HomeMy WebLinkAbout1263 HawesIn Re: James Hawes, III
File Docket:
X -ref:
Date Decided:
Date Mailed:
Before: Louis W. Fryman, Chair
John J. Bolger, Vice Chair
Daneen E. Reese
Frank M. Brown
Donald M. McCurdy
Michael Healey
98- 046 -C2
Order No. 1263
12/4/02
12/16/02
This is a final adjudication of the State Ethics Commission.
Procedurally, the Investigative Division of the State Ethics Commission conducted an
investigation regarding a possible violation of the Public Official and Employee Ethics Act, Act
9 of 1989, P.L. 26, 65 P.S. §§ 401 et seq., as codified by Act 93 of 1998, Chapter 11, 65
Pa.C.S. § 1101 et seq., by the above -named Respondent. At the commencement of its
investi9ation, the Investigative Division served upon Respondent written notice of the specific
allegation(s). Upon completion of its investi9ation the Investigative Division issued and
served upon Respondent a Findings Report identified as an "Investigative Complaint." An
Answer was filed and a hearing was waived. The record is complete. A Consent Agreement
and Stipulation of Findings were submitted by the parties to the Commission for consideration.
The Stipulation of Findings is quoted as the Findings in this Order. The Consent Agreement
was subsequently approved.
Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter 11
of Act 93 of 1998, 65 Pa.C.S. § 1101 et seq., which essentially repeats Act 9 of 1989 and
provides for the completion of pending matters under Act 93 of 1998.
This adjudication of the State Ethics Commission is issued under Act 93 of 1998 and
will be made available as a public document thirty days after the mailing date noted above.
However, reconsideration may be requested. Any reconsideration request must be received at
this Commission within thirty days of the mailing date and must include a detailed explanation
of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code §
21.29(b). A request for reconsideration will not affect the finality of this adjudication but will
defer its public release pending action on the request by the Commission.
The files in this case will remain confidential in accordance with Chapter 11 of Act 93 of
1998. Any person who violates confidentiality of the Ethics Act is guilty of a misdemeanor
subject to a fine of not more than $1,000 or imprisonment for not more than one year.
Confidentiality does not preclude discussing this case with an attorney at law.
Hawes 98- 046 -C2
Page 2
I. ALLEGATION:
That James Hawes, a public official /public employee, in his capacity as President and
CEO of the Philadelphia Gas Works (PGW) violated Section 3(a)/1103(a) of the Public
Official and Employee Ethics Law, 65 Pa.C.S. §3(a)/1103(a) when he used the authority of
his position for a private pecuniary benefit by accepting gifts from the Transcontinental Gas
Pipeline Corporation in the form of all expense paid trips to golf tournaments, when he claimed
and were [sic] reimbursed for expenses in excess of moving expenses approved by contract,
when he used PGW funds to make a contribution(s) to his alma mater, and when he billed
personal expenses for him and his family to the P
II. FINDINGS:
1. James Hawes, III, served as President and Chief Executive Officer of the Philadelphia
Gas Works (PGW) from January 10, 1996, to October 30, 1998.
2. PGW, is an entity consisting of property, real and personal, created and owned by the
City of Philadelphia for the purpose of the purchase, manufacture, and distribution of
natural gas, and other gas, within the city.
a. PGW is the largest municipally owned gas utility in the country.
b. PGW maintains a distribution system of approximately 6,000 miles of gas mains
and services 518,000 customers.
3. PGW was created pursuant to the provisions of the City of Philadelphia's Home Rule
Charter which authorizes the city to operate facilities for the production and distribution
of natural gas.
4. The Philadelphia Facilities Management Corporation (PFMC) was incorporated by the
City of Philadelphia for the purpose of providing management services for the
Philadelphia Gas Works, on a non - profit basis for the sole and exclusive benefit of the
city.
a. The PFMC was originally incorporated on May 5, 1933.
1. Amended corporation documents were filed on January 11, 1974.
b. Upon termination of the corporation, all of the assets of any kind become the
sole property of the city.
5. The business and affairs of the PFMC are managed by a five member board of
directors appointed by the mayor of the City of Philadelphia.
6. On December 29, 1972, the City of Philadelphia (City) entered into an agreement with
the PFMC authorizing PFMC to manage, operate and maintain all the property, real
and personal, collectively known as the Philadelphia Gas Works for the sole and
exclusive benefit of the City.
a.
b.
The agreement was signed pursuant to an Ordinance of City Council (Bill #455)
approved on December 29, 1972.
PFMC's primary obligation under this agreement is to apply the highest
standards of management practice and diligence to the operation of the Gas
Works.
7. Item 6 of the City's 1972 Agreement with PFMC provides that PFMC will provide the
Hawes 98- 046 -C2
Page 3
following personnel for the operation of PGW.
a. A Chief Executive Officer;
b. A Chief Operating Officer;
c. A Chief Financial Officer; and
d. Such other personnel as deemed appropriate by PFMC.
8. All personnel selected by PFMC, for the operation of PGW, are subject to the approval
of the Philadelphia Gas Commission (PGC).
a. Any personnel not approved by the PGC must be replaced by employees
approved by PGC.
9. Personnel provided by PFMC are compensated by PGW and receive all other benefits
available generally to PGW employees such as the opportunity to participate in PGW's
pension, health and life insurance plans.
10. PFMC is authorized to purchase natural gas or other gas from other parties pursuant to
contracts and agreements for such purchases.
a. Such contracts and agreements are first submitted to the Philadelphia Gas
Commission for its recommendation and then approved by Philadelphia City
Council.
11. The Philadelphia Gas Commission has regulatory authority over the PGW with the
responsibility of establishing PGW's rates, gas quality, standards and review of PGW's
capital and operating budgets.
12. The Philadelphia Gas Commission consists of five members: the Philadelphia City
Controller; two members appointed by the mayor of the City of Philadelphia; two
members appointed by the Philadelphia City Counsel.
13. PFMC is required to file semi - annual reports with the Gas Commission setting forth all
salaries, fringe benefits, expenses and costs incurred by PFMC in carrying out its
duties and responsibilities under the terms and conditions of the agreement with the
City.
