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HomeMy WebLinkAbout1373 Regola, Jr.In Re: Robert T. Regola, Jr. File Docket: X -ref: Date Decided: Date Mailed: Before: Louis W. Fryman, Chair John J. Bolger, Vice Chair Donald M. McCurdy Raquel K. Bergen Nicholas A. Colafella 02- 090 -C2 Order No. 1373 9/12/05 9/21/05 This is a final adjudication of the State Ethics Commission. Procedurally, the Investigative Division of the State Ethics Commission conducted an investigation regarding a possible violation of the Public Official and Employee Ethics Act, Act 9 of 1989, P.L. 26, 65 P.S. § 401 et seq., as codified by Act 93 of 1998, Chapter 11, 65 Pa.C.S. § 1101 et seq., by the above -named Respondent. At the commencement of its investigation, the Investigative Division served upon Respondent written notice of the specific allegations. Upon completion of its investigation, the Investigative Division issued and served upon Respondent a Findings Report identified as an "Investigative Complaint." An Answer was filed and a hearing was waived. A Consent Agreement and Stipulation of Findings were submitted by the parties to the Commission for consideration. The Stipulation of Findings is quoted as the Findings in this Order. The Consent Agreement was subsequently approved. Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter 11 of Act 93 of 1998, 65 Pa.C.S. § 1101 et seq., which essentially repeats Act 9 of 1989 and provides for the completion of pending matters under Act 93 of 1998. This adjudication of the State Ethics Commission is issued under Act 93 of 1998 and will be made available as a public document thirty days after the mailing date noted above. However, reconsideration may be requested. Any reconsideration request must be received at this Commission within thirty days of the mailing date and must include a detailed explanation of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code § 21.29(b). A request for reconsideration will not affect the finality of this adjudication but will defer its public release pending action on the request by the Commission. The files in this case will remain confidential in accordance with Chapter 11 of Act 93 of 1998. Any person who violates confidentiality of the Ethics Act is guilty of a misdemeanor subject to a fine of not more than $1,000 or imprisonment for not more than one year. Confidentiality does not preclude discussing this case with an attorney at law. Regola, 02- 090 -C2 Page 2 I. ALLEGATION: Robert Regola, Jr., a public official, in his capacity as Chairman of the Municipal Authority of Hempfield Township, West Moreland County, violated provisions of the State Ethics Act (Act 9 of 1989, 65 P.S. §401 et seq.) when he used the authority of his office for a private pecuniary gain of himself and /or a business with which he and /or members of his immediate family are associated, including but not limited to participating in actions of the board to award contracts to businesses who subcontracted authority work to Robert T. Regola Engineering and Surveying /R &R Surveying, a business owned by Regola, Jr., and /or members of his immediate family. II. FINDINGS: 1. The Investigative Division of the State Ethics Commission received a signed, sworn complaint alleging that Robert T. Regola, Jr. violated provisions of the State Ethics Act (Act 93 of 1998). 2. Upon review of the complaint the Investigative Division initiated a preliminary inquiry on October 23, 2002. 3. The preliminary inquiry was completed within sixty days. 4. On December 18, 2002, a letter was forwarded to Robert T. Regola, Jr., by the Investigative Division of the State Ethics Commission informing him that a complaint against him was received by the Investigative Division and that a full investigation was being commenced. a. Said letter was forwarded by certified mail, no. 7000 1670 0005 2766 5156. b. The domestic return receipt bore the signature of Evelyn Regola, with a delivery date of December 23, 2002. 5. On April 24, 2003, the Investigative Division of the State Ethics Commission forwarded a letter to Robert T. Regola, Jr., that the allegations contained in the letter dated December 18, 2002, were being amended. a. Said letter was sent by certified mail no. 7001 1940 0001 2179 4691. b. The domestic return receipt bore the signature of Evelyn Regola with a delivery date of April 26, 2003. 6. On May 21, 2003, the Investigative Division of the State Ethics Commission filed an application for a ninety day extension of time to complete the Investigation. 7. The Commission issued an order on June 2, 2003, granting the ninety day extension. 8. On July 21, 2003, the Investigative Division of the State Ethics Commission filed an application for a ninety day extension of time to complete the investigation. 9. The Commission issued an order on July 30, 2003, granting the ninety day extension. 10. Periodic notice letters were forwarded to Robert T. Regola, Jr., in accordance with the provisions of the Ethics Law advising him of the general status of the investigation. Regola, 02- 090 -C2 Page 3 11. The Investigative Complaint was mailed to the Respondent on December 12, 2003. 12. Robert T. Regola, Jr., has served on the Municipal Authority of Hempfield Township (HTMA), Westmoreland County, since July 12, 1990. a. Regola has served as chairman of the Authority Board since January 13, 1998. b. Regola served as treasurer of the board prior to 01/13/98. 13. The Authority Board consists of five members appointed by the Hempfield Township Board of Supervisors. a. The HTMA was formed on July 8, 1949, with the powers and purposes to include: acquiring, holding, constructing, improving, maintaining and operating, owning, leasing, either in the capacity of lessor or lesee, water works, water supply works and water distribution systems in the Township of Hempfield, Westmoreland County, Pennsylvania; (2) acquiring, holding, constructing, improving, maintaining, and operating, owning, leasing, either in the capacity of lessor or lessee, sewers, sewer systems and sewage treatment works, and is to exercise all the powers incident to such authority, as provided by the Act, and (3) such other projects as the Township of Hempfield may from time to time by resolution specify. b. The HTMA has approved the construction of sewer lines and improvements to the system. 