OFFICIAL OPINION No. 22

OFFICIAL OPINION No. 22 State Adverse Interest Act-Act of July 19, 1957, P. L. 1017-Conduct by Com- monwealth advisors, consultants and employees prohibited. The State Adverse Interest Act applies only to persons working for and activi- ties involving the executive branch of the state government and a small number of independent agencies. The State Adverse Interest Act prohibits certain covered persons from having an adverse interest in a contract with certain agencies in the executive branch of state government or with a covered independent agency. A state employee as defined in the act is prohibited from representing another person for remuneration before a covered state agency or on any matter involving a covered state agency. Harrisburg, Pa., October 16, 1957. Honorable John H. Ferguson, Secretary of Administration, Harris- burg, Pennsylvania. Sir: You have requested our advice concerning the Act of July 19, 1957, P. L. 1017, 71 P. S. §§ 776.l to 776.81, the so-called "State Adverse Interest Act." Specifically, you ask what conduct on the part of Commonwealth employees is prohibited by this act. Your request for advice is in general terms and does not present a specific situation or set of facts for our analysis. Our advice, there- fore, must similarly be given in general terms; and this opinion sets forth such clear standards of conduct as are required by the act. Where possible, we have included specific examples of proscribed con- duct as well as of conduct not prohibited by the act. It is obvious that this opinion cannot anticipate and, thus, cannot resolve all possible questions which may arise. Individual problems will re- quire individual answers. To this end the Department of Justice already has advised the heads of the various departments and com- missions of the state government that we stand ready to assist any person who feels that he has an individual problem arising under the act. We now reiterate our offer of assistance. Initially, it should be noted that the act is written in terms limiting both the persons and activities covered. The basic qualification is found in use of the term "state agency,'' for both a person who works for a "state agency" and an activity involving a "state agency" must 1 Act No. 451, 1957 Session of the' General Assembly. OPINIONS OF THE ATTORNEY GENERAL 109 be present before the act applies2 • The definition of "state agency" is as follows: "(1) State agency: a department, board, commission or other part of the executive branch of the government of the Commonwealth or the Pennsylvania Turnpike Commission, the General State Authority or other State Authority created by a statute which declares in substance that such authority performs or has for its purpose the performance of an essential governmental function and that its bonds shall not pledge the faith or credit or be obligations of the Commonwealth." This definition excludes not only all parts of government at the local levels, but also both the judicial and legislative branches of the state government. The exclusion of the legislative branch applies not just to such an obviously legislative body as the General Assembly; it applies equally to the Public Utility Commission3 and to the Milk Control Commission4, both of which are agents of the legislature. Thus, the scope of the act is restricted to persons working for and activities involving the executive branch of the state government and the small number of named agencies operating in varying degrees apart from the executive branch5. The remainder of the act is devoted to outlining the persons and activities covered. The former are divided into three categories: (I) state advisor, (2) state consultant and (3) state employee. A "state advisor" is defined as follows: "(2) State advisor: a person who performs professional, scientific, technical or advisory service for a State agency or serves as a member of an advisory board, professional li- censing board or similar part of a State agency and who receives no compensation for his service other than reim- bursement for expenses incurred by him in furnishing such service." This category is limited to persons who receive no compensation- per diem or otherwise-for their services except reimbursement for their expenses. An example of such person would be a citizen mem- ber of the State Planning Board. 2 The entire act is written in terms of persons who serve state agencies and of activities by such persons which involve state agencies. •See Commonwealth ex rel. v. Benn, 284 Pa. 421, 131 Atl. 253 (1925) . •See Snyder v. Barber, 378 Pa. 377, 106 A. 2d 410 (1954). •The Pennsylvania Turnpike Commission and the General State Authority are specifically named. The only other authorities which appear to come within the definition are the State Highway and Bridge Authority, the State Public School Building Authority and the parking authorities incorporated under the Act of June 5, 1947, P. L. 458, as amended, 53 P. S. §§ 341 to 356 (see Pittsburgh Public Parking Authority Petition, 366 Pa. 10, 76 A. 2d 620 (1950)). 