Loading...
HomeMy WebLinkAbout03-536 BullanoJoseph V. Bullano, Esq. 2656 Wilmington Road New Castle, PA 16105 Re: Conflict; Public Official /Employee; Member; Board of Directors; County Industrial Development Authority; Purchase of Property By Authority Board Member From County Industrial Development Authority. Dear Mr. Bullano: ADVICE OF COUNSEL March 28, 2003 03 -536 This responds to your letter of February 24, 2003, by which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq., presents any prohibition or restrictions upon a member of the board of directors of a county industrial development authority as to purchasing property owned by the authority. Facts: You are Solicitor for the Lawrence County Industrial Development Authority Authority "). You are also private counsel to Angelo Medure ( "Medure "), an Authority Board Member who has authorized you to seek an advisory on his behalf based upon the following submitted facts. In 1976, the Authority participated in an industrial development bond financing project for Metallurgical Company of America ( "Metcoa "), which constructed an industrial facility (metal reclamation) on approximately 22 acres of land located in Pulaski Township, Lawrence County, Pennsylvania. The facility was approximately 50,000 square feet in size. In the process of business operations, Metcoa contaminated the surrounding area with hazardous substances. After the operations of Metcoa ceased in the early 1980's, the United States Environmental Protection Agency ( "EPA ") identified approximately 100 responsible parties who were named in litigation filed in the United States District Court, Western District of Pennsylvania, which resulted in a clean up and stabilization of the hazardous substances on the premises. The cost of cleanup was paid for by the defendants. Metcoa then went into bankruptcy leaving the property abandoned and deteriorating for the past 20 years. Bullano /Medure 03 -536 March 28, 2003 Page 2 Approximately two years ago, Medure, in his private capacity, became interested in making the property productive and returning it to the tax roles; thus, at his own expense, he engaged a local environmental engineering firm which conducted both Phase 1 and Phase II Environmental Audits on the property. Medure then secured preliminary approvals from both the EPA and the PaDEP to acquire and develop the property and contacted lending institutions who still had valid mortgages encumbering the property. The mortgagees agreed to assign their interests in the mortgages in exchange for $115,000 notwithstanding that the mortgage balances, penalty and interest exceeded $1,000,000. The county, school and township agreed to exonerate all delinquent taxes over the past 20 years in exchange for $15,000 of the $115,000 to be paid to the mortgagees. All of the foregoing governmental agencies and lending institutions jointly cooperated in order that a community benefit would be served in rehabilitating this superfund site and developing an industrial facility thereby creating new jobs. In spite of the progress made by Medure which took in excess of one year, in June 2002, he decided to focus on other business ventures and stopped pursuing the Metcoa project. In late January 2003, Medure learned that an industrial firm was interested in occupying the Metcoa property to expand a division of its products. Medure contacted you and instructed you to inform EPA and the mortgagees that he wanted to proceed with acquisition of the property. You state that both EPA and the mortgagees were very pleased to take the appropriate measures to facilitate the acquisition. The mortgagees agreed to the terms of the previous agreement. EPA is in the process of issuing a "comfort letter" which precedes the issuance of a "Prospective Purchaser Agreement" which was approved for Medure in his efforts to acquire the property two years ago. You state that because of the recent amendment of the applicable 'Brownfield Legislation," the EPA has indicated that the acquisition will not be a long process. You state that record title to the property is in the Authority as a result of the original industrial development bond project with Metcoa. Title was required to be placed in the Authority with a Lease Agreement to Metcoa so that the lenders for this project could take advantage of tax -free financing under the industrial and commercial development law. Upon satisfying the underlying loan, Metcoa could exercise an option in the Lease to purchase the property from the Authority for $100. Since Metcoa never exercised the option, title remained in the name of the Authority. You state that Medure now requests that the Authority transfer title to the property to his firm, Medure Development, LLC ( "Medure Development ") so that he may begin the restoration process. You state that the industrial firm which has expressed an interest in the property is requiring the facility to be operational by early summer or will investigate other potential locations. The industrial firm anticipates the creation of 25 to 50 new jobs with the expansion plans, which you state is extremely vital to Lawrence County. If Medure is to be successful in meeting this time constraint, the construction schedule must being at the very earliest date. Based upon the foregoing facts, you ask whether Medure, as an Authority Board Member would have a conflict as to matters before the Authority relating to his acquisition of the Metcoa 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 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 Bullano /Medure 03 -536 March 28, 2003 Page 3 affords a defense to the extent the requestor has truthfully disclosed all of the material facts. As a Member of the Board of Directors of the Lawrence County Industrial Development Authority ( "Authority "), Angelo Medure ( "Medure ") is a public official as that term is defined in the Ethics Act, and hence he is 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, 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. "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 Bullano /Medure 03 -536 March 28, 2003 Page 4 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(f) of the Ethics Act provides as follows: § 1103. Restricted activities (f) Contract. - -No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official or public employee is associated or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the public official or public employee is associated, unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the public official or public employee shall not have any supervisory or overall responsibility for the implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of the making of the contract or subcontract. 