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HomeMy WebLinkAbout03-581 WolfFrederick S. Wolf, Esquire Henry & Beaver, LLP 937 Willow Street P.O. Box 1140 Lebanon, PA 17042 -1140 ADVICE OF COUNSEL August 14, 2003 03 -581 Re: Conflict; Public Official /Employee; Member; Borough Council; Immediate Family; Spouse; Father; Water Authority; Business; Employee; Board; Ownership Reversion; Bond; Debt. Dear Mr. Wolf: This responds to your letter of July 24, 2003, by which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq., presents any prohibition or restrictions upon borough council members in participating as to the borough taking ownership and operation of the municipal authority water system and guaranteeing an authority bond issue where one council member's spouse is an authority board member, another council member's father is an authority board member, and a third council member is an employee of a company that performs maintenance services for the authority. Facts: As solicitor for Myerstown Borough (Borough) in Lebanon County, several questions have arisen concerning potential conflicts of interest by certain members of Borough Council. One member of Borough Council has a spouse who serves on the Water Authority Board of the Borough. Another council member has father who also sits on the Authority Board. A third council member is an employee of a company that provides maintenance services to the Authority. Sometimes, the company performs the maintenance work for the Authority pursuant to bid and at other times by direct request. Each member of the Water Authority Board receives $75.00 per month or $75.00 per meeting for meeting attendance. You present following issues and questions: Wolf, 03 -581 August 14, 2003 Page 2 The first issue that was presented to Borough Council was whether or not [sic] the Borough should take back ownership and operation of the water system from the Authority. 2. The second issue that was presented to Borough Council was a request from the Water Authority for the borough to guarantee the new Authority Bond Issue debt where the proceeds will be utilized to payoff existing Bonds and to pay for capital improvements. If the Borough agrees to guarantee these Bonds, it will not be able to take back ownership and operation of the water system for a period of at least five (5) years and the call date on the Bonds could go out as out as long as ten (10) years. The questions are as follows: 1. May the members of Council vote on issue number 1? If the answer is no, are these members of Borough Council restricted from discussing their opinions on the issue with the other members of Council? 2. May the members of Council vote on issue number 2? If the answer is no, are these members of Borough Council restricted from discussing their opinions on the issue with the other members of council ?" You seek an advisory from the Commission as to the above. Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §§ 1'107(10), (11), advisories are issued to the requestor based upon the facts which the requestor has submitted. In issuing the advisory based upon the facts which the requestor has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts which have not been submitted. It is the burden of the requestor to truthfully disclose all of the material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent the requestor has truthfully disclosed all of the material facts. As members of Myerstown Borough Council, the three individuals are public officials as that term is defined in the Ethics Act, and hence they are subject to the provisions of that Act. Section 1103(a) of the Ethics Act provides: § 1103. Restricted activities (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 Pa.C.S. § 1103(a). The following terms are defined in the Ethics Act as follows: § 1102. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his Wolf, 03 -581 August 14, 2003 Page 3 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. "Immediate family." A parent, spouse, child, brother or sister. "Business." Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self - employed individual, holding company, stock company, receivership, trust or any legal entity organized for profit. "Business with which he is associated " Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. 65 Pa.C.S. § 1102. In addition, Sections 1103(b) and 1103(c) of the Ethics Act provide in part that no person shall offer to a public official /employee anything of monetary value and no public official /employee shall solicit or accept anything of monetary value based upon the understanding that the vote, official action, or judgment of the public official /employee would be influenced thereby. Reference is made to these provisions of the law not to imply that there has been or will be any transgression thereof but merely to provide a complete response to the question presented. Section 1103(j) of the Ethics Act provides as follows: § 1103. Restricted activities (j) Voting conflict. - -Where voting conflicts are not otherwise addressed by the Constitution of Pennsylvania or by any law, rule, regulation, order or ordinance, the following procedure shall be employed. Any public official or public employee who in the discharge of his official duties would be required to vote on a matter that would result in a conflict of interest shall abstain from voting and, prior to the vote being taken, publicly announce and disclose the nature of his interest as a public record in a written memorandum filed with the person responsible for recording the minutes of the meeting at which the vote is taken, provided that whenever a governing body would be unable to take any action on a matter before it because the number of members of the body required to abstain from voting under the provisions of this section makes the majority or other legally required vote of approval unattainable, then such members shall be permitted to vote if disclosures are made as otherwise provided herein. In the case of a three - member governing body of a political subdivision, where one member has abstained from voting as a result of a conflict of interest and the remaining two members of the governing body have cast Wolf, 03 -581 August 14, 2003 Page 4 opposing votes, the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. 