110 OPINIONS OF THE ATTORNEY GENERAL A "state consultant" is defined as follows: "(3) State consultant: a person who as an independent contractor performs professional, scientific, technical or ad- visory service for a State agency and who receives a fee, honorarium or similar compensation for such service." The restriction of "state consultant" to an "independent contractor" excludes any person who serves the state and receives compensation therefrom as a result of an appointment by the Governor or other official. The only persons covered are those who serve the state under contractual arrangement. An example of this would be a professional management firm which contracts with a state department to review its internal procedures. The final category is "state employee": " ( 4) State employe: an appointed officer or employe in the service of a State agency and who receives a salary or wage for such service." This title covers persons serving at all levels of activity (i.e. officers at the higher levels, employees at the lower). It includes members of the various boards and commissions and the administrative officers and employees thereof. This conclusion applies equally to persons who receive per diem compensation, such as members of the State Civil Service Commission, and to those who receive an annual salary, such as members of the Labor Relations Board or Pennsylvania Turnpike Commission. To sum up the discussion thus far, the only persons subject to the provisions of the act are the following: (I) uncompensated advisors to and members of boards in the executive branch of the state govern- ment, the Pennsylvania Turnpike Commission and the General State or other state Authority; (2) compensated contractors who perform professional or similar services for any of the above; and (3) com- pensated officers and employees of any of the above. Inquiry into a person's status is not the only one that must be made, however. If it is established that a person does come within one of the three categories, it is then necessary to determine if a particular activity is proscribed. These activities involve two types of situations: (I) adverse interest in a contract6 and (2) representa- tion7. In each case the activity must be with a "state agency"; 0 Act of July 19, 1957, P. L. 1017, §§ 3, 4 and 5, 71 P. S. §§ 776.3, 776.4 and 776.5. 7 Id., § 7, 71 P. S. § 776.7. OPINIONS OF THE ATTORNEY GENERAL 111 that is, a covered person is not forbidden from carrying on representa- tion before or having an adverse interest in a contract with a legis- lative or judicial agency of the state government or with an agency of local government. To have an adverse interest in a contract means to be a party (or stockholder, partner or agent of a party), other than the Common- wealth or a "state agency", to a contract for the "acquisition, use or disposal by a state agency of services or of supplies, materials, equip- ment, land or other personal or real property8." Excluded from this is the contract between a covered person and the state respecting his own personal services to the state9. The following dealings are then prohibited: (1) A "state advisor" or "state consultant" is not allowed to have an adverse interest in a contract with a "state agency" only if the agency involved is the one in which he serves and if he recommended either the making of the contract or a course of action which con- templated the making of the contract1°. If both of these conditions are not present, the advisor or consultant has not violated the act. (2) A "state employe" is not allowed to deal in any way with a contract in which he has an adverse interest. This includes in- fluencing or attempting to influence the making of such contract or the supervising of such contract, and the restriction is not limited to contracts with the agency in which the person is employed11. How- ever, he is not prevented merely from having an adverse interest in a contract with a non-employing state agency although he is so pro- hibited where his own agency is involved12• Restrictions on representation are limited to "state employees" only. Except in performing his duties as an employee, such a person is for- bidden to represent for remuneration any other person before a state agency or on any matter involving a state agency13. Since indirect representation is included, a business or professional partner of a 8 Id., §§ 2(6) and 2(5), 71 P. S. §§ 776.2(6) and 776.2(5) . •Id., § 2(5), 71 P. S. § 776.2(5). 10 Id., § 3, 71 P. S. § 776.3. n Id., § 4, 71 P. S. § 776.4. "Id. § 5 71 P. S. § 776.5. Note, however, that while the act does not so preven't an' employee a mere interest in certain contracts is forbidden by the Pennsylvania Constitution, Article III, § 12, and by "The Administrative Code of 1929" Act of April 9, 1929, P. L. 177, § 516, 71 P. S. § 196, which implements the constitutional provision. These restrictions must be read together with § 5 of the "State Adverse Interest Act." Note also, § 690 of "The Penal Code," Act of June 24, 1939, p _ L. 872, 18 P . S. § 4690, with regard to architects and engineers who are state employees. 13 Id., § 7, 71 P. S. § 776.7. 112 OPINIONS OF THE ATTORNEY GENERAL state employee may not so act without subjecting the employee to the sanctions of the statute. We reiterate that representation by a state employee ·before a legislative or judicial state body or before a local body is not forbidden. Also, routine actions on behalf of others (e.g. filing of a tax return or of articles of incorporation) do not come within the concepts of "pending before" or "involving" and may be engaged in by a state employee. We caution, however, that such routine matters may subsequently become non-routine (e.g. if the state assesses additional tax or refuses to accept the articles of in- corporation) ; if so, the employee must withdraw. The act contains two sanctions. First, no person who has an ad- verse interest in a contract with a state agency may become an employee of that agency until he divests himself of such interest14. Second, violation of any of the provisions of the act subjects the violator to criminal penalties and forfeiture of any office or employ- ment held by him in a state agency15 We hope this general outline is of assistance to you. We want to emphasize that this act in no way precludes the heads of the various departments, boards and commissions from promulgating such ad- ministrative regulations concerning their employees' activities which might involve conflicts of interest as they see fit. Such administra- tive regulations may be more stringent than this act although they may not be more lenient or contravene its provisions in any other way. Very truly yours, DEPARTMENT OF JUSTICE, HARRY J. RUBIN' Deputy Attorney General. THOMAS D. McBRIDE, Attorney General.