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HomeMy WebLinkAbout04-572 ShuckrowAlan T. Shuckrow, Esquire Strassburger McKenna Gutnick & Potter Four Gateway Center, Suite 2200 444 Liberty Avenue Pittsburgh, PA 15222 Dear Mr. Shuckrow: ADVICE OF COUNSEL July 21, 2004 04 -572 Re: Conflict; Public Official /Employee; Charter School; Board of Trustees; Business With Which Associated; Contract with Charter School. This responds to your letters of June 9 and 17, 2004, by which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Ha.G.S. § 1101 et seq., presents any prohibition or restrictions upon a president of the ru board of trustees of a charter school board with respect to contracting between the charter school and a business with which the board president is associated. Facts: As counsel to Propel Schools ( "Propel "), a charter school organized pursuant oofh7 Charter School Law, 24 P.S § 17- 1701 -A et. seq, you have been authorized to seek an advisory on behalf of Thomas Joseph ( "Joseph "), President of the Propel Board of Trustees. You have submitted facts, which may be fairly summarized as follows. In a private capacity, Joseph is the CEO and owner/principal of Bookminders, an accounting /information management services company. To date, Bookminders has performed pro bono bookkeeping services for Propel. If Bookminders would cease providing such services gratis, Propel would seek an accounting firm to fill the void with the understanding that the firm would be paid for its services. You state your understanding that pursuant to 24 P.S. § 17- 1715 -A (11), Trustees of a charter school are considered "public officials." Based upon the foregoing facts, you pose the following specific inquiries: 1. Given the restrictions under Section 1103(f) of the Ethics Act, whether Bookminders would be prohibited from submitting a proposal to perform bookkeeping services for Propel; Shuckrow, 04 -572 July21, 2004 Page 2 2. What constitutes an "open and public process" under Section 1103(f) of the Ethics Act; and 3. Whether the restriction under Section 1103(f) that a public official /employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body would limit Joseph's ability to provide services to Propel on behalf of Bookminders, or to serve as a Board Member during the duration of a contract between Bookminders and Propel. Discussion: It is initially noted that ursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requestor based upon the facts which the requestor has submitted. In issuing the advisory based upon the facts which the requestor has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts which have not been submitted. It is the burden of the requestor to truthfully disclose all of the material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), , (11). An advisory only affords a defense to the extent the requestor has truthfully disclosed all of the material facts. As President of the Board of Trustees for Propel, Joseph is a public official as that term is defined in the Ethics Act, and hence he is subject to the provisions of that Act. Section 1103(a) of the Ethics Act provides: § 1103. Restricted activities (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 Pa.C.S. § 1103(a). The following terms are defined in the Ethics Act as follows: § 1102. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through 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 legaf entity organized for profit. Shuckrow, 04 -572 July21, 2004 Page 3 "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. "Contract." An agreement or arrangement for the acquisition, use or disposal by the Commonwealth or a political subdivision of consulting or other services or of supplies, materials, equipment, land or other personal or real property. The term shall not mean an agreement or arrangement between the State or political subdivision as one party and a public official or public employee as the other party, concerning his expense, reimbursement, salary, wage, retirement or other benefit, tenure or other matters in consideration of his current public employment with the Commonwealth or a political subdivision. 65 Pa.C.S. § 1102. In addition, Sections 1103(b) and 1103(c) of the Ethics Act provide in part that no person shall offer to a public official /employee anything of monetary value and no public official /employee shall solicit or accept anything of monetary value based upon the understanding that the vote, official action, or judgment of the public official /employee would be influenced thereby. Reference is made to these provisions of the law not to imply that there has been or will be any transgression thereof but merely to provide a complete response to the question presented. Section 1103(f) of the Ethics Act provides as follows: § 1103. Restricted activities (f) Contract. - -No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with 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 Shuckrow, 04 -572 July21, 2004 Page 4 process" be observed as to the contract with the governmental body. Pursuant to Section 1103(f), an "open and public process" includes: (1) prior public notice of the employment or contracting possibility; (2) sufficient time for a reasonable and prudent competitor /applicant to be able to prepare and present an application or proposal; (3) public disclosure of all applications or proposals considered; and (4) public disclosure of the contract awarded and offered and accepted. Section 1103(f) of the Ethics Act also requires that the public official /employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. Section 1103(j) of the Ethics Act provides as follows: § 1103. Restricted activities (j) Voting conflict. - -Where voting conflicts are not otherwise addressed by the Constitution of Pennsylvania or by any law, rule, regulation, order or ordinance, the following procedure shall be employed. Any public official or public employee who in the discharge of his official duties would be required to vote on a matter that would result in a conflict of interest shall abstain from voting and, prior to the vote being taken, publicly announce and disclose the nature of his interest as a public record in a written memorandum filed with the person responsible for recording the minutes of the meeting at which the vote is taken, provided that whenever a governing body would be unable to take any action on a matter before it because the number of members of the body required to abstain from voting under the provisions of this section makes the majority or other legally required vote of approval unattainable, then such members shall be permitted to vote if disclosures are made as otherwise provided herein. In the case of a three - member governing body of a political subdivision, where one member has abstained from voting as a result of a conflict of interest and the remaining two members of the governing body have cast opposing votes, the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. 