How Candidates Should Deal Responsibly with Conflicts

A post yesterday in Coates' Canons: NC Local Government Law Blog raises an interesting issue about the situation of a local government candidate who has an interest in a contract with the local government which, by NC law, is prohibited not for candidates, but for a winning candidate the day he or she takes office. This provides a good occasion to look at the intersection of candidates and local government ethics codes, outside of the more common campaign finance issues.

Dealing with a Contract That Will Become Illegal
According to the post, a NC statute prohibits officials and their spouses from benefitting from public contracts over which the official or his body or agency has authority. Non-incumbent candidates, however, are not in any way prohibited from benefitting from local government contracts. It is only on the day they take office that the statute affects them. On that day, the candidate becomes an official with authority to oversee, make decisions about, or interpret the contract. According to the state statute, the contract is rendered void, and any direct benefit derived by the newly-elected official from that point forward is illegal, with criminal law consequences.

This is serious stuff, and the law seriously affects the local government (having a contract voided) and often many individuals besides the candidate. What should the candidate do to responsibly prepare for this eventuality?

The candidate should, if possible, arrange that he will not receive any benefits under the contract from the day he takes office, or even earlier for the sake of appearances. And as soon as he wins the election (or even earlier if his victory is very likely) he should start the process to have the contract bid out, so that a new contractor can do the work as soon as possible. The statute allows the continuation of a contract until an alternative can be arranged when “immediate termination would result in harm to the public health or welfare,” which would be true in the great majority of cases. The continuation does, however, have to be approved by a state official, which prevents the local agency from looking like it is helping the new official.

Voiding Contracts
It's worth noting that the new official cannot simply withdraw from participation in matters involving the contract, because it is automatically void the day he takes office. Automatic avoidance seems like a very severe penalty, but an official who benefits from a government contract over which his body or agency has authority creates one of the most serious appearances of impropriety there is. Allowing a body or agency to oversee a colleague's (sometimes a boss's) contract not only makes its decisions questionable, but also places a great deal of pressure on honest officials who want to make the right decisions, but become worried that their decisions will look like favoritism toward their colleague, boss, or council member.

The state statute does have an exception for small contracts in small towns, which are much more common, and harder to replace, than in larger jurisdictions.

Taking the Initiative with Respect to Upcoming Conflicts
Last year, I wrote about a situation in Tampa where a candidate headed a nonprofit that had a large contract with the city. I felt that the candidate should say what she is going to do about the situation, and why. Since there were questions about the language in the local ordinance, I felt that the candidate should seek an advisory opinion from the ethics commission, so that the interpretation came not from the candidate's attorney, but from the proper, neutral source.

Instead the candidate said things like, "My compensation does not change. I'm a little offended that these questions are even coming up."

A candidate shouldn't wait to be attacked by his opponents about the conflict he would have when elected. He should anticipate this, and responsibly deal with the issue as early as possible.

When Withdrawal Is Sufficient
There are situations where drastic action is unnecessary. Two years ago I wrote a post about a school board candidate who worked for a company that had a minor contract with the school district. The school board attorney said that he would have to choose between the school board and his job, and so he resigned his job. The size of the contract and the limited benefit the candidate would receive from the contract made withdrawal from matters regarding the contract a sufficiently responsible way to deal with the conflict.

Making Appointments of Agency Directors That May Investigate a Candidate
Last year, I wrote about a situation involving a Florida gubernatorial candidate whose company was likely to be investigated by the state's health department, whose director he would appoint if he won the election (which he did). He said that he would withdraw from the matter in every way, but would appoint the health director who would be involved in deciding about and overseeing an investigation of his company. I felt that he should have announced that he would not replace the current health director. An alternative would be to have an independent body, current or created for the purpose, make the new appointment.

EC Jurisdiction Over Candidates
Sometimes candidates can abuse their candidacy by using it to favor a business they own. I dealt with this situation in a post last year with respect to a senatorial candidate in Connecticut whose company decided to give away merchandise with its name on it at the polls. A mayoral candidate could similarly use her campaign to push her car dealership or restaurant. Once elected, this kind of conduct would be considered an ethics violation, but most ethics codes do not cover candidates. I think they should.

Similarly, candidates should be required to fill out financial disclosure statements, so that potential conflicts are made public. And candidates should be permitted to request advisory opinions from ethics officers or commissions, so that they can start dealing responsibly with their conflicts as soon as possible. And candidates should be required to take an ethics training course, if one is available during the candidacy.

Two Other Candidate-Related Posts Worth Looking At
Also see my post on a mayoral candidate who was counsel to the city's sports, transit, and port authorities (and his firm was bond counsel to the school district). I recommended that the candidate make it clear how he was going to handle all the possible conflicts that might arise, personally and with respect to his law firm.

And a post about a clerk candidate who was suing the city for wrongful termination from her position as finance director. The city attorney argued that she had a conflict, but I found none of these arguments convincing.

Robert Wechsler
Director of Research-Retired, City Ethics

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