CN 1992-237
Created By: Sheila LaCost on 01/20/1998 at 02:21 PM
Category: Ethics Rulings
Caption:


LOUISIANA BOARD OF ETHICS

DATE: December 18, 1997 OPINION NO.: CN 92-237
RE: In the matter of Kenneth Samaha, Sales Tax, Inc., and Georgia Gulf Corporation

The Commission on Ethics for Public Employees (the “Commission), at its September 14, 1994 and October 21, 1994 meetings, conducted a public hearing for the purpose of exploring the following:

CHARGES
1.
2.
3.
4.

On the basis of the testimony and evidence presented during the public hearing, the Commission, in an Opinion published August 28, 1995 concluded that Mr. Samaha violated Sections 1112B(4) and 1121A of the Code and that his corporation, Sales Tax, Inc., violated Section 1121C of the Code in essentially the manner set forth in the stated charges. The Commission concluded that Georgia Gulf Corporation violated Section 1117 of the Code by virtue of payments made to Mr. Samaha through Sales Tax, Inc. that Mr. Samaha and Sales Tax, Inc. were otherwise proscribed from receiving. The Commission imposed fines of $10,000 on both Mr. Samaha and Sales Tax, Inc., in solido, and on Georgia Gulf Corporation. The Commission also barred Mr. Samaha, either directly or through Sales Tax, Inc., from receiving compensation for assisting any person in any transaction involving the Department of Revenue and Taxation for a period of five-years’ reckoning from date of publication of the opinion and a corresponding imposition was made with respect to Georgia Gulf Corporation through its agent and representative, Mr. Robert Harrison.
The decision of the Commission was appealed to the Court of Appeal, First Circuit and by opinion dated June 28, 1996 the Court of Appeal remanded the matter to the "Commission" for further proceedings consistent with certain procedural guidelines set forth in its published opinion. The Court of Appeal instructed the Commission to render a new decision on the basis of the existing record while reserving the right of both the respondents and the staff of the Commission to offer supplemental evidence.
The Commission applied to the Supreme Court of Louisiana for supervisory review of the decision of the Court of Appeal and, after granting review, the Supreme Court of Louisiana published an opinion on May 9, 1997 affirming the decision of the Court of Appeal and remanding the matter to the Commission for further proceedings consistent with the pronouncements contained therein.
While these proceedings were pending first before the Court of Appeal and thereafter before the Supreme Court of Louisiana, the Legislature by Act 64 of the 1996 First Extraordinary Session abolished the Commission on Ethics for Public Employees and replaced the Commission with the Louisiana Board of Ethics. The Louisiana Board of Ethics is statutorily authorized to take such action as would otherwise have been appropriate under the circumstances by the Commission.
Accordingly, the Board scheduled these proceedings for a public hearing and for the purpose of reaching a new determination on the existing record while contemporaneously providing to counsel the right to elicit such additional testimony as might be appropriate under the circumstances.
On the eve of the scheduled public hearing the Board, on the basis of the record of the testimony and evidence previously introduced before the Commission, on the basis of an additional stipulation submitted jointly by counsel for the Board and for the Respondents, with the consent of all parties concerned, the Board now makes among others the following essential:
I.
FINDINGS OF FACT
1.
Kenneth Samaha was employed by the Department of Revenue and Taxation from February, 1982 through June 12, 1992.
2.
Kenneth Samaha served as a Revenue Senior Agent with supervisory duties for the last six years of his employment at the Department of Revenue and Taxation. He had chief administrative responsibilities over his particular unit at the Department of Revenue and Taxation and was, therefore, an agency head.
3.
Sales Tax, Inc. is a corporation owned solely by Kenneth Samaha. It is a private corporation duly authorized and incorporated under Louisiana law with its registered agent and director identified as Kenneth Samaha. The Articles of Incorporation of Sales Tax, Inc. were filed with the Secretary of State’s office on July 13, 1992.
4.