65 Pa.C.S. § 1103(j). In each instance of a conflict, Section 1103(j) requires the public official /employee to abstain and to publicly disclose the abstention and reasons for same, both orally and by filing a written memorandum to that effect with the person recording the minutes or supervisor. In the event that the required abstention results in the inability of the governmental body to take action because a majority is unattainable due to the abstention(s) from conflict under the Ethics Act, then voting is permissible provided the disclosure requirements noted above are followed. See, Pavlovic, Opinion 02 -005. In applying the above provisions of the Ethics Act to the instant matter, 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 Shuckrow, 04 -572 July21, 2004 Page 5 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. It is noted that Section 1103(a) of the Ethics Act pertaining to conflicts of interest does not prohibit public officials /public employees from having outside business activities or employment; however, the public official /public employee may not use the authority of his public position - -or confidential information obtained by being in that position - -for the advancement of his own private pecuniary benefit or that of a business with which he is associated. Pancoe, Opinion 89 -011. Examples of conduct that would be prohibited under Section 1103(a) would include: (1) the pursuit of a private business opportunity in the course of public action, Metrick, Order 1037; (2) the use of governmental facilities, such as governmental telephones, postage, staff, equipment, research materials, or other property, or the use of governmental personnel, to conduct private business activities, Freind, Order 800; Pancoe, supra; and (3) the participation in an official capacity as to matters involving the business with which the public official/ public employee is associated in his private capacity, Gorman, Order 1041, or private client(s). Miller, Opinion 89 -024; Kannebecker, Opinion 92 -010. If the private employer or business with which the public official /public employee is associated or a private client would have a matter pending before the governmental body, the public official /public employee would have a conflict of interest as to such matter. Miller, supra; Kannebecker, supra. 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 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 the instant matter, Bookminders would be considered a business with which Joseph as an officer and owner is associated. Pursuant to Section 1103(a) of the Ethics Act, Joseph would generally have a conflict of interest in matters that would financially impact himself or Bookminders, including any contract between Propel and Bookminders. In each instance of a conflict, Joseph would be required to abstain from participating and to satisfy the disclosure requirements under Section 1103(j) of the Ethics Act. Having established the above general principles, your specific inquiries shall now be addressed. In response to your first specific inquiry, the Ethics Act does not address whether a business with which a public official /employee is associated is permitted or prohibited from submitting bids or proposals to the public official /employee's governmental body. Section 1103(f) of the Ethics Act does provide that 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, the contract must be awarded through an "open and public process," and 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. In response to your second specific inquiry, an "open and public process" must include: (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. See, Fields, Opinion 82 -006. See also, Pennsylvania Training School v. Independent Mutual Fire Insurance Co., 12 559—(1889). Shuckrow, 04 -572 July21, 2004 Page 6 In response to your third specific inquiry, the restriction under Section 1103(f) that a public official may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body would only apply to Joseph in his public capacity as a Board Member, not in his private capacity as CEO /owner of Bookminders. Thus, Joseph, as a Board Member, would be prohibited from having any supervisory or overall responsibility as to the implementation or administration of a contract between Bookminders and Propel. 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. Specifically not addressed herein is the applicability of the Charter School Law. Conclusion: As President of the Board of Trustees for Propel Schools ( "Propel "), I homas Joseph (Joseph" is a public official subject to the provisions of the Public Official and Employee Ethics Act ("Ethics Act "), 65 Pa.C.S. § 1101 et seq. Bookminders would be considered a business with which Joseph as an officer and owner is associated. Pursuant to Section 1103(a) of the Ethics Act, Joseph would generally have a conflict of interest in matters that would financially impact himself or Bookminders, including any contract between Propel and Bookminders. In each instance of a conflict, Joseph would be required to abstain from participating and to satisfy the disclosure requirements under Section 1103 of the Ethics Act. The restrictions with respect to Sections 1103(a), 1103(j) and 1103( outlined above and as discussed in the responses to the above specific inquiries must be observed. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Sincerely, Vincent J. Dopko Chief Counsel Pursuant to Section 1107(11), an Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, provided the requestor has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. This letter is a public record and will be made available as such. Finally, if you disagree with this Advice or if you have any reason to challenge same, you may appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Any such appeal must be in writing and must be actually received at the Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa. Code § 13.2(h). The appeal may be received at the Commission by hand delivery, United States mail, delivery service, or by FAX transmission (717- 787 - 0806). Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal.