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A Gift Exception That Undermines the Rule
Tuesday, December 21st, 2010
Robert Wechsler
My
last blog post involved the Baltimore Employees'
Retirement System board calling in an image consultant to help
protect it from an investigation by the
city's ethics board. This blog post will look at why there is an
investigation (again, I could not find any minutes posted, so I am
dependent on the research done by the Investigative Voice).
An Exception That Undermines the Rule
According to a series of Investigative Voice posts, emails show that extensive travel by Baltimore pension board members (all but one) and staff is partially subsidized by financial firms seeking contracts with the pension board. Gifts from companies doing business with one's agency are prohibited by the Baltimore ethics code (§6-27), but there are, of course, exceptions, including a big one relevant to acceptance of travel costs:
Those who drafted this exception seem to feel that this charitable impulse actually exists. They appear to have assumed that the board member's expertise as a speaker is worth someone's while to fly them to Florida or California or Monaco. I don't think this impulse exists, nor that the exception should exist. Effectively, the exception makes the rule meaningless, at least in this context.
According to an Investigative Voice post, investment firms have anticipated this sort of exception by providing an opportunity to pension board members to select a discussion panel to serve on. They don't have to indicate any special knowledge or experience, they don't have to be asked, as is common at conferences, they just sign up and, voila!, they have met the principal criterion of the exception.
A History of Travel Problems
The pension board's travel is not a new issue. Back in 2006, this issue arose when a board member filed a financial disclosure statement reflecting the board's travel practices, according to a Calvert Institute for Policy Research article published this September, entitled "Hit and Run Politics: Baltimore City and Maryland State Pensions: A Short History."
The pension board authorized $10,000 for a study of the travel practices of other large-city pension boards (to show it's hardly alone?) and to recommend new travel policies. Then it rejected a motion to reduce the travel limit per member from $10,000 a year to $7,500 a year. However, it did limit each member to one international trip and placed a limit of three trustees per conference.
A Dissident Pension Board Member's View
The disclosing pension board member is still on the board. He is quoted by Investigative Voice as saying, “The sponsors of the conferences pay for part of the expenses because they want access to the trustees; that’s why they pay — they want business. But it’s a violation of city ethics to accept gifts from people who are doing or want to do business with the city, and not declare them. I used to travel myself, but when the rules changed, I stopped.”
What makes this especially odd is that the board is chaired by the city comptroller who, one would think, would be concerned about ethics issues. The board also contains a labor leader, the city's labor commissioner, an investment firm executive, an attorney, a city employee, and a retired pension administrator who is the board's ethics dissident.
Dealing Responsibly with the Problem and the Investigations
There's nothing wrong with a reasonable amount of travel for educational and networking purposes, especially by staff members. But at least as long as there are any exceptions to the gift provision, great care needs to be taken in publicly disclosing the source of all spending (city, personal, investment firm) as well as all discounts (including free registration) and other gifts taken by board members and staff.
It appears that this information is not being made available to Investigative Voice nor, presumably, to the public. This lack of transparency makes it appear that the pension board is doing something it shouldn't be doing.
Therefore, it has only itself to blame for any investigation that is done into its practices, either by the ethics board or by investigative reporters. Instead of hiring an image consultant, it should immediately make all of its travel records for the last ten years or so public, and reach a settlement with the ethics board as quickly, and publicly, as possible. As respondent, it should insist on a public ethics proceeding.
If staff or board members have been misrepresenting the source of their travel expense payments, they should be removed.
Consideration should also be given to staggering the terms of pension board members. All but one of their terms end in December 2011.
Robert Wechsler
Director of Research-Retired, City Ethics
---
An Exception That Undermines the Rule
According to a series of Investigative Voice posts, emails show that extensive travel by Baltimore pension board members (all but one) and staff is partially subsidized by financial firms seeking contracts with the pension board. Gifts from companies doing business with one's agency are prohibited by the Baltimore ethics code (§6-27), but there are, of course, exceptions, including a big one relevant to acceptance of travel costs:
-
§ 6-28. Qualified exemptions.
