Created By: Sheila LaCost on 01/26/1998 at 01:26 PM
| CN 1995-368|
Category: Ethics Rulings
LOUISIANA BOARD OF ETHICS
DATE: January 15, 1998 OPINION NO.: CN 95-368
RE: Patrick L. Gootee, member of the Louisiana State Licensing Board for Contractors
The Louisiana Board of Ethics (the "Board"), the successor body to the Commission on Ethics for Public Employees, at its August 28, 1997 meeting, conducted a public hearing for the purpose of exploring the following:
That Pat Gootee, member of the Louisiana Contractor’s Licensing Board, may have violated Sections 1112A and/or B(1) of the Louisiana Code of Governmental Ethics (La. R.S. 42:1112A and/or B(1)) by participating, in fact and by law, in a transaction involving Manhattan/Gibbs Joint Venture at a time when Gootee Construction, Inc., a company owned by Mr. Gootee’s wife and sister (sic), had an interest in a subcontract with Manhattan/Gibbs Joint Venture.
On the basis of the evidence and testimony adduced, and on the basis of a stipulation of facts entered into between counsel for the Board and counsel for the respondent, the Board now makes the following essential:
II. Patrick L. Gootee served on the Louisiana State Licensing Board for Contractors from 1984 to 1996. While a member of the Louisiana State Licensing Board for Contractors, Patrick L. Gootee served as vice-chairman from 1984 to 1996.
FINDINGS OF FACT
The shareholders of Gootee Construction, Inc. are as follows:
Common Stock: Kathleen Gootee: 51% Elaine Gootee: 49%
Preferred Stock: First National Bank of Commerce, the Trustee for the IRA of Patrick L. Gootee: 110 shares of non-voting preferred stock.
Kathleen Gootee is married to Patrick L. Gootee’s brother. Elaine Gootee is Patrick L. Gootee’s wife, but her stock in Gootee Construction, Inc. is her separate property.
3. Pat Gootee serves as a consultant for Gootee Construction, Inc. He received $2,500 in 1994, $0 in 1995 and $600 in January of 1996 in exchange for providing consulting services to Gootee Construction, Inc. In addition, the corporation reimburses him for his itemized expenses upon submission of appropriate receipts for expenses determined to be reimbursable business expenditures. Gootee Construction, Inc. reimbursed Mr. Gootee $4,329.08 in 1995 for such business expenses.
Pat Gootee was not involved in the mechanical division of Gootee Construction, Inc. Rather, he was involved in marketing and business development for the general construction division of the business. Although he had been involved in the construction business since 1968, Pat Gootee seriously curtailed his business involvement in 1987 because of health concerns.
4. On June 13, 1995, Gootee Construction, Inc. submitted a bid of $4,620,000 to Manhattan/Gibbs for subcontracting services on an East Jefferson General Hospital contract. This bid was submitted by Leslie J. Wells, Jr., Manager of the Mechanical Division of Gootee Construction, Inc. Mr. Wells testified that, although there were four general contractors, he only submitted a bid to Manhattan/Gibbs. Gootee Construction, Inc. was the low bidder to Manhattan/Gibbs.
5. According to Leslie J. Wells, Jr., the volume of work for the mechanical division of Gootee Construction, Inc. was $8 to $10 million for the year 1995-96.
6. During the late Spring or early Summer of 1995, Joe Caldarera filed a complaint with Contractor’s Licensing Board staff, complaining that Manhattan/Gibbs was in violation of the contractor’s licensing law. After conducting an investigation, the staff concluded that no violation of the law had occurred. When Mr. Caldarera was informed of the staff’s finding, he requested an opportunity to make his complaint directly to the Contractor’s Licensing Board at its next meeting. In accordance with that request, on July 20, 1995, Joe Caldarera appeared before the Louisiana Contractors Licensing Board to protest the bid made by Manhattan/Gibbs on the East Jefferson General Hospital project. Mr. Caldarera argued that since the separate juridical entity of Manhattan/Gibbs did not hold a state contractor’s license, Manhattan/Gibbs was in strict violation of the contractors’ licensing law, as well as the rules and regulations issued by the Louisiana Contractors Licensing Board. The chairman of the board stated that it was best not to render a decision as to whether the bid submitted by Manhattan/Gibbs was proper or improper but rather to leave the resolution of the matter to the courts. No motion was made so the board moved onto other business. Pat Gootee was not present at the July 20, 1995 meeting of the Louisiana Contractors Licensing Board.
