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HomeMy WebLinkAbout05-513 RichardsonJohn J. Richardson, Jr. 26 Park Drive Dillsburg, PA 17019 ADVICE OF COUNSEL February 24, 2005 05 -513 Re: Conflict; Public Official /Employee; Borough; Council Member; Private Employment or Business; Employee; Insurance Agent /Broker for the Borough; Business With Which Associated. Dear Mr. Richardson: This responds to your letter of January 22, 2005, by which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa. .S. § 1101 et seq., presents any prohibition or restrictions upon a borough council member who, in his private capacity, is employed by the insurance agent /broker for the borough. Facts: You have recently been elected to serve as a Council Member for Dillsburg Borough ( "Borough "). In your private capacity, you are a licensed insurance producer and an employee of "CommunityBanks Insurance Services," which is the insurance agent /broker for the Borough. You seek guidance on how to avoid a conflict of interest under the Ethics Act as to the above. 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, 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 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 a Borough Council Member, you are a public official subject to the provisions of the Ethics Act. Richardson, 05 -513 February 24, 2005 Page 2 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 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. "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. Richardson, 05 -513 February 24, 2005 Page 3 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 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: Richardson, 05 -513 February 24, 2005 Page 4 § 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 Sections 1103(a), (f), and (j) of the Ethics Act to the facts that you have submitted, it is clear that CommunityBanks Insurance Services is a business with which you as its employee are associated. Although the Ethics Act would not preclude you from having outside business activities or employment, pursuant to Section 1103(a) of the Ethics Act, you would be prohibited from using the authority of your public position as a Borough Council Member, or confidential information received by being in your public position, for the advancement of your private pecuniary benefit or that of a business with which you are 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 No. 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 No. 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 (Gorman, Order No. 1041, Kurtz, Order 1116) or private clients. Miller, Opinion No. 89 -024; Kannebecker, Opinion No. 92 -010. A reasonable and Richardson, 05 -513 February 24, 2005 Page 5 legitimate expectation that a business relationship will form may also support a finding of a conflict of interest. Amato, Opinion No. 89 -002; Garner, Opinion No. 93 -004; Snyder, Order No. 979 -2, affirmed Snyder v. SEC, 686 A.2d 843 (Pa. Cmwlth. 1996), alloc. den., No. 0029 M.D. Allocatur Docket 1997 (Pa. December 22, 1997). Given that CommunityBanks Insurance Services is currently under contract with the Borough, you would generally have a conflict of interest as to matters involving the Borough's insurance, such as, for example: approving /signing payments for insurance coverage obtained through CommunityBanks Insurance Services; policy renewals; changes in coverage; and proposals submitted by your employer's competitors. In each instance of a conflict of interest, you would be required to abstain from participation and to satisfy the disclosure requirements of Section 1103(j). As for Section 1103(f) of the Ethics Act, you are advised that the restrictions and requirements of Section 1103(f) would have to be strictly observed when applicable. Parenthetically, although the contracting in question would not be prohibited under the Ethics Act provided the restrictions and requirements of the Ethics Act would be observed, a problem could exist as to such contracting under the Borough Code. It is administratively noted that the Borough Code, provides in pertinent part: § 46404. Penalty for personal interest in contracts or purchases Except as otherwise provided in this act, no borough official either elected or appointed, who knows or who by the exercise of reasonable diligence could know, shall be interested to any appreciable degree either directly or indirectly in any purchase made or contract entered into or expenditure of money made by the borough or relating to the business of the borough, involving the expenditure by the borough of more than one thousand dollars ($1000) in any calendar year, but this limitation shall not apply to cases where such officer or appointee of the borough is an employe of the person, firm or corporation to which the money is to be paid in a capacity with no possible influence on the transaction, and in which he cannot be possibly benefited thereby either financially or otherwise. But in the case of a member of council or mayor, if he knows that he is within the exception just mentioned he shall so inform council and shall refrain from voting on the expenditure or any ordinance relating thereto, and shall in no manner participate therein. Any official or appointee who shall knowingly violate the provisions of this section shall be subject to surcharge to the extent of the damage shown to be thereby sustained by the borough and to ouster from office, and shall be guilty of a misdemeanor, and upon conviction thereof shall be sentenced to pay a fine not exceeding one thousand dollars ($ 1000), or not exceeding one hundred eighty days' imprisonment, or both. 53 P.S. § 46404. The State Ethics Commission does not have the statutory jurisdiction to interpret the Borough Code. Therefore, it is suggested that you seek legal advice as to its applicability. Richardson, 05 -513 February 24, 2005 Page 6 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. Conclusion: As a Council Member for Dillsburg Borough ( "Borough "), you are a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. CommunityBanks Insurance Services is a business with which you as its employee are associated. Although the Ethics Act would not preclude you from having outside business activities or employment, pursuant to Section 1103(a) of the Ethics Act, you would be prohibited from using the authority of your public position as a Borough Council Member, or confidential information received by being in your public position, for the advancement of your private pecuniary benefit or that of a business with which you are associated. Given that CommunityBanks Insurance Services is currently under contract with the Borough, you would generally have a conflict of interest as to matters involving the Borough's insurance, such as, for example: approving /signing payments for insurance coverage obtained through CommunityBanks Insurance Services; policy renewals; changes in coverage; and proposals submitted by your employer's competitors. In each instance of a conflict of interest, you would be required to abstain from participation and to satisfy the disclosure requirements of Section 1103(j). The restrictions and requirements of Section 1103(f) of the Ethics Act must be strictly observed when applicable. Since a problem could exist as to such contracting under the Borough Code, it is suggested that you seek legal advice in that regard. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. 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. Sincerely, Vincent J. Dopko Chief Counsel