in
their minutes the fact that they had approved this participation for you, your
participation was, in fact, approved hy the auditors. As a result, it is our
opinion that that portion of the pension program, which was paid by the
township on your hehalf for your service as township roadmaster, was -
authorized and approved by the township board of auditors. According to the
information received, this would have heen one half of the yearly premium
payment on your hehalf by the township, or $800.00 per year. The action of
the auditors in your case is distinguished from the principles of
Hoak /McCutcheon and other cases because we have evidence that the auditors
used the premiums paid by the township in setting compensation for your
roadmaster position and would have approved higher immediate compensationhad
it not been for these premiums.
With relation to your participation in the plan as a non - working township
supervisor, clearly in light of the foregoing, you were not entitled to
participate in the plan at the township's expense only in your capacity as a
supervisor.
We note that you were on the township hoard of supervisors in October,
1978 when the pension plan was officially initiated. We also note that you
received henefits since 1974 hut there was no official action, even hy the
supervisors, until 1978. You in fact voted in 1978 to ohtain this plan for
yourself and the other supervisors. (See finding 8(a)). This is a use of
your puhlic office as defined in the Ethics Act. See, McCutcheon v. State
Ethics Commission, Supra.
Mr. Cyril Ley
June 20, 1986
Page 13
Also, in 1981, the propriety of the plan was questioned and you and the
other supervisors were in fact informed that the plan was not authorized hy
law. (See finding 8 h,c). Questions along this line had also been raised as
early as 1978. (See finding 7).
The Supervisors were, thus, informed hy the Solicitor that the plan
should be terminated. (See Finding 8(c)). You were still a supervisor during
1981 when these questions were raised. -
Eventually, on April 14, 1982, the plan was terminated. When the plan
was terminated, the Insurance Company requested that each supervisor execute
an authorization for withdrawal of funds in order to receive the cash value of
the plan. The refunds were then forwarded to each individual supervisor.
Records reflect that on March 26, 1982, you cashed a refund check in the
amount of $16,413.30 and retained the proceeds.
Some questions have heen raised as to whether the township hoard of
supervisors were informed as to the procedure offered by Columbia Life
Insurance Company for the termination of the policy. Attorney Bolla testified
that two methods of termination were offered. Under the first method, the
supervisors would he required to sign a release after which the funds would be
transmitted directly to the township. Under the second termination program,
the supervisors would sign authorization for withdrawal forms where after the
funds would be disbursed directly to the township supervisor. The township
hoard of supervisors signed the authorization for withdrawal forms rather than
the official releases. However, each member of the township hoard of
supervisors testified that Attorney Rolla never informed them of the procedure
whereby the township would have directly received the money. In any event,
even if we, for the sake of this order assume that Attorney - Rolla, in fact,
never informed the township hoard of supervisors as to the alternative
termination procedure, this nevertheless does not alleviate the fact that you
accepted and retained the funds that were received for your own benefit.
Those funds, as noted in the findings of fact, were eventually used to pay a
legal fee to Attorney Rolla for his representation of you in a private matter.
There is no reason why, even after the funds were released to you as an
individual, that you could have not turned over to the township that portion
of funds which were paid for your participation in the program as a
non - working supervisor. Your acceptance of these funds, after suhstantial
questions as to the legality of the program had heen raised, was clearly a
violation of the State Ethics Act.
It is also important to note, in relation to the foregoing situation,
that even prior to the questions that had heen raised hy Mr. Herman regarding
the propriety of the plan, in 1978 the supervisors approved a defined
contribution plan at the suggestion of the Columbia Life Insurance
representative. Specifically, set forth in that defined contribution plan,
Mr. Cyril Ley
June 20, 1986
Page 14
was the requirement that the plan was for full -time employees and the township
was to contribute $800.00 per year for each eligihle employee. While the plan
indicated that supervisors were eligihle to participate, there was no
provision in the plan for premium payments for supervisors who were not
emloyees. Thus, as early as 1978, the board of supervisors should have known
that the payment for this program hy the township, regarding non- working
supervisors., was questionable. To argue that the supervisors were not aware
of the standards for participation that those same supervisors established in
the defined contribution -plan would he incredulous. Regardless of all the
questions that had been raised regarding this plan, from-1978 on, you
nevertheless accepted and retained the funds that were received. As such, we
believe that your receipt of those funds to which you were not entitled
violates the State Ethics Act, Such an acceptance of a gain or of
compensation to which an employee is not entitled is a use of one's public
office in violation of Section 3(a) of the State Ethics Act. Huff, 84 -015,
Domalakes, 85 -010, Weaver, 85 -014, Blumling, No. 388.
Generally, the State Ethics Act provides as follows:
Section 9. Penalties.
