Kistler v. State Ethics Commission

958 A.2d 1092, 2008 Pa. Commw. LEXIS 508, 2008 WL 4601448

• Court: Commonwealth Court of Pennsylvania
• Decided: October 17, 2008
• Docket: 1352 C.D. 2007
• Status: Published

Opinions

OPINION BY

Judge FRIEDMAN.

Kenneth Kistler (Kistler) petitions for review of the June 29, 2007, order of the State Ethics Commission (Commission), which concluded, inter alia, that he violated sections 1103(a) and 1103(f) of the Public Official and Employee Ethics Act (Act).¹ We reverse.

Kistler is a member of the Carbon-Lehigh Intermediate Unit (CLIU) Board of Directors (Board) and was chairman of the Board’s building committee from January 1988 until March 18, 2002. Kistler also is owner and president of Kistler Building Supply, Inc., and Kistler Pole Building Company. (Findings of Fact, Nos. 2, 5, 7,10-11.)

I. Factual Background

A. Transportation Facility

In late 1999, the Board began to explore the possibility of constructing a garage (Transportation Facility) to house its buses. In June 2001, Robert J. Keegan, Jr., (Keegan), who was placed in charge of the project, discussed the project with Dale Roth (Roth), an architect who previously had done work for the CLIU. Keegan asked Roth to do a cost comparison to determine whether it would be more cost effective for the CLIU to take a lease-and-purchase approach as opposed to a purchase-and-build approach. (Commission’s op. at 61-62.)

Between June and November 2001, there were discussions between Roth, or his staff, and Kistler about using a pole building for the Transportation Facility. In November 2001, Roth directed an associate of his to start looking at pole building options. The associate telephoned Kistler for information, but the associate did not indicate to Kistler the nature of the project. Another Roth associate subsequently requested a quote from Kistler for a main building and ancillary storage building. Kistler faxed a quote, but Kistler was unaware that the quote was related to the Transportation Facility. (Commission’s op. at 63-64.)

Sometime between February 21, 2002, and March 18, 2002, Roth told Kistler that he was considering a pole building for the Transportation Facility. Although Roth had not made a final decision, Roth was going to provide details about the project to Kistler, and Kistler was going to provide pricing and planning information to Roth. Afterward, Kistler informed the Executive Director of the CLIU that Roth was considering a pole building for the Transportation Facility and that, as a result, Kistler would need to leave his position on the Board’s building committee. (Commission’s op. at 64.)

At the March 18, 2002, Board meeting,² the Board accepted Kistler’s resignation from the building committee. The Solicitor for the CLIU (Solicitor) expressed his opinion that Kistler could be involved in the construction of the Transportation Facility, but that he should abstain from any votes relating to that project. When the Board voted to make a Roth architectural fii’m, the Roth Marz Partnership, its agent in pursuing a lease-purchase agreement for the acquisition of property for the Transportation Facility, Kistler abstained.³ The Board did not seek competitive bids because the Board believed that it could pursue a lease-purchase agreement without doing so. (Commission’s op. at 64-65.)

In May 2002, Roth made an initial commitment to Kistler to use Kistler Pole Building Company for construction of the Transportation Facility. On July 12, 2002, Kistler Pole Building Company entered into a Purchase Agreement contract with Cornerstone R.E., LLC, (Cornerstone), another Roth entity, for construction of the Transportation Facility. (Commission’s op. at 65-66.)

At the Board meeting on July 15, 2002, the Board approved the execution of an Assignment of Real Estate Sales Agreement ⁴ to Cornerstone and a Lease Agreement and Option Agreement with Cornerstone. Kistler abstained from the vote.⁵ In August, the CLIU entered into the Lease Agreement and Option Agreement. Kistler’s company began construction in September and completed the Transportation Facility in early February 2003. (Commission’s op. at 66-67.)

B. Lehigh Learning and Adjustment School

In 1999, the CLIU entered into a lease with Steven Hirsh for the use of property in Oreville, Pennsylvania, for the Lehigh Learning and Adjustment School (LLAS). However, the property had a problem with mold. Thus, at its June 17, 2002, meeting, the Board approved a motion terminating the lease with Hirsh and another motion authorizing Roth to pursue construction of an LLAS facility on property adjacent to Roth’s Lehigh Valley office. Kistler voted in favor of the motions, having no idea that he would be involved in construction of the LLAS facility. (Commission’s op. at 67.)

