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HomeMy WebLinkAbout05-589 ZinchiniGeorge A. Kotjarapoglus, Esquire Cassidy, Kotjarapoglus & Pohland, LLC 118 North Main Street Greensburg, PA 15601 Dear Mr. Kotjarapoglus: ADVICE OF COUNSEL November 4, 2005 05 -589 Re: Conflict; Public Official /Employee; Borough; Council; Business With Which Associated; Oil and Gas; Lease; Vote; Contract. This responds to your letter of October 4, 2005, by which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa. .S. §1101 et seq., presents any prohibition or restrictions upon a borough council member with regard to participating in matters pertaining to oil and gas leases granted by the borough when the borough council member is in the business of drilling oil and gas leases and is an applicant for an oil and gas lease with the borough. Facts: On behalf of Jeffrey Zinchini ( "Zinchini "), a Council Member of Vandergrift Borough ( "Borough "), Westmoreland County, you seek an advisory from the State Ethics Commission based upon the following submitted facts. The Borough owns oil and gas rights under some of its lands. Zinchini is in the business of drilling and producing oil and gas wells. Zinchini wishes to submit an application to the Borough requesting oil and gas leases from the Borough. You state that typically, oil and gas leases provide for a fixed term. For example, a lease might set the term for a period of five years and for so long thereafter as oil and gas are produced from a well drilled in accordance with the terms of the lease. In addition, oil and gas leases typically provide for a 1/8 royalty paid from the revenue realized from an gas production on the leased acreage. You state that the Borough had intended to form a citizen's committee to review the matter of the Borough obtaining oil and gas well royalties. The citizen's committee was to forward its recommendations to Borough Council, which would then decide whether and to whom an oil and gas lease should be granted. However, a recent communication from the Borough Solicitor now indicates that the Borough may have to grant oil and gas leases pursuant to competitive bidding. Kotlaraoglus- Zinchini, 05 -589 November 4, 2005 Page 2 Based upon the foregoing facts, you pose the following specific inquiries. 1. Whether Zinchini may enter into an oil and gas lease with the Borough without transgressing Section 1103(a) of the Ethics Act, assuming he communicates his proposal and intentions as a proposed lessee and responds to any questions that may be posed by the citizens committee and /or Borough Council, but abstains from: 1 participating in deliberations of the citizens committee and Borough Council; and (2) voting on whether the Borough should entertain the lease of municipal lands for oil and gas development and whether the Borough should grant a lease in favor of himself. 2. Whether Zinchini would have a conflict of interest if: (1) he would be selected to enter into an oil and gas lease with the Borough; or (2) if he would not be selected to enter into an oil and gas lease with the Borough. 3. Whether Zinchini may vote on whether to grant oil and gas leases to another without transgressing Section 1103(a) of the Ethics Act, where: (1) he has withdrawn his request from consideration as an interested lessee; (2) he is one of the top finalists; or (3) he is not one of the top finalists and cannot obtain an oil and gas lease by voting on the matter. 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. As a Council Member for Vandergrift Borough ( "Borough "), Jeffery Zinchini ( "Zinchini ") is a public official as that term is defined in the Ethics Act, and hence he 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 Kotlaraoglus- Zinchini, 05 -589 November 4, 2005 Page 3 employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. "Authority of office or employment." The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. "Business." Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self - employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit. "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. "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 Kotlaraoglus- Zinchini, 05 -589 November 4, 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 abstained from voting as a result of a conflict of interest and Kotlaraoglus- Zinchini, 05 -589 November 4, 2005 Page 5 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). 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, Zinchini's oil and gas drilling business would be considered a business with which he is associated. Pursuant to Section 1103(a) of the Ethics Act, Zinchini would generally have a conflict of interest in his public capacity as a Borough Council Member in matters that would financially impact himself, the oil and gas drilling business, or private customer(s) /client(s). In that Zinchini intends to apply for an oil and gas lease with the Borough, he would specifically have a conflict of interest in establishing the criteria by which selections for lessees are made, participating in discussions to advance or promote the selection of his oil and gas drilling business, or otherwise using the authority of office or confidential information to effectuate a private pecuniary benefit to Zinchini or his business through a detriment to a business competitor. See, Pepper, Opinion 98 -008. In each instance of a conflict of interest, Zinchini would be required to abstain from participating and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. Having established the above general principles, your specific inquiries shall now be addressed. In response to your first question, the Ethics Act would not prohibit Zinchini from entering into an oil and gas lease with the Borough. However, in addition to the conflicts Zinchini would have as a proposed lessee, which conflicts are noted above, Zinchini, as the selected lessee, would have a conflict of interest under Section 1103(a) Kotlaraoglus- Zinchini, 05 -589 November 4, 2005 Page 6 of the Ethics Act in matters pertaining to his lease with the Borough that would financially impact himself /his business, including, but not limited to, the amount of rent payable to the Borough, whether the parties should renew the lease, or whether the parties should enter into a new lease. In each instance of a conflict, Zinchini would be