The Petitioner initiated these adjudicatory proceedings on December 16, 1983 by filing Orders to Show Cause pursuant to the Commission's Rules of Practice and Procedure, 930 CMR .01(5)(a). The Order in Adjudicatory Docket No. 247 alleged that Frank Wallen, the Commissioner of the Brockton Department of Public Works (DPW), violated G.L. c. 268A, s.3 and s.23 (paragraph 2)(3) by accepting $8,500 from Charm Construction Company (Charm) in two separate transactions at a time when Charm had contracts and other business dealings with the DPW. The Order also alleged that Wallen violated s.23 (paragraph 2)(3) by his official and private dealings with companies owned by Gerald J. Kelleher. The Order in Adjudicatory Docket No. 246 alleged that John Cardelli, an owner of Charm, violated G.L. c. 268A, s.3(a) by giving respondent Wallen $8,500 at times when Charm had contracts and other business dealings with the DPW.
The Respondents' Answers denied the material allegations and raised several affirmative defenses asserting the Commission's lack of jurisdiction and authority to adjudicate the factual allegations. Prior to the commencement of the hearings, the Respondents filed motions to dismiss addressing the timeliness of the Orders, the Commission's authority to issue summonses during a preliminary inquiry, and the appropriateness of admitting into evidence the results of a polygraph examination. These motions were ruled upon by Commission Chairman Colin Diver, who was designated as the Presiding Officer. See, G.L. c. 268A, s.4(c).
Hearings were conducted on nine days between April and July, 1984. The parties thereafter filed briefs with the Commission and presented oral arguments before the full Commission on September 11,1984. In rendering this Decision and Order, all members of the Commission have considered the testimony, evidence and arguments, of the parties.
1. Wallen was DPW commissioner from December 14, 1976 to June 29, 1982. In that capacity, he had direct supervisory responsibility for seven divisions, including the water and sewer divisions. He was authorized to make such contracts as were necessary to carry out the functions of the department, and he had general supervision of all subordinate officers of the department and general supervision of the seven divisions within the department. His duties included reviewing each division's budget and approving all contracts and invoices for payment after the appropriate subordinates had made their review and indicated their approval. In addition to approving budgets, projects, and payments for projects, he would on occasion become involved in resolving individual disputes or matters between division heads and contractors.
2. Charm was a Massachusetts corporation during all relevant periods covered by the Order to Show Cause. From 1978 through 1982 inclusive, Charm received approximately $1.3 million for various construction services provided to the DPW. Respondent John Cardelli and Domenic D'Allesandro were owners and officers from 1979 through January 31, 1981. In 1982, Cardelli redeemed D'Allesandro's stock, and the company ceased operations later in the year.
3. Gerald Kelleher is the owner of Sergeant Supply Company (Sergeant Supply), a building supply company in Brockton. Kelleher also owns Kelleher Contractors, a company which provides materials and equipment services.
The $8,000 payment to Kelleher on December 24,1980
4. In March, 1980, Wallen purchased property at 55 Chilton Road in Brockton. In April through June, 1980, Wallen, acting as his own general contractor, began his home construction. He contracted with Kelleher Contractors to help clear the land, prepare the foundation, and provide cement for the foundation. Although the work was performed in April or May, Kelleher did not bill Wallen for these services and materials until December 18, 1980. The bill was approximately $11,600.
5. In early July, 1980, Wallen opened a credit account with Sergeant Supply in order to buy building materials to construct his house. Wallen incurred a substantial number of charges on the accounts between July and December, 1980.
6. As of mid-December, 1980, Wallen owed $18,000 to Sargent Supply and $11,601.83 to Kelleher Contractors.
7. On December 24, 1980, Wallen paid $8,000 in cash to Kelleher on his Sergeant Supply bill, leaving approximately a $10,000 balance.
