HomeMy WebLinkAbout05-570 Sapienza, Jr.Charles P. Sapienza, Jr., Esquire
Law Offices of Charles Sapienza, L.L.C.
101 S. Mercer Street
Suite 303, Central Building
New Castle, PA 16101
ADVICE OF COUNSEL
August 11, 2005
05 -570
Re: Conflict; Public Official; School Director; School District; Business With Which
Associated; Contracting; Vote.
Dear Mr. Sapienza:
This responds to your letters of June 30, 2005, and July 12, 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 school director
with regard to contracting with the school district for which he serves.
Facts: As Solicitor for the New Castle Area School District ( "School District "), you
seek an advisory on behalf of an unnamed school director (the "School Director ") based
upon the following submitted facts.
The School Director owns a sporting goods store located in the New Castle area.
You state your understanding that the business is a small, closely -held "Sub- chapter S"
corporation of which the School Director is sole shareholder and President.
The School District, without the participation of the School Director, prepared
specifications and issued a Request For Proposals ( "RFP" ) for athletic supplies,
including various items and equipment. In response to the RFP, the School Director
submitted a bid to the School District. You state that the bids were opened in
accordance with the bid specifications and the Public School Code. You further state
that the School Director's bid was the lowest responsible bid.
You state that at no time did you or the Administration know or contemplate that
the School Director would be submitting a bid. You further state that at no time did you
or the Administration discuss the issue with the School Director.
Sapienza, 05 -570
August 11, 2005
Page 2
You note that the School Director, prior to being elected to the School Board, had
previously submitted bids to the School District on similar supplies and had been
awarded contracts for sports equipment.
You state that you have reviewed the Public School Code and the Ethics Act.
You note that the Public School Code was amended to permit school districts to enter
into contracts with businesses with which school directors are associated conditioned
upon strict compliance with the Ethics Act. You state your understanding that a school
director must make a complete disclosure of all the relevant facts and circumstances,
may not participate in any deliberation with regard to the awarding of the contract, and
may not vote on the same.
In that it is unclear to you as to whether the above safeguards are sufficient to
avoid a conflict of interest, you seek an advisory from the State Ethics Commission as
to whether the School Director would have a conflict of interest under the Ethics Act as
to contracting with the School District.
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
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.
The School Director on whose behalf you seek this advisory is a "public official"
as that term is defined in the Ethics Act, and hence the School Director 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
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August 11, 2005
Page 3
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.
"Financial interest." Any financial interest in a legal
entity engaged in business for profit which comprises more
than 5% of the equity of the business or more than 5% of the
assets of the economic interest in indebtedness.
"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
Sapienza, 05 -570
August 11, 2005
Page 4
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:
§ 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
Sapienza, 05 -570
August 11, 2005
Page 5
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, 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 Kannebecker, supra, the State Ethics Commission determined that a township
supervisor, who in his private capacity was an attorney, would have a conflict of interest
as to matters before the township involving ongoing clients or client(s) for whom he
was on retainer, even if he would not represent such client(s) as to the matter pending
before the township. The Commission determined that as a general rule, a conflict
would not exist as to former client(s), but that under certain circumstances, a conflict
could exist as to former client(s) depending upon factors such as the number of prior
representations of the given client and the period of time over which such occurred.
The Commission has also held that a reasonable and legitimate expectation that a
business relationship will form may support a finding of a conflict of interest. Amato,
Opinion 89 -002.
In the instant matter, the School Director's sporting goods store would be
considered a business with which the School Director is associated. Pursuant to Section
1103(a) of the Ethics Act, the School Director would generally have a conflict of interest
in his public capacity in matters that would financially impact the School Director, the
School Director's business, or private customer(s) /client(s). The School Director would
specifically have a conflict of interest in matters relating to any contract(s) between the
School Director /his business and the School District and any votes to approve the
payment of invoices submitted by the School Director /his business under said contract(s).
In each instance of a conflict of interest, the School Director would be required to abstain
from participating and to satisfy the disclosure requirements of Section 1103(j) of the
Ethics Act.
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August 11, 2005
Page 6
As a general rule, a conflict would not exist as to former customer(s)/client(s), but
under certain circumstances, a conflict could exist as to former customer(s)/client(s)
depending upon factors such as the number of prior business transactions involving the
given customer /client and the period of time over which such occurred.
You are further advised that the de minimis exclusion to the definition of "conflict"
or "conflict of interest" precludes a finding of conflict of interest as to an action having a
de minimis (insignificant) economic impact. See, Kolb, Order 1322; Schweinsburq,
Order 900. The Commission has determined the applicability of the de minimis
exclusion on a case -by -case basis, considering all relevant circumstances. In the past,
the Commission has found amounts ranging from $2 to approximately $400 to be de
minimis.
Therefore, you are advised that the School Director would not have a conflict of
interest as to a customer /client from which he would receive only a de minimis
(insignificant) financial benefit. 65 Pa.C.S. § 1102. See, Bixler v. State Ethics
Commission, 847 A.2d 785 (Pa. Cmwlth. 2004). For a customer /client involved in
multiple transactions, the aggregate financial benefit received from such transactions
should be considered in order to determine whether the de minimis exclusion would be
applicable.
With respect to Section 1103(f) of the Ethics Act, it would appear from the
submitted facts that the School Director /his business is currently under contract with the
School District. Under Section 1103(f), in the School Director's public capacity, he would
be prohibited from having any supervisory or overall responsibility for the implementation
or administration of the contract.
Parenthetically, although the contracting in question would not be prohibited
under the Ethics Act provided the requirements of Sections 1103(a), 1103(f), and
1103(j) are satisfied, a problem may exist as to such contracting under the Public
School Code of 1949 as amended ( "Public School Code ").
It is administratively noted that the Public School Code, provides in pertinent part:
§ 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
[sic] 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 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
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August 11, 2005
Page 7
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).
The State Ethics Commission does not have the statutory jurisdiction to interpret
the Public School Code. Therefore, it is suggested that the School Director seek legal
advice as to its applicability.
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: The School Director on whose behalf you seek this advisory 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. The School Director's sporting goods store would be
considered a business with which the School Director is associated. Pursuant to Section
1103(a) of the Ethics Act, the School Director would generally have a conflict of interest
in his public capacity in matters that would financially impact the School Director, the
School Director's business, or private customer(s) /client(s). The School Director would
specifically have a conflict of interest in matters relating to any contract(s) between the
School Director /his business and the New Castle Area School District ("School District ")
and any votes to approve the payment of invoices submitted by the School Director /his
business under said contract(s). In each instance of a conflict of interest, the School
Director would be required to abstain from participating and to satisfy the disclosure
requirements of Section 1103(j) of the Ethics Act. The School Director would not have a
conflict of interest as to a customer /client from which he would receive only a de minimis
(insignificant) financial benefit. For a customer /client involved in multiple transactions,
the aggregate financial benefit received from such transactions should be considered in
order to determine whether the de minimis exclusion would be applicable. With respect
to Section 1103(f) of the Ethics Act, it would appear from the submitted facts that the
School Director /his business is currently under contract with the School District. Under
Section 1103(f), in the School Directors public capacity, he would be prohibited from
having any supervisory or overall responsibility for the implementation or administration of
the contract. Given the possible applicability of the Public School Code of 1949 as
amended, it is suggested that the School Director seek legal advice in this 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 requester has disclosed
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August 11, 2005
Page 8
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