HomeMy WebLinkAbout1422 ButlerIn Re: Michael Butler,
Respondent
File Docket:
X -ref:
Date Decided:
Date Mailed:
Before: Louis W. Fryman, Chair
John J. Bolger, Vice Chair
Donald M. McCurdy
Paul M. Henry
Nicholas A. Colafella
Reverend Scott Pilarz
06 -001
Order No. 1422
1/8/07
1/23/07
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 ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq., by the above -named Respondent. At the
commencement of its investigation, the Investigative Division served upon Respondent
written notice of the specific allegations. Upon completion of its investigation, the
Investigative Division issued and served upon Respondent a Findings Report identified as
an "Investigative Complaint." An Answer was filed and a hearing was requested. A
Stipulation of Findings and a Consent Agreement waiving an evidentiary hearing were
subsequently submitted by the parties to the Commission for consideration. The
Stipulation of Findings is quoted as the Findings in this Order. The Consent Agreement
has been approved.
This adjudication of the State Ethics Commission is issued under the Ethics Act 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 the Ethics Act. Any
person who violates such confidentiality commits a misdemeanor and, upon conviction,
may be 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.
Butler, 06 -001
Page 2
I. ALLEGATION:
That Michael Butler, a private citizen and President of TriTech, violated Section
1103(b) provision of the State Ethics Act (Act 93 of 1998), 65 Pa.C.S. §1103(b) when he
offered and /or gave to a public employee something of monetary value including a gift
and /or reward based on his and /or the public employee's understanding that the official
action or judgment of the public employee would be influenced thereby, by offering and
giving to Thomas McGraw, a public employee for the Governor's Action Team, a $20,000
payment in return for McGraw's official action as a public employee to recommend and
assist in TriTech's receipt of an Opportunity Grant through the Commonwealth of
Pennsylvania.
II. FINDINGS:
1. Michael Butler is a private citizen who is affiliated with the following businesses:
a. STM 11, LTD /TriTech
b. STM
c. 280 West Market Street Associates.
2. STM 11, Ltd, d /b /a TriTech, is a limited liability company.
a. STM 11, Ltd filed a Certificate of Organization, Domestic Limited Liability
Company with [the] Pennsylvania Corporation Bureau on May 31, 2001.
b. Michael Butler is the President and Chief Executive Officer of STM 11 Ltd.
3. STM 11, Ltd was established in connection with School Technology Management
(STM).
a. STM was a Maryland Corporation formed by John Amatruda.
1. Since approximately the fall of 2002 STM has been controlled by
Dennis Smith.
b. STM 11 Ltd., d /b /a Tri -Tech, was formed four years after STM to operate in
Pennsylvania to enhance and develop software.
4. STM's primary business consisted of selling, maintaining, and supporting software
solutions to schools, including building access, cafeteria access, attendance,
course scheduling, grade reporting, textbook management, student data, and
school management and student data hosing [sic].
a. STM's main customers included New York Public Schools, and the Baltimore
City Public Schools.
b. Since September 2002 Butler has been the only authorized individual to
make expenditures from STM accounts.
5. 280 West Market Street Associates is jointly owned by Butler and Smith.
a. This entity owns the properties which housed TriTech, USTAAD, STM, and
Third Millennium Systems, a corporation controlled by Dennis Smith.
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6. STM II Ltd does business in Pennsylvania as TriTech.
7. USTAAD is [a] company controlled by Dennis Smith.
8. Butler has been affiliated with TriTech since at least the spring of 2001.
a. Butler continues to serve as President and CEO of TriTech.
9. Butler was also an attorney licensed to practice law in Pennsylvania.
a. In 2001, Butler was affiliated with the York law firm Kagen, McDonald, and
France [KMF].
b. Butler whose Attorney Registration Number is 53666, is currently listed as
inactive with the Pennsylvania Disciplinary Board.
10. Thomas McGraw and Butler are both residents of York, PA and have known each
other for a number of years.
11. Thomas McGraw was employed by the Commonwealth of Pennsylvania Department
of Community and Economic Development (DCED) from May 22, 2000, until August
11, 2004.
a. McGraw was employed by the Governor's Action Team (GAT) as the
Manager of Technology Initiatives until June 14, 2003.
12. In his public position, McGraw assisted Butler and Dennis Smith secure [sic] grants
from the Commonwealth.
a. The companies receiving grants were TriTech and USTAAD.
13. Thomas McGraw's duties and responsibilities as Manager of Technology Initiatives
for the GAT included the following:
a. Identify companies located outside of Pennsylvania and encourage
relocation and /or expansion to the Commonwealth through the offers of
grants and low interest loans.
b. Identify companies within the Commonwealth and encourage preservation
and /or expansion through offers of financial assistance.
c. McGraw was responsible for meeting with companies to determine financial
needs.
1. McGraw would then develop a financial package based on the needs.
2. McGraw would meet with his supervisor, the GAT Director to
recommend project(s) to be funded.
3. McGraw's information would form the basis for an offer for assistance
which was forwarded to the Secretary of DCED.
d. The only offer of direct financial assistance recommended by McGraw was
the Opportunity Grant.
e. McGraw was required to complete a "due diligence" on each company he
recommended to receive financial assistance.
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1. Due diligence included reviewing the company's financial status and
business plan to determine the viability of the plan.
2. McGraw's "due diligence" was the basis for any OGP grant awarded.
14. McGraw's job duties also entailed making referrals of companies to other state
agencies and to other companies who [sic] were involved in similar ventures.
a. McGraw was to assist companies seeking to do business with the
Commonwealth by making introductions and referrals to other state agencies
and officials.
b. McGraw was also to assist grantees obtain [sic] permits from DCNR or
PennDOT.
15. The Job Enhancement Act enacted by the PA General Assembly, on June 29, 1996,
established the Opportunity Grant Program (OGP) within the Department of
Community and Economic Development (DCED).
a. The OGP was enacted for the purpose of securing job- creating economic
development opportunities, including the expansion or preservation of
existing industry within the Commonwealth.
1. The OGP also sought the attraction of economic development
prospects to the Commonwealth.
b. Section 703 of the Act authorizes DCED to make grants under the OGP to
eligible recipients.
16. Eligible applicants for participation in the OGP include the following:
Municipalities
Industrial Development Authorities and Corporations
Municipal Authorities
Redevelopment Authorities
Private Developers
Private Companies (including any person, partnership, corporation, or other for -
profit business entity involved in the following:
Agricultural enterprise
Agricultural producer
Industrial enterprise
Manufacturing Enterprise
Research and Development Enterprise
Export Services
Other — includes any enterprise that offers a significant economic impact to
the Commonwealth as determined solely by DCED.
17. Eligible uses of grant funds include the following:
Job Training.
Construction or rehabilitation of infrastructure.
Acquisition of land, buildings, and rights -of -way.
Construction or rehabilitation of buildings.
Purchase or upgrading of machinery and equipment.
Working capital.
Site preparation, including demolition and clearance.
Butler, 06 -001
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Environmental assessments.
Remediation of hazardous materials.
Architectural and Engineering fees up to 10% of the Opportunity Grant Program
award.
18. Ineligible uses of funds include, but are not limited to, refinancing or retirement of
existing debt and costs unrelated to a company's expansion or location at a site in
Pennsylvania.
19. Eligible companies are required to meet the following conditions:
a. The company must locate, expand, or maintain operations at a Pennsylvania
site.
b. The company must invest private capital at the site.
c. The company must create or preserve jobs at the site.
20. Program requirements include private investment and employment requirements.
a. Private investment requirements includes any new investment made at a
Pennsylvania site by a private company or private developer in any of the
categories of eligible uses of funds.
b. Employment requirements include the following within three years of
receiving OGP funding:
1. Create or preserve a minimum of 100 full -time jobs or
2. Increase employment within Pennsylvania by 20% or
3. Provides a substantial number of new employment opportunities
within a high - growth industry or
4. Create or preserve fewer than 100 jobs when those projects are
located in counties or communities suffering from economic distress.
21. A company seeking funding from the OGP is required to submit to DCED a Letter of
Intent signed by the chief executive officer.
a. The Letter of Intent is required to contain the following:
1. The amount of Opportunity Grant Program funds that are being
requested and the intended use of the funds.
2. The legal name and address of the applicant for Opportunity Grant
Program funds if different from the company.
3. The name of the municipality, county, and zip code in which the
project site is located.
4. A description of the type of business (what the company does) and its
Standard Industrial Classification (S.I.C.) or North American Industrial
Classification System (NAICS) code.
5. A statement regarding the current employment levels at the project
site, statewide and worldwide and the number of net, new full -time
Butler, 06 -001
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jobs to be created or preserved at the project site.
6. A project description, an estimated total dollar amount, and estimated
commencement and completion dates for the private investment to be
made at the site.
7. The estimated starting wage level and dollar value of the benefits that
will be paid to workers employed at the project site.
8. The company's Federal Employer Identification Number (FEIN).
9. The company's total dollar sales in Pennsylvania and total sales
outside the USA.
10. Percentage of the company's yearly budget spent on research and
development and the percentage spent on employee training.
11. How the company is organized, i.e. Sole proprietorship, S
Corporation, C Corporation, Partnership.
12. If the company is minority or woman owned.
22. GAT /DCED determines eligibility for OGP financing by scoring requests according
to the following criteria:
a. The number of jobs created and /or preserved.
b. The quality of the jobs created or preserved jobs as reflected in the average
wage threshold.
c. The economic conditions of the region where the project is located.
d. The relationship of the industry segment to priorities of the Governor's Action
Team.
e. The impact of the project on the Commonwealth's competitiveness in the
global marketplace as reflected in export expansion, investment in workforce
skills and /or the potential for impact on other Commonwealth businesses
(suppliers /vendors for example).
f. The level of private sector investment leveraged; and the contribution of the
project to the reuse of industrial /manufacturing sites.
23. If GAT determines a funding request is valid, a recommendation is made to the
secretary of DCED to award the grant.
a. GAT's determination is based on the GAT specialist's recommendation.
1. The GAT specialist is responsible for developing the information used
to evaluate the funding proposal.
b. A commitment letter is then sent to the company notifying the company of the
terms and conditions.
c. The company is required to sign and return the commitment letter to DCED
agreeing to comply with the terms and conditions.
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24. Subsequent to the issuance of a commitment letter a grant agreement is executed
between the applicant and DCED. Provisions of the grant agreement include the
following:
a. Conditions of funding commitments — includes terms and conditions
contained in the commitment letter.
b. Certification of expenses — Applicant required to submit affidavits certifying
expenses incurred where in accordance with the scope of work approved by
DCED. Company is required to submit copies of cancelled checks verifying
the expenditure of the grant proceeds.
c. Non discrimination — Applicant required to certify that they shall not
discriminate.
d. Disbursements — Disbursement requests must be submitted to the DCED's
Economic Development Assistance Office using a payment request form that
is accompanied by invoices or other approved documentation verifying costs
incurred.
25. A company failing to adhere to the grant agreement provisions is liable for a penalty
up to the full amount of the grant, plus an additional 10% of the grant. Provisions
include:
a. Failure to operate at the project site for a minimum if [sic] five years.
b. Failing to crate [sic] or preserve the number of jobs specified in the
commitment letter.
c. Failing to inject the required amount of private investment.
26. In or about 2000 and 2001 the administration of the Governor placed a priority on
assisting technology development in the state.
a. This included providing grants and loans to companies expanding, relocating
or starting in the state.
1. Startup companies were not generally provided with funding.
27. Thomas McGraw's role as Manager of Technology Initiatives was to act as the
primary person responsible for identifying technology companies to apply for OGP
funding.
a. McGraw would identify companies out of state and encourage their
relocation to Pennsylvania through the offer of OGP funding.
b. McGraw was to identify existing Pennsylvania companies seeking to expand
and offer grants of assistance to encourage expansion.
c. McGraw was the only GAT employee to have statewide assignments.
1. GAT had regional offices to accommodate companies in specific
regions.
2. McGraw was not limited to a particular region.
28. McGraw and Butler began discussing OGP grants for TriTech since at least
Butler, 06 -001
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February 25, 2001.
b. Butler confirmed in interviews with the Office of Inspector General that
McGraw explained to him the funding available through the Opportunity
Grant Program.
1. Butler had told McGraw about STM.
2. Butler also introduced McGraw to Dennis Smith.
29. Between February and June 2001 Butler and McGraw discussed assistance that
the GAT could provide to TriTech.
a. At that time TriTech had not yet been created.
b. McGraw provided Butler with information regarding the OGP.
c. Dennis Smith also participated in some of these meetings.
1. McGraw agreed to also recommend USTAAD for an OGP grant.
30. On June 4, 2001, five days after filing corporate documents with the Pennsylvania
Department of State for TriTech, Butler met with McGraw.
a. McGraw's TEV's reflect expenses claimed by McGraw on 6/4/01 for traveling
to Clarksburg, Maryland to meet with STM.
31. Sometime prior to July 5, 2001, Butler arranged with McGraw to use the KMF trust
account to conceal payments McGraw was receiving from companies he (McGraw)
had recommended to receive OGP funding.
a. In 2001 McGraw had been soliciting payments from Eschoolmall.com, an
OGP grant recipient, for consulting contracts.
b. McGraw wanted the payments concealed and Butler provided the KMF trust
account as a means of concealing the payments.
