HomeMy WebLinkAbout1286 YurekIn Re: Frank Yurek
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
02- 086 -C2
Order No. 1286
6/23/03
7/8/03
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
investigation, the Investigative Division served upon Respondent written notice of the specific
allegation(s). Upon completion of its investigation the Investigative Division issued and
served upon Respondent a Findings Report identified as an "Investigative Complaint." An
Answer was not filed and a hearing was deemed waived. The record is complete.
Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter 11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.
Yurek 02- 086 -C2
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I. ALLEGATIONS:
That Frank Yurek, a (public official /public employee) in his capacity as a Member of
Wyoming Borough Council, Luzerne County, violated the following provisions of the State
Ethics Act (Act 93 of 1998) including but not limited to participating in discussions and actions
of borough council and council committees to place borough police pension funds with an
investment firm, LPL Financial Services, which employs his brother; when the contract with
LPL, in excess of $500 was entered into without an open and public process; when he failed
to disclose sources of income in excess of $1,300.00 on Statements of Financial Interests
filed for the 2001 calendar year; and when he failed to disclose his ownership interest in
Cleaning Express, Inc.
Section 311103. Restricted activities
(a) Conflict of interest. - -No public official or public
employee shall engage in conduct that constitutes a conflict of
interest.
65 P.S. § 403(a)/65 Pa.C.S. § 1103(a).
Section 311103. 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 P.S. § 403(f)/65 Pa.C.S. § 1103(f).
Section 211102. 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.
Yurek 02- 086 -C2
Page 3
65 P.S. § 402/65 Pa.C.S. § 1102.
Section 511105. Statement of financial interests
(b) Required information. - -The statement shall include
the following information for the prior calendar year with regard to
the person required to file the statement:
(5) The name and address of any direct or indirect
source of income totaling in the aggregate $1,300 or
more. However, this provision shall not be construed to
require the divulgence of confidential information
protected by statute or existing professional codes of
ethics or common law privileges.
(8) Any office, directorship or employment of any
nature whatsoever in any business entity.
(9) Any financial interest in any legal entity
engaged in business for profit.
65 P.S. § 405(b)/65 Pa.C.S. § 1105(b).
II. FINDINGS:
1. The Investigative Division of the State Ethics Commission received information alleging
that Frank Yurek violated provisions of the State Ethics Act (Act 93 of 1998).
2. Upon review of the information the Investigative Division initiated a preliminary inquiry
on September 27, 2002.
3. The preliminary inquiry was completed within sixty days.
4. On November 26, 2002, a letter was forwarded to Frank Yurek, by the Investigative
Division of the State Ethics Commission informing him that a complaint against him
was received by the Investigative Division and that a full investigation was being
commenced.
a. Said letter was forwarded by certified mail, no. 7001 1940 0001 2179 5704.
b. The domestic return receipt bore the signature of Frank P. Yurek, with a
delivery date of December 4, 2002.
5. Periodic notice letters were forwarded to Frank Yurek in accordance with the provisions
of the Ethics Law advising him of the general status of the investigation.
6. The Investigative Complaint was mailed to the Respondent on May 16, 2003.
7. Frank Yurek has served as a member of Wyoming Borough Council since January
1996.
a. Since 1996 Yurek has served on the borough's Administration, Finance and
Grants Committee.
b. Yurek was the chairman of the committee from 1998 to 2001.
8. Yurek is owner and operator of The Cleaning Express, Inc., 178 East Sixth Street,
Yurek 02- 086 -C2
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Wyoming, PA.
9. Articles of Incorporation on file with the Pennsylvania Department of State include
corporate filings for Cleaning Express, Inc.
a. Cleaning Express, Inc., 178 E. Sixth Street, Wyoming, PA 18644, was
incorporated by Frank P. Yurek, on September 6, 1996.
b. Effective January 31, 2002, the business name became Cleaning Express of
Wyoming Valley Inc., 178 E. Sixth Street, Wyoming, PA 18644, with listed
incorporators of Francis P. Yurek, Jr., and Lisa Yurek.
1. Lisa Yurek is Frank Yurek's wife.
10. Wyoming Borough is governed by a six member council and a mayor.
a The mayor has supervisory responsibility over the borough's police department.
b. The police department typically consists of 4 full -time [and] 3 part -time officers,
and a part -time clerical position.
11. Wyoming Borough provides a pension for its police personnel.
a. The borough's police pension plan falls under the review of council's
administrative committee.
12. Members of council's administrative committee since 1996 have included:
a. 1996: Yurek, Carroll, Stahley
b. 1997: Yurek, Carroll, Stahley
c. 1998: Yurek, Guilford, Nalewajko
d. 1999: Yurek, Gilford, Nalewajko
e. 2000: Yurek, Gilford, Nalewajko
f. 2001: Yurek, Guilford, Nalewajko
g. 2002: Flynn, Yurek, Nalewajko
h. Yurek was the committee chairman between 1998 and 2001.
13. Minutes are not maintained from meetings of the borough's administration committee.
a. Committee meetings typically occur in conjunction with council meetings or
council work sessions.
b. The committee chairman is responsible for making committee presentations
before the entire council.
14. The borough has utilized the services of pension plan administrator to manage the
assets of the police pension fund.
15. Trollinger Consulting Group, 1132 Hamilton Street, Suite 212, Allentown, PA 18101,
served as the borough's police pension administrator from April 1, 1996, until August
18, 1998.