14. From December 19, 1994, to January 11, 1996, the PFMC contracted with Phoenix
Management Services, Inc., to provide Turn Around Interim Management of the PGW.
a. In 1995 the PFMC contracted with a search committee to select a CEO and
Executive Vice President.
15. James Hawes was hired as President and CEO of the PGW pursuant to an
employment contract entered into with PFMC.
a. Hawes' appointment was approved by the Philadelphia Gas Commission on
January 11, 1996.
16. Hawes' agreement with PFMC dated January 10, 1996, provided in part:
a. HAWES shall be retained by PFMC and shall serve as the CEO of PGW with
full power and authority of the operation and management of the business of
PGW in accordance with the provisions of the City -PFMC Agreement.
Hawes 98- 046 -C2
Page 4
b. The terms of Hawes' contract was for a period of three years beginning on
January 10, 1996.
1. Hawes' contract could be extended on [sic] additional two years by the
board based on a satisfactory job performance.
c. Hawes' contract contained, in part, the following regarding compensation,
benefits and expenses reimbursed.
1. A base salary equal to $285,000 per annum, as it may be adjusted from
time to time. The base salary shall be payable in equal monthly
payments.
2. Annual merit increases based on performance as determined by the
Board, commencing in the beginning of the third year of this Agreement
and continuing throughout the Term.
3. Annual incentive compensation of up to $75,000 per year to be
determined at the close of each fiscal year of PGW by the Board based
on an evaluation of the performance of HAWES and his management
team in the following areas: financial goals, customer service, new
revenues and collections.
4. Specific performance targets for achievement and incentive
compensation will be determined by the board.
5. Use of a personal company automobile of choice (leased), provided
such automobile shall be of domestic manufacture.
6. All other benefits available generally to other executives of PGW,
including the opportunity to participate in PGW's pension, health and life
insurance plans.
7. Reimbursement for expenses to the extent incurred by him while
performing services for PFMC in accordance with policies and
guidelines approved by the Board;
8. Expenses related to the relocation of HAWES' personal property to an
address within the City of Philadelphia and other expenses incidental to
moving such as closing costs on sale and purchase, gross -up of moving
expense reimbursements on account of taxes, and transfer tax not to
exceed, in the aggregate, $90,000.
9. Expenses for temporary housing (furnished) for HAWES and his family
not to exceed twelve months, commencing on the Effective Date of
employment.
10. Expenses with respect to trips by HAWES and his spouse for purpose
of house hunting and /or relocation not to exceed three times per month,
ceasing twelve months after January 10, 1996.
17. Hawes' salary as CEO of the PGW was paid from PGW revenues.
a. All reimbursements for expenses were also paid by PGW.
18. Hawes' executive job description required he report directly to the chairman of the
board of PFMC.
Hawes 98- 046 -C2
Page 5
19. Hawes' executive job description outlined, in part, the following duties and
responsibilities:
a. Responsible for net corporate income, rate of return on equity or other similar
measurements, resulting from:
1. The purchase, processing, distribution and sale of energy -based
products and services.
2. The application of corporate cost control measures.
b. Corporate operating and administrative policies and strategic plans to assure
compliance with and dedication to the goals of the corporate mission, and which
optimizes PGW assets and increase its value.
c. Safeguards which protect municipal equity and ownership of all PGW assets
and investments.
d. Corporate operating standards and ethics which assure:
1. Quality of PGW products and service for its customers.
2. A positive work environment which enhances employee welfare and
opportunity.
3. Favorable PGW relationships with government agencies, financial
community and the general public.
e. A service culture within PGW which engenders mutually beneficial relations
with its customers, employees, the general public and various governmental
bodies.
20. Pursuant to Section 5.2 of the PFMC By -Laws, Hawes, as CEO and President of the
PGW has the authority to bind PFMC and PGW in an unlimited amount in any contract
consistent with the terms of the 1972 agreement between the City and PFMC.
21. The following positions at PGW report directly to Hawes:
a. Executive Vice President and COO
b. Vice President and CFO
c. Vice President, Gas Supply
d. Vice President, Strategic Planning
e. Sr. Vice President, Marketing
f. Vice President, Human Resources
g. Vice President and General Counsel
22. Hawes submitted requests for reimbursements for relocation expenses in excess of
$90,000 while employed as President and CEO of PGW.
a. Requisition for Voucher Request No. 02 -80155
Description: Home Sale relocation expenses
Cost: $43,266.70
Hawes 98- 046 -C2
Page 6
Approved By: Ramon Sharbutt, Senior VP CFO
(Second Set of Initials Unreadable)
Date: 01/22/97
b. Requisition for Voucher Request No. 02 -80160
Description:
Cost:
Approved By:
Date:
Description:
Cost:
Approved By:
Date:
United Van Lines, moving expenses for
James Hawes
$31,795.57
Ramon Sharbutt, Senior VP CFO
02/06/97
c. Requisition for Voucher Request No. 02 -80162
Closing Costs for James Hawes' purchase
of Philadelphia Home
$34,089.50
Ramon Sharbutt, Senior VP CFO
02/06/97
d. Requisition For Voucher Request No. 02 -80172
Description:
Cost:
Approved By:
Description:
Cost:
Approved By:
Broker fee for representing Hawes in finding house
$5,000.00
J. Hawes, Ramon Sharbutt, Senior VP CFO
e. Requisition For Voucher Request No. 02 -80213
Expenses incurred relating to moving and unpacking
$4,518.50
James Hawes, Ramon Sharbutt, Senior VP CFO
Total: $118,670.27
23. Hawes' requests for reimbursements totaling $118,677.27 exceeded the $90,000
maximum expenses allowed by the board by $28,677.27.
24. The requisition for voucher requests outlined in Finding No. 22 were approved by
Hawes, and /or his subordinate, Ramon Sharbutt.
a. Sharbutt, as Senior Vice President and Chief Financial Officer, reported directly
to Hawes.
b. He approved vouchers at the direction of Hawes.
25. PGW has provided employees with Corporate American Express Cards for official
PGW business.
26. The PGW established a policy and procedures for expense account reporting for all
management and employees.
a. Procedure 778.01, Expense Account Reports, defines requirements for
approval and reporting of expenses including American Express Cards.