required to abstain and to observe the disclosure requirements of Section 1103(j of the Ethics Act. Further, under Section 1103(f) of the Ethics Act, Zinchini as a Borough Council Member 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 Borough Code. In this regard, you are advised that the State Ethics Commission does not have the statutory jurisdiction to interpret the Borough Code. In response to your second question, the conflicts that Zinchini would have as the selected lessee are set forth in the response to your first question. However, a conflict could exist even if Zinchini would not be selected to enter into an oil and gas lease with the Borough if Zinchini would have a reasonable and legitimate expectation that upon the default of the successful lessee, the Borough would then grant his lease application. See, Amato, supra. In such a case, Zinchini would have a conflict in matters pertaining to the lease that would have a financial impact upon the lessee, as for example, the amount of rent that the Borough should charge the lessee. In response to your third question, Zinchini would not have a conflict of interest in participating in the Board's decision to grant an oil and gas lease to another where he would have withdrawn his own request for consideration or would not have been a top finalist for consideration and therefore unable to obtain and oil and gas lease absent a use of authority of office by Zinchini or confidential information for a private pecuniary benefit of himself or his business. Zinchini would have a conflict of interest in participating in the Board's decision to grant an oil and gas lease to another where he would be one of the top finalists and have a reasonable and legitimate expectation that upon the default of the successful lessee, the Borough would then grant his lease application. See, Amato, supra. In each instance of a conflict of interest, Zinchini would be required to abstain from participating and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. The propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Specifically not addressed herein is the applicability of the Borough Code. Conclusion: As a Council Member for Vandergrift Borough ( "Borough "), Jeffery Zinchini ("Zinchini ") 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. Zinchini's oil and gas drilling business would be considered a business with which he is associated. Pursuant to Section 1103(a) of the Ethics Act, Zinchini would generally have a conflict of interest in his public capacity as a Borough Council Member in matters that would financially impact himself, the oil and gas drilling business, or private customer(s) /client(s). In that Zinchini intends to apply for an oil and gas lease with the Borough, he would specifically have a conflict of interest in establishing the criteria by which selections for lessees are made, participating in discussions to advance or promote the selection of his oil and gas drilling business, or otherwise using the authority of office or confidential information to effectuate a private pecuniary benefit to Zinchini or his business through a detriment to a business competitor. The Ethics Act would not prohibit Zinchini from entering into an oil and gas lease with the Borough. However, in addition to the conflicts Zinchini would have as a proposed lessee, which conflicts are noted above, Zinchini, as the selected Kotlaraoglus- Zinchini, 05 -589 November 4, 2005 Page 7 lessee, would have a conflict of interest under Section 1103(a) of the Ethics Act in matters pertaining to his lease with the Borough that would financially impact himself /his business, including, but not limited to, the amount of rent payable to the Borough, whether the parties should renew the lease, or whether the parties should enter into a new lease. Under Section 1103(f) of the Ethics Act, Zinchini as a Borough Council Member would be prohibited from having any supervisory or overall responsibility for the implementation or administration of the contract. Although the contracting in question would not be rohibited under the Ethics Act provided the requirements of Sections 1103(a), 1103(ff), and 1103(j) are satisfied, a problem may exist as to such contracting under the Borough Code. A conflict could exist even if Zinchini would not be selected to enter into an oil and gas lease with the Borough if Zinchini would have a reasonable and legitimate expectation that upon the default of the successful lessee, the Borough would then grant his lease application. In such a case, Zinchini would have a conflict in matters pertaining to the lease that would have a financial impact upon the lessee, as for example, the amount of rent that the Borough should charge the lessee. Zinchini would not have a conflict of interest in participating in the Board's decision to grant an oil and gas lease to another where he would have withdrawn his own request for consideration or would not have been a top finalists for consideration and therefore unable to obtain and oil and gas lease absent a use of authority of office by Zinchini or confidential information for a private pecuniary benefit of himself or his business. Zinchini would have a conflict of interest in participating in the Board's decision to grant an oil and gas lease to another where he would be one of the top finalist and have a reasonable and legitimate expectation that upon the default of the successful lessee, the Borough would then grant his lease application. In each instance of a conflict of interest, Zinchini would be required to abstain from participating and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11), an Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, provided the requester has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. This letter is a public record and will be made available as such. Finally, if you disagree with this Advice or if you have any reason to challenge same, you may appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Any such appeal must be in writing and must be actually received at the Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa. Code § 13.2(h). The appeal may be received at the Commission by hand delivery, United States mail, delivery service, or by FAX transmission (717- 787 - 0806). Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. Sincerely, Vincent J. Dopko Chief Counsel