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HomeMy WebLinkAbout07-512 BailyChuck Baily Baily Insurance Agency, Inc. 55 S. Washington Street Waynesburg, PA 15370 ADVICE OF COUNSEL March 2, 2007 07 -512 Dear Mr. Baily: This responds to your letter of January 26, 2007, by which you requested advice from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 1=CTS.. 1101 et seq., would present any prohibition or restrictions upon a member of a county industrial development authority board, who in a private capacity is the president of an insurance company, with regard to: (1) bidding on a contract to underwrite insurance for the industrial development authority; or (2) continuing to underwrite insurance for the county. Facts: You are the President of Baily Insurance Agency, Inc. ( "the Agency "). The Agency underwrites most of the insurance for Greene County ( "the County "). The Agency is also the current insurance agent for the Greene County Industrial Development Authority ( "the Authority "). You state that in interacting with the Authority in the past, you have acted in the capacity as the Authority's insurance agent as well as in the capacity as the County's insurance agent. In January 2007, the County Commissioners appointed you to the Authority Board. You seek guidance as to how you should conduct yourself in the future as an Authority Board Member. You state that you would not mind if the Agency would not be able to underwrite the Authority's insurance in the future. You pose the following specific inquiries: 1. Whether the Agency, which has fifteen staff members, would be permitted to offer an insurance quote to the Authority in the future and if so, under what circumstances. You state your assumption that if the Agency would be permitted to offer a quote, you would be required to be out of the room" and completely uninvolved with regard to all insurance issues and presentations. 2. Whether you and /or the Agency would be prohibited from acting as the insurance advisor(s) for the Authority with regard to the insurance bid process in the future. Bails, 07 -512 March 2, 2007 Page 2 3. Whether you would be permitted to have conversations (officially or unofficially) with either the Authority or Agency staff members as to what the future insurance specifications or coverage should be for the Authority. If such conversations would not be permitted, you ask where the Authority would get expert advice regarding the process for picking an agent or evaluating insurance quotes and coverage. 4. Assuming that you and the Agency would no longer be involved in offering any insurance quotes to the Authority, whether you would be permitted to counsel the Authority on insurance matters. 5. Whether the Authority now must put its insurance needs out for bid when its insurance comes up for renewal since the insurance premiums are currently over $500. 6. Whether your appointment to the Authority Board would jeopardize or complicate anything that you do for the County's insurance programs. 7 Whether there are any boundaries on your conduct of which you need to be aware. 8. Noting that you are on the boards of a few local non - profits, whether you should either resign from those boards or stop underwriting the insurance for those non - profits. Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based upon the facts that the requester has submitted. In issuing the advisory based upon the facts that the requester has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts that have not been submitted. It is the burden of the requester to truthfully disclose all of the material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent the requester has truthfully disclosed all of the material facts. It is further initially noted that, pursuant to the same aforesaid Sections of the Ethics Act, an opinion /advice may be given only as to prospective (future) conduct. If the activity in question has already occurred, the Commission may not issue an opinion /advice, but any person may then submit a signed and sworn complaint, which will be investigated by the Commission if there are allegations of Ethics Act violations by a person who is subject to the Ethics Act. To the extent that your inquiries relate to conduct that has already occurred, such past conduct may not be addressed in the context of an advisory opinion. However, to the extent that your inquiries relate to future conduct, your inquiries may and shall be addressed. As a Member of the Board of Directors of the Authority, you are a "public official" subject to the provisions of the Ethics Act. Sections 1103(a) and 1103(j) of the Ethics Act provide: § 1103. Restricted Activities (a) Conflict of interest. —No public official or public employee shall engage in conduct that constitutes a conflict of interest. (j) Voting conflict. —Where voting conflicts are not otherwise addressed by the Constitution of Pennsylvania or by any law, rule, regulation, order or ordinance, the following procedure shall be employed. Any public official or Bails, 07 -512 March 2, 2007 Page 3 public employee who in the discharge of his official duties would be required to vote on a matter that would result in a conflict of interest shall abstain from voting and, prior to the vote being taken, publicly announce and disclose the nature of his interest as a public record in a written memorandum filed with the person responsible for recording the minutes of the meeting at which the vote is taken, provided that whenever a governing body would be unable to take any action on a matter before it because the number of members of the body required to abstain from voting under the provisions of this section makes the majority or other legally required vote of approval unattainable, then such members shall be permitted to vote if disclosures are made as otherwise provided herein. In the case of a three - member governing body of a political subdivision, where one member has abstained from voting as a result of a conflict of interest and the remaining two members of the governing body have cast opposing votes, the member who has abstained shall be permitted to vote to break the tie vote if disclosure is made as otherwise provided herein. 