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HomeMy WebLinkAbout06-507 CONFIDENTIALADVICE OF COUNSEL January 12, 2006 06 -507 Re: Conflict; Public Official /Public Employee; Executive -Level State Employee; A of Unit B; Commonwealth Agency C; Commonwealth Assistance to Businesses; Business With Which Immediate Family Member is Associated; Spouse. This responds to your letter of December 19, 2005, by which you requested a confidential advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa. S.. § 1101 et seq., would impose any prohibitions or restrictions upon an individual serving as the A of Unit B with regard to requests for Commonwealth assistance that have been submitted by businesses with which the A's spouse is associated. Facts: As A of Unit B and part of Commonwealth Agency C, you seek a confidential advisory from the State Ethics Commission. You have submitted facts, the material portions of which may be fairly summarized as follows. In your current capacity, you report directly to D as well as the E of Commonwealth Agency C. Unit B acts as the F for businesses seeking Commonwealth assistance to G in Pennsylvania. The type of assistance offered can take the form of [listing of forms of assistance], and can come from a variety of statutorily created programs. The majority of the assistance programs are administered by Commonwealth Agency C, but a few are administered by other agencies, such as Commonwealth Agency H and Commonwealth Agency I. Unit B also interfaces with other Commonwealth agencies as required by the needs of a particular project. You state that Unit B does not have final approval authority for any form of assistance. Unit B only makes recommendations to the E of Commonwealth Agency C and D, who make the final decisions. Unit B has approximately [number] employees, and has regional offices in [listing of locations]. You state that in your capacity as A of Unit B, you were approached by a representative of two companies (the "Companies ") seeking Commonwealth assistance. The Companies are both sub - chapter S corporations, and your spouse owns approximately [number] percent of each of the Companies. Most of the remaining ownership of the Companies resides in your spouse's immediate family. You have no ownership of either of the Companies. Confidential Advice, 06 -507 January 12, 2006 Page 2 Based upon the foregoing facts, you pose the following specific inquiries: (1) Whether the Companies are eligible for Commonwealth assistance while you are employed as the A of Unit B; (2) If the answer to the first question is in the affirmative, what procedures must be put in place to avoid any actual or perceived impropriety; and If the answer to the first question is in the negative, whether your resignation as A of Unit B would "cure" any problem. 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. It is further initially noted that, pursuant to the same aforesaid Sections of the Ethics Act, an opinion /advice may be given only as to prospective (future) conduct. If the activity in question has already occurred, the Commission may not issue an opinion /advice but any person may then submit a signed and sworn complaint, which will be investigated by the Commission if there are allegations of Ethics Act violations by a person who is subject to the Ethics Act. To the extent you have inquired as to conduct that has already occurred, such past conduct may not be addressed in the context of an advisory opinion. However, to the extent you have inquired as to future conduct, your inquiry may, and shall be addressed. As A of Unit B, you are a public official /public employee and Executive -level State employee as those terms are defined by the Ethics Act and hence you are subject to the provisions of the Ethics Act. 65 Pa.C.S. § 1102; 51 Pa. Code § 11.1. Sections 1103(a) and 1103(j) of the Ethics Act provide: § 1103. Restricted activities (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. (3) (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 Confidential Advice, 06 -507 January 12, 2006 Page 3 permitted to vote if disclosures are made as otherwise provided herein. In the case of a three - member governing body of a political subdivision, where one member has abstained from voting as a result of a conflict of interest and the remaining two members of the governing body have cast opposing votes, the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. 65 Pa.C.S. §§ 1103(a), (j). The following terms pertaining to conflict of interest are defined in the Ethics Act as follows: § 1102. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. The term does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. "Authority of office or employment." The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. "Immediate family." A parent, spouse, child, brother or sister. "Business 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. 65 Pa.C.S. § 1102. Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited 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. The use of authority of office encompasses all of the tasks needed to perform the functions of a given position. See, Juliante, Order 809. In each instance of a conflict, Section 1103(j) Confidential Advice, 06 -507 January 12, 2006 Page 4 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. 