27. PGW Procedure No. 778.01 pertaining to expense reporting and reimbursement was
effective January 9, 1992, and covered all employees, who, in conducting PGW
business incur expenses due to business trips and activities related to their position or
Hawes 98- 046 -C2
Page 7
assignment with the company.
a. The procedure required PGW AMEX cards be used for business expenses
only.
b. Expense reports of the President and CEO (Hawes) will be approved by the Sr.
Vice President and Chief Financial Officer (Sharbutt).
28. Hawes was provided a PGW Corporate American Express Card for official PGW
business use.
29. Hawes billed meal expenses to the PGW Corporate American Express Card.
a. These expenses were paid by PGW upon the approval of Hawes' subordinate,
Ramon Sharbutt.
30. During 1996 and 1997 Hawes' charged meal expenditures to PGW credit cards.
a. These expenditures were then submitted to PGW by Hawes on expense reports
as official PGW business related expenses.
b. The expense reports were signed by Hawes and were approved by Ramon
Sharbutt.
31. Hawes submitted expense reports showing the purchases of meals as follows:
Description
Date of Expenditure Amount
01/22/96 Dinner $ 10.00
01/25/96 Dinner $ 8.00
01/29/96 Dinner $ 20.61
02/02/96 Dinner $ 33.00
02/03/96 Lunch /Dinner $ 26.78
02/06/96 Dinner -Ribit $ 14.00
02/11/96 Dinner -Warm
Daddys $ 25.00
02/13/96 Dinner - Magnolia
Cafe $ 31.00
02/20/96 Dinner Warm
Daddys $ 30.25
02/26/96 Dinner -Ribit $ 13.50
03/01/96* Lunch $ 21.83
03/05/96* Lunch $ 22.00
03/15/96* Dinner $ 33.00
03/16/96* Lunch /Dinner $ 41.00
03/17/96* Dinner $ 25.00
03/18/96* Lunch $ 13.04
03/18/96* Dinner $ 20.00
03/19/96* Dinner $ 20.00
03/22/96* Dinner $ 20.00
03/23/96* Dinner $ 24.16
03/24/96* Dinner $ 23.00
03/28/96* Dinner $ 27.07
03/29/96* Dinner $ 14.10
$ 38.00
04/01/96* Dinner Uno $ 26.00
Hawes 98- 046 -C2
Page 8
04/03/96*
04/09/96*
04/11/96*
04/12/96*
04/13/96*
Description
Date
04/18/96*
04/29/96
05/01/96
05/03/96
05/05/96
05/06/96
05/14/96
05/18/96
05/19/96
05/20/96
05/27/96
05/27/96
06/02/96*
06/10/96*
06/19/96*
06/26/96*
07/02/96
07/03/96
07/05/96
07/10/96
07/13/96
07/14/96
07/23/96
07/30/96
08/02/96*
08/05/96*
08/08/96*
08/08/96*
08/12/96*
08/15/96*
08/20/96*
09/14/96*
09/20/96*
09/26/96*
10/01/96*
10/16/96*
10/24/96*
11/01/96*
11/07/96*
11/23/96
11/27/96
12/01/96
12/05/96
12/09/96
12/08/96
12/22/96
12/26/96
01/10/97
01/15/97
Dinner
Dinner
Lunch - Butlers
Lunch
Dinner
of Expenditure
Dinner
Dinner
Dinner
Lunch
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Lunch Misc.
Dinner
Dinner
Dinner
Dinner
Dinner
Lunch
Lunch
Dinner - Sen
Lucas, GA
Dinner
Dinner
Lunch
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner Reloc.
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
Dinner
$ 20.00
$ 20.00
$ 21.21
$ 15.00
$ 20.00
Amount
$ 36.10
$ 20.00
$ 13.45
$ 17.88
$ 39.65
$ 40.00
$ 40.00
$ 23.65
$ 17.90
$ 20.00
$ 13.67
$ 19.95
$ 11.00
$ 13.45
$ 30.00
$ 30.00
$ 26.95
$ 36.50
$ 113.20
$ 39.57
$ 21.00
$ 21.00
$ 19.59
$ 25.60
$ 30.30
$ 18.60
$ 36.13
$ 6.50
$ 11.05
$ 21.52
$ 29.07
$ 29.40
$ 29.71
$ 36.39
$ 39.98
$ 23.98
$ 47.02
$ 54.87
$ 56.93
$ 37.83
$ 26.24
$ 45.00
$ 47.00
$ 41.00
$ 42.80
$ 41.98
$ 29.88
$ 39.58
$ 46.70
Hawes 98- 046 -C2
Page 9
01/17/97 Dinner
Total
$ 37.07
$2,273.19
Indicates the expense reports on which these expenditures were submitted did not contain
the approval signature of the Senior Vice President and Chief Financial Officer.
32. No evidence exists indicating that these meal expenses were not related to PGW
business.
33. Hawes submitted expense reports showing expenditures for the following items which
were not authorized through his employment agreement with PFMC and did not relate
to PGW business. These expenses included health club memberships and various
items as follows:
Description
Date of Expenditure Amount
03/11/96* Rewards Member $ 50.00
10/17/96 Airline Tickets $ 808.00
Morehouse College
12/06/96 College Fund- $ 47.34
raising event
08/96 to Corp. Sporting
04/97 Club Member $ 1,395.00
04/10/97 Purchase(s) Gust.
Rel. - Augusta $ 1,059.75
05/97 to Membership Fees
08/97 Sporting Club $ 528.00
08/97 to Club Fees - $ 132.00
09/97 September
09/97 to Club Fees -
10/97 October $ 132.00
10/97 to Club Fees - $ 264.00
11/97 Nov /Dec
Jan /Feb Sporting Club
Fees $ 132.00
02/28/98 Membership Rew. $ 75.00
April Sporting Club Fees $ 132.00
May /June Sporting Club $ 264.00
Total $ 5,019.09
Indicates the expense reports on which these expenditures were submitted did not contain
the approval signature of the Senior Vice President and Chief Financial Officer.
34. While employed as CEO and President of PGW James Hawes accepted trips and gifts
from Transco one of the PGW's largest vendors.
a. Some of these trips occurred at a time when PGW and Transco were
renegotiating service contracts.
