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HomeMy WebLinkAbout1375 FilippiIn Re: Rick Filippi 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 04 -009 Order No. 1375 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 Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter 11 of Act 93 of 1998, 65 Pa.C.S. § 1101 et seq., which essentially repeats Act 9 of 1989 and provides for the completion of pending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. Filippi, 04 -009 Page 2 I. ALLEGATION: Rick Filippi, a (public official /public employee) in his capacity as Mayor of the City of Erie, violated Section 1103(a) provisions of the State Ethics Act (Act 93 of 1998), 65 Pa.C.S. §1103(a) when he used the authority of his office for a private pecuniary gain including but not limited to accepting compensation not provided for by law by accepting an annual stipend in lieu of benefits paid for by the City, and when he used the authority of his public position to increase the stipend. II. FINDINGS: 1. Richard E. Filippi has served as the Mayor of the City of Erie since January 2002. a. Filippi previously served as a member of Erie City Council from January 1998 through December 2001. 2. The salaries of council and the mayor are established by ordinance. a. The compensation for council and the mayor may not be increased or diminished after election to those positions. b. An ordinance may be enacted to change the compensation of council or the mayor, but the change shall not affect the compensation of the mayor or council member in office at that time or of the mayor or council member taking office within six months of final passage of the ordinance providing for such change. 3. The Administrative Code of the City of Erie outlines ordinances and resolutions passed by City Council and delineates the ordinances fixing the compensation for council and the mayor. 4. The approved compensation for the Erie City Mayor is $65,000.00 per year. a. This compensation was established by Ord. 50 -1996 passed on September 4, 1996. 5. The approved compensation for council is $6,000.00 per year. a. The council president can receive an additional $1,500.00 per year. b. This compensation was established by Ord. 84 -1984 passed on December 26, 1984. 6. The mayor and city council members are eligible to be included in the City's health insurance plan. a. The coverage offered is the same that is offered to other city employees and includes medical, dental, and vision coverage. 7 In late 1997, Erie Mayor Joyce Savacchio approved a policy known as the Waiver of Insurance Coverage Policy for Elected, Managerial, and Non - Bargaining Employees. a. The intent of the policy was to encourage individuals in this group who had access to health insurance from another source to opt -out of the City's insurance as a cost savings measure by offering a monetary incentive. 8. The policy was recommended and written by Connie Cook, City of Erie Benefits Coordinator. a. Cook recommended and developed the policy based on its use in the private sector and the fact that bargaining unit City employees were already offered this option as per the union contracts. Filippi, 04 -009 Page 3 b. Cook began developing the policy after receiving approval from Savacchio. 9. After drafting the policy, Cook had the policy reviewed by Jeannie Putman and Charles Herron. a. Putman was the Human Resource Manager and Cook's immediate supervisor at that time. b. Herron was the City's Director of Finance at that time. 10. The waiver policy was not approved or reviewed by the City Solicitor's office prior to becoming effective. 11. City Council did not authorize the opt -out payment in lieu of health benefits by way of a specific ordinance or during the annual budget ordinance process. 12. Savacchio officially approved the policy on December 12, 1997 which became effective January 1, 1998. a. The approval of the policy was done at the sole discretion of the Mayor. 13. The Waiver of Insurance Coverage Policy for Elected, Managerial, and Non - Bargaining Employees effective January 1, 1998 provides in part as follows: a. Policy: The City of Erie shall make available to elected, managerial, and non - bargaining employees the option of not enrolling in the City of Erie sponsored health Insurance Coverage. The employee will make this choice once a year during the open enrollment period. The opt -out employee must provide proof of coverage elsewhere and sign a waiver form applicable to the type of coverage waived. Employees may opt back into the Plan at a period other than the open enrollment period based on a significant life event change. b. Procedure: The employee's gross annual wage shall be increased by an amount equivalent to the premiums savings generated by the waiver not to exceed $1,500.00. This amount shall be paid to the employee as taxable wages on a bi- weekly basis subject to standard payroll procedures. In the event that a significant life event change occurs during the waiver year, the employee's gross wages shall be adjusted back to the regular wage effective with the next payroll following the effective date of the change. The effective date of the change will be the first of the month following the date of the significant life event change. No retroactive payments or adjustments will be required or permitted. 