32. On or about June 30, 2001, McGraw gave Andy Flanagan, CEO of
Eschoolmall.com instructions to wire transfer $4,000 to KMF trust account.
a. McGraw received the instructions from Butler.
b. A wire transfer was made from Eschoolmall.com's account at First Union
Bank, Horsham, PA to KMF's trust account at Farmer's First Bank.
c. The wire transfer reflects the payment as for the benefit of Tom McGraw.
33. No partner or associate in the KMF law firm other than Michael Butler discussed the
wire transfer with McGraw or authorized the receipt of the wire transfer.
a. Trust account documents confirm Michael Butler as the attorney involved
with the transfer.
34. The wire transfer occurred in close proximity to Butler's filing of corporate
documents for TriTech and during the time period when McGraw was
recommending that TriTech receive an OGP grant.
Butler, 06 -001
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35. The $4,000 wire transfer from Eschoolmall.com to KMF was utilized by McGraw and
Butler for the purpose of renting a beach house at Avalon, New Jersey during the
week of July 28, 2001.
a. The property was rented from Avalon Realty Company.
36. Avalon Realty Company records confirm that on June 6, 2001, a down payment of
$500.00 was received from Michael Butler for a property located at 63 East 13
Street, Avalon, New Jersey.
a. McGraw and Butler had met on June 4, 2001, two days prior to Butler
making the down payment.
37. On July 7, 2001, a $3,235.00 payment was credited toward the balance of the cost
of the Avalon rental property.
a. Rental records confirm that $3,235.00 payment was wire transferred from the
KMF trust account.
1. Michael Butler authorized the wire transfer.
b. The $3,235.00 payment was part of $4,000 McGraw received from
Eschoolmall.com.
38. In or about June 7, 2001, Thomas McGraw recommended that an OGP grant be
awarded to TriTech, Butler's Company.
39. McGraw and Butler previously discussed McGraw receiving payments in return for
getting the grant for Tri -Tech.
a. McGraw told Butler he wanted to be paid in a way that was untraceable.
b. Butler said he would take care of it.
1. Butler's way of making the payment untraceable was to pass the
money through KMF's trust account.
c. McGraw told Butler he would let him know when he needed the money.
40. On or about June 7, 2001, DCED Secretary Samuel McCullough forwarded to
Michael Butler, President, School Technology Management (STM) an outline of
assistance the Commonwealth would offer to STM if STM relocated to
Pennsylvania. McCullough's letter, in part, noted the following:
My understanding is that your firm wishes to locate your corporate
headquarters in York, Pennsylvania. Moreover, I understand that the
proposed project would result in the creation of at least 100 new jobs within
three years. Additionally, I understand that School Technology Management
will make a $1.5 million investment in this project. Based upon this
information, I am pleased to propose the following forms of assistance by the
Commonwealth through its economic development programs:
Opportunity Grant Program
The Opportunity Grant program has the flexibility necessary to allow
Pennsylvania to customize its assistance to the specific needs of your
project. Because of the significant economic impact of your project, I am
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proposing a $200,000 Opportunity Grant be made available to School
Technology Management for costs associated with your project.
Please be aware that the assistance proposed herein is based upon
information that has been provided to us by your company regarding job
creation projections, cost estimates and project timing. All of the assistance
outlined above is contingent upon School Technology Management
submitting complete applications, meeting all program guidelines and the
availability of funds. If you have any questions regarding he [sic] application
process for any of our financial assistance programs, please contact the
Governor's Action Team. The proposal is in effect for a period of 60 days
from this date, unless extended in writing by the Department.
41. McCullough's letter was based on information provided by Thomas McGraw as the
Governor's Action Team (GAT) representative who solicited STM d /b /a TriTech to
request an Opportunity Grant.
a. McGraw had recommended to then GAT Director Stephen Morgan that
TriTech receive OGP funding.
b. McGraw's positive recommendation was necessary in order for TriTech to be
awarded the grant.
42. McGraw and Butler met on July 19, 2001, eight days prior to their vacation in
Avalon New Jersey.
a. At that time Butler had assisted McGraw in concealing the $4,000 payment
from Andy Flanagan by utilizing the KMF trust account to launder the
payment for the beach house.
b. McGraw had recommended that TriTech, Butler's company, receive a
$200,000 OGP grant.
43. On or about August 2, 2001, Butler as President and CEO of STM 11 Ltd registered
TriTech as a fictitious name with the PA Department of State.
44. On or about September 7, 2001, Butler in his capacity as CEO and President of
TriTech forwarded a cover letter and Letter of Intent in application for an
Opportunity Grant.
a. Butler's September 7, 2001, cover letter essentially paraphrases the June 7,
2001, Letter of Intent from McCullough by stating the company anticipated
creating 100 jobs in the next three years and investing over 1.5 million.
45. TriTech's Letter of Intent also included the following information:
a. TriTech is currently operating out of temporary offices at 284 West Market
Street, York, PA but plans to locate at 280 West Market St. York, PA within 3
to 6 months following renovations.
b. TriTech has only one employee (Butler) but expected [sic] to hire at least
100 employees over the next three years.
c. TriTech will use the grant to assist in funding capital needs including
leasehold improvements, equipment and furniture, research and
development, payroll, and computer technology.
Butler, 06 -001
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d. TriTech anticipates investments of more than $1.5 million in connection with
the relocation and transfer of STM operations to TriTech in Pennsylvania.
46. McGraw's travel records document a meeting with Butler on September 19, 2001,
five days before Butler received notification of the grant award.
47. On September 24, 2001, McCullough forwarded a letter to Butler advising that STM
II Ltd, d /b /a TriTech was awarded OGP funding in the amount of $200,000. The
letter contained the following:
The following conditions shall apply to the grant offer:
The grant will be used for working capital at the Company's facility
located at 280 West Market Street, in the City of York, York County,
Pennsylvania (the "Project "). The grant may not be used for any
other activities without first obtaining the written consent of the
Department.
The Company shall provide the Department with copies of all Project -
related purchase orders and contracts for acquisitions and /or work to
be paid for with Opportunity Grant funds. The Company must provide
a narrative describing the method followed in selecting contractors or
vendors for activities paid for with Opportunity Grant funds. All
contracts for activities paid for with Opportunity Grant funds must
contain the nondiscrimination provision enclosed.
Opportunity Grant funds must be applied to costs incurred on or
before June 30, 2004.
The Company must enter into the Opportunity Grant Program contract
and comply with all of the requirements of the program. The contract
will include Nondiscrimination, Contractor Integrity and similar
clauses required of all contracts with the Commonwealth.