The $500 military party check from Charm
8. As of early 1982, Charm had a number of contracts with the DPW but was beginning to wind down. Dominic D'Allesandro, who was in the process of dropping out of Charm, appeared in Wallen's office in early January 1982. He had learned of Wallen's recent military promotion and told Wallen that he wanted to take him out to eat to celebrate the promotion and would pay for the dinner out of Charm's remaining fringe benefit account. Wallen responded that his military reserve duty commitments limited his availability, but that the officers who served under him were planning to take him out to eat at the Hanscom Field Officer's Club later in the month. D'Allesandro agreed to have Charm pay for the cost of the meal for all of the officers, including Wallen. Based on their discussions about the party, they understood that the cost would be approximately $500.
9. On Friday, January 22, 1982, D'Allesandro visited Wallen at his DPW office. He discussed with Wallen Charm's commitment to fulfilling its snowplowing contracts with the DPW despite the fact that Cardelli was hospitalized. There was a snowstorm that day, and D'AIlesandro confirmed that the Charm equipment would be available. During this visit, D'Allesandro handed to Wallen a Charm check signed by John Cardelli. The purpose of the check was to pay for Wallen's military promotion party. It is not clear if Wallen filled in the dollar amount of the check ($500) upon receiving the check from D'Allesandro, or if the amount had already been filled in by D'Allesandro. It is also unclear whether Wallen filled in the name of the payee, Hanscom Field Officers Club, upon receiving the check.
10. The party was held on the scheduled date of January 23, 1982, but had to be relocated to the Sheraton Lexington Hotel due to a snowstorm. D'Allesandro did not attend, presumably because of the storm. Approximately eighteen officers did attend, and at least one officer was told by Wallen that someone was "picking up the tab" for the party. At the end of the party, Wallen used the $500 Charm check to pay for the bulk of the bill, with the remaining charges distributed among the officers. Wallen changed the name of the payee on the Charm check to reflect the Sheraton Lexington Hotel.
Wallen's public and private dealings with Kelleher
11. Kelleher's companies, Sergeant Supply and Kelleher Contractors, received approximately $225,000 for contract work for the DPW between 1978 and 1982.
12. As DPW Commissioner, Wallen was responsible for approving and overseeing the contracts. Additionally, Wallen participated as Commissioner in arranging for the DPW to use a Kelleher-owned building rent-free as of July, 1981 in lieu of Kelleher's paying property taxes.
13. In July, 1980, Wallen opened a credit account at Sergeant Supply through which he arranged to purchase building supplies on account. Wallen had also previously contracted to have Kelleher contractors perform services worth $11,600 on his house. See, paragraph 4, 5, supra.
14. In August, 1980, Kelleher agreed to give Wallen a ten percent discount totaling $2,277 on two bills which Wallen had paid promptly. A discount was customarily given to large-volume purchasers who paid their bills promptly, although the amount of the discount was discretionary. The discount was not formally credited to Wallen's account until December, 1980. Through a bookkeeping error, the discount was not reflected in Wallen's 1981 bills. Wallen corrected the error after discussions with Sergeant Supply in October, 1981.
15. Wallen's purchases from Sargent Supply exceeded $40,000 in 1980, and Wallen fell behind in his payments towards the end of 1980.
16. Despite Wallen's failure to pay his bills to Sargent Supply, Kelleher permitted Wallen to charge new purchases exceeding $5,000 in late 1980.
17. As of May, 1981, Wallen's unpaid balance to Sargent Supply was $10,000. Wallen paid $1,000 to Kelleher in May, 1981 and paid off the remaining $9,000 in October, 1981. Although the Sargent Supply bills indicated that interest of one and one-half percent per month and eighteen percent annually would be charged on all past due accounts, Kelleher did not charge Wallen interest on his unpaid bills during this period.
18. From December, 1980 until November, 1981, Kelleher Contractor's $11,600 bill to Wallen remained unpaid. During that ten-month period, Kelleher neither formally notified Wallen that
he was delinquent nor charged Wallen any interest on his unpaid bill.
