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HomeMy WebLinkAbout21-566 McCabePHONE: 717-783-1610 TOLL FREE: 1-800-932-0936 STATE ETHICS COMMISSION FINANCE BUILDING 613 NORTH STREET, ROOM 309 HARRISBURG, PA 17120-0400 FACSIMILE: 717-787-0806 WEBSITE: www.ethics.pa.gov ADVICE OF COUNSEL December 21, 2021 To the Requester: Michael G. McCabe, Esquire Goehring Rutter & Boehm Frick Building 437 Grant Street, 14�h Floor Pittsburgh, PA 15219 Dear Attorney McCabe: 21-566 This responds to your correspondence dated November 30, 2021 (received December 1, 2021), by which you requested an Advice of Counsel from the Pennsylvania State Ethics Commission ("Commission"). Issues: Would an employee of the County Treasurer's Office be prohibited by the Public Official and Employee Ethics Act ("Ethics Act"), 65 Pa. C. S. § 1101 et seq., from receiving referral fees through an LLC which is paid by entities serving as a vendor to the County Employee Retirement System Board, on which the employee's supervisor/superior (County Treasurer) serves as a Member? Brief Answer: NO. The employee/applicant did not engage in any use of office regarding the receipt of the referral fees, and as such there would be no prohibition to her continuing to receive same. 2. Would an employee of the County Treasurer's Office be prohibited by the Public Official and Employee Ethics Act ("Ethics Act"), 65 Pa. C.S. § 1101 et seq., from referring new entities to provide investment advisory services to the County Employee Retirement System Board, on which the employee's supervisor/superior (County Treasurer) serves as a Member? McCabe, 21-566 December 21, 2021 Page 2 Brief Answer: NO. Provided the employee/applicant did not engage in any use of office or utilize confidential information gained as an employee of the Treasurer's Office in furtherance of the LLC's pecuniary gain. Facts: You request an advisory from the Commission based upon the following facts that are summarized below: Your office is Solicitor for the Allegheny County Treasurer, John Weinstein, and you have been authorized by Treasurer Weinstein and the employee to submit this request for an advisory opinion. Allegheny County is a county of the second class incorporated and existing pursuant to the Pennsylvania Second Class County Code. The Allegheny County Treasurer (the "County Treasurer") is an elected officer of the County who is responsible for the following: receiving all moneys due or accruing to the County; keeping an account of all moneys received and disbursed; reporting to the Allegheny County Controller all moneys received, the names of the payors, and the accounts for which the money was received; and giving receipts for the same. In addition to the aforementioned functions, the Second Class County Code requires that the County Treasurer serve as a member of the Allegheny County Employees' Retirement System Board ("Employees' Retirement System Board") and serve as Treasurer of that Board. 16 P.S. §§ 4703, 4704. The purpose of the Employees' Retirement System Board is to manage a retirement fund for Allegheny County employees. The County Treasurer employs individuals to assist him with the responsibilities of his office. One such employment position is the Chief of Budget Management, Audits and Compliance Officer. A copy of the Job Description for this position was included within the request and is incorporated herein by reference. None of the functions of the Chief of Budget Management, Audits and Compliance Officer relate to the responsibilities of the County Treasurer, with respect to his position as a member of the Employees' Retirement System Board or as the Treasurer of the Employees' Retirement System Board. Additionally, the Chief of Budget Management, Audits and Compliance Officer will have no involvement with, or responsibility for, any of the County Treasurer's duties that relate to being a Board Member and Treasurer of the Employees' Retirement System Board, as other employees of the County Treasurer's Office will handle such work. Further, the Chief of Budget Management, Audits and Compliance Officer will not have access to any records of the County Treasurer that relate to his responsibilities as a Board member and Treasurer of the Employees' Retirement System Board. An employee/applicant for the position of Chief of Budget Management, Audits and Compliance Officer is also the sole member of a limited liability company (" LLC" ). Prior to employment with the County Treasurer, the individual had referred investment advisors to the McCabe, 21-566 December 21, 2021 Page 3 Employees' Retirement System Board and is currently receiving a referral fee from the investment advisors for the referrals. Specifically, the Employees' Retirement System Board has engaged entities to provide investment advisory services for the retirement fund. Two (2) of such entities were introduced to the Employees' Retirement System Board by the LLC in the years 2013 and 2015, respectively; however, the LLC is not otherwise affiliated with the two (2) entities. The LLC is an independent contractor, and is not an agent, representative or employee of the two (2) entities. The Employees' Retirement System Board pays the two (2) entities an advisory fee for their investment services, pursuant to agreements between the Employees' Retirement System Board and the two (2) entities. Pursuant to agreements between the LLC and the two (2) entities, the two (2) entities pay the LLC a percentage of the advisory fees as a referral fee. The referral fees will continue to be paid to the LLC, as long as the Employees' Retirement System Board continues to use the investment advisory services of the two (2) entities. At present, the LLC is receiving referral fees from both entities. You seek an Advisory as to the following specific issues: 1. Would the employee/applicant have a conflict of interest that would prohibit her from being employed by the County Treasurer's Office, if the LLC continues to receive the referral fees from the two (2) entities referenced above while the Job Candidate is an employee of the County Treasurer's Office? 