A City Land Sale That Requires a Broader Investigation

Anonymous

Mon, 08/05/2013 - 05:50

City Related

Here's an interesting case study from Hartford, CT. The facts come
from <a href="http://www.nbcconnecticut.com/investigations/Hartford-Councilman-Faces-…; target="”_blank”">an
NBC Connecticut Troubleshooters post</a> from Friday and <a href="http://wethepeoplehartford.blogspot.com/2013/06/internal-audit-commissi…; target="”_blank”">a
report of the city's Chief Auditor</a> 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 href="http://hartfordinfo.org/issues/documents/housing/hbj_072009.asp" target="”_blank”">a
2009 Hartford Business Journal article</a>, 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:<blockquote>

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.</blockquote>

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 <a href="http://www.cityethics.org/files/lgep1-0%20-%20Robert%20Wechsler.htm#Exp…; target="”_blank”">the
relevant section of my book Local Government Ethics Programs</a>. 
 
Robert Wechsler 
Director of Research-Retired, City Ethics 
 
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A City Land Sale That Requires a Broader Investigation

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