State: No ethics issue over water lease

The company that stands to make as much as $3 million as the consultant for Altoona’s proposed lease of its water and sewer systems was recommended for the job by the city’s Act 47 coordinator – the company’s sister firm.

That recommendation suggested enough of a potential conflict of interest that coordinator Stevens & Lee asked the state Department of Community and Economic Development – which hired Stevens & Lee as the city’s Act 47 coordinator in 2012 – for its opinion on the matter.

DCED lawyers didn’t object, according to DCED spokesman Steve Kratz.

“There was full disclosure,” Kratz said. “(Therefore) it was determined it was not a conflict.”

Had the parties tried to hide the issue, “it would have been a different story,” Kratz said.

“DCED signed off,” said Councilman Bruce Kelley, who initiated council’s interest in the potential lease.

Asked about the recommendation, Pennsylvania NewsMedia Association lawyer Melissa Melewsky had reservations, while adding that she isn’t an ethics expert.

The Ethics Act requires both “disclosure and abstention for public officials when there is a conflict of interest,” Melewsky said.

But ultimately, it’s for the state Ethics Commission to “figure out,” Melewsky said.

The Ethics Act states: “No public official or public employee shall engage in conduct that constitutes a conflict of interest.” The act defines conflict of interest as “use by a public official … of the authority of his office … for the private pecuniary benefit … [of] a business with which he … is associated.”

The precise relationship between coordinator Stevens & Lee and lease consultant Griffin Financial Group isn’t clear to Ethics Commission Executive Director Robert Caruso, who checked it out for the Mirror, so he’s not sure whether the recommendation constitutes a problem.

The Stevens & Lee website doesn’t explain the relationship exactly – although in an overview, the website says “Stevens & Lee/Griffin” is a “multidisciplinary professional services platform” that includes Griffin Financial Group.

Caruso suggested asking the state Corporation Bureau about the companies.

The bureau’s database lists the officers of Stevens & Lee and one Griffin “organizer” – who is not one of those officers.

Still, the issue is dicey enough on its face that if Stevens & Lee had asked, he would have suggested the firm obtain an “advisory ruling” from the commission before proceeding, Caruso said.

“The area is kind of gray,” Melewsky said, adding that the coordinator position is not that of “the typical public official.

Stevens & Lee attorney and shareholder John Espenshade is the leader of the Act 47 coordinator team – and is often referred to personally as the city’s coordinator.

Tom Martin, a member of the Altoona Water Authority, which could lose its operational role if the city leases the systems to some other organization, doesn’t think the conflict is OK.

“To me, that’s completely unethical,” Martin said. “Obviously, to me, it’s not independent advice.”

Martin said he was always conscious of potential conflicts when he was Altoona mayor and sought to eliminate them before they became problems.

When he learned of Stevens & Lee’s recommendation of Griffin, Councilman Mike Haire said he questioned it.

But ultimately, he concluded it wasn’t a problem, he said.

Many other parties besides Griffin will be looking at the water and sewer systems over many months, which eased his concerns, Haire said.

The percentage payment deal also won’t benefit Griffin unless it benefits the city, said Councilman Dave Butterbaugh.

Griffin’s incentive is to find the best lease price, he said.

Having a consultant affiliated with the coordinator might actually be advantageous because the companies can work together on the project, Butterbaugh said.