In April 2003, Kistler learned that Roth was considering a pole building for the LLAS facility. Afterward, Kistler had no involvement with the Board on that project. At the Board meeting on October 20, 2003, the Board authorized a Roth entity to begin construction of the LLAS facility, but Kistler abstained from the vote.⁶ At the Board meeting on May 17, 2004, the Board approved a Lease Agreement between Roth and the CLIU for the LLAS facility, but Kistler abstained from the vote.⁷ On June 17, 2004, Kistler and Roth executed a Purchase Agreement for construction of the LLAS facility. (Commission’s op. at 68-69.)

By letter dated August 4, 2004, Kistler was notified that he was being investigated for possible violations of the Act. At the time, Kistler Pole Building Company had not begun construction of the LLAS facility. On August 20, 2004, Kistler requested an advisory from the Commission as to whether he would be in violation of the Act if he were to proceed to fulfill his contractual obligations with respect to the LLAS facility. By letter dated August 20, 2004, the Commission responded that it could not issue an advisory on past conduct or matters under investigation. Kistler then contacted the Solicitor’s law firm and received an opinion letter dated August 27, 2004, concluding that Kistler had not violated the Act. Kistler proceeded to build the LLAS facility based on that letter. Kistler began construction of the LLAS facility in September 2004 and completed it in January 2005. (Commission’s op. at 69.)

C. Commission Conclusions

After holding hearings on the matter, the Commission concluded that: (1) Kist-ler unintentionally violated section 1103(a) of the Act on June 17, 2002, when he voted to authorize Roth to pursue construction of the LLAS facility because, at the time, Kistler was engaged in business with Roth regarding the Transportation Facility;⁸ (2) Kistler violated section 1103(f) of the Act on July 12, 2002, when his company entered into a subcontract with Cornerstone for construction of the Transportation Facility because the Board did not award the contract with Roth through an open and public process, i.e., through competitive bidding; and (3) Kist-ler violated section 1103(f) of the Act on June 17, 2004, when his company entered into a subcontract with Roth for construction of the LLAS facility because the Board did not award the contract with Roth through an open and public process, i.e., through competitive bidding.

The Commission recognized that Kistler did not intentionally violate section 1103(f) of the Act, noting that, in entering into the contracts with Roth, Kistler had relied on CLIU administrators and the Solicitor.⁹ The Commission stated, “Kistler erroneously believed that [despite the Board’s failure to seek competitive bids] he could lawfully enter into the aforesaid subcontracts.” (Commission’s op. at 80.) Kistler now petitions this court for review.¹⁰

II. The Violations

In a proceeding before the Commission, the Commission has the burden of proving a violation of the Act. Pulice v. State Ethics Commission, 713 A.2d 161 (Pa.Cmwlth.), appeal denied, 557 Pa. 642, 732 A.2d 1211 (1998). In order to find a violation of the Act, at least four members of the Commission must find clear and convincing proof of a violation. Section 1108(g) of the Act, 65 Pa.C.S. § 1108(g). Clear and convincing proof is evidence that is so clear, direct, weighty and convincing that it enables the trier of fact to come to a clear conviction, without hesitance, of the truth of the precise facts in issue. In re Adoption of Charles E.D.M., 550 Pa. 595, 708 A.2d 88 (1998).

A. Open and Public Process

Kistler first argues that the Commission erred in concluding that the “open and public process” in section 1103(f) of the Act must be a competitive bidding process. We agree.

Section 1103(f) of the Act allowed Kist-ler to enter into a subcontract with Roth for construction of the facilities if “the contract [between the CLIU and Roth was] awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded.” 65 Pa.C.S. § 1103(f).

Initially, we point out that, in setting forth the purpose of the Act, the legislature understood that “clear guidelines are needed in order to guide public officials ... in their actions. Thus, the General Assembly ... intends to define as clearly as possible those areas which represent conflict with the public trust.” Section 1101.1(a) of the Act, 65 Pa.C.S. § 1101.1(a) (emphasis added). Section 1103(f) of the Act does not clearly define the “open and public process” as a competitive bidding process.

Indeed, when the legislature intends to define an “open and public process” as a competitive bidding process, the legislature makes its intent clear. For example, section 6017(c)(3) of the Pennsylvania Convention Center Authority Act states that certain individuals shall not enter into a contract valued at $500 or more “unless the contract has been awarded to the lowest responsible bidder through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded.” 64 Pa.C.S. § 6017(c)(3) (emphasis added). Section 2899.16(c)(3) of the Third Class County Convention Center Authority Act¹¹ also states that certain individuals shall not enter into a contract valued at $500 or more “unless the contract has been awarded to the lowest responsible bidder through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded.” 16 P.S. § 2399.16(c)(3) (emphasis added). The fact that the phrase “to the lowest responsible bidder” does not appear in section 1103(f) of the Act indicates that the “open and public process” requirement in that provision may be satisfied without competitive bidding.

