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HomeMy WebLinkAbout23-511 FreimuthPHONE: 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 February 9, 2023 To the Requester: Andrew R. Freimuth, Esquire Dear Mr. Freimuth: 23-511 This responds to your letter dated January 23, 2023, by which you requested an advisory from the Pennsylvania State Ethics Commission ("Commission"), seeking guidance as to the issues presented below: Issues: (1) Whether, pursuant to Section 1103(a) of the Public Official and Employee Ethics Act ("Ethics Act"), 65 Pa.C.S. § 1103(a), an individual serving as a Member of the Board of the Redevelopment Authority of Montgomery County ("Authority") would have a conflict of interest with regard to participating in discussions or votes of the Authority Board pertaining to the Authority's award of an agreement/contract for the administration of grant funds for housing projects, if a non-profit corporation with which the individual is employed would submit a proposal to the Authority to administer the grant funds. BriefAnswer: YES. If the individual's employer would submit a proposal to the Authority to administer the grant funds, the individual would have a conflict of interest under Section 1103(a) of the Ethics Act with regard to participating in discussions or votes of the Authority Board pertaining to the Authority's award of an agreement/contract to administer the grant funds. (2) Whether the Ethics Act would impose prohibitions or restrictions upon the individual, as an Authority Board Member or as an employee (i.e., executive director) of the non-profit corporation, with regard to overseeing work performed by the non-profit corporation under an agreement/contract between the non-profit corporation and the Authority for the administration of the grant funds. Freimuth123-511 February 9, 2023 Page 2 Brief Answer: YES. Pursuant to Section 1103(f) of the Ethics Act (pertaining to contracting), in her public capacity as a Member of the Authority Board, the individual would be prohibited from having any supervisory or overall responsibility for the implementation of an agreement/contract between the non-profit corporation and the Authority for the administration of the grant funds. The Ethics Act would not prohibit the individual, in her private capacity as the executive director of the non-profit corporation, from overseeing work performed by the non-profit corporation under such an agreement/contract. Facts: You have been authorized by Judith M. Memberg ("Ms. Memberg") to request an advisory from the Commission on her behalf. You have submitted facts that may be fairly summarized as follows. Ms. Memberg is a Member and Secretary of the Authority Board. The Authority was organized by Montgomery County ("County"), Pennsylvania pursuant to the Urban Redevelopment Law, 35 P.S. § 1701 et sec for the purpose of assisting the County's townships and boroughs in stimulating economic revitalization and aiding in the provision of affordable housing through applications to state and federal sources. The Authority is holding repaid loan funds from Pennsylvania's Communities of Opportunity grant program (the "Grant Funds"), and it has received authorization from the Pennsylvania Department of Community and Economic Development ("DCED") to repurpose and use the Grant Funds for housing projects in Pottstown Borough. In order to determine an appropriate disposition of the Grant Funds, the Authority plans to issue a request for proposals ("RFP") seeking qualified candidates to administer the use of the Grant Funds for specific housing programs in Pottstown Borough. An agreement/contract between the successful proposer and the Authority for the administration of the Grant Funds will be required. It is anticipated that a percentage of the total Grant Funds will be paid to the successful proposer as compensation for the costs and expenses of administering the Grant Funds. In a private capacity, Ms. Memberg is employed as the Executive Director of Genesis Housing Corporation ("Genesis"), which is a 501(c)(3) non-profit corporation. Genesis is a community housing development corporation that rehabilitates homes, improves and stabilizes neighborhoods by reducing blighting influences, and provides counseling services on housing and financial issues for potential homebuyers in Montgomery County and the surrounding counties. Because Genesis has experience in administering housing -related grant programs and in administering housing programs in Pottstown Borough, it is anticipated that Genesis will submit a proposal to the Authority to administer the Grant Funds in accordance with the RFP. Ms. Memberg, as a Member of the Authority Board, has not participated in the preparation of the RFP, and she did not attend the Authority Board meeting at which the RFP was authorized. You state that if Genesis would submit a proposal in response to the RFP, Ms. Memberg, as a Member of the Authority Board, would not participate in any discussions regarding the review of proposals received, and she would abstain from voting on the award of any agreement/contract to Genesis. Ms. Memberg would not participate in the administration and enforcement of any agreement/contract awarded to Genesis. Freimuth123-511 February 9, 2023 Page 3 In her capacity as the Executive Director of Genesis, Ms. Memberg would have ultimate responsibility for preparing and submitting a proposal in response to the RFP and for any communications necessary for clarification of the RFP process. If the agreement/contract would be awarded to Genesis, Ms. Memberg would be responsible for preparing and providing reports to the Authority as required for appropriate reporting to DCED to demonstrate that Genesis complied with the agreement/contract and disposed of the Grant Funds in accordance with its proposal and the agreement/contract. Ms. Memberg's compensation as the Executive Director of Genesis would not be affected by the award of an agreement/contract to Genesis. Based upon the above submitted facts, the questions that