HomeMy WebLinkAbout03-008 AbrahamDear Ms. Abraham:
Issue:
OPINION OF THE COMMISSION
Before: Louis W. Fryman, Chair
John J. Bolger, Vice Chair
Daneen E. Reese
Frank M. Brown
Donald M. McCurdy
Michael J. Healey
Paul M. Henry
DATE DECIDED: 9/16/03
DATE MAILED: 9/29/03
03 -008
Lynne Abraham, District Attorney
District Attorney's Office
1421 Arch Street
Philadelphia, PA 19102
Re: Public Official; FIS; District Attorney; Philadelphia County; Broker; Securities; Income;
Power of Attorney; Friend; Finances; Disclosure.
This Opinion is issued in response to your advisory requests on dated June 18, 2003.
Whether a district attorney is required under the Public Official and Employee Ethics
Act (the "Ethics Act"), 65 Pa.C.S. § 1101 et seq. to list on her Statement of Financial Interests
(SFI), as sources of income, her broker or the actual sources of securities income and
secondly the financial interests that she holds for a friend through a power of attorney.
II. FACTUAL BASIS FOR DETERMINATION:
As the District Attorney of Philadelphia County, you pose the following two questions:
1. For securities income that meets the reporting threshold, is the name and address of
the broker sufficient, or must each company in which you own stock be listed as a
source of income on the SFI form?
2. For a power of attorney as to the finances of an elderly friend, must such financial
interests be disclosed on the SFI form?
By letter dated August 7, 2003, you were notified of the date, time and location of the
public meeting at which your request would be considered.
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September 29, 2003
Page 2
III. DISCUSSION:
It is initially noted that pursuant to Sections 1107(10) and 1107 (11) of the Ethics Act,
65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requestor based upon the facts
which the requestor has submitted. In issuing the advisory based upon the facts which the
requestor has submitted, this 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.
The Preamble of the Ethics Act in part provides:
(a) The Legislature hereby declares that public office is a public
trust and that any effort to realize personal financial gain through
public office other than compensation provided by law is a
violation of that trust. In order to strengthen the faith and
confidence of the people of this Commonwealth in their
government, the Legislature further declares that the people have
a right to be assured that the financial interests of holders of or
nominees or candidates for public office do not conflict with the
public trust. Because public confidence in government can best
be sustained by assuring the people of the impartiality and
honesty of public officials, this chapter shall be liberally construed
to promote complete financial disclosure as specified in this
chapter.
65 Pa.C.S. §1101(a).
The following terms are defined under the Ethics Act:
§ 1102. Definitions
"Income." Any money or thing of value received or to be
received as a claim on future services or in recognition of
services rendered in the past, whether in the form of a payment,
fee, salary, expense, allowance, forbearance, forgiveness,
interest, dividend, royalty, rent, capital gain, reward, severance
payment, proceeds from the sale of a financial interest in a
corporation, professional corporation, partnership or other entity
resulting from termination or withdrawal therefrom upon
assumption of public office or employment or any other form of
recompense or any combination thereof. The term refers to gross
income and includes prize winnings and tax - exempt income. The
term does not include gifts, governmentally mandated payments
or benefits, retirement, pension or annuity payments funded
totally by contributions of the public official or employee, or
miscellaneous, incidental income of minor dependent children.
"Financial interest." Any financial interest in a legal
entity engaged in business for profit which comprises more than
5% of the equity of the business or more than 5% of the assets
of the economic interest in indebtedness.
65 Pa.C.S. §1102
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Section 1104 of the Ethics Act provides in part:
§ 1104. Statement of financial interests required to be filed
(a) Public official or public employee. - -Each public
official of the Commonwealth shall file a statement of financial
interests for the preceding calendar year with the commission no
later than May 1 of each year that he holds such a position and
of the year after he leaves such a position. Each public employee
and public official of the Commonwealth shall file a statement of
financial interests for the preceding calendar year with the
department, agency, body or bureau in which he is employed or
to which he is appointed or elected no later than May 1 of each
year that he holds such a position and of the year after he leaves
such a position. Any other public employee or public official shall
file a statement of financial interests with the governing authority
of the political subdivision by which he is employed or within
which he is appointed or elected no later than May 1 of each year
that he holds such a position and of the year after he leaves such
a position. Persons who are full -time or part -time solicitors for
political subdivisions are required to file under this section.