7. On August 17, 1995, Mr. Caldarera again protested the bid made by Manhattan/Gibbs to the Louisiana Contractors Licensing Board. Mr. Caldarera argued that Manhattan/Gibbs was not a licensed contractor in the State of Louisiana since its name did not appear on the official roster of Louisiana Contractors Licensing Board.
8. Pat Gootee was present at the August 17, 1995, meeting of the Louisiana Contractors Licensing Board and participated in discussions regarding Mr. Caldarera’s bid protest. After presentations made by Mr. Caldarera’s attorney, Mr. Lloyd Shields, and by Manhattan/Gibbs’ attorney, Mr. H. Bruce Schreves, Mr. Caldarera addressed the Board. In response, Mr. Gootee stated that the “contract will not be written in the name of Manhattan/Gibbs, a Joint Venture. The contract will be written in the name of Manhattan Construction Co., Inc/Gibbs Construction Co., Inc. Mr. Lambert just answered that question. That is a legal entity that this board has already recognized. The issue is past us now. The issue was: at the opening of the bids, when something called Manhattan/Gibbs’ bid was read aloud, was that a licensed entity? We don’t know. Mr. Lambert said the same thing. We don’t know, that is for a court to decide. But now, we have no control over that. That’s no different than not putting your number on the outside of the envelope or not having your bid bond. That part of our law is to protect public entities from having bids from contractor’s who aren’t licensed at the time of the bid. That’s why we put all this stuff in here and it’s no different than all the other parts of the Public Works Act, to protect the public entity at the time of the bid opening. But once they open the bids, it’s too late, it’s done. They are not going to award that contract to Manhattan/Gibbs, a Joint Venture. They are going to award it to Manhattan Construction Co., Inc./Gibbs Construction Co., Inc., a Joint Venture, a licensed entity by this board. And, Sonny pointed out that they have a President/Vice-president, that’s not true. What that document says is that Lawrence Gibbs is the President of Gibbs Construction and the other guy is the Vice-president of Manhattan. Joint ventures don’t have officers. Joint ventures don’t file papers at the Sec. of State’s Office down the block. All a joint venture does is put an agreement together between the two of them. They need that to get a tax i.d. number and to open up a bank account. They are treated separately on their income tax returns and treated separately by legal authorities. If you look in a dictionary for ‘joint venture’, you don’t find a ‘joint venture’ in Webster’s Dictionary. If you look into the Louisiana law, they told us that joint ventures are recognized as a partnership in Louisiana law. If you look at R.S. Means Dictionary you see that a ‘joint venture’ is something similar to, which is a construction dictionary, something similar to a partnership that is put together to do one or more projects that usually have some risk associated with them. So, what do we define a ‘joint venture’ as? We define a ‘joint venture’. You go to page 834 under “proper classification”. What is a ‘joint venture’? When two or more contractors bid. Two or more contractors. What is a ‘contractor’? A contractor under our law is someone who does work over fifty-thousand dollars and is licensed by us. So, we are saying what a ‘joint venture’ is. It is two or more contractors that are licensed by us. And that’s the way this whole issue has been treated for thirty something years. This is nothing new. That’s what a joint venture is, it is two or more contractors. I don’t think we need to vote. The chairman gave an answer and the answer was that we don’t know what Manhattan/Gibbs is and we don’t really care because that is a dead issue. We know that Gibbs Construction and Manhattan Construction, a joint venture, is a live entity and it is recognized in our law. I don’t see why we need to vote.”