Yurek 02- 086 -C2
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16. During the spring of 1998, borough police personnel became dissatisfied with the fees
charged by Trollinger.
a. Trollinger's fees would exceed $30,000 annually while the plan's balance
increased only slightly.
17. In the spring of 1998, borough police chief John Gilligan and Officer Joseph Kopko
contacted Timothy Yurek regarding the availability of pension investment alternatives.
a. In 1998 plan participants included Chief Gilligan and Officers Joseph Kopko,
William Ragantesi and Chris Mercavitch.
b. Gilligan and Kopko were familiar with Tim Yurek and LPL as a result of
investment services LPL performed for the borough's volunteer fire company.
c. Gilligan and Kopko were aware of the family relationship between Tim Yurek of
LPL and Councilman Frank Yurek at the time.
18. Timothy Yurek is the brother of Respondent Frank Yurek.
a. Timothy Yurek is employed by Linsco /Private Ledger (LPL), an independent
brokerage firm.
b. Timothy Yurek has been employed by LPL Financial as a financial advisor
since approximately 1994.
19. Linsco /Private Ledger (LPL) was created in 1989 by the merger of brokerage firms
Linsco and Private Ledger.
a. Company representatives advise clients on stocks and bonds, mutual funds,
commodities, options, annuities, insurance, real estate investment trusts and
other investment vehicles.
b. As an independent company, LPL does not sell its own investment products but
provides access to others across the nation.
c. LPL maintains corporate offices in Boston, MA, and San Diego, CA.
d. Independent representatives operate throughout the United States.
20. Timothy Yurek and Michael J. Hirthler operate an independent LPL branch located at
100 Baltimore Drive, Wilkes- Barre, PA 18702.
a. Yurek specializes in insurance while Hirthler specializes in investments.
b. Yurek and Hirthler pay a ten percent franchise fee to operate locally using the
LPL name.
21. At Chief Gilligan's request, Tim Yurek reviewed the borough's police pension plan with
Trollinger Consulting Group.
a. Yurek's review found the borough was paying fees of approximately $29,040 on
the borough's police pension account with an approximate value of $680,000 as
of January 6, 1998.
b. Tim Yurek based Trollinger's fee estimation on the following fee schedules
included with Trollinger account records.
Yurek 02- 086 -C2
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Fees
Asset charge 2.5% (page 1 contract summary page)
Mutual Fund Management .55%
(page 3, prospectus dated 01/06/98)
Advisory Fee — 1%
Administration charge $1,500.00
Total
$ 17,000.00
$ 3,740.00
$ 6,800.00
$ 1,500.00
$ 29,040.00
c. Tim Yurek also found that Trollinger was not investing police pension funds
directly but was utilizing the services of Nationwide Insurance to serve as the
plans trustee.
d. Nationwide Insurance in turn applied police pension funds to fund services
offered by the following entities.
Phoenix Series Fund Nationwide Financial Services
Delaware Group Neuberger & Berman Funds
Dreyfus Corporation Oppenheimer Funds Management
Evergreen Funds Strong Funds
Fidelity Investments Twentieth Century Investors
Janus Funds
22. Chief Gilligan believed that Trollinger's fee structure resulted in the plan being double
billed for many investment services.
a. Both Trollinger and Nationwide would charge fees every time an account
transaction occurred.
b. Gilligan also felt that Trollinger wasn't providing all relevant pension records
timely and [sic] over - billing for actuarial reports.
23. Borough Solicitor Mark Bufalino, Esquire, examined pension records and concluded
that Trollinger and Nationwide were charging fees for similar account activities.
a. Bufalino reviewed documents and correspondence related to the change for
council.
24. As a result of Tim Yurek's review, LPL prepared investment proposals for the
borough's police pension plan with asset investments handled by Goldman Sachs and
Oppenheimer Funds, Inc.
a. Use of Oppenheimer Funds, Inc., would eliminate asset charges and advisory
fees previously paid.
b. The elimination of these fees would result in an approximate annual savings of
$23,800 dependent upon investment performance.
c. Savings were based on the following fee schedule:
Fees Using Oppenheimer andlor Franklin Funds
Asset Charge $ 0.00
Mutual Fund Management fees at .55% $ 3,740.00
Advisory Fee $ 0.00
Administration Change $ 1,500.00
Total $ 5,240.00
25. In May 1998, Michael Hirthler d /b /a LPL submitted an investment proposal for the
Yurek 02- 086 -C2
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Wyoming Borough Police Pension Plan.
a. LPL Proposal was not in response to any official request for proposals or
advertised bid solicitations.
b. Tim Yurek assisted in the preparation of the proposal.
c. LPL's proposal was submitted in response to a request from Chief Gilligan and
Officer Kopko.
26. Wyoming Borough did not solicit proposals for a pension administrator or for
investment services from any other companies.
27. The value of the borough's investment fund in May 1998 was in excess of
$680,000.00.
28. Early in May 1998, Tim Yurek and Michael Hirthler representing LPL held a meeting
with borough officials including council members, police and the mayor to discuss the
borough's pension plan.
a. During this meeting, pension options were explained by LPL representatives.
b. No minutes were taken from this meeting.
c. Councilman Frank Yurek was present and participated in this meeting.
d. Councilman Yurek was chairman of the borough's administration, finance and
grants committee at the time.
e. Members of council were aware of the family relationship between Councilman
Frank Yurek and Tim Yurek of LPL.
29. Councilman Yurek reported on the meeting with LPL representatives Timothy Yurek
and Michael Hirthler during council's May 11, 1998, meeting.