2. As an employee of the County Treasurer's Office, would the individual have a conflict of interest if the LLC referred new entities to provide investment advisory services to the Employees' Retirement System Board and consequently receive new referral fees as a result of introducing the new entities to the Employees' Retirement System Board? 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 requester based upon the facts that the requester has submitted. In issuing the advisory based upon the facts that the requester has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts that have not been submitted. It is the burden of the requester 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 requester has truthfully disclosed all of the material facts. As an employee of the Allegheny County Treasurer's Office, the Chief of Budget Management, Audits and Compliance is a "public employee" as that term is defined by 65 Pa.C.S. §1102 and is therefore subject to the provisions of the Ethics Act. This conclusion is based upon the Job Description specifications, which when reviewed on an objective basis, indicate clearly that the power exists to take or recommend official action of a non -ministerial nature with respect to one or more of the following: contracting; procurement; administering or monitoring grants or McCabe, 21-566 December 21, 2021 Page 4 subsidies; planning or zoning; inspecting; licensing; regulating; auditing; or other activity(ies) where the economic impact is greater than de minimis on the interests of another person. 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 related to Section 1103(a) 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, joint stock company, receivership, trust or any legal entity organized for profit. "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. "Financial interest." Any financial interest in a legal entity engaged in business for profit which comprises more than 5% of the McCabe, 21-566 December 21, 2021 Page 5 equity of the business or more than 5% of the assets of the economic interest in indebtedness. "Immediate family." A parent, spouse, child, brother or sister. 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 judgement of the public official /employee would be influenced thereby. Reference is made to these provisions of the law not to imply that there has been or will be any transgression thereof but merely to provide a complete response to the question presented. Subject to the statutory exclusions to the Ethics Act's definition of the term "conflict" or "conflict of interest," 65 Pa.C. S. § 1102, a public official is prohibited from using the authority of public office or confidential information received by holding such a public position for the private pecuniary benefit of the public official themself, any member of their immediate family, or a business with which they or a member of their immediate family are associated. The use of authority of office is not limited merely to voting but extends to any use of authority of office/employment including, but not limited to, discussing, conferring with others, and lobbying for a particular result. Juliante, Order 809. In each instance of a conflict of interest, a public official/public employee would be required to abstain from participation, which would include voting, unless one of the statutory exceptions of Section 11030) of the Ethics Act would be applicable. Per the Pennsylvania Supreme Court's decision in Kistler v. State Ethics Commission, 610 Pa. 516, 22 A.3d 223 (2011), in order to violate Section 1103(a) of the Ethics Act, a public official/employee: ... must act in such a way as to put his [office/public position] to the purpose of obtaining for himself a private pecuniary benefit. Such directed action implies awareness on the part of the [public official/public employee] of the potential pecuniary benefit as well as the motivation to obtain that benefit for himself. Kistler, supra, 610 Pa. at 523, 22 A.3d at 227. To violate Section 1103(a) of the Ethics Act, a public official/employee "must be consciously aware of a private pecuniary benefit for himself, his family, or his business, and then must take action in the form of one or more specific steps to attain that benefit." Id., 610 Pa. at 528, 22 A.3d at 231. Section 1103(a) of the Ethics Act does not prohibit public officials/employees from outside business activities or employment; however, the public official/employee may not use the authority of public office for the advancement of his/her own private pecuniary benefit or that of a business McCabe, 21-566 December 21, 2021 Page 6 with which he/she