1. Approvals are made during public meetings, in the form of motions voted on by the board. 2. Approvals are noted as motion approved. 3. On some occasions, votes are recorded. 14. Regola is a professional land surveyor licensed by the Pennsylvania Department of State, Bureau of Professional and Occupational Affairs, License No. S0009423E. a. Regola has been a registered Professional Land Surveyor since 08/16/63. 1. Regola renewed his license on 07/22/03. 15. Regola owns and operates Robert T. Regola Engineering and Surveying. a. The office of the business is located in Regola's residence at 615 Oakridge Drive, Greensburg, PA 15601. b. Robert T. Regola Engineering and Surveying has been in business since the 1960's. c. The business is not incorporated. 16. Members of Regola's family employed by Robert T. Regola Engineering and Surveying, include his sons Robert T. Regola, III, and Ronald Regola, and his daughter Brenda (Regola) DePetris. 17. Regola retired from Robert T. Regola Engineering & Surveying in or about 1993 but continued to remain active in the business. Regola, 02- 090 -C2 Page 4 a. Regola did not receive a salary, however, he continued to prepare estimates and perform surveying services. b. Regola controlled other aspects of the business including maintenance of checking accounts and issuing paychecks to employees. 18. Since at least 1997, Regola and his family have also done business in the name of R &R Surveying. a. This name has been utilized when doing surveying and /or services related to sewer line projects. b. Regola is physically unable to negotiate the terrain on such jobs requiring that his sons perform the bulk of physical services related to projects in the name of R &R. 19. On Statements of Financial Interests filed with the Hempfield Township Municipal Authority, Regola disclosed his ownership of Robert T. Regola Engineering and Surveying. a. Regola has annually filed these forms while serving on the HTMA. b. On forms filed for calendar years 1998, 1999 and 2000, Regola disclosed the following information: Occupation: Surveyor Direct /Indirect Income: Regola Surveying Sources of Income: HTMA Office, Directorship or Emp. in any Business: Robert T. Regola Surveying, Owner Financial Interests in any legal entity for profit: None c. On forms filed for calendar years 2001 and 2002, Regola reported his occupation as retired. 1. Regola did not report Regola Surveying as a source of income. 2. Regola did not report his office, directorship or employment in Regola Surveying for calendar year 2001. 3. Regola disclosed his business interest in Regola Engineering & Surveying on the Statement of Financial Interests filed for the 2002 calendar year. d. Robert T. Regola Engineering and Surveying continued operation under the company name in 2001 and 2002. 20. Regola has remained active in Robert T. Regola Engineering & Surveying and R &R Surveying. a. Regola does no field work for R &R Surveying. Regola, 02- 090 -C2 Page 5 b. Payments received by both Regola Surveying and R &R for services rendered are endorsed by Regola and most are deposited to accounts he controls. 21. Between January 1998 and December 2002, the HTMA awarded projects for the construction of or improvements to the township sewer system. a. Regola has participated in board decisions to approve projects, award contracts and issue payments. 22. The following companies have been awarded contracts by the HTMA between 1997 and 2002 for various sewer line improvements. Company Contract D &M Contracting, Inc. Stage 5, Contract #4 A. Merante Contracting Kifer Hill Ricon Incorporated High Park/Sunview Nicassio Enterprises, Inc. Fosterville Road Gene Raymond Construction Company Farmbrook South Interceptor Project 23. Robert Regola Engineering & Surveying has served as a sub - contractor for the sewer projects awarded by the HTMA between 1997 and 2000. a. Robert T. Regola, Jr., Engineering and Surveying has had business relationships with D &M Contracting, Inc.; Ricon Incorporated and Nicassio Enterprises, Inc. prior to those firms bidding on HTMA projects. 1. Since 1996 D &M Contracting has utilized the services of Regola exclusively for all of its surveying needs within Pennsylvania. 24. In 2001, the Municipal Authority began Stage V of a sewer line extension project, which included the completion of a pump station. a. The Authority financed the sewer line extension project with a PennVest loan. b. Six contracts were to be awarded including four specific to the sewer line extension, and two relating to the pump station. 25. On January 9, 2001, the HTMA applied for a PennVest loan in the amount of $5,980,000. a. The application sought funding for Stage V of the sewer system to install approximately 9,200 lineal feet of 12" PVC, 48,725 lineal feet of 8" PVC, 8,876 lineal feet of 6" PVC, and a pumping station to serve approximately 363 residents in Hempfield Township; and to eliminate the occurrence of malfunctioning on lot sewage systems and wildcat sewers in the project area, which are polluting local waterways and posing health /safety issues. b. The loan application was signed by Robert Regola as Chairman and General Manager Gerald Answine. c. The application was submitted to the Pennsylvania Department of Community & Economic Development (DCED). 26. PennVest funding was approved on March 26, 2001, in the amount of Regola, 02- 090 -C2 Page 6 $5,841,000.00. a. The HTMA received a commitment letter dated March 30, 2001. b. The HTMA's required contribution was $60,000. c. The funding was reduced on 09/18/01 to $5,763,279 based on revised estimates. 27. The Loan Agreement between HTMA and PennVest was signed by Regola on or about September 12, 2001, and provided as follows regarding compliance with laws and regulations. a. Section 2(d), Conflict, Breach — provides in part, that the HTMA will not conflict with or result in the breach of any applicable law, judgment, order, writ, injunction, rule or regulation of any court, administrative agency or other governmental agency. b. Section 3(v)(i)(iii) — The borrower shall conduct its business and maintain its properties in strict accordance with requirements of all applicable laws, ordinances, rules, regulations, judgments, orders and decrees (federal, state or local judicial, governmental or administrative) and shall be subject to federal audit requirements. 