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HomeMy WebLinkAbout1319 CorelloIn Re: John Corello File Docket: X -ref: Date Decided: Date Mailed: Before: Louis W. Fryman, Chair John J. Bolger, Vice Chair Daneen E. Reese Donald M. McCurdy Michael Healey Paul M. Henry Raquel K. Bergen 02- 081 -C2 Order No. 1319 March 11, 2004 March 26, 2004 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 filed and a hearing was waived. The record is complete. A Consent Agreement and Stipulation of Findings were submitted by the parties to the Commission for consideration. The Stipulation of Findings is quoted as the Findings in this Order. The Consent Agreement was subsequently approved. Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter 11 of Act 93 of 1998, 65 Pa.C.S. § 1101 et seq., which essentially repeats Act 9 of 1989 and provides for the completion of pending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. Corello 02- 081 -C2 Page 2 I. ALLEGATION: That John Corello, a (public official /public employee) in your capacity as a member of the Catasauqua School Board of Directors, Northampton County violated Section 1103(a) of the Public Official and Employee Ethics Law, (65 Pa.C.S. §1101 et seq.) when you used the authority of your office for the private pecuniary gain of yourself and /or a business with which you are associated, including but not limited to participating in discussions, actions and votes of the Catasauqua School Board finance committee ancf the discussions and votes of the Catasauqua School Board of Directors resulting in your employer, Janney, Montgomery, Scott LLC being awarded bond underwriting contracts by the school district. II. FINDINGS: 1. John Corello has served as a member of the Catasauqua School District Board of Directors since September 13, 1999. a. On September 13, 1999, the Catasauqua Area School Board voted unanimously to appoint John Corello to fill the vacancy for the remainder of the term of a member who had resigned. b. Corello has served as Chairman of the Building and Grounds Committee and also serves on the Finance Committee. c. Since 2002, Corello has served as Chairman of the Building Project Committee of the Whole which was formed with oversight of the construction of a new high school. 2. John Corello is employed as a Vice- President for Investments at Janney, Montgomery Scott, LLC, Allentown, PA. a. John Corello has been so employed by Janney, Montgomery Scott LLC for approximately 13 years. 3. Janney, Montgomery Scott is a full service brokerage firm which can provide investment banking services. a. The Public Finance Department, which has been in existence for approximately twenty years, provides clients with access to municipal bond products. 1. Services provided related to tax exempt bond issues include underwriting bond issues, financial advisory and arbitrage rebate calculations. b. The Investment Banking group provides banking services, including private placements, equity underwriting and merger and acquisition advisory services to emerging growth and middle market companies. 4. John Corello works for JMS as a retail broker providing individualized brokerage services to private retail clients. 5. In or about the spring of 1999 the Catasauqua School Board was contemplating obtaining funding for improvements /additions to school district properties. a. The district was interested in building a new high school and renovating other school buildings and facilities of the school district. 6. Prior to May 1999, the Catasauqua School District (CSD) retained the services of Corello 02- 081 -C2 Page 3 Public Financial Management (PFM), a financial investment advisory firm to assist with securing financing for the project. a. In or about May 25, 1999, PFM presented a financing plan update to the board. 7. Two months prior to Mr. Corello's membership on the Board, in or about June 1999, PFM provided the CSD with recommended steps for financing the board's initiatives. a. The recommendations included the following: Action Month Determine that there is "Reasonable Expectation" that there June is a Capital Project to occur within the next three (3) years Formally appoint a Financial Advisor and a Bond Counsel July ( "Financing Team ") Develop & select a financing plan: Financing Team presents and discusses financing options, plan & structure with school district (Board /Committee/ Administration) such as: • Size and number of borrowing • Permanent vs. interim financing • Choice of financing