is associated. Pancoe, Opinion 89 -011. A public official/employee must exercise caution so that his/her private business activities do not conflict with his/her public duties. Crisci, Opinion 89 -013. Thus, apublic official/employee could not perform private business using governmental facilities or personnel_ In particular, the governmental telephones, postage, staff, equipment, research materials, personnel or any other property could not be used as a means, in whole or part, to carry out private business activities. In addition, the public official/employee could not, during government working hours, solicit or promote such business activity. Pancoe, supra. Similarly, Section 1103(a) would expressly prohibit the use of confidential information received by holding public office/employment for such a prohibited private pecuniary benefit. In the event that the private employer or business has a matter pending before the governmental body or if the public official/public employee as part of such official duties must participate, review or pass upon that matter, a conflict would exist. Miller, Opinion 89 -024. In those instances, it is necessary that the public official/public employee be removed from that process. In such cases as noted above, Section 11030) of the Ethics Act would require not only that the public official/public employee abstain from participation but also file a written memorandum to that effect with the person recording the minutes or the supervisor. In applying the above provisions of the Ethics Act to the instant matter, it is noted that the Office of the Allegheny County Treasurer and Allegheny County Employee's Retirement System Board are two separate governmental bodies, despite having overlapping membership. See Shorall, Advice 91-567, Buber, Advice 94-617. The employee/applicant would serve in a subordinate employment position to the Treasurer not is not an employee or official of the Retirement Board. The employee/applicant has no duties or responsibilities respective to the Retirement Board — as an employee of the County Treasurer. As to your specific questions: 1. Would the employee/applicant have a conflict of interest that would prohibit her from being employed by the County Treasurer's Office, if the LLC continues to receive the referral fees from the two (2) entities referenced above while the Job Candidate is an employee of the County Treasurer's Office? NO. The employee/applicant did not engage in any use of office regarding the receipt of the referral fees, and as such there would be no prohibition to her continuing to receive same. 2. As an employee of the County Treasurer's Office, would the individual have a conflict of interest if the LLC referred new entities to provide investment advisory services to the Employees' Retirement System Board and consequently receive new referral fees as a result of introducing the new entities to the Employees' Retirement System Board? McCabe, 21-566 December 21, 2021 Page 7 NO. Provided the employee/applicant did not engage in any use of office or utilize confidential information gained as an employee of the Treasurer's Office in furtherance of the LLC's pecuniary gain. In summary, the Ethics Act would restrict the employee/applicant from the following: 1. The use of authority of office to obtain any business in a private capacity; 2. Utilization of confidential information gained through public position; 3. Participating in discussions, reviews, or recommendations on matters which relate to the business/private employer which may come before the governmental body and in such cases publicly announcing the relationship or advising the supervisor as well as filing a written memorandum as per the requirements of Section 11030) of the Ethics Act. See Brooks, Opinion 89 -023. 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 an employee of the Allegheny County Treasurer's Office, the Chief of Budget Management, Audits and Compliance is a "public employee" as that term is defined by 65 Pa.C. S. §1102 and is therefore subject to the provisions of the Ethics Act. With regard to the LLC (employee/applicant) continuing to receive referral fees from vendors of the Retirement Board while an employee of the County Treasurer's Office, there does not appear to be a conflict of interests, as there was no use of office by the employee/applicant in acquiring those fees. Additionally, the employee/applicant is not an employee/member of the Retirement Board, and as such same is not a governmental body with which she is associated. As an employee of the County Treasurer's Office, the employee/applicant's actions through the LLC of referring new entities to the Employee Retirement System Board would not contravene Section 1103(a) of the Ethics Act, conditioned upon the assumption that she would comply with the principles set forth above as to Section 1103(a) of the Ethics Act, and specifically would not use the authority of her public position or confidential information accessible to her as a result of her public position to advance a pecuniary gain to the LLC. Pursuant to Section 1107(11) of the Ethics Act, 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 requester has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. McCabe, 21-566 December 21, 2021 Page 8 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. Respectfully, rian D. Ja Chief Coun