9. Following the aforementioned discussions, a motion was made and passed to take no further action as to Mr. Caldarera’s bid protest and to leave the resolution of whether the Manhattan/Gibbs bid was proper or improper to the courts. The Chairman had stated that those board members with a financial stake in the issue should abstain. Mr. Gootee abstained from voting on the motion. Mr. Gootee testified that the reason he abstained was that, in his mind, there was nothing on which to vote.
10. Joseph Caldarera testified that his company, J. Caldarera, Inc. bid as general contractor on the East Jefferson General Hospital job. He further stated that he had received a telephone bid of $4,900,000 from Ken Gootee of Gootee Construction, Inc. on the subcontract for mechanical work. Leslie Wells of Gootee Construction, Inc. testified that his company did not submit a bid, telephone or otherwise, to Mr. Caldarera.
11. Mr. Caldarera testified that it was the general practice in the construction industry for subcontractors to submit the same bid to all contractors.
12. Mr. Gootee was generally aware, at all times pertinent to these proceedings, that Gootee Construction, Inc. had prepared or planned to prepare a bid or bids on the East Jefferson General Hospital Project, but was unaware of the specifics of the bid or bids. Leslie Wells, Jr. did not discuss the bid with Pat Gootee prior to August 17, 1995. There would have been bid lists posted at various locations in the Gootee Construction, Inc. offices indicating a bid was made on the East Jefferson General Hospital Project. The list would not have indicated the contractors to whom the bid was submitted.
13. On October 20, 1995, Manhattan/Gibbs consummated an agreement to serve as general contractor for the East Jefferson General Hospital project. The agreement provided that, in exchange for general contracting services, Manhattan/Gibbs would receive $25,780,000.
14. On November 20, 1995, Gootee Construction, Inc. consummated an agreement with Manhattan/Gibbs to provide subcontracting services on the East Jefferson General Hospital project. The agreement provided that, in exchange for subcontracting services, Gootee Construction, Inc. would receive $4,690,910. On December 12, 1995, Gootee Construction began work on the East Jefferson General Hospital project pursuant to its agreement with Manhattan/Gibbs.
15. J. Caldarera & Company, Inc. has, on at least three occasions, sought a determination from a court that its position asserted before the State Licensing Board for Contractors was correct, with no success.
16. Joy Evans, Administrator of the State Licensing Board for Contractors, A. Hays Town, Jr., current chairman of the Licensing Board, and Donald G. Lambert, current member and former chairman of the Licensing Board, all agreed that the Licensing Board has consistently interpreted its own regulations to mean that two or more contractors may bid a project as a joint venture without obtaining a license for the joint venture as long as both entities are licensed and perform work only in the classification for which they are licensed.
17. In March 1996, counsel to the Contractors Licensing Board requested and obtained an advisory opinion from the Commission on Ethics for Public Employees. That opinion stated in pertinent part that "Section 1112B(1) of the Code prohibits a member of the Contractors Licensing Board from participating in any Board business in which a member of his immediate family has a substantial economic interest, and that recusal by a member of the Board confronted with such a situation does not cure such a violation of the Code." Although Pat Gootee was aware of the opinion request, and in fact appeared before the Ethics Commission on that request, he had never seen the written opinion and, in his opinion, the written opinion did not reflect the Commission’s ruling. Donald Lambert and A. Hays Town, Jr., members of the Licensing Board, each testisied they were unaware of the opinion.
18. In response to the advice of counsel for this Board in connection with the investigation which forms the basis of these proceedings, the State Licensing Board for Contractors sought and the Legislature enacted House Bill Number 564 during the 1997 Regular Session of the Legislature, which allows members of the State Licensing Board for Contractors to recuse themselves from participating in administrative hearings specifically relating to transactions in which they, their immediate families, or businesses in which they have a substantial economic interest have participate, and to provide that such action does not constitute a violation of the Code of Ethics. House Bill Number 564 has been signed by the Governor and enacted as Act 501, effective August 15, 1997.