30. Minutes from council's May 11, 1998, meeting confirm that under emergency services,
"Mr. Yurek reported the mayor, police and a representative from LPL met and reviewed
the uniform pension plan. It was decided that the funds would be transferred from
Trollinger to LPL Financial Services."
a. The following motion occurred regarding LPL's proposal: "Motion to accept a
proposal from LPL in regards to the police pension plan. Motion by Mr. Carroll,
seconded by Mr. Scrobola, Mr. Yurek abstained from vote due to conflict of
interest. Ayes have it. Present: Scrobola, Carroll Nalewjko, Yurek, Guilford,
Zekoski."
b. Minutes do not reflect any other businesses were considered other than LPL.
c. The administration committee did not meet separately to discuss or consider
LPL's proposal.
31. Council officially took action on June 8, 1998, to move the borough's police pension
plan from Trollinger to LPL Financial Services.
a. Minutes from council's June 8, 1998, meeting include the following motion
making the change:
Yurek 02- 086 -C2
Page 8
Motion by Mr. Guilford, seconded by Mr. Scrobola, Mr. Yurek and Mr. Carroll
asked to abstain from the vote. Motion carried. Ayes have it. Present: Carroll,
Guilford and Zekoski; absent: Nalewjko.
32. Frank Yurek's role in his official capacity as a Wyoming Borough Councilman
regarding the approval of the LPL proposal included reviewing LPL's proposal and
participating in the discussion during a workshop meeting in May 1998.
a. Frank Yurek's participation occurred while his brother, Tim Yurek,
simultaneously was working as a compensated representative of LPL.
b. No other companies were considered.
c. Frank Yurek was the administration committee chairman at the time of LPL's
proposal.
1. The administration committee was responsible for the police pension
plan.
33. LPL representatives worked with borough solicitor Mark Bufalino, Borough Secretary
Karen Pokorny and Council President Clem Zekoski on the change from Trollingersto
LPL.
a. The borough's administration, grants and finance committee, including Frank
Yurek, did not get involved with work needed to make the switch.
34. Council President Clem Zekoski was signatory on borough correspondence facilitating
the change from Trollinger to LPL.
a. Correspondence from LPL to the borough came under the signatures of either
Timothy Yurek or Michael Hirthler.
b. Councilman Frank Yurek did not sign any plan documents.
35. On August 18, 1998, four (4) separate pieces of correspondence were sent from
Wyoming Borough under the signature of Clem Zekoski to the Trollinger Consulting
Group requesting termination of the following services.
a. Trollinger Consulting Group's Investment Advisory Agreement for Municipalities
dated April 1, 1996.
b. Release all actuarial valuation reports, actuarial cost studies, MMO worksheets,
GASB Financial Statements, projected retirement benefit calculations and any
and all similar or related items to Michael J. Hirthler or Jill Hayes, Linsco /Private
Ledger.
c. Terminate the Nationwide Group Separate Account Annuity contract no. GA-
PC 154 as current custodian of all plan assets.
d. Terminate all actuarial, consulting, accounting and compliance services
provided by Trollinger Consulting Group as the borough's actuarial /consulting
advisor of record pursuant to Act 205.
36. On November 13, 1998, Clem Zekoski signed an account application with
Oppenheimer funds on behalf of the Wyoming Borough Police Pension Plan.
a. The accounts financial advisor is listed as Michael J. Hirthler, Linsco /Private
Date
Activity
06/04/98
Oppenheimer — says need to look at lan document before can advise on
transfer procedure. called Karen and Gilligan for plan doc. and no one can
seem to locate . Asked Tim. Benefit consultants' group in Phila can be
TPA. Contact is Ellen Glick. Is faxing quote. $1M to set up, $1,500
annually. Make sure you know when meeting is. Check with the boys
06/22/98
Told Karen Tim thinks Mark Bufalino has plan document. She will check
with him this week and get back.
06/26/98
No one can find plan doc. Need to send letter to Gilligan requesting info on
who would TTEE's are.
06/30/98
Sent letter to Gilligan to send to Nationwide requesting case number.
Karen called with case no. that may be right. Called Troy Craze and LM to
see if could get plan doc.
08/18/98
Need to get ppwk together and call Oppenheimer and tell them Ellen Glick
never responded to your calls re: TPA
08/31/98
Sent letter to Atty Mark Bufalino asking him to request plan document from
Trollinger. Also included a letter to be put on his letterhead if he wants to
Yurek 02- 086 -C2
Page 9
Ledger, 100 Commerce Blvd, Wilkes- Barre, PA 18702.
b. Account information was to be provided to John Gilligan, 277 Wyoming
Avenue, Wyoming, PA 18644.
1. Gilligan was the borough's police chief at the time.
c. Included with the application were the following funds selected.
Champion Income Fund Balanced Fund
Strategic Income Fund Main Street Income & Growth Fund
US Government Trust Global Fund
Quest Valve Fund, Inc.
d. The borough's administration, grants and finance committee was not involved in
completing the application.
37. On November 13, 1998, Michael J. Hirthler forwarded Wyoming Borough General
Fund Check No. 1638 in the amount of $707,742.60 to Oppenheimer Mutual Funds.
a. Police Pension Fund is listed in the memo portion of the check.
b. The check contained the signature stamp for Karen Pokorny (secretary), Clem
Zekoski (council president) and Joseph Saricelli (treasurer).
Frank Yurek played no role in this transfer.
38. Oppenheimer Funds invested the borough pension money on November 17, 1998.
a. Borough pension funds have remained invested and reinvested with
Oppenheimer since then.