28. The Authority Engineer, Gibson - Thomas Engineering, was responsible for the following aspects of the project, including: design, permitting, PennVest application process, drafting of the specifications, advertising, reviewing bids, recommending bids to be awarded, inspecting, dealing with contractors, holding job meetings, providing progress reports to the board, review of pay estimates, recommending payments to the contractors for general contract work and change orders, and right of way acquisitions in conjunction with the board solicitor. a. Dan Schmitt was the representative to the Authority from Gibson - Thomas. 29. HTMA Engineer Dan Schmitt opened for bids for the Stage V projects on July 27, 2001. 30. Bids received and reviewed by Schmitt are as follows: Bidder Ligonier Construction Bruce Allen, Inc. Nicassio Enterprises D &M Contracting, Inc. Glenn Johnson Gene Rayman Construction Fort Allen Construction Chapman Construction Kukurin Contracting David W. Jones Co. Contract #2 $1,04613.00 $1,085,811.00 $1,400,000.00 $1,556,470.00 $1,743,527.00 Contract #3 $740,159.00 $860,000.00 $1,242,205.00 $1,333,702.00 Contract #4 $869,0.00 $893,135.00 $1,531,000.00 $763,375.00 $1,436,705.00 Contract #5 $946,60 $1,084,003.00 $1,010,000.00 $1,009,830.0 $1,570,292.00 $775,330.34 Contract #6 $712,243.00 $884,400.00 $528,200.00 - -- $662,798.00 - -- $763,367.00 - -- Contract #7 $343,599.00 Regola, 02- 090 -C2 Page 7 a. Bids for Contract No. 5 and No. 7 were rejected, and rebid. b. Gene Rayman withdrew his bid on Contract No. 5. c. Contract No. 6: An alternate bid from Chapman Excavating of $665,773.00, was based on the use of pump equipment from a different supplier. d. The bid opening for the re- bidding of Contract No. 5 occurred on 08/21/01, with the following results: Bidder Bid Ligoneer Construction X939,035.00 Nicassio Enterprises, Inc. $996,000.00 D &M Contracting, Inc. $978,732.00 Glenn Johnston $1,468,892.00 Allison Park Contracting $1,635,843.00 e. The bid opening for the re- bidding of Contract No. 7 occurred on 08/14/01, with the following results: Bidder Bid Alternate Bid Blalock Electric & Supply X249,923.00 ($5,000.00) Vantage Corporation $284,890.00 ($6,970.00) David W. Jones Co. $297,290.00 1. The Alternate Bids were based on a variation of equipment which resulted in net deductions in the original bid total. 31. Schmidt recommended to the HTMA board that bids be awarded to the following contractors: Contract No. 2 Contract No. 3 Contract No. 4 Contract No. 5 Contract No. 6 Contract No. 7 Ligonier Construction Bruce Allen, Inc. D &M Contracting, Inc. Ligonier Construction Fort Allen Construction Blalock Electric & Supply $1,046,413.00 $ 740, 519.00 $ 763, 375.00 $ 939, 035.00 $ 528,200.00 $ 249, 923.00 32. The majority of the contracts for Stage V of the project were awarded at a special meeting of the HTMA on August 2, 2001. a. Contracts were awarded based on the engineer's recommendation. 33. Contract No. 4, Oakford Park Road, was awarded to D &M Contracting, Inc., with a bid of $763,375.00. a. The contract awarded to D &M was approved on a motion by Jerry Answine, seconded by Henry Springer. 1. Votes were not recorded. 2. No abstentions were recorded. b. Regola was present at the meeting. Regola, 02- 090 -C2 Page 8 c. This was the first contract D &M Contracting, Inc., was awarded by the Hempfield Township Municipal Authority. 34. The contract between the Hempfield Township Municipal Authority and D &M Contracting, dated 08/31/01, was signed by Robert Regola, Chairman, and Henry Springer, Secretary, on behalf of the authority; and Martin Castelli, vice - president, and Audrey Nowichi, secretary, on behalf of D &M Contracting, Inc. 35. D &M Contracting, Inc., owned by Martin and Dennis Castelli, has been in business since 1996. a. Prior to 1996, Martin and Dennis Castelli worked for their father's construction company. 1. The father's business had utilized Regola's surveying services, and this practice was continued by the sons. 36. D &M Contracting, Inc., has utilized Robert T. Regola Engineering and Surveying consistently since 1996 to perform surveying and related services. a. D &M Contracting does not have a contract with Regola's company requiring that Regola's firm he used. b. When needing surveying services, D &M will telephonically contact Regola's company and inform of the services needed. 1. Regola has a set price for surveying services with which D &M is familiar. 37. D &M Contracting, Inc., utilized Robert T. Regola Engineering and Surveying to perform the surveying services related to Contract No. 4, Oakford Park Road Project. 38. D &M Contracting, Inc., began working on Contract No. 4 in December 2001 as noted in the HTMA Engineer's Reports dated 11/09/01, 12/06/01, and 12/31/01. 39. D &M Contracting, Inc., submitted payment requests for work performed on Contract No. 4, by way of five pay estimates and three change orders. a. Payment requests required the approval of the HTMA board. b. Regola is not recorded as abstaining from the approval process. c. It was common for Regola when serving as Board Chair to refrain from casting a vote except to break ties. 40. Proceeds from the PennVest Loan utilized to pay for Stage V improvements were held in a trust indenture account with J.P. Morgan Institutional Trust Services. a. Contractors submitted pay estimates and change orders which were reviewed by the engineer, who made recommendations to the board regarding payment based on the amount of work completed at the time of submission. b. Pay estimates and Requisitions require approval of the HTMA board. 1. Pay estimates are submitted by the contractor to the engineer listing Regola, 02- 090 -C2 Page 9 percentages of completed construction and requesting payment based on the percentage of the project completed. 2. Requisitions are draw downs from the funding source for all costs, including engineering, legal, construction, based on invoices submitted to the bank for payment. c. The HTMA board votes to authorize release of funds from the PennVest account in the form of requisitions. 1. Checks generated by J.P. Morgan are sent to the HTMA for disbursement. 