Ethics & completing the SEC-1 Form: the STATEMENT OF FINANCIAL INTERESTS

Ethics

statement of financial interest

About a week ago, we posted an article about the SEC-1 form: THE STATEMENT OF FINANCIAL INTERESTS. Each year political candidates seeking office, nominees, elected and appointed public officials, public employees and solicitors are supposed to truthfully complete the Form SEC-1.

Columbia news, views & reviews has requested and received the completed forms for several of the above positions from the Borough of Columbia and the School District of Columbia.

The instructions about how to complete the form are on the back of the form; they’re also here.

Last week, we spoke with a senior person at the Pennsylvania Ethics Commission about some of the questions we had.

Let’s take a look at some of the areas of concern we have about some of the forms submitted:

  • A few of the persons completing the forms left block 2 blank. Here’s what the instructions state: “List a business, governmental, home, or postal address.” According to the State Ethics Commission, not completing that line is just wrong. Some years ago, the Commission received complaints from some who had to complete the form; they did not want to list their home address. The Commission resolved that by indicating that the person completing the form could list a business, governmental or postal address instead. 
  • One of the persons completing the forms completed block 8 by listing the person’s home address. Block 8 states: REAL ESTATE INTERESTS: This section contains the address of any property which was involved in transactions (leasing, purchasing, or condemnation proceedings of real estate interests) with the Commonwealth or any other governmental body within the Commonwealth. If you have no direct or indirect interests in such a property, then answer “No.”
  • Several of the persons completing the forms left block 9 blank. According to the State Ethics Commission, here’s where there are real questionable responses. About half ot the completed forms we reviewed showed no creditors. The form states: CREDITORS: This section contains the name and address of any creditor and the interest rate of any debt over $6,500 regardless of whether such debt is held solely by you or jointly by you and any other individual, including your spouse, where each obligor is fully responsible for the obligation. A joint obligation with other persons, for which the filer is responsible only for a proportional share that is less than the reporting threshold, is not required to be reported. DO NOT REPORT a mortgage or equity loan on your home (or secondary home), or loans or credit between you and your spouse, child, parent or sibling. Car loans, credit cards, personal loans and lines of credit must be listed on the form if the balance owed was in excess of $6,500 at any time during the calendar year. If you do not have any reportable creditor, then answer “No.” During our conversation with the State Ethics Commision spokesperson, we learned “this is a real red flag.” We asked what percentage of forms completed across the state showed NO CREDITORS. The response was, “Very few.” Most people, we were informed have credit card debt or car loans or home repair loans. 
  • When it comes to block 10, we noticed that some left that blank. That’s entirely possible, though not likely. Block 9 states: Direct or Indirect Sources of Income: DIRECT OR INDIRECT SOURCES OF INCOME: List the name and address of each source of $1,300 or more of gross income regardless of whether such income is received solely by you or jointly by you and another  individual such as a spouse. “Income” includes any money or thing of value received or to be received as a claim on future services or in recognition of services rendered in the past, whether in the form of a payment, fee, salary, expense, allowance, forbearance, forgiveness, interest, dividend, royalty, rent, capital gain, reward, severance payment, proceeds from the sale of a financial interest in a corporation, professional corporation, partnership or other entity resulting from termination/withdrawal therefrom upon assumption of public office or employment or any other form of recompense or combination thereof. The term refers to gross income; it includes prize winnings and tax-exempt income but does not include gifts, governmentally mandated payments or benefits, retirement, pension or annuity payments funded totally by contributions of the public official or employee, or miscellaneous, incidental income of minor dependent children. If you do not have ANY reportable source of income, then answer “No.” Curiously, some persons who own businesses listed no income from those businesses.
  • Equally intriguing are some of the responses for block 13. OFFICE, DIRECTORSHIP OR EMPLOYMENT IN ANY BUSINESS ENTITY: List both the name and the address of the business entity for any office that you hold (for example, President, Vice President, Secretary, Treasurer), any directorship that you hold (through service on a governing board such as a board of directors), and any employment that you have in any capacity whatsoever, as to any business entity. This section focuses solely on your status as an officer, director or employee, regardless of income. If you hold no such office, directorship or employment, then answer “No.” Nearly all checked that NONE block.
  • Block 14 states:  Financial Interest in any Legal Entity in Business for Profit: FINANCIAL INTERESTS: List the name and address and interest held in any business for profit of which you own more than 5% of the equity or more than 5% of the assets of economic interest in indebtedness. If you do not have any such financial interest to report, then answer “No.” Here, again, it’s most curious that some claim elsewhere on the form to own a business, yet do not complete this block.
  • None completed block 15 and that’s entirely likely, though in previous years with different people, we’ve seen that happen (and the block was not completed). Block 15 states “TRANSFERRED BUSINESS INTERESTS: List the name and address of any business as to which you transferred a financial interest (as defined in Section 14) to a member of your immediate family (parent, spouse, child, brother or sister), as well as the interest held, relationship to the individual, and date of transfer. If you did not transfer any such business interest, then answer “No.”

At the very bottom of the SEC-1 (page 3) is this line: THIS FORM IS CONSIDERED DEFICIENT IF ANY BLOCK ABOVE IS NOT COMPLETED.


So, what’s the penalty for failure to complete the form at all. Or failing to complete it accurately? Willfully or by innocent ignorance?

The State Ethics Commission has responsibility for the 2,560 municipal jurisdictions in the Commonwealth. And for 501 school districts. Clearly, the limitation of staff at the Commission renders it impossible for a comprehensive audit of all the SEC-1 forms filed. So the Commission does sampling inspections. Unless there’s a claim of an ethics violation, the Commission’s staff randomly inspects municipalities and school districts to verify the completeness and accuracy of the SEC-1 forms. The forms are kept at the separate municipalities and school district offices.

When violations are identified, the Commission has to determine whether there was purposeful intent to hide information or whether ignorance was the case. In any case, the punishment is relatively mild.

” … failure to timely file a Statement of Financial Interests or the filing of a deficient statement may result in a civil penalty of not more than $25 per day up to $250.”

Since the State Ethics Commission and the penalties it may impose are creations of the Commonwealth’s Legislative Actions, any actions to increase the penalty requires legislative action.


NOTE: A public official of a political subdivision who acts in good faith reliance on an opinion of the political subdivision solicitor shall not be subject to the criminal or treble damage penalties of the Ethics Act if the solicitor’s opinion was written and non confidential or was publicly stated at an open meeting of the political subdivision and recorded in the official meeting minutes.

2 comments

  1. Re: the SEC forms: I’m not sure I sent this before, but it’s worth repeating: “Rather than love, than money, than fame, give me the truth.” – Henry David Thoreau

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