vehicle (Bonds, Bank Loan and Bond pools) • Millage Impact & Phase -in • Repayment Structure & Maturity Term: Level vs. Wrap Around • Use of Capitalized Interest or not • Method of Bond Sale Authorize Financing Team and Administration to take necessary steps to implement the financing plan and issue debt Financing team prepares official statement, drafts bond August /September documents, secures bond insurance and obtains credit rating Bond Sale Bond closing & investment of bond proceeds July /August August September October 8. The Finance Committee of the CSD, consisting of members of the board, in accord with normal board procedure, reviews all expenditure options of the district and provides recommendations to the board of directors. a. The finance committee regularly met with PFM consultants to discuss recommended financing options for the building projects. 1. John Corello participated in these meetings after his appointment to the board on September 13, 1999. b. The finance committee made recommendations to the board as to the action to be taken regarding financing. 9. The Finance Committee of the CSD met on September 8, 1999, to review proposals of bond counsel and the financial advisor regarding the process to be followed for the Corello 02- 081 -C2 Page 4 district's financing of future building projects. This is a necessary step toward building a new school, and within normal board procedure. Mr. Corello was not yet a member of the Finance Committee, nor a member of the Board at this time. a. The Committee recommended adopting a resolution authorizing bond counsel and financial advisors to commence proceedings for the issuance of General Obligation Bonds, in the amount of ten million dollars, for final adoption by the end of calendar year 1999. 10. The Long Range Capital Financing Plan for CSD as prepared by PFM, prior to Mr. Corello's membership on the Board, and presented on September 8, 1999, included the following: Phase I 1999 Fall Phase 11 2000 Jan -Feb Phase III 2001 Jan -Feb Total Estimated Costs: $10 million permanent issue $10 million 'temporary financing" (Emmaus Bond Pool) $10 million permanent issue $20 million 11. The resolution prepared and planned by PFM beginning in June 1999 was put up fora vote on September 13, 1999. The resolution authorized the school district's Board counsel and financial advisors to start proceedings for the issuance of General Obligations Bonds in the amount of ten million dollars for final adoption by the end of calendar year 1999. John Corello, at his first meeting as a School Board member, voted in favor of this resolution that did not mention Janney, Montgomery Scott. 12. The resolution approved by the board during the September 13, 1999, meeting noted the intent of the board to issue General Obligation Bonds for the acquisition, construction, installation, equipment and renovation of high school facilities and that the project was expected to commence prior to the issuance of the bond requiring the district to pay for certain of the costs with general funds. a. The board resolved that the maximum debt for the project to be $10,000,000 and that the district would reimburse the original expenditures from general funds with proceeds of the bonds. 13. The Finance Committee met on October 4, 1999, with PFM and school district bond counsel, Stevens & Lee, for the purpose of reviewing the building project and the financing plan. a. John Corello attended the meeting and participated in the discussions. 14. Motions approved by the Finance Committee on October 4, 1999, included the following: a. Recommendation to authorize bond counsel and financial advisor to proceed with Phase I of the Long -Term Capital Financing Plan consisting of temporary financing through the Emmaus General Authority Bond in the amount of $10,000,000. b. Recommendation to proceed with Phase II of the financing plan of the permanent issue of General Obligation Bonds in the amount of $10,000,000 be sold on a competitive bid sale with formal closing on February /March 2000. c. Corello participated in these recommendations by voting for the committee recommendations. 15. The selection of the bond underwriter recommended by PFM was to advertise for bids Corello 02- 081 -C2 Page 5 over the internet rather than negotiate with a select vendor or vendors. a. PFM believed that the bid process would result in more favorable interest rates for the CSD. b. Corello noted on the record that he recommended a negotiated sale with a single vendor over a competitive sale. 16. During the school board meeting of October 11, 1999, a resolution authorizing the district's board counsel and financial advisor to proceed with Phase 1 and Phase II of the Long Range Capital Financing Plan was adopted. a. John Corello voted in favor of the resolution which was unanimously approved. 