19. In November, 1981 Wallen executed a note to Kelleher for the $11,600 unpaid Kelleher Contractor bill at an annual twelve percent interest rate. Kelleher did not require Wallen to provide any collateral on the note until November, 1982.
20. The accommodations which Wallen received from Kelleher between 1980 and 1982 were significant to Wallen because of his cash flow difficulties during that period.
A. Procedural Issues
Prior to and during the adjudicatory hearings, the Presiding Officer ruled on a number of procedural issues raised by the parties. To the extent that the parties have renewed their objections to the Presiding Officer's rulings, the Commission will briefly review those rulings. None of the objections is meritorious.
1. Statute of Limitations
The Petitioner's action was timely. The December 16,1983 Order to Show Cause was issued within three years of the date of the acts upon which the s.3 and s.23 violations were alleged. Contrary to Wallen's assertion, the statute of limitations is tolled on the date of issuance of the Order to Show Cause and not on the date of receipt by the Respondent. See, In the Matter of John P. Saccone, 1982 Ethics Commission 87; Commission's Procedures Covering the Initiation and Conduct of Preliminary Inquiries and Investigations (Procedures), s.10; Mass. R. Civ. P.3. The Respondent has not alleged any lack of due diligence in the Petitioner's effectuating service following the issuance of the Order to Show Cause, and, even if alleged, the assertion would not prevail. An examination of the certificate of service filed together with the Show Cause Order demonstrates that service by certified mail was effectuated simultaneously with the issuance of the Order to Show Cause on December 16, 1983. See, Bates Mfg. Co. v. U.S., 303 U.S. 567, 572(1938).
2. Commission Procedures
a) Contrary to Respondent Cardelli's assertion, the Commission did not violate its confidentiality mandate under G.L. c. 268B s.7 by issuing a summons during the preliminary inquiry stage of the investigation. The Commission is authorized to issue summonses at the preliminary inquiry stage of an investigation. The Commission's enabling statute, G.L. c. 268B, s.4, provides the Commission with summons issuance authority with respect to "any matter being investigated by it." The Commission's Procedures construe G.L. c. 268B, s.4 to authorize expressly the issuance of summonses for investigative purposes during the course of any preliminary inquiry and full investigation. Procedures (1980) s.9A. The Commission's interpretation of its own enabling statute is reasonable, Baker Transportation Inc., v. State Tax Commission, 371 Mass 872, 877 (1977) and consistent with the conclusions of the Supreme Judicial Court in a comparable case, Massachusetts Commission Against Discrimination v. Liberty Mutual Insurance Company, 371 Mass. 186 (1976). Inasmuch as the summonses were issued pursuant to the Commission's authority, there was no violation of the confidentiality mandate of G.L. c. 268B, s.7.
b) The fact that the investigative phase of the case was lengthy is not a basis for dismissal of the Order to Show Cause. The duration of a Commission preliminary inquiry and full investigation is within the discretion of the Commission. Brotherhood of Railway Clerks v. Association for Benefit of Non-Contract Employees, 380 U.S. 650, 661, 662 (1965); Inland Empire District Council v. Millis, 325 U.S. 697,706 (1945); In the Matter of John R. Buckley, 1982 Ethics Commission 2,5. The Commission's Procedures s.6(C) and 8(B) establish a procedure for extending an inquiry or investigation. The Petitioner's compliance with these extension procedures did not violate the Respondent's due process rights.
c) The notice to Cardelli of the initiation of the preliminary inquiry was timely. The Commission notified Cardelli of the initiation of a preliminary inquiry within thirty days of the July 19,1982 commencement of the inquiry pursuant to G.L. c. 268B, s.4(a). Because the minutes of the Commission's meetings do not reflect an earlier initiation date of the preliminary inquiry with respect to Cardelli, there was no reason to provide earlier notice.
