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HomeMy WebLinkAbout1387 EspenshadeIn Re: Ronald L. Espenshade File Docket: X -ref: Date Decided: Date Mailed: Before: Louis W. Fryman, Chair John J. Bolger, Vice Chair Donald M. McCurdy Paul M. Henry Raquel K. Bergen Nicholas A. Colafella 04 -047 Order No. 1387 2/23/06 3/13/06 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 allegation(s). 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 Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter 11 of Act 93 of 1998, 65 Pa.C.S. § 1101 et seq., which essentially repeats Act 9 of 1989 and provides for the completion of pending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. Espenshade, 04 -047 Page 2 I. ALLEGATION: That Ronald Espenshade, a public official /public employee, in his capacity as Deputy Director and Chief of Operations, Department of Military and Veteran Affairs, violated Sections 1103(a), and 1105(b)(6) and 1105(b)(7) of the State Ethics Act (Act 93 of 1998), 65 Pa.C.S. § §1103(a), 1105(b) and 1105(b)(7) when he accepted gifts from Abacus, a vendor of the Department of Military and Veterans Affairs, at a time when he was participating as a public employee in approving and recommending contracts with Abacus; and when he failed to report the receipt of said gifts on Statements of Financial Interests filed for the 2002 and 2003 calendar years. II. FINDINGS: 1. The Investigative Division of the State Ethics Commission received information alleging that Ronald Espenshade violated provisions of the State Ethics Act (Act 93 of 1998). 2. Upon review of the information the Investigative Division initiated a preliminary inquiry on September 7, 2004. 3. The preliminary inquiry was completed within sixty days. 4. On November 4, 2004, a letter was forwarded to Ronald Espenshade, 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. 7001 0360 0001 4061 3051. b. The domestic return receipt bore the signature of Grace A. Shoop, with a delivery date of November 5, 2004. 5. On February 14, 2005, the Investigative Division of the State Ethics Commission filed an application for a ninety day extension of time to complete the Investigation. 6. The Commission issued an order on February 28, 2005, granting the ninety day extension. 7 On May 18, 2005, the Investigative Division of the State Ethics Commission filed an application for a ninety day extension of time to complete the Investigation. 8. The Commission issued an order on June 6, 2005, granting the ninety day extension. 9. Periodic notice letters were forwarded to Ronald Espenshade in accordance with the provisions of the Ethics Law advising him of the general status of the investigation. 10. The Investigative Complaint was mailed to the Respondent on October 28, 2005. 11. Espenshade has been employed as the Deputy Director of the Bureau of Facilities and Engineering for the Department of Military Affairs since October 28, 2000. a. Espenshade also serves as the Division Chief of Operations for the Bureau of Facilities and Engineering. 12. The Bureau of Facilities and Engineering is a section of the Department of Military Espenshade, 04 -047 Page 3 and Veterans Affairs that is responsible for the support and maintenance of all of the DMVA buildings statewide. a. The DMVA buildings include: 1. Fort Indiantown Gap. 2. 90 National Guard Armories and Readiness Centers 3. 27 Maintenance Sites 4. 6 Veterans Homes 5. 11 Weekend Training Sites 6. Scotland School for Veterans' Children b. The Bureau of Facilities and Engineering consists of four divisions. 1. Operations 2. Engineering 3. Environmental 4. Maintenance 13. As Deputy Director for the Bureau of Facilities and Engineering, Espenshade is responsible for technical and administrative development, coordination, design, execution of construction, utilization, and maintenance of all facilities in support of the Pennsylvania National Guard, Air Bases, and Fort Indiantown Gap. a. Espenshade is supervised and reports directly to Munford, Director for the Bureau of Facilities and Engineering. 1. Espenshade's work is subject to review by Munford. 14. Espenshade's job duties as outlined in his official job description include: a. Conducting assessments of needs and maintenance priorities for the Air National Guard armories and air bases. b. Plan, direct, and coordinate long and short range construction programs, which includes determining project scope, approval of arrangements, and final approval of funding. c. Oversee preparation of contract bidding documents to ensure all contracts are completed in compliance with terms outlined in Federal and State laws. d. Validate necessity of charge orders, and approval of progress authorization and completion payments. 15. A Guaranteed Energy Savings program was instituted by the Commonwealth as a result of an amendment to Title 62 (Procurement) on September 18, 2003, is a contract for the evaluation and recommendation of Energy Conservation Measures (ECMs) and for implementation of one or more such measures. Espenshade, 04 -047 Page 4 a. An Energy Conservation Measure is a program or facility alteration designed to reduce energy consumption and operating costs. 16. The Guaranteed Energy Savings Contract is undertaken between a state agency and a pre - qualified provider that agrees to implement ECMs that will lead to realized energy savings that meet or exceed the cost of the ECMs over the length of the contract. a. This agreement is guaranteed in writing as part of the contract, and has penalties for the provider if necessary energy savings are not realized. 17. Pursuant to the Guaranteed Energy Savings Act, Act 28 of 1998, members of the Department of General Services, Penn State Facilities Engineering Institute, and the Governor's Green Council developed a program that outlined the policies and procedures for the Guaranteed Energy Saving Contract process. a. The program that was developed, produced a standard process with standard contracts that would ensure that all projects would be the same. 18. The process for an agency to obtain a Guaranteed Energy Savings Contracts is initiated by the state agency, who [sic] contacts DGS and provides information on the facilities the agency wishes to improve. a. From the information provided, DGS determines if the facility is eligible for a contract. b. DGS contacts the agency through a letter informing the agency of their approval, and informing the agency to issue a letter of interest. 19. The agency issues a letter of interest (LOI) to all pre - qualified Energy Savings Contract Companies (ESCO) asking them to submit a proposal to be considered for the project. a. A pre - qualified ESCO is a company that registers through DGS in order to be considered for State ESCO Contracts. 20. The agency, after receiving the returned LOIs and proposals of the ESCO companies, then narrows the field to three (3) companies that will take part in the Request for Proposal (RFP) process. a. The ESCOs are narrowed down, or short listed, to three (3) companies based on their preliminary proposals. b. The short listed companies submit a full proposal for the project which includes, suggested ECMs as well as a profile of their company. 21. The agency selects individuals from diverse backgrounds to be a part of the RFP Committee, which is in charge of reviewing the proposals of the ESCOs and selecting the winner of the contract. a. Each member of the RFP Committee scores the ESCOs proposals on various criteria, and the score sheets are provided to an independent agency who tabulates and determines the winner. 22. The winning ESCO develops an Investment Grade Audit (IGA) which lists all of the ECMs for the entire project. Espenshade, 04 -047 Page 5 a. The IGA determines the scope and size of the project, as well as the cost and the amount of energy savings. 23. Following the IGA, a Guaranteed Energy Savings Agreement (GESA) is entered into between the agency and the ESCO, which guarantees that the ESCO will save the agency the amount of the contract over the length of the contract. a. A yearly reconciliation is performed by an independent audit or to determine if the energy savings are being realized. b. The cost of any energy savings not realized must be reimbursed by the contractor. 24. The agency, the ESCO, and a third party financing institution entered into an Installment Purchase Agreement and payment schedule which sets up financing between the agency and the bank as well as a schedule of payments between the agency and the ESCO. a. This agreement provides the agency representatives with the authorization to approve invoices and release payments. 25. Following the signing of the contracts, the ESCO begins work on the facilities, and the agency begins to finance the project. a. The agency will pay off the contract over the designated period, which is set and should not exceed 15 years. 26. On December 21, 2000, Lieutenant Colonel Paul A. Trapani, Construction and Facilities Manager, informed DGS, by letter, of the DMVA's interest in implementing a Guaranteed Energy Savings Project at the Pennsylvania Army National Guard Base, Fort Indiantown Gap. a. DGS responded to the DMVA's request by authorizing the DMVA to issue a LOI to all qualified ESCOs in a January 23, 2001 letter. 