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HomeMy WebLinkAbout02-610 ConfidentialADVICE OF COUNSEL October 23, 2002 02 -610 Re: Conflict; Public Official /Employee; School Director; School District; Business With Which Associated; Real Estate Company; Vote. This responds to your letter of September 16, 2002, by which you requested a confidential advice from the State Ethics Commission. Issue: Whether under the Public Official and Employee Ethics Act ( "Ethics Act "), 65 IHa.C.S. § 1101 et seq., a school director must abstain from participating in matters before the school board pertaining to the purchase by the school district of privately owned property, in order to allow a real estate brokering agency owned by the school director or an employee thereof to collect commissions or fees related to the sale and purchase of that property. Facts: Since [year], you have served as a School Director for the A School District ( "School District "). You currently serve as B of the School Board. In a private capacity, you are the sole owner of C, a real estate brokering agency in D, Pennsylvania, which was incorporated in [year]. You operate C with [number] Pennsylvania licensed real estate agents. You state that the School District, which is one of the E school districts in Pennsylvania, has purchased land and built [number] new schools during the past ten years. You further state that the School District has been "researching" various properties for acquisition on a fairly constant basis for the past several years. One of the agents for C has independently located a privately owned property ( "Property ") that may be available for sale to the School District and may, at some future time, be recommended and approved by the School Board for purchase. You ask whether, as a School Director, you must abstain from participating on any matter(s) before the School Board pertaining to the purchase by the School District of privately owned property, in order to allow C, or an employee of C to collect commissions or fees related to the sale and purchase of that property. 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 Confidential Advice 02 -610 October 23, 2002 Page 2 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 a School Director for the A School District ( "School District "), you are a public official as that term is defined in the Ethics Act, and hence you are 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. "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. "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. Confidential Advice 02 -610 October 23, 2002 Page 3 "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. 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 1103(j) of the Ethics Act provides as follows: § 1103. Restricted activities (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. Confidential Advice 02 -610 October 23, 2002 Page 4 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, it is noted that Section 1103(a) of the Ethics Act pertaining to conflicts of interest 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 public action, Metrick, Order 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 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, Gorman, Order 1041, or private client(s). Miller, Opinion 89 -024; Kannebecker, Opinion 92 -010. A reasonable and legitimate expectation that a business relationship will form may also support a finding of a conflict of interest. Amato, Opinion No. 89 -002; Garner, Opinion No. 93 -004; Snyder, Order No. 979 -2, affirmed Snyder v. SEC, 686 A.2d 843 (Pa. Commw. Ct. 1996), alloc. den., No. 0029 M.D. Allocatur Docket 1997 (Pa. December 22, 1997). In each instance of a conflict of interest, the public official /public employee would be required to abstain from participation and to satisfy the disclosure requirements of Section 1103(j) set forth above. The abstention requirement would not be limited to merely voting, but would extend to any use of authority of office including, but not limited to, discussing, conferring with others, and lobbying for a particular result. Juliante, Order 809. In considering the above, it is clear that C would be considered a business with which you, as its sole owner, are associated. As a general rule, pursuant to Section 1103(a) of the Ethics Act, you would have a conflict of interest as to matters before the School Board pertaining to you, a member of your immediate family, C, or C's client(s). See, Miller, supra; Kannebecker, supra. Specifically, as a School Director, you could not participate in recommending or approving the purchase by the School District of the Property because such would result in a private pecuniary benefit to C or C's client(s). A conflict would exist even as to making recommendations against or disapproving sales of other properties that would be listed with competing real estate brokering agencies, where such action would assure or increase the possibility that the School District would purchase the Property and C, or C's client(s) would financially benefit. See, Pepper, Opinion 87 -008. A pecuniary benefit to an employee of C would not, in an�C of itself, provide the basis of a conflict of interest under Section 1103(a); however, based upon the submitted facts, it is likely that there would be a portion of commission(s) /fee(s) flowing to C, which would establish the element of a private pecuniary benefit to a business with which you are associated. As noted above, in each instance of a conflict, you would be required to abstain fully and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. Finally, it is administratively noted that the Public School Code of 1949 as amended ( "Public School Code "), provides in pertinent part: § 3 -324. Not to be employed by or do business with district; exceptions (a) No school director shall, during the term for which he was elected or appointed, as a private person engaged [sic] Confidential Advice 02 -610 October 23, 2002 Page 5 in any business transaction with the school district in which he is elected or appointed, be employed in any capacity by the school district in which he is elected or appointed, or receive from such school district any pay for services rendered to the district except as provided in this act: Provided, That one who has served as a school director for two consecutive terms, of six years each, may be elected to the position of attorney or solicitor for the board of which he was a member by the unanimous vote of all the other members of the board, and, after resigning his office as school director, shall be entitled to receive such pay for his services as solicitor as the board of school directors may determine: Provided, however, That a school director may be appointed to the position of secretary to the board of a school district of the second class, of which he was a member during the term for which he was elected or appointed upon the unanimous consent of all the other members of the board after resigning his office as school director, and he shall be entitled to receive such pay for his services as secretary as the board of school directors shall determine: And provided further, That one who has served as a school director may, after resigning from office as a school director, be elected to the position of teacher by the board of which he was a member by a vote of at least two - thirds of all other members of the board and shall be entitled to receive such pay for his services as a teacher as the board of school directors may lawfully determine. (c) It shall not be a violation of this section for a school district to contract for the purchase of goods or services from a business with which a school director is associated to the extent permitted by and in compliance with 65 Pa.C.S. Ch. 11 (relating to ethics standards and financial disclosure). In that the Public School Code may impose restrictions upon your ability to conduct business with the School District, it is suggested that you seek legal advice in this regard. 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. Conclusion: As a School Director for the A School District ( "School District "), you are a public official subject to the provisions of the Public Official and Employee Ethics Act ("Ethics Act "), 65 Pa.C.S. § 1101 et seq. C, a real estate brokering agency, would be considered a business with which you, as its sole owner, are associated. Pursuant to Section 1103(a) of the Ethics Act, you would have a conflict of interest as to matters before the School Board pertaining to you, a member of your immediate family, C, or C's client(s). With respect to your question of whether as a School Director, you must abstain from participating on any matter(s) before the School Board ertaining to the purchase by the School District of privately owned property ( "Property "), in order to allow C, or an employee of C to collect commissions or fees related to the sale and purchase of the Property, you are advised that you could not participate in recommending or approving the purchase by the School District of the Property Confidential Advice 02 -610 October 23, 2002 Page 6 because such would result in a private pecuniary benefit to C or C's client(s). A conflict would exist even as to making recommendations against or disapproving sales of other properties that would be listed with competing real estate brokering agencies, where such action would assure or increase the possibility that the School District would purchase the Property and C, or C's client(s) would financially benefit. A pecuniary benefit to an employee of C would not provide the basis of a conflict of interest under Section 1103(a), provided no portion of the fee would be received by C or yourself. In each instance of a conflict, you would be required to abstain fully and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. In that the Public School Code of 1949 as amended may impose restrictions upon your ability to conduct business with the School District, it is suggested that you seek legal advice in this regard. 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