3. Polygraph Examination
Respondent Wallen, through his counsel, voluntarily initiated the proposal that he take a polygraph examination, agreed to a polygraph examiner, and thereafter voluntarily participated in the examination. The Commission finds no reason to preclude the admission of the results of the polygraph examination in the adjudicatory proceeding. The Commission is a state agency with civil enforcement powers, G.L. c. 268B, s.3(i), and possesses the power to impose only civil fines and initiate only civil actions. G.L. c. 268B, s.4(d). See, Craven v. State Ethics Commission, 390 Mass. 191,201, (1983); Opinion of the Justices, 375 Mass. 795, 819 (1978). Because proceedings before the Commission are civil and not criminal in nature, the Commission is not bound by the strict rules of admissibility of evidence which prevail in criminal judicial proceedings. None of the precedents cited by the Respondent holds that the results of polygraph tests would be inherently inadmissible in civil administrative proceedings in jurisdictions such as Massachusetts which have accepted the admissibility of such evidence. See, Commonwealth v. Vitello, 376 Mass. 426 (1978). However, as will be seen, infra, the weight to be given such evidence is a matter within the Commission's deliberative discretion.
In view of the Respondent's voluntary initiation of and participation in the polygraph examination, with the assistance of counsel, whatever fifth amendment privileges from self-incrimination were implicated by the Respondent's responses to the polygraph examination were therefore knowingly and intelligently waived. Commonwealth v. Mandeville, 386 Mass. 393 (1982); Commonwealth v. Harris, 11 Mass. App. 165 (1981); Blaisdell v. Commonwealth, 372 Mass. 753 (1977); Johnson v. Zerbst, 304 U.S. 458 (1938).
B. G.L. c. 268A Allegations
1. The $8,000 Kelleher Payment
The question which preoccupied the hearings was the source of Wallen's payment of $8.000 in cash to Kelleher on December 24, 1980 in partial payment for the substantial bill which Wallen had incurred in purchasing supplies for his new house. Although the Petitioner alleges that the $8,000 came from Charm and was given to Wallen for or because of his official acts as DPW commissioner, the evidence is not persuasive.
There is no direct evidence that Charm gave the money to Wallen. The evidence linking Charm and Wallen is circumstantial that on the day before Wallen paid Kelleher $8,000, Charm wrote a check for $10,014 which was endorsed and cashed by Wallen's uncle, who could have given the cash to Wallen. The response of Wallen and Cardelli is two-fold:
a. The Charm check for $10,014 was a loan by Charm to Frank Barrett to pay off his gambling debts; that Albert Wallen cashed the check and gave Barrett the cash as a favor, and that Albert Wallen did not give the cash to Frank Wallen, and
b. The source of the $8,000 cash payment which Frank Wallen make to Kelleher was a loan from Edward R. Tautkus, Sr. on December 24, 1980.
The Petitioner's case is built on discrediting the testimony supporting the Respondents' version and asserting that the only remaining explanation is that the cash which Frank Wallen used to pay Kelleher on December 24, 1980 had to have come from Charm. Based upon a review of the record and consideration of the observations of the Presiding Officer who viewed the demeanor of the witnesses and heard first-hand their testimony, the Commission is not persuaded that the source of the $8,000 was Charm.
The Respondents' position regarding the $10,014 Charm check is plausible. In particular, the Commission credits the testimony of Francis Barrett. While there may have been potential reasons for Barrett to have participated in a cover-up for Frank Wallen, he made too many admissions against his own interest concerning his gambling history to conclude that he was lying about the check. Barrett's asserted reasons for having Albert Wallen endorse and cash the check are also believable. Having misrepresented to Charm that he was still affiliated with Shenanigan's Restaurant so that Charm could write the check to Shenanigan's in an odd figure as a business expense, Barrett could reasonably have doubted his ability to cash the check on his own. Rather than risk a bank questioning Barrett's authority to cash the check, Barrett endorsed the check to Albert Wallen who was in a better position to cash it. Albert Wallen was a reasonable choice because he knew of Barrett's debt problems and had previously assisted him.
