Irresponsible Handling of a Possible Conflict by Four Local Government Officials

Anonymous

Sun, 10/18/2009 - 12:05

City Related

One problem in government ethics is that when conflict situations are
dealt with responsibly, there is rarely a record of them. They pass
quietly, failing to end up in the newspaper, at an ethics commission,
or in court. So generally we're stuck learning from the times when
conflict situations are dealt with irresponsibly. One of these situations, in Wausau, Wisconsin, made it to court, and a decision this
week by the U.S. District Court for the Western District of Wisconsin
sets the facts out clearly (the decision is attached; see below).

The Facts 
The conflict situation involves a council member who met a developer
who owned a piece of property with two buildings on it. The council
member said she might be interested in moving her and her husband's
marketing operation there. She also told him about a HUD grant program. 
 
The developer met with the director of the Community Development
Department about the possibility of getting a grant to help raze one
building and gut the other, and then sell the property. The director
suggested he might be able to give the developer a $25,000
interest-free loan via a HUD grant. The developer said that the council
member was one of the people interested in buying the property, and the
director suggested there might be a conflict if she did. The developer
said that the council member had asked him not to mention her. It does
not appear that the developer told the council member about the
director's concerns about a future conflict. 
 
The director consulted with the city attorney, but it is not clear what
his advice was, if any. However, nothing was said to the council member
about a possible conflict. 
 
The loan was made. Such loans are normally reviewed by the council's
Economic Development Committee, on which the council member sat, but
for some reason no such review occurred, so the council member was not
able to recuse herself from a vote on the loan. 
 
A company owned by the council member and her husband purchased the
property a year later. No objection was raised to the purchase. 
 
However, a few months later the director met with HUD officials about
the purchase, seeking an investigation of the council member's
purchase. Apparently, the director hoped to get a letter that would
disqualify the council member from voting on the community block grant
development program. Apparently toward that end, the director tried to
rush the HUD officials so that the letter would arrive in time. The
director said that the council member had personally benefited in the
sum of $2,000 in interest saved, although he apparently had no
knowledge of the terms of sale. 
 
Not a word was said to the council member, so that she was unable to
tell HUD her side of the story. 
 
HUD concluded that the council member had personally benefited from the transaction and, therefore, that the loan was an ineligible use of HUD funds and the city would have to repay the funds or ask HUD to reconsider. The next
day, the council member received a letter from the mayor, seeking a
meeting on this matter. But no meeting took
place. 
 
Days later, the developer filed an affidavit with the mayor saying that
the council member had told him about the money available and that she
had asked that he keep her interest in the property confidential. The
mayor immediately asked the council member to resign, and wrote a memo
to the council about the allegations, saying that the council member
had refused to meet with him about the allegations. 
 
The council decided to refer the allegations to the city's ethics
board. A responsible decision. Four months later, the ethics board held
a hearing and recommended that the council censure the council member.
But with her term ending thirteen days later, no censure was made. 
 
The Suit 