17. The resolution approved by the board during the October 11, 1999, board meeting authorized the following: a. The district's bond counsel and financial advisor are hereby authorized to proceed with Phase 1 of the District's Long -Term Capital Financing Plan, which shall consist of interim temporary financing through the Emmaus General Authority Bond Pool in the amount of $10,000,000. b. The district's bond counsel and financial advisor are hereby authorized to proceed with Phase 2 of the Financing Plan, which consists of permanent issuance of General Obligation Bonds in the amount of $10,000,000. 18. Minutes of the October 11, 1999, board meeting confirm John Corello voting yes to approve the selection of the bond underwriter through a competitive bid. However, Mr. Corello made a note to the record that he was opposed to it because in his professional opinion, he felt that using a competitive sale rather than a negotiated sale was riskier for the school district. 19. On or about December 14, 1999, PFM provided the school board with a financing plan timeline. 20. John Corello as a member of the board and finance committee received this information and participated in the meeting of December 14, 1999, with PFM when issues relating to the bond sale were discussed. 21. PFM's contract with the district required the solicitation and tabulation of bids from the various bond companies. 22. PFM issued an invitation to bid over the internet for the CSD General Obligation Bonds, Series of 2000, in the amount of $9,995,000. a. All bids were to be submitted on PFM's website (www.PFMauction.com) prior to 11:30 a.m. on February 14, 2000. b. Only NASD registered broker - dealers and dealer banks with OTC clearing arrangements were eligible to bid. c. Type of bids allowed were "All-or- None" (AON) or "Maturity by Maturity" (MBM) to enable prospective bidders to bid the entire issue or separate bids for a particular maturity of the bonds. 23. Bids received and tabulated by PFM by February 14, 2000, included the following: Corello 02- 081 -C2 Page 6 Firm Bid Janney Montgomery Scott 5.6281 % - 11:27:07 a.m. Commerce Capital Markets Inc. 5.6340% - 11:26:19 a.m. Boenning & Scattergood Inc. 5.6374% - 11:29:48 a.m. Mellon Financial Markets, Inc. 5.6577% - 11:26:16 a.m. First Union Capital Markets 5.6661% - 11:29:09 a.m. Nike Securities L.P. 5.7013% - 11:28:37 a.m. 5.8081% - 11:21:40 a.m. 24. On February 14, 2000, PFM and Stevens & Lee, the school district's bond counsel, presented to the school board the results of the bids received for the bond sale. a. The bids submitted to the board by PFM were as follows: Discount Interest Bidder TIC* NET of OID Rate Range Janney Montgomery Scott 5.6281 $4.87 4.600 -5.850 Commerce Capital Markets Inc. 5.6340 $6.19 4.600 -5.800 Boenning & Scattergood Inc. 5.6374 $5.65 4.500 -5.800 Mellon Financial Markets Inc. 5.6477 $5.61 4.600 -5.850 First Union Capital Markets 5.6661 $8.47 4.700 -5.800 Nike Securities 5.7013 $7.40 4.700 -5.900 Maturity -by- Maturity 5.8081 Varies 5.000 -6.000 *T.I.C. — True Interest Cost 25. Following the presentation by PFM the board took the following action on February 14, 2000, to authorize the bond issue in the amount of $9,995,000 and to accept the bid of Janney, Montgomery, Scott at their rate of 5.6281 (true interest cost) as recommended by Public Financial Management, Inc., and reviewed by Bond Counsel, Stevens & Lee. 26. John Corello was present at the February 14, 2000, meeting and voted to approve the General Obligation Bond Issue and to accept the bid of Janney Montgomery Scott, his employer. a. The motion was unanimously approved. 27. During the finance committee meeting of January 25, 2001, Brad Remig of PFM presented the committee with a number of financing options as part of the long range financial plan. a. The committee voted to recommend to the board to authorize bond counsel and financial advisor to proceed with a $10,000,000 General Obligation Bond Issue, Series 2001, with $8,000,000 for capital projects and $2,000,000 to advance refund a portion of the 2000 GOB and any associated costs. b. John Corello did not attend this meeting. 