are presented by your advisory request are: (1) if Genesis would submit a proposal to the Authority to administer the Grant Funds, whether the Ethics Act would impose prohibitions or restrictions upon Ms. Memberg with regard to participating in discussions or votes of the Authority Board pertaining to the award of an agreement/contract to administer the Grant Funds; and (2) whether the Ethics Act would impose prohibitions or restrictions upon Ms. Memberg, as an Authority Board Member or as the Executive Director of Genesis, with regard to overseeing work performed by Genesis under an agreement/contract with the Authority for the administration of the Grant Funds. Discussion: 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. An advisory opinion only affords a defense to the extent the requester has truthfully disclosed all material facts. In issuing an advisory opinion, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to acts that have not been submitted. It is the burden of the requester to truthfully disclose all material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). Sections 1103(a) and 11030) of the Ethics Act provide: § 1103. Restricted activities (a) Conflict of interest. -- No public official or public employee shall engage in conduct that constitutes a conflict of interest. 0) 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 Freimuth123-511 February 9, 2023 Page 4 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(a), 11030). 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. 65 Pa.C.S. § 1102. Freimuth123-511 February 9, 2023 Page 5 Section 1103(a) of the Ethics Act, pertaining to conflict of interest, restricts public officials and public employees in their public capacities, not their private capacities. Subject to the statutory exclusions to the Ethics Act's definition of the term "conflict" or "conflict of interest" (i.e., the "de minimis exclusion" or the "class/subclass exclusion"), 65 Pa.C.S. § 1102, a public official/public employee is prohibited from using the authority of public office or confidential information received by holding such a public position for the private pecuniary (financial) 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. The definition of the term "business" as set forth in the Ethics Act includes a non-profit corporation. Rendell v. State Ethics Commission, 603 Pa. 292, 983 A.2d 708 (2009). The use of authority of office is not limited merely to voting but extends to any use of authority of office including, but not limited to, discussing, conferring with others, and lobbying for a particular result. Juliante, Order 809. In 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. Additionally, the disclosure requirements of Section 11030) of the Ethics Act would have to be satisfied in the event of a voting conflict. Section 1103(f) of the Ethics Act, pertaining to contracting, provides as follows: (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). The term "contract" is defined in the Ethics Act as follows: § 1102. Definitions "Contract." An agreement or arrangement for the acquisition, use or disposal by the Commonwealth or a political Freimuth123-511 February 9, 2023 Page 6 subdivision of consulting or other services or of supplies, materials, equipment, land or other personal or real property. The term shall not mean an agreement or arrangement between the State or political subdivision as one parry and a public official or public employee as the other parry, 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. 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. Section 1103(f) of the Ethics Act also provides that the public official/public employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. Conclusion: In applying the above provisions of the Ethics Act to the instant matter, you are advised as follows. As a Member of the Authority Board, Ms. Memberg is a public official subject to the provisions of the Ethics Act. Genesis is a business with which Ms. Memberg is associated in her capacity as an employee (Executive Director). In her capacity as a Member of the Authority Board, Ms. Memberg generally would have a conflict of interest under Section 1103(a) of the Ethics Act in matters that would financially impact her or Genesis. If Genesis would submit a proposal to the Authority to administer the Grant Funds, Ms. Memberg would have a conflict of interest with regard to participating in discussions or votes of the Authority Board pertaining to the award of an agreement/contract to administer the Grant Funds. In each instance of a conflict of interest, Ms. Memberg 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. Additionally, the disclosure requirements of Section 11030) of the Ethics Act would have to be satisfied in the event of a voting conflict. The restrictions and requirements of Section 1103(f) of the Ethics Act would have to be observed as to any agreement/contract between Genesis and the Authority for the administration of the Grant Funds. (See, Kistler v. State Ethics Commission, 610 Pa. 516, 22 A.3d 223 (2011), regarding the requirements for an "open and public process.") In pertinent part, Section 1103(f) of the Ethics Act would prohibit Ms. Memberg, in her public capacity as a Member of the Authority Board, from having any supervisory or overall responsibility for the implementation of an agreement/contract awarded to Genesis by the Authority for the administration of the Grant Funds. The Ethics Act would not prohibit Ms. Memberg, in her private capacity as the Executive Freimuth, 23-511 February 9, 2023 Page 7 Director of Genesis, from overseeing work performed by Genesis under such an agreement/contract. 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. Specifically not addressed herein is the applicability of the Urban Redevelopment Law. Pursuant to Section 1107(11) of the Ethics Act, an Advice of Counsel 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. 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. Respectfully, Bridget K. Guilfoyle Chief Counsel