65 Pa.C.S. § 1103(j). In each instance of a conflict, Section 1103(j) requires the public official /employee to abstain and to publicly disclose the abstention and reasons for same, both orally and by filing a written memorandum to that effect with the person recording the minutes or supervisor. In the event that the required abstention results in the inability of the governmental body to take action because a majority is unattainable due to the abstention(s) from conflict under the Ethics Act, then voting is permissible provided the disclosure requirements noted above are followed. See, Mlakar, Advice 91- 523 -S. Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited 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 two questions you have posed will now be jointly addressed. Preliminarily, advice may not be proffered to the Borough as a municipal body as such is beyond the scope of the Ethics Act which applies to the conduct of public officials and public employees and in certain instances, individuals who have contracts with them. Regarding the reversion of the ownership of the Authority to Borough and guarantee for the bond issue, a council member would have a conflict if his /her participation would result in a private pecuniary benefit to himself /herself, an immediate family member or business with which the council member /immediate family member is associated. If a conflict would exist, the public official may not participate, vote, or discuss his /her opinions on the issue. The Commission in Juliante, Order 809, has held that use of authority of office includes more than the mere mechanics of voting and encompasses all of the tasks needed to p erform the functions of a given position, such as discussing, conferring with others, and lobbying for a particular result. The elements for a conflict of interest as to the Authority reversion and bond issue guarantee exist in this case. Participating or voting on the Authority issues would be a use of authority of office by the council members. Such use of authority of office could result in pecuniary benefits, as for example, continuing service (and compensation) for Authority Board members, continuing service contracts with the company that performs maintenance services for the Authority, or acting to lessen or eliminate the cessation of pecuniary benefits by preserving the status quo of the Authority. The pecuniary benefits would inure to the council member's father and spouse who sit on the Authority Board as well as to the council member who is an employee of the company that provides the maintenance services to the Authority through a continuation of such services. When a conflict exists, there are two exclusions: a "de minimis" economic impact exception and the class /subclass exception. The de minimis exclusion precludes a finding of a conflict of interest as to an action having a de minimis (insignificant) economic impact. Thus, when a matter that would otherwise constitute a conflict of interest under the Ethics Act would have an insignificant economic impact upon a public official, a member of his immediate family, or a business with which he or a member of his immediate family is associated, a conflict would not exist and Sections 1103(a) and 1103(j) of the Ethics Act would not restrict participation in such matter. See, Schweinsburq, Order 900. In that the financial impact in this case would be more than Wolf, 03 -581 August 14, 2003 Page 5 insignificant, such action would not have a de minimis economic impact, and therefore, this exclusion would not apply. Regarding the application of the class /subclass exception which is contained in the definition of conflict quoted above, two criteria must be met: (1) the affected public official /public employee, immediate family member, or business with which the public official /public employee or immediate family member is associated must be a member of a class consisting of the general public or a true subclass consisting of more than one member; and (2) the public official /public employee, immediate family member, or business with which the public official /public employee or immediate family member is associated must be affected "to the same degree" as the other members of the class /subclass. 65 Pa.C.S. § 1102; see, Graham, Opinion 95 -002 (citing Van Rensler, Opinion 90 -017); Rubenstein, Opinion 01 -007. The first criterion of the exclusion is satisfied where the members of the proposed subclass are similarly situated as the result of relevant shared characteristics. The second criterion of the exclusion is satisfied where the individual /business in question and the other members of the class /subclass are reasonably affected to the same degree by the proposed action. Kablack, Opinion 02 -003. The two council members' immediate family members who sit on the Authority Board are part of a sub -class of Authority Board members. Having delineated the sub- class, the question is whether these two sub -class members, that is, the father and spouse of these two council members, would be affected to the same degree as to action on the above two issues. This question turns upon the degree to which the father and spouse would be financially impacted by the two issues. The criteria to be considered concern the financial impact on the two members of the subclass: whether the father and spouse are officers or employees or whether they have different terms on the Authority Board. These criteria impact upon compensation, both as to amount and duration, for the father and