28. The finance committee met on February 27, 2001, in part, to review the long range financing plans. a. John Corello attended the meeting. b. Brad Remig reviewed two options concerning the financing plan for the new high school. Corello 02- 081 -C2 Page 7 c. Following Remig's presentation, Corello made a motion to recommend to the board to refinance the existing bond issue, Series 2000, and complete the transaction through a negotiated sale. 1. The motion was unanimously approved. 29. The finance committee's recommendation of February 27, 2001, was presented to the CSD board of directors on March 12, 2001. 30. On March 12, 2001, a resolution was introduced before the board, for vote, authorizing the district administration to work with Public Financial Management, Inc., (PFM) as financial advisor; Janney Montgomery Scott LLC as underwriter, Stevens & Lee, as bond counsel, and its solicitor to proceed with a ten million dollar General Obligation Bond issue, Series of 2001, to advance refund a portion of its 2000 General Obligation Bonds. a. The purpose of this resolution was to refinance the bonds at a more favorable rate to the district. b. The motion to approve the resolution was approved to a 7 to 0 vote with one abstention. c. John Corello was present during the meeting and abstained from the vote. 31. The resolution authorizing the refinance of the 2000 bond issue was discussed by the school board during its March 19, 2001, board meeting. a. Corello was in attendance at this meeting. 32. The resolution introduced during the March 19, 2001, meeting provided, in part, as follows: a. The Board of Directors has determined that bonds will be issued and designated generally as "General Obligation Bonds, Series of 2001." b. The bond shall be issued in the aggregate principal amount of $10,000,000. c. The district in contemplation of the issuance and sale of general obligation bonds in the amount of $10,000,000 to provide funds for and towards advance refunding of the 2000 General Obligation Bonds, has determined that the private sale by negotiation is in the best financial interest of the school district. 33. The resolution authorized the negotiation with Janney Montgomery Scott for refinancing of the 2000 bond issue. 34. Minutes of the March 19, 2001, GSD board of directors meeting confirm the following action to approve the refinancing of the bonds with Janney Montgomery Scott at their rate of 4.729% (true interest costs) as recommended by Public Financial Management, Inc. and reviewed by Bond Counsel, Stevens & Lee. Roll Call Vote: Roll Call: Atkinson aye; Bruchak aye; Castner aye; Cunningham aye; Hahn aye; Hein aye, and Pacifico aye. Corello abstained from voting . Zero nay. Motion carried. 35. The CDS has paid the following fees for finance and refinance of the CSD 2000 and 2001 bond issues. Corello 02- 081 -C2 Page 8 a. 2000: Bond Discount (0.487 %) Gross Sales Commission (to Janney Montgomery Scott Financial Consultants) Sales Commission (To other syndicate members) Expenses (includes public finance) Underwriting Profit To Janney) Underwriting Profit (to other syndicate members) b. 2001: Bond Discount (0.599 %) Gross Sales Commissions (To Janney Montgomery Scott Financial Consultants) Sales Commissions (to other firms) Expenses (including charitable contributions) Management Fee $ 48,676 a. JMC did not refinance the 2002 and 2003 bond issues. $ 19,206 $ 21,973 $ 4,998 $ 2,183 $ 48,676 $ 59,900 $ 16,570 $ 20,730 $ 5,708 $ 16,892 $ 59,900 36. The CSA has approved additional finance /refinance issues in both 2002 and 2003. 37. Employees of Janney, Montgomery Scott LLC normally receive a "finders fee" if they help the company identify and pursue public finance business. 38. The amount of a "finders fee" paid to a Janney Montgomery Scott LLC employee is based upon the following factors, including but not limited to: a. If the company actually receives the business. b. The dollar value amount of the business. c. The extent of the employee's involvement in securing the business. 39. Prior to May 10, 2001, John Corello had a conversation with William J. Carlin, First Vice - President, Janney Montgomery Scott LLC. a. During this call, it was agreed that in lieu of a "finders fee" JMS would fund charitable contributions of Corello's selection. b. John Corello was an elected member of the Catasaqua [sic] Area School Board at this time. c. The total amount of the contributions was not to exceed $3,600.00. 