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HomeMy WebLinkAbout02-613 KennedyRonald J. Saffron, Esquire 135 East Market Street, Suite 105 Blairsville, PA 15717 Dear Mr. Saffron: ADVICE OF COUNSEL October 24, 2002 02 -613 Re: Conflict; Public Official /Employee; School Director; Business With Which Associated; Tax Collection Firm; Contract. This responds to your letter of September 20, 2002, 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 a school director who is employed - by a private tax collection firm that may enter into a contract with the school district to provide tax collecting services to the school district with regard to servicing the school district's account in return for a salary and commission from the tax collection firm. Facts: As Solicitor for the Penns Manor Area School District ( "School District" , youhave been authorized to seek an advisory on behalf of James Kennedy ( "Kennedy "), a School Director. In a private capacity, Kennedy is employed as a sales representative for Berkheimer Associates ( "Berkheimer "), a tax collection firm. Kennedy receives a salary in addition to sales commissions when he is successful in acquiring new business for Berkheimer. You state that Kennedy has no ownership interest in Berkheimer. Kennedy's job responsibilities include, but are not limited to, soliciting school districts and municipalities for their tax collection business and providing answers to questions posed by taxpayers. Berkeimer would like to make a presentation to the School Board with respect to becoming the tax collection agent for the School District. You state that an employee of Berkheimer other than Kennedy would make the presentation. Saffron /Kennedy, 02 -613 October 24, 2002 Page 2 You state that if the School District would retain Berkheimer as its tax collector, Kennedy would be eligible to receive a commission. In addition, Kennedy would, in such an event, act as a sales representative in servicing the School District's account. You anticipate that any contract between the School District and Berkheimer would be valued at more than $500. You state that you have advised Kennedy that he should publicly announce at the School Board meeting prior to the presentation, that he is employed by Berkheimer. You further state that you have advised Kennedy that he should publicly announce and disclose his employment relationship with Berkheimer, execute a written memorandum to that effect and file the same with the Board Secretary at the meeting at which any vote is taken on whether the School District should retain Berkheimer as its tax collection agent. Finally, you state that you have advised Kennedy that he must abstain from voting on the issue of whether the School District should retain Berkeimer as its collector of certain taxes. You pose the following specific inquiries. 1. Whether Berkheimer may solicit the business of the School District and enter into a contract with the School District for the collection of certain taxes; 2. If the answer to the first question is in the affirmative, whether Kennedy may service the School District's account and receive a commission from Berkheimer; and 3. Whether it would make a difference if Kennedy would refuse to accept the commission. 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, 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 a School Director for the Penns Manor Area School District ( "School District "), James Kennedy ( "Kennedy ") is a public official as that term is defined in the Ethics Act, and hence Kennedy is 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 Saffron /Kennedy, 02 -613 October 24, 2002 Page 3 his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. The term does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. "Authority of office or employment." The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. "Business." Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self - employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit. "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. "Contract." An agreement or arrangement for the acquisition, use or disposal by the Commonwealth or a political subdivision of consulting or other services or of supplies, materials, equipment, land or other personal or real property. The term shall not mean an agreement or arrangement between the State or political subdivision as one party and a public official or public employee as the other party, concerning his expense, reimbursement, salary, wage, retirement or other benefit, tenure or other matters in consideration of his current public employment with the Commonwealth or a political subdivision. 65 Pa.C.S. § 1102. 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(f) of the Ethics Act provides as follows: § 1103. 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 Saffron /Kennedy, 02 -613 October 24, 2002 Page 4 which the public official or public employee is associated or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the public official or public employee is associated, unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the public official or public employee shall not have any supervisory or overall responsibility for the implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of the making of the contract or subcontract. 