Georgia Gulf Corporation is a publicly traded corporation. Georgia Gulf Corporation is not a public servant or state employee and has no contract with the state or with any department or agency of the state.
5.
Georgia Gulf Corporation has been charged as an “other person” in connection with an alleged violation of La. R.S. 42:1117.
6.
On May 12, 1992, a Department of Revenue and Taxation audit of Georgia Gulf Corporation commenced regarding sales and use tax compliance.
7.
Kenneth Samaha was the Revenue Senior Agent responsible for the supervision of the 1992 audit of Georgia Gulf Corporation from the Commencement date of May 12, 1992 through the date of his resignation from the Department of Revenue and Taxation, June 12, 1992.
8.
Kenneth Samaha, Clarence Speed, a Revenue Agent II for the Department of Revenue and Taxation who served as lead auditor for the Department of Revenue and Taxation on the Georgia Gulf Corporation audit, and Robert Harrison, Director of Corporate Tax for Georgia Gulf Corporation, attended the opening conference for the audit held May 12, 1992.
9.
Kenneth Samaha sent a memorandum to the Department of Revenue Area Audit Manager on May 21, 1992 that announced his resignation effective June 12, 1992.
10.
When the audit of Georgia Gulf began, Kenneth Samaha knew he was leaving the Department of Revenue and Taxation and anticipated that the would go to work for Georgia Gulf, as Georgia Gulf had problems with sales and use tax on prior audits.
11.
Sometime during the first week of the audit of Georgia Gulf, Kenneth Samaha notified Robert Harrison that he was resigning from the Department the following week and going into the sales tax consulting business. Mr. Samaha asked Mr. Harrison if Georgia Gulf Corporation would be interested in his services. Mr. Harrison inquired of Mr. Samaha as to whether there would be any problems with Sales Tax, Inc. and Georgia Gulf Corporation entering into a contract or whether Kenneth Samaha could get in trouble for what he was doing. Kenneth Samaha testified that he informed Mr. Harrison that he knew of no restrictions. However, Robert Harrison testified that Kenneth Samaha informed him that the only problem would be his own and that he could only get fined $500.
12.
Conversations occurred between Kenneth Samaha and Robert Harrison sometime during the first week of the Georgia Gulf Corporation audit. Thereafter, Kenneth Samaha provided Robert Harrison with a proposed written contract. Mr. Harrison took the contract for Georgia Gulf Corporation’s legal staff to review. He returned from Atlanta on June 22, 1992 with a signed contract.
13.
On June 22, 1992, Sales Tax, Inc., through Kenneth Samaha, entered into a written agreement with Georgia Gulf Corporation. The agreement stated that Sales Tax, Inc. was to receive 25% of the total amount of discovered overpayment of taxes by Georgia Gulf Corporation to the State of Louisiana and Iberville Parish.
14.
On June 23, 1992 Mr. Samaha began his work for Georgia Gulf pursuant to the contract between Georgia Gulf and Sales Tax, Inc.
15.
Field Audit Section reports of the Department of Revenue and Taxation filed by Kenneth Samaha for the time period between May 11, 1992 and June 12, 1992 showed Mr. Samaha at Georgia Gulf Corporation for a total of 33-1/2 hours. The testimony of Kenneth Samaha was that these hours included travel time, and that he estimated he spent 18-l/2 hours actually at Georgia Gulf Corporation during this time period.
16.
The testimony of Clarence Speed was that a meeting was held at the end of June or the beginning of July regarding the audit. Kenneth Samaha attended this meeting along with Robert Harrison as representatives of Georgia Gulf Corporation. Mr. Speed and his supervisor attended the meeting for the Revenue Department. The purpose of the meeting was to discuss refund issues which were arising.
17.
Sales Tax, Inc. identified significant overpayments of sales tax by Georgia Gulf Corporation.
18.
Georgia Gulf Corporation paid Sales Tax, Inc. a total of $53,438.77 for services rendered pursuant to the contract between Georgia Gulf and Sales Tax, Inc.
II.
APPLICABLE LAW
Kenneth Samaha was been charged with violating Section 1121A and Section 1112B(4) of the Code.
Section 1121A provides as follows:
Generally, this Section of the Code prohibits a former public servant, who is an agency head, for a period of two years, from assisting any other person in any transaction involving his former agency. Section 1112B(4) provides as follows:
* * * *
* * * *