35. Transcontinental Gas Pipeline Corporation (Transco), a Delaware Corporation with
headquarters in Houston, Texas, has provided natural gas, gas storage facilities, and
natural gas pipeline services to PGW since October 30, 1970.
36. Transco and PGW entered into service agreement contracts on the following dates:
Hawes 98- 046 -C2
Page 10
a. December 14, 1953*
b. October 30, 1972*
c. April 19, 1972*
d. May 10, 1978**
e. August 1, 1991
f. December 1, 1993
g. July 1, 1996"
h. May, 1998**
*Indicates the agreement was between Transco and the United Gas Improvement
Company, predecessor to PFMC.
**Indicates the agreement was between Transco and PGW through PFMC.
37. The service agreement contracts contained details of Transco's sale of gas to PGW,
and PGW's use of Transco's pipeline and storage facilities.
a. The service agreement contracts were drawn up by PGW and Transco officials.
38. The PGW officials who prepared the contracts in 1996 and 1998 were subordinates of
Hawes.
a. Bud Karachiwaca, PGW Vice President for Gas Management, signed the July
1, 1996, contract.
b. Gregory D. Martin, PGW Executive Vice President, and Chief Operating Officer
signed the May 1998 contract.
39. James Hawes participated in discussions and directed the work of Karachiwaca and
Martin.
40. Hawes was a guest at Transco social events in 1996 and 1997 as a result of his
position as CEO of the PGW.
41. Hawes attended the Transco Executive Customer meeting from Sunday, April 21,
1996, to Wednesday, April 24, 1996, at the Boca Raton Resort and Club, Boca Raton,
Florida.
a. The purpose of these meetings was to serve as customer appreciation and to
provide entertainment.
42. Hawes traveled by airline from Philadelphia to Boca Raton on April 21, 1996, and
returned on April 24, 1996.
a. Airfare totaling $542.00 was billed by Hawes to his PGW Corporate American
Express card.
b. The expense was paid by PGW.
Hawes 98- 046 -C2
Page 11
43. Hawes checked into the Boca Raton Resort and Club on April 21, 1996, and checked
out on April 24, 1996.
a. The daily room rate was $275.00
b. Charges for Hawes totaled $1,372.72, which included $825 room charges.
1. The balance of $542.72 included tax and meal charges.
44. The agenda for the meeting included a welcoming address on Sunday evening,
04/21/96, and business meeting on Monday morning, 04/22/96.
a. There were no other business meetings scheduled during the course of the
conference.
45. The remaining agenda for Monday afternoon, April 22, 1996, through Wednesday
morning, April 24, 1996, confirmed Hawes participated in golf outings sponsored by
Transco.
46. Transco paid $1,367.72 for Hawes' stay at the Boca Raton Resort and Club from
04/21/96 to 04 /24/96.
a. Transco also paid for all other meals and expenses Hawes incurred while he
stayed at the resort and club.
47. Hawes incurred cart rentals and greens fees totaling $294.00 while staying at the Boca
Raton Resort and Club which were paid by Transco.
a. 04/22/96: Greens Fees $ 78.00
Cart $ 20.00
Tax $ 5.00
$ 103.00
b. 04/23/96(am) Greens Fees $ 78.00
Cart $ 20.00
Tax $ 5.00
$ 103.00
c. 04/23/96(pm) Greens Fees $ 78.00
Cart $ 20.00
Tax $ 5.00
$ 103.00
48. Transco paid a total of $1,676.72 for lodging meals and golf expenses for James
Hawes from 04/21/96 through 04/24/96.
a. Lodging - Meals $ 1,367.72
b. Golf Fees $ 309.00
Total $ 1,676.72
49. Hawes also attended the Masters Golf Tournament in Augusta, Georgia, from
Wednesday, April 9, 1997, to Sunday, April 13, 1997, as a guest of Transco.
50. Hawes was transported to and from the Masters Golf Tournament in a private jet
provided by Transco.
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Page 12
a. Hawes departed Philadelphia on April 9, 1997, at 3:10 p.m. and arrived in
Augusta on April 9, 1997, at 5:00 p.m.
51. On Sunday, April 12, 1997, Hawes was taken, via private airplane, from Augusta,
Georgia, to North Myrtle Beach where he played golf.
a. Hawes arrived in Myrtle Beach at 7:10 a.m.
b. The greens fees and the golf cart rentals at North Myrtle Beach were paid for by
Transco.
c. Hawes returned to Augusta later that day.
d. Hawes returned to Philadelphia on April 13, 1997, at 7:30 p.m.
e. Hawes was part of a group of five (5) guests entertained by Transco.
52. Hawes stayed at a private residence rented by Transco while in Augusta attending the
Masters Golf Tournament.
a. All of Hawes' meals were provided by Transco.
b. Transco paid other expenses, including greens fees and cart rentals for Hawes
on April 10, 1997; April 11, 1997; and April 12, 1997.
53. While attending the Masters Golf Tournament, Hawes purchased $1,059.75 worth of
merchandise of a personal nature from the Augusta National Golf Club gift shop, using
his PGW American Express credit card.
a. The purchases were not authorized by PFMC's Board or PGW's regulations.
b. The expenses were paid by the PGW.
54. During the time period that Hawes was a guest of Transco's at Boca Raton and the
1996 Masters Golf Tournament, the PGW was negotiating service agreements with
Transco.
a. An amendment to the service agreement under Rate Schedule S -2 was entered
into effective April 16, 1996, and extended the agreement to purchase gas from
Transco for five contract years.
b. A service agreement, effective July 1, 1996, was negotiated for the provision of gas
between July 1, 1996, to June 30, 2001, and July 1, 2001, to March 31, 2013.
55. Hawes and his family attended the 1997 U.S. Open Golf Tournament at the
Congressional Country Club, Bethesda, Maryland, from June 12, 1997, to June 15,
1997, as guests of Transco.
56. Hawes and his family stayed at the Sheraton Premier Hotel at Tysons Corner, Virginia,
from June 12, 1997, to June 15, 1997.
a. Transco paid $1,361.79 for two hotel rooms for the Hawes family.
