Violation of the Public Official and Employee Ethics Act; Restitution for Indirect Financial Gain; Conflict of Interest Exception
Sivick v. State Ethics Commission, 202 A.3d 814 (Pa. Cmwlth. 2019), allocatur granted Aug. 6, 2019, appeal docket 62 MAP 2019
The Supreme Court granted allocatur to consider whether a Township Supervisor’s participation in verifying Township payroll records for Township employees, including his son, constituted a prohibited conflict of interest in violation of Section 1103(a) of the Ethics Act and whether restitution may be ordered for an ethics violation where the individual who obtained financial gain was not a public official, but an immediate family member.
John P. Sivick (Sivick) was the Lehman Township Supervisor and Public Works Director subject to the Public Official and Employee Ethics Act (Ethics Act). Lehman Township (Township) is a “second class township with a three-member Board of Supervisors (Board).” Slip Op. at 2. From January 1994 to December 2017, Sivick was a member of the Board, which also included his time as the Public Works Director. Part of his job was to conduct all of the Township’s hiring as there was no formal hiring process in place. In 2009, the employee handbook (Handbook) was upgraded and approved and included a Nepotism Policy, which provided “detailed rules and regulations and contained a policy that prohibited the hiring of an individual if that person would supervise or be supervised by a member of the person’s immediate family.” Slip Op. at 2-3. In 2012, Sivick met with the other Township’s other Supervisors (Supervisors) to discuss his desire to hire Justin Sivick (Son), and it was mentioned that the Township would need to remove the Handbook’s Nepotism Policy. The Board removed the Nepotism Policy. Per the Township’s Solicitor’s advice, Sivick abstained from voting on the Handbook’s revision. No errata sheet reflecting the Handbook’s changes was created per Sivick’s instruction.
In March 2013, Son was included in the Township’s flagger course, even though he had not yet applied for employment in the Township. Sivick paid the $50.00 Township fee for the “Flagging Class.” Slip Op. at 4. In June 2013, Son applied to work for the Township in publics work maintenance, which resulted in Sivick approaching the Supervisors to approve Son’s employment at the meeting. Even though the meeting minutes did not reflect the approval of Son’s hiring, Son began working shortly after the meeting for the Township with a starting pay rate consistent with other employee pay rates. Every subsequent year until 2016, Son received raises. Township road crew employees, including Son, would complete time sheets for payment purposes that Sivick would review, verify, and sign before forwarding to the Township for additional review and issuing checks. Before being discharged in June 2016, Son received 81 pay periods from 2013 to 2016 earning a gross amount of $126,552.24.
In 2015, the Investigation Division of the State Ethics Commission received a complaint alleging Sivick violated the Ethics Act. The Commission conducted a full investigation, determined that Sivick violated the conflicts of interest provisions of the Ethics Act, and ordered Sivick to pay $30,000 in restitution to the Commonwealth. Sivick appealed to Commonwealth Court, arguing that the Commission erred when it concluded that Sivick committed a conflict of interest violation by verifying Township payroll records for Son because there is no evidence that Son acquired a pecuniary benefit to which he was not entitled and because Sivick’s son was a member of a class/subclass of employees subject to Sivick’s supervision. Sivick further argued that restitution may only be granted under the Ethics Act where a public official or public employee has obtained a financial gain in violation of the Ethics Act, thus, because Son – the only individual who obtained a financial gain – was not a public official or public employee, the Commission was not authorized to order restitution.
Commonwealth Court affirmed the Commission’s decision and found that Sivick’s review and forwarding of his Son’s payroll time sheets did not fall within the class/subclass exemption of the “conflict of interest” definition and thus, violated the Ethics Act, explaining:
Sivick’s actions were not broad conduct generally affecting a class – his employees. Instead, he reviewed each employee’s individual time sheet presumably to consider whether it accurately reflected that employee’s working hours. Thereafter, he issued approvals based on each such individual’s time sheet. We discern no error in the Commission’s analysis. Thus, Sivick’s argument is unfounded.
Slip Op. at 20.
Commonwealth Court further held that the Commission did not err nor abuse its discretion by ordering Sivick to pay the Commonwealth $30,000 in restitution, reasoning:
This Court cannot agree with Sivick’s interpretation. Section 1107(13) of the Ethics Act states, in pertinent part, that “[a]ny order resulting from a finding that a public official or public employee has obtained a financial gain in violation of this chapter may require the restitution plus interest of that gain to the appropriate governmental body.” Id. This Court interprets Section 1107(13) of the Ethics Act consistent with Section 1102 of the Ethics Act, which defines “conflict of interest,” in relevant part, as “[u]se by a public official or public employee of the authority of his office or employment . . . for the private pecuniary benefit of himself, [or] a member of his immediate family . . . .” 65 Pa.C.S. § 1102. Thus, the reference to “a finding that a public official or public employee has obtained a financial gain in violation of this chapter” in Section 1107(13) of the Ethics Act, 65 Pa.C.S. § 1107(13) (emphasis added), refers to a financial gain “benefit[ting the public official or public employee], [or] a member of his immediate family[.]” 65 Pa.C.S. § 1102. Any other interpretation would be illogical and result in an inconsistent application of the Ethics Act based solely upon who happened to benefit from the prohibited conduct. More importantly, this Court has already concluded that Sivick violated the Ethics Act by using the authority of his office for his Son’s private pecuniary benefit. Had Sivick not engaged in the improper conduct, the Board would not have rescinded the Nepotism Policy or hired his Son. Because Sivick’s Son’s salary was a direct consequence of Sivick’s use of his authority of office, it was “financial gain in violation of [the Ethics Act]” for which the Commission could order restitution. 65 Pa.C.S. § 1107(13). Accordingly, this Court rejects Sivick’s argument.
Slip Op. at 25.
The Supreme Court granted allocatur to determine:
1) Whether, under Section 1107(13) of the Public Official and Employees Ethics Act, 65 Pa.C.S. §§ 1101-1113, the State Ethics Commission, upon a finding that a public official or public employee violated the Act, has the authority to order restitution when the individual who obtained financial gain is not the public official or employee, but is an immediate family member of the public official or employee?
2) Whether the action of a public official or public employee reviewing and approving payroll records of a group of subordinate employees, one or more of whom is the public official’s or employee’s immediate family member, falls within the class/subclass exemption of the “conflict of interest” definition in the Public Official and Employee Ethics Act, 65 Pa.C.S. §§ 1101-1113?
As part of the courts’ ongoing Covid 19 response, the Supreme Court will hear oral argument in this case via video conference: www.pacourts.us/courts/supreme-court/may-2020-supreme-court-session.