41. Payments to D &M Contracting, Inc., were approved by HTMA as follows: Pay Meeting Estimate Date Amount Date Vote #1 01/31/02 $206,105.09 02/12/02 Motion Carried #2 02/28/02 $295,806.96 03/12/02 Motion Carried #3 03/27/02 $117,961.48 04/09/02 Motion Carried #4 04/29/02 $44,254.32 05/14/02 Motion Carried #5 09/26/02 $56,900.50 10/08/02 Motion Carried *Individual member votes are not recorded in the minutes. Regola is not recorded as abstaining. No votes are noted. 42. D &M Contracting, Inc.'s first pay estimate in an amount of $206,105.09 was approved by the HTMA on February 12, 2002. a. The motion to approve payment passed with no abstentions recorded. b. Regola was present for the meeting. 43. Requisition No. 4 of the Capital Improvements and Redemption Fund Stage V Project Account with J.P. Morgan was approved by vote of the Authority board at the 02/12/02 meeting for payment. a. Regola was present at the meeting. 1. No abstentions or votes are noted in the minutes. b. Pay Estimate No. 1, submitted by D &M Contracting, Inc., was among the disbursements included in Requisition No. 4. c. Check No. 11662, dated 02/19/02, was issued to D &M Contracting, Inc., in the amount of $206,105.09 from the Trust Account. d. Regola signed Requisition No. 4 as board chairman, as did board secretary Henry Springer, authorizing the release of funds. 44. D &M Contracting, Inc.'s second pay estimate, in the amount of $295,806.96, was approved at the 03/12/02 authority board meeting. a. The motion passed with no abstentions recorded. b. Regola was present at the meeting. Regola, 02- 090 -C2 Page 10 45. Requisition No. 5 was approved by the authority board at the 03/12/02 meeting for payment from the PennVest Loan. a. Meeting minutes reflect the Requisition No. 5 was approved by vote of the board. 1. Regola was present. 2. No abstentions or votes are recorded. b. Pay Estimate No. 2, submitted by D &M Contracting, Inc., was among the disbursements included in Requisition No. 5. c. Check No. 14002, dated 03/14/02, was issued to D &M Contracting, Inc., in the amount of $295,806.96 from the Trust Account. d. Regola signed Requisition No. 4 as board chairman, as did board secretary Henry Springer, authorizing the release of the funds. 46. At the April 9, 2002, board meeting, pay estimate no. 3, in the amount of $117,961.48, submitted by D &M Contracting, Inc., was approved by vote of the board. a. Regola was present at the meeting and was not recorded as abstaining or voting no. 47. Requisition No. 6 was approved by the Authority board at the 04/09/02 meeting, which authorized release of funds from the PennVest Loan. a. Regola was present at the meeting. 1. Regola is not recorded as abstaining or not voting. b. Pay Estimate No. 3, submitted by D &M Contracting, Inc., was among the disbursements included in Requisition No. 6. c. Check No. 16616, dated 04/15/02, was issued to D &M Contracting, Inc., in the amount of $117,961.48 from the Trust Account. d. Regola signed Requisition No. 6 as board chairman, as did board secretary Henry Springer authorizing the release of funds. 48. At the May 14, 2002, board meeting, Pay Estimate no. 4 in the amount of $44,254.32, submitted by D &M Contracting, Inc., was approved by vote of the board. a. Regola was present and not recorded as abstaining or not voting. 49. Requisition No. 7, approved by the Authority board at the 05/14/02 meeting authorized the release of funds from the PennVest loan. a. Regola was present but not recorded as abstaining or not voting. b. Pay Estimate No. 4 submitted by D &M Contracting, Inc. was among the disbursements included in Requisition No. 7 approved by HTMA board. c. Check No. 19608, dated 05/20/02, was issued to D &M Contracting, Inc., in Regola, 02- 090 -C2 Page 11 the amount of $44,254.32 from the Trust Account. d. Regola signed Requisition No. 7 as board chairman, as did board assistant secretary /treasurer Jerry Answine. 50. At the October 8, 2002, HTMA board meeting, pay estimate no. 5, in the amount of $56,900.58, submitted by D &M Contracting, Inc., was approved. a. Regola was present and not recorded as abstaining from the vote. 51. Requisition no. 12 approved by the Authority board at the 10/08/02 board meeting authorized the release of funds from the PennVest loan. a. Regola was present and not recorded as abstaining or not voting. b. Pay Estimate no. 5, submitted by D &M Contracting, Inc., was among the disbursements included in Requisition No. 12. c. Check No. 31582, dated 10/15/02, was issued to D &M Contracting, Inc., in the amount of $56,900.58 from the Trust Account. d. The Requisition authorizing payments is signed by Regola as Chairman, Henry Springer as Secretary and Alan Berk, Solicitor. 52. During the October 18, 2002, meeting, Change Order No. 2, which reduced D &M Contracting's total amount by $41,180.95, to $728,311.55, was approved. a. Change Order No. 2 was a balancing change order reflecting as -bid versus as -built quantities. b. Regola was present and not recorded as abstaining or not voting. 53. By way of letters dated January 4, 2002, and February 6, 2002, to HTMA Engineer Dan Schmitt, D &M Contracting, Inc., advised of the company's intention to be reimbursed in the amount of $38,341.46 over and above the contract amount. a. The change order was in relation to rock encountered at depths not originally anticipated in the specifications. 1. Regola's survey crew determined that the specifications relating to the depth of the pipe installation on Contract No. 4, were incorrect. 54. By way of letter dated February 12, 2002, to D &M Authority Engineer Dan Schmitt addressed D& M's request for additional compensation. Schmitt determined that the charges were not warranted and were not acceptable changes to the scope of the work. 1. The contract did not contain a rock clause in the specifications. 2. The change of elevation did not warrant payment for the next grade of elevation. b. Schmitt denied all of the claims by D &T Contracting for additional payment. 55. D &M Contracting, Inc., submitted a letter of request dated March 11, 2002, for reimbursement of the costs totaling $38,341.45 as a result of the rock encountered a. Regola, 02- 090 -C2 Page 12 due to the change in the specifications. a. Regola presented D &M's letter to the board during an Executive Session held after the March 27, 2002, meeting. b. Regola expressed his understanding as to why D &M Contracting claimed that it was entitled to the payment because the engineer had made a mistake on the specifications. c. The board referred D &M's letter to the Authority engineer for review and recommendation. 