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HomeMy WebLinkAbout24-555 Confidential PHONE: 717-783-1610 STATE ETHICS COMMISSION FACSIMILE: 717-787-0806 TOLL FREE: 1-800-932-0936 FINANCE BUILDING WEBSITE: www.ethics.pa.gov 613 NORTH STREET, ROOM 309 HARRISBURG, PA 17120-0400 ADVICE OF COUNSEL August 22, 2024 To the Requester: 24-555 This responds to your letter dated July 29, 2024, by which you requested a confidential advisory from the Pennsylvania State Ethics Commission (“Commission”), seeking guidance as to the general issue presented below: Issue: Whether the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. § 1101 et seq., would impose prohibitions or restrictions upon an individual serving as a Member of \[the Governing Body\]of the \[Name of School District\] (“the School District”), who in a private capacity is employed as \[the Position\] of \[the Organization\], with regard to participating in deliberations, votes, or other official actions of \[the Governing Body\] related to various entities and individuals that she or \[the Organization\] interact with professionally. Brief Answer: \[The Organization\] is a business with which the individual is associated in her capacity as an employee. As a Member of \[the Governing Body\], the individual generally would have a conflict of interest under Section 1103(a) of the Ethics Act in matters that would financially impact her or \[the Organization\]. The individual would not have a conflict of interest with regard to participating in deliberations, votes, or other official actions of \[the Governing Body\]related to various entities and individuals that she or \[the Organization\] interact with professionally unless: (1) the individual would be consciously aware of a private pecuniary (financial) benefit for herself or \[the Organization\]; (2) her action(s) would constitute one or more specific steps to attain that benefit; and (3) neither of the statutory exclusions to the definition of “conflict” or “conflict 1 of interest” as set forth in Section 1102 of the Ethics Act would be applicable. 1 Action that has a de minimis (insignificant) economic impact or that 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, does not constitute a conflict of interest. Confidential Advice, 24-555 August 22, 2024 Page 2 Facts: You have been authorized by \[the Individual\] to request a confidential advisory from the Commission on her behalf. You have submitted facts that may be fairly summarized as follows. On \[Date\], \[the Individual\] began serving as a Member of \[the Governing Body\] of the School District. \[The Governing Body\] is responsible for overseeing all policies and budgetary decisions of the School District and \[the Intermediate Unit\]. \[The Governing Body\] is also the authorizer for all charter schools located in \[the Political Subdivision\]. As a Member of \[the Governing Body\], \[the Individual\] is charged with the power and duty to adopt the School District’s comprehensive plan of education, operating and personnel policies, cooperative agreements, and employment hiring and termination decisions. \[The Individual\] is privy to confidential information regarding the School District’s operations and strategies, student achievement, education plans, and contracts. In a private capacity, \[the Individual\] is \[the Position\] of \[the Organization\], which is a membership-based \[Type of Entity\] that exists to \[Perform a Certain Function For Schools in the Political Subdivision\]. \[The Organization’s\] membership is composed of various educational entities, including \[School District Schools\] and public charter schools that operate under a charter authorized by \[the Governing Body\]. \[The Organization’s Governing Body\] includes: (1) a School District employee/principal; (2) an employee of \[Contractor One\], a School District contractor; (3) \[an Individual Related to a Particular School District School\]; and (4) \[the Position\] of \[Contractor Two\], a School District contractor that \[Performs a Certain Function For a Certain School District School\]. As \[the Position\]of \[the Organization\], \[the Individual\] might administer \[Organization\] projects at School District schools and charter schools. These projects, which involve no expense to the schools or their employees and students, include: (1) \[Project Details Redacted\]. (2) \[Project Details Redacted\]. (3) \[Project Details Redacted\]. Based upon the above submitted facts, you ask generally whether \[the Individual\] would have a conflict of interest with regard to participating in deliberations, votes, or other official actions of \[the Governing Body\] related to various entities and individuals that she or \[the Organization\] interact with professionally. In particular, you pose the following questions: (1) Whether, under Sections 1103(a), 1103(b), 1103(c), or 1103(f) of the Ethics Act, either \[the Individual\]or \[the Organization\] may advertise to, contract with, and administer free services to a School District school, a School District school \[That Receives Certain Services From a School District Contractor\], or a charter school authorized by \[the Governing Body\]; Confidential Advice, 24-555 August 22, 2024 Page 3 (2) Whether Section 1103(f) or any other Section of the Ethics Act would prohibit \[the Organization\]from entering into zero dollar