40. John Corello would identify the charities that would receive these contributions. a. John Corello directly made contributions to charities of his choice. c. John Corello was reimbursed for the contributions made by him on behalf of JMS. 41. On May 10, 2001, Allen Schankel, Senior Vice- President, Janney Montgomery Scott LLC, directed a memo to Richard Thornton, Senior Vice - President /Chief Financial Officer concerning John Corello's expenses. Corello 02- 081 -C2 Page 9 a. The memo indicates that the public finance area of Janney Montgomery Scott LLC will support up to $3,600 of John Corello's contributions to charitable entities. b. Brian Lee, Office Branch Manager, Janney Montgomery Scott, LLC, Allentown Office, will initially approve the contributions. c. Brian Lee is the immediate supervisor of John Corello. d. William Carlin, First Vice - President, Janney Montgomery Scott LLC will subsequently approve the contributions. 1. Carlin manages the public finance department at Janney, Montgomery Scott LLC. 2. The public finance department handled the underwriting of the ten million dollar General Obligation Bonds, Series of 2001, for the Catasaqua [sic] Area School District. 42. On May 17, 2001, John Corello submitted a Janney Montgomery Scott (JMS) Travel Entertainment Report to Brian Lee for approval. a. It requested contributions be made to: 1. Easter Seals, Mary Ellen Golf Tournament in the amount of $500.00. 2. Collingswood Memories Golf Tournament in the amount of $900.00. b. Lee approved the contribution expenses on May 18, 2001. 43. On May 17, 2001, John Corello submitted a JMS Travel /Entertainment report to Brian Lee for approval. a. It requested that a contribution be made to Santa's Hide -a -Way Hollow in the amount of $250.00. b. Lee approved the contribution expense on May 18, 2001. 44. On June 7, 2001, John Corello, submitted a JMS Travel /Entertainment Report to Brian Lee for approval. a. It requested contributions be made to the Catasaqua [sic] Youth Athletic Association in the amount of $500.00. b. Lee approved the contribution expense on June 7, 2001. 45. On July 13, 2001, John Corello submitted a JMS Travel /Entertainment Report to Brian Lee for approval. a. It requested that contributions be made to the Catasaqua [sic] Youth Soccer Association in the amount of $250.00. b. Lee approved the contribution expenses on July 16, 2001. 46. On September 5, 2001, John Corello submitted a JMS Travel /Entertainment Report to Brian Lee for approval which requested that contributions be made to: Corello 02- 081 -C2 Page 10 a. Lehigh Valley Prospects in the amount of $100.00. b. Palkovitz -Koch Memorial Golf Tournament in the amount of $350.00. c. Lee approved the contribution expense on September 5, 2001. 47. On September 10, 2001, John Corello submitted a JMS Travel /Entertainment Report to Brian Lee for approval. a. It requested that contributions be made to the East End Fire Company of Catasaqua [sic] in the amount of $275.60. b. Lee approved contribution expenditure on September 10, 2001. 48. On November 22, 2001, John Corello submitted a JMS Travel /Entertainment Report to Brian Lee for approval. a. It requested that a contribution be made to the September 11 Fund Raising Dinner in the amount of $400.00. b. Lee approved the contribution expenditure. 49. Total charitable contributions made by JMS totaled $3,525.60 as follows: Easter Seals Golf Tournament $ 500.00 Collingswood Memories Golf Tournament $ 900.00 Santa's Hide -a -Way Hollow $ 250.00 Catasaqua sic Youth Athletic Association $ 500.00 Catasaqua !sic Youth Soccer Association $ 250.00 Lehigh Valley rospects $ 100.00 Palkovitz -Koch Memorial Golf Tournament $ 350.00 East End Fire Company $ 275.60 9 -11 Fund Raising Dinner $ 400.00 Total $ 3,525.60 50. The total charitable contributions of $3,525.60 made by Janney Montgomery Scott. Mr. Corello, as an employee of Janney Montgomery Scott identified the charitable organizations and directed the JMS funds to those organizations. Mr. Corello, not being a member of the Public Finance Department was not specifically entitled to a finder's fee. 51. The charitable contributions made by Janney Montgomery Scott were made for the tax deductible benefit of the company. a. Sworn statements provided to investigators for the State Ethics Commission by company officials William Carlin, First Vice President, Richard Thornton, Sr. Vice President /Chief Financial Officer and Allen Schankel, Sr. Vice President confirmed the charitable contributions were for the benefit of JMS. 52. John Corello inadvertently claimed as tax deductions on his personal federal income tax filings charitable contributions made by Janney Montgomery Scott on his behalf. a. These were the same deductions J MS made for the tax deductible benefit of the company. 