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.<br>
<br>
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 <a href="https://library.municode.com/index.aspx?clientId=13347" target="”_blank”">the
county Code of Ordinances</a> (Sec. 94-51). But there is no local ethics program.<br>
<br>
According to <a href="http://inforney.com/texas/item/2072-federal-grand-jury-indicts-a-dallas…; target="”_blank”">a
press release from the U.S. Attorney for the Northern District of
Texas</a>, a federal grand jury has returned <a href="https://cbsdallas.files.wordpress.com/2014/07/price-indict.pdf" target="”_blank”">a
109-page indictment</a> 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.<br>
<br>
<b>A Different Sort of Inside Lobbyist</b><br>
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.<br>
<br>
<b>Benefits to Others</b><br>
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:<blockquote>
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;<br>
<br>
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<br>
<br>
c. granting particular minority subcontractors specified by Price a
certain percentage of the bids submitted for contracts in Dallas
County and other jurisdictions..."</blockquote>
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.<br>
<br>
<b>The Procurement Process</b><br>
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.<br>
<br>
Here's how the indictment describes Dallas County's procurement
process:<blockquote>
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.<br>
<br>
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.<br>
<br>
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.</blockquote>
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?<br>
<br>
<b>The Misuse of Confidential Information</b><br>
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.<br>
<br>
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:<blockquote>
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.</blockquote>
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.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
<br>
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