56. In an April 3, 2002, letter Schmitt provided the board with his analysis of the D &M Contracting request for additional payment. a. Schmitt confirmed to the board his prior denial of D &M's claims. b. The Board discussed the issue of whether to pay D &M the additional funds, at which discussion Regola was present. c. No vote of the board occurred at this meeting. 57. Between April 2002 and March 2003 no decision was made by the HTMA board regarding D &M's request for the additional payment. a. Schmitt and D &M were not able to reach an agreement acceptable to both parties. b. D &M was threatening litigation. 58. At the March 11, 2003, HTMA board meeting, D &M Contracting, Inc.'s, request for additional payment, was considered following an executive session of the board. The minutes of that meeting reflect the following: "Upon coming out of executive session at 9:36 p.m., Kathy Libertini indicated she wished to discuss and possibly make a motion concerning the D &M Contracting claim. At this point, Chairman, Robert Regola, turned over the chair to the vice - chairman, Scott Ream, and withdrew from any participation in the discussion concerning the subject. At that time, Scott Ream took over the Chair after which time Kathy Libertini made a motion to pay D &M Contracting the sum of $38,341.46 for Change Order No. 3, and the balance of retainage being withheld ($7,283.13), because she did not want to risk any litigation. The chair then called for a vote which consisted of three votes in favor to the motion, those affirmative votes being made by Scott Ream, Kathy Libertini and Brian Melenia, and one (1) vote against the motion being made by Henry Springer. The motion passed three to one. Shortly thereafter, Scot Ream returned the chair to Robert Regola, who again began to participate in the business brought before the meeting." a. Regola did not disclose his reason for removing himself from participation in the D &M matter. 59. Regola's action to recuse himself from participating in the D &M Change Order No. 3 occurred after he received notification from the Investigative Division of the State Ethics Commission dated December 18, 2002, advising that his actions as a board member participating in decisions affecting D &M were being investigated. a. This is the first time that Regola abstained on any matters relating to D &M. Regola, 02- 090 -C2 Page 13 60. Requisition No. 17, approved at the April 8, 2003, Board Meeting, included $45,624.58 to D &M Contracting, Inc, which consisted of the remaining retainage ($7,283.13) and payment for Change Order #3 ($38,341.46). a. The total amount of the Requisition was $52,134.58. b. Regola signed Requisition No. 17, on which payments to D &M Contracting were included. c. On April 8, 2003, Regola signed the Fiscal Form and the Construction Status Report certifying that the amount was correct and complete, and that "there existed no Event of Default or event or condition which with the passage of time or the giving of notice or both would constitute an Event of Default under any of the Loan Documents..." d. By letter dated 04/24/03, PennVest notified the authority that funds in the amount of $52,134.58, had been released. 61. PennVest applications, that included payment to D &M Contracting, Inc., were approved at the Authority Board meetings, as follows: Requisition No. Date Total D &M 6 02/12/02 $7,655,077.60 $206,105.09 7 03/12/02 $ 680, 573.64 $295,806.96 8 04/09/02 $ 425, 692.53 $117,961.48 9 05/14/02 $ 580,950.90 $ 44,254.32 14 10/08/02 $ 167, 262.85 $ 56, 900.58 17 04/08/03 $ 52,134.58 $ 45,624.58 62. D &M Contracting, Inc., was invoiced on February 19, 2002, in the amount of $7,510.59 for the survey work on Contract No. 4, under the name R &R Surveying, 615 Oakridge Drive, Greensburg, PA 15601. a. The services were performed by Regola's sons. b. The address for R &R Surveying is the same address of Robert T. Regola Engineering and Surveying and Regola's residence. 63. D &M Contracting, Inc., paid for the survey work on Contract No. 4 with company check no. 8588 dated 03/14/02, payable to Robert T. Regola in the amount of $7,510.69. a. The check was deposited into a PNC Bank account in the name of Robert T. Regola, Jr., and Evelyn Regola, over which Regola and his wife have signature authority. b. Regola endorsed the reverse side of the check. 64. Regola and /or a business with which he is associated has received payments from D &M for services rendered totaling $357,852.80 from 1997 through 2002. 1997: $ 17,648.98 1998: $ 47, 388.01 1999: $ 57, 546.69 2000: $ 64,438.88 2001: $ 70,105.22 Regola, 02- 090 -C2 Page 14 2002: $ 90, 725.02 Total $357,852.80 65. From 1998 through 2002 Robert T. Regola, Jr., Surveying reported gross receipts on Schedule C of federal tax returns as follows: 1998: $ 345, 748.00 1999: $ 303, 028.00 2000: $ 279, 883.00 2001: $ 210, 791.00 Total $1,139,486.00 66. Payments from D &M during 1998 through 2001 consisted of 25.84% of Regola's total gross receipts during this period. a. Total Receipts: $1,139,486.00 Payments from D &M: $ 294,478.00 Percentage: 25.843143% 67. Regola reasonably expected that his company would have an opportunity to subcontract surveying services to D &M at the time the Board voted to award the contract for Contract No. 4 to D &M during the August 2, 2001, HTMA meeting. a. D &M has been using Regola's company exclusively since 1996. b. In 2001, D &M represented $33.26% of all gross receipts of Regola's company. 1. Total gross receipts ($210,791), D &M Receipts ($70,105). 68. In or about February 11, 2002, the Commonwealth of Pennsylvania, Governor's Office of the Budget, began an audit of HTMA's use of the PennVest Loan. a. The audit began with an Entrance Conference on February 11, 2002, and concluded with an exit conference on February 15, 2002. 1. Regola did not attend either conference. b. The issue of related party transactions was discussed during both conferences. 1. No related party transactions were reported by HTMA officials in attendance. c. By letter dated February 15, 2002, HTMA General Manager Gerald Answine reported to the auditors that all related party transactions had been reported. 