53. John Corello filed a 2001 U.S. Individual Tax Return utilizing IRS Form 1040. Corello 02- 081 -C2 Page 11 a. Amongst other charitable contributions identified on the Charitable Contributions Worksheet, Schedule A, Lines 15 -17, are the following contributions. 1. Santa's Hide -a -Way Hollow - $250.00. 2. Easter Seals - $500.00. 3. CATA Youth Athletic Association - $500.00. b. These contributions totaling $1,250 were made by John Corello on behalf of JMS. c. Corello realized the tax benefit intended for the company, which he subsequently corrected by filing an amended return and paying the appropriate taxes. 54. On September 9, 2002, John Corello provided to the board members of the Catasaqua [sic] Area School District a letter concerning questions of conflict of interest with his employment for JMS and the bond issues. 55. During the time period from September 13, 1999, through 2001, Mr. Corello participated in discussions and votes of the Finance Committee, unintentionally leading to recommendations to negotiate with Janney Montgomery Scott. Mr. Corello participated in discussions of the school board and votes to approve the 2000 Bond Issue without knowledge or intent that Janney Montgomery Scott would be awarded the sale. Pursuant to PA School Code 24 P.S. 4- 440.1, 24 P.S. 6 -631, 24 P.S. 6 -610, and full Board approval, JMS was compensated by the Catasauqua School Board for fees, commissions and payments. III. DISCUSSION: At all times relevant to this matter, the Respondent, John Corello, hereinafter Corello, 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 Pa.C.S. § 1101 et seq., which Acts are referred to herein as the "Ethics Act." The allegations are that Corello, as a member of the Catasauqua School Board of Directors (School Board), violated Section 1103(a) of the Ethics Act when he participated in discussions, actions and votes of its finance committee and discussions and votes of the School Board resulting in his employer, Janney Montgomery Scott LLC, being awarded bond underwriting contracts. Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited from engaging in conduct that constitutes a conflict of interest. The term "conflict of interest" is defined under Act 9 of 1989/Act 93 of 1998 as follows: Section 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 f of ce 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. "Conflict" or Corello 02- 081 -C2 Page 12 "conflict of interest" 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. 65 Pa.C.S. § 1102. Section 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. As noted above, the parties have submitted a Consent Agreement and Stipulation of Findings. The parties' Stipulated Findings are reproduced above as the Findings of this Commission. We shall now summarize the relevant facts as contained therein. Corello has served as a member of the board of directors of the Catasauqua School District (School District) since September 13, 1999. In a private capacityhe is employed as a Vice President for Investments at Janney Montgomery Scott, LLC (JMS), a full- service brokerage firm which provides investment banking services. Corello acts as a retail broker for JMS providing individualized brokerage services to private retail clients. In the spring of 1999, the School District Board contemplated obtaining funding for building a new high school and renovating other school buildings and facilities. At that time, the School District retained the services of Public Financial Management (PFM) which presented a financing plan to the School Board. The finance committee of the School District met in September of 1999 to review proposals of bond counsel and PFM regarding the future building projects. The committee recommended adopting a resolution to authorize bond counsel and the financial advisor to commence proceedings for the issuance of General Obligation Bonds in the amount of $10 million for final adoption by the end of the calendar year 1999. At the time, Corello was not a member of the School Board. The resolution was put before the School Board for a vote on September 13, 1999, Corello's first meeting as a board member, where he voted in favor of the resolution which was approved by the