14. The initial policy allowed the employee to opt -out of any or all of the health plans offered by the City. a. The employee's wages would be increased in an amount determined by the plan(s) opted out of, but in no event greater than $1,500. b. The opt -out wages were subject to taxes. 15. Opt -out payments are made via separate checks issued on a monthly basis and are processed in the same manner as the regular City of Erie payroll checks. 16. Filippi played no role in the initial implementation of the "opt out" program and was not in office when Mayor Savacchio authorized the program. 17. Officials and employees elected or hired subsequent to January 1, 1997, the effective date of the policy, were made aware of the waiver policy during the new employee orientation provided by the City. Filippi, 04 -009 Page 4 18. Filippi, as a newly elected City Council member, attended a new employee orientation presented in or around December 1997 and learned of the program. 19. Filippi chose to opt -out of all of the health insurance plans offered by the City by signing a Waiver /Refusal of Coverage Form on December 30, 1997. a. Opting -out of all of the health plans enabled Filippi to receive the maximum amount of additional taxable income of $1,500.00 per year. 20. Filippi remained enrolled in the waiver option through the end of his term on City Council in December 2001 and after his term as Mayor began in January 2002. 21. In December 2002, Filippi, as mayor, approved changes to the waiver policy, which included the increase of the maximum opt -out payment to $2,500.00 per year and mandated waiving all health insurance plans. a. The changes were made solely as a result of recommendations made by a health insurance committee that was exploring ways to lower health insurance costs for the City by encouraging higher enrollment in the waiver option. 22. Filippi completed an updated Waiver /Refusal of Coverage Form on December 27, 2002 due to the changes in the waiver policy he approved, at the recommendation of the health insurance committee. a. Filippi continued to decline all health coverage offered by the City and chose to receive the increased opt -out payment of $2,500.00 per year. b. Under the new policy, the monthly opt -out payment increased to $208.33 (gross). 23. Filippi was the only elected official who chose to receive the opt -out payments from January 1998 through December 2002, prior to when he, at the recommendation of the health insurance committee, approved the amendment of the policy and the amount was increased. Although several elected officials chose to participate in the opt -out, after the amount was increased by Filippi in December 2002, none retained the compensation received as a result thereof. 24. Filippi received opt -out payments in each of the years 1998 through 2004 in his capacities as a member of City Council and as Mayor as follows: a. 1998: $1,500 b. 1999: $1,500 c. 2000: $1,500 d. 2001: $1,500 e. 2002: $1,375 f. 2003: $2,624.96 g. 2004: $ 416.66 25. Filippi received a gross total of $10,291.62 in taxable wages as a result of his participation in the health insurance opt -out plan in his capacity as Councilman and Mayor as follows: a. a. Councilman: $6,000.00 Filippi, 04 -009 Page 5 b. Mayor: $4,291.62 c. Total: $10,291.62 26. Filippi received a gross total of $3,041.62 in taxable wages as a result of his participation in the health insurance opt -out plan subsequent to his approval of the increase in the amount of the yearly amount to $2,500.00 effective in January 2003 as follows: a. 2003: $2,624.96 b. 2004: $416.66 c. Total: $3,041.62 27. In January 2003, the Opt Out Program was raised in City Council. 28. By a memorandum to the President of City Council, Mario Bagnoni, dated January 31, 2003, City Solicitor Paul Curry addressed the opt -out payment to the council members and the mayor, which included, in part, the following: a. The custom and practice of City Council has been to define or describe compensation solely in terms of cash and not to include various other items (such as health benefits) that may be considered "compensation." b. Accordingly, changes in these other items such as increases or decreases in health benefits have not and would not be a change in the compensation of the Mayor which remains at $65,000.00. 29. On or about February 24, 2003, City Council received an opinion from its Special Counsel that concluded that receipt of opt out payments would be a form of unauthorized compensation. 29. By letter dated December 17, 2003, Bagnoni wrote a letter of request for an advice from the State Ethics Commission, which stated, in part, the following: As a City of Erie elected official, I have been offered the option of "opting - out" of the Health Insurance coverage offered by the City. Instead of receiving the benefit of the insurance coverage, I would receive an additional $2,500.00 per year. Would you please advise me if this is a violation of state law or ethics rules since my City Council salary, which is set by ordinance, would be increased by the above amount. Also, I understand that under the Third Class City Code, elective officials salaries cannot be increased or diminished during their term." 30. On January 22, 2004, the Legal Division of the State Ethics Commission issued Advice of Counsel No. 04 -503 to Bagnoni, which included, in part, the following conclusion: "Section 1103(a) of the Ethics Act would not prohibit you from "opting -out" of your City -paid health insurance benefits conditioned upon the assumption that such action would not result in any private pecuniary benefit prohibited under Section 1103(a) of the Ethics Act. Section 1103(a) of the Ethics Act would prohibit you from receiving a monetary payment in lieu of your City - paid health insurance benefits unless there is a specific authorization in law Filippi, 04 -009 Page 6 permitting you to exercise an option to forego such benefits for a monetary payment. Even if such an arrangement were authorized in law, the provision in the Third Class City Code which provides that the compensation to be received by councilman shall not be increased or diminished after their election" may prove problematic, and therefore, it is suggested that you seek legal advice in that regard. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act." III. DISCUSSION: At all times relevant to this matter, the Respondent, Rick Filippi (Filippi), 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 Filippi violated Section 1103(a) of the Ethics Act when he accepted compensation not provided for by law as to an annual "opt out" payment in lieu of insurance benefits paid by the City, and when he increased the payment resulting in increased pecuniary benefits to himself. 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. 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. 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. 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. Filippi, 04 -009 Page 7 Filippi has served as a member of Erie City Council (Council) from January 1998 through December 2001 and as Mayor of Erie (City) since January 2002. The salaries of Council members and the Mayor are established by ordinance and are prohibited from being increased or diminished after election to those positions. The Mayor and members of Council are eligible for inclusion in the City's health insurance plan. In 1997, then Mayor Joyce Savacchio approved a policy for waiving the insurance coverage provided by the City. The waiver allowed the individual to opt out of the provided health insurance coverage and receive a payment in lieu thereof, not to exceed $1,500 for waiving the insurance coverage. Filippi did not play any role in the implementation of the insurance waiver /opt out program (Program) in that he was not in office when Mayor Savacchio authorized the Program. When the Program became effective January 1, 1997, officials and employees who held public office were made aware of the Program. Filippi chose to opt out of the health insurance plan and executed a waiver on December 30, 1997. As a consequence, Filippi received an additional amount of taxable income of $1,500 per year. Filippi remained enrolled in the Program throughout his term on Council and during his Mayoral term that began in January 2002. In December 2002, Filippi, as Mayor, approved changes to the insurance waiver policy that included a maximum opt out payment of $2,500 per year, coupled with a mandated waiver of all health insurance plans. This change came about as a result of a recommendation by the Health Insurance Committee to lower the health insurance costs for the City by encouraging higher usage of the Program. Filippi completed an insurance waiver opt out form on December 27, 2002 due to the changes in the Program. In addition, Filippi continued to decline all health coverage offered by the City. At the time, Filippi was the only elected official who chose to receive the opt out payments from January 1998 through 2002. Several elected officials chose to participate in the Program after the amount was increased but none retained the compensation. The opt out payments that Filippi received totaled $6,000 while a Councilman and $4,291.62 as Mayor. The gross amount that Filippi received subsequent to the increase in the opt out payment was $2,624.96 in 2003 and $416.66 in 2004 or $3,041.62 in total. In February 2003, the City Solicitor opined to City Council that the receipt of opt out payments would be unauthorized compensation. In December of 2003, the President of City Council sought an advisory from this Commission. In January of 2004, our Legal Division issued an Advice of Counsel No. 04 -503 advising that such opt out payments would be considered as private pecuniary benefits contrary to Section 1103(a) of the Ethics Act unless there was a specific authorization in law permitting the officials to exercise an option to forego insurance benefits for the monetary payment. 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: "3. The Investigative Division will recommend the following in relation to the above allegations: a. That no violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1103(a) occurred when Filippi accepted an annual stipend, as an Erie City Council Member, in lieu of benefits paid for by the City, as there was no use of the authority of office on the part of Filippi. Filippi, 04 -009 Page 8 b. That an unintentional violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1103(a) occurred when Filippi, in his position as Erie City Mayor, in reliance upon the advice of a Health Insurance Committee, approved a revised policy which increased the annual stipend in lieu of benefits in conjunction with the mandatory waiver of all health benefits, and thereafter received such stipend as part of his compensation. 