65 Pa. C. S. §§ 1103(a), (j). The following terms pertaining to conflicts of interest under the Ethics Act are defined as follows: § 1102. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. The term does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. "Authority of office or employment." The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. "Business." Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self - employed individual, holding company, joint stock company, receivership, trust or any legal entity organized for profit. "Business with which he is associated." Any business in which the person or a member of the person's immediate family is a director, officer, owner, employee or has a financial interest. Bails, 07 -512 March 2, 2007 Page 4 65 Pa.C.S. § 1102. Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited from using the authority of public office /employment or confidential information received by holding such a public position for the private pecuniary benefit of the public official /public employee himself, any member of his immediate family, or a business with which he or a member of his immediate family is associated. In each instance of a conflict of interest, Section 1103(] of the Ethics Act requires the public official /public employee to abstain and to publicly disclose the abstention and reasons for same, both orally and by filing a written memorandum to that effect with the person recording the minutes or supervisor. The abstention requirement is not limited merely to voting, but extends to any use of authority of office including, but not limited to, discussing, conferring with others, and lobbying for a particular result. Juliante, Order 809. In the event that the required abstention results in the inability of the governmental body to take action because a majority is unattainable due to the abstention(s) from conflict under the Ethics Act, then voting is permissible provided the disclosure requirements noted above are followed. See, Pavlovic, Opinion 02 -005. Section 1103(f) of the Ethics Act provides as follows: § 1103. Restricted activities (f) Contract. - -No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official or public employee is associated or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the public official or public employee is associated, unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the public official or public employee shall not have any supervisory or overall responsibility for the implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of the making of the contract or subcontract. 65 Pa.C.S. § 1103(f). The following terms pertaining to Section 1103(f) are defined in the Ethics Act as follows: § 1102. Definitions "Contract." An agreement or arrangement for the acquisition, use or disposal by the Commonwealth or a political subdivision of consulting or other services or of supplies, materials, equipment, land or other personal or real property. The term shall not mean an agreement or arrangement between the State or political subdivision as one party and a public official or public employee as the other party, concerning his expense, reimbursement, salary, Bails, 07 -512 March 2, 2007 Page 5 wage, retirement or other benefit, tenure or other matters in consideration of his current public employment with the Commonwealth or a political subdivision. "Governmental body." Any department, authority, commission, committee, council, board, bureau, division, service, office, officer, administration, legislative body, or other establishment in the executive, legislative or judicial branch of a state, a nation or a political subdivision thereof or any agency performing a governmental function. "Governmental body with which a public official or public employee is or has been associated." The governmental body within State government or a political subdivision by which the public official or employee is or has been employed or to which the public official or employee is or has been appointed or elected and subdivisions and offices within that governmental body. 65 Pa. C. S. § 1102. Section 1103(f) does not operate to make contracting with the governmental body permissible where it is otherwise prohibited. Rather, where a public official /public employee, his spouse or child, or a business with which he, his spouse or child is associated, is otherwise appropriately contracting with the governmental body, or subcontracting with any person who has been awarded a contract with the governmental body, in an amount of $500.00 or more, Section 1103(f) requires that an "open and public process" be observed as to the contract with the governmental body. Pursuant to Section 1103(f), an "open and public process" includes: (1) prior public notice of the employment or contracting possibility; (2) sufficient time