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HomeMy WebLinkAbout04-007 MeansOPINION OF THE COMMISSION Before: Louis W. Fryman, Chair John J. Bolger, Vice Chair Daneen E. Reese Donald M. McCurdy Michael J. Healey Paul M. Henry Raquel K. Bergen DATE DECIDED: 6/9/04 DATE MAILED: 6/22/04 04 -007 Charles M. Means, Esquire Campbell, Durrant & Beatty, P.C. 555 Grant Street, Suite 310 Pittsburgh, PA 15219 -4408 Re: Conflict; Public Official; School Director; Real Estate Agency; Business With Which Associated; Buyer Agency Agreement; Contract With School District; Bixler v. State Ethics Commission, 847 A.2d 785 (Pa. Commw. Ct. 2004). Dear Mr. Means: This Opinion is issued in response to your advisory request dated March 30, 2004. I. 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 and /or a real estate agency owned by the school director with regard to entering into a non - exclusive buyer agency agreement with the school district where: (1) the school district has been searching for suitable property to rent to offer certain educational services; (2) the school director has located a property that potentially meets the school district's needs; and (3) the real estate agency has proposed to enter into a non - exclusive buyer agency agreement with the school district, pursuant to which the real estate agency will receive a commission from the listing agent for finding a tenant for the property. II. FACTUAL BASIS FOR DETERMINATION: As Solicitor for the Highlands School District ("School District "), you seek an advisory on behalf of School Director Timothy J. McCue ("McCue") based upon the following submitted facts. The School District is seeking to rent property in which to offer certain alternative Means, 04 -007 June 22, 2004 Page 2 education services. McCue, who owns Agnes R. Nicklas Realtor and Associates, a real estate agency, has found a property (hereinafter referred to as the "Property ") that potentially meets the School District's needs. Agnes R. Nicklas Realtor and Associates is proposing to enter into a non - exclusive buyer agency agreement with the School District. You have submitted a copy of the buyer agency agreement, which is incorporated herein by reference. If the School District rents the Property, the listing agent will pay a commission to the tenant's agent, Agnes R. Nicklas Realtor and Associates, for finding a tenant. You state that the commission is expected to be half of the listing agent's commission, which in turn, will be 5% of the base rental price. You further state that the commission arrangement is standard and will be applicable regardless of who the tenant agent is. Referencing Section 1103(f) of the Ethics Act, you request an advisory opinion as to whether McCue and /or Agnes R. Nicklas Realtor and Associates may serve as the School District's agent in leasing the Property. By letter dated April 30, 2004, you were notified of the date, time and location of the public meeting at which your request would be considered. 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 that the requestor has submitted. In issuing the advisory based upon the facts that the requestor has submitted, this 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 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. Act. As a School Director, McCue is a public official subject to the provisions of the Ethics Sections 1103(a) and 1103(j) of the Ethics Act provide as follows: § 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 Means, 04 -007 June 22, 2004 Page 3 65 Pa.C.S. The as follows: 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. §§ 1103(a), 0). following terms pertaining to conflicts of interest under the Ethics Act are defined § 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(f) of the Ethics Act, which pertains 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 Means, 04 -007 June 22, 2004 Page 4 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 following terms that pertain to Section 1103(f) are defined in the Ethics Act as follows: § 1102. Definitions "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. "Governmental body." Any department, authority, commission, committee, council, board, bureau, division, service, office, officer, administration, legislative body or other establishment in the executive, legislative or judicial branch of a state, a nation or a political subdivision thereof or any agency performing a governmental function. "Person." A business, governmental body, individual, corporation, union, association, firm, partnership, committee, club or other organization or group of persons. 65 Pa.C.S. § 1102. It is administratively noted that Sections 3-324(a) and (c) of the Public School Code of 1949 as amended ( "Public School Code "), provide 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 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: Provided, That one who has served as a school director for two consecutive terms, of six years each, may Means, 04 -007 June 22, 2004 Page 5 be elected to the position of attorney or solicitor for the board of which he was a member by the unanimous vote of all the other members of the board, and, after resigning his office as school director, shall be entitled to receive such pay for his services as solicitor as the board of school directors may determine: Provided, however, That a school director may be appointed to the position of secretary to the board of a school district of the second class, of which he was a member during the term for which he was elected or appointed upon the unanimous consent of all the other members of the board after resigning his office as school director, and he shall be entitled to receive such pay for his services as secretary as the board of school directors shall determine: And provided further, That one who has served as a school director may, after resigning from office as a school director, be elected to the position of teacher by the board of which he was a member by a vote of at least two - thirds of all other members of the board and shall be entitled to receive such pay for his services as a teacher as the board of school directors may lawfully determine. (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). Although the State Ethics Commission does not have the statutory jurisdiction to interpret