Court Cases

12/30/09 Formal Guidance from the PA House Committee on Ethics for Members of the PA Legislature and Staff Associated with Nonprofits.  As a result of the recent Pennsylvania Supreme Court decision in Rendell v. Pennsylvania State Ethics Commission, 983 A.2d 708 (November 30, 2009), the House Committee on Ethics issues the following guidance for Members and staff associated with nonprofit entities.  This far reaching court decision essentially expands the reach of the term “business.”  Specifically, the court clarified in this ruling that nonprofit entities should be treated the same as for-profit businesses when analyzing potential conflicts of interests violations under the State Ethics Act.  Moreover, while this is a brand new interpretation of the law by the court, it is important to note that this term has existed in the statutory language since 1978.  Formal Guidance

11/30/09 State Supreme Court Reverses Lower Court, in DiBerardinis and McGinty Case. The Pennsylvania Supreme Court overruled a lower court opinion, and found in favor of the State Ethics Commission.  The High court held that cabinet secretaries Michael DiBerardinis former Secretary of the Department of Conservation and Natural Resources (DCNR) and Kathleen McGinty former Secretary of the Department of Environmental Protection (DEP) violated the State’s Ethics Act when their departments awarded grants to 2 nonprofits that were linked to their spouses. In 2007, the State Ethics Commission issued advisory rulings (in advance of a potential violation) stating that Secretaries McGinty and DiBerardinis would violate the State’s conflict-of-interest laws if they were to approve department grants to organizations that were closely linked to their spouses.

In 2007, the spouses of Mr. DiBerardinis and Ms. McGinty were associated with nonprofit entities. Joan Reilly was the manager of the Pennsylvania Horticultural Society (PHS) and Secretary DiBerardinis’ wife. Reilly oversaw a PHS program in Philadelphia.  Dr. Karl Hausker was a consultant for Enterprising Environmental Solutions, Inc. (EESI) and Secretary McGinty’s husband.  McGinty’s department gave a grant to a nonprofit that, paid $4,000 to Hausker for work unrelated to the grant.  In the past, PHS applied for grants to DCNR, and EESI applied for grants to DEP.  The advisory opinion was requested in advance of any actual ethics violation.

Where nonprofits are concerned, the Supreme Court concluded that the term “business,” as defined by Section 1102 of the State Ethics Act, does include nonprofit entities. So the ethics act would be applicable. In practical terms, a conflict of interests would arise if a public official grants state funding to a nonprofit that is closely associated with one of his/her family members. The decision seems to allow for the conflict to be avoided however, if someone other than the public official is selected to approve grants in such cases.

While the ruling highlights the disagreement between the Governor and the State Ethics Commission, it ultimately vindicates the State Ethics Commission officials who for the past two years have been subjected to harsh criticism for their position.

Summary 
Court Ruling
Read the concurring opinion at http://www.aopc.org/OpPosting/Supreme/out/J-43c&d-2009co.pdf  for a mind-numbing procedural analysis of advisory opinions.

7/16/07 Supreme Court Addresses Faith-Based Funding; Sidesteps Main Issue. On June 25, the US Supreme Court ruled in the first "faith-based funding" case to reach it, that in this case they would not decide issues of what types of grants to religious groups violate the United States Constitution. Hein v. Freedom from Religion Foundation, Inc was based on a suit by a taxpayer organization against the White House Office of Faith Based and Community Initiatives. The Court held that the taxpayer group did not have standing to bring the lawsuit.

As a result, a number of issues will have to wait for further litigation, including whether federal or state governments may make grants to faith-based organizations that restrict participants to members of a particular religious faith; require participants to attend religious services; require staff members to be members of a particular religious faith; or discriminate in hiring such as refuse to hire homosexuals.

For a copy of the Court Opinion go to http://www.supremecourtus.gov/opinions/06pdf/06-157.pdf. 

(written by Michael A. Sand, head of Sand Associates, a nationwide management consulting group based in Harrisburg.)