This grant offer is extended based upon the following representations
made by the Company in the Opportunity Grant Program Letter of
Intent:
1. The Company has 0 employees and will create within three
years, 100 full -time jobs at the Project site, beginning June 7,
2001.
2. The Company will invest at least ONE MILLION FIVE
HUNDRED THOUSAND DOLLARS ($1,500,000) in private
match at the Project site within three years, beginning June 7,
2001.
3. The Company will operate at the Project site for a minimum of
five years.
48. The September 24, 2001, letter is signed by Dennis Smith as Chairman of the
Board of TriTech and is attested to by Michael Butler.
a. The letter was signed on 9 -28 -01 as an acknowledgment to agree and
accept the terms and conditions as outlined in the letter.
49. The contract entered into by DCED and TriTech, contract no. 21- 168 -0022, was
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signed on September 28, 2001, by Butler as TriTech President and Smith as
Chairman.
a. Butler returned the signed contract to DCED on or about October 1, 2001.
b. The contract was signed by Emily White, DCED Deputy Secretary on
October 9, 2001.
c. Contract # 21- 168 -0022 contained the following relating to the grant:
Effective date: June 7, 2001
Ending date: June 30, 2004
Grant amount: $200,000
50. Article V Section (h) Grant Integrity Provisions of contract #21- 168 -0022 contained
the following in subsections 4 through 7 regarding gifts, gratuities, and payments:
(4) The Grantee shall not, in connection with this or any other agreement
with the Commonwealth, directly or indirectly offer, confer or agree to
confer any pecuniary benefit on anyone as consideration for the
decision, opinion, recommendation, vote, other exercise of discretion
or violation of a known legal duty by any officer or employe of the
Commonwealth.
The Grantee shall not, in connection with this or any other agreement
with the Commonwealth, directly or indirectly offer, give, or agree or
promise to give to anyone any gratuity for the benefit of, or at the
direction or request of, any officer or employe of the Commonwealth.
(6) Except with the consent of the Commonwealth, neither the Grantee
nor anyone in privity with him shall accept or agree to accept from, or
give or agree to give to, any person, any gratuity from any person in
connection with the performance of work under this Contract except
as provided therein.
Except with the consent of the Commonwealth, the Grantee shall not
have a financial interest in any other contractor, subcontractor or
supplier providing services, labor or material on this project.
(5)
(7)
51. DCED file notes confirm Tom McGraw as being the GAT contact person for the
TriTech grant and Michael Butler as the TriTech contact.
52. Information utilized by DCED in reviewing TriTech's application for assistance was
developed by Thomas McGraw in his capacity as an employee of the Governor's
Action Team.
53. On September 13, 2001 Danielle Narkin, Economic Development Analyst, DCED
contacted Butler via fax transmission with a number of questions concerning the
grant.
a. Narkin was the analyst assigned oversight responsibilities for the TriTech
grant.
b. Narkin's questions related to number of employees, employee
compensation, private investments, and sales.
54. At the time McGraw recommended that TriTech receive a $200,000 OGP grant,
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TriTech had no employees and no contracts.
55. Butler responded by fax on September 13, 2001, that the company had only one
paid employee at the York office and only one employee worldwide (Butler).
a. Total dollar sales were $0.
b. Private investments were projected to be $1.5 million over the next three
years.
56. Butler began submitting Program Payment Requests to DCED on or about October
24, 2001.
a. A second request was submitted by Butler on November 7, 2001.
b. Both payment requests were denied.
c. Denial reasons included Butler's request to have his salary reimbursed.
57. On or about November 1, 2001, Butler submitted a request to expand the scope of
work to include "costs and expenses directly attributable to the leasehold
improvements being constructed on TriTech's principal offices, 280 West Market
Street, York, PA."
a. On that same date McGraw met with Dennis Smith, TriTech's board
Chairman.
b. Scott Dunkelberger, Director, Center for Business Financing, DCED,
approved the request on November 1, 2001, to include machinery,
equipment and furniture and fixtures.
c. Dunkelberger sent a second letter on December 12, 2001, approving the
scope of work change request.
58. DECD [sic] Analyst Danielle Narkin was advised to document "red flags" in relation
to the TriTech payment request. Narkin authorized a memo dated December 7,
2001, which included the following:
Initial payment request form requested reimbursement for rental payments
paid to Sparky and Clark's Roasting Company. Mike Butler, President and
CEO of TriTech, is a co -owner of Sparky and Clark's Roasting Company.
The first request was also to reimburse salary to Mike Butler, Currently the
only employee of TriTech that is not a consultant. That payment request has
been discarded.
The scope of work was amended to include leasehold improvements at the
company's permanent site which is owned by 280 West Market Street
Associates LLC. 280 West Market Street Associates LLC is the real estate
holding arm of TriTech formed by TriTech executives. TriTech has a lease
agreement in place with 280.
59. Narkin provided a copy of the memo to her immediate supervisor, Barbara Musko.
a. Musko discussed the memo with Scott Dunkelberger.
b. Dunkelberger advised Barbara Musko, Narkin's supervisor on December 12,
Butler, 06 -001
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2001, that OGP funds could be used for Leasehold Improvements.
60. By letter dated November 29, 2001, Butler submitted his third payment request form.
a. The request sought reimbursements totaling $60,354.00.
1. The description for reimbursements included lease payments to
Sparky & Clarks and Leasehold Improvements to 280 W. Market
Street Associates, entities controlled, in part, by Butler.
b. DCED approved the request on December 27, 2001.
61. Commonwealth check no. 09627275 in the amount of $60,354 was issued to
TriTech on January 16, 2002, and deposited to a TriTech account on January 18,
2002.
62. The additional Payment Request forms were submitted by Butler between March 5,
2002, and June 5, 2003.
Date Amount Requested
March 5, 2002 $76,725
November 1, 2002 $44,908
June 5, 2003 $18,013
63. Total payments issued to TriTech by DCED are as follows:
Date Amount Check # Date Deposited
April 5, 2002 $76,725 03260228 April 9, 2002
March 11, 2003 $44,908 047889136 March 16, 2003
July 11, 2003 $18,013 05004331 July 14, 2003
All three checks were deposited to a TriTech account at Farmers First Bank.
64. Between January 18, 2002, and March 16, 2003, when $181,987 of the grant
money was deposited to TriTech's account, the two largest individual recipients of
payments were Michael Butler and Thomas McGraw.
a. Butler received $88,939.67 in payments from TriTech between April 10,
2002, and December 19, 2002.
b. McGraw received the $20,000 wire transfer on October 2, 2002.
c. Payments from TriTech's account are controlled by Michael Butler.
65. McGraw had numerous contacts with Narkin during the period of TriTech's OGP
grant (November 2001 through November 2002).
a. McGraw referred to Butler as his "old friend" and "good buddy ".
b. McGraw continually requested that payments be made to TriTech without
delay and that Narkin treat Butler "right ".
c. McGraw offered to assist the expediting of payments including contacting the
State Treasury and the Department of Revenue.
