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The Pennsylvania State Ethics Commission was founded in 1978 to bolster confidence in the integrity of Pennsylvania government. The commission is an independent state agency that enforces the Ethics Act, a statute controlling the financial dealings of public employees and officials (generally including everyone who is elected, appointed or employed in a responsible position by a Pennsylvania unit of government.) This article discusses the commission’s work and comments on its recent predilection to refer cases for criminal prosecution as opposed to civil resolution. The commission has three main tasks. First, the commission administers and enforces the financial disclosures required of state officials and employees. Second, the commission issues written opinions to state officials and employees who have questions regarding their responsibilities under the Ethics Act. Third, the commission investigates alleged violations of the Ethics Act and either pursues administrative remedies or refers matters for criminal prosecution. In the past several years, the commission has become more aggressive in pursuing criminal cases. It investigates these cases and then turns them over to either the state Attorney General’s Office or the U.S. Attorney’s Office for prosecution. The Ethics Act requires state officers and employees to file annual ethics disclosure forms listing their interests in real estate, any creditors owed over $6,500, any outside income over $1,300, any expense reimbursements from outsiders of over $650, any business entity they are associated with, and any gifts over $250 in value, except for those from family and friends. Second, the Ethics Act bans honoraria, which are broadly defined to include any remuneration of any type in exchange for or in appreciation of speaking, presence at an event, consultation, or the like. Third, the Ethics Act bans conflicts of interest, which are defined to include any use of one’s official position for personal advantage. Finally, the Ethics Act bans employees from dealing with their former agencies for one year after leaving state employment, and it bans higher-ranking officials from such dealings for two years after leaving office. Neither ban applies to attorneys. In the past, the commission has been tenacious in pursuing economic penalties. The Ethics Act requires a violator to repay three times the amount recovered in violation of the act. The commission enforces financial penalties through contempt citations filed in the Commonwealth Court. Recently, the commission has become aggressive in pursuing criminal remedies. Some recent criminal cases brought under the Ethics Act are discussed below. Criminal Referrals Criminal cases under the Ethics Act run the gamut, from the receipt of a few college football tickets to six-figure bribes. The typical case is mundane, involving a government employee who receives a payment from some outside source in excess of either the gift limit ($650) or the outside income limit ($1,300). The payment comes to the attention of his or her co-workers through loose lips, and is reported by the jealous colleague. Almost without fail, the employee or official will omit the payment on the annual ethics disclosure form. The investigators at the commission need only couple proof of the payment with a copy of the relevant ethics disclosure form to make out an Ethics Act violation. The Ethics Act does not require corrupt intent. Of course, where such scienter exists, it increases the likelihood of criminal prosecution. After gathering their “proof,” the commission investigators typically contact the offending official or employee and ask for their version of the events. Many otherwise savvy public officials have walked in to an interview with the commission under the mistaken belief that “the worst that could happen is a slap on the wrist.” Sadly, these officials are oblivious to the seriously compromised position that they find themselves in, and the potentially disastrous ramifications of the interview. Many officials deny receipt of the payment (bad move) or disclaim knowledge of the need to report the payment (not much better). Regardless, even before the interview begins, the commission already has proven an offense. The commission’s case only gets stronger as the interview continues. To make matters worse, after the interviews, the briber and the bribee typically race to the prosecutor’s office, seeking a plea and lenient treatment. The winner of the race provides testimony against the loser. Where the briber wins the race, he or she may be offered immunity in exchange for testimony against the official or employee. Recent Criminal Referrals Several recent cases demonstrate the range of situations that the commission now deems appropriate for criminal prosecution. A constable in Wilkes-Barre did not file a statement of financial interest despite repeatedly being requested to do so. He was smart enough to hire a lawyer before meeting with commission investigators. Nevertheless, the commission referred the case for prosecution. The constable’s attorney then convinced the prosecutor to allow the constable to file the ethics disclosure form and to pay a $250 civil assessment in lieu of criminal charges. In another case, a borough councilman accepted gratuities from business interests but did not include the gratuities on his ethics disclosure form. The commission found out about the gratuities through a tip and pursued the matter, bringing in the local district attorney’s office. After a torturous procedural history involving the entry and withdrawal of guilty pleas on several occasions, the councilman was eventually allowed to plead guilty to offenses that would preserve his right to a governmental pension. In this case, there was little evidence of any quid pro quo related to the gratuities. Thus, the district attorney likely could not have proven bribery. The district attorney, however, had little difficulty proving the councilman’s failure to list the gratuities on the ethics disclosure form. Thus, the councilman had little choice but to work out a deal. He was lucky, frankly, to retain his pension. In another case, the mayor of a borough took money to perform marriage ceremonies. The mayor deposited these funds into his personal bank account and ultimately donated them to a charity. Nonetheless, the arrangement was held to be a conflict of interest in violation of the Ethics Act. The court found that even though the mayor donated the money to a charity, the payments redounded to his private gain, as he garnered good publicity for his contributions. In a similar case, a township supervisor had township vehicles serviced at the garage where he worked. While the conflict of interest was apparent, the court exonerated the supervisor, holding that the less than $600 in profits to the garage were “de minimis.” In a more serious case, a management-level state employee accepted $90,000 in payments to direct loans and grants to several out-of-state companies relocating to Pennsylvania. The commission referred this case to federal authorities. The state official and several representatives of the out of state companies have entered guilty pleas to federal felonies. They await sentencing. Conclusion The state Ethics Commission has become increasingly aggressive in investigating potential violations and in referring matters for criminal prosecution. Given that the mere failure to report payments (without any improper motive) constitutes a crime, subjects and targets of Ethics Commission investigations are in great jeopardy. The simple solution, of course, is to not violate the Ethics Act in the first place. Those who find themselves under Ethics Commissions scrutiny, however, should immediately hire experienced counsel and proceed with extraordinary care. David M. Laigaie , a partner at Dilworth Paxson, heads the corporate investigations and white collar group. His areas of practice include health care fraud, securities fraud, tax fraud, export violations, pharmaceutical marketing fraud, municipal corruption, defense procurement fraud and public finance fraud. He regularly conducts internal corporate investigations. He can be reached at 215-575-7168 or [email protected]. Joseph U. Metz is a partner at Dilworth Paxson, where he is a member of the corporate investigations and white collar group. His areas of practice include white collar criminal defense and related litigation as well as internal corporate investigations. He has defended a number of officials and employees accused of violating the Ethics Act. He can be reached at 717-236-4812 or [email protected].

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