65 Pa.C.S. § 1103(f). Section 1103(f) does not operate to make contracting with the governmental body permissible where it is otherwise prohibited. Rather, where a public official /public employee, his spouse or child, or a business with which he, his spouse or child is associated, is otherwise appropriately contracting with the governmental body, or subcontracting with any person who has been awarded a contract with the governmental body, in an amount of $500.00 or more, Section 1103(f) requires that an open and public process" be observed as to the contract with the governmental body. Pursuant to Section 1103(f), an "open and public process" includes: (1) prior public notice of the employment or contracting possibility; (2) sufficient time for a reasonable and prudent competitor /applicant to be able to prepare and present an application or proposal; (3) public disclosure of all applications or proposals considered; and (4) public disclosure of the contract awarded and offered and accepted. Section 1103(f) of the Ethics Act also requires that the public official /employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. 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 Saffron /Kennedy, 02 -613 October 24, 2002 Page 5 approval unattainable, then such members shall be permitted to vote if disclosures are made as otherwise provided herein. In the case of a three - member governing body of a political subdivision, where one member has abstained from voting as a result of a conflict of interest and the remaining two members of the governing body have cast opposing votes, the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. 65 Pa.C.S. § 1103(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. In applying the above provisions of the Ethics Act to your inquiry, it is noted that Section 1103(a) of the Ethics Act pertaining to conflicts of interest does not prohibit public officials /public employees from having outside business activities or employment; however, the public official /public employee may not use the authority of his public position - -or confidential information obtained by being in that position- -for the advancement of his own private pecuniary benefit or that of a business with which he is associated. Pancoe, Opinion 89 -011. Examples of conduct that would be prohibited under Section 1103(a) would include: (1) the pursuit of a private business opportunity in the course of public action, Metrick, Order 1037; (2) the use of governmental facilities, such as governmental telephones, postage, staff, equipment, research materials, or other property, or the use of governmental personnel, to conduct private business activities, Freind, Order 800; Pancoe, supra; and (3) the participation in an official capacity as to matters involving the business with which the public official /public employee is associated in his private capacity, Gorman, Order 1041. If a business with which the public official /public employee is associated or its client(s) would have matter(s) pending before the governmental body, the public official /public employee would have a conflict of interest as to such matter(s). Miller, Opinion No. 89 -024; see, also, Kannebecker, 92 -010. In each instance of a con iff ct of interest, the public official /public employee would be required to abstain from participation and to satisfy the disclosure requirements of Section 1103(j) set forth above. The abstention requirement would not be limited to merely voting, but would extend to any use of authority of office including, but not limited to, discussing, conferring with others, and lobbying for a particular result. Juliante, Order 809. In considering the above, it is clear that Berkheimer Associates ( "Berkheimer "), Inc. would be considered a business with which Kennedy, as its employee, is associated. As a general rule, pursuant to Section 1103(a) of the Ethics Act, Kennedy would have a conflict of interest as to matters before the School Board pertaining to himself, a member of his immediate family, Berkheimer, or Berkheimer's client(s). As a School Director, Kennedy would specifically have a conflict as to recommending or approving Berkheimer as tax collecting agent for the School District because such would result in a private pecuniary benefit to both Berkheimer and Kennedy. A conflict would exist even as to making recommendations against or disapproving other candidates for the position of tax collecting agent, where such action would assure or increase the possibility that the School District would contract with Berkheimer. See, Saffron /Kennedy, 02 -613 October 24, 2002 Page 6 Pepper, Opinion 87 -008. In each instance of a conflict, Kennedy would be required to abstain and to observe the disclosure requirements of Section 1103(j) of the Ethics Act. Having established the above general principles, your specific inquiries shall now be addressed. In response to your first question which asks whether Berkheimer may solicit the business of the School District and enter into a contract with the School District, you are advised that your inquiry cannot be addressed within the statutory parameters of the Ethics Act, §§ 1107(10), (11) because the request is third party and involves a private business /firm, and not a public official /public employee. However, given that Berkheimer is a business with which Kennedy is associated, any contract that Berkheimer would have with the School District, if over $500, would be subject to the restrictions of Section 1103(f). Under Section 1103(f), Kennedy in his capacity as a public official would be prohibited from having any supervisory or overall responsibility for the implementation or administration of the contract. In addition, pursuant to Section 1103(a) of the Ethics Act, Kennedy, as a School Director, would have a conflict as to matters before the School Board that would financially impact himself or his private employer, such as the contract between Berkheimer and the School District. Parenthetically, although the contracting in question would not be prohibited under the Ethics Act provided the requirements of Sections 1103(a), 1103(f), and 1103(j) are satisfied, a problem may exist as to such contracting under the Public School Code of 1949 as amended ( "Public School Code"), given that Kennedy, as sales representative, would service