contracts to provide free services for the School District, a School District-run school, a School District school \[That Receives Certain Services From a School District Contractor\], or a charter school authorized by \[the Governing Body\], or to teachers at the aforesaid schools; (3) Whether \[the Individual\], as \[the Position\] of \[the Organization\], may administer \[the Organization’s\] provision of free services through oral or written zero dollar contracts, which do not involve the spending of taxpayer dollars, between \[the Organization\] and the School District, any School District school, or a charter school authorized by \[the Governing Body\] without being in violation of Section 1103(f) or any other Section of the Ethics Act; (a) Whether the answer to this question would be different if the contracts were in place prior to \[the Individual’s\] appointment as a Member of \[the Governing Body\]; (4) Whether \[the Individual\] would have a conflict of interest with regard to participating in \[Governing Body\] votes or other official \[Governing Body\] actions involving: (a) Matters pertaining to a school that is a member of \[the Organization\], such as a vote to approve or disapprove a \[Dollar Amount\] contract for professional and technical services for \[a Certain School District School\]; (i) Whether the answer to (4)(a) would change if \[the Organization\] member school would be one of many schools that would be the subject of the matter presented for deliberation, vote or other official action, such as a vote to approve or disapprove the purchase of curriculum materials for all School District schools; (ii) Whether the answer to (4)(a) would change if the contract would be a zero dollar contract such as a Memorandum of Understanding; (b) Matters pertaining to a company with which Members of \[the Organization’s Governing Body\] are associated, such as a vote to approve or disapprove a \[Dollar Amount\] contract between \[Contractor One\] (a company that employs a Member of \[the Organization’s Governing Body\]) and the School District for professional services; (i) Whether the answer to (4)(b) would change if the contract would be a zero dollar contract for free services; (c) Matters regarding the hiring or termination of employees who work at \[Organization\]member schools or at a school of which a Member of \[the Organization’s Governing Body\]serves as the principal or executive director; Confidential Advice, 24-555 August 22, 2024 Page 4 (5)Whether, under Sections 1103(a), 1103(b), and1103(c) of the Ethics Act,\[the Individual\] or \[the Organization\] may advertise and administer free services provided to the School District or a charter school authorized by \[the Governing Body\]; and (6) Whether the Ethics Act would prohibit \[the Individual\] from voting to authorize or revoke the charter or take any other action regarding the charter status of a charter school that is a member of \[the Organization\] or from voting to take any action regarding a charter management company that operates a charter school that is a member of \[the Organization\]. Discussion: Pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based upon the facts that the requester has submitted. In issuing the advisory based upon the facts that the requester has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts that have not been submitted. It is the burden of the requester to truthfully disclose all material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent the requester has truthfully disclosed all material facts. Sections 1103(a) and 1103(j) of the Ethics Act provide: § 1103. Restricted activities (a) Conflict of interest. -- No public official or public employee shall engage in conduct that constitutes a conflict of interest. (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 Confidential Advice, 24-555 August 22, 2024 Page 5 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(a), 1103(j). The following terms related to Section 1103(a) 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 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. 65 Pa.C.S. § 1102. Section 1103(a) of the Ethics Act, pertaining to conflict of interest, imposes restrictions upon public officials and public employees, and not their immediate family members or businesses. Subject to the statutory exclusions to the Ethics Act’s definition of the term “conflict” or “conflict of interest,” 65 Pa.C.S. § 1102, a public official/public employeeis prohibited from using the authority of public office or confidential information received by holding such a public position for the private pecuniary (financial) benefit of the public official/public employee himself, Confidential Advice, 24-555 August 22, 2024 Page 6 any member of his immediate family, or a business with which he or a member of his immediate family is associated. The use of authority of office is not limited merely to voting but extends 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 each instance of a conflict of interest, a public official/public employee would be required to abstain from participation, which would include voting unless one of the statutory exceptions of Section 1103(j) of the Ethics Act would be applicable. Additionally, the disclosure requirements of Section 1103(j) of the Ethics Act would have to be satisfied in the event of a voting