27. The DMVA, through Deputy Director Ronald Espenshade issued a LOI to the qualified ESCO companies. a. Six (6) LOIs were returned to Espenshade with the necessary information. 28. The DMVA short listed the responding ESCOs and Espenshade notified the three on March 27, 2001, to provide a proposal for the RFP process. a. The three short listed ESCOs were: 1. Abacus Engineered Systems, Inc. 2. CMS Viron Energy Services 3. Noresco. b. CMS Viron Energy Services dropped out of the RFP process before submitting a proposal. 29. The short listed ESCOs developed a proposal which include a preliminary technical proposal, energy audit report, a cost analysis, and an energy audit agreement for scoring by the agencies RFP committee. Espenshade, 04 -047 Page 6 a. Espenshade was chosen by Munford as the contact person for the agency. 1. The ESCOs developed their proposals from information and site visits provided by Espenshade. 30. The DMVA formed a RFP committee in order to score the proposals provided by the ESCOs. a. The RFP committee for the Fort Indiantown Gap Project consisted of the following members: 1. Ronald Espenshade, DMVA 2. LTC Paul Trapani, DMVA, Facilities and Management Officer 3. Major John Saufley, DMVA, Engineering Division 4. Dave Birr, Synchronous Energy Solutions, Consultant 5. Laura Miller, Penn State University, Consultant 6. Bob Becker, Penn State University, Consultant 7. James Walter, DMVA Administrative Services, Budget Analyst 8. Patricia Sale, DMVA Administrative Services, Budget Analyst 9. Tom Rados, DGS, Assistant Director b. Ronald Espenshade was the Chairman of the Committee, and was responsible for providing scoring materials, and organizing meetings. 31. The RFP committees score sheets were filled out for Noresco and Abacus's proposal and then sent to an independent agency, Donahue and Associates in Florida. a. Each member filled out their score sheet independently, and sent it to the scoring agency. 32. On July 26, 2001, the DMVA, through a letter from Espenshade, notified Abacus that they were chosen for the contract and asked to proceed with an Investment Grade Audit. a. The Investment Grade Audit was completed in June of 2002, calling for approximately $10 million in ECMs at approximately 50 of the facility's buildings. 33. Abacus Engineered Systems is a Seattle Washington based business founded in 1985 that provides facility energy and engineering solutions. a. Abacus provides integrated, holistic systems engineering, construction management, and performance assurance services that serve the needs of building owners and occupants in a cost - effective and environmentally suitable manner. b. Aside form Abacus' main office in Seattle, Abacus has satellite offices in Espenshade, 04 -047 Page 7 Pennsylvania, Virginia, Arizona, and Oregon. 34. Prior to the Fort Indiantown Gap ESCO project, Abacus had one ESCO contract with the Commonwealth at the Hiram G. Andrews Center located in Johnstown, PA. 35. Upon signing the Investment Grade Audit for the Gap project, Abacus opened a satellite office in Harrisburg to handle the needs of the Hiram and Gap projects. a. That office had a staff of approximately 22, which included the projects managers, salesman, financial individuals, engineers, and executives that were responsible for working on the Gap project. b. Mark Webb and Rick Evans were Abacus' key people on the Gap project. 36. On or around June 2002, Abacus was qualified as an ESCO by the Department of General Services. a. This qualification was required for Abacus to do the Gap project. 37. On July 18, 2002, the DMVA and Abacus entered into the Guaranteed Energy Savings Agreement which guaranteed that the DMVA will realize annual energy savings that total the cost of the project over the length of the project, 10 years. 38. On August 28, 2002, Abacus and the DMVA enter into an installment purchase agreement and payment schedule. a. This agreement sets up an escrow account which is held by LaSalle Bank NA., Chicago, IL. b. This agreement sets up a schedule of payments for the DMVA to make to LaSalle Bank over a 10 year period. c. This agreement is executed by General William B. Lynch, and attested to by Ronald L. Espenshade. 39. An attachment to this agreement entitled "Equipment Exhibit 1" gives the authority to representatives from the DMVA to enter into the installment purchase agreement and to execute certificates of acceptance, payment requests, and other documents relating to the agreement. a. The representatives named on behalf of the DMVA, and whose signatures appear on this agreement are: 1. Duke Munford, Director 2. Ronald Espenshade, Deputy Director 3. Paul Trappani, LTC, CFMO 40. The payment schedule outlines a project cost of $10,370,000.00, ($11,145,743.77 with interest), to be paid in monthly installments over the course of 11 years. a. This schedule has the first payment on September 15, 2002 and the final payment on August 15, 2013. b. This payment schedule is executed with the signature of Espenshade on behalf of the DMVA. Espenshade, 04 -047 Page 8 41. Construction of the ESCO project at Fort Indiantown Gap began in October of 2002 and ended in November of 2003. 42. Throughout the course of the construction, Munford and Espenshade, as representatives of the DMVA routinely approved project change orders and certifications of substantial completion. a. These approvals were made in their official capacities as DMVA employees. b. Munford as Director of Facilities and Engineering made the final decision, on behalf of the DMVA, on any change orders and ECMs. c. Espenshade, as Deputy Director, and Project Manager for the DMVA routinely approved all certificates of substantial completion for the release of payment to Abacus. 43. Espenshade in his official capacity as Deputy Director signed fifteen (15) invoices totaling $10,178,439.32 submitted by Abacus to the DMVA for project payments. Abacus invoices were approved by Espenshade as follows: a. 44. In addition to approving Abacus invoices Espenshade signed fourteen (14) of fifteen (15) requisitions for payment which were forwarded to LaSalle Bank for payment. Espenshade approved the requisitions for payment as follows: a. Date of Invoice Amount 10/10/2002 $ 950,000.00 11/5/2002 $ 241, 322.00 12/2/2002 $ 306, 994.00 1/5/2003 $ 557, 973.00 2/5/2003 $ 812, 791.00 3/5/2003 $ 938, 035.00 4/5/2003 $ 1, 210, 715.00 5/1/2003 $ 1,179, 087.00 6/2/2003 $ 626,496.22 7/2/2003 $ 854, 793.10 8/1/2003 $ 938,274.00 9/1/2003 $ 923, 535.00 10/1/2003 $ 459, 045.00 11/3/2003 $ 161, 214.00 12/2/2003 $ 18,165.00 Total $ 10,178,439.32 Approved by Espenshade Unsigned Espenshade Date of Approval 10/15/2002 Not Dated 12/9/2002 Approved By Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Date of approval 10/15/2002 12/4/2002 12/9/2002 1/13/2003 2/10/2003 3/7/2003 Not Dated 5/6/2003 6/4/2003 7/3/2003 8/4/2003 9/3/2003 10/3/2003 11/4/2003 12/8/2003 Espenshade, 04 -047 Page 9 Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade Espenshade 1/13/2003 2/10/2003 3/7/2003 4/4/2003 5/6/2003 6/4/2003 7/3/2003 8/4/2003 9/3/2003 10/3/2003 11/4/2003 12/8/2003 45. During the course of construction, Munford and Espenshade attended and participated in project meetings with Abacus as representatives from the DMVA. 46. Espenshade as Deputy Director and project manager for DMVA for the Fort Indiantown Gap project reported all actions and decisions to his supervisor Munford. a. Munford was responsible for providing direction and final decisions to Espenshade. 47. Subsequent to the July 18, 2002 Guaranteed Energy Savings Agreement entered into between DMVA and Abacus, employees /officials of Abacus discussed with Munford and Espenshade a trip to Abacus' Seattle Washington headquarters. a. Craig Williamson, then President and CEO of Abacus, advised Mark Webb, an Abacus sales representative that they (Abacus) needed to do something for Munford and Espenshade. b. A decision was made to invite both Munford and Espenshade to Seattle. c. Webb shared this information with Munford and Espenshade who were interested in the trip. 48. On or about August 8, 2002 airline tickets were purchased by Abacus for Espenshade's and Munford's trip to Seattle. 49. On August 19, 2002, Abacus sent a letter to Major General William B. Lynch, Adjutant General, inviting Lynch, Munford, Espenshade, and Trapani to a pre - construction meeting at Abacus's corporate office in Seattle Washington, from September 9 -12, 2002. 50. Abacus invited only those DMVA personnel considered essential to the project. a. Abacus invited Espenshade and Munford since their duties included approvals of payment and change orders. b. Both Espenshade and Munford accepted Abacus' invitation. c. LTC Tripani and Major General Lynch did not attend the trip because they did not feel it was necessary to complete the project. Espenshade, 04 -047 Page 10 51. Abacus offered the trip under the premise of "team building ". a. Abacus' team building concept consisted of fostering relationships during projects to keep communications open. b. Abacus utilized meals, trips, and other gratuities as team building incentives. c. The team building concept contained little or no time on the project reviews and planning. 