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HomeMy WebLinkAbout04-006 McDowellOPINION 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 -006 James J. Eisenhower, Esquire Ballard, Spahr, Andrews & Ingersoll, LLP 1735 Market Street, 51 Floor Philadelphia, PA 19103 -7599 Re: Philadelphia Housing Authority; Managerial -Level Employee; Director of Scattered Sites; Housing Authority Project; Contracting With Housing Authority; Proposed Purchase of Residential Property. Dear Mr. Eisenhower: This Opinion is issued in response to your advisory request dated February 23, 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 management -level housing authority employee with regard to contracting with the housing authority to purchase real property that is included in a housing project. II. FACTUAL BASIS FOR DETERMINATION: As counsel to the Philadelphia Housing Authority ( "PHA "), you seek an advisory opinion as to whether PHA may sell one of its residential properties to the Director of Scattered Sites for PHA, Jacqueline McDowell ( "McDowell "). You state your belief that such a sale would not constitute a violation of any federal or state law; however, as a cautionary measure, PHA sought an opinion from HUD in May 2002. You have submitted a copy of a letter dated May 22, 2002, whereby PHA, through its Acting General Counsel, sought approval for the transaction from the U.S. Department of Housing and Urban Development ( "HUD "), which letter is incorporated herein by reference. In the said letter, PHA argued that PHA should not be precluded from selling the scattered site property to Eisenhower, 04 -006 June 22, 2004 Page 2 McDowell. The letter provided facts pertinent to the instant inquiry with this Commission, which facts may be fairly summarized as follows. PHA was created under the Pennsylvania Housing Authorities Law as "a public body, corporate and politic, exercising public powers of the Commonwealth as an agency thereof ... ." 35 P.S. § 1550. In 1984, PHA developed a 5(h) Demonstration Plan to sell 300 of its scattered site homes. In 1996, PHA submitted a revised 5(h) plan to HUD, which was subsequently approved. As per federal regulations, a 5(h) Plan is written when a public housing authority is working toward creating a homeownership plan to provide homeownership opportunities for residents of the public housing development. Under PHA's 5(h) Plan, scattered site homes may be sold to the residents who currently live in those homes or to other PHA residents participating in the Scattered Site Program. Once a tenant qualifies for residency under HUD's income guidelines, that tenant is permitted to live on PHA property even if the tenant's salary increases. McDowell became a public housing resident in 1972 when she entered into a Dwelling Lease for a scattered site property included in PHA's 5(h) Plan. McDowell moved into her scattered site home approximately 27 years before she was appointed as PHA's General Manager for Scattered Sites at an annual salary of $94,493. As Director of Scattered Sites, McDowell is a managerial -level employee of PHA who influences decisions with respect to PHA's Scattered Sites. McDowell does not influence policy with respect to the 5(h) Home Ownership Policy and does not have authority or supervisory functions over the 5(h) Home Ownership Division, which performs the function of implementing and administering the 5(h) Home Ownership Program. On November 1, 2002, HUD wrote to you acknowledging an October 1, 2002, letter that you sent to HUD concerning PHA's request for approval, and stating, interalia, that in the absence of statutory or case law supporting PHA's interpretation of the Pennsylvania Housing Authorities Law, PHA would have to obtain a formal opinion from this Commission. You have submitted a copy of HUD's November 1, 2002, letter, which is incorporated herein by reference. You state that during the summer of 2002, the Investigative Division of this Commission began to examine McDowell's potential home purchase based upon allegations that she violated the Ethics Act. Given the ending investigation, PHA decided to wait for a resolution of the matter before requesting a formal opinion from this Commission. You further state that on February 20, 2004, McDowell entered into a Consent Agreement to resolve the matter. It is administratively noted that on May 26, 2004, this Commission issued McDowell, Order 1316. It is noted that to the extent your advisory request attempts to characterize McDowell, supra, that Order speaks for itself. You now request a formal opinion as to the propriety of PHA selling one of its properties to McDowell. You have submitted a copy of a job description for the position of General Manager of Housing Operations, which job description is incorporated herein by reference. You state that the position of General Manager of Housing Operations was divided into more than one position, including McDowell's current position of Director of Scattered Sites. You characterize the job description that you have submitted as "outdated" and "over- inclusive," noting that PHA is currently in the process of redoing all of its job descriptions