1. None had been reported to the auditors on February 15, 2002. d. On April 16, 2002, Answine advised the auditors of a related party transaction as follows: To the best of my knowledge, but without an independent investigation therof, there are no related party transactions between this Authority and companies or vendors with whom directors, officers, members, employees or immediate family members or affiliate companies have direct financial Regola, 02- 090 -C2 Page 15 interest; however, a director of this Authority has provided professional services as a subcontractor for a prime contractor doing business with the Authority." e. In Note D of its April 26, 2002, audit report submitted to PennVest and the HTMA, the Office of the Budget cited the related party transaction as reported by Answine. f. PennVest took no further action. 69. Regola's contract with D &M Contracting, Inc., on Stage V, Contract 4, was addressed as a related party transaction in the Single Audit Report dated May 6, 2002, prepared by Sarp & Company, the auditing firm retained by the HTMA. a. Sarp noted the following in relation to Regola contracting with D &M: Item Subsequent to balance sheet date, we became aware of a related party transaction in which a member of the authority's board served as a subcontractor to the general contractor, D &M Contracting, Inc., of New Alexandria, PA. Examination of the minutes showed this board member voted on change orders and periodic payments. Criteria Under the criteria for procurement, a board member who acts in a related party capacity must disclose such relationship and must abstain from all votes concerning award, change order and payment of periodic estimates. Effect Failure to disclose and abstain from voting presents the appearance of enrichment due to the related party nature of payments made, however, we were able to verify dates and amounts paid to related parties. Such verification showed these payments fall within the "de minimis economic impact" provisions of the Ethics Code. Recommendation We recommend that the board prohibit related party transactions and, in such cases where payments are de minimis, disallow any votes regarding such contracts. 70. Sarp's conclusion that payments to Regola by D &M were de minimis was based on their determination that the amount paid to Regola by D &M totaling $7,510.69 was less than the generally accepted standard for materiality of 5% of the total contract of $801,776.00 or $40,085.00. 71. Sarp's conclusions were not based on any judicial or Commission precedent regarding the application of the term de minimis under the Ethics Law or the actual definition of this term under the Ethics Law. 72. Regola's actions as described above may have been resulted in the appearance of private gross pecuniary gain of $7,510.69 being obtained as a result of payments from D &M Contracting. However, D &M Contracting was entitled to an award of the contract as the lowest responsible bidder and Regola's payments from D &M Contracting were legitimate compensation for professional surveying services provided. For reasons expressed below, the net gain was little or zero. Regola, 02- 090 -C2 Page 16 73. In presenting correspondence to the Board on March 27, 2002 Regola believed he was helping the Board understand the facts underlying the survey problem; furthermore, he believed his explanation of the facts to the board was justified. 74. The Board's position on the change order was not determined until a year after Regola had made his presentation to the Board by vote of the Board in which Regola did not participate. 75. Regola did not receive any funds that were paid by the township as a result of the change order. 76. Regola made little or no profit from his subcontract with D &M construction. As the elevation error had not yet been detected, Regola did not factor into his original bid the additional work needed to correct the error. 77. Regola agrees that he will not vote, lobby, or discuss future issues in which he or R &R Surveying stand to financially benefit. III. DISCUSSION: At all times relevant to this matter, the Respondent, Robert Regola, Jr. (Regola), has been a public official subject to the provisions of the Public Official and Employee Ethics Law, Act 9 of 1989, Pamphlet Law 26, 65 P.S. § 401, et seq., as codified by the Public Official and Employee Ethics Act, Act 93 of 1998, Chapter 11, 65 Pa.C.S. § 1101 et seq., which Acts are referred to herein as the "Ethics Act." The allegations are that Regola, as Chairman of the Municipal Authority of Hempfield Township, West Moreland County violated provisions of the State Ethics Act (Act 9 of 1989, 65 P.S. §401 et seq.) when he used the authority of his office for a private pecuniary gain to himself or a business with which he or members of his immediate family are associated, including but not limited to participating in actions of the board to award contracts to businesses that subcontracted authority work to Robert T. Regola Engineering and Surveying /R &R Surveying, businesses with which he or members of his immediate family are associated. Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited from engaging in conduct that constitutes a conflict of interest. The term "conflict of interest" is defined under Act 9 of 1989/Act 93 of 1998 as follows: Section 2/1102. 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. "Conflict" or "conflict of interest" 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. Regola, 02- 090 -C2 Page 17 65 P.S. § 402/65 Pa.C.S. § 1102. Section 1103(a) of the Ethics Act prohibits a public official /public employee 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. Section 1103(f) of the Ethics Act imposes certain restrictions as to contracting. Section 1103(f) of the Ethics Act provides: Section 1103. Restricted activities (f) 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 P.S. § 403(f)/65 Pa.C.S. § 1103(f). Section 1103(f) of the Ethics Act provides in part that no public official /public employee or spouse or child or business with which he or the spouse or child is associated may enter into a contract with his governmental body valued at five hundred dollars or more or any subcontract valued at five hundred dollars or more with any person who has been awarded a contract with the governmental body with which the public official /public employee is associated unless the contract is awarded through an open and public process including prior public notice and subsequent public