52. On September 4, 2002, Munford submitted a request for approval for out -of -state travel and out - service training authorization for his and Espenshade's travel to Seattle. a. Both requests state the purpose of "energy project pre- construction meting." [sic] b. "Attendance is required to implement construction project at Fort Indiantown Gap" is typed on the out - service training authorization request while "attendance is required to implement the guaranteed energy savings construction project at Fort Indiantown Gap" is typed on the requests for approval for out -of -state travel. c. Both forms are signed by Donald Munford as supervisor and agency head for the request for approval of out -of -state travel. d. Espenshade signed the out - service training authorization form. e. A notation on the out - service training authorization form lists "transportation and accommodations to be provide by vendor (Abacus)." 1. Estimated travel costs listed totaled $450.00. f. Both forms were prepared at Munford's direction. g. Travel was to be from September 9, 2002 through September 12, 2002. 53. The requests for approval for out -of -state travel submitted by Munford and Espenshade were false as the requests noted that attendance was "required ". a. Neither Espenshade nor Munford were required to attend a pre- construction meeting in Seattle. b. If such a pre- construction meeting was necessary Abacus would have held the pre- construction meeting at Ft. Indiantown Gap. c. No trip would have been provided had either declined the offer. 54. The out - service training authorization was initially reviewed by John Cutler, DMVA Training Officer. a. Cutler initialed his approval of the form. 55. Espenshade's and Munford's out - service training authorization was then forwarded to Linda L. Leese, Director, Bureau of Administrative Services on September 5, 2002, four days prior to their scheduled departure. Espenshade, 04 -047 Page 11 a. Leese was advised by Cutler that Lynch wanted the authorization approved. b. Leese signed the Out Service Training Authorization form on September 5, 2002. 1. Leese believed that since Lynch wanted the trip approved, she did not thoroughly review the contents of the request. 2. Leese did not have sufficient time to review the out -of -state travel request prior to Munford and Espenshade's departure as they had waited until the last moment to submit the request even though they were aware that they would be going as early as August 8, 2002. c. Upon close review of the request after they departed, Leese realized that the trip was not appropriate. 56. Espenshade and Munford departed for Seattle on the morning of September 9, 2002 before Linda Leese could deny the request. a. The request for our -of -state travel was submitted by Munford and Espenshade on September 5, 2002 allowing Leese little or not time to review the request. 1. Leese was not in the office on Friday September 6, 2002. 57. On September 11, 2002 Leese formally advised Munford and Espenshade by memo that their request for out -of -state travel to Seattle, WA could not be approved for the following reasons: a. Out Service Training Authorization was not signed by your Supervisor, the Adjutant General, or his designee. 1. The form was signed by Munford approving both his and Espenshade's travel. b. Out Service Training is not relevant to this trip, since it does not appear to be either training or conference. c. The Out of State Travel Request was not signed by the Adjutant General and is there fore invalid, since you cannot sign /approve you own out of state travel and do not have authorization to sign this document for the Agency head. d. Upon thorough review, this appears to be a conflict of interest as there is no fully executed contract with Abacus. The accompanying letter from Abacus as well as your comment on the STD -279, brings up issues that could be construed as violations of the Governors' Code of Conduct and State Ethics Act as far as travel and accommodations being provided. 58. Prior to departing for Seattle WA, Espenshade and Munford were made aware by Mark Webb of Abacus that the trip was going to include the opportunity for golf, fishing, Kayaking, and fine dining. a. Espenshade advised Webb of his desire to fish while in Seattle. b. Webb was aware of Munford's interest in golfing. Espenshade, 04 -047 Page 12 1. Munford was instructed to bring his own golf clubs. c. Espenshade was instructed to bring wet weather gear for Kayaking. d. Abacus provide Espenshade and Munford with an itinerary for the trip. 59. Espenshade and Munford departed from Harrisburg for Seattle WA on September 9, 2002 via United Airlines flight 1749 to Chicago /O'Hare and United Flight 365 from Chicago /O'Hare to Seattle. a. Espenshade and Munford's return flight itinerary for September 12, 2002 included United Flight 1236 from Seattle to Chicago /O'Hare and United flight 1476 from Chicago /O'Hare to Harrisburg. b. Mark Webb, Damian Sphar, and Greg Koussis from Abacus' Harrisburg office also attended the trip. 60. Munford and Espenshade stayed at the Alexis Hotel in Seattle Washington from September 10, 2002 to September 12, 2002. a. Munford and Espenshade stayed at Westpost Hotel on September 9, 2002. b. All meals, hotel expenses, and entertainment were paid for by Abacus. 61. A limited pre- construction meeting was held at Abacus Seattle Headquarters on September 9, 2002. a. The brief meeting and related tour of Abacus' Seattle facility lasted less than two (2) hours. b. This meeting was not required for the project to proceed. 62. Munford and Espenshade's itinerary included the following travel and other activities with Abacus employees while guests of Abacus in Seattle between September 9, 2002 and September 12, 2002. a. Date Event 9/9/2002 Flight from Harrisburg to Seattle 9/9/2002 Dinner at Olympia Restaurant 9/9/2002 Lodging at Westport Hotel 9/10/2002 Fish on Charted Boat with Abacus Employees 9/10/2002 Spahr pays for Espenshade and Munford's Ice Cream at Whale of a Cone 9/10/2002 Dinner at McCormick & Schmick's 9/10/2002 Dinner at the Bar with Abacus Employees 9/10/2002 Lodging at Alexis Hotel in Seattle 9/11/2002 Golf trip with Abacus Employees (Munford) 9/11/2002 Kayaking trip with Abacus Employees (Espenshade) 9/11/2002 BBQ at Abacus CEO's House (Espenshade) 9/11/2002 Dinner at Crab Pot Restaurant 9/11/2002 Lodging at Alexis Hotel in Seattle b. Abacus incurred all costs associated with these activities. 63. A comprehensive itinerary of the Seattle trip received by Espenshade and Munford includes the following: Espenshade, 04 -047 Page 13 8/8/2002 a. September 9, 2002 Abacus provides airfare Harrisburg to Seattle. Two (2) hour pre- construction meeting and facility tour. Abacus provides dinner at Olympia Restaurant Abacus provides overnight accommodations at Westport Hotel. b. September 10, 2002 Abacus provides chartered fishing trip near Westport. Abacus provides lunch. Abacus provides ice cream. Abacus provides dinner at McCormick & Schmick's. Abacus provides drinks at Irish Pub and hotel bar. Abacus provides overnight accommodations at Alexis Hotel. c. September 11, 2002 Abacus provides golf outing and lunch for Munford at high end club. Abacus provides Kayaking and lunch at residence of Abacus' CEO Craig Williamson. Abacus provides dinner at Crab Pot. Abacus provides drinks at hotel bar. Abacus provides overnight accommodations at Alexis Hotel. d. September 12, 2002 Abacus provides meal. Abacus provides airfare Seattle to Harrisburg. 64. Neither Espenshade nor Munford sought reimbursement from the Commonwealth for any expenses associated with this trip. a. All expenses were absorbed by Abacus and /or Abacus employees. 65. Business records of Abacus confirm expenses incurred by Abacus entertaining Espenshade in Seattle. Date of Purchase 9/9/2002 9/10/2002 9/9/2002 9/10/2002 9/10/2002 9/10/2002 9/10/2002 9/11/2002 9/11/2002 9/11/2002 9/12/2002 9/10- 9/12/2002 9/10- 9/12/2002 while Event Cost of Gratuity Airfare $ 600.00 Dinner at Olympia WestPort Hotel for 9/9/02 Fishing trip Boat for 9/10/02 Fishing Trip Meals Ice Cream after Fishing Trip Entertainment supplies Dinner at McCormick and Schmick's Lunch at Golf Course Dinner at Crab Pot Drinks at Bar Meal with Abacus Alexis Hotel Alexis Hotel- Breakfast, Lunch & Bar Total $ 48.42 $ 82.00 $ 71.22 $ 36.52 $ 8.73 $ 13.28 $ 58.12 $ 24.12 $ 40.86 $ 12.60 $ 33.82 $ 537.09 $ 103.26 $ 1,670.04 a. None of the costs listed above were attributed to the two (2) hour meeting and facility tour held on September 9, 2002. Espenshade, 04 -047 Page 14 66. Espenshade received compensation from the Commonwealth for four (4) 7.5 hour days, 30 hours total while being entertained by Abacus officials in Seattle. 67. Leave records on file with the DMVA confirm Espenshade did not have any recorded leave for the thirty (30) normal work hours between September 9, 2002 and September 12, 2002. a. From September 9, 2002 through September 12, 2002 Espenshade did not transact any Commonwealth business. 1. The travel was not required or necessary for this Commonwealth position. b. Espenshade was compensated at a rate of $26.08 per hour in September 2002. c. Espenshade was paid $782.40 by the Commonwealth while being entertained in Seattle by Abacus officials. 