57. Transco paid for all of Hawes' and his family's meals while attending the U.S. Open.
58. Transco also paid the following greens fees for Hawes on June 13, 1997, and June 14,
Hawes 98- 046 -C2
Page 13
1997:
a. June 13, 1997 - Argyle Country Club - $ 115.00
b. June 13, 1997 - TPC at Avenel - $ 165.00
c. June 14, 1997 - Tantallon Country Club - $ 90.00
Total $ 370.00
59. Expenses paid by Transco on Hawes' behalf for the 1997 U.S. Open Golf Tournament
totaled $1,731.79.
a. Lodging: $ 1,361.79
Greens Fees: $ 370.00
Total $ 1,731.79
60. The PGW and PFMC have policies that have been in effect since at least 1986
prohibiting the receipt of gifts from companies doing business with the PGW.
a. On April 8, 1986, the PFMC board approved a policy applicable to all directors
and employees of PFMC and all PGW Management Committee members
prohibiting gifts from entities that do business with the PGW.
b. The PGW Employee Handbook and the PGW Human Resources Department
Personnel Department Policies and Procedures (Policy No. 003 -9) prohibits
employees from accepting gifts from those who do business with the PGW.
61. In 1996, Hawes used PGW funds to make a donation to his alma mater, Morehouse
College, in the amount of $5,000.
62. The $5,000.00 donation to Morehouse was for a fundraiser for the college and allowed
PGW to place an ad in a souvenir booklet.
a. PGW determined that this contribution was not consistent with PGW policies
and practices.
63. In a letter to PGW, Senior Vice President and General Counsel, Aby Pozefsky, from
Hawes' attorney, it was asserted that:
a. Hawes believed that under his employment contract, his discussions with board
members, city executives, and industry -wide practices, most of the expenses
totaling $1,909.29 and the $5,000.00 provided to Morehouse College were
appropriate business related expenses.
b. Hawes also believed that the expenses related to his golf fees and spousal
expenses at the 1997 American Gas Association (AGA) Conference were
considered acceptable business practice by Hawes.
c. Hawes claimed rental car expenses totaling $1,366.20 were part of his
relocation expenses and therefore allowable.
d. Hawes finally asserted that the $5,181.12 total expenditures to Morehouse
College were justified by Hawes for "numerous business reasons."
64. Hawes was not aware that his position with PGW /PFMC qualified him as a public
official or public employee under the provisions of the Ethics Law.
Hawes 98- 046 -C2
Page 14
65. Restitution for personal expenses was made by Hawes in the form of a $2,500.00
wage attachment to his final payroll by PGW.
a. Hawes also made a $1,625.00 payment to PGW on May 25, 1998, as
reimbursement for his expenses.
III. DISCUSSION:
At all times relevant to this matter, the Respondent, James Hawes, III, hereinafter
Hawes, has been a public employee subject to the provisions of the Public Official and
Employee Ethics Law, Act 9 of 1989, Pamphlet Law 26, 65 P.S. § 401, et se as codified by
the Public Official and Employee Ethics Act, Act 93 of 1998, Chapter 11, 65Pa.C.S. § 1101
et seq., which Acts are referred to herein as the "Ethics Act."
The allegations are that James Hawes, as President and CEO of the Philadelphia Gas
Works (PGW) violated Section 3(a)/1103(a) of the Ethics Act when he: used the authority of
his position for private pecuniary benefits by accepting gifts from the Transcontinental Gas
Pipeline Corporation in the form of all expense paid trips to golf tournaments; claimed and
received reimbursement for expenses in excess of moving expenses approved by contract;
used PGW funds to make a contribution to his alma mater; and billed personal expenses for
himself and his family to PGW.
Pursuant to Section 3(a)/1103(a) of the Ethics Act, a public official /public employee is
prohibited from engaging in conduct that constitutes a conflict of interest.
The term "conflict of interest" is defined under Act 9 of 1989/Act 93 of 1998 as follows:
Section 2/1102. 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
f
of ce 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. "Conflict" or
"conflict of interest" 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.
65 P.S. § 402/65 Pa.C.S. § 1102.
Section 3(a)/1103(a) of the Ethics Act prohibits a public official /public employee from
using the authority of public office /employment or confidential information received by holding
such a public position for the private pecuniary benefit of the public official /public employee
himself, any member of his immediate family, or a business with which he or a member of his
immediate family is associated.
As noted above, the parties have submitted a Consent Agreement and Stipulation of
Findings. The parties' Stipulated Findings are reproduced above as the Findings of this
Commission. We shall now summarize the relevant facts as contained therein.
Hawes 98- 046 -C2
Page 15
Hawes served as President and CEO of PGW from January 1996 to October 1998.
PGW was established by Philadelphia in order to purchase, manufacture and distribute as in
the City. PGW, while owned by Philadelphia, is operated by the Philadelphia Facilities
Management Corporation (PFMC). PFMC provides certain staff subject to the approval of the
Philadelphia Gas Commission (P C). Such personnel receive compensation from PGW plus
benefits such as PGW's pension, health and life insurance plans.
When Hawes was hired as President and CEO in a three year contract with PFMC, the
terms of the contract provided for: a possible two year extension of the contract, a base salary
of $285,000 plus annual merit increases plus annual incentive compensation up to $75,000,
use of a personal company vehicle, PGW executive benefits, reimbursement for expenses
while performing services for PFMC, and expenses related to relocation, temporary housing
and for trips for the purposes of house hunting and relocation. Hawes had responsibility for
net corporate income, corporate operating administrative policies and strategy lans,
safeguards to protect municipal equity and ownership, corporate operating standards and
ethics, and the engenderment of mutually beneficial relations among customers, employees
and the general public and governmental bodies.
At the beginning of Hawes' employment with PGW, there was an allowance up to
$90,000 for reimbursement of relocation expenses. Hawes submitted and received a total
reimbursement of $118,670.27. The excess reimbursements of $28.677.27 were approved
by Hawes himself or his subordinate Ramon Sharbutt, Senior Vice President and CFO, as per
Hawes' direction.
PGW provided Corporate American Express (AMEX) cards to certain personnel for
PGW business use and established policy and procedures for expense account reporting.