for a reasonable and prudent competitor /applicant to be able to prepare and present an application or proposal; (3) public disclosure of all applications or proposals considered; and (4) public disclosure of the contract awarded and offered and accepted. Section 1103(f) of the Ethics Act also requires that the public official /public employee may not have any supervisory or overall responsibility as to the implementation or administration of the contract with the governmental body. In applying the above provisions of the Ethics Act to the instant matter, it is noted that Section 1103(a) of the Ethics Act pertaining to conflicts of interest does not prohibit public officials /public employees from having outside business activities or employment; however, the public official /public employee may not use the authority of his public position - or confidential information obtained by being in that position - for the advancement of his own private pecuniary benefit or that of a business with which he is associated. Pancoe, Opinion 89 -011. Examples of conduct that would be prohibited under Section 1103(a) would include: (1) the pursuit of a private business opportunity in the course of public action, Metrick, Order No. 1037; (2) the use of governmental facilities, such as governmental telephones, postage, staff, equipment, research materials, or other property, or the use of governmental personnel, to conduct private business activities, Freind, Order No. 800; Pancoe, supra; and (3) the participation in an official capacity as to matters involving the business with which the public official /public employee is associated in his private capacity or private client(s). Miller, Opinion 89- 024; Kannebecker, Opinion No. 92 -010. Bails, 07 -512 March 2, 2007 Page 6 If a private employer or business with which the public official /public employee is associated or a client of the private employer or business would have a matter pending before the governmental body, the public official /public employee would have a conflict of interest as to such matter. Miller, supra; Kannebecker, supra. In each instance of a conflict of interest, the public official /public employee would be required to abstain from participation and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. In the instant matter, given that you are the President of the Agency, the Agency is a business with which you are associated. Pursuant to Section 1103(a) of the Ethics Act, you would generally have a conflict of interest in matters before the Authority that would financially benefit you, the Agency, or the Agency's clients. See, Miller, supra; Kannebecker, supra. In your public capacity as an Authority Board Member, you would have a conflict of interest in matters pertaining to the Authority's insurance at such times as your Agency would be providing insurance or seeking to provide insurance to the Authority. An actual business relationship, or a reasonable expectation of a business relationship forming between the Agency and the Authority (see, Amato, Opinion 89 -002) could form the basis for a conflict of interest as to action(s) taken in your public capacity. In each instance of a conflict of interest, you would be required to abstain fully from participation and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. The abstention requirement would extend beyond voting to include any use of authority of office. For example, as an Authority Member, you could not participate in matters such as drawing up the contract specifications or reviewing or selecting bids or proposals. In addition, the Ethics Act would prohibit you from using the authority of your public position, or confidential information accessed or received as a result of being an Authority Board Member, to effectuate a private pecuniary benefit to the Agency through a detriment to a business competitor. See, Pepper, Opinion 87 -008. In addition, you would have a conflict of interest with respect to voting to approve the payment of any invoices that would be submitted by the Agency to the Authority. As noted above, in each instance of a conflict, you would be required to abstain from participation and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. Having established the above general principles, your specific inquiries shall be addressed. In response to your first four specific inquiries, you are advised that to the extent the inquiries relate to the conduct of the Agency and /or your conduct as President of the Agency, Section 1103(a) of the Ethics Act does not operate to restrict the conduct of a business or a public official in his private capacity. Rather, Section 1103(a) of the Ethics Act regulates the conduct of a public official /public employee in his public capacity. Therefore, you are advised that the Ethics Act itself would not prohibit the Agency or you in your private capacity from bidding on a contract to underwrite insurance for the Authority. However, as an Authority Member, your conduct would be restricted by Sections 1103(a) and 1103(j) of the Ethics Act as set forth above. Additionally, given your status as an Authority Member, the requirements of Section 1103(f) of the Ethics Act would have to be observed whenever applicable. Parenthetically, although the contracting in question would not be prohibited under the Ethics Act itself, provided the requirements of Sections 1103(a), 1103(f), and 1103(j) would be satisfied, a problem could exist as to such contracting under the Economic Development Financing Law. Bails, 07 -512 March 2, 2007 Page 7 In the instant situation, the Economic Development Financing Law provides as follows: § 382. Competition in award of contracts (d) No member of the authority or officer or employee thereof shall, either directly or indirectly, be a party to or be in any manner interested in any contract or agreement with the authority for any matter, cause or thing whatsoever by reason whereof any liability or indebtedness shall in any way be created against such authority. If any contract or agreement shall be made in violation of the provisions of this section the same shall be null and void and no action shall be maintained thereon against such authority. 