1. 30 hrs @ $26.08/hr = $782.40. 68. Espenshade received a private pecuniary gain of $2,452.44 as a result of the use of his public position to secure entertainment /gifts from Abacus during the time when he had oversight responsibility for the Abacus project. a. The gain is based on $1,670.04 in gratuities paid for by Abacus plus $782.40 in salary paid to Munford. 69. Shortly after returning from Seattle, Munford and Espenshade met with Linda Leese to discuss the trip. a. The meeting occurred between September 13, 2002 and September 26, 2002. b. Neither Espenshade nor Munford disclosed to Leese the activities which comprised the majority of the trip. 1. No expense reimbursement other than $6.00 parking was claimed by either Munford or Espenshade. c. Leese directed that the DMVA be invoiced by Abacus for the travel. 1. Back -up receipts for such items as hotel and airline costs was requested. 70. Abacus submitted an invoice dated September 26, 2002 in the amount of $2,418.16 to the DMVA. a. The invoice was labeled "pre- construction meeting September 9 -12, 2002 at Abacus main offices, includes airfare, lodging, and meals for Munford and Espenshade." b. The invoice contained no receipts documenting expenses. c. This invoice was not paid by the DMVA because of Abacus' failures to document expenses. Espenshade, 04 -047 Page 15 71. Espenshade admitted to investigators of the State Ethics Commission that he was not required to attend the Seattle meeting contrary to his request for out -of -state travel. a. Espenshade personally saw nothing wrong with accepting the trip. b. Espenshade took no action to reimburse Abacus for the value of the trip. c. Espenshade took no action to utilize annual leave or to reimburse the Commonwealth for the time spent in Seattle. 72. In addition to the Seattle trip Munford and Espenshade received golf, and/or fishing trips courtesy of Abacus. a. Gifts and gratuities were provided throughout the duration of the project while Munford and Espenshade were taking official action relating to Abacus. b. Abacus only provided gratuities to individuals who were in positions to made decisions regarding the Gap ESCO project. 1. Munford and Espenshade were both in positions to made decisions, particularly regarding change orders and the release of payments to Abacus. c. Abacus did not provide Espenshade or Munford any gratuities prior to the inception of the project. d. Abacus has not provided Espenshade or Munford any gratuities since completing the Gap ESCO project. 73. Abacus employees providing gifts, or trips to Munford and /or Espenshade would charge the expenses to their individual Fort Indiantown Gap expense accounts under the headings Gap, Espenshade, or Munford. a. The DMVA was not invoiced for these expenses. 74. Expense records of Abacus include charges for meals provided to Munford, Espenshade, and Abacus employee involved with the Gap ESCO project. a. Expense records generally do not identify expenses incurred per person. 75. On May 12, 2003 Espenshade was provided a guided bass fishing trip on the Susquehanna River from Abacus. a. Several Abacus employees attended this outing. b. Abacus covered Espenshade's expenses associated with this trip. c. Abacus singled out Espenshade for this event because of Espenshade's interest in fishing. 76. Abacus expense records detail total trip costs incurred of $494.77. a. Detailed expenses included Koinania guide service $410.00 and meals $84.77. Espenshade, 04 -047 Page 16 b. Abacus attributes $123.69 to Espenshade which included his meal. 1. Espenshade's meal valued at $21.19. 77. Ronald Espenshade hosted three private party /picnics at this residence between October 2002 and October 2003. a. The events were held on October 25, 2002, March 18, 2003, and October 10, 2003 and coincided with the Abacus project. b. The invitees included Abacus employees from the Harrisburg office and selected DMVA employees, including Munford and Espenshade. c. Espenshade discussed the events with Abacus employees. d. The main item served was Dungeness Crabs. e. Abacus supplied the Dungeness crabs, flown in from Seattle for each event. f. Abacus provided the crabs based on comments made by Espenshade that he enjoyed the crabs while being entertained in Seattle. 78. Abacus incurred expenses totaling $2,736.82 for crabs shipped in from Seattle for the crab feasts. Expenses per event are as follows: a. Date Description DMVA Attendees Total Amount 10/25/2002 Crab for team party Munford and Espenshade $ 1,010.00 10/10/2003 Seafood for event Munford and Espenshade $ 727.57 3/18/2003 GAP team meeting Munford and Espenshade $ 999.25 Total of 3 Crab Parties $ 2,736.82 79. Abacus furnished the crabs for the parties as part of their overall team building efforts with Espenshade and Munford. a. Crabs were provided as part of Abacus' efforts to influence Espenshade and Munford. b. The parties hosted by Espenshade were personal events for which Abacus provided the gift of the crabs flown in from Seattle. c. Because Abacus provided this benefit Espenshade did not have to incur personal expense for this food. 80. While receiving gifts, meals, and entertainment from Abacus in late 2002 and 2003 Munford and Espenshade participated in actions to expand the Gap project to all armories in the Commonwealth and the Veterans Homes. 81. During the development of the IGA for the Gap project, Munford and Espenshade wanted to expand the scope of the Gap project to include the DMVA Armories located throughout the Commonwealth. a. Munford and Espenshade were advised by DGS that the Armories had to be a separate open bid contract. Espenshade, 04 -047 Page 17 b. Munford and Espenshade sought the advice of Abacus personnel on how to start an Armories ESCO project. 82. Prior to DMVA issuing the LOI for the armories contract in October 2002, Espenshade asked Abacus personnel to review one of the armoires in order to determine the viability of an ESCO project at the State Armories. a. No other ESCO contractor was asked to review the facilities at this time. b. This was in violation of the standard operating procedures for the Guaranteed Energy Savings Program. c. Espenshade approached Abacus approximately one month after receiving the all expense paid trip to Seattle from Abacus. 83. On October 25, 2002, Ronald Espenshade as a representative from DMVA issued a LOI for the armory ESCO project to all qualified ESCO companies. a. Two ESCO companies showed interest in the project by returning the LOI with a preliminary proposal. 1. Custom Energy. 2. Abacus Engineered Systems. 84. On January 10, 2003, Abacus submitted a full proposal for the RFP, in which the DMVA representative and point of contact for the project was listed as Ronald Espenshade. 85. As in the Fort Indiantown Gap ESCO project, Munford served as the representative from DMVA responsible with making the final decisions of the course of the project. a. Espenshade was designated by Munford to oversee this project. 86. An RFP Committee was formed in order to score the two proposals and choose a contractor. a. The RFP Committee was chosen by Munford and led by the RFP Committee Chairman, Espenshade. b. The RFP Committee for the Armories ESCO consisted of: 1. Ronald Espenshade, DMVA - Chairman 2. LTC Paul Trapani, DMVA 3. Norm Klinikowski, DGS 4. Dave Bier 5. Larry Myers, Penn State 6. Bob Becker, Penn State 7. Patty Sale, DMVA 8. Mike Barrett, DMVA — Assistant Chief Counsel Espenshade, 04 -047 Page 18 c. Espenshade participated in the review, including evaluating Abacus' proposal even though he was receiving gifts and gratuities from Abacus. 87. On February 10, 2003, in a letter from Espenshade, Abacus was notified that they were selected for the armories contract, and ask to proceed with the IGA. a. During the development of the IGA, Munford and Espenshade, as the representatives from the DMVA, negotiated the size and scope of the contract. 88. On March 17, 2003, the DMVA and Abacus entered into the Energy Audit Agreement for the Armory ESCO. a. This document was executed by General William B. Lynch with Espenshade as a witness for the DMVA. 1. Lynch signed the document based on recommendations from Munford and Espenshade. b. This document was never approved with the signature from the Comptroller's office. 89. Abacus proceeded with the IGA for the armories project, however in November of 2003, Abacus was ordered to cease work on the project by the Comptroller's office due to fiscal, legal, and policy reasons. 90. In August 2003, DMVA issued a LOI for an ESCO project that would include six (6) veteran's homes which are located throughout the Commonwealth. a. The Hollidaysburg Veterans Home, located in Hollidaysburg, Pennsylvania was used as the model home for preparation of proposals. 91. As in the previous DMVA ESCO projects, Munford and Espenshade acted in the same decision making role, with the same responsibilities. a. Munford appointed Espenshade as the project manager and point of contact for the project. b. Munford was in charge of overseeing the development of the program and making the final decisions. c. Espenshade was responsible for the daily running of the project. 