65 Pa.C.S. §1104(a)
Section 1105 of the Ethics Act provides in part:
§ 1105. Statement of financial interests
(a) Form. - -The statement of financial interests filed
pursuant to this chapter shall be on a form prescribed by the
commission. All information requested on the statement shall be
provided to the best of the knowledge, information and belief of
the person required to file and shall be signed under oath or
equivalent affirmation.
(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.
65 Pa.C.S. § 1105.
We shall now address the two inquiries that you have posed. First, with regard to
disclosure of sources of income, the Ethics Act requires disclosure of the name and address
of any source of income totaling in the aggregate $1,300 or more. 65 Pa.C.S. § 1105(b)(5).
You ask whether, for securities income meeting the reporting threshold, disclosure of the
name and address of the broker is sufficient, or whether each company in which you own
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September 29, 2003
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stock must be listed as a source of income on your SFI form.
The State Ethics Commission Regulation as to income reporting provides in part:
§ 17.4 Income
(d) An individual or an individual and a spouse who
has an investment portfolio, with a broker, other than a mutual
fund, shall list individually the income from each asset to which
subsection (b) applies if the asset may be bought and sold by the
individual or by the individual and a spouse.
51 Pa. Code §17.4(d)
The above regulation establishes that listing a broker is insufficient for reporting
purposes since each asset that is bought or sold must be reported. Hence, the Ethics Act and
Regulations require the reporting of each source of income. You are advised that the source
of income will vary depending upon the circumstances.
If you would receive income from a sale of securities held in an entity, the source of
income to be disclosed would be the actual purchaser, if known. However, in the typical
securities sale effectuated through a broker, the seller would not know the identity of the
purchaser. In such instances where the identity of the purchaser is unknown, the source of
income to be disclosed is the entity in which the securities are held. First, the Ethics Act
requires full disclosure so that a source of income must be listed. Second, the income, that is,
the gain on the sale, is in essence derived from the increase in value of the security of the
entity. Third, any potential conflict would typically not relate to an unknown purchaser or
broker. Listing the broker would not satisfy the reporting requirements of the Ethics Act and
Regulation 17.4, supra, because the broker merely processes the buy or sell orders, typically
holds the securities, or performs other related transactions or services. Consequently, the
name and address of the purchaser, if known, and otherwise, the name and address of the
entity is the source of income to be disclosed. Such is required for each security when income
totaling in aggregate $1,300 or more is received in the calendar year.
As to dividend /distribution /income generated by securities, the source of income would
be the entity in which the securities are held. Under this scenario, there would be no
purchaser to list, and, once again, the broker would not be the source of income.
Some brokerage firms have their own investment funds such as mutual funds or
money market funds. If you would receive income meeting the reporting threshold from such
a fund, then in that instance, the brokerage firm fund would be listed as your source of
income.
Reporting the sources of income from securities as delineated above will comply with
both the spirit and letter of the requirements of the Ethics Act for complete financial disclosure.
Turning to your second question, you ask whether you must disclose on your SFI the
financial interests of an elderly friend for whom you hold a power of attorney. You are advised
that the Ethics Act does not require the disclosure of finances that one holds for another by
power of attorney. Since such finances are not your personal finances and since you have a
fiduciary duty to your friend, you legally have no ownership as to the finances. Consequently,
you are not required to list the finances of the other person on your SFI. This scenario,
however, is in sharp contrast to the more typical situation where, for example, a husband and
wife hold joint accounts such that each has an undivided interest in the whole, and the filer is
attributed with all of the income generated by such accounts for purposes of reporting sources
of income under the Ethics Act.
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September 29, 2003
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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.
IV. CONCLUSION:
A county district attorney is a "public official" subject to the Public Official and
Employee Ethics Act and the Regulations of the State Ethics Commission. For income from
each security that is in the aggregate $1,300 or more, the name and address of the purchaser,
if known, and otherwise, the name and address of the entity is the source of income to be
disclosed. Financial interests that are held for a friend through a power of attorney need not be
listed on the Statement of Financial Interests.
The propriety of the proposed conduct has only been addressed under the Ethics Act.
Pursuant to Section 1107(10), the person who acts in good faith on this Opinion issued
to him shall not be subject to criminal or civil penalties for so acting provided the material facts
are as stated in the request.
This letter is a public record and will be made available as such.
Finally, a party may request the Commission to reconsider its Opinion. The
reconsideration request must be received at this Commission within thirty days of the mailing
date of this Opinion. The party requesting reconsideration must include a detailed explanation
of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code §
21.29(b).
By the Commission,
Louis W. Fryman
Chair