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HomeMy WebLinkAbout07-546 ConfidentialADVICE OF COUNSEL June 14, 2007 07 -546 This responds to your letters of April 11, 2007, and April 30, 2007, and your submission of May 3, 2007, by which you requested a confidential advisory from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa. .S. § 1101 et seq., would present any prohibitions or restrictions upon the F for the B of State Governmental Body C, who also currently serves as the A of State Governmental Body C, with regard to obtaining a forty percent (40 %) ownership interest in a business that contracts for products and services with local political subdivisions. Facts: You currently hold the position of A of State Governmental Body C. As the A, your duties and responsibilities include overseeing and administering the fiscal and personnel matters of the D in conjunction with the E. In addition, you work closely with Public Official G, the B of State Governmental Body C, as his F, providing [types of service] and support to the members of State Governmental Body C. You have submitted a copy of the job description for the position of F, which is incorporated herein by reference. You have also submitted a copy of the statutory provision at [cite], which references your duties as A. You seek guidance as to whether the Ethics Act would permit you to have a 40% ownership interest in a business (hereinafter referred to as the Company ") that contracts for products and services with local political subdivisions. You state that the contracts are generally awarded through a public bid process; however, if the contracts are small in scope, they are occasionally commissioned through written agreement. You further state that the Company does not contract with State Governmental Body C or any state agency. As a 40% owner of the Company, your responsibilities would be limited to: working with business partners to develop a business plan for the Company that would include yearly projections; attending monthly meetings of the Company officers that would focus on the Company's financial picture; advising on advertising and major purchases; and reviewing quarterly and annual returns. You state that you would not be involved in the day -to -day operations of the Company, and the managing partner would be responsible for most of the business decisions, including the bidding process. Finally, you note that if your prospective ownership interest in the company would be permissible under the Ethics Act, you would report your financial interest in the Confidential Advice, 07 -546 June 14, 2007 Page 2 Company as well as reportable income from the Company on your Statements of Financial Interests. 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. As A of State Governmental Body C and F for the B of State Governmental Body C, you are a public employee subject to the provisions of the Ethics Act. This conclusion is based upon the job description, which when reviewed on an objective basis, indicates clearly that the power exists to take or recommend official action of a non - ministerial nature with respect to one or more of the following: contracting; procurement; planning; inspecting; administering or monitoring grants; leasing; regulating; auditing; or other activities where the economic impact is greater than de minimis on the interests of another person. Section 1103(a) of the Ethics Act provides: § 1103. Restricted activities (a) Conflict of interest. - -No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 Pa.C.S. § 1103(a). The following terms are defined in the Ethics Act as follows: § 1102. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. The term does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. "Authority of office or employment." The actual power provided by law, the exercise of which is necessary to the performance of duties and responsibilities unique to a particular public office or position of public employment. "Business." Any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, self - employed individual, holding company, Confidential Advice, 07 -546 June 14, 2007 Page 3 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. "Financial interest." Any financial interest in a legal entity engaged in business for profit which comprises more than 5% of the equity of the business or more than 5% of the assets of the economic interest in indebtedness. 65 Pa.C.S. § 1102. Pursuant to Section 1103(a) of the Ethics Act, a public official /public employee is prohibited from using the authority of public office /employment or confidential information received by holding such a public position for the private pecuniary benefit of the public official /public employee himself, any member of his immediate family, or a business with which he or a member of his immediate family is associated. The use of authority of office includes more than mere voting; for example, it includes discussing, conferring with others, and lobbying for a particular result. Juliante, Order 809. In each instance of a conflict of interest, a public official /public employee is required to abstain fully from participation. Section 1103(f) of the Ethics Act, pertaining to contracting, 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 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 Confidential Advice, 07 -546 June 14, 2007 Page 4 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, 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 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 with that governmental body. "Person." A business, governmental body, individual, corporation, union, association, firm, partnership, committee, club or other organization or group of persons. 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 interests 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 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 800; Pancoe, supra; and (3) the participation in an official capacity as to matters involving the business with which the public official /public Confidential Advice, 07 -546 June 14, 2007 Page 5 employee is associated in his private capacity or private clients(s). Miller, Opinion 89- 024; Kannebecker, Opinion 92 -010. Having established the above general principles, you are advised as follows. Section 1103(a) of the Ethics Act would not prohibit you from obtaining a 40% ownership interest in the Company. If you would obtain such an ownership interest, the Company would be a business with which you would be associated. Pursuant to Section 1103(a) of the Ethics Act, in your public capacity as A of State Governmental Body C and F for the B of State Governmental Body C, you would generally have a conflict of interest in matters that would financially impact the Company. In each instance of a conflict of interest, you would be required to abstain fully from participation. Parenthetically, it is noted that the submitted facts provide that the Company does not contract with State Governmental Body C or any state agency. You are advised that if you would obtain an ownership interest in the Company and the Company would seek to contract with State Governmental Body C, or would seek to subcontract with a "person" awarded a contract with State Governmental Body C, and the value of the Company's contract /subcontract would be $500 or more, the restrictions of Section 1103(f) would be applicable and would have to be observed. 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. Conclusion: As the A of State Governmental Body C and F for the B of State Governmental Body C, you are a public employee subject to the provisions of the Public Official and Employee Ethics Act ( "Ethics Act "), 65 Pa.C.S. § 1101 et seq. Section 1103(a) of the Ethics Act would not prohibit you from obtaining a 40% ownership interest in a business ( "the Company ") that contracts for products and services with local political subdivisions. If you would obtain such an ownership interest, the Company would be a business with which you would be associated. Pursuant to Section 1103(a) of the Ethics Act, in your public capacity as A of State Governmental Body C and F for the B of State Governmental Body C, you would generally have a conflict of interest in matters that would financially impact the Company. In each instance of a conflict of interest, you would be required to abstain fully from participation. If the Company would seek to contract with State Governmental Body C, or would seek to subcontract with a person awarded a contract with State Governmental Body C, and the value of the Company's contract /subcontract would be $500 or more, the restrictions of Section 1103(f) of the Ethics Act would be applicable and would have to be observed. 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 Confidential Advice, 07 -546 June 14, 2007 Page 6 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