39. The November 13, 1998, account application with Oppenheimer is the only signed
application and /or contract for the police pension plan.
a. No contracts or agreements are in place between the borough and LPL.
40. Internal file records of LPL detail LPL's efforts to facilitate the change in pension
carriers from Trollinger to Oppenheimer.
Date
Activity
be signed and sent by him to Trollinger requesting plan document.
09/15/98
Rec'd copy of letter and asset transfer request form from Karen. She rec'd
from Manchester Benefits Group. Called Karen back to let her know okay
to sign and send back. Except: Told Karen that if we get no plan
document before Nationwide releases the money, there will be no place for
the money to go. Oppenheimer needs plan doc in order to set up the
account. Karen has not heard from Sally Lingo. (Trollinger Consulting
Group lady) regarding their convo last week. Sally told Karen she'd get
back to her with contact name and phone number at Nationwide so Karen
could call and get plan document from them. Karen has heard nothing yet
and will call Sally again today.
09/16/98
LM for Mary Ann Phelan to Mancheseter Benefits Group. Asked to call
back re: plan document
09/17/98
LM for Mary Ann Again
09/21/98
Mary Ann returned my call. She is surprised Trollinger does not have plan
doc. Said person who would know whether Manchester ever had a copy of
plan doc is in a training session today. She will also know who to ask for at
Trollinger if Mancheseter does not have a copy of it. Mary Ann or this
other woman will call back 9/22 sometime.
09/18/98
Karen rec'd transfer of assets form from Nationwide. Requires TTEE
signature. Since plan doc is nowhere to be found, Chief Gilligan said they
don't who TTEEs are and who should sign. Need plan doc Gilligan said
plan doc wherever it is may have never been updated to reflect changes on
the board (and changes in TTEEs) and one of the former TTEEs may
have passed away. Can't move forward without plan doc
09/22/98
Mary Ann from Manchester called. They did not administer the plan.
Trollinger did. Trollinger should have plan doc. Can't administer without it.
09/22/98
Tried Bufalino's idea that plan doc may have to be filed with state. Per
Luci, it does not (see notes firs column). LM for Bufalino to let him know
09/28/98
Wrote letter to Trollinger as the "final" letter. Copy in file
10/13/98
Per Tim sent copy of "final" letter to Bufalino. Haven't heard back from
Atty B.
Yurek 02- 086 -C2
Page 10
41. Wyoming Borough Council meeting minutes include three (3) additional actions related
to LPL serving as the pension carrier after the November 17, 1998, investment of
funds with Oppenheimer.
a. April 12, 1999: Solicitor's report. Attorney Bufalino reported that he needs
council's permission to pass a resolution ratifying the movement of the police
pension money from Trollinger to LPL. Motion to allow Attorney Bufalino to
advertise a resolution which will ratify the prior actions naming LPL as the police
pension carrier. Motion by Mr. Guilford, seconded by Mr. Scrobola. Motion
carried. Aye's have it. Mr. Yurek asked that he go on record as abstaining from
the vote. Present: Zekoski, Yurek, Carroll, Nalewjko, Guilford and Scrobola.
b. May 8, 2000: "Motion to pass a resolution ratifying the transfer of the Uniform
Pension Plan from Trollinger Consulting Group to LPL Financial Services.
Motion by Mr. Scrobola, seconded by Mr. Guilford. Motion carried. Ayes have
it." Present: Carroll, Guilford, Nalewjko, Scrobola, Yurek, Zekoski. No
recorded abstentions.
c. March 11, 2002: Unfinished business. "Motion to develop and prepare an
updated agreement between the police pension plan and LPL Financial
Services, motion made by Mr. Scrobola, seconded by Mr. Flynn. Mr. Yurek
abstained from voting. Ayes have it." Present: Scaltz, Guilford, Nalewjko,
Scrobola, Yurek, Flynn.
MEETING DATES
CONTRIBUTIONS
(CALENDAR YEAR)
01/10/00
2000
03/11/02
2001/2002
04/08/02
Indefinite
10/07/02
2003
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Page 11
42. Yurek's participation in council action taken May 8, 2000, related to approving a
resolution for the change.
a. This motion occurred almost two (2) years after LPL's proposal was accepted
and 18 months after pension funds were invested with Oppenheimer.
b. This motion occurred after it was learned that the pension change was not
properly advertised in 1998.
c. This motion did not change the status of the pension plan in any way.
43. Council did not need the additional motions making the change from Trollinger to LPL.
a. Council officially accepted LPL's proposal on May 11, 1998, and ratified making
the change June 8, 1998.
b. Respondent Yurek abstained from both of these motions.
c. Subsequent actions taken to approve resolutions were for record keeping
purposes.
44. Meeting minutes confirm that Councilman Yurek participated in actions taken waiving
council contributions to the police pension plan. Minutes reflect Yurek's participation in
actions occurring on the following meetings.
a.
b. Wyoming Borough contributions to the fund were not needed based on
investment performance.
c. Contributions were also waived on December 8, 1997, for calendar year 1998,
the last full year funds were with Trollinger.
45. Council's action of March 11, 2002, requesting an updated agreement with LPL
Financial Services was the result of an audit of the Borough's pension plan by the
Commonwealth of Pennsylvania, Department of Auditor General.