73 P.S. § 382(d). Because the State Ethics Commission does not have the statutory jurisdiction to interpret the Economic Development Financing Law, it is suggested that you seek legal advice as to its applicability. As to your fourth specific inquiry, you are advised that if you and the Agency would no longer be involved in either insuring or offering any insurance quotes to the Authority, then in the absence of any other basis for a conflict of interest, you would not have a conflict of interest as an Authority Member in matters pertaining to the Authority's insurance, and you would not be prohibited from counseling the Authority on insurance matters as an Authority Member. Your fifth specific inquiry cannot be addressed because the State Ethics Commission does not have the statutory jurisdiction to provide advisory opinions regarding the proposed conduct of a governmental body. With regard to your sixth specific inquiry, you are advised that the Ethics Act would generally not impose any limitations or restrictions upon you with regard to doing business with governmental bodies other than the Authority. Your seventh specific inquiry has been addressed above. For reasons noted above, your eighth specific inquiry cannot be addressed to the extent the inquiry relates to your conduct of serving on the boards of private non - profits in your private capacity. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act; the applicability of any other statute, code, ordinance, regulation or other code of conduct other than the Ethics Act has not been considered in that they do not involve an interpretation of the Ethics Act. Specifically not addressed herein is the applicability of the Economic Development Financing Law. Conclusion: As a Member of the Board of the Greene County Industrial Development Authority "the Authority "), you are a public official subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. The Baily Insurance Agency, Inc. ("the Agency "), of which you are President, would be considered a business with which you are associated. Pursuant to Section 1103(a) of the Ethics Act, as an Authority Board Member, you would generally have a conflict of interest in matters that would financially impact you, the Agency, or the Agency's clients. Section 1103(a) of the Ethics Act does not operate to restrict the Bails, 07 -512 March 2, 2007 Page 8 conduct of a business or a public official in his private capacity but rather regulates the conduct of a public official /public employee in his public capacity. The Ethics Act itself would not apply to restrict the Agency or you in your private capacity from bidding on a contract to underwrite insurance for the Authority. However, in your public capacity as an Authority Board Member, you would have a conflict of interest in matters pertaining to the Authority's insurance at such times as your Agency would be providing insurance or seeking to provide insurance to the Authority. An actual business relationship, or a reasonable expectation of a business relationship forming between the Agency and the Authority (see, Amato, Opinion 89 -002) could form the basis for a conflict of interest as to action(s) taken in your public capacity. In each instance of a conflict of interest, you would be required to abstain fully from participation and to satisfy the disclosure requirements of Section 1103(j) of the Ethics Act. The abstention requirement would extend beyond voting to include any use of authority of office. The requirements of Section 1103(f) of the Ethics Act would have to be observed whenever applicable. Although the contracting in question would not be prohibited under the Ethics Act itself, provided the requirements of Sections 1103(a), 1103(f), and 1103(j) of the Ethics Act would be satisfied, a problem could exist as to such contracting under the Economic Development Financing Law, and therefore, it is suggested that you seek legal advice in that regard. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11), an Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, provided the requester has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. This letter is a public record and will be made available as such. Finally, if you disagree with this Advice or if you have any reason to challenge same, you may appeal the Advice to the full Commission. A personal appearance before the Commission will be scheduled and a formal Opinion will be issued by the Commission. Any such appeal must be in writing and must be actually received at the Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa. Code, § 13.2(h). The appeal may be received at the Commission by hand delivery, United States mail, delivery service, or by FAX transmission (717 - 787 - 0806). Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. Sincerely, Robin M. Hittie Chief Counsel