conflict. Per the Pennsylvania Supreme Court’s decision in Kistler v. State Ethics Commission, 610 Pa. 516, 22 A.3d 223 (2011), in order to violate Section 1103(a) of the Ethics Act, a public official/public employee: … must act in such a way as to put his \[office/public position\] to the purpose of obtaining for himself a private pecuniary benefit. Such directed action implies awareness on the part of the \[public official/public employee\] of the potential pecuniary benefit as well as the motivation to obtain that benefit for himself. Kistler, supra, 610 Pa. at 523, 22 A.3d at 227. To violate Section 1103(a) of the Ethics Act, a public official/public employee “must be consciously aware of a private pecuniary benefit for himself, his family, or his business, and then must take action in the form of one or more specific steps to attain that benefit.” Id., 610 Pa. at 528, 22 A.3d at 231. A conflict of interest would not exist to the extent the "de minimis exclusion" or the “class/subclass” exclusion set forth within the Ethics Act’s definition of the term "conflict" or "conflict of interest" would be applicable. The de minimis exclusion precludes a finding of 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, a conflict would not exist and Section 1103(a) of the Ethics Act would not be implicated. See, Kolb, Order 1322; Schweinsburg, Order 900. The Commission has determined the applicability of the de minimis exclusion on a case-by-case basis, considering all relevant circumstances. In order for the class/subclass exclusion to apply, 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" (in no way differently) than the other members of the class/subclass. 65 Pa.C.S. § 1102; see, Kablack, Opinion 02-003; 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 Confidential Advice, 24-555 August 22, 2024 Page 7 individual/business in question and the other members of the class/subclass are reasonably affected to the same degree by the proposed action. Kablack, supra. Sections 1103(b) and 1103(c) of the Ethics Act, 65 Pa.C.S. §§ 1103(b), 1103(c), provide in part that no person shall offer or give to a public official/public employee anything of monetary value and no public official/public employee shall solicit or accept anything of monetary value based upon the understanding that the vote, official action, or judgment of the public official/public employee would be influenced thereby. Section 1103(f) of the Ethics Act, pertaining to contracting, 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 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). The term “contract” is defined in the Ethics Act as follows: “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 mattersin consideration of his current public employment with the Commonwealth or a political subdivision. 65 Pa.C.S. § 1101. Confidential Advice, 24-555 August 22, 2024 Page 8 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. Section 1103(f) of the Ethics Act also provides that the public official/public employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. It is administratively noted that the Public School Code provides in part: § 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 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… …. (c) It shall not be a violation of this section for a school district to contract for the purchase of goods or services from a business with which a school director is associated to the extent permitted by and in compliance with 65 Pa.C.S. Ch. 11 (relating to ethics standards and financial disclosure). 24 P.S. § 3-324(a), (c). On its face, Section 3-324(c) of the Public School Code permits contracting between school districts and businesses with which school directors are associated as long as the requirements of the Ethics Act are observed. Conclusion: In applying the above provisions of the Ethics Act to the instant matter, you are advised as follows. As a Member of \[the Governing Body\], \[the Individual\]isa public official subject to the provisions of the Ethics Act. \[The Organization\] is a business with which \[the Individual\]is associated in her capacity as an employee. As a Member of \[the Governing Body\], \[the Individual\] generally would have a conflict of interest under Section 1103(a) of the Ethics Act in matters that would financially impact her or \[the Organization\]. \[The Individual\] would not have a conflict of interest with regard to participating in deliberations, votes, or other official actions of \[the Governing Body\] related to various entities and individuals that she or \[the Organization\] interact Confidential Advice, 24-555 August 22, 2024 Page 9 with professionally unless: (1) she would be consciously aware of a private pecuniary(financial) benefit for herself or \[the Organization\]; (2) her action(s) would constitute one or more specific steps to attain that benefit; and (3) neither of the statutory exclusions to the definition of “conflict” or “conflict of interest” as set forth in Section 1102 of the Ethics Act would be applicable. In response to your specific questions, you are advised as follows. Questions (1) and (5): Section 1103(a) of the Ethics Act, pertaining to conflict of interest, imposes restrictions upon public officials and public employees, and not businesses. Therefore, Section 1103(a) imposes restrictions upon \[the Individual\]in her