This Section generally proscribes a public servant from "participating" in any transaction involving any person with whom the public servant is negotiating prospective employment. "Participate" has been defined at Section 1102(15) as follows:
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Mr. Samaha’s corporation, Sales Tax, Inc., has likewise been charged by the Commission with violating the Ethics code. Section 1121C of the Code, which Sales Tax, Inc. has alleged to have violated, provides as follows:
* * * *

This Section of the Code, directed at legal entities in which the former public servant is an officer, director, trustee, partner or employee, prohibits the legal entity from assisting another person for compensation, for a period of two years, in a transaction involving the agency of the former public servant in which the former public servant participated.
Georgia Gulf Corporation has been charged with violating Section 1117 of the Code. This Section provides as follows:
In the context of Georgia Gulf Corporation, this Section of the Code, in the Board’s opinion, prohibits persons from giving anything of economic value either directly or indirectly to any public servant or to any other person anything that the public servant is otherwise prohibited from receiving by virtue of the application of other provisions of the Ethics Code. By way of illustration, if Mr. Samaha is prohibited from receiving any thing of economic value from Georgia Gulf Corporation for performing post-employment services otherwise proscribed by Section 1121A of the Code, then Section 1117 would, under the Board’s construction, likewise render Georgia Gulf Corporation in violation for making payments to Mr. Samaha that he is prohibited from receiving.
III.
OPINION
It is the opinion and the conclusion of the Board that Mr. Kenneth Samaha, both directly and through Sales Tax, Inc., a corporation that he formed and controlled, violated Section 1112B(4) and 1121A of the Code. Mr. Samaha, as a Revenue Senior Agent, was an agency head and had ultimate and direct responsibility for auditing Georgia Gulf Corporation. In his capacity as such, and during highly material times of the subject audit, Mr. Samaha discussed with Mr. Robert Harrison, a representative of Georgia Gulf Corporation, that he was going to leave the department and enter the "sales tax consulting business". Mr. Samaha and Mr. Harrison continued their conversations while Mr. Samaha reportedly supervised staff employees during the course of the Georgia Gulf Corporation audit and reached an agreement during May or June of 1992 that Mr. Samaha would render compensated services to Georgia Gulf Corporation with respect to "discovered overpayments". Mr. Samaha was aware of the provisions of the Ethics Code. Indeed, he informed Mr. Harrison of the potential problems that he, Mr. Samaha, would encounter but told Mr. Harrison that Georgia Gulf Corporation could not be subjected to fines by the Commission. On June 22, 1992, Mr. Samaha, through Sales Tax, Inc., entered into a written agreement, that he had prepared, with Georgia Gulf Corporation and the next day, on June 23, 1992, Mr. Samaha returned to the site of the audit but now in his capacity as a representative of Georgia Gulf Corporation and to begin his work for Georgia Gulf Corporation under his contract to recover "overpayments".
Mr. Samaha violated Section 1112B(4) of the Code by having negotiated his arrangement concerning prospective employment with Mr. Harrison at a time when Mr. Samaha continued to serve as the agency head with the Department and with respect to the particular Georgia Gulf Corporation audit; and, Mr. Samaha violated Section 1121A of the Code by having assisted Georgia Gulf Corporation for compensation in both a transaction and in appearances in connection with this transaction and involving the former agency of which he served as the agency head.
It is further the opinion and the conclusion of the Board that Georgia Gulf Corporation likewise violated the provisions of the Code. Georgia Gulf Corporation, in derogation of Section 1117 of the Code, made at least two substantial payments to Mr. Samaha through Sales Tax, Inc. that Mr. Samaha and Sales Tax, Inc. were prohibited from receiving by virtue of the provisions of Sections 1112B(4) and 1121A of the Code (and by 1121C as to Sales Tax, Inc.). Mr. Harrison was aware of certain Ethics Code concerns by virtue of the comments made to him by Mr. Samaha. Mr. Harrison chose to have the contract prepared by Mr. Samaha reviewed by lawyers representing Georgia Gulf Corporation. Only after these lawyers reviewed and advised Mr. Harrison was the contract with Sales Tax, Inc. confected.
The Commission viewed these violations of the Code as very serious; the Board concurs. Mr. Samaha was an agency head. He was directly responsible for the Georgia Gulf Corporation audit. Mr. Harrison knew Mr. Samaha, was aware of the position that he occupied with the Department, and had dealt with him during the course of previous audits. Both Mr. Samaha and Mr. Harrison were aware of certain potential Ethics Code prohibitions, at least as to Mr. Samaha. Vital interests of a major state agency could have been compromised by virtue of the events in question. Mr. Samaha’s duplicity, coupled with the willingness by representatives of Georgia Gulf Corporation to assist him through illegal payments, not only violated specific provisions of the Ethics Code but undermined fundamental principles of conflicts of interest. The Board is aware of the argument advanced that Georgia Gulf Corporation was “entitled” to recover the overpayments that were identified by Mr. Samaha and that Mr. Samaha was only paid for recovering funds that Georgia Gulf Corporation was due. This argument, however, does not alter or mitigate the consideration that these were serious violations of the provisions of the Code.