65 Pa.C.S. § 1103(f). Section 1103(f) does not operate to make contracting with the governmental body permissible where it is otherwise prohibited. Rather, where a public official /public employee, his spouse or child, or a business with which he, his spouse or child is associated, is otherwise appropriately contracting with the governmental body, or subcontracting with any person who has been awarded a contract with the governmental body, in an amount of $500.00 or more, Section 1103(f) requires that an open and public process" be observed as to the contract with the governmental body. Pursuant to Section 1103(f), an "open and public process" includes: (1) prior public notice of the employment or contracting possibility; (2) sufficient time for a reasonable and prudent competitor /applicant to be able to prepare and present an application or proposal; (3) public disclosure of all applications or proposals considered; and Bullano /Medure 03 -536 March 28, 2003 Page 5 (4) public disclosure of the contract awarded and offered and accepted. Section 1103(f) of the Ethics Act also requires that the public official /employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. 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 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. If the private employer or business with which the public official /public employee is associated or a private client would have a matter pending before the governmental body, the public official /public employee would have a conflict of interest as to such matter. Miller, supra; Kannebecker, supra. A reasonable and legitimate expectation that a business relationship will form may also support a finding of a conflict of interest. Bullano /Medure 03 -536 March 28, 2003 Page 6 Amato, Opinion 89 -002. 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 11030) set forth above. The abstention requirement would not be limited merely to 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. Having established the above general principles, your specific inquiry shall be addressed. Based upon the submitted facts, it would appear that Medure Development, LLC ( "Medure Development ") is a business with which Medure is associated. Therefore, as an Authority Board Member, Medure would have a conflict of interest in matters before the Authority that would financially impact himself, Medure Development, or client(s) of Medure Development. Medure would specifically have a conflict of interest as to any matter before the Authority pertaining to the acquisition or purchase of the Metcoa property, either by Medure, Medure Development, or any others who would be interested in the property because a public official may not use the authority of office to eliminate competitors thereby increasing his or her own chances of prevailing. See, Pepper, Opinion 87 -008. In each instance of a conflict, Medure would be requirecfto abstain and to observe the disclosure requirements of Section 1103(j) of the Ethics Act. Further, where Section 1103(f) applies, its requirements must be strictly observed. Under the facts that you have submitted, the governmental body with which Medure would be associated would be the Authority. Accordingly, the contract between Medure and the Authority, if over $500, would be subject to the restrictions of Section 1103(f). Parenthetically, although the contracting in question would not be prohibited under the Ethics Act provided the requirements of Sections 1103(a), 1103(f), and 1103(1) are satisfied, a problem may exist as to such contracting under the Economic Development Financing Law. In the instant situation, the Economic Development Financing Law provides as follows: § 382. Competition in award of contracts (d) No member of the authority or officer or employee thereof shall, either directly or indirectly, be a party to or be in any manner interested in any contract or agreement with the authority for any matter, cause or thing whatsoever by reason whereof any liability or indebtedness shall in any way be created against such authority. If any contract or agreement shall be made in violation of the provisions of this section the same shall be null and void and no action shall be maintained thereon against such authority. 73 P.S. § 382(d). Since such contracting may be prohibited by the above quoted provision of the Economic Development Financing Law, and since the State Ethics Commission does not administer or enforce that Law, it is suggested that Medure seek legal advice in that 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 Bullano /Medure 03 -536 March 28, 2003 Page 7 conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Specifically not addressed herein is the applicability of the respective municipal code. Conclusion: As a Member of the Board of Directors of the Lawrence County Industrial Development Authority ( "Authority "), Angelo Medure ( "Medure ") is a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. Based upon the submitted facts, it would appear that Medure Development LLC( "Medure Development ") is a business with which Medure is associated. Therefore, as an Authority Board Member, Medure would have a conflict of interest in matters before the Authority that would financially impact himself, Medure Development, or client(s) of Medure Development. Medure would specifically have a conflict of interest as to any matter before the Authority pertaining to the acquisition or purchase of the Metcoa property, either by Medure, Medure Development, or any others who would be interested in the property. Where Section 1103(f) applies, its requirements must be strictly observed. Under the facts that you have submitted, the governmental body with which Medure would be associated would be the Authority. Accordingly, the contract between Medure and the Authority, if over $500, would be subject to the restrictions of Section 1103(f). However, since such contracting may be prohibited by the Economic Development Financing Law, it is suggested that Medure seek legal advice in that 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