66. On November 16, 2001, Narkin discussed with McGraw the rejection of TriTech's
payment request.
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a. McGraw offered his assistance in getting the payment request approved.
b. McGraw wanted Narkin to assure there would be no delays in payment being
issued to TriTech.
67. McGraw's contracts with Narkin, including requests for expediting payment to
TriTech, were not usual for a GAT representative.
a. No other GAT employees have intervened on behalf of grant recipients to
the extent of McGraw's intervention on behalf of TriTech.
68. In or about March 2002 Thomas McGraw and his wife began the process of
purchasing a lot and building a house.
a. McGraw discussed the house purchase with Michael Butler and Dennis
Smith.
1. McGraw met with Butler and /or Smith on February 7, 2002, February
28, 2002, and March 2, 2002.
b. Michael Butler assisted with the process by arranging for an attorney from
KMF to represent the McGraws.
c. Butler and Smith were shown blueprints of the house by McGraw.
69. On March 12, 2002, Butler faxed a memo to Andy Kagen of KMF which advised as
follows:
"Tom and Tracy McGraw are buying a lot from Kinsley (price $60,000) and
will be building a residence (approximately $225,000). Would you handle
this?
They'd like to close on the lot within the next two weeks. It will then take
about a month to approve the building plans, etc., and construction will take
another 4 -5 months."
70. The KMF firm, specifically Andy Kagen, represented the McGraws in the purchase
of a lot and the subsequent closing for the house purchase.
a. The lot settlement occurred on March 28, 2002.
b. The final settlement was on October 25, 2002.
71. The costs for the McGraw house included the following:
a. Lot 122 Spring Meadows $60,000
Manchester Twp.
York Co.
b. House $270,864
$330, 864
72. Michael Butler contacted the KMF by e -mail requesting to attend the lot settlement.
a. March 19, 2002: Butler e- mailed Andy Kagen requesting to attend the
March 28, 2002, settlement.
Butler, 06 -001
Page 16
1. Butler's e-mail address was mbutler @ustaad.com.
2. USTAAD is Dennis Smith's company.
73. Prior to October 2002 Butler agreed to make a $20,000 payment to McGraw for
McGraw's helping TriTech obtain the OGP grant.
a. Butler agreed to pay McGraw $20,000 for help in getting the $200,000 OGP
grant.
b. The $20,000 payment represented McGraw's demand for 10% of the grant
amount.
74. Butler and McGraw agreed that Butler would wire transfer $20,000 from a TriTech
account to the KMF trust account.
a. The transfer would be similar to the transfer made to Eschoolmall.com in
June 2001.
b. The transfer would be made near the time McGraw was going to settlement
for the house.
c. To keep the $20,000 payment concealed, Butler arranged to have the
payment made to KMF trust account.
75. In October 2002 Butler also arranged for a $32,500 wire transfer to be made from
USTAAD's business account to the KMF account for McGraw's benefit.
a. Butler provided instructions to Dennis Smith's bookkeeper regarding the
transfer.
b. This payment from USTAAD also concealed that Smith was paying McGraw
for an OGP grant.
76. McGraw was scheduled to go to settlement on the house purchase on October 25,
2002.
77. TriTech maintains a corporate checking account at People's Bank.
a. The account has been opened since January 18, 2002.
b. Michael Butler as President and CEO is one of two authorized signatures.
1. Dennis Smith, Chairman of the Board also has signature authority.
78. On October 2, 2002, Butler authorized a wire transfer of $20,000 from TriTech's
account at People's Bank to the KMF trust account at Farmer's First Bank.
a. The $20,000 was credited to Thomas McGraw's client account.
b. This is the same account into which the $4,000 from Eschoolmall.com was
wired for McGraw.
79. The $20,000 remained credited to Thomas McGraw's client account at KMF until
November 8, 2002.
Butler, 06 -001
Page 17
a. Smith's payment of $32,000 also remained in the trust account until
November 2002.
80. Prior to the McGraw settlement of October 25, 2002, Butler e- mailed Andy Kagen to
advise of the wire transfers to be made on McGraw's behalf.
a. September 18, 2002, 10:54 a.m.:
In an unrelated matter, we represent Tom and Tracy McGraw in a real estate
matter. Tom is owed some moneys from TriTech and from USTAAD
Systems. He would like these two companies to wire the money to KMF's
trust account. The money would then be used to fund part of the McGraws'
closing costs. Would you send me wire instructions for transmitting the
money to our trust account? When the wire is ready to go, I will contact you
with the details so the firm can properly account for the money.
b. September 30, 2002, 11:10 a.m.:
I spoke with Tom McGraw on Friday. He tells me that their new home will
shortly be completed and they will be looking to close around the third week
in October. Perhaps you could give him a call and talk about this. His
number is 648 -9040.
Also, Tom did some work for my company (TriTech) and Dennis Smith's
company (USTAAD Systems). He had asked us not to pay him while he was
going through some marital problems. He now wants TriTech and USTAAD
Systems to make the payments to KMF's trust account, and the monies will
help fund settlement. The two payments total $52,500. These monies will
be wired into your trust account for his benefit tomorrow.
Tom indicates that his mortgage company needs a letter from KMF, stating
that Tom has this money in our trust account. I'II let you know when the
wires occur. Could you have Cookie /someone else write the letter, and then
call Tom to make arrangements for him to get the letter? Again, the letter
need only state that there is $52,500 in the firm's trust account for his
benefit.
81. During settlement of October 25, 2002, McGraw obtained a mortgage in the amount
of $55,163.50 from Guaranty Bank.
a. On November 8, 2002, McGraw settled the Guaranty Bank loan.
b. A payment of $55,163.50 was made to Guaranty Bank from KMF trust
account.
c. Of the $55,163.50, $20,000 came from TriTech /Mike Butler.
1. $32,500 was paid by Dennis Smith, Chairman of TriTech's Board of
Directors.
82. Michael Butler testified in a sworn statement that he paid McGraw $20,000 in order
to receive the grant.
a. Butler testified that he paid McGraw 10% of the $200,000 grant.
83. During his Sworn Statement Butler testified in part as follows:
Butler, 06 -001
Page 18
Q. And just describe for me this grant money that you've just
mentioned as —
Butler: Right, when I was an attorney at Kagen, McDonald & France,
I became acquainted with a fellow named Tom McGraw who
works with the Governor's Action Team in Pennsylvania.
Essentially what they do is their — they look to attract and
maintain employers to Pennsylvania and they offer grant
money and low income loans and things like that and working
with Tom, we were able to obtain a grant for $200,000 if
TriTech would open up an office in Pennsylvania and I think
we paid like $20,000 for it. And that money came in chunks,
maybe in four or five disbursements.