Moreover, interpreting the words “open and public process” in section 1103(f) of the Act to mean a competitive bidding process would lead to absurd and unreasonable results.¹² In this regard, we note that, under section 511 of the Commonwealth Procurement Code, (the Procurement Code), there are exceptions to the general rule that “all Commonwealth agency contracts shall be awarded by competitive bidding.” 62 Pa.C.S. § 511.

For example, a contract may be awarded without competition if it is determined that only a single contractor is capable of providing the supply, service or construction.¹³ Section 515(1) of the Procurement Code, 62 Pa.C.S. § 515(1). If we were to interpret “open and public process” in section 1103(f) of the Act to mean only a competitive bidding process, then it would be a violation of the provision for a public official who is the only contractor capable of providing a service to enter into a contract for that service.

Similarly, section 516 of the Procurement Code allows an agency to make an emergency procurement when there is a threat to the public health, welfare or safety, or when circumstances outside the control of the agency create an urgency of need that does not permit formal competitive bidding. 62 Pa.C.S. § 516. If we were to interpret “open and public process” in section 1103(f) of the Act to mean only a competitive bidding process, then it would be a violation of the provision for a public official with the means to avert a threat to public health, welfare or safety, or satisfy an urgent need, to enter into a contract to address the emergency.

It is absurd and unreasonable to find a public official in violation of the Act for entering into a contract for a service that only he can provide or for a service that is needed in an emergency. Thus, we conclude that the Commission erred in construing the words “open and public process” in section 1103(f) of the Act to mean only a competitive bidding process. Because of the Commission’s legal error, the Commission failed to prove by clear and convincing evidence that the contracts in this case were not awarded through an “open and public process.” ¹⁴

B. LLAS Vote

Kistler also argues that the Commission erred in concluding that he violated section 1103(a) of the Act by voting on June 17, 2002, to authorize Roth to pursue the construction of the LLAS facility. We agree.

Under section 1103(a) of the Act, no public official shall engage in conduct that constitutes a conflict of interest. “Conflict of interest” is defined, in pertinent part, as follows:

Use by a public official ... of the authority of his office ... or any confidential information received through his holding public office ... 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.

Section 1102 of the Act, 65 Pa.C.S. § 1102.

Initially, we set forth in a timeline the sequence of events showing the overlap between Kistler’s involvement in the Transportation Facility and his vote on the LLAS facility project.

March 18, 2002 — At the Board meeting, Kistler resigned from the building committee because of his possible involvement in the construction of the Transportation Facility. Kistler abstained from a vote to make a Roth firm the Board’s agent in pursuing a lease-purchase agreement for the Transportation Facility property, but Kistler voted to authorize a company to study a mold problem at the LLAS facility on property that the Board leases.

May 2, 2002 — Roth gave Kistler an initial commitment to use a Kistler company to build the Transportation Facility. May 15, 2002 — The Board received the findings and recommendations of the company conducting the study of the mold problem at the LLAS facility.

May 28, 2002 — Roth faxed Kistler a memo containing the color sequences for the Transportation Facility’s roof, gutters, downspouts and sidewalk panels.

June 17, 2002 — At the Board meeting, Kistler voted to terminate the LLAS facility lease. On a separate motion, Kistler voted to authorize Roth to pursue construction of a new LLAS facility, having no idea that he would be involved in that construction.

June 29, 2002 (approximately) — Roth made a definite commitment to Kistler for the Transportation Facility building. July 12, 2002 — Roth and Kistler executed an agreement for the Transportation Facility.

July 15, 2002 — At the Board meeting, the Board approved the agreement for the Transportation Facility, and Kistler abstained.

(Commission’s Findings of Fact, Nos. 25-26, 31-34, 50-53; Commission’s op. at 66-68, 74.)

The timeline shows that, once Kistler realized that he might be involved in the construction of the Transportation Facility, he resigned from the building committee and abstained from every vote on the Transportation Facility. The LLAS facility was a completely different matter. Because of a mold problem, the Board voted on June 17, 2002, to terminate its lease for the LLAS facility. Having done so, the Board needed to find another location for the LLAS facility. Someone, not Kistler, moved to authorize Roth to pursue the matter. Kistler voted in favor of the motion in order to remedy the situation caused by the mold problem, not in order to give business to Roth so that Roth would make a final commitment to Kistler for the Transportation Facility contract.