(a) Any person who violates the provisions of Section 3(a)
and (h) is guilty of a felony and shall be fined not more
than $10,000 or imprisoned for not more than five years,
or he both fined and imprisoned. 65 P.S. 409(a).
Section 9. Penalties.
(c) Any person who obtains financial gain from :violating
any provision of this act, in Gddition to any other
penalty provided hy law, shall pay into the State
Treasury a sum of money equal to three times the
financial gain resulting from such violation. 65 P.S.
409(c).
In addition to the above, the Act provides that the Commission may forward the
results of any investigation to the appropriate prosecuting authority, unless
the alleged offender removes himself from the conflict of interest hy
divesting himself of any financial gain received in violation of the State
Ethics Act. 65 P.S. b4079(iii). This principle has been upheld by the
Commonwealth Court of Pennsylvania in McCutcheon v. State Ethics Commission,
supra. In addition to the following, the Commission regulations also set
forth that the Commission may, in determining to recommend a prosecution,
decide not to recommend such prosecution if:
Mr. Cyril Ley
June 20, 19R6
Page 15
67.17. Extenuating or mitigating circumstances.
(a) The Commission may, in deciding whether to
recommend prosecution as set forth in 67.16 (relating to
options availahle to the Commission) decide not to refer a
matter for prosecution if any of the following events
occur:
(3) .•The Supervisor, if gain has already been
secured as a result of inclusion in a plan, remits
and refunds the gain, as determined by the
Commission, to the plan, the township or the State
Treasury as appropriate; or
(4) The Supervisor, if gain has already been
secured as set forth in paragraph (3) refunds, in
addition to the amount determined thereunder, an
additional 10% thereof per annum so that any benefit
derived from the gain associated with the plan is
negated. 51 Pa. Code 7.17(a).
As a result of the foregoing, the Commission may offer a person who has
ohtained financial gain in violation of the State Ethics Act, the opportunity
to divest himself of that financial gain.
In addition to the following, we note, that even if you were to have
received your pension program and the financial gain resulting therefrom, in
good faith and hased upon the advice that you had received from others
including your solicitor, such good faith receipt of benefits or financial
gain to which you are not entitled, would not alleviate you from the duty-of
returning such gain to the governmental body from which it was received. Good
faith reliance upon a solicitor, has been held not to constitute just cause
for retention of a financial gain to which one was not entitled. See,
Allegheny County v. Grier, 179 Pa. 639, 368. 353, (1897); McCutcheon v. State
Ethics Commission, 77 Pa. Commw. 529, 466 A.2d 283
Pa. Comm. 1, 444 A.2d 761 (1981). We � (1983); Kestler Appeal, 66
and, therefore, we will offer you th atotdivestsulu is appropriate
financial gain that was received in violation of the State Ethics e Act. We
will also impose the 10% interest requirement as set forth in the regulations
of the State Ethics Act. 51 Pa. Code 7.17(a), (4). The amount of financial
gain which we have determined to have been ohtained in violation of the State
Ethics Act, would he the amount of funds expended by the township on your
behalf in your capacity as supervisor. This would have been one —half of the
yearly amount of the premium payment or $800.00. The total amount expended by
the township, on your behalf, was $12,000.00 and with accrued credits and
interest ohtained through the pension program a total amount which you
Mr. Cyril Ley
June 20, 1986
Page 16
received as a result of your termination of the program was $16,413.30. We
believe that one -half of this amount, that which was paid for by the township
for you in your position as roadmaster was appropriate under the law. One
half of this amount, however, was paid for you in your position as township
supervisor and, therefore, not in accordance with the law. The amount,
therefore, that was inappropriately received was $8,206.65. This amount, plus
the 10% penalty, equals $9,027.31.
C. Conclusion: You violated the State Ethics Act when you, as a township
supervisor, received, accepted and retained the proceeds from a
township - provided pension plan to which you knew you were not entitled.
Unless, within thirty (30) days of the date of this order you remit to the
State Ethics Commission a check made payable to Franklin Township in the
amount of S9,027.31. In the event that you do not make such restitution, we
will refer this matter to the appropriate law enforcement authorities for
further review.
Our files in this case will remain confidential in accordance with
Section 8(a) of the Ethics Act, 65 P.S. 408(a). However, this Order is final
and will he made available as a public document 5 days after service (defined
as mailing) unless you file documentation with the Commission which justifies
reconsideration and /or challenges pertinent factual findings. See 51 Pa. Code
2.38. During this 5 -day period, no one, including the Respondent unless he
waives his right to challenge this Order, may violate this confidentiality by
releasing, discussing or circulating this Order.
Any person who violates the confidentiality of a Commission proceeding
is guilty of a misdemeanor and shall he fined not more than $1,000 or
imprisoned for not more than one year or hoth see 65 P.S. 409(e).
By the Commission,
J�,+
G. Sieber Pancoast
Chairman