46. Around March 7, 2002, Auditor General Robert P. Casey, Jr., released audit findings
on the Wyoming Borough Police Pension Plan covering the period January 1, 1999, to
December 31, 2000.
a. The audit report had the following observation regarding a related party:
The brother of a member of the Wyoming Borough Council serves as the
investment advisor for the police pension plan. Borough council approves all
changes in investment custodians and strategies prior to occurrence. We
recommend that borough council, in concert with their solicitor, and, if
necessary, the State Ethics Commission, review all transactions of the plan
affected by this relationship for propriety and compliance with the State Ethics
Act. We also recommend that borough council identify and implement any
Yurek 02- 086 -C2
Page 12
Year
1998
1999
2000
2001
2002
Totals
procedures necessary to ensure compliance with the act in the future.
b. The related party observation pertained to Councilman Frank Yurek and his
brother, Tim Yurek of LPL.
47. As a result of the audit and subsequent council action on March 11, 2002, borough
manager Denis Ring sent correspondence dated March 22, 2002, to Tim Yurek of LPL
Financial requesting an updated agreement. Ring specifically wrote:
a. "The Borough of Wyoming was recently audited by the Auditor General's Office
for the municipal pension plan. Based on their recommendation our council
passed a motion at the last meeting to develop and prepare an updated
agreement between LPL Financial and the borough. Frank Yurek abstained
from voting."
48. Tim Yurek replied to Manager Ring's request by way of correspondence dated March
27, 2002.
a. "LPL Financial Services was appointed by Wyoming Borough Council to invest
the police pension fund assets. Currently the administrator is Actuarial
Enterprises of Yardley, PA."
b. To date, no signed agreement exists between LPL and the Borough.
49. LPL has not received any compensation directly from Wyoming Borough.
a. LPL receives commission payments from Oppenheimer which was funded by
the borough.
b. LPL received 1% of the plan's value in commission the first year and 1/4 of 1%
each subsequent year.
50. LPL Financial records include commission statements for the Wyoming Borough
account.
a. Michael J. Hirthler of LPL is the listed representative.
b. Oppenheimer is listed under product identification.
c. Gross and net commissions paid are listed.
d. Net commissions were split equally between Hirthler and Tim Yurek to cover
common office expenses.
51. LPL commission statements include the following year end balance, gross and net
commissions paid to Michael Hirthler and Tim Yurek's 50% share of net commissions.
Year End Balance
$720,520.01
$772,142.80
$801,645.50
$781,500.02
$723,993.12
Gross Net
$ 11,316.14 $ 10,184.53
$ 1,930.36 $ 1,737.32
$ 2,004.11 $ 1,803.70
$ 1,953.75 $ 1,758.38
$ 1,809.98 $ 1,628.98
$ 19,014.34 $ 17,112.91
Yurek's 50%
$ 5,092.26
$ 868.66
$ 901.85
$ 879.18
$ 814.49
$ 8,556.41
52. Tim Yurek realized net commissioners [sic] totaling $8,556.41 as a result of LPL
Yurek 02- 086 -C2
Page 13
serving as the Wyoming Borough Police Pension advisor.
53. Tim Yurek realized net commissions totaling $2,219.75 [sic]* following Frank Yurek's
participation in council action taken on May 8, 2000, ratifying a resolution for the
transfer of the pension plan from Trollinger to LPL. Net commission total based on the
following calculation:
a. 2000 pro -rated seven months at $75.15 per month = $879.18 [sic]*
b. 2001 entire year = $879.18
c. 2002 entire year = $814.49
54. Frank Yurek was annually required to file a Statement of Financial Interests form in his
official capacity as a Wyoming Borough Councilman.
55. Statements of Financial Interests on file with Wyoming Borough include the following
filings for Frank Yurek:
Calendar year:
Filed:
Position:
All other financial interests:
Calendar year:
Filed:
Position:
Creditors:
Direct /indirect income:
Office /directorship or employment
in any business:
Financial interest in any business:
All other financial interests:
Calendar year:
Filed:
Position:
Creditors:
Direct /indirect income:
Office /directorship or employment
in any business:
Financial interest in any
business:
All other financial interests:
Calendar year:
Filed:
Position:
Creditors:
Direct /indirect income:
Office /directorship or employment
in any business:
Financial interest in any business:
All other financial interests:
Not specified (2001)
03/06/02 on SEC Form 1/02
Councilman
None
2000
02/07/01 on SEC Form 01/01
Council
None
Cleaning Express
President; Cleaning Express, Inc.
Cleaning Express, Inc. 100%
None
1999
01/28/00 on SEC Form 01/00
Council
None
Cleaning Express
President; Cleaning Express, Inc.
Cleaning Express, Inc. 100%
None
1998
03/08/99 on SEC Form 01/99
Council
None
Cleaning Express
President; Cleaning Express, Inc.
Cleaning Express, Inc. 100%
None
56. Yurek failed to list the Cleaning Express, Inc., and Wyoming Borough as a [sic]
sources of income in excess of $1,300.00 on his Statement of Financial Interests form
Yurek 02- 086 -C2
Page 14
for calendar year 2001.
a. Yurek failed to disclose his office, directorship or employment in the Cleaning
Express, Inc., on this form.
b. Yurek failed to disclose his financial interests in the Cleaning Express, Inc., on
this form.
c. Yurek was the owner of the Cleaning Express, Inc., during calendar year 2001.
57. Wyoming Borough records include a W -2 wage and tax statement for Frank Yurek for
calendar year 2001 detailing wages totaling 1,500.00.
58. Yurek admitted to failing to disclose the information detailed in the previous finding
during a statement provided to an Ethics Commission investigator on May 8, 2003.