Q. Were papers prepared to obtain this grant?
Butler: Yes, sir.
Q. And do you have copies of those papers?
Butler: Oh, yeah.
Q. And this Mr. McGraw, was he with the Kagen law firm?
Butler: No, no, he worked with the Governor's Action Team.
Q. So he's a government employee?
Butler: I don't know if he's employed by them. He's the guy that had
the connection to get the money, yeah.
Q. Who prepared the papers to obtain the grant?
Butler: He got me the papers, he didn't prepare them, I did,
prepared them, yeah.
Q. Just going down the item list, there is one kind of near the
bottom of the expense for legal at $20,000?
Butler: Right.
Q. Can you describe that line item for me?
Butler: Yeah, that was the payment we made for the opportunity
grant.
Q. And that was made out to — that was all to Mr. McGraw?
Butler: I'm trying to think how that went. The law firm kind of
coordinated it, so the payment went to the firm and I think
they in turn paid Mr. McGraw, yeah, it was 10 percent of the
opportunity grant.
Q. And when you say the firm, that's your old law firm?
Butler: Right.
84. Dennis Smith confirmed payments were made by USTAAD and TriTech to Tom
McGraw for his role in arranging OGP grants.
85. McGraw also admitted to his immediate supervisor that he had taken payments from
companies he helped obtain OGP funds.
a. McGraw stated that he was approached by Butler about the payments.
b. Butler wanted McGraw to do more than he (McGraw) normally did for other
companies.
Butler, 06 -001
Page 19
c. Butler would help him out in return for getting money from DED [sic] for
TriTech.
86. Butler was aware, at least from September 28, 2001, that payments to McGraw
were prohibited.
a. Butler signed the grant contract no. 21- 168 -0022 on September 28, 2001
accepting the terms and conditions which, in Article V Section (h)
subsections 4 through 7, prohibited the offer, directly or indirectly [of] any
pecuniary benefit to any officer or employee of the Commonwealth in return
for their decision, opinion, recommendation, vote or other exercise of
discretion of their position (finding #60) [sic].
87. TriTech did not comply with the requirements as outlined in its contract with DCED.
a. TriTech did not hire 100 employees.
1. The only employees of TriTech are those transferred from STM.
b. TriTech did not secure investments from any source other than related
companies STM and USTAAD.
c. Butler was the Tri -Tech employee receiving the bulk of payments from Tri-
Tech's account.
88. DCED eventually required documentation for TriTech and ultimately sought to have
the grant money returned.
a. On March 22, 2005, Kevin Rowland, Director of Performance Monitoring
DCED, addressed a letter to Butler which requested that a form be
completed and returned within (30) days so that DCED could monitor the
results of the project.
1. Butler ignored the request and did not answer within the (30) day time
frame.
2. A similar request was sent by Rowland on May 11, 2005, which Butler
ignored.
b. On June 28, 2005, Rowland sent a third letter to Butler marked final request
which stated, in part,
Our office has been trying to contact your company since March, 2005. As
of this date, we have not heard from your company. We can only assume
that your company has not met the requirement of the Opportunity Grant
Program and therefore, you are directed to send a check for $200,000 made
payable to the Commonwealth of Pennsylvania at the address listed above.
If we do not receive a response from you within 30 days, we will refer this
issue to the Department's Office of Chief Counsel to commence collection
proceedings.
89. Butler ultimately issued a check dated October 4, 2005, in the amount of $20,000 to
settle TriTech's account with the state.
90. Michael Butler conspired with Thomas McGraw to enable McGraw to receive
Butler, 06 -001
Page 20
payments from companies in return for McGraw's official actions as a
Commonwealth employee in recommending OGP funding for these companies,
including Butler's company TriTech.
a. Butler offered and provided McGraw a $20,000 payment based on his and
McGraw's understanding that McGraw would use the authority of his public
position to recommend an OGP grant for TriTech.
1. Without McGraw's positive recommendation TriTech would not have
received a grant.
2. TriTech received a $200,000 grant based on McGraw's actions as a
public official.
b. Butler provided the means for McGraw to launder payments received for
helping other companies obtain grants.
1. Butler used the trust account of the law firm he was affiliated with to
deposit payoffs received by McGraw from Eschoolmall.com and
USTAAD in order to conceal the payments.
2. The payments were then used by McGraw for personal purposes.
3. Butler benefited from the Eschoolmall.com payment by vacationing
with McGraw in July- August 2001.
III. DISCUSSION:
Respondent, Michael Butler (hereinafter also referred to as "Butler "), is a private
citizen who is subject to Section 1103(b) of the Public Official and Employee Ethics Act
( "Ethics Act "), 65 Pa.C.S. § 1101 et seq.
The allegations are that Butler, a private citizen and President of TriTech, violated
Section 1103(b) of the Ethics Act when he offered and /or gave to Thomas McGraw, a
public employee for the Governor's Action Team (GAT), a payment in the amount of
$20,000 in return for McGraw's official action in recommending and assisting in TriTech's
receipt of an Opportunity Grant through the Commonwealth of Pennsylvania.
Section 1103(b) of the Ethics Act provides as follows:
Section 1103. Restricted activities
(b) Seeking improper influence. - -No person shall
offer or give to a public official, public employee or nominee or
candidate for public office or a member of his immediate family
or a business with which he is associated, anything of
monetary value, including a gift, loan, political contribution,
reward or promise of future employment based on the offeror's
or donor's understanding that the vote, official action or
judgment of the public official or public employee or nominee
or candidate for public office would be influenced thereby.
65 Pa.C.S. § 1103(b).
Section 1103(b) of the Ethics Act provides in part that no person shall offer or give
to a public official /public employee anything of monetary value based upon the
Butler, 06 -001
Page 21
understanding that the vote, official action, or judgment of the public official /public
employee would be influenced thereby.
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.
STM II, Ltd. is a limited liability company formed pursuant to a Certificate of
Organization filed with the Pennsylvania Corporation Bureau in May 2001. STM II Ltd.
does business in Pennsylvania as TriTech. TriTech was established in connection with
School Technology Management (STM), a Maryland corporation that sells software
solutions to schools. Butler is the President and Chief Executive Officer of STM II, Ltd.
d /b /a TriTech, and he has been affiliated with TriTech since at least the spring of 2001.
In 2001, Butler was also an attorney licensed to practice law in Pennsylvania and
was affiliated with the York, Pennsylvania law firm of Kagen, McDonald and France (KMF).
