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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 Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter 11 of Act 93 of 1998, 65 Pa.C.S. § 1101 et seq., which essentially repeats Act 9 of 1989 and provides for the completion of pending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 Page 2 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 Page 4 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 Page 5 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 Page 6 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 Page 7 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 Yurek 02- 086 -C2 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