You are here
A City Land Sale That Requires a Broader Investigation
Monday, August 5th, 2013
Robert Wechsler
Here's an interesting case study from Hartford, CT. The facts come
from an
NBC Connecticut Troubleshooters post from Friday and a
report of the city's Chief Auditor dated June 27, 2013.
In October 2011, the city sold a piece of property to one of the city's merchants associations for $1. That day, the merchants association sold part of the property to Hartford Hospital, on which it planned to build a parking garage. The sale price was $500,000.
The sale was not put before the council's Planning & Economic Development Committee (or should it have been the planning and zoning commission?), as supposedly required by law, but is said to have gone straight to a public hearing (or was it just a public meeting?) and full council vote.
One of the council members, who was a member of the merchants association, was counsel to a company owned by the merchants association's president. And, according to a 2009 Hartford Business Journal article, the council member was a partner of the merchants association president in a $32 mixed-use building project in the city. The council member is also a former Hartford corporation counsel, and at the time of the transaction was the chair of the Planning & Economic Development Committee.
He fully participated as a council member in the matter.
Hartford is a poor city that can hardly afford to make a gift of $500,000, plus the value of the remaining part of the property. Therefore, the sale cannot be said to have been in the public interest. In addition, the formal process for such a land sale was apparently not followed.
The result is a serious appearance of impropriety, with the implication that the land sale was an act of preferential treatment to the merchants association. The sale appears to have lost the city a substantial amount of money.
The Council Member's Conflict Situation
But did the council member have a conflict situation that made his participation in the matter problematic, as an ethics complaint asserts? According to the auditor, the council member did no legal or other work for the merchants association in 2011. But we don't know if he did work for the association before or after, that is, whether he had an ongoing business relationship with the association. If he did, that would make his withdrawal from matters involving the association the responsible thing to do.
Is it enough that he was a member of the association? No. Many people on boards and commissions are members of a merchant or other business association. Had he been an officer of the association, that would make withdrawal the most responsible decision. It is curious, however, that the council member insisted that he had not paid his dues for seven to ten years. Does this mean that he was not active in the association, that he was an active freeloader, or that he was given preferential treatment due to his position on the council?
The council member's most important relationship with someone in this possible conflict situation is the business relationship he had with the association's longtime president. He was a partner in a development project as well as a lawyer representing the president's business.
If the association were a company, this relationship with the president would certainly be sufficient to make withdrawal from participation the responsible thing to do. But the association is a nonprofit, and there is no reason to believe that the president would benefit financially from the transaction (I am assuming that the president is not paid by the association). It is the association and its mission that benefits.
Were the association president himself a member of the city council, he would be required to withdraw. But things are much less clear regarding someone who has a special relationship with an association president. He certainly would appear to be biased toward the president, but there is no direct benefit for anyone, nor is there any definite indirect benefit, financial or otherwise.
The only benefit that relates to the council member is the desire to help his client and his past, and possibly future, business partner, for personal reasons and to maintain their ongoing business relationship. People in a business relationship tend to help each other out. That is how what happened here appears to many people.
The Relevant Ethics Provision
Hartford's ethics code, using language more vague than City Ethics recommends, appears to recognize that such a relationship creates a conflict situation. One of the code's basic conflict provisions reads as follows:
Going Beyond the Criminal Paradigm
Whatever the story is with the council member (short of fraudulently hiding the value of the land in light of the sale to the hospital), this is a situation where the criminal paradigm is not the best approach. By this I mean that proceeding against the council member is not the best way to get at the heart of what makes this land sale problematic. He was just one vote in favor of a damaging land sale. He did not alone prevent the government from following formal processes. And he did not benefit from the transaction (if he did, it would be a criminal matter).
This is a situation where the city's ethics commission can make up for its lack of teeth (it can only recommend penalties to the "appropriate parties"). It can use the complaint against the council member to investigate the entire transaction in a way far better than the auditor has done.
What should it do? It should ask the other council members to say what they knew about the transaction, why they did not insist on following the formal process, whether the council member or anyone else attempted to influence their decision or the decision-making process, and whether they have any relationship with the merchants association or its officers or most influential members.
It should also question the merchants association president and counsel, asking about how the transaction came to be, who was involved in it and in what manner, why it felt it was being given the opportunity to make $500,000 from city property, etc. If its answers are not wholly satisfactory, the ethics commission should ask it to return the funds and pay a penalty. It cannot force restitution or a penalty, but there is no reason why it cannot ask.
At the very least, the public will have the opportunity of learning how such a damaging transaction came to pass, who was involved, whether other officials had special relationships with the merchants association, who knew about the sale to the hospital (before and after it occurred), etc. If officials refuse to answer questions, or if their answers are false or inadequate, this will put pressure on them to resign.
And the city's ethics program will show how it can protect the interests of the public even without having a full set of teeth. Although the ethics code states, "The primary responsibility of the commission is to enforce the code of ethics," enforcement against individual officials is not the principal reason for having an ethics program. The principal reason is to prevent misconduct. When misconduct occurs, the principal goal is to find out what happened, to have those involved make restitution, as much as possible, and to use the situation as a learning experience for everyone in the government and everyone who seeks special benefits from the government.
A broad investigation will likely lead to many more officials seeking advice before getting involved in matters where they or a colleague has a special relationship with a party. More requests for advice will likely lead to the hiring of an ethics officer. And the result will be a far better ethics program.
For more on going beyond the criminal paradigm, see the relevant section of my book Local Government Ethics Programs.
Robert Wechsler
Director of Research-Retired, City Ethics
---
In October 2011, the city sold a piece of property to one of the city's merchants associations for $1. That day, the merchants association sold part of the property to Hartford Hospital, on which it planned to build a parking garage. The sale price was $500,000.