disclosure. As noted above, the parties have submitted a Consent Agreement and Stipulation of Findings. The parties' Stipulated Findings are reproduced above as the Findings of this Commission. We shall now summarize the relevant facts as contained therein. Regola has served as a member of the Hempfield Township Municipal Authority (HTMA) since 1990. The HTMA Board (Authority Board) is composed of five members who are appointed by the Hempfield Township Board of Supervisors. In a private capacity, Regola is a professional land surveyor who is licensed by the Pennsylvania Department of State. Regola, who owns and operates Robert T. Regola Engineering and Surveying, employs his two sons and daughter at his engineering business. Even though Regola retired from his business in 1993, he remains active in performing services but does not receive a salary. Regola and his family also do business under the name of R &R Surveying. Regola also remains active in R &R Surveying. Payments received by both Regola, 02- 090 -C2 Page 18 Regola Engineering and R &R Surveying are endorsed by Regola with most of the receipts deposited into accounts that he controls. Between 1997 and 2000, HTMA has awarded contracts for various sewer projects to different businesses. From January 1998 to December 2002, Regola has participated in Authority Board decisions to approve such projects, award the contracts and issue payments to various companies that in turn have entered into subcontracts with Regola Engineering and R &R Surveying. When the HTMA began Stage V of a sewer line extension project in 2001, an application was submitted to PennVest for a loan of $5.98 million which was co- signed by Regola as Authority Board Chairman. PennVest approved a loan of $5.841 million in March 2001 subject, inter alia, to a conflict of interest provision in Section 2(d) of the agreement. Subsequently, various bids under the Stage V project were submitted for several contracts that were then reviewed by the HTMA engineer. The Authority Board awarded the contracts based upon the engineer's recommendation. The details of the bidding and the awards of the contracts are delineated in Fact Findings 29 through 34. D &M Contracting, Inc., the successful bidder under Contract No. 4 of the Stage V project, utilized the services of Regola Engineering and Surveying. D &M had previously utilized Regola's services for surveying and related services since 1996. D &M Contracting began working on Contract No. 4 in December 2001. Subsequently, D &M Contracting submitted five pay estimates and three change orders to the Authority Board. Although it was common for Regola to refrain from voting except to break ties, he is not recorded as abstaining as to the approval process for Contract No. 4. Five instances in which payments to D &M Contracting were approved by the Authority Board are set forth in Fact Finding 41. The specific votes are not noted and Regola is not recorded as abstaining on any of the votes. Regola, as Board Chairman, co- signed requisitions as to D &M Contracting for release of funds. See, Fact Findings 43(d), 45(d), 47(d), 49(d), 51(d). Regola is listed as being present and not abstaining or voting as to a change order that reduced D &M Contracting's total receipt by over $41,000. See, Fact Finding 52. Similarly, Regola participated in a matter of a claim by D &M Contracting for an additional expenditure relating to costs as a result of rock encountered in the performance of the contract. The Authority Board engineer determined that the charges were not warranted, noting that there was no rock clause in the specifications of the Agreement. Regola's participation consisted of presenting D &M's letter to the Authority Board in an Executive Session wherein Regola stated that D &M Contracting's claim was based upon a mistake that the engineer made in the specifications. When D &M Contracting's claim was considered at an Authority Board meeting in March 2003, Regola recused himself from participation. This occurred at a point in time after Regola had received notification that he was being investigated by the Investigative Division of this Commission regarding charges as to his participation in decisions affecting D &M Contracting. The Authority Board meeting in March 2003 was the first time that Regola abstained on matters involving D &M Contracting. Regola signed a requisition as to D &M Contracting at an April 2003 Authority Board meeting that related to the remaining retainage of over $7,000 and a payment change order amounting to approximately $38,000. Just as D &M Contracting received various payments for performing the contract under the Stage V agreement for HTMA, Regola or his business in turn received payments for work that it performed for D &M Contracting as to its contract with the Authority Board. For the period 1997 through 2002, Regola or the business with which he is associated received total payments of $357,852.80 from D &M Contracting. Payments received from D &M Contracting by Regola for the years 1998 through 2001 amounted to over 25% of Regola, 02- 090 -C2 Page 19 Regola's total receipts during that time frame. In this regard, Regola had a reasonable expectation that his business would have an opportunity to provide subcontract services to D &M Contracting at the time the Authority Board voted to award Contract No. 4 to D &M Contracting. When the Commonwealth did an audit of HTMA's use of the PennVest loan in February 2002, the matter of a related party transaction arose. The General Manager of HTMA advised the auditors that there were no related party transactions in his view, but he did note that the Authority Chair (Regola) had a professional services arrangement as a subcontractor for a prime contractor doing business with the Authority. Although the audit report was submitted to PennVest, it took no action in the case. In a report prepared by an auditing firm in May 2002, Regola's contract with D &M Contracting as to the Stage V project, Contract 4, was addressed. The firm, in its audit report, noted a related party transaction by an Authority Board member with D &M Contracting, Inc. The firm noted that a board member who acts in a related party capacity must disclose the relationship and abstain as to all votes concerning the award, change order or periodic payments. Lastly, the firm recommended