The Board is presently authorized by Section 1153 of the Code to impose fines of up to $10,000 for each violation of the Code. At the time these violations occurred, however, the operational provisions of the existing code were not in effect; the maximum penalty that could have been imposed by the Commission at the time these violations occurred was $5,000 for each violation. The Board shares with the Commission the concerns - indeed the belief - that the conduct of the respondents represents very serious violations of the Code. However, the Board must conclude that there was but a single violation of Section 1117 of the Code by Georgia Gulf. The Board also concludes that there were two violations of the Code by Mr. Samaha and Sales Tax, Inc. as there were violations of both Sections 1112B(4) and 1121A.
For these reasons, the Board imposes the maximum fine permissible by law of $5,000 on Georgia Gulf Corporation.
The Board also imposes the maximum fine permissible by law of $5,000 for each of the two violations by Mr. Samaha and Sales Tax, Inc., for a total of $10,000.
Moreover, it is remembered that the Commission, pursuant to Section 1151B of the Code, has barred both Mr. Samaha and Georgia Gulf Corporation through Mr. Robert Harrison from entering into compensated transactions involving the Department of Revenue and Taxation. The actions of the Commission under the circumstances with respect to Mr. Samaha were reasonable, legally permissible and justified by the events in question. However, as noted above, years have passed since Mr. Samaha was engaged as a public servant and, indeed, more than 2-l/2 years have elapsed since the publication by the Commission of its opinion on April 28, 1995. Though the Commission was prevented from enforcing its opinion during a portion of the time that has now elapsed, as a practical matter, the Board is satisfied that the contacts that Mr. Samaha had with the Department subsequent to the publication of the Commission’s opinion have been limited and inconsequential. For all of these reasons, the Board is of the opinion that no significant governmental interest would be advanced by imposing further restrictions on Kenneth Samaha and Sales Tax, Inc.
With respect to Georgia Gulf Corporation, the Board likewise shares with the Commission the concern that Georgia Gulf Corporation should have been proscribed from utilizing the services of Mr. Harrison for a period of time subsequent to the Commission’s published opinion. However, the Board is not satisfied that it was legally permissible to take remedial action affecting directly Mr. Harrison as he was not cited as a respondent and did not otherwise appear before the Commission in any capacity other than that of a material witness. Years have elapsed since the occurance of the events in question and little could be achieved by visiting remedial action on Mr. Harrison at this time and under these circumstances.
Nevertheless, former public servants, in general, and former Revenue Department agency heads in particular, must be discouraged from entering into post employment violations of the Code that could seriously undermine fundamental governmental considerations. These violations can only occur, however, with the assistance of "non-governmental persons" such as Georgia Gulf Corporation. Caution must therefore be exercised not only by former employees of the Department of Revenue and Taxation but also taxpayers such as Georgia Gulf Corporation to ensure that violations of this sort do not occur in the future.
IV.
DECREE
For the reasons given:
IT ORDERED AND DECREED that Kenneth Samaha is found to have violated Section 1112B(4) of the Code of Governmental Ethics;
IT IS FURTHER ORDERED AND DECREED that Kenneth Samaha is found to have violated Section 1121A of the Code of Governmental Ethics;
IT IS FURTHER ORDERED AND DECREED that Sales Tax, Inc. is found to have violated Section 1121C of the Code of Governmental Ethics;
IT IS FURTHER ORDERED AND DECREED that Georgia Gulf Corporation is found to have violated Section 1117 of the Code of Governmental Ethics;
IT IS FURTHER ORDERED AND DECREED that Kenneth Samaha and Sales Tax, Inc. are ordered and commanded in solido to pay the state of Louisiana through the Office of the State Treasurer the sum of $10,000 as a civil fine;
IT IS FURTHER ORDERED AND DECREED that Georgia Gulf Corporation is commanded to pay the State of Louisiana through the Office of the State Treasurer the sum of $5,000 as a civil fine.
BY ORDER OF THE BOARD this 18th day of December, 1997.

s/Robert L. Roland s/ Harry Blumenthal, Jr.
Robert L. Roland, Chairman Harry Blumenthal, Jr., Vice Chairman


Absent and did not participate s/ E. L. Guidry, Jr.
Robert P. Bareikis E. L. Guidry, Jr.


s/ Virgil Orr s/ Revius O. Ortique, Jr.
Virgil Orr Revius O. Ortique, Jr.


s/ T. O. Perry, Jr. s/ Ronald L. Sawyer
T. O. Perry, Jr. Ronald L. Sawyer


s/ Nathan J. Thornton, Jr. s/ Edwin O. Ware
Nathan J. Thornton, Jr. Edwin O. Ware


s/ Carole Cotton Winn
Carole Cotton Winn

C O N S E N T

The undersigned duly authorized agent and representative of Georgia Gulf
Corporation:



C O N S E N T


The undersigned duly authorized agent and representative of Kenneth Samaha and Sales Tax, Inc.:
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