59. Yurek admitted to participating in the review process of LPL's proposal which resulted
in council's decision to switch from Trollingers to LPL.
'Finding 53 of the Investigative Complaint includes mathematical /typographical errors. The
calculation in Finding 53 a (7 months at $75.15 per month) should be $526.05, which, when
added to the amounts listed in Findings 53 b and 53 c, results in $2,219.72 of net
commissions received by Timothy Yurek following Respondent's participation in the May 8,
2000 ratification vote. The latter figure, being a few cents less than that stated in Finding 53,
is adopted by this Commission as the figure most favorable to the Respondent.
III. DISCUSSION:
At all times relevant to this matter, the Respondent, Frank Yurek (also referred to herein
as "Respondent," "Respondent Yurek," or "Yurek ") has been a public official subject to the
provisions of the Public Official and Employee Ethics Law, Act 9 of 1989, Pamphlet Law 26,
65 P.S. § 401, et seq. as codified by the Public Official and Employee Ethics Act, Act 93 of
1998, Chapter 11, 65 seq., § 1101 et seq., which Acts are referred to herein as the "Ethics
Act."
The allegations are that Yurek, a public official in his capacity as a Member of Wyoming
Borough Council, violated Sections 3(a)/1103(a), 3(f)/1103(f), and 5(b)(5), (8), and
(9)/1105(b)(5), (8), and (9) of the Ethics Act as follows: (1) through uses of the authority of
his public office including but not limited to participation in discussions and actions of borough
council and council committees to place borough police pension funds with an investment firm,
LPL Financial Services, which firm employs his brother; (2) when the contract with LPL, in
excess of $500, was entered into without an open and public process; (3) when he failed to
disclose sources of income in excess of $1,300.00 on Statements of Financial Interests filed
for the 2001 calendar year; and (4) when he failed to disclose his ownership interest in
Cleaning Express, Inc.
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. The term Immediate family" is defined in the Ethics Act to
include a parent, spouse, child, brother or sister. 65 Pa.C.S. § 1102. The term "business with
which he is associated" is defined in the Ethics Act to encompass, inter alia, an employment
relationship.
Section 3(f)/1103(f) of Act 9 of 1989 specifically provides in part that no public
official /public employee or spouse or child or business with which he or the spouse or child is
Yurek 02- 086 -C2
Page 15
associated may enter into a contract with his governmental body valued at five hundred dollars
or more or any subcontract valued at five hundred dollars or more with any person who has
been awarded a contract with the governmental body with which the public official /public
employee is associated unless the contract is awarded through an open and public process
including prior public notice and subsequent public disclosure.
Section 5(b)(5)/1105(b)(5) of the Ethics Act quoted above requires, inter alia, that a
public official /public employee disclose on his Statement(s) of Financial Interests the name
and address of any direct or indirect source of income totaling in the aggregate $1,300 or
more; any office, directorship or employment in any business entity; and any financial interest
in any legal entity engaged in business for profit.
Having noted the issues and applicable law, we shall now summarize the relevant facts.
Given Respondent's failure to file an Answer to the Investigative Complaint, the facts as
averred by the Investigative Complaint are deemed admitted by the Respondent. 65 Pa.C.S.
§ 1108(e); 51 Pa. Code § 21.5(k).
Respondent Yurek has served as a member of Wyoming Borough Council since
January 1996.
The Wyoming Borough Police Pension Plan falls under the review of council's
administrative committee. Yurek has served on the committee since 1996 and was committee
chairman between 1998 and 2001.
The borough uses a pension plan administrator to manage the assets of the police
pension fund. From April 1, 1996, until August 18, 1998, the pension plan administrator was
Trollinger Consulting Group." However, during the spring of 1998 borough police personnel
became dissatisfied with the fees charged by Trollinger Consulting Group, and Police Chief
John Gilligan and Officer Joseph Kopko contacted Yurek's brother, Timothy Yurek, regarding
the availability of pension investment alternatives.
At all times relevant to these proceedings, Timothy Yurek has been employed by
Linsco /Private Ledger (LPL), an independent brokerage firm. Timothy Yurek and Michael J.
Hirthler operate an independent LPL branch and pay a ten percent franchise fee to operate
locally using the LPL name.
At Chief Gilligan's request, Timothy Yurek reviewed the borough's police p ension plan
with Trollinger Consulting Group. As a result of that review, LPL prepared
proposals for the boroughs police pension plan with asset investments handled by Goldman
Sachs and Oppenheimer Funds, Inc. The use of Oppenheimer Funds, Inc., would eliminate
asset charges and advisory fees previously paid, resulting in an approximate annual savings
of $23,800 depending upon investment performance.
In May 1998 Michael Hirthler d /b /a LPL submitted an investment proposal for the
Wyoming Borough Police Pension Plan. The LPL proposal was not in response to any official
request for proposals or advertised bid solicitations, but rather, was submitted in response to a
request from Chief Gilligan and Officer Kopko. Timothy Yurek assisted in the preparation of
the proposal.
Early in May 1998, Timothy Yurek and Michael Hirthler representing LPL met with
borough officials including council members, police and the mayor to discuss the borough's
pension plan. Respondent Yurek was present and participated in this meeting. No minutes
were taken.