that the Board prohibit related party transactions. The firm concluded that the payments to Regola from D &M would constitute a de minimis amount based upon the generally accepted standard for materiality of 5% of the total contract. Lastly, D &M Contracting was entitled to the award of the contract, being the lowest responsible bidder. In addition, Regola's payments from D &M Contracting were legitimate compensation for professional services that were provided. Regola agrees that for future occurrences, he will not vote, lobby or discuss issues that financially affect Regola or his business. Having highlighted the Stipulated Findings and issues before us, we shall now apply the Ethics Act to determine the proper disposition of this case. The parties' Consent Agreement sets forth a proposed resolution of the allegations. The Consent Agreement proposes that this Commission find: "3. The Investigative Division will recommend the following in relation to the above allegations: a. An unintentional technical violation of Section 1103(a) when Regola presented correspondence to Municipal Authority on March 27, 2002 regarding the payment of D &M Contracting. b. The parties agree to dismiss the allegation that there was a violation of Section 1103(f). 4. Regola agrees to make payment in the amount of $500.00 in settlement of this matter. Said amount to be payable to Commonwealth of Pennsylvania and forwarded to the Pennsylvania State Ethics Commission within thirty (30) days of the issuance of the final adjudication in this matter." Consent Agreement, ¶3, ¶4. As to Section 1103(f) of the Ethics Act, the Investigative Division, through the exercise of prosecutorial discretion and in conjunction with the Consent Agreement has elected not to pursue and therefore withdraw the allegation as to this Section 1103(f) of the Ethics Act. Hence, the only issue before us is Regola's participation as an Authority Board Regola, 02- 090 -C2 Page 20 member regarding HTMA payments to D &M Contracting for which company Regola's business performed subcontracting services. Regarding Section 1103(a) of the Ethics Act, but for the fact that Regola was an Authority Board member, he would not have been in a position to participate as to the payment to D &M Contracting. Uses of authority of office are not limited to merely making motions and voting. Uses of authority of office include actions that are taken by virtue of being in that position, such as, participation in discussions or lobbying for a particular result. See, Juliante, Order 809. The Stipulation of Findings as submitted by the parties reflects such uses of authority of office on the part of Regola. The uses of authority of office resulted in a pecuniary benefit to Regola or his business consisting of the subcontracting services that were provided to D &M Contracting under the Phase V project initiated by the Authority Board. The pecuniary benefit was private because there was no provision in law that would allow Regola to participate as to payments for D &M Contracting that subcontracted with Regola's business. Hence the pecuniary benefit was private. We also note that the agreement entered into between the Authority and PennVest had a conflict of interest provision against related party transactions. Lastly, the private pecuniary benefit inured to Regola or the business with which he was associated. Accordingly, Regola unintentionally technically violated Section 1103(a) when he presented correspondence to the Municipality Authority Board regarding the payment for D &M Contracting, a business that received a contract from the Authority as to a sewer extension project and then subcontracted with Regola's business for the provision of certain services. See, Fulkerson, Order, 1289. We determine that the Consent Agreement submitted by the parties sets forth the proper disposition for this case, based upon our review as reflected in the above analysis and the totality of the facts and circumstances. Accordingly, Regola is directed to make payment in the amount of $500.00 in settlement of this matter. Said amount to be payable to the Commonwealth of Pennsylvania and forwarded to the Pennsylvania State Ethics Commission within thirty (30) days of the issuance of the final adjudication in this matter. Regola agrees that for future occurrences, he will not vote, lobby or discuss issues that financially affect Regola or his businesses. Compliance with the foregoing will result in the closing of this case with no further action by this Commission. Noncompliance will result in the institution of an order enforcement action. IV. CONCLUSIONS OF LAW: 1. Robert Regola, Jr. ( "Regola "), as Chairman of the Municipal Authority of Hempfield Township, is a public official subject to the provisions of Act 9 of 1989 as codified by Act 93 of 1998. 2. Regola unintentionally violated Section 1103(a) when he presented correspondence to the Municipal Authority on March 27, 2002 regarding the payment of D &M Contracting, a business that received a contract from the Authority as to a sewer extension project and then subcontracted with Regola's business for the provision of certain services. In Re: Robert T. Regola, Jr. File Docket: 02- 090 -C2 Date Decided: 9/12/05 Date Mailed: 9/21/05 ORDER NO. 1373 Robert Regola, Jr. ( "Regola "), as Chairman of the Municipal Authority of Hempfield Township unintentionally violated Section 1103(a) when he presented correspondence to the Municipal Authority on March 27, 2002 regarding the payment of D &M Contracting, a business that received a contract from the Authority as to a sewer extension project and then subcontracted with Regola's business for the provision of certain services. 2. For future occurrences, Regola is directed not to vote, lobby or discuss issues that financially affect Regola or his business. 3 Per the Consent Agreement of the parties, Regola is directed to make payment in the amount of $500.00 payable to the Commonwealth of Pennsylvania and forwarded to the Pennsylvania State Ethics Commission within thirty (30) days of the issuance of the final adjudication in this matter. a. Compliance with the foregoing will result in the closing of this case with no further action by this Commission. b. Non - compliance will result in the institution of an order enforcement action. BY THE COMMISSION, Louis W. Fryman, Chair