The PGW AMEX cards could be only used for business expenses and the expense reports
for Hawes had to be approved by Sharbutt. Hawes billed meal expenses using his PGW
AMEX card. Fact Finding 31 provides a list of meals which Hawes purchased at PGW
expense that totaled $2,273.19. No evidence exists as to whether these meal expenses were
in fact related to PGW business.
There were many instances where Hawes submitted expense reports which were not
authorized as per his employment agreement in that the expenses were not for PGW
business. Such expenses totaling $5,019.09 are delineated in Fact Finding 33. Hawes, as
CEO and President of PGW also accepted trips and gifts from Transcontinental Gas Pipeline
Corporation (Transco), which is one of PGW's largest vendors. Some of the trips occurred at
a time when PGW and Transco were renegotiating service contracts. Fact Finding 36
delineates the dates of the various service agreement contracts between Transco and PGW.
The contracts that were prepared in 1996 and 1998 were done by subordinates of Hawes who
participated in those discussions and directed such work.
Hawes was a guest at social events of Transco in 1996 and 1997 because of his
position with PGW. Hawes attended Transco executive customer meeting in Boca Raton
Resort and Club, from April 21 through 24, 1996, which serves as a customer appreciation
and entertainment event. Hawes charged his airfare of $542 to the PGW AMEX card which
was paid by PGW. The room, meals and tax charges for Hawes' stay totaling $1,367.72 were
paid by Transco. The agenda for the Boca Raton junket consisted of a welcome address one
morning and a business meeting the next morning with no other business meetings scheduled
during the remainder of the conference. From Monday afternoon through Wednesday, Hawes
participated in golf outings sponsored by Transco which also aid for other meals and
expenses that Hawes incurred such as cart rentals and green fees totaling $309. Thus,
Transco paid a total of $1,676.72 for Hawes' lodging, meals and golf fees during the Boca
Raton junket. While Hawes was a guest of Transco, an amendment was made to the
PGW/Transco service agreement which was entered into effective April 16, 1996, to extend
Hawes 98- 046 -C2
Page 16
the agreement for five contract years as well as another service agreement relating to the
provision of gas.
Hawes attended the Master's Golf Tournament in Augusta, Georgia, April 9 -13, 1997,
as a guest of Transco. Hawes was flown from Philadelphia to Augusta in a private jet provided
by Transco and then taken by a private airplane to North Myrtle Beach where he played golf.
Hawes' green fees and golf cart rentals at North Myrtle Beach were paid by Transco. Transco
provided a private residence for Hawes while attending the Master's Golf Tournament as well
as paid for Hawes' meals and other expenses such as green fees and cart rentals during his
stay. While at the Master's Golf Tournament, Hawes purchased $1,059.75 worth of
merchandise of a personal nature at the Augusta National Golf Club Gift Shop which he
charged to his PGW AMEX credit card. Even though those purchases were not authorized by
the PFMC's Board or PGW regulations, the expenses were nevertheless paid by PGW.
Transco also provided for Hawes and his family to attend the 1997 U. S. Open Golf
Tournament in Bethesda, Maryland. Hawes and his family stayed at the Sheraton Premier
Hotel, June 12- 15,1997, with Transco paying $1,361.79 for two hotel rooms for the Hawes
family. In addition, Transco paid for all of Hawes' and his family's meals and $370 in green
fees for Hawes. The total expenses paid by Transco for Hawes and his family at the 1997 U.
S. Open Golf Tournament was $1,731.79.
Despite PGW and PFMC policies which have been in place since 1986, prohibiting the
receipt of gifts from companies doing business with PGW, Hawes received the above gifts,
travel, lodging and meals from Transco.
In 1996, Hawes used PGW funds to make a $5,000 donation to his alma mater,
Morehouse College. Even though an ad for PGW appeared in the college souvenir booklet,
PGW determined that the contribution was contrary to its policies and practices. Hawes,
through his attorney, proffers various excuses for his actions as set forth in Fact Finding 63.
A payment of $2,500 was made from Hawes to PGW as a result of a wage attachment from
his final PGW paycheck. Further, Hawes paid $1,625 to PGW on May 25, 1998.
Having highlighted the Stipulated Findings and issues before us, we shall now apply
the Ethics Act to determine the proper disposition of this case.
The parties' Consent Agreement sets forth a proposed resolution of the allegations.
The Consent Agreement proposes the following:
"a. A violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65
Pa.C.S. §1103(a) relating to Hawes' use of his position to obtain reimbursement for
moving expenses ($28,677) in excess of that provided for in his agreement of
employment.
b. No violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65
Pa.C.S. §11/03(a) [sic] in relation to Hawes' receipt of reimbursement for meal
reimbursements as there was insufficient evidence to establish that such expenses
were not related to official business.
c. A violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65
Pa.C.S. §1103(a) in relation to Hawes' receipt of reimbursement for miscellaneous
expenses in the amount of $5,019.09 that were personal in nature including but not
limited to fitness club memberships, transportation to his college alma mater and
miscellaneous personal expenses as specifically delineated in the findings.
d. A violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65
Pa.C.S. §1103(a) in relation to Hawes' use of his position in order to obtain a $5,000
donation from PGW/PFMC to his alma mater, when such donation was unrelated to
Hawes 98- 046 -C2
Page 17
any official business of PGW /PFMC.
e. A violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65
Pa.C.S. 1103(a) in relation to Hawes' receipt of reimbursement a [sic] in the amount
of $1,676 for transportation, lodging and hospitality expenses relating to his attendance
at a golf outing in Florida and at the Master's Golf Tournament in April of 1996, which
expenses were paid for by a business with which PGW was then negotiating the
renewal of a contract relating to certain services.
f. No violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65 Pa.
C.S. 1103(a) in relation to Hawes' receipt of reimbursement for transportation, lodging
and hospitality expenses relating to his attendance at the 1997 Master's Golf
Tournament, which expenses were paid for by a business with which PGW had an
ongoing contract for the provision of certain services, as such reimbursement had
occurred at a time when no current contract negotiations or renewal were ongoing."