School Board. The finance committee of the School Board met in October of 1999 with Corello attending the meeting. Motions were approved by the finance committee at that time to recommend proceeding with Phase 1 of the Long -Term Capital Financing Plan for temporary financing of $10 million, and with Phase II for the permanent issuance of bonds in the amount of $10 million to be sold at a competitive bid sale. Corello participated by voting for the committee recommendations. When PFM recommended the selection of a bond underwriter through an advertisement for bids rather than by negotiations with a single vendor or vendors, Corello recommended a negotiated sale with a single vendor rather than a competitive sale process. At the School Board meeting in October of 1999, Corello voted in favor of a resolution, which was unanimously approved, to proceed with Phase 1 and Phase 11 of the Long -Term Capital Financing Plan. Although Corello voted in favor of the selection of bond underwriter through a competitive bid, he noted on the record that he was opposed to such a plan because he believed that a competitive sale rather than a negotiated sale was riskier for the School District. PFM, as per its contract with the School District for the solicitation and tabulation of bids from various bond companies, issued an invitation for such bids over the internet with a Corello 02- 081 -C2 Page 13 deadline of February 14, 2000. Seven bids were received and tabulated by PFM including one from JMS. The bid from JMS had the lowest true interest cost (TIC). Following presentation to the School Board by PFM, action was taken to authorize the bond issue in the amount of $9,995,000 and to accept the bid of JMS at the rate of 5.6281 TIC. Corello voted in favor of that motion which was approved unanimously. At a finance committee meeting in late February of 2001 attended by Corello, he made a motion to recommend to the School Board that the existing bond issue be refinanced and completed through a negotiated sale, which motion was unanimously approved and sent to the School Board in March of 2001. At a March 12, 2001, School Board meeting, a resolution was introduced authorizing the School District's administration to work with PFM, JMS, the bond council, and solicitor to proceed with a $10 million General Obligation Bond Series and to refund a portion of the 2000 General Obligation Bonds for the purpose of refinancing the bonds at a more favorable rate to the School District. Although Corello was present for that meeting, he abstained on the vote which adopted the resolution. That resolution in effect authorized negotiations with JMS for the purpose of refinancing the 2000 bond issue at a rate of 4.729 TIC as recommended by PFM. The various fees, including those of JMS, that the School District paid for the finance and refinance of the 2000 and 2001 bond issues are delineated in Fact Finding 35. Employees of J MS who identify and pursue public finance business normally receive a "finders fee." Prior to May 10, 2001, Corello had a conversation with the first Vice President of JMC where it was agreed that in lieu of a "finders fee" from JMS, various charitable contributions would be made by JMS based upon Corello's selection. Corello identified the charities, made the contributions directly, and then received reimbursement from JMS. Fact Finding 40. The total charitable contributions made by JMS amounted to $3,525.60. See, Fact Finding 49. Corello, as a JMS employee, identified the charitable organizations and directed the payment of J MS funds to those organizations. See, Fact Finding 50. Corello was not entitled to a "finders fee" in that he was a member of a public finance department. The charitable contributions made by JMS gave the company a tax deductible benefit. Corello inadvertently claimed the tax deductions on his personal federal income tax filings. Fact Finding 52. Subsequently, Corello filed an amended tax return paying the appropriate taxes. In September of 2000, Corello provided the School Board with a letter concerning questions of conflict of interest with his JMS employment vis -a -vis the bond issues. Corello participated in discussions of the School Board and votes to approve the 2000 bond issue without knowledge or intent that JMS would be awarded the sale. Between September of 1999 through 2001, he participated in discussions and votes of the finance committee that unintentionally lead to recommendations to negotiate with JMS. After full