the Public School Code, Section 3 -324 on its face clearly permits a school district to contract for the purchase of goods or services from a business with which a school director is associated as long as the restrictions and requirements of the Ethics Act are observed. In applying Sections 1103(a) and 1103(j) 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 articipation 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; Rembold, Order 1303; Wilcox, Order 1306. If the private employer or business with which the public official /public employee is associated would have a matter pending before the governmental body, the public official /public employee would have a conflict of interest as to such matter. A reasonable and legitimate expectation that a business relationship will form may also support a finding of a conflict of interest. Amato, Opinion 89 -002. In each instance of a conflict 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 Means, 04 -007 June 22, 2004 Page 6 not be limited merely to 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, Agnes R. Nicklas Realtor and Associates is a business with which McCue, as owner, is associated. Pursuant to Section 1103(a) of the Ethics Act, McCue would generally have a conflict of interest as to using the authority of his office as a School Director, or confidential information received by being a School Director, for the private pecuniary benefit of himself or Agnes R. Nicklas Realtor and Associates. McCue would specifically have a conflict of interest under Section 1103(a) of the Ethics Act in matters pertaining to the School District leasing space for alternative education services because his real estate agency, Agnes R. Nicklas Realtor and Associates, has proposed to enter into a related contract (non - exclusive buyer agency agreement) with the School District. In each instance of a conflict, McCue would be required to abstain fully and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. As for Section 1103( of the Ethics Act, we note that the proposed non - exclusive buyer agency agreement involves McCue and /or Agnes R. Nicklas and Associates entering into a contract with the School District. Under these particular facts, we determine that the restrictions of Section 1103(f) would apply, assuming that the value of the contract would be $500 or more. In light of the recent ruling in Bixler v. State Ethics Commission, 847 A.2d 785 (Pa. Commw. Ct. 2004), we must further consider the extent to which McCue and /or Agnes R. Nicklas Realtor and Associates would be subject to Section 1103(f). In Bixler, su ra, the Commonwealth Court held that a township supervisor did not violate Section 11(f) of the Ethics Act when a business that employed him entered into a contract in excess of $500 with his township without an open and public process, but the supervisor was neither a party to the contract nor a principal of the contracting business. Id. The Court determined that Section 1103(f) of the Ethics Act prohibited the conduct of entering into the contract under such circumstances. The Court concluded that although a violation of Section 1103(f) of the Ethics Act would be established under such circumstances, it would not be the public official who would be in violation of the law. Id. Based upon Bixler, supra, if McCue would be a party to a contract with the School District, he would be subject to Section 1103(f) of the Ethics Act. If Agnes R. Nicklas Realtor and Associates would be a party to the contract, McCue would likewise be subject to Section 1103( of the Ethics Act to the extent he would be deemed to have entered into the contract on behalf of or as a principal of the business. As for the applicability of Section 1103(f) to Agnes R. Nicklas Realtor and Associates, Bixler would suggest that Section 1103(f) would apply to a business as a party to such a contract assuming the value of the contract would be $500 or more. However, this Commission has never exercised jurisdiction over a private business entity with respect to Section 1103(f). We note that the Ethics Act provides for a judicially imposed remedy where a business runs afoul of Section 1103(f). Such remedy consists of a court declaring the contract void if an action is properly filed with the court within 90 days of the making of the contract. See, 65 Pa.C.S. § 1103(f). It is well settled that "the object of all interpretation and construction of statutes is to ascertain and effectuate the intention of the General Assembly." 1 Pa.C.S. § 1921. We determine that it was the intention of the General Assembly for the courts, not this Means, 04 -007 June 22, 2004 Page 7 Commission, to enforce Section 1103(f) of the Ethics Act as to a business entity that transgresses Section 1103(f) of the Ethics Act. Where Section 1103(f) would apply to McCue, its requirements would have to be strictly observed: in addition to the requirements for an open and public process, McCue, 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. 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 school director is a "public official" subject to the provisions of the Ethics Act. A real estate agency owned by the school director is a business with which the school director is associated. The school director would have a conflict of interest under Section 1103(a) of the Ethics Act in matters pertaining to the school district leasing space for alternative education services where the school director's real estate agency has proposed to enter into a related contract with the school district. In each instance of a conflict, the school director would be required to abstain and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. The restrictions and requirements of Section 1103(f) would have to be observed if the contract would be valued at $500 or more. The school director would be subject to Section 1103(f) of the Ethics Act if he would be a party to the contract with the school district or if he would be deemed to have entered into the contract on behalf of or as a principal of his business. Section 1103(f) would appear to apply to the school director's business if it would be a party to the contract, with enforcement as to the business being a matter for the courts and not the State Ethics Commission. 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