In addition, Hawes agrees to make payment in the amount of $22,000 in settlement of
this matter, payable to the Commonwealth of Pennsylvania, Department of Treasury and
forwarded to the Pennsylvania State Ethics Commission within 30 days of the issuance of the
final adjudication in this matter.
In applying Section 3(a)/1103(a) of the Ethics Act to the stipulated findings, there was a
pattern of conduct by Hawes to use the authority of his office and his position as President
and CEW of PGW, for personal financial gain despite the Ethics Act and prohibitions in the
policies and practices of the PFMC. The record is replete with instances of such uses of
authority of office: submitting vouchers for unauthorized relocation expenses directing a
subordinate to approve relocation expenses despite the fact that Hawes exceeded the
$90,000 cap by $28,677.27; using the PGW AMEX credit card for personal purposes, even
though usage was limited to official PGW business; using $5,000 of PGW funds to make a
donation to his college alma mater; and accepting travel, lodging, meals, golf fees and other
expenses from Transco, which had existing contracts and contract negotiations with PGW.
Utilizing PGW funds for personal purposes, exceeding limits of reimbursements, giving PGW
funds to his college alma mater, receiving gifts, transportation, lodging and meals from
Transco are certainly pecuniary benefits. These pecuniary benefits are private in that they are
not authorized in law. In fact, such pecuniary benefits are expressly prohibited as per the
policies and practice of the PFMC. These private pecuniary benefits inured to Hawes
individually and to members of his immediate family.
In reviewing the specific allegations as to Section 3(a)/1103(a), Hawes received
$28,677.27 in excess of the reimbursements for his relocation as President and CEO of the
PGW. Although Hawes was allowed up to a maximum of $90,000 for his relocation expenses,
he submitted and received reimbursements of $118,677.27 which were conveniently approved
by Hawes himself, his subordinate, the Senior Vice President /CFO, or by both of them. Even
if the excess $28,677.27 were legitimate relocation expenses, those amounts exceeded the
$90,000 cap. Accordingly, Hawes violated Section 3(a)/1103(a) of the Ethics Act when he
obtained $28,677.27 in unauthorized relocation expenses from PGW.
As to reimbursements for meals, those particular charges in the one -year period of
January of 1996 through January of 1997 totaled $2,273.19. With a few exceptions, all those
meal expenses were for dinners. The consent agreement proposes a resolution of this
allegation as no violation based upon an insufficiency of evidence. We agree for the following
three reasons. First, the standard of proof under the Ethics Act is one of clear and convincing
proof which is higher than substantial evidence. Second, the evidence does not establish
whether the meals were really personal and not for PGW business, Third, the Investigative
Division would be placed in the position of attempting to prove a negative, namely, that those
dinner expenses were not for official PGW business purposes. Given the above, we find no
Hawes 98- 046 -C2
Page 18
violation of Section 3(a)/1103(a) of the Ethics Act as to Hawes' receipt of meal
reimbursements in the amount of $2,273.19 based upon an insufficiency of evidence.
Turning to the matter of the personal expenses for which Hawes received
reimbursement from the PGW, the items listed in Fact Finding 33 were expenses that did not
relate to PGW business and were not authorized as part of the employment agreement
between Hawes and PFMC. Nevertheless, Hawes submitted and received reimbursement for
those personal expenditures. Accordingly, Hawes violated Section 3(a)/1103(a ) of the Ethics
Act when he submitted and received reimbursement in the amount of $5,019.19 for
expenditures which were personal in nature and not related to PGW business.
Regarding the $5,000 of PGW funds that Hawes used as a donation to his college
alma mater, this was action by Hawes of expropriating PGW funds not for business matters
but rather for his own personal purposes. This is another example of an overt use of public
office by Hawes for personal financial gain. The private pecuniary benefit consisted of Hawes'
use of PGW funds rather than his own for the contribution. Accordingly, violated
Section 3(a)/1103(a) of the Ethics Act when he utilized $5,000 in PGW funds to make a
donation to his college alma mater.
As to the matter of Hawes' attendance at the Boca Raton junket sponsored by Transco
and the 1996 Master's Golf Tournament, the transportation, hospitality, lodging, meals and
golfing expenses, were paid by Transco, a business with which PGW had completed
contracts, ongoing contracts, and pending contract negotiations, one of which concerned
extending the term of one contract. But for the fact that he was President and CEO of the
PGW, he would not have been in a position to accept such transportation, lodging, hospitality,
meals and other expenses from Transco, PGW's largest vendor. Since Hawes received these
various pecuniary benefits which were not authorized in law, these financial gains were,
therefore, private pecuniary benefits for Hawes. Accordingly, Hawes violated Section
3(a)/1103(a) of the Ethics Act when he received $1,676 in reimbursement for transportation,
lodging, hospitality, and expenses relating to a Transco Junket at Boca Raton, Florida, and the
Master's Golf Tournament, which expenses were paid by Transco, a business with which
PGW was negotiating services contracts.
As to the last allegation, we will accept the consent agreement of the parties that no
violation of Section 3(a)/1103(a) of the Ethics Act occurred by Hawes relative to the
reimbursement of transportation, lodging, hospitality expenses for the attendance at a 1997
Master's Golf Tournament where the expenses were paid by Transco, a business which has
ongoing contracts with PGW on the basis that the reimbursement occurred at a time when no
current contract negotiations or renewals were pending. Accordingly, we are constrained to
find no violation of Section 3(a)/1103(a) as to that particular allegation.
Having applied the Ethics Act to the individual allegations, we are compelled to
comment generally on Hawes' conduct. We place Hawes' conduct in the category of other
individuals who have crassly used public office for personal financial gain: Foster, Order749,
Helsel, Order 801, and Johnson, Order 1137. In Foster, we held that a township supervisor
violated Section 3(a) of the Ethics Law when he took cheese, butter, rice and other food items
from a surplus food distribution program for his own personal purposes. In Helsel, we
determined that a school board member violated Section 3(a) of the Ethics Act by using public
office to support or vote for vendors as to school district contracts in return for gifts or
gratuities. That case, in part, involved the school director's supporting a food vendor who
supplied him with gifts but supplied sour milk to the district's elementary school children.