School Board approval, JMS was compensated through fees, commissions or payments. Having highlighted the Stipulated Findings and issues before us, we shall now apply the Ethics Act to determine the proper disposition of this case. The parties' Consent Agreement sets forth a proposed resolution of the allegations that this Commission find an unintentional violation of Section 1103(a) of the Ethics Act when Corello, in his capacity as a Catasauqua Area School District Board Member and Finance Committee Member, participated in actions and discussions, and subsequently voted to acquire bonds for the school district, which resulted in a private pecuniary gain to his employer, Janney Montgomery Scott, who then, in lieu of a finders fee to Corello, made charitable contributions to various entities of Corello's choosing. Corello further agrees to make payment of $3,525.60 to Catasauqua Area School District through this Commission within 30 days of the issuance of this order. In applying Section 1103(a) of the Ethics Act to the stipulated facts in this case, we find that there were uses of authority of office on the part of Corello. But for the fact that Corello Corello 02- 081 -C2 Page 14 was a member of the School Board and finance committee, he could not have participated in actions and discussions and subsequent votes regarding the bond issues for the School District. Such actions were uses of authority of office. See, Juliante, Order 809. The uses of authority of office resulted in a private pecuniary gain to Corello's employer, JMS, in terms of the various fees that it obtained for providing such services. See, Fact Finding 35. JMS, Corello's employer, is a business with which he is associated as that term is defined under the Ethics Act, 65 Pa.C.S. §1102. In addition, a private pecuniary benefit inured to Corello in the form of "finders fees" which were made into charitable contributions to various entities or groups of Corello's choosing. Accordingly, Corello unintentionally violated Section 1103(a) of the Ethics Act when he, as a Catasauqua Area School District Board Member and Finance Committee Member, participated in actions to acquire bonds for the school district which resulted in a private pecuniary benefit to his employer, Janney Montgomery Scott, LLP, and a "finders fee" to him which he made as charitable contributions to various entities. See, Gorman, Order 1041. We determine that the Consent Agreement submitted by the parties sets forth the proper disposition for this case, based upon our review as reflected in the above analysis and the totality of the facts and circumstances. Accordingly, Corello is directed to make payment of $3,525.60 to Catasauqua Area School District through this Commission within 30 days of the issuance of this order. 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. Corello, as a Catasauqua Area School District Board Member, is a public official subject to the provisions of Act 9 of 1989 as codified by Act 93 of 1998. 2. Corello unintentionally violated Section 1103(a) of the Ethics Act when he, as a Catasauqua Area School District Board Member and Finance Committee Member, participated in actions to acquire bonds for the school district which resulted in a private pecuniary benefit to his employer, Janney Montgomery Scott, LLP, and a "finders fee" to him which he made as charitable contributions to various entities. In Re: John Corello ORDER NO. 1319 File Docket: 02- 081 -C2 Date Decided: March 11, 2004 Date Mailed: March 26, 2004 1. Corello, as a Catasauqua Area School District Board Member, unintentionally violated Section 1103(a) of the Ethics Act when he, as a Catasauqua Area School District Board Member and Finance Committee Member, participated in actions to acquire bonds for the school district which resulted in a private pecuniary benefit to his employer, Janney Montgomery Scott, LLP, and a "finders fee" to him which he made as charitable contributions to various entities 2. Per the Consent Agreement of the parties, Corello is directed to make payment of $3,525.60 to Catasauqua Area School District through this Commission within 30 days of the issuance of this order. a. Compliance with the foregoing will result in the closing of this case with no further action by this Commission. b. Non - compliance will result in the institution of an order enforcement action. BY THE COMMISSION, John J. Bolger, Vice Chair Chair Louis W. Fryman did not participate in the consideration of this matter.