...the prohibitions in § 6-27 ... do not apply to the unsolicited receipt of ...
(3) in return for a speaking engagement or participation on a panel at a meeting, reasonable expenses for food, travel, lodging, and scheduled entertainment of the public servant, but only if:
(i) the expenses are associated with the meeting; and
(ii) to the extent the expenses are anticipated to exceed $500, the public servant has notified the Ethics Board before attending the meeting
-
§ 6-29. Exemption limitations.
The exemptions specified in § 6-28 {“Qualified exemptions”} of this subtitle do not apply to any gift if:
(1) the gift would tend to impair the recipient’s impartiality and independent judgment; or
(2) for a gift of significant value:
(i) the gift would give the appearance of impairing the recipient’s impartiality and independent judgment; or
(ii) the recipient believes or has reason to believe that the gift is designed to impair his or her impartiality and independent judgment.
Those who drafted this exception seem to feel that this charitable impulse actually exists. They appear to have assumed that the board member's expertise as a speaker is worth someone's while to fly them to Florida or California or Monaco. I don't think this impulse exists, nor that the exception should exist. Effectively, the exception makes the rule meaningless, at least in this context.
According to an Investigative Voice post, investment firms have anticipated this sort of exception by providing an opportunity to pension board members to select a discussion panel to serve on. They don't have to indicate any special knowledge or experience, they don't have to be asked, as is common at conferences, they just sign up and, voila!, they have met the principal criterion of the exception.
A History of Travel Problems
The pension board's travel is not a new issue. Back in 2006, this issue arose when a board member filed a financial disclosure statement reflecting the board's travel practices, according to a Calvert Institute for Policy Research article published this September, entitled "Hit and Run Politics: Baltimore City and Maryland State Pensions: A Short History."
The pension board authorized $10,000 for a study of the travel practices of other large-city pension boards (to show it's hardly alone?) and to recommend new travel policies. Then it rejected a motion to reduce the travel limit per member from $10,000 a year to $7,500 a year. However, it did limit each member to one international trip and placed a limit of three trustees per conference.
A Dissident Pension Board Member's View
The disclosing pension board member is still on the board. He is quoted by Investigative Voice as saying, “The sponsors of the conferences pay for part of the expenses because they want access to the trustees; that’s why they pay — they want business. But it’s a violation of city ethics to accept gifts from people who are doing or want to do business with the city, and not declare them. I used to travel myself, but when the rules changed, I stopped.”
What makes this especially odd is that the board is chaired by the city comptroller who, one would think, would be concerned about ethics issues. The board also contains a labor leader, the city's labor commissioner, an investment firm executive, an attorney, a city employee, and a retired pension administrator who is the board's ethics dissident.
Dealing Responsibly with the Problem and the Investigations
There's nothing wrong with a reasonable amount of travel for educational and networking purposes, especially by staff members. But at least as long as there are any exceptions to the gift provision, great care needs to be taken in publicly disclosing the source of all spending (city, personal, investment firm) as well as all discounts (including free registration) and other gifts taken by board members and staff.
It appears that this information is not being made available to Investigative Voice nor, presumably, to the public. This lack of transparency makes it appear that the pension board is doing something it shouldn't be doing.
Therefore, it has only itself to blame for any investigation that is done into its practices, either by the ethics board or by investigative reporters. Instead of hiring an image consultant, it should immediately make all of its travel records for the last ten years or so public, and reach a settlement with the ethics board as quickly, and publicly, as possible. As respondent, it should insist on a public ethics proceeding.
If staff or board members have been misrepresenting the source of their travel expense payments, they should be removed.
Consideration should also be given to staggering the terms of pension board members. All but one of their terms end in December 2011.
Robert Wechsler
Director of Research-Retired, City Ethics
---
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