092104 PAEO, ETH 04-015

• Case Date: September 21, 2004
• Court: Pennsylvania

ETH 04-015 No. 04-015 Pennsylvania Ethics Opinions Opinion of the Commission September 21, 2004           DATE MAILED: 10/1/04.          John M. Whitlock, Deputy Chief Counsel          Pennsylvania Department of Community and Economic Development          Commonwealth Keystone Building          400 North Street, Fourth Floor          Harrisburg, PA 17120           Before: Louis W. Fryman, Chair John J. Bolger, Vice Chair Donald M. McCurdy Michael J. Healey Paul M. Henry Raquel K. Bergen.          Re: Conflict; Public Official; Authority Member; Commonwealth Financing Authority; Legislative Appointee; Voting Conflicts Exception; Contracting; Open and Public Process; Prior Public Notice; Jurisdiction.          Dear Mr. Whitlock:          This Opinion is issued in response to the advisory request letters of Frank L. Newburger, III, former Chief Counsel of the Pennsylvania Department of Community and Economic Development, which letters were dated August 25-26, 2004.          I. ISSUE:          Whether, pursuant to Section 1103(j) of the Public Official and Employee Ethics Act ("Ethics Act"), 65 Pa.C.S. § 1103(j), a legislative appointee to the Commonwealth Financing Authority ("Authority") may, with disclosure, vote despite a conflict of interest in a matter for which the consent of all four legislatively appointed Authority Board members is statutorily required; whether an Authority Board member may enter into financing transactions or related subcontracts with the Authority under the First Industries Program pursuant to 64 Pa.C.S. §1552 or the Second Stage Loan Program pursuant to 64 Pa.C.S. §1553 without the requirements of Section 1103(f) of the Ethics Act for prior public notice being satisfied, if such transactions typically involve urgency and demands by the companies involved for confidentiality until an agreement is reached; and whether compliance with Section 1103(j) of the Ethics Act and to the extent required Section 1103(f) of the Ethics Act as to the above matters would constitute compliance with the State Adverse Interest Act, 71 P.S. § 776.1 et seq.          II. FACTUAL BASIS FOR DETERMINATION:          All members of the Board of the Commonwealth Financing Authority ("Authority") have authorized the instant advisory request based upon the following submitted facts.          The Authority Board is composed of the Secretary of Community and Economic Development or a designee, the Secretary of the Budget or a designee, the Secretary of Banking or a designee, and four legislative appointees. 64 Pa.C.S. § 1512(a).          The consent of all four legislative appointees is statutorily required for certain types of matters considered by the Board:

(d) Quorum - Five members of the board shall constitute a quorum, and the following shall apply:

(1) The consent of at least five members of the board, with at least four of the consenting members being appointed under subsection (a)(4) [the legislative appointees], shall be necessary to take action on behalf of the authority for any of the following:

(i) Adopting bylaws.

(ii) Hiring professionals under section 1513(a)(5) and (6) (relating to powers).

(iii) Authorizing bonds.

(iv) Approving projects and contracts under Subchapter E (relating to programs).

(v) Adopting guidelines relating to the implementation of Subchapter E.

(2) A majority of the board shall be necessary to take any other action on behalf of the authority.

64 Pa.C.S. §1512(d) (Emphasis added).          Three questions have been posed for review by this Commission.          The first question is whether, pursuant to Section 1103(j) of the Ethics Act, a legislative appointee to the Authority may, with disclosure, vote despite a conflict of interest in a matter for which the consent of all four legislatively appointed Authority Board members is statutorily required. With regard to this question, it has been noted that the Authority can take no action on a matter described in 64 Pa.C.S. §1512(d)(1) if any one of the four legislatively appointed board members is required to abstain. It has been argued that the clear language as well as the apparent intent of Section 1103(j), as interpreted by this Commission, would permit an Authority Board member who is a legislative appointee to vote despite a conflict as long as he would make the required disclosures.          The second question is whether an Authority Board member may enter into financing transactions or related subcontracts with the Authority under the First Industries Program pursuant to 64 Pa.C.S. §1552 or the Second Stage Loan Program pursuant to 64 Pa.C.S. §1553 without the requirements of Section 1103(f) of the Ethics Act for prior public notice being satisfied, if such transactions typically involve urgency and demands by the companies involved for confidentiality until an agreement is reached. We parenthetically note that the question as originally posed extended beyond the conduct of the Authority          Board members who authorized the request, and so has been modified to fit within the parameters of the authorization...