Subsequently, at a council meeting on May 11, 1998, Respondent Yurek reported on
the earlier meeting with LPL representatives. Minutes from council's May 11, 1998, meeting
confirm that under emergency services, "Mr. Yurek reported the mayor, police and a
Yurek 02- 086 -C2
Page 16
representative from LPL met and reviewed the uniform pension plan. It was decided that the
funds would be transferred from Trollinger to LPL Financial Services." (Finding 30). Council
then voted to accept a proposal from LPL as to the police pension plan. The minutes reflect
that Respondent Yurek abstained from the vote due to conflict of interest.
On June 8, 1998, Council officially took action to move the borough's police pension
plan from Trollinger to LPL Financial Services. Respondent abstained from the vote. The
change from Trollingers to LPL was effectuated in November 1998.
Thereafter, Wyoming Borough Council took three actions delineated in Finding 41
related to LPL serving as the pension carrier. Yurek abstained as to two of these actions.
However, Yurek participated in a May 8, 2000, vote of council as to passing a resolution
ratifying the transfer of the Uniform Pension Plan from Trollinger Consulting Group to LPL
Financial Services. This action occurred after it was learned that the pension change was not
properly advertised in 1998. The status of the pension plan was not changed by this vote.
LPL has not received any compensation directly from Wyoming Borough. LPL has
received commission payments from Oppenheimer as to the Wyoming Borough account, as
detailed in Finding 51. The net commissions were split between Hirthler and TimothyYurekto
cover common office expenses. Timothy Yurek received net commissions totaling $8,556.41
as a result of LPL serving as the Wyoming Borough Police Pension advisor (Findings 51 -52).
Finally, in his private capacity, Yurek is the owner and operator of a business that
existed in 2001 under the name, "The Cleaning Express, Inc." In 2001, Yurek received
income from the said business as well as from Wyoming Borough in amounts in excess of
$1,300.00, yet he failed to list "The Cleaning Express, Inc." or Wyoming Borough as sources
of income on his Statement of Financial Interests form for calendar year 2001. Per Finding
55, Respondent had listed the business as a source of income on Statements of Financial
Interests filed for other calendar years. Yurek also failed to disclose his financial interest in the
Cleaning Express, Inc., as well as his office, directorship or employment in the Cleaning
Express, Inc. on his Statement of Financial Interests for calendar year 2001.
Having summarized the above relevant facts, we must now determine whether the
actions of Respondent Yurek violated Sections 3(a)/1103(a), 3(f)/1103(f), and 5(b)(5), (8), and
(9)/1105(b)(5), (8), and (9) of the Ethics Act.
As we apply the facts to the allegations, due process requires that we not depart from
the allegations. Pennsy v. Department of State, 594 A.2d 845 (Pa. Cmwlth. 1991). Based
upon our review of the record, we find that there is clear and convincing evidence to support
violations of the Ethics Act under some of the allegations.
Clear and convincing evidence is "testimony that is so 'clear, direct, weighty, and
convincing as to enable the trier of fact to come to a clear conviction, without hesitance, of the
truth of the precise facts in issue. - In Re: Charles E.D.M., 550 Pa. 595, 601, 708 A.2d 88,
91 (1998) (Citation omitted).
It is alleged that Respondent Yurek, a public official in his capacity as a Member of
Wyoming Borough Council, violated Sections 3(a)/1103(a), 3(f)/1103(f), and 5(b)(5), (8), and
(9)/1105(b)(5), (8), and (9) of the Ethics Act as follows: (1) through uses of the authority of
his public office including but not limited to participation in discussions and actions of borough
council and council committees to place borough police pension funds with LPL, an
investment firm that employs his brother; (2) when the contract with LPL, in excess of $500,
was entered into without an open and public process; (3) when he failed to disclose sources of
income in excess of $1,300.00 on Statements of Financial Interests filed for the 2001
calendar year; and (4) when he failed to disclose his ownership interest in Cleaning Express,
Inc.
Yurek 02- 086 -C2
Page 17
In considering the first allegation involving conflict of interest, we find that Respondent
Yurek violated Section 3(a)/1103(a) of the Ethics Act through uses of the authority of his
public office to place borough police pension funds with LPL, a business with which his
brother is associated. The particular uses of authority of office supporting this conclusion
include: (1) Respondent's participation at the May 1998 meeting held with TimothyYurekand
Michael Hirthler of LPL, council members, police and the mayor to discuss the borough's
pension plan; Respondent's participation at the May 11, 1998, council meeting at which
Respondent reported on the earlier meeting with LPL representatives; and Respondent's
participation in the May 8, 2000, vote of council as to passing a resolution ratifying the 1998
transfer of the Uniform Pension Plan from Trollinger Consulting Group to LPL Financial
Services.
We would note that Respondent's abstentions from the council's votes on May 11,
1998, and June 8, 1998, do not shield him from a determination that he violated Section
3(a)/1103(a) of the Ethics Act. Use of authority of office is more than the mere mechanics of
voting and encompasses all of the tasks needed to perform the functions of a given position.
See, Juliante, Order 809. Use of authority of office includes, for example, discussing,
conferring with others, and lobbying for a particular result.
Respondent's uses of the authority of his office were for the private pecuniary benefit of
his brother and /or LPL, a business with which Respondent's brother is associated. The
resulting private pecuniary benefit consists of the commissions received by LPL and
Respondent's brother relative to the Wyoming Borough police pension plan.
Based upon all of the above, we find that there is clear and convincing evidence to
support each element of a violation by the Respondent of Section 3(a)/1103(a) of the Ethics
Act with regard to the first allegation before us.
In considering the second allegation, we find no violation of Section 3(f)/1103(f) of the
Ethics Act because that provision is not operative as to contracting by a public official's brother
or a business with which his brother is associated. O'Donnell, Order 1044.