92. Following the issuing of the LOI, Munford and Espenshade organized a meeting between Abacus personnel and Paul M. Cain, Deputy Director and Construction Project Manager for the State Veterans Homes, Bureau of Veterans Affairs, DMVA. a. The meeting was held at approximately 3:30 p.m. at the Community Club, an officer's club, located on the Gap base. b. During the meeting, Abacus personnel solicited information from Cain to use in the development of their proposal. c. Munford and Espenshade attended the meeting and participated in the discussions that took place. Espenshade, 04 -047 Page 19 d. Alcoholic beverages were consumed during the meeting by Munford, Espenshade, and Abacus personnel. e. Neither Munford nor Espenshade provided any information discussed at the meeting to any other competing ESCO, as required as a condition of the ESCO process. 93. The three short listed ESCOs for the Veterans Home Project were: a. Sempra Energy b. Building Controls and Services, Inc. c. Abacus Engineered Systems. 94. During the oral presentations in connection with the ESCO RFP for the VA Homes, one of the vendors, Semper Energy, expressed the opinion that Department of Military and Veterans Affairs had an apparent preference for one particular vendor. a. This same sentiment had been earlier expressed by a different vendor, Joe Huddak of Custom Energy, as an explanation for not submitting a proposal for the same project. 95. In November 2003, Prior to the awarding of the Veterans Home Contract, the Chief Counsel's office for the DMVA cancelled the project. a. Munford and Espenshade were both under the impression that the meeting held at the Community Club and the overall perception that Munford and Espenshade were favoring Abacus for ESCO projects caused the closing of the project. (The following findings relate to the allegation that Espenshade filed deficient Statements of Financial Interests.) 96. Espenshade in his official capacity as Administrative Officer IV was annually required to file a Statement of Financial Interests form by May 1 containing information for the prior calendar year. 97. Statements of Financial Interests forms on file with the DMVA include the following filings for Espenshade. Calendar Year: 2000 Filed: 04/10/01 on SEC Form 1/01 Position: Held: Assistant County Maintenance Manager Hold: Deputy Director Facilities and Engineering Creditors: None Direct /Indirect Income: USAF Pension; PennDOT; DMVA All Other Financial Interests: None Gifts: None Calendar Year: 2001 Filed: 04/14/02 on SEC Form 1/02 Position: Deputy Director Facilities and Engineering Creditors: None Direct /Indirect Income: USAF Pension; DMVA All Other Financial Interests: None Gifts: None Espenshade, 04 -047 Page 20 Calendar Year: 2002 Filed: 04/21/03 on SEC Form 1/03 Position: Assistant Officer 4 Creditors: Chase Financial Services Direct /Indirect Income: DMVA All Other Financial Interests: None Gifts: None Calendar Year: 2003 Filed: 04/15/04 on SEC Form 1/04 Position: Assistant Officer 4 Creditors: Chase Financial Services 4.9% P.O. Box 15700, Wilmington, DC 19886 Direct /Indirect Income: Commonwealth of PA - DMVA Gifts: None All Other Financial Interests: None Calendar Year: 2004 Filed: 04/27/05 on SEC Form 1/05 Position: Assistant Officer 4 Creditors: Chase Financial Services 4.9% P.O. Box 15700, Wilmington, DC 19886 Direct /Indirect Income: Commonwealth of PA - DMVA Gifts: None All Other Financial Interests: None 98. In addition to the filing SFI's Espenshade was annually required to file a Governors Code of Conduct form. a. Governors code of Conduct forms require disclosures with respect to personal economic interests, business interests, liabilities, employment, real property interests, severance payments, and gifts. b. With respect to gifts, the following disclosure requirements exist: "List all gifts of value in excess of $100, including the forgiveness of a debt received during the preceding calendar year. For the purpose of this section, gifts received from family members need not be disclosed. Name /Address of the person(s) /entity(ies) form whom or on behalf of whom the gift was directly or indirectly received Nature and value of gift(s)" 99. Espenshade in his official capacity as a DMVA employee was annually required to complete a Governors Code of Conduct form. Espenshade completed Code of Conduct forms at the following dates. a. Calendar Year Date Filed 2001 04/10/01 2002 04/16/02 2003 04/21/03 2004 04/20/04 2005 06/27/05 Espenshade, 04 -047 Page 21 100. Espenshade did not disclose the receipt of any gifts on SFI's or Code of Conduct forms filed. a. This includes gifts received from Abacus. 101. Espenshade did not disclose Abacus as a company he received gifts valued in the aggregate at $250 or more from on his SFI filed for calendar year 2002. a. Espenshade received transportation and lodging or hospitality in connection with his state service totaling at least $1,670.04 from Abacus during 2002. 1. Seattle Trip 9/9/02 - 9/12/02$1,670.04 b. Espenshade received meals and other gratuities totaling at least $1,274.07 from Abacus during 2002. 1. 10/25/02 Crab Feast $1,010.00 c. The aggregate total for all gifts received from Abacus in 2002 was $2,944.11. 102. Espenshade did not list Abacus as a company he received transportation and lodging or hospitality exceeding $650 in the course of a single event in connection with his public position during 2002. a. The Seattle trip lodging and transportation was valued by Abacus at $2,418.16 for both Espenshade and Munford. b. Espenshade's portion of the trip, based on Abacus' expense records, was valued at approximately $1,670.04. 103. Espenshade did not disclose Abacus as a company he received in the aggregate gifts valued at $250 or more from on his SFI filed for calendar year 2003. a. Espenshade received gifts valued in the aggregate at $2,133.25 from Abacus during 2003. 1. 05/12/03 Fishing Trip 102.50 2. 03/18/03 Crab Feast 999.25 3. 10/10/03 Crab Feast 727.57 $1,829.32 104. Espenshade's failure to disclose Abacus on SFI's for calendar years 2002 and 2003 concealed the fact that he was receiving gifts and gratuities form a Commonwealth vendor in connection with his public position at a time when he was taking official action in relation to that vendor. a. The receipt of such gifs is prohibited by DMVA's standards of conduct and work rules. b. Espenshade was aware since at least October 31, 2000 of the prohibition of the receipt of gifts from vendors as he received a handbook which outlined the prohibitions. 105. On June 15, 2004, Ronald Espenshade was notified via memo from Major General Espenshade, 04 -047 Page 22 Jessica Wright, of a pre disciplinary conference to be conducted on June 21, 2004 at 1:30 p.m. in a conference room within Fort Indiantown GAP, to discuss the alleged misconduct of Espenshade. 106. On June 21, 2004 at 1:30 p.m., a predisciplinary conference was conducted by Nancy Dearing Mating, Deputy Secretary for Human Resources and Management, and Dennis Guise, Chief Counsel, DMVA of Ronald Espenshade. 107. During that conference Espenshade answered questions pertaining to his relationship with Abacus personnel and his acceptance of gratuities. 108. Espenshade admitted receiving a $50 gift certificate for Outback Steakhouse at Christmas 2002. a. Espenshade also received at home a cheese, bread, and jelly assortment from Abacus. 109. Espenshade admitted hosting three crab fests at his home. a. The third and largest had as many as 40 guests, most of whom were employees of Abacus. b. Only a handful of the participants were DMVA employees or spouses. c. Abacus (Art Vertner) provided the crab. 110. Espenshade admitted going on a bass fishing trip paid for by Abacus on the Susquehanna River in spring 2003. 111. Espenshade admitted going to meals paid for by Abacus. a. Locations included: 1. Lunches at Farmer's Wife 2. Lunch at Harper's Tavern 3. Dinner with Art Vertner with spouse at Stocks on 2nd 4. Dinner with Mark Webb at Tavern on the Hill. 112. Espenshade admitted making no disclosure of gifts and meals or travel to Seattle. 113. Espenshade admitted participating in seminars sponsored by Abacus on performance (energy saving) contracting. a. Espenshade was on a panel discussion. b. The seminars were largely for State employees. c. Abacus paid for Espenshade's meals in connection with seminar. 114. Espenshade admitted that he provided a testimonial for Abacus, which was distributed with written materials. 115. Espenshade admitted that someone from Abacus (Damien Spahr) called him and asked him to set up meeting with Paul Cain, deputy director for Veterans' Homes in Espenshade, 04 -047 Page 23 the Bureau for Veterans Affairs, to discuss Hollidaysburg Veterans' Home (HVM) project, which was part of pending Veterans' Homes RFP. a. Espenshade and Abacus paid for pitchers of beer. b. The meeting disrupted the RFO Process because Paul Cain "complained" about it and raised questions about whether other offerors should receive information. 116. As a result of the findings during the pre - disciplinary conference, a memo was sent to Espenshade from Wright on August 6, 2004, outlining a 15 day suspension without pay, and the reasons for the disciplinary action including violations of Governor's code of Conduct and DMVA standards of conduct and work rules. 