There are fewer reasons for crediting the entire testimony of Wallen or his uncle. Wallen's hearing testimony conflicted with an earlier version which he had given to Commission investigators concerning the source of the $8,000. Moreover, the polygraph examiner's opinion was that Wallen was untruthful in denying in February, 1984 that he had received any of the money from Charm's $10,014 check to Barrett. Yet, even by limiting the weight of Wallen's hearing testimony and giving some probative value to the results of the polygraph examination, the Commission is not persuaded that Wallen received any of the cash from Charm's $10,014 check to Barrett.
Albert Wallen did not come across as a completely reliable witness, but his testimony concerning the role he played in facilitating the cash payment to Barrett is believable. Moreover, if there were a master plan to conceal the routing of a payoff from Charm to Wallen through the $10,014, it is logical that Wallen's uncle would not have appeared as an endorser of the check. Rather than regarding the endorsement as a "mistake" in the execution of the plan, a more likely inference from the endorsement is that there is no plan.
There is no conclusive evidence in the record concerning the source of Wallen's $8,000 cash payment to Kelleher on December 24, 1984. While it may be true, as the Respondent contends, that the source of the money was a loan from Edward R. Tautkus, Sr., the documentary evidence which the Respondents provided at the hearing is questionable.
On the other hand, there is credible testimony from Jane Santos, the Tautkus' accountant, that Edward R. Tautkus, Sr. told her in early 1981 that he had given a $10,000 house loan to Frank Wallen. Whether Edward R. Tautkus, Sr. was telling Santos the truth or merely participating in a cover-up scheme is an open question. On balance, it does not seem likely that Tautkus, Sr. would have lied to his accountant in 1981 about a loan to Frank Wallen as part of a cover-up. It is also possible that the $10,000 loan to Frank Wallen was made by Tautkus but not through the questionable savings bank withdrawals. Because Tautkus was not available to testify, he
could not shed any light on the matter.
We may never know for certain who gave Frank Wallen the money from which he paid Kelleher $8,000 in December, 1980. However, even if Edward R. Tautkus, Sr. was not the plausible source of the money, it does not necessarily follow that the source of the money was Charm. At best, the Petitioner has established a circumstantial case linking Charm to Frank Wallen's $8,000 payment to Kelleher, but one with too many competing inferences suggesting that Charm was not the source. Given the lack of direct witnesses linking Charm, the Respondents' plausible explanation of the course of the $10,014 Charm check, and the uncertainties presented by the
Petitioner's circumstantial case, the Commission finds that the Petitioner was not established that the $8,000 came from Charm. Accordingly, the allegations in the Show Cause Orders relating to the $8,000 cash payment have not been proved by a preponderance of the evidence.
2. The $500 party check
The record amply supports the allegation that Wallen violated G. L. c. 268A, s.23 (paragraph 2)(3) by accepting a $500 military party check from Charm in January, 1982.
As of January, 1982, Wallen was still exercising official responsibility over Charm's contracts with the DPW, and Charm would continue to perform such work during 1982. By accepting Charm's offer to pay for a military dinner in Wallen's honor during the same period as his exercise of official responsibility over Charm, Wallen gave reasonable basis for the impression that Charm would unduly enjoy his favor. In particular, the timing and location of the discussion of Charm's initial offer created the improper impression. Charm's offer was made in Wallen's DPW office. The actual check was given to Wallen in his DPW office during the discussion of whether Charm could satisfy the very contracts which Wallen was responsible for overseeing. While it may be true that there was no evidence of actual favoritism which Charm received from Wallen, s.23 (paragraph 2)(3) does not require such a showing. Section 23 (paragraph 2)(3) is intended to prevent public officials from intertwining their public and personal dealings with private parties, because such conduct raises questions over the integrity and impartiality of their official acts. By accepting the check, Wallen gave reasonable basis for the impression that Charm could unduly enjoy his favor. See, In the Matter of Rocco J. Antonelli, 1982 Ethics Commission 101.