4. Filippi agrees to make payment in the amount of $1,500 in settlement of this matter 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." Consent Agreement, ¶3 and ¶4. In applying Section 1103(a) of the Ethics Act to the two allegations before us, we will first consider Fillipi's acceptance of the opt out payments while he served as a Council member and then as a Mayor. When Filippi served as a Council member, it was the prior Mayor who implemented the Program that allowed for payments of $1,500 to individuals who would forego the City paid insurance benefits. Filippi, as a Council member, elected to receive the payments that were authorized and implemented before he came into office as a City Council member. In McGuire and Marchitello v. SEC, 657 A.2d 1346 (Pa. Commw. 1995), Commonwealth Court held that it was not a violation of the Ethics Act for authority board members to receive compensation that was not authorized but was put in place before their terms on the board. The Court concluded that the authority board members did not use the authority of office as to the implementation of the compensation increase. In the instant case, the implementation of the opt out payments, that Filippi received as a Council member, occurred prior to his term on Council. As such, Filippi's receipt of the payments would not be considered a use of authority of office. Without a use of authority of office, there can be no violation of the Ethics Act. Dixon, Order 821. Accordingly, Filippi, as an Erie City Council member, did not violate Section 1103(a) of the Ethics Act when he accepted opt out payments in lieu of insurance benefits paid by the City in that there was no use of authority of office on his part as to payments received under the pre- existing Program. While Filippi was Mayor, there was a change in the Program that was made as a result of recommendations by the Health Insurance Committee to lower health insurance costs for the City by encouraging a higher enrollment in the Program. Filippi raised the opt out payment from $1,500 to $2,500 per year, provided there was a waiver of all health insurance plans. Filippi received $3,041.62 from the Program subsequent to his approval of the yearly increase that was effective January 2003. In this instance, Filippi used the authority of office in that he implemented the increase as Mayor. But for the fact that Filippi was Mayor, he would not have been in a position to change the policy whereby the opt out payment was increased from $1,500 to $2,500. Such an action was a use of authority of office. See, Juliante, Order 809. The use of authority of office on the part of Filippi resulted in a pecuniary benefit to himself consisting of the $3,041.62 that he received subsequent to the change he made in the Program. The pecuniary benefit was private because there is no authorization in a law that would allow the Mayor to make such a change that would have application to public officials currently in office. Lastly, the private pecuniary benefit inured to Filippi himself. Accordingly, Filippi unintentionally violated Section 1103(a) when he, as Erie City Mayor, in reliance upon the advice of a Health Insurance Committee, approved a revised policy that increased the annual stipend in lieu of benefits in conjunction with the mandatory waiver of all health benefits, and thereafter received such stipend as part of his compensation. Filippi, 04 -009 Page 9 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, Filippi is directed to make payment in the amount of $1,500 in settlement of this matter payable to the Commonwealth of Pennsylvania and forwarded to this Commission within thirty (30) days of the issuance of the final adjudication in this matter. 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. Rick Filippi ( "Filippi "), as a Council member and then as Mayor of the City of Erie (City), is a public official subject to the provisions of Act 9 of 1989 as codified by Act 93 of 1998. 2. Filippi, as a City Council member, did not violate Section 1103(a) of the Ethics Act when he accepted opt out payments in lieu of insurance benefits paid by the City in that there was no use of authority of office on his part as to the payments received under the pre- existing Program. 3. Filippi, as City Mayor, in reliance upon the advice of a Health Insurance Committee, unintentionally violated Section 1103(a) when he approved a revised policy that increased the annual stipend in lieu of benefits in conjunction with the mandatory waiver of all health benefits, and thereafter received such stipend as part of his compensation. In Re: Rick Fllippi File Docket: 04 -009 Date Decided: 9/12/05 Date Mailed: 9/21/05 ORDER NO. 1375 1 Rick Filippi ( "Filippi "), as Council member of the City of Erie (City), did not violate Section 1103(a) of the Ethics Act when he, as a City Council member, accepted opt out payments in lieu of insurance benefits paid by the City in that there was no use of authority of office on his part as to the payments received under the pre- existing Program. 2. Filippi, as City Mayor, in reliance upon the advice of a Health Insurance Committee, unintentionally violated Section 1103(a) when he approved a revised policy that increased the annual stipend in lieu of benefits in conjunction with the mandatory waiver of all health benefits, and thereafter received such stipend as part of his compensation. 3. Per the Consent Agreement of the parties, Filippi is directed to make payment in the amount of $1,500 in settlement of this matter payable to the Commonwealth of Pennsylvania and forwarded to this 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