and that the submitted job description for the position of General Manager of Housing Operations is the only one available for review. You have also submitted a copy of PHA's organizational chart and a copy of PHA's bylaws, which documents are also incorporated herein by reference. You state that upon receipt of an Opinion from this Commission, PHA intends to submit the Opinion to the Office of General Counsel of HUD for a final determination. Eisenhower, 04 -006 June 22, 2004 Page 3 By letter dated April 29, 2004, you were notified of the date, time and location of the public meeting at which your request would be considered. On June 2, 2004, this Commission received a Memorandum of Law submitted by your office on behalf of the PHA. The Memorandum of Law presents arguments that may be fairly summarized as follows. It is PHA's position that selling one of its units to McDowell would not constitute a violation of any federal or state law. (Memorandum of Law, at 1). PHA is concerned that forbidding the sale would result in litigation by McDowell. (Id., at 2). PHA argues that the Ethics Act does not prohibit all transactions between a public employee and the public employer. (Memorandum of Law, at 7). PHA contends that the Ethics Act would permit the proposed sale, as long as McDowell would report the purchase on her Statement of Financial Interests, because the nature of the process would be open and public and McDowell would have no supervisory responsibility over the execution of the transaction. Id., at 2, 8). PHA notes that the Home Ownership Division, under the supervision of another individual and with the approval of the Legal and Executive Departments, implements and administers the 5(h) Home Ownership Program. (Id., at 8 -9). PHA notes that the Pennsylvania Housing Authority Law includes Section 1548, entitled "Interested Members or Employes," which provides that "[n]o member or employe of an Authority shall acquire any interest, direct or indirect, in any housing project or in any property included or planned to be included in any project . . ." (35 P.S. § 1548) (Emphasis added). (Memorandum of Law, at 5). The Housing Authority Law defines the term "Housing Project" or "Project" to include "[a]ny work or undertaking ... to provide safe and sanitary dwelling accommodations by means of new construction, or the reconstruction, restoration, reconditioning, remodeling, or repair of existing structures for persons of low income ...." 35 P.S. § 1543. (Memorandum of Law, at 5). PHA contends -- without referencing legal authority - -that the Section 1548 prohibition should only apply to a business interest, as opposed to the purchase of a home under the 5(h) Program. (Memorandum of Law, at 6). PHA notes that the proposed transaction could raise issues under a contractual agreement (1/28/98 Annual Contributions Contract ( "ACC ")) between HUD and PHA, which provides: [N]either the HA [Housing Authority] nor any of its contractors or their subcontractors may enter into any contract, subcontract, or arrangement in connection with a project under this ACC in which any of the following classes of people has an interest, direct or indirect, during his or her tenure or for one year thereafter: (ii) Any employee of the HA who formulates policy or who influences decisions with respect to the project(s), or any member of the employee's immediate family, or the employees partner. (Memorandum of Law, at 10). PHA argues that the concern underlying the policy of the above provision (preventing employees with influence over projects from receiving a benefit from those projects as a result of that influence) is obviated in this instance by McDowell's lack of authority or supervision over the 5(h) Home Ownership Division. (Id., at 10 -11). Finally, PHA contends that selling the property to McDowell would further several HUD and PHA objectives. (Memorandum of Law, at 11). PHA requests that this Commission issue an opinion permitting the proposed sale of property by PHA to McDowell. (Id., at 12). At the public meeting on June 9, 2004, Counsel appeared to offer answers to any Eisenhower, 04 -006 June 22, 2004 Page 4 questions of this Commission. 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. It is further initially noted that the prospective conduct of PHA as a governmental body shall not be addressed in this Opinion. The conduct of a governmental body does not fall within the scope of Section 1103(a) or Section 1103(f) of the Ethics Act, and therefore this Commission does not have jurisdiction to address the prospective conduct of PHA in this matter. Accordingly, our focus shall be upon the prospective conduct of McDowell. As Director of Scattered Sites for PHA, McDowell is a public employee as that term is defined in the Ethics Act, and hence she is subject to the provisions of the Ethics 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 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. "Contract." An agreement or arrangement for the Eisenhower, 04 -006 June 22, 2004 Page 5 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. Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited 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. 