capacity as a public official, rather than upon \[the Individual\] in her privatecapacity as \[the Position\] of \[the Organization\] or upon \[the Organization\] itself. Sections 1103(b) and 1103(c) of the Ethics Act do not apply in the absence of an improper understanding with respect to the vote, official action or judgment of a public official or public employee. Additionally, Section 1103(f) of the Ethics Act prohibits a public official or public employee, rather than an individual in his or her private capacity, from having any supervisory or overall responsibility for the implementation or administration of a contract subject to the restrictions of Section 1103(f). Accordingly, neither Section 1103(a), Section 1103(b), Section 1103(c), nor Section 1103(f) would prohibit \[the Individual\], as \[the Position\] of \[the Organization\], or \[the Organization\] itself from advertising to, contracting with, or administering free services to a School District school, a School District school \[That Receives Certain Services From a School District Contractor\], or a charter school authorized by \[the Governing Body\]. Questions (2) and (3): Because the restrictions and requirements of Section 1103(f) of the Ethics Act are applicable only to contracts or subcontracts valued at $500 or more, those restrictions and requirements would not apply with respect to a zero dollar contract. Neither Section 1103(f) nor any other Section of the Ethics Act would prohibit \[the Organization\] from entering into zero dollar contracts to provide free services for the School District, a School District-run school, a School District school \[That Receives Certain Services From a School District Contractor\], or a charter school authorized by \[the Governing Body\], or to teachers at the aforesaid schools. Additionally, neither Section 1103(f) nor any other Section of the Ethics Act would prohibit \[the Individual\], as \[the Position\] of \[the Organization\], from administering \[the Organization’s\] provision of free services through oral or written zero dollar contracts, which do not involve the spending of taxpayer dollars, between \[the Organization\] and the School District, any School District school, or a charter Confidential Advice, 24-555 August 22, 2024 Page 10 school authorized by \[the Governing Body\]. Whether the contracts would be entered into prior to or after \[the Individual’s\]appointment as a Member of \[the Governing Body\] would not be a relevant factor. Question (4): A conflict of interest would not exist in the absence of a private pecuniary (financial) benefit to \[the Individual\] or \[the Organization\]. As such, unless action by \[the Governing Body\] on a matter before it would financially impact \[the Individual\] or \[the Organization\], there would be no basis for \[the Individual\] to have a conflict of interest as to such matter. Accordingly, \[the Individual\] would not have a conflict of interest under Section 1103(a) of the Ethics Act with regard to participating in \[Governing Body\] votes or other official \[Governing Body\] actions involving: (a) matters pertaining to a school that is a member of \[the Organization\], such as a vote to approve or disapprove a \[Dollar Amount\] contract for professional and technical services for \[a Certain School District School\] or a zero dollar contract such as a Memorandum of Understanding; (b) matters pertaining to a company with which Members of \[the Organization’s Governing Body\] are associated, such as a vote to approve or disapprove a \[Dollar Amount\] contract or a zero dollar contract between \[Contractor One\] (a company that employs a Member of \[the Organization’s Governing Body\]) and the School District for professional services; or (c) matters regarding the hiring or termination of employees who work at Organization member schools or at a school of which a Member of \[the Organization’s Governing Body\] serves as the principal or executive director. Question (6): Absent some basis for a conflict of interest such as a private pecuniary (financial) benefit to \[the Individual\] or \[the Organization\], \[the Individual\] would not have a conflict of interest under Section 1103(a) of the Ethics Act with regard to: (a) voting to authorize or revoke the charter or take other action regarding the charter status of a charter school that is a member of \[the Organization\]; or (b) voting to take action regarding a charter management company that operates a charter school that is a member of \[the Organization\]. In each instance of a conflict of interest, \[the Individual\] would be required to abstain from participation, which would include voting unless one of the statutory exceptions of Section 1103(j) of the Ethics Act would be applicable. Additionally, the disclosure requirements of Section 1103(j) of the Ethics Act would have to be satisfied in the event of a voting conflict. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11) of the Ethics Act, an Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any Confidential Advice, 24-555 August 22, 2024 Page 11 other civil or criminal proceeding, provided the requester 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. 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 receivedat 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. Respectfully, Bridget K. Guilfoyle Chief Counsel