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Effective December 15, 1998, Act 9 of 1989 was repealed and replaced by Chapter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