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HomeMy WebLinkAbout05-528 LuceFred L. Gold 5408 Centennial Station Drive Warminster, PA 18974 Gentlemen: ADVICE OF COUNSEL March 29, 2005 Richard J. Luce, Jr. 660 Henry Avenue Warminster, PA 18974 05 -528 Re: Conflict; Public Official /Employee; Supervisor; Township; Condominium; Resident; Road; Easement; Escrow; Association; School District; Business with which Associated. This responds to your letters of February 25, 2005, by which you requested a joint advisory 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 township supervisors as to participating in a matter before the township board to release funds from an escrow account for the purpose of repairing an access easement road that the condominium association has the responsibility for maintaining when two of the five members of the board of supervisors live in the condominium and one of the two is a member of the board of directors of the condominium association. Facts: Fred Gold, a Township Supervisor, lives with his spouse in Centennial Won, an age - qualified condominium consisting of 410 units. Supervisor Gold's spouse is a School Director for the Centennial School District (School District). Gold is also a member of the Board of Directors of the Centennial Station Condominium Association (Condominium Association). Richard Luce, who is also a Township Supervisor, lives with his parents in Centennial Station. You two, hereinafter referred to as Gold and Luce, as members of the five member board of Warminster Township, have submitted a joint request for an advisory based upon the following submitted facts. Gold /Luce, 05 -528 March 29, 2005 Page 2 A portion of the Improvement Agreement for the condominium which is quoted below provides for the payment for the installation of traffic improvements that would serve the condominium: In the event PENNDOT does not approve the application for the construction and installation of the TRAFFIC IMPROVEMENTS on or before the first day of January, 1993, owner shall pay to the TOWNSHIP the sum of One Hundred Twelve Thousand Six Hundred Twenty -three Dollars and Fifty Cents ($112,623.50) less any amounts released by the TOWNSHIP for TRAFFIC IMPROVEMENTS actually installed by OWNER to be used by the TOWNSHIP for highway traffic improvements within the TOWNSHIP. The parties acknowledge that the said sum of One Hundred Twelve Thousand Six Hundred Twenty -three Dollars and Fifty Cents ($112,623.50) is included as an IMPROVEMENT set forth on Exhibit "A" and payment is secured by the terms of the Financial Security Agreement." Advisory Request Letter(s), p. 1. PennDOT has not approved the installation of the traffic signal as contemplated by the Improvement Agreement. The Board of Directors of the Condominium Association has requested that the $60,000 remaining in the (presumably township held) escrow be released to improve an access road that runs adjacent to the Centennial Station Condominiums. That easement was obtained by the developer of Centennial Station from the School District. The easement provides that the School District may utilize it for ingress and egress to the School. The School District is responsible for plowing the snow on the easement while the Condominium Association is responsible for maintaining the easement. Because the easement is beginning to deteriorate, the Condominium Association has requested that the Township release the escrow and allow the money to be spent repairing the access easement which is also utilized by the general public. There is a difference of opinion within the Township as to whether the escrow money should be spent to repair the easement. Some residents of the Township believe that the money should be used for other types of highway traffic improvements. Therefore, you expect that there will be significant discussion at the Township Board of Supervisors meetings as well as possible negotiations with the School District and other interested parties. Based upon the foregoing facts, you pose the following inquiries: (1) Whether Supervisors Gold and Luce may vote on the release of the funds in escrow; and (2) Prior to the vote being taken, whether Supervisors Gold and Luce may participate in the negotiations regarding how the funds will be utilized. 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 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 of the material Gold /Luce, 05 -528 March 29, 2005 Page 3 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 of the material facts. As Township Supervisors, Gold and Luce are public officials as that term is defined in the Ethics Act, and hence they are 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. "Immediate family." A parent, spouse, child, brother or sister. "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. (Emphasis added.) 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 Gold /Luce, 05 -528 March 29, 2005 Page 4 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(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 applying the above provisions of the Ethics Act to the instant matter, it is noted that Section 1103(a) of the Ethics Act 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; Rembold, Order 1303; Wilcox, Order 1306), or private customer(s)/client(s) (Miller, Opinion 89 -024; Kannebecker, Opinion 92 -010). In the instant case, Supervisor Gold is a member of the Board of Directors of the Condominium Association. Therefore, the Condominium Association would be considered a business with which Supervisor Gold is associated under the Ethics Act. Gold /Luce, 05 -528 March 29, 2005 Page 5 Under the submitted facts, participation in the matter of the use of the $60,000 escrow fund would be a conflict for both Gold and Luce. Under Section 1103(a) of the Ethics Act, Gold and Luce would use the authority of office by participating in actions of the township board as to the disposition and use of the escrow fund. Further, such action would result in private pecuniary benefits to them consisting of a lessening or elimination of the potential liability of the condominium owners /residents who would otherwise have to contribute more for the repairs to the easement if the $60,000 would not be used. Lastly, that pecuniary benefit would inure to Gold and Luce. Hence, all of the elements of a conflict would exist for Gold and Luce. As to Gold individually, he would have another basis of conflict, given that he is a member of the Condominium Association which has the responsibility for maintaining the easement and a derivative liability if the easement is not so maintained. However, the statutory definition of "conflict" or "conflict of interest" includes two exclusions, hereinafter referred to as the "de minimis" exclusion and the "class /subclass exclusion." If either exclusion applies, actions that would otherwise be a conflict would be permissible under Section 1103(j) of the Ethics Act. The de minimis exclusion precludes a finding of a 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 upon a public official, a member of his immediate family, or a business with which he or a member of his immediate family is associated, a conflict would not exist and Sections 1103(a) and 1103(] of the Ethics Act would not restrict participation in such matter. See, Schweinsburq, Order 900. In that the Gold and Luce inquiry involves a significant amount of money, vis -a -vis the escrow account and the repairs of the easement, such action would not have a de minimis economic impact, and therefore, this exclusion would not apply. 