The sale was not put before the council's Planning & Economic Development Committee (or should it have been the planning and zoning commission?), as supposedly required by law, but is said to have gone straight to a public hearing (or was it just a public meeting?) and full council vote.
One of the council members, who was a member of the merchants association, was counsel to a company owned by the merchants association's president. And, according to a 2009 Hartford Business Journal article, the council member was a partner of the merchants association president in a $32 mixed-use building project in the city. The council member is also a former Hartford corporation counsel, and at the time of the transaction was the chair of the Planning & Economic Development Committee.
He fully participated as a council member in the matter.
Hartford is a poor city that can hardly afford to make a gift of $500,000, plus the value of the remaining part of the property. Therefore, the sale cannot be said to have been in the public interest. In addition, the formal process for such a land sale was apparently not followed.
The result is a serious appearance of impropriety, with the implication that the land sale was an act of preferential treatment to the merchants association. The sale appears to have lost the city a substantial amount of money.
The Council Member's Conflict Situation
But did the council member have a conflict situation that made his participation in the matter problematic, as an ethics complaint asserts? According to the auditor, the council member did no legal or other work for the merchants association in 2011. But we don't know if he did work for the association before or after, that is, whether he had an ongoing business relationship with the association. If he did, that would make his withdrawal from matters involving the association the responsible thing to do.
Is it enough that he was a member of the association? No. Many people on boards and commissions are members of a merchant or other business association. Had he been an officer of the association, that would make withdrawal the most responsible decision. It is curious, however, that the council member insisted that he had not paid his dues for seven to ten years. Does this mean that he was not active in the association, that he was an active freeloader, or that he was given preferential treatment due to his position on the council?
The council member's most important relationship with someone in this possible conflict situation is the business relationship he had with the association's longtime president. He was a partner in a development project as well as a lawyer representing the president's business.
If the association were a company, this relationship with the president would certainly be sufficient to make withdrawal from participation the responsible thing to do. But the association is a nonprofit, and there is no reason to believe that the president would benefit financially from the transaction (I am assuming that the president is not paid by the association). It is the association and its mission that benefits.
Were the association president himself a member of the city council, he would be required to withdraw. But things are much less clear regarding someone who has a special relationship with an association president. He certainly would appear to be biased toward the president, but there is no direct benefit for anyone, nor is there any definite indirect benefit, financial or otherwise.
The only benefit that relates to the council member is the desire to help his client and his past, and possibly future, business partner, for personal reasons and to maintain their ongoing business relationship. People in a business relationship tend to help each other out. That is how what happened here appears to many people.
The Relevant Ethics Provision
Hartford's ethics code, using language more vague than City Ethics recommends, appears to recognize that such a relationship creates a conflict situation. One of the code's basic conflict provisions reads as follows:
No [official] shall engage in any business or transaction or have a financial, or personal interest, direct or indirect, which is incompatible with the proper discharge of the individual's official duties in the public interest or would tend to impair the individual's independence of judgment and action in the performance of the individual's official duties.In other words, the council member's financial and personal interest in maintaining his business relationship with the association president could be seen as impairing his independence of judgment and action. But it is arguable that what occurred was, if an ethics violation at all, worthy of no more than a reprimand. But that is assuming that the council member was not involved in any way in not following the formal process, took no initiative in convincing his colleagues to approve the sale, and did not in any way hide from anyone the value of the property and the ensuing sale to the hospital, before or after the fact.
Going Beyond the Criminal Paradigm
Whatever the story is with the council member (short of fraudulently hiding the value of the land in light of the sale to the hospital), this is a situation where the criminal paradigm is not the best approach. By this I mean that proceeding against the council member is not the best way to get at the heart of what makes this land sale problematic. He was just one vote in favor of a damaging land sale. He did not alone prevent the government from following formal processes. And he did not benefit from the transaction (if he did, it would be a criminal matter).
This is a situation where the city's ethics commission can make up for its lack of teeth (it can only recommend penalties to the "appropriate parties"). It can use the complaint against the council member to investigate the entire transaction in a way far better than the auditor has done.
What should it do? It should ask the other council members to say what they knew about the transaction, why they did not insist on following the formal process, whether the council member or anyone else attempted to influence their decision or the decision-making process, and whether they have any relationship with the merchants association or its officers or most influential members.
It should also question the merchants association president and counsel, asking about how the transaction came to be, who was involved in it and in what manner, why it felt it was being given the opportunity to make $500,000 from city property, etc. If its answers are not wholly satisfactory, the ethics commission should ask it to return the funds and pay a penalty. It cannot force restitution or a penalty, but there is no reason why it cannot ask.
At the very least, the public will have the opportunity of learning how such a damaging transaction came to pass, who was involved, whether other officials had special relationships with the merchants association, who knew about the sale to the hospital (before and after it occurred), etc. If officials refuse to answer questions, or if their answers are false or inadequate, this will put pressure on them to resign.
And the city's ethics program will show how it can protect the interests of the public even without having a full set of teeth. Although the ethics code states, "The primary responsibility of the commission is to enforce the code of ethics," enforcement against individual officials is not the principal reason for having an ethics program. The principal reason is to prevent misconduct. When misconduct occurs, the principal goal is to find out what happened, to have those involved make restitution, as much as possible, and to use the situation as a learning experience for everyone in the government and everyone who seeks special benefits from the government.
A broad investigation will likely lead to many more officials seeking advice before getting involved in matters where they or a colleague has a special relationship with a party. More requests for advice will likely lead to the hiring of an ethics officer. And the result will be a far better ethics program.
For more on going beyond the criminal paradigm, see the relevant section of my book Local Government Ethics Programs.
Robert Wechsler
Director of Research-Retired, City Ethics
---
Story Topics:
- Robert Wechsler's blog
- Log in or register to post comments
