A Complex Procurement Conspiracy in Dallas County

When city and county contractors and their lobbyists don't follow the rules, it's difficult to catch them, because few cities have an oversight office that investigates on its own initiative. Without such a program, communities depend on federal and state criminal enforcers who focus on bribery and kickbacks.

It is the FBI and a federal grand jury that did the job in Dallas County which, unlike the city of Dallas, has no ethics program, just an aspirational code. In fact, it has two aspirational codes, only one of which is linked to on the county website; the one linked to is the National Association of Counties Code of Ethics (attached; see below); there is also a short ethics code in the county Code of Ordinances (Sec. 94-51). But there is no local ethics program.

According to a press release from the U.S. Attorney for the Northern District of Texas, a federal grand jury has returned a 109-page indictment charging a long-time Dallas County commissioner (Price), his chief of staff, a corporate lobbyist, (Nealy) and a corporate consultant (Campbell) with a conspiracy that involved nearly $1 million going to the commissioner (in the form of money, land, and cars (one of the four cars, a New 2005 BMW 645Ci, cost $100,000)), while the commissioner supported the bids of the lobbyist's clients and provided them with confidential information that gave them a "strategic advantage" over other bidders.

A Different Sort of Inside Lobbyist
Usually, the term "inside lobbyist" refers to an employee of a company or organization that is seeking special benefits from a government and communicates with officials to reach the company or organization's goals. But in this case, according to the indictment, the lobbyist is alleged to have been a different sort of "inside lobbyist." This lobbyist got her jobs by letting it be known that she had special influence with a county commissioner. She was an "outside lobbyist" to the companies she represented, and an "inside lobbyist" to the commissioner, seeking to benefit him as well as the companies she represented. This arrangement is far from unusual, commonly involving a family member of the official. It is rarely prohibited.

Benefits to Others
Many ethics codes focus on direct benefits to government officials. But as this case shows, things don't necessarily work that way. It's harder to get caught, and it can make a lot more friends, if you share the wealth (usually with the understanding that some of the wealth will indirectly go back into the official's hands). According to the indictment, the county commissioner did just that. He "solicited and demanded a series of benefits for other persons, with the intent to be influenced and rewarded ...  These benefits included:

a. having vendors enter into or renew consulting agreements with Nealy so that Nealy would (i) personally benefit from the compensation provided under the contracts and (ii) have the means to continue funneling a stream of financial benefits and other things of value to Price;

b. hiring and promoting certain individuals ..., including C.K., the daughter of a Texas politician and close friend of Price, and H.T., who, while employed by a Nealy business client, championed the renewal of Nealy's contract and covertly increased Campbell's pay so Campbell could pay Nealy during an RFP selection period; and

c. granting particular minority subcontractors specified by Price a certain percentage of the bids submitted for contracts in Dallas County and other jurisdictions..."

This is far less than simply taking bribes directly from a contractor. This approach brought a large number of people into the misconduct, including his chief of staff and subcontractors who would be deeply indebted to the official. From an ethical point of view, the more people who are led to engage in misconduct, the worse it is. But when you look at the situation in terms of developing relationships — which is what lobbying, and politics in general, is all about — nothing could be better than making the web of mutual obligations large enough to include as many people as possible. This is the goal of lobbying, of getting re-elected and, incidentally, of amassing a fortune through the misuse of a local government office.

The Procurement Process
One thing that comes out of this situation is the recognition that having elected officials involved in the procurement process is asking for trouble. It's much easier to have procurement officials trained and prevented from having ex parte communications with (not to mention taking bribes from) those seeking contracts, than it is having elected officials do the same, because elected officials consider such communications a constituent service and, therefore, feel they have a right to such communications. In addition, those seeking contracts often play an important role in election campaigns, and most jurisdictions do not prohibit this. Campaigns not only allow gifts to officials to be made legally, often in large amounts (via direct contributions (often bundled), party contributions, and independent expenditures). They also allow ongoing communications and the formation of mutual obligations and important personal relationships.

Here's how the indictment describes Dallas County's procurement process:

From January 2001 through 2011, Dallas County invited vendors to bid for contracts to provide services that included IT services and equipment, digital imaging and indexing of records, inmate telephone service, collection of Justice of the Peace Court fines, and others.

The process would begin when the Commissioners Court [the county's legislative body] voted to issue a Request for Proposals (RFP) or a Request for Qualifications (RFQ). ... Once submitted, an evaluation committee (also known as a selection committee) composed of county employees would review, score, and recommend to the Commissioners Court which vendors should advance in the bidding process. The Commissioners Court would then vote on whether to accept or reject the committee's recommendations.

Frequently, the Commissioners Court would vote to narrow the bidders to a smaller group of four to six companies, all of which would submit a second bid that would be their "Best and Final Offer" (BAFO). The evaluation committee would again review and score the bids and recommend a final bidder to the Commissioners Court. The Court then voted on whether the County should enter into contract negotiations with the selected bidder. After negotiations were finalized, the Court voted again to authorize the County Judge [the county's CEO] to sign the contract with the chosen vendor. If the County could not reach an agreement with the selected vendor, the County could choose to end negotiations with that vendor and begin negotiating with the next most-qualified vendor until a contract was awarded.

The involvement of county commissioners in the procurement process is unnecessary,. Why should they, rather than an evaluation committee or procurement officers, narrow the list of bidders or approve the recommendation of a final bidder? This makes it appear that competitive bidding is a policy matter, when it is not. It also politicizes the process, so that evaluation committees must take into account commissioners' personal, political, and district loyalties, and commissioners may bargain over contracts, so that each of them gets a choice of someone to whom they have obligations or whom they want to be obligated to them. And for what? To have policy oversight over an otherwise independent, professional process?

The Misuse of Confidential Information
What county commissioner involvement does more than anything is give them access to valuable confidential information. This creates a terrible temptation to sell this information, which is exactly what the county commissioner is accused of having done. But rarely are officials caught doing this. Without a sting operation, it is very difficult.

Although there are rules, stated in the RFPs and RFQs, that prevent ex parte communications and the misuse of confidential information, it is hard to prevent. The better approach is to keep bids secret from everyone but the small circle of individuals who sit on bid evaluation committees. Here's a description (from the indictment) of what a local legislator can do with confidential information:

At some point in the process, these businesses would hire Nealy, and through Nealy, they would obtain inside information about competitors' bids and other strategically helpful information, which they used to pursue and obtain lucrative contracts with Dallas County. These businesses often continued to pay Nealy for the duration of the businesses' dealings in Dallas County, so that, in exchange, Price would continue to take beneficial actions on their behalf in his capacity as a County Commissioner, including providing non-public internal Dallas County memos, emails, and discussions about issues that arose during the performance of such contracts; advocating on their behalf to the Commissioners Court, to committees on which Price served including the IT Steering Committee, to the County's Purchasing Department, and to others; approving additional necessary funding on their contracts; providing information as to contemplated RFPs or contract renegotiations under consideration by Dallas County; and refraining from voting in a negative manner or otherwise taking positions on issues that would negatively impact the businesses' interests.

The number of people with discretion or access to confidential information should be strictly limited. Local legislators should be limited to dealing with policy issues. They should have nothing to do with contracts or grants once the budgetary decision has been made to hand out grants or seek bids on contracts.

Robert Wechsler
Director of Research-Retired, City Ethics

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