Lastly, in Johnson, we ruled that a full -time count y solicitor violated Section 3(a)/1103(a) of the
Ethics Act when he accepted all expense paid trips from a county vendor when he was
participating in drafting bid specifications and receiving bids for a contract awarded to that
vendor. See also, Shaner Order 1163.
Hawes 98- 046 -C2
Page 19
In our review of this case, we find that Hawes' conduct was flagrant and outrageous.
Public office to Hawes meant, "to the victor goes the spoils." Consider the excess relocation
expenses totaling $28,677 (above the $90,000 he received) to which he was not entitled but
nevertheless pocketed when he or his subordinate approved such expenditures for payment
from PGW funds. Consider his use of $5,000 of PGW funds to give a gift to his college alma
mater. Consider all of the various personal expenses, totaling over $5,000, for which Hawes
received reimbursement as if the expenses were related to PGW business when they were
not. Consider the junket and golf tournament trips paid by Transco which had existing
contracts and, in some instances, renewals or negotiations as to other contracts for services
with PGW. Nevertheless, Hawes went forward with his machinations of using public office for
personal financial gain, violating both the letter and the spirit of the Ethics Act. Hawes used
public office to pursue personal financial gain at the expense of the public trust. The preamble
to the Ethics Act provides that public confidence in government can be best sustained by
assuring the people of the impartiality and honesty of public officials. In the case of Hawes,
the only way that that could be achieved is through his departure from public office.
Fortunately, Hawes' reign for financial gain as CEO and President of PGW concluded when
his service ended on October 30, 1998.
We determine that the Consent Agreement submitted by the parties sets forth the
proper disposition for this case, based upon our review as reflected in the above analysis and
the totality of the facts and circumstances. Accordingly, Hawes is directed to pay $22,000 to
the Commonwealth of Pennsylvania, Department of Treasury, through this Commission within
30 days of the mailing date of this Order. Compliance with the foregoing will result in the
closing of this case with no further action by this Commission. Noncompliance will result in
the institution of an order enforcement action.
IV. CONCLUSIONS OF LAW:
1. Hawes, as President and CEO of the Philadelphia Gas Works for the relevant time
period, was a public employee subject to the provisions of Act 9 of 1989 as codified by
Act 93 of 1998.
2. Hawes violated Section 3(a)/1103(a) of Ethics Act when he used his position to obtain
reimbursement for relocation expenses ($28,677) in excess of the $90,000 provided
for in his agreement of employment.
3. Hawes did not violate Section 3(a)/1103(a) of the Ethics Act when he received
reimbursements for meals as there was insufficient evidence to establish that such
expenses were not related to official PGW business.
4. Hawes violated Section 3(a)/1103(a) of the Ethics Act when he received
reimbursements for miscellaneous expenses in the amount of $5,019.09 that were
personal in nature including but not limited to fitness club memberships, transportation
to his college alma mater and miscellaneous personal expenses.
5. Hawes violated Section 3(a)/1103(a) of the Ethics Act when he used his position to
donate $5,000 of PGW/PFMC funds to his alma mater, when such donation was
unrelated to any official business of PGW /PFMC.
6. Hawes violated Section 3(a)/1103(a) of the Ethics Act when he received
reimbursement in the amount of $1,676 for transportation, lodging and hospitality
expenses relating to his attendance at a golf outing in Florida and at the Masters Golf
Tournament in April of 1996, which expenses were paid for by Transcontinental Gas
Pipeline Corporation (Transco) which was then negotiating the renewal of a contract
relating to certain services.
7. Hawes did not violate of Section 3(a)/1103(a) of the Ethics Act when he received
Hawes 98- 046 -C2
Page 20
reimbursement for transportation, lodging and hospitality expenses relating to his
attendance at the 1997 Master's Golf Tournament, which expenses were paid for by
Transco, a business with which PGW had an ongoing contract, as such
reimbursement occurred at a time when no current contract negotiations or renewal
were ongoing.
In Re: James Hawes, III
ORDER NO. 1263
File Docket: 98- 046 -C2
Date Decided: 12/4/02
Date Mailed: 12/16/02
1. Hawes, as President and CEO of the Philadelphia Gas Works for the relevant time
period, violated Section 3(a)/1103(a) of Ethics Act when he used his position to obtain
reimbursement for relocation expenses ($28,677) in excess of the $90,000 provided
for in his agreement of employment.
2. Hawes did not violate Section 3(a)/1103(a) of the Ethics Act when he received
reimbursements for meals as there was insufficient evidence to establish that such
expenses were not related to official PGW business.
3. Hawes violated Section 3(a)/1103(a) of the Ethics Act when he received
reimbursements for miscellaneous expenses in the amount of $5,019.09 that were
personal in nature including but not limited to fitness club memberships, transportation
to his college alma mater and miscellaneous personal expenses.
4. Hawes violated Section 3(a)/1103(a) of the Ethics Act when he used his position to
donate $5,000 of PGW/PFMC funds to his alma mater, when such donation was
unrelated to any official business of PGW /PFMC.
5. Hawes violated Section 3(a)/1103(a) of the Ethics Act when he received
reimbursement in the amount of $1,676 for transportation, lodging and hospitality
expenses relating to his attendance at a golf outing in Florida and at the Masters Golf
Tournament in April of 1996, which expenses were paid for by Transcontinental Gas
Pipeline Corporation (Transco) which was then negotiating the renewal of a contract
relating to certain services.
6. Hawes did not violate of Section 3(a)/1103(a) of the Ethics Act when he received
reimbursement for transportation, lodging and hospitality expenses relating to his
attendance at the 1997 Master's Golf Tournament, which expenses were paid for by
Transco, a business with which PGW had an ongoing contract, as such
reimbursement occurred at a time when no current contract negotiations or renewal
were ongoing.
7. Per the Consent Agreement of the parties, Hawes is directed to pay $22,000 to the
Commonwealth of Pennsylvania, Department of Treasury, through this Commission
within 30 days of the mailing date of this Order.
a. Compliance with the foregoing will result in the closing of this case with no
further action by this Commission.
b. Non - compliance will result in the institution of an order enforcement action.
BY THE COMMISSION,
Hawes 98- 046 -C2
Page 22
Louis W. Fryman, Chair