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 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: Eisenhower, 04 -006 June 22, 2004 Page 6 (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 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). Subject to certain voting conflict exceptions set forth therein, Section 1103(j) requires a public official /employee with a conflict to abstain fully 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. The abstention requirement 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 applying the above provisions of the Ethics Act to the instant matter, the specific issue before us for consideration is whether pursuant to the Ethics Act, McDowell who is a public employee employed by PHA may purchase property from PHA when that property is included in a PHA housing project. Although this Commission does not have the statutory jurisdiction to interpret laws Eisenhower, 04 -006 June 22, 2004 Page 7 other than the Ethics Act, such other laws do become relevant in determining whether a particular pecuniary benefit is authorized in law and therefore permitted under the Ethics Act, or is not authorized in law and therefore considered a private pecuniary benefit which may form the basis for a conflict of interest under Section 1103(a) of the Ethics Act. See, O'Connor, Order 1269 at 26; Ferrie, Opinion 03 -004; Thompson, Opinion 99 -005, at 3 -4. See also, Patterson, Order 1023; Rohanna, Opinion 01 -003; Marsh, Opinion 93 -007. Where a law prohibits a public official /public employee from contracting with his own governmental body to acquire an interest in property owned by that governmental body, and where such public official /public employee nevertheless contracts with his own governmental body and acquires such a prohibited interest, any resulting pecuniary benefit received by that public official /public employee is unauthorized in law and therefore a private pecuniary benefit contrary to Section 1103(a) of the Ethics Act. See, Moore, Opinion 04 -004; Hoak/McCutcheon v. State Ethics Commission, 466 A.2d 283 (Pa. Commw. Ct. 1983); Confidential Opinion, 03 -003. In the instant matter, Section 1548 of the Pennsylvania Housing Authorities Law, on its face, clearly prohibits a housing authority employee from acquiring any interest, direct or indirect, in any property included in any housing project. Section 1548 does not contain any exception to the foregoing restriction. McDowell is a PHA employee. Furthermore, based upon the submitted facts, the property that McDowell wishes to purchase is part of a PHA housing project. Therefore, if McDowell would purchase the said PHA property, the element of a prohibited private pecuniary benefit would be established, and any use of authority of office by McDowell as to such purchase would complete the elements for a conflict of interest under Section 1103(a) of the Ethics Act. With regard to Section 1103(f) of the Ethics Act, we note that this provision is not a general authorization for a public official /public employee to contract with his own governmental body. Rather, Section 1103(f) sets forth a procedure to be utilized where contracting is otherwise allowed by law. Where Section 1103(f) would apply, the requirements as to an open and public process would have to be strictly observed. In addition, the public official /public employee could not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. This Opinion is limited to addressing the applicability of Sections 1103(a), 1103(f), and 1103(j) of the Ethics Act. It is expressly assumed that there has been no use of authority of office for a private pecuniary benefit as prohibited by Section 1103(a) of the Ethics Act. Further, you are advised that Sections 1103(b) and 1103(c) of the Ethics Act provide in part that no person shall offer to a public official /public employee 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. 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. 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 managerial -level employee of a city housing authority is a public employee subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act'), 65 Pa.C.S. § 1101 et seq. Where a law prohibits a public official /public employee from contracting with his own governmental body to acquire an interest in property owned by that governmental body, and where such public official /public employee nevertheless contracts with his own Eisenhower, 04 -006 June 22, 2004 Page 8 governmental body and acquires such a prohibited interest, any resulting pecuniary benefit received by that public official /public employee is unauthorized in law and therefore a private pecuniary benefit contrary to Section 1103(a) of the Ethics Act. Where Section 1103(f) would apply, the requirements as to an open and public process would have to be strictly observed. In addition, the public official /public employee could not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. 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, John J. Bolger Vice Chair Chair Louis W. Fryman did not participate in the consideration of this matter.