the account of the School District. The Public School Code provides in pertinent part as follows: 3 -324. Not to be employed by or do business with district; exceptions (a) No school director shall, during the term for which he was elected or appointed, as a private person engaged [sic] in any business transaction with the school district in which he is elected or appointed, be employed in any capacity by the school district in which he is elected or appointed, or receive from such school district any pay for services rendered to the district except as provided in this act.... 24 P.S. § 3 -324. Since the State Ethics Commission does not administer or enforce the Public School Code, it is suggested that Kennedy seek legal advice in that regard. In response to your second question, as a general rule, the Ethics Act would not prohibit Kennedy from servicing the School District's account as a sales representative and receiving a commission from Berkheimer subject to the above restrictions and conditioned upon the assumptions that: (1) there would be no improper understandings under Sections 1103(b) and 1103(c ) of the Ethics Act; (2) Kennedy would not be using the authority of his position as a School Director or confidential information to obtain or perform such work as per Section 1103(a) of the Ethics Act; and (3) Kennedy would not have any supervisory or overall responsibility for the implementation or administration of the contract as per Section 1103(f) of the Ethics Act. In response to your third question, the fact that Kennedy would refuse a commission from Berkheimer would not have any legal significance because Kennedy, as a sales representative servicing the School District's account, would still receive a Saffron /Kennedy, 02 -613 October 24, 2002 Page 7 salary. In addition, Berkheimer, a business with which Kennedy is associated, would financially benefit from the contract with the School District. In each instance of a conflict, Kennedy would be required to abstain and to 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. Conclusion: As a School Director for the Penns Manor Area School District ( "School District ") James Kennedy ( "Kennedy ") is a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. Berkheimer Associates ("Berkheimer"), Inc. would be considered a business with which Kennedy, as its employee, is associated. As a general rule, pursuant to Section 1103(a) of the Ethics Act, Kennedy would have a conflict of interest as to matters before the School Board pertaining to himself, a member of his immediate family, Berkheimer, or Berkheimer's client(s). As a School Director, Kennedy would specifically have a conflict as to recommending or approving Berkheimer as tax collecting agent for the School District because such would result in a private pecuniary benefit to both Berkheimer and Kennedy. A conflict would exist even as to making recommendations against or disapproving other candidates for the position of tax collecting agent, where such action would assure or increase the possibility that the School District would contract with Berkheimer. Any contract entered into by Berkheimer and the School District, if over $500, would be subject to the restrictions of Section 1103(f), which would prohibit Kennedy in his capacity as a public official from having any supervisory or overall responsibility for the implementation or administration of the contract. In addition, pursuant to Section 1103(a) of the Ethics Act, Kennedy, as a School Director, would have a conflict as to matters before the School Board that would financially impact himself or his private employer, such as the contract between Berkheimer and the School District. Although the contracting in question would not be prohibited under the Ethics Act provided the requirements of Sections 1103(a), 1103(f), and 1103(j) are satisfied, a problem may exist as to such contracting under the Public School Code of 1949 as amended, and therefore, it is suggested that Kennedy seek legal advice in that regard. The Ethics Act would not prohibit Kennedy from servicing the School District's account as a sales representative and receiving a commission from Berkheimer subject to the above restrictions and conditioned upon the assumptions that: (1) there would be no improper understandings under Sections 1103(b) and 1103(c) of the Ethics Act; (2) Kennedy would not be using the authority of his position as a School Director or confidential information to obtain or perform such work as per Section 1103(a) of the Ethics Act; and (3) Kennedy would not have any supervisory or overall responsibility for the implementation or administration of the contract as per Section 1103(f) of the Ethics Act. The fact that Kennedy would refuse a commission from Berkheimer would not have any legal significance because Kennedy, as a sales representative servicing the School District's account, would still receive a salary. In addition, Berkheimer, a business with which Kennedy is associated, would financially benefit from the contract with the School District. In each instance of a conflict, Kennedy would be required to abstain and to 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. Saffron /Kennedy, 02 -613 October 24, 2002 Page 8 This letter is a public record and will be made available as such. Finally, if you disagree with this Advice or if you have any reason to challenge same, you may appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Any such appeal must be in writing and must be actually received at the Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa. Code § 13.2(h). The appeal may be received at the Commission by hand delivery, United States mail, delivery service, or by FAX transmission (717 -787 -0806. Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. Sincerely, Vincent J. Dopko Chief Counsel