The Commission does not find that Wallen's acceptance of the check, or Cardelli's authorization of the check, also violated G.L. c. 268A, s.3. Although the evidence supports the conclusion that the check was given "for or because of" Wallen's official acts, it is not clear that what Wallen received was of "substantial value" to him. The prestige which Wallen may have gained with his officers by having found a sponsor for the party does not have sufficient prospective worth or utility value to be regarded as of substantial value to him. Compare, EC-COI-81-136. Whether Wallen's share of the party which Charm assumed ($25) was of substantial value to Wallen presents a closer question. One court decision has concluded that $50 is substantial value under s.3, Commonwealth v. Famigletti, 4 Mass. App. 584 (1976), but no court cases or Commission decisions have found substantial value based on a cash payment of less than $50. See, In the Matter of George Michael, 1981 Ethics Commission 59,69. On balance, given the potential s.3 criminal sanctions which could also apply to these facts, it seems more appropriate to address the problems associated with the receipt of gifts of $25 or less under s.23 rather than s.3. Section 23 also provides more flexibility to appointing officials to determine when, if ever, nominal gifts are appropriate for employees under their authority, and what safeguards or standards can be established to avoid creating the impressions which s.23 was designed to prohibit.
3. Wallen's Public and Private Dealings with Kelleher
The Commission concludes that Wallen violated G.L. c. 268A, s.23 (paragraph 2)(3) by virtue of his substantial dealings with Kelleher in both his public and private capacities. Specifically, by Wallen's having purchased substantial products and services from Kelleher and having received numerous accommodations on his overdue accounts, while continuing to exercise his official responsibility with respect to Kelleher's contracts with the DPW in 1981 and 1982,
Wallen gave reasonable basis for the impression that Kelleher's companies would unduly enjoy his favor.
The Commission's conclusion does not rest on whether any particular accommodation which Wallen received from Kelleher was unusual or excessive. Rather, it is based on the dimension of Wallen's private dealings with Kelleher and the importance of the accommodations to Wallen. In view of this private relationship with Kelleher, Wallen's official DPW dealings with Kelleher raised questions over his impartiality. By failing to take any affirmative steps to eliminate or minimize the impression of favoritism towards Kelleher, Wallen gave reasonable basis for the impression that Kelleher's companies would unduly enjoy his favor. One such safeguard would have been to avoid altogether any private dealings with Kelleher while exercising official DPW responsibility over Kelleher. In Wallen's situation, there were at least three other building supply companies in the area which Wallen knew of and could have used instead of Kelleher's company.
Even assuming that Wallen's private dealings with Kelleher were unavoidable, Wallen was obliged to establish safeguards with his appointing official to avoid creating an improper impression. Recent Commission advisory opinions have required that an employee with significant public and private dealings with the same parties disclose the existence of these dealings to his appointing official. The appointing official may then either 1) assign that responsibility to another employee 2) assume the responsibility himself, or 3) make a written determination that the interest is not substantial enough to affect the employee in the performance of his official duties. See, EC-COI-83-25; 84-94. The appointing official is therefore responsible for overseeing the potential conflict of interest and for determining how the credibility and impartiality of the agency can be maintained. Wallen did not notify his appointing official about the private dealings with Kelleher and took no steps to establish safeguards against his appearance of undue favoritism.
This is not to say that s.23 (paragraph 2)(3) rigidly prohibits public officials from any private commercial contact with parties over whom they also have official dealings. One factor is the relative dimension of the public and private dealings. Where the dealings are substantial, the impression of favoritism may be inevitable. For example, in Antonelli, supra, the Commission found that Antonelli's depositing large sums of county funds in the same banks at which he was seeking a large commercial loan during the same time period created the impression that the banks would unduly enjoy his favor. On the other hand, the private purchase of a small over-the-counter product at the same price as other members of the public pay does not create the same impression of favoritism. Wallen's dealing with Kelleher are analogous to Antonelli because substantial funds and accommodations were involved in both his public and private dealings with Kelleher.