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" as the other members of the class /subclass. 65 Pa.C.S. § 1102; see, Graham, Opinion 95 -002 (citing Van Rensler, Opinion 90 -017); 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 individual /business in question and the other members of the class /subclass are reasonably affected to the same degree by the proposed action. Kablack, Opinion 02 -003. In considering the first criterion, it would appear that the correct identification of the class /subclass is the condominium owners /residents. Regarding the second criteria concerning being affected to the same degree as the other members of the class /subclass, the submitted facts, however, do not disclose any facts as to whether there are other members of the class /subclass who would be affected to the same degree. Therefore, a determination cannot be made as to whether Gold and Luce would be reasonably affected to the same degree as one or more other members of the class /subclass. Thus, no factual information has been presented to determine whether the financial impact upon Gold and Luce would be to the same degree as all others in the class /subclass. When a factual insufficiency exists as to the impact of proposed action on members of the class /subclass, the advisory must necessarily be limited to providing general guidance. Gold /Luce, 05 -528 March 29, 2005 Page 6 If, as a result of the proposed action, Gold and Luce would be affected to the same degree as one or more other members of the class /subclass, the class /subclass exclusion would apply and Gold and Luce would not have a conflict of interest under Section 1103(a) of the Ethics Act as to only voting in the matter of the use of the escrow fund. If, as a result of the proposed action, Gold and Luce would not be affected to the same degree as one or more other members of the class /subclass, the class /subclass exclusion would not apply and Gold and Luce would have a conflict of interest under Section 1103(a) of the Ethics Act as to participating in the matter of the use of the escrow fund. In any instance of a conflict, Gold and Luce would be required to abstain from participating and observe the disclosure requirements of Section 1103(j) of the Ethics Act. Given the two questions that have been posed by Gold and Luce, a discussion of Section 1103(j) is warranted. Although Section 1103(j) of the Ethics Act allows for voting in instances where the 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," that Section is not applicable in this case. For a five member board, three or more members must have a conflict under the Ethics Act for Section 1103(j) of the Ethics Act to have application. In this case, only two members have conflicts. Second, even in the limited instances under Section 1103(j) where voting is allowed after disclosure of conflict, the public official is only allowed to vote but not participate in discussions or negotiations. See, Juliante, Order 809. 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 Second Class Township Code. Conclusion: As Supervisors for Warminster Township, Fred L. Gold and Richard J. Luce, Jr. are public officials subject to the provisions of the Public Official and Employee Ethics Act ("Ethics Act "), 65 Pa.C.S. § 1101 et seq. Supervisor Gold is a member of the Board of Directors of the Condominium Association which would be considered a business with which he is associated under the Ethics Act. Participation in the matter of the use of the $60,000 escrow fund would be a conflict for both Gold and Luce. Such action would result in private pecuniary benefits to them consisting of a lessening or elimination of the potential liability of the condominium owners /residents who would otherwise have to contribute more for the repairs to the easement if the $60,000 would not be used. Gold individually would have another basis of conflict, given that he is a member of the Condominium Association which has the responsibility for maintaining the easement and a derivative liability if the easement is not so maintained. The statutory definition of "conflict" or "conflict of interest" includes two exclusions, the "de minimis" exclusion and the "class /subclass exclusion." In that the inquiry involves a significant amount of money, vis -a -vis the escrow account and the repairs of the easement, such action would not have a de minimis economic impact, and therefore, this exclusion would not apply. 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" as the Gold /Luce, 05 -528 March 29, 2005 Page 7 other members of the class /subclass. In considering the first criterion, it would appear that the correct identification of the class /subclass is the condominium owners/ residents. Regarding the second criteria concerning being affected to the same degree as the other members of the class /subclass, the submitted facts, however, do not disclose any facts as to whether there are other members of the class /subclass who would be affected to the same degree. If, as a result of the proposed action, Gold and Luce would be affected to the same degree as one or more other members of the class /subclass, the class /subclass exclusion would apply and Gold and Luce would not have a conflict of interest under Section 1103(a) of the Ethics Act as to only voting in the matter of the use of the escrow fund. If, as a result of the proposed action, Gold and Luce would not be affected to the same degree as one or more other members of the class /subclass, the class /subclass exclusion would not apply and Gold and Luce would have a conflict of interest under Section 1103(a) of the Ethics Act as to participating in the matter of the use of the escrow fund. In any instance of a conflict, Gold and Luce would be required to abstain from participating and observe the disclosure requirements of Section 1103(j) of the Ethics Act. 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