Indeed, the Commission found that Kist-ler unintentionally used his LLAS vote to obtain the Transportation Facility contract with Roth. However, because Kistler did not intend there to be any connection between his LLAS vote and the Transportation Facility contract with Roth, one cannot logically say that Kistler “used” his vote to obtain that contract. Thus, we conclude that when Kistler cast his LLAS vote on June 17, 2002, he did not violate section 1103(a) of the Act.¹⁵

Accordingly, we reverse.

Judge BUTLER concurs in the result only.

ORDER

AND NOW, this 17th day of October, 2008, the order of the State Ethics Commission, dated June 29, 2007, is reversed.

1 . 65 Pa.C.S. §§ 1103(a) and 1103(f). Section 1103(a) of the Act states, "No public official ... shall engage in conduct that constitutes a conflict of interest.” 65 Pa.C.S. § 1103(a). Section 1103(f) of the Act provides, in pertinent part, as follows:

No public official ... or any business in which the person ... is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official ... 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 ... 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.

65 Pa.C.S. § 1103(f).

2 . All of the Board's public meetings are advertised in advance, with the Board’s agendas given to the media, and are open to the public. (Commission’s op. at 70.)

3 . Kistler and the Solicitor both testified that Kistler disclosed his potential involvement in the construction of the Transportation Facility. (Commission’s op. at 64-65.)

4 . The CLIU had executed a Sales Agreement to purchase property for the Transportation Facility. (Commission’s op. at 62.)

5 . On August 19, 2002, Kistler filed two Conflict of Interest Abstention Memoranda, stating that he abstained from votes on March 18, 2002, and July 15, 2002, because he may be involved in construction of the Transportation Facility. (Commission’s op. at 65-66.) Kist-ler filed the documents pursuant to section 1103(j) of the Act, which provides:

Any public official ... 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....

65 Pa.C.S. § 1103(j) (emphasis added). The Commission declined to address whether, in filing the documents, Kistler complied with this provision. (Commission’s op. at 74.)

6 . Kistler testified that, in abstaining, he indicated that he might be involved in the construction of the building. On November 17, 2003, he filed an abstention memorandum stating that he had worked for Roth in the past. (Commission's op. at 68.)

7 . Kistler testified that, in abstaining, he indicated that he might be involved in the construction of the building. (Commission’s op. at 69.)

8 .The Commission explained that Kistler’s violation was unintentional because he voted based on the legal advice he received from the Solicitor; the Commission further stated that it was unfortunate Kistler did not seek an advisory on the matter. (Commission’s op. at 75.)

9 . A public official who acts in good faith reliance on a written, non-confidential opinion of the solicitor of the political subdivision, or upon the solicitor’s opinion publicly stated at an open meeting and recorded in the official minutes, shall not be subject to criminal penalties, unless the solicitor rendered the opinion under duress or as a result of collusion with the public official to violate the Act. Section 1109(g) of the Act, 65 Pa.C.S. § 1109(g).

10 . Our scope of review is limited to determining whether constitutional rights were violated, whether the adjudication is in accordance with the law and whether the necessary findings of fact are supported by substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa.C.S. § 704.

11 . Act of August 9, 1955, P.L. 323, added by section 3 of the act of November 3, 1999, P.L. 461, 16 P.S. § 2399.16(c)(3).

12 . In ascertaining the intention of the General Assembly in the enactment of a statute, we presume that the General Assembly does not intend a result that is absurd or unreasonable. Section 1922(1) of the Statutory Construction Act of 1972, 1 Pa.C.S. § 1922(1).

13 . We note that Keegan testified with respect to the Transportation Facility that “there was no other property or facility to meet the CLIU's needs.” (Commission's op. at 67.)

14 .The evidence shows that there were public meetings with discussions about the intention to build the facilities and to enter into contracts with Roth, that the meetings were advertised and that the agendas were distributed to the media. (Commission's op. at 79.) Moreover, there is no evidence suggesting that the proposals considered and the contracts awarded were not subsequently disclosed to the public.

15 . In concluding otherwise, the Commission relied on Snyder v. State Ethics Commission, 686 A.2d 843 (Pa.Cmwlth. 1996), in which a township supervisor voted on two projects while actively engaged in business relationships with respect to those projects. That is not the situation here. Once Kistler became involved with Roth on the LLAS project, he cast no more votes on that project.

The Commission also relied on Yocabet v. State Ethics Commission, 109 Pa.Cmwlth. 432, 531 A.2d 536 (1987), in which this court held that a public official violated the conflict of interest provision of the Act, even though he did not intend to do so, where he voted to appoint himself secretary/treasurer of the township and receive compensation for the position that was not set in accordance with law. In other words, the public official’s vote led directly to illegal financial gain. However, as indicated above, in this case, there is no evidence that Kistler’s vote on the LLAS facility led directly to the Transportation Facility contract.