117. In addition to the gifts and other gratuities provided to Munford and Espenshade, Abacus also provided salmon and a $1,000 donation to the DMVA. a. A box of salmon was provided to DMVA employees to share. b. A $1,000 donation was made towards the grand opening of the remolded DMVA Headquarters, building S -047. 118. In September of 2003, Abacus hosted and sponsored four seminars on Facility Performance Contracting the Guaranteed Energy Savings Process, throughout the state of Pennsylvania. a. Espenshade attended the seminar on September 27, in Harrisburg; September 25, in Scranton; and September 26, in Philadelphia. b. Espenshade was invited to serve as a panelist giving an ESCO clients perspective on the process and Abacus as a vendor. c. Espenshade traveled as a guest with Abacus to each of the three seminars. d. Espenshade's meals while on the trip were provided by Abacus personnel. 119. Two endorsements from Espenshade promoting Abacus appeared on materials shown and provided to the attendees of the four seminars. 120. Following the seminars Espenshade received counseling and a letter from Munford reprimanding him on the appearance of impropriety as a result of Espenshade's endorsement of Abacus. 121. Espenshade did not disclose the receipt of any gift on SFI's or Code of Conduct forms filed. a. Espenshade's failure to disclose gifts received from Abacus. 122. Espenshade realized a minimum private pecuniary gain of $5,880.95 as a result of his receipt of gifts and gratuities provided by Abacus during the time when he was supervising the Gap project. a. Minimum financial gain based on the following totals: 1. Seattle Trip $1,670.04 Espenshade, 04 -047 Page 24 2. Leave not used for trip $ 782.40 3. 10/25/02 Crab Feast $ 1,010.00 4. 03/18/03 Crab Feast $ 999.25 5. 10/10/03 Crab Feast $ 727.57 6. 05/12/03 Fishing Trip $ 123.69 $5,312.95 c. Espenshade did not reimburse Abacus or DMVA for any of the items listed above. III. DISCUSSION: At all times relevant to this matter, the Respondent, Ronald L. Espenshade (Espenshade), 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 Espenshade, as Deputy Director and Chief of Operations, Department of Military and Veteran Affairs (DMVA), violated Sections 1103(a), and 1105(b)(6) and 1105(b)(7) of the Ethics Act when he accepted gifts from Abacus, a vendor of DMVA, at a time when he was participating as a public employee in approving and recommending contracts with Abacus; and when he failed to report the receipt of such gifts on Statements of Financial Interests filed (SFIs) for the 2002 and 2003 calendar years. 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 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. 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 Espenshade, 04 -047 Page 25 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 1105 of the Ethics Act provides as follows: § 1105. Statement of financial interests (b) Required information. - -The statement shall include the following information for the prior calendar year with regard to the person required to file the statement: (6) The name and address of the source and the amount of any gift or gifts valued in the aggregate at $250 or more and the circumstances of each gift. This paragraph shall not apply to a gift or gifts received from a spouse, parent, parent by marriage, sibling, child, grandchild, other family member or friend when the circumstances make it clear that the motivation for the action was a personal or family relationship. However, for the purposes of this paragraph, the term "friend" shall not include a registered lobbyist or an employee of a registered lobbyist. Section 1105(b)(6) of the Ethics Act requires that every public official /public employee and candidate list the name and address of the source and amount of any gift valued in the aggregate of $250 or more and the circumstances of each gift. § 1105. Statement of financial interests (b) Required information. - -The statement shall include the following information for the prior calendar year with regard to the person required to file the statement: (7) The name and address of the source and the amount of any payment for or reimbursement of actual expenses for transportation and lodging or hospitality received in connection with public office or employment where such actual expenses for transportation and lodging or hospitality exceed $650 in the course of a single occurrence. This paragraph shall not apply to expenses reimbursed by a governmental body or to expenses reimbursed by an organization or association of public officials or employees of political subdivisions which the public official or employee serves in an official capacity. Section 1105(b)(7) of the Ethics Act requires the filer to list the name and address of the source and the amount of any payment for or reimbursement of actual expenses for transportation /lodging /hospitality received in connection with public office or employment where such actual expenses exceed $650 in the course of a single occurrence. This disclosure requirement excludes expenses reimbursed by a governmental body or by an organization or association of public officials or employees of political subdivisions which Espenshade, 04 -047 Page 26 the public official or employee serves in an official capacity. 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. Espenshade has been employed as the Deputy Director and Division Chief of Operations of the Bureau of Facilities and Engineering in DMVA. Espenshade'sjob duties include conducting needs assessments and maintenance priorities; planning, directing and coordinating construction programs; overseeing the preparation of contract bidding documents; and validating the necessity of change orders, approving progress authorization and completion payments. The Commonwealth instituted a guaranteed energy savings program designed to reduce energy consumption and operating costs. A state agency may initiate a process to obtain a guaranteed energy savings contract through the Department of General Services (DGS). If DGS determines that the agency's facility is eligible for a contract, the agency then issues a letter of interest (LOI) to all pre - qualified energy savings contract companies (ESCOs) asking them to submit project proposals. After the agency narrows down the field of ESCOs to three, the agency selects individuals for an RFP committee that will select the ESCO to be awarded the contract. The ESCO that is selected will enter into a contract with the agency and a financing institution for an installment purchase agreement and payment schedule prior to the commencement of work on the facilities. In December of 2000, DMVA informed DGS of its interest to implement a guaranteed energy savings project at the Pennsylvania Army National Guard Base at Fort Indiantown Gap. After Espenshade issued an LOI to the ESCOs, six responses were received. Espenshade notified the three ESCOs that were on the short list to submit proposals for the RFP process. Of the three ESCOs, Abacus Engineering Systems, Inc. (Abacus), CMS Environ Energy Services (CMS) and Noresco, CMS dropped out of the process before submitting a proposal. Espenshade was the contact person at the agency for the remaining two proposals. The DMVA established an RFP committee, consisting of Espenshade and eight other members, to rate the two proposals. After the RFP committee score sheets were completed by Noresco and Abacus, the sheets were sent to an independent agency for scoring. In July 2001, DMVA through Espenshade notified Abacus, a company that facilitates energy and engineering solutions, that it was selected for the contract. Abacus had qualified as an ESCO in June 2002. When Abacus and DMVA entered into an installment purchase agreement and payment schedule, there was an attachment that gave authority to DMVA representatives to enter into the installment purchase agreement and execute certificates of acceptance, payment requests and other documents relating to the agreement. Three individuals, one of whom was Espenshade, had the authorization to sign the agreement on behalf of DMVA. Construction for the ESCO project at Fort Indiantown Gap began in October 2002 and ended in November 2003 with a payment schedule extending over 11 years and comprising total payments of approximately $11.146 million. During the construction phase of the project, Duke Munford, the DMVA Director, and Espenshade, routinely approved project change orders and certifications of completion. Espenshade, as the DMVA Deputy Director, signed 15 invoices totaling over $10 million submitted by Abacus for project payments. Espenshade also signed 14 of the 15 requisitions for payments. In the latter part of 2002, Greg Williamson, the President and CEO of Abacus instructed one of his sales representatives that Abacus should "do something for Munford Espenshade, 04 -047 Page 27 and Espenshade." An invitation was extended to Munford and Espenshade to visit Abacus' headquarters in Seattle. The invitation was extended to a few other individuals for a pre- construction meeting at Abacus' corporate office. Although Espenshade and Munford accepted