spouse who sit on the Authority Board. If there is a disparity as to such compensation, then the financial impact would be greater for one than the other so that they would not be affected to the same degree. If the criteria would be the same for the father and spouse, then they would be affected to the same degree and the subclass exclusion would apply, thereby permitting the two council members to participate. As to the council member who is an employee of the company that provides maintenance services, a conflict exists. Participation on the two Authority issues would financially impact upon the company as to continuing to provide maintenance services. If the Authority continues, a reasonable expectation would exist for the continuation of such maintenance services by the company. See, Amato, Opinion 89 -002. That company is a business with which the council m is associated in that he is an employee of the company. Further, the de minimis and sub -class exclusions would not apply since the financial impact is more than insignificant and there is not a sub - class, that is, the council member is unique as an employee of the company doing the maintenance services for the Authority. Hence, that council member would have a conflict on the two issues. In any instance of a conflict, the council member would be required to abstain from participating and observe the disclosure requirements of Section 1103(j) of the Ethics Act. The propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Specifically not addressed herein is the applicability of the Borough Code. Conclusion: As members of Myerstown Borough Council, the three individuals whose conduct is in question are public officials subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. Wolf, 03 -581 August 14, 2003 Page 6 Participation by the three council members in issues as to the Water Authority reversion to the Borough and guaranteeing the bond issue of the Authority form the basis of a conflict. When a conflict exists, there are two exclusions: a "de minimis" economic impact exception and the class /subclass exception. In that the financial impact in this case would be more than insignificant, such action would not have a de minimis economic impact, and therefore, this exclusion would not apply. Regarding the application of the class /subclass exception which is contained in the definition of conflict quoted above, two criteria must be met: (1) the affected public official /public employee, immediate family member, or business with which the public official /public employee or immediate family member is associated must be a member of a class consisting of the general public or a true subclass consisting of more than one member; and (2) the public official /public employee, immediate family member, or business with which the public official /public employee or immediate family member is associated must be affected "to the same degree" as the other members of the class /subclass. The two council members' immediate family members who sit on the Authority Board are part of a sub -class of Authority Board members. Having delineated the sub- class, the question is whether these two sub -class members, that is, the father and spouse of these two council members, would be affected to the same degree as to action on the above two issues. This question turns upon the degree to which the father and spouse would be financially impacted by the two issues. The criteria to be considered concern the financial impact on the two members of the subclass: whether the father and spouse are officers or employees or whether they have different terms on the Authority Board. These criteria impact upon compensation, both as to amount and duration, for the father and spouse who sit on the Authority Board. If there is a disparity as to such compensation, then the financial impact would be greater for one than the other so that they would not be affected to the same degree. If the criteria would be the same for the father and spouse, then they would be affected to the same degree and the subclass exclusion would apply, thereby permitting the two council members to participate. As to the council member who is an employee of the company that provides maintenance services, a conflict exists. Participation on the two Authority issues would financially impact upon the company as to continuing to provide maintenance services. If the Authority continues, a reasonable expectation would exist for the continuation of such maintenance services by the company. See, Amato, Opinion 89 -002. That company is a business with which the council m is associated in that he is an employee of the company. Further, the sub -class exclusion would not apply since there is not a sub - class, that is, the council member is unique as an employee of the company doing the maintenance services for the Authority. Hence, that council member would have a conflict on the two issues. In any instance of a conflict, the council member would be required to abstain from participating and observe the disclosure requirements of Section 1103(j) of the Ethics Act. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11), an Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, provided the requestor has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. This letter is a public record and will be made available as such. Wolf, 03 -581 August 14, 2003 Page 7 Finally, if you disagree with this Advice or if you have any reason to challenge same, you may appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Any such appeal must be in writing and must be actually received at the Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa. Code § 13.2(h). The appeal may be received at the Commission by hand delivery, United States mail, delivery service, or by FAX transmission (717-787-0806). Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. Sincerely, Vincent J. Dopko Chief Counsel