PRINCIPLES OF LAW
The Section of the Code of Governmental Ethics (the "Code") at issue here is Section 1112 which provides in pertinent part as follows:
Participation in certain transactions involving the governmental entity
A. No public servant, except as provided in R.S. 42:1120, shall participate in a transaction in which he has a personal substantial economic interest of which he may be reasonably expected to know involving the governmental entity.
B. No public servant, except as provided in R.S. 42:1120, shall participate in a transaction involving the governmental entity in which, to his actual knowledge, any of the following persons has a substantial economic interest:
(1) Any member of his immediate family.
* * * * * * *
C. Every public employee, excluding an appointed member of any board or commission, shall disqualify himself from participating in a transaction involving the governmental entity when a violation of this Part would result. The procedures for such disqualification shall be established by regulations issued pursuant to R.S. 42:1134(1).
D. No appointed member of any board or commission, except as provided in R.S. 42:1120.1 and R.S. 42:1120.2, shall participate or be interested in any transaction involving the agency when a violation of this Part would result.
It is the opinion of the Board that Patrick L. Gootee, a former member of the State Licensing Board for Contractors ("Contractors Board"), violated Sections 1112A and B(1) of the Code by having participated in Contractors Board transactions which involved a protest against the joint venture of Manhattan/Gibbs. The protest alleged that Manhattan/Gibbs was not properly licensed to receive a construction contract with East Jefferson General Hospital.
Mr. Gootee and his wife each had a substantial economic interest in the Contractors Board consideration of the protest against Manhattan/Gibbs because Gootee Construction, Inc. had submitted the low bid on a subcontract for Manhattan/Gibbs on the East Jefferson Hospital. Gootee Construction, Inc. would therefore have lost a subcontract worth over $4 million if Manhattan/Gibbs had been found ineligible to receive the contract. Mr. Gootee did not violate Section 1112B(1) of the Code as charged as to his sister because it was his sister-in-law, rather than his sister, who had a substantial economic interest in the transactions.
The Board is mindful of the testimony that the Contractors Board had consistently held that a joint venture itself was not required to be licensed, so long as the parties to the joint venture were properly licensed. Mr. Gootee’s assertion that the Contractors Board could take no action on the protest against Manhattan/Gibbs was therefore correct from a practical standpoint. However, the fact remains that the issue was presented to the Contractors Board while Mr. Gootee served on that body and he therefore participated, as a matter of law, in transactions that impacted Gootee Construction, Inc. as a subcontractor to Manhattan/Gibbs. The law at the time the transactions arose before the Contractors Board prohibited Mr. Gootee from recusing himself in order to avoid a violation of the Code.
The Board therefore concludes that, although Mr. Gootee violated the Code, no penalty should be imposed and he should merely be cautioned to avoid such participation if he should ever accept a public position in the future.
V. On motion duly made and seconded and unanimously approved and for reasons given:
IT IS ORDERED, ADJUDGED AND DECREED that the Board finds as a matter of fact and conclusion of law that Patrick L. Gootee violated Sections 1112A and B(1) of the Code, but that no penalty be imposed for such violations.
BY ORDER OF THE BOARD this 15th day of January , 1998.
s/ Robert L. Roland s/ Harry Blumenthal, Jr.
Robert L. Roland, Chairman Harry Blumenthal, Jr., Vice Chairman
s/ Robert P. Bareikis s/ E. L. Guidry, Jr.
Dr. Robert P. Bareikis *Judge E. L. Guidry, Jr.
s/ Revius O. Ortique, Jr. s/. Virgil Orr
Justice Revius O. Ortique, Jr. Dr. Virgil Orr
s/ T. O. Perry, Jr. s/ Ronald L. Sawyer
T. O. Perry, Jr. Ronald L. Sawyer
Absent and did not participate s/ Edwin O. Ware
Nathan J. Thornton, Jr. Edwin O. Ware
s/ Carole Cotton Winn
Rev. Carole Cotton Winn
*Judge Guidry dissents from a finding of a violation of Section 1112A of the Code.