Abacus' invitation, the other invitees declined because they believed that it was unnecessary for the completion of the project. Abacus offered the meals, trips and gratuities as a means of fostering relationships and keeping communications open during the construction phase of the project. In September 2002, Munford submitted a request for out of state travel and training for himself and Espenshade, noting that the travel and accommodations would be paid by Abacus. The statement that the out of state travel was required was false. The travel request was submitted to the DMVA's Bureau of Administrative Services (BAS) four days prior to scheduled departure. Linda Leese, the BAS Director, approved the form because she believed that an approval was warranted and that there was insufficient time to properly review the request. Upon a more detailed review, Leese concluded that the trip was inappropriate. Shortly thereafter, Leese advised Munford and Espenshade that their request for the out of state travel to Seattle could not be approved for a number of reasons: lack of approving signatures, no training or conference at the meeting and conflict of interest in that the Abacus contract was not fully executed. Prior to departing for Seattle, both Espenshade and Munford knew that the trip would include recreational and dining activities such as golf, fishing, kayaking and fine dining. Munford and Espenshade flew round trip to Seattle and stayed at the Alexis and Westport Hotels in Seattle with all meals, expenses and entertainment paid by Abacus. While in Seattle, Munford and Espenshade attended a limited pre- construction meeting at Abacus headquarters that lasted less than two hours. The meeting was not required for the project to proceed. Details of the itinerary and recreational activities for Munford and Espenshade are delineated in Fact Findings 62 and 63. Since all expenses for Espenshade and Munford were paid by Abacus or its employees, no expenses were sought for reimbursement from the Commonwealth. Espenshade received compensation of $782.40 from the Commonwealth for the four days that he was entertained by Abacus officials during the four day trip to Seattle. Espenshade received a private pecuniary benefit of $2,452.44 consisting of $1,670.04 in gratuities from Abacus plus his Commonwealth compensation of $782.40. After returning from Seattle, Munford and Espenshade met with Leese regarding the trip. Neither Espenshade nor Munford disclosed the recreational and social activities that occurred. Leese then sought an invoice from Abacus for the travel. Abacus submitted an invoice in the amount of $2,418.16 that DMVA did not pay due to the lack of documentation. Although Espenshade admitted that he was not required to attend the Seattle meeting, he stated that he saw no impropriety in taking the trip to Seattle. Abacus also provided other gifts and gratuities to Espenshade during the duration of the project. No such gratuities were provided to Espenshade or Munford either prior to the inception of the project or after completion of the project. In May of 2003, Abacus provided Espenshade with a guided bass fishing trip on the Susquehanna River. The expense records of Abacus reflect the total trip cost at $494.77. Espenshade also hosted three parties at his residence with Abacus supplying Dungeness crabs that were specially flown from Seattle for each event. The total expenses incurred by Abacus to ship the crabs to Espenshade's parties totaled $2,736.82. During the time that Espenshade and Munford were receiving gifts, meals and entertainment from Abacus, they participated in actions to expand the Fort Indiantown Gap project to all armories in the Commonwealth and veterans' homes. Espenshade specifically asked Abacus personnel to review one of the armories in order to determine the viability of an ESCO project. No other ESCO contractor was asked to review the Espenshade, 04 -047 Page 28 facilities. In October 2002, Espenshade, on behalf of DMVA, issued an LOI for the armory ESCO projects to all qualified ESCO companies. Only Custom Energy and Abacus expressed an interest. Abacus submitted a full proposal for the RFP to Espenshade as the DMVA representative on the project. Munford was the DMVA representative who would make the final decisions on the course of the project. Espenshade was designated by Munford to oversee the project. An RFP committee was formed with eight individuals, one of whom was Espenshade. As a committee member, Espenshade participated in the review and evaluation of the Abacus proposal at a time when he was receiving gifts and gratuities from Abacus. Espenshade notified Abacus by letter in February 2003 that it was selected for the armory's contract. However, in November 2003, Abacus was ordered to cease work on the project by the comptroller's office due to fiscal, legal and policy reasons. In August 2003, DMVA issued an LOI for an ESCO for six veterans' homes in the Commonwealth. Munford was in charge of overseeing the development of the program and Munford appointed Espenshade as project manager and contact person. Following the issuance of an LOI, Munford and Espenshade arranged a meeting with Abacus personnel. That meeting was held at an officer's club in Indiantown Gap where alcoholic beverages were consumed. The short list for the ESCO veterans home project consisted of Sempra Energy, Building Controls and Services, Inc. and Abacus. However, prior to awarding the veterans home contract, DMVA's chief counsel cancelled the project. As an Administrative Officer IV in DMVA, Espenshade was required to file SFIs. The information listed on Espenshade's SFIs for the calendar years 2000 through 2004 are delineated in Fact Finding 97. In addition, Espenshade was required to file the Governor's Code of Conduct disclosure form. See, Fact Findings 98 and 99. Espenshade did not disclose the receipt of gifts from Abacus on either his SFIs or Code of Conduct forms. Espenshade did not disclose Abacus as a company from which he received transportation, lodging and hospitality in the year 2002. Espenshade did not disclose Abacus as a company that he received gifts in 2002 and 2003. By failing to disclose such information on his SFIs, Espenshade attempted to conceal his receipt of gifts and gratuities from Abacus at the time he was taking official action as to that company. Subsequently, Espenshade became the subject of a DMVA pre - disciplinary conference. At that conference, Espenshade admitted that he received a $50 gift certificate for Outback Steakhouse for Christmas 2002 and hosted three crab fests at his home with the crabs provided by Abacus. Espenshade admitted going to meals that were paid for by Abacus as well as a paid guided bass fishing trip. Espenshade admitted that he did not disclose the gifts, meals and travel to Seattle. Following the pre - disciplinary conference, Espenshade was suspended for 15 days without pay. Finally, Espenshade received a letter from Munford outlining the appearance of impropriety on Espenshade's part as a result of his endorsement of Abacus. 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 as follows: "3. The Investigative Division will recommend the following in relation to the above allegations: a. That a violation of Section 1103(a), of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1103(a) occurred in Espenshade, 04 -047 Page 29 relation to a trip to Seattle that Espenshade received from Abacus, and his failure to take leave for the same period. b. That a violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1103(a) occurred in relation to the contribution of food Espenshade received from Abacus for three social events that took place at his home on October 25, 2002, March 18, 2003, and May 12, 2003. c. That a violation of Section 1103(a) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1103(a) occurred in relation to a fishing trip Espenshade received from Abacus on May 12, 2003. d. That a violation of Section 1105(b)(6)(7) of the Public Official and Employee Ethics Law, 65 Pa.C.S. §1105(b)(6)(7) occurred when he failed to report the Seattle trip from Abacus on his Statement of Financial Interests for calendar year 2002. 