In considering the third allegation, we find that Respondent technically violated Section
5 (b)(5)/1105(b)(5) of the Ethics Act when he failed to disclose sources of income in excess of
$1,300.00, specifically, Wyoming Borough and his business, "The Cleaning Express, Inc.," on
Statement(s) of Financial Interests filed for the 2001 calendar year.
In considering the fourth allegation, we find that Respondent technically violated
Section 5(b)(9)/1105(b)(9) of the Ethics Act when he failed to disclose his ownership interest
in "The Cleaning Express, Inc." on Statement(s) of Financial Interests filed for the 2001
calendar year. Per Finding 55, Respondent had listed the business as a source of income on
Statements of Financial Interests filed for other calendar years.
Parenthetically, we note that Finding 56 a states that Yurek failed to disclose his office,
directorship or employment in "The Cleaning Express, Inc." on the Statement of Financial
Interests as well. However, given that this is not part of the allegation, we need not address it
further.
Section 407(13)/1107(13) of the Ethics Act empowers this Commission to impose
restitution in instances where a public official /public employee has obtained a financial gain in
violation of the Ethics Act. Based upon the totality of the facts and circumstances in this case,
restitution is not warranted.
If Respondent Yurek has not already done so, he is directed to file, within 30 days of
the date of mailing of this Order, an amended Statement of Financial Interests for calendar
year 2001 to reflect all reportable sources of income as well as businesses in which he had a
Yurek 02- 086 -C2
Page 18
financial interest or for which he was an officer, director, or employee. The original of such
amended form is to be filed with Wyoming Borough, with one copy sent to the Administrative
Division of this Commission for compliance verification purposes.
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. Respondent Frank Yurek ( "Respondent Yurek "), as a Member of Wyoming Borough
Council, has at all times relevant to these proceedings been a public official subject to
the provisions of the Public Official and Employee Ethics Law, Act 9 of 1989, Pamphlet
Law 26, 65 P.S. § 401, et seq., as codified by the Public Official and Employee Ethics
Act, Act 93 of 1998, Chapter 11, 65 Pa.C.S. § 1101 et seq., which Acts are referred to
herein as the "Ethics Act."
2. Respondent Yurek violated Section 3(a)/1103(a) of the Ethics Act through uses of the
authority of his public office, consisting of his participation at two May 1998 meetings
and in a May 8, 2000, ratification vote, to place Wyoming Borough police pension
funds with Linsco /Private Ledger (LPL), a business with which his brother is
associated.
3. Respondent Yurek did not violate Section 3 /1103(f) of the Ethics Act as to alleged
contracting between Wyoming Borough and PL in excess of $500 without an open
and public process in that Section 3(f)/1103(f) of the Ethics Act is not operative as to
contracting by a public official's brother or a business with which his brother is
associated.
4. Respondent Yurek technically violated Section 5(b)(5)/1105(b)(5) of the Ethics Act
when he failed to disclose sources of income in excess of $1 300.00, specifically,
Wyoming Borough and his business, "The Cleaning Express, Inc.," on Statement(s) of
Financial Interests filed for the 2001 calendar year.
5. Respondent Yurek technically violated Section 5(b)(9)/1105(b)(9) of the Ethics Act
when he failed to disclose his ownership interest in "The Cleaning Express, Inc." on
Statement(s) of Financial Interests filed for the 2001 calendar year.
6. Restitution is not warranted in this case.
In Re: Frank Yurek
ORDER NO. 1286
File Docket: 02- 086 -C2
Date Decided: 6/23/03
Date Mailed: 7/8/03
1. Respondent Frank Yurek ( "Respondent Yurek "), a public official as a Member of
Wyoming Borough Council, violated Section 3(a)/1103(a) of the Ethics Act through
uses of the authority of his public office, consisting of his participation at two May 1998
meetings and in a May 8, 2000, ratification vote, to place Wyoming Borough police
pension funds with Linsco /Private Ledger (LPL), a business with which his brother is
associated.
2. Respondent Yurek did not violate Section 3 /1103(f) of the Ethics Act as to alleged
contracting between Wyoming Borough and PL in excess of $500 without an open
and public process in that Section 3(f)/1103(f) of the Ethics Act is not operative as to
contracting by a public official's brother or a business with which his brother is
associated.
3. Respondent Yurek technically violated Section 5(b)(5)/1105(b)(5) of the Ethics Act
when he failed to disclose sources of income in excess of $1 300.00, specifically,
Wyoming Borough and his business, "The Cleaning Express, Inc.," on Statement(s) of
Financial Interests filed for the 2001 calendar year.
4. Respondent Yurek technically violated Section 5(b)(9)/1105(b)(9) of the Ethics Act
when he failed to disclose his ownership interest in "The Cleaning Express, Inc." on
Statement(s) of Financial Interests filed for the 2001 calendar year.
5. If Respondent Yurek has not already done so, he is directed to file, within 30 days of
the date of mailing of this Order, an amended Statement of Financial Interests for
calendar year 2001 to reflect all reportable sources of income as well as businesses in
which he had a financial interest or for which he was an officer, director, or employee.
The original of such amended form is to be filed with Wyoming Borough, with one copy
sent to the Administrative Division of this Commission for compliance verification
purposes.
a. Compliance with this Order will result in the closing of this case with no further
action by this Commission.
b. Noncompliance will result in the institution of an order enforcement action.
BY THE COMMISSION,
Louis W. Fryman, Chair