Thomas McGraw (hereinafter also referred to as "McGraw ") was employed by the
Pennsylvania Department of Community and Economic Development (DCED) from May
22, 2000, until August 11, 2004. Until June 2003, McGraw was the Manager of
Technology Initiatives for the GAT with duties and responsibilities of identifying companies
for relocation or expansion in the Commonwealth through grants or low interest loans;
identifying Commonwealth companies and encouraging their expansion; and determining
the financial needs of the companies. McGraw was required to complete a "due diligence"
on each company that he would recommend to receive financial assistance through the
Opportunity Grant Program (OGP). McGraw made recommendations to his supervisor, the
GAT Director, who forwarded the information to the DCED Secretary.
Eligible applicants for Opportunity Grants (OG) included municipalities, industrial
development authorities, industrial development corporations, municipal authorities,
redevelopment authorities, private developers and private companies. OGs could be
utilized for job training, infrastructure construction /rehabilitation, property acquisition,
building construction /rehabilitation, machinery and equipment purchases or upgrades,
working capital, site preparation, environmental assessments, remediation of hazardous
materials and, to a certain extent, architectural and engineering fees. However, OGs could
not be used for the refinancing or retirement of existing debt and costs unrelated to a
company's expansion or location in Pennsylvania.
In order for an eligible company to receive an OG, it must locate, expand or
maintain operations in Pennsylvania, invest private capital at a Pennsylvania site, and
create or preserve jobs at the site. Any company seeking OGP funding is required to
submit a detailed letter of intent to DCED. GAT /DCED determines eligibility by scoring the
requests according to specified criteria. If it is determined that a funding request is valid, a
recommendation is made to the DCED Secretary to award the OG. DCED then issues a
commitment letter to the company, specifying the terms and conditions for the OG. The
company's representative must sign and return the commitment letter and agree to its
terms and conditions.
Subsequent to the issuance of the commitment letter, the applicant and DCED
execute a grant agreement that specifies, inter alia: conditions of funding commitments;
certification of expenses; non - discrimination requirements; and requirements for
disbursement requests. Failure of a company to adhere to the grant agreement will result
in the imposition of a penalty up to the full amount of the OG plus an additional 10 %.
Circumstances constituting non - adherence to the grant agreement include failure to
operate at the project site for a specified minimum number of years, failure to create or
preserve the number of jobs specified in the commitment letter, or failure to provide the
required amount of private investment.
Butler, 06 -001
Page 22
As Manager of Technology Initiatives, McGraw was the primary person responsible
for identifying technology companies for OGP funding. McGraw would identify out -of -state
companies and encourage them to relocate to Pennsylvania through the offer of OGP
funding.
Per the Stipulation of Findings, Butler conspired with McGraw to enable McGraw to
receive payments from companies in return for McGraw's official actions as a
Commonwealth employee in recommending OGP funding for such companies, including
Butler's company, TriTech.
Per the Stipulation of Findings, TriTech received a $200,000 grant through the OGP
based on McGraw's actions as a public official.
Between February and June of 2001, Butler and McGraw discussed financial
assistance that GAT could provide to TriTech. At that time, TriTech had not even been
created. On June 4, 2001, five days after Butler filed corporate documents with the
Pennsylvania Department of State for TriTech, Butler met with McGraw. McGraw
subsequently recommended to the GAT Director that an OGP grant in the amount of
$200,000 be awarded to TriTech. McGraw's positive recommendation was necessary in
order for TriTech to be awarded a grant. At the time that McGraw recommended OGP
grant funding in the amount of $200,000 to TriTech, TriTech had no employees, no
contracts and no sales.
Information utilized by DCED in reviewing TriTech's application for an OGP grant
was developed by McGraw in his capacity as an employee of the GAT. On or about June
7, 2001, the DCED Secretary forwarded to Butler a letter outlining assistance the
Commonwealth would offer to STM if STM would relocate to Pennsylvania. The details of
the OGP grant in the amount of $200,000 are detailed in Fact Finding 40. The letter that
the DCED Secretary sent to Butler was based upon information and recommendations
provided by McGraw. In September of 2001, Butler, as CEO and President of TriTech,
forwarded a letter of intent for the OGP funding, the details of which letter are set forth in
Fact Finding 45.
On September 24, 2001, the DCED Secretary forwarded a letter to Butler advising
that STM II, Ltd. d /b /a TriTech was awarded OGP funding in the amount of $200,000,
subject to certain conditions as delineated in Fact Finding 47. TriTech was required
within three years to create 100 full -time jobs, invest at least $1,500,000 in private
matching funds and operate the project at the project site for a minimum of five years. A
letter of September 24, 2001, was signed by Dennis Smith (Smith), as Chairman of the
Board of TriTech, acknowledging and agreeing to accept the terms and conditions.
On September 28, 2001, a contract between DCED and TriTech was signed by
Butler as TriTech President and Smith as Board Chairman. The contract contained grant
integrity provisions detailed at Fact Finding 50. As of at least September 28, 2001, when
Butler signed the aforesaid contract, Butler was aware that paying McGraw for obtaining
an OGP grant for TriTech was prohibited. The OGP grant contract signed by Butler on
that date contained a provision prohibiting the recipient of the grant from offering or giving
any pecuniary benefit to an officer of employee of the Commonwealth in return for, inter
alia, the recommendation or other exercise of discretion of the officer or employee.
On October 24, 2001, and November 7, 2001, Butler submitted payment requests to
DCED. Both payment requests were denied. The reasons for denial included Butler's
request to have his salary reimbursed. Thereafter, Butler submitted a request to expand
the scope of the work to include costs and expenses attributable to leasehold
improvements for TriTech's principal offices. DCED approved the request, which included
machinery equipment, furniture and fixtures. However, the DCED analyst was advised to
Butler, 06 -001
Page 23
"red flag" TriTech payment requests. Butler submitted a third payment request in the
amount of $60,354 for reimbursements including lease payments, which request was
approved by DCED.
Three additional payment requests were subsequently submitted by Butler in the
amounts of $76,725, $44,908 and $18,013. DCED issued checks in the aforesaid amounts
to TriTech, which checks were issued and deposited into a TriTech account. McGraw
requested DCED to issue payments to TriTech without delay and offered his assistance in
expediting payments by contacting the State Treasury and the Department of Revenue.
Prior to McGraw's recommendation that an OGP grant be awarded to TriTech,
Butler and McGraw discussed McGraw receiving payments in return for his assistance in
obtaining an OGP grant for TriTech. McGraw indicated that he wanted the payment to be
made in a manner such that it would be untraceable, and that he would inform Butler as to
when to effectuate the payment. Butler indicated that he would make the necessary
arrangements. Butler's way of making the payment untraceable was to pass the money
through KMF's trust account. Butler and McGraw had previously arranged to use the KMF
trust account to conceal payments that McGraw was receiving from other companies that
McGraw had recommended to receive OGP funding.