4. Espenshade agrees to make payment in the amount of $5,300.00 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 the provisions of §1103(a) of the Ethics Act to the above allegations, there were uses of authority of office on the part of Espenshade. But for the fact that Espenshade was Deputy Director of the DMVA, he could not have been in a position to take the four day trip to Abacus corporate headquarters in Seattle, Washington. The record reflects that the trip was not necessary. Further, although Espenshade indicated that the trip was for training purposes, it was not. Espenshade met with Abacus officials for a few hours and the meeting did not involve training or any necessary matters vis -a -vis the Fort Indiantown Gap project. In short, Espenshade misstated the purpose for the trip to Seattle so that he could have a four day all expense paid trip to Seattle by the Commonwealth vendor, Abacus, over which Espenshade had oversight. That trip was essentially for Espenshade's recreation. Espenshade took the trip while receiving payment for the Commonwealth for those days as the Deputy Director of DMVA. All such actions were uses of authority of office. See, Juliante, Order 809. The uses of authority of office on the part of Espenshade resulted in pecuniary benefits to him consisting of the trip to Seattle as well as the paid compensation that he received from the Commonwealth during the time he was on the trip. The pecuniary benefits were private because there was no authorization in law for Espenshade to take that trip. Lastly, the private pecuniary benefits inured to Espenshade himself. Accordingly, Espenshade violated §1103(a) of the Ethics Act when he took a trip to a Commonwealth vendor's, Abacus', corporate headquarters and did so without taking Commonwealth leave when the trip was unnecessary as part of his public employment and provided by the Commonwealth vendor over which Espenshade had oversight. See, Volpe, Order 579 -R. Turning to the matter of the three social events that Espenshade held at his residence, there were uses of authority of office on the part of Espenshade. Espenshade included Abacus employees as invitees for his parties. The main course at these parties was Dungeness crabs that were flown in specially from Seattle by Abacus to be served at Espenshade's parties. If Espenshade were not DMVA Deputy Director with oversight as to the contract that Abacus had with the Commonwealth, he would not have been in a Espenshade, 04 -047 Page 30 position to prevail upon Abacus to have these particular crabs flown in from Seattle for his parties. Such uses of authority of office resulted in private pecuniary benefits consisting of the cost of specialty crabs that were flown in from Seattle. In this regard, Espenshade did not have any out of pocket expenses to purchase the crabs that were supplied by Abacus for those three events. The private pecuniary benefits inured to Espenshade himself. Accordingly, Espenshade violated §1103(a) of the Ethics Act when he prevailed upon Abacus, a Commonwealth vendor over which he had oversight, to supply specialty crabs flown in from Seattle for three social events at Espenshade's residence. See, Helsel, Order 801. The last of the series of gratuities that Espenshade obtained from Abacus was a bass fishing trip with a guide that was provided by Abacus. As noted, Espenshade's involvement as Deputy Director of DMVA as to the contract that Abacus had with the Commonwealth were uses of authority of office on his part. Espenshade used his position to obtain such gratuities from Abacus. Those uses of authority of office resulted in a private pecuniary benefit consisting of the bass fishing trip with a guide at the expense of Abacus. Since Espenshade had no out of pocket expenses, the trip was a private pecuniary benefit. Lastly, the private pecuniary benefit inured to Espenshade. Accordingly, Espenshade violated §1103(a) of the Ethics Act when he obtained a fishing trip from Abacus, a company that had a contract with the Commonwealth as to which Espenshade had oversight and involvement as Deputy Director of DMVA. See, Johnson, Order 1137. Turning to the SFI allegations, the Investigative Division has pared down the allegation to the failure to report the Seattle trip from Abacus on Espenshade's SFI for the calendar year 2002. The stipulated findings in the record reflect that Espenshade received ifts in excess of $250 and travel, hospitality and lodging in excess of $650, relative to the eattle trip. Espenshade failed to report those financial interests on his calendar year 2002 SFI. Thus, Espenshade violated §1105(b)(6) and §1105(b)(7) of the Ethics Act when he failed to report gifts on his 2002 calendar year SFI, hospitality, transportation and lodging as to his Seattle trip that he received from Abacus, a vendor that had a contract with the Commonwealth when Espenshade had oversight and involvement with that vendor. 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, Espenshade is directed to make payment in the amount of $5,300 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 mailing of this Order. If Espenshade has not already done so, he is directed to file amended SFIs for the calendar years 2002 and 2003 reflecting the gifts, hospitality, transportation and lodging from Abacus with the originals filed with DMVA and copies with this Commission for compliance verification purposes. 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. In our review of the record in this case, it is clear to us that Espenshade used his position with the Commonwealth as a means to obtain private pecuniary benefits for himself. Such actions violated not only the spirit but the letter of the Ethics Act. Espenshade viewed his position with the Commonwealth as a means of obtaining gifts and hospitality, transportation and lodging from a vendor that had a contract with the Commonwealth at a time when Espenshade had oversight over that vendor in the performance of a DMVA contract. We find Espenshade's actions of using his public position as a means of obtaining financial gain for himself as totally appalling. Parenthetically, we find the so- called Espenshade "reprimand" from Munford to have been a laughable mockery of a remonstration from the very individual who, instead of Espenshade, 04 -047 Page 31 supervising, was a full participant in the same unethical conduct for which Espenshade has been penalized by this Commission. We admonish Espenshade that as a current Commonwealth employee, he must conduct himself in a fashion so that his conduct will be compliant with the provisions of the Ethics Act. IV. CONCLUSIONS OF LAW: 1. Ronald L. Espenshade, as Deputy Director and Chief of Operations, Department of Military and Veteran Affairs, is a public official subject to the provisions of Act 9 of 1989 as codified by Act 93 of 1998. 2. Espenshade violated §1103(a) of the Ethics Act when he took a trip to a Commonwealth vendor's, Abacus', corporate headquarters and did so without taking Commonwealth leave when the trip was unnecessary as part of his public employment and provided by the Commonwealth vendor over which Espenshade had oversight. 3. Espenshade violated §1103(a) of the Ethics Act when he prevailed upon Abacus, a Commonwealth vendor over which he had oversight, to supply specialty crabs flown in from Seattle for three social events at Espenshade's residence. 4. Espenshade violated §1103(a) of the Ethics Act when he obtained a fishing trip from Abacus, a company that had a contract with the Commonwealth as to which Espenshade had oversight and involvement as Deputy Director of DMVA. 5. Espenshade violated §1105(b)(6) of the Ethics Act when he failed to report gifts on his 2002 calendar year SFI as to his Seattle trip that he received from Abacus, a vendor that had a contract with the Commonwealth when Espenshade had oversight and involvement with that vendor. 6. Espenshade violated §1105(b)(7) of the Ethics Act when he failed to report hospitality, transportation and lodging as to his Seattle trip that he received from Abacus, a vendor that had a contract with the Commonwealth when Espenshade had oversight and involvement with that vendor. In Re: Ronald L. Espenshade File Docket: 04 -047 Date Decided: 2/23/06 Date Mailed: 3/13/06 ORDER NO. 1387 1. Ronald L. Espenshade, as Deputy Director and Chief of Operations, Department of Military and Veteran Affairs, violated §1103(a) of the Ethics Act when he took a trip to a Commonwealth vendor's, Abacus', corporate headquarters and did so without taking Commonwealth leave when the trip was unnecessary as part of his public employment and provided by the Commonwealth vendor over which Espenshade had oversight. 2. Espenshade violated §1103(a) of the Ethics Act when he prevailed upon Abacus, a Commonwealth vendor over which he had oversight, to supply specialty crabs flown in from Seattle for three social events at Espenshade's residence. 3. Espenshade violated §1103(a) of the Ethics Act when he obtained a fishing trip from Abacus, a company that had a contract with the Commonwealth as to which Espenshade had oversight and involvement as Deputy Director of DMVA. 4. Espenshade violated §1105(b)(6) of the Ethics Act when he failed to report gifts on his 2002 calendar year SFI as to his Seattle trip that he received from Abacus, a vendor that had a contract with the Commonwealth when Espenshade had oversight and involvement with that vendor. 5. Espenshade violated §1105(b)(7) of the Ethics Act when he failed to report hospitality, transportation and lodging as to his Seattle trip that he received from Abacus, a vendor that had a contract with the Commonwealth when Espenshade had oversight and involvement with that vendor. 6. Per the Consent Agreement of the parties, Espenshade is directed to make payment in the amount of $5,300 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 mailing of this Order. If Espenshade has not already done so, he is directed to file amended SFIs for the calendar years 2002 and 2003 reflecting the gifts, hospitality, transportation and lodging from Abacus with the originals filed with DMVA and copies with this Commission for compliance verification purposes. 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 Espenshade, 04 -047 Page 33