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 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. In applying the above provisions of the Ethics Act to your inquiry, Section 1103(a), which pertains to conflicts of interest, shall be considered first. As noted above, pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited 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 Confidential Advice, 06 -507 January 12, 2006 Page 5 member of his immediate family, or a business with which he or a member of his immediate family is associated. Under the submitted facts, the Companies are businesses with which your spouse, a member of your immediate family, is associated. Therefore, you are advised that pursuant to Section 1103(a) of the Ethics Act, you would have a conflict of interest and would be prohibited from participating in matters pertaining to requests submitted by one or more of the Companies for Commonwealth assistance. See, Kurtz, Order 1252; Gallen, Order 1198. In each instance of a conflict of interest, you would be required to abstain fully and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. You are further advised that if there is no pre- existing mechanism in place specifying how and by whom your authority is to be exercised in the event of a conflict, your delegation of such authority to a subordinate would itself constitute a use of authority of office that could form the basis for a conflict of interest. See, Confidential Opinion, 02 -004. Therefore, in the absence of a pre- existing mechanism for delegation in the event of a conflict, your duties as to the Companies' requests for Commonwealth assistance would have to be performed by one of your superiors or by someone chosen by one of your superiors. If your subordinate(s) would perform duties as to the Companies' requests for Commonwealth assistance ou would then have a conflict of interest as to matters involving such subordinate(s). See, Bassi, Opinion 86- 007 -R, Woodrinq, Opinion 90- 001, Elisco, Opinion 00 -003, and Confidential Opinion, 05 -004. The basis for this conclusion is that you would exercise authority over your subordinate(s) as to employment, while the subordinate(s) would exercise authority with respect to the Companies' requests for Commonwealth assistance. For the reasons enunciated in Bassi, Woodrinq, Elisco, and Confidential Opinion, 05 -004, supra, such a scenario involving reciprocal authority would result in a conflict of interest for you under Section 1103(a) of the Ethics Act. As for Section 1103(f) of the Ethics Act, the restrictions and requirements of Section 1103(f) would have to be observed and satisfied to the extent they would be applicable. Turning to your specific inquiries, you ask whether the Companies are eligible for Commonwealth assistance while you are employed as the A of Unit B. It is noted that you have not established standing to request an advisory as to the conduct of the Companies. See, 65 Pa.C.S. §§ 1107(10), (11). However, you are generally advised that Section 1103(a) of the Ethics Act only restricts public officials /public employees, while all "persons,' including businesses, are subject to Section 1103(b) of the Ethics Act, 65 Pa.C.S. § 1103(b). Sections 1103(b) and 1103(c) of the Ethics Act provide in part that no person shall offer or give to a public official /public employee and no public official /public employee shall solicit or accept anything of monetary value based upon the understanding that the vote, official action, or judgment of the public official /public 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. As for the question of whether your resignation as A of Unit B would "cure" any problem, you are advised that the Ethics Act would not require that you resign, but only that you comply fully with the above provisions of the Ethics Act. This Advice is limited to addressing the applicability of Sections 1103(a), 1103(f) and 1103(j) of the Ethics Act. It is expressly assumed that there has been no use of authority of office for a private pecuniary benefit as prohibited by Section 1103(a) of the Ethics Act. Confidential Advice, 06 -507 January 12, 2006 Page 6 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 Governor's Code of Conduct, the State Adverse Interest Act, or federal statutes or regulations. Conclusion: As A of Unit B, you are a public official /public employee and Executive -level State employee subject to the provisions of the Public Official and Employee Ethics Act, ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. The businesses of which your spouse owns approximately [number] percent (the "Companies ") are businesses with which your spouse is associated. Pursuant to Section 1103(a) of the Ethics Act, you would have a conflict of interest and would be prohibited from participating in matters pertaining to requests for Commonwealth assistance submitted by one or more of the Companies. In each instance of a conflict of interest, you would be required to abstain fully and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. If there is no pre- existing mechanism in place specifying how and by whom your authority is to be exercised in the event of a conflict, your delegation of such authority to a subordinate would itself constitute a use of authority of office that could form the basis for a conflict of interest. In the absence of a pre - existing mechanism for delegation in the event of a conflict, your duties as to the Companies' requests for Commonwealth assistance would have to be performed by one of your superiors or by someone chosen by one of your superiors. If your subordinate(s) would perform duties as to the Companies' requests for Commonwealth assistance, you would then have a conflict of interest as to matters involving such subordinate(s). The restrictions and requirements of Section 1103(f) would have to be observed and satisfied to the extent they would be applicable. 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