In 2002, Butler tendered a $20,000 payment to McGraw in return for McGraw's help
in getting an OGP grant for TriTech. Butler, in a sworn statement, specifically admitted
that he paid McGraw 10% for obtaining the $200,000 grant. The payment was made
through the KMF trust account. Specifically, in March 2002, Butler arranged for an
attorney from the KMF firm to represent McGraw and his spouse as to the purchase of a lot
and the construction of a new home. Butler and McGraw agreed that Butler would wire
$20,000 from the TriTech corporate bank account into a KMF trust account for McGraw at
or about the time that McGraw would have settlement on his new home. On October 2,
2002, Butler authorized a wire transfer of $20,000 from the TriTech corporate bank
account to the KMF trust account. The $20,000 was credited to McGraw's KMF client
account.
The $20,000 remained credited to McGraw's KMF account until November8, 2002,
when McGraw settled with Guaranty Bank as to a mortgage on his new home. McGraw
made a payment of $55,163.50 from the KMF trust account, which included the $20,000
from Butler resulting from the TriTech OGP funding.
When it was determined that TriTech did not comply with the requirements of its
OGP funding contract, DCED sought to have the grant money returned. Butler ultimately
issued a check to DCED in the amount of $20,000 to settle TriTech's obligation to the
Commonwealth.
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 allegation
as follows:
3. The Investigative Division will recommend the following in relation to
the above allegations:
a. That a violation of Section 1103(b) of the Public Official
and Employee Ethics Law, 65 Pa.C.S. §1103(b)
occurred based on Butler's payment of $20,000.00 as
President of TriTech, Incorporated to Thomas McGraw,
a public employee for the Governor's Action Team in
the Department of Community and Economic
Butler, 06 -001
Page 24
Development, in return for McGraw's official action, as
a public employee, to recommend and assist in
TriTech's receipt of an Opportunity Grant through the
Commonwealth of Pennsylvania.
4. Butler agrees to make payment in the amount of $5,000.00 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.
5. The Investigative Division will recommend that this matter be referred
for review by the appropriate law enforcement authorities. The
Commission also retains the right to initiate appropriate enforcement
actions in the event of Respondent's failure to comply with this
agreement. Nothing in this agreement shall prohibit the Commission
from cooperating with any authority who may so choose to review this
matter further.
6. Butler's acceptance and execution of this Consent Agreement is
solely for the purpose of resolving the matter currently pending before
the Pennsylvania State Ethics Commission and is in no way related to
any other proceedings or matters that may be currently ongoing or
which may be initiated in the future. In executing this Consent
Agreement, Butler does not waive, in any other matter, his Fifth
Amendment privilege against self- incrimination. Butler, by accepting
and executing this Consent Agreement, does not admit the factual
findings set forth in the attached Stipulation of Findings but does
admit the legal conclusions set forth at paragraphs 2.a. and 3.a.
herein, and further accepts the legal consequences set forth in this
Consent Agreement.
Consent Agreement, at 1 -2.
In applying the provisions of Section 1103(b) of the Ethics Act to the stipulated
findings, we initially note that this Section applies to persons in general and not just to
public employees and public officials. The prohibition of this Section encompasses the
offer or provision to a public employee of anything of monetary value based upon the
offeror's /donor's understanding that the vote, official action or judgment of the public
employee would be influenced thereby.
The record establishes that such a prohibited understanding existed in this case.
Butler, as President of TriTech, agreed to make a $20,000 payment to McGraw, a public
employee in his capacity as the Manager of Technology Initiatives for the GAT, based on
Butler's understanding that in return, McGraw would recommend that TriTech be awarded
an OGP grant. McGraw's positive recommendation was necessary in order for TriTech to
be awarded such a grant. After McGraw made a positive recommendation, TriTech was
awarded a $200,000 OGP grant. Butler subsequently authorized a $20,000 wire transfer
from TriTech's corporate bank account to a client account in McGraw's name with KMF, as
payment for McGraw's help in getting the OGP grant for TriTech. Butler, in a sworn
statement, specifically admitted that he paid McGraw 10% of the $200,000 grant for
obtaining the grant.
Accordingly, Butler violated Section 1103(b) of the Ethics Act when he offered and
gave to McGraw a payment in the amount of $20,000 in return for McGraw's official action
in recommending and assisting in TriTech's receipt of an Opportunity Grant from DCED.
Our decision is consistent with prior Commission precedent holding that a violation of
Butler, 06 -001
Page 25
Section 1103(b) of the Ethics Act occurred when a private citizen made payments to a
public official in return for an official recommendation that a contract be awarded by the
public official's governmental body to a business owned by the private citizen. See,
Ellsworth, Order 1416.
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, Butler is directed to make
payment in the amount of $5,000.00 in settlement of this matter payable to the
Commonwealth of Pennsylvania and forwarded to this Commission within thirty (30) days
of the issuance of this Order.
Additionally, this matter will be referred to the appropriate law enforcement
authorities for review and appropriate action.
Compliance with the foregoing will result in the closing of this case with no further
action by this Commission. Noncompliance will result in the institution of an order
enforcement action.
IV. CONCLUSIONS OF LAW:
1. Michael Butler, a private citizen, is subject to the prohibitions of Section 1103(b) of
the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et
seq.
2. Butler violated Section 1103(b) of the Ethics Act when he, as President of STM 11,
Ltd., d /b /a TriTech, offered and gave to Thomas McGraw, a public employee for the
Governor's Action Team in the Department of Community and Economic
Development (DCED), a payment in the amount of $20,000 in return for McGraw's
official action in recommending and assisting in TriTech's receipt of an Opportunity
Grant from DCED.
In Re: Michael Butler
ORDER NO. 1422
File Docket: 06 -001
Date Decided: 1/8/07
Date Mailed: 1/23/07
1 Michael Butler, a private citizen, violated Section 1103(b) of the Ethics Act when he,
as President of STM II, Ltd., d /b /a TriTech, offered and gave to Thomas McGraw, a
public employee for the Governor's Action Team in the Department of Community
and Economic Development (DCED), a payment in the amount of $20,000 in return
for McGraw's official action in recommending and assisting in TriTech's receipt of
an Opportunity Grant from DCED.
2. Per the Consent Agreement of the parties, Butler is directed to make payment in the
amount of $5,000.00 payable to the Commonwealth of Pennsylvania and forwarded
to this Commission within thirty (30) days of the issuance of this Order.
3. This matter will be referred to the appropriate law enforcement authorities for review
and appropriate action.
4. Compliance with the foregoing will result in the closing of this case with no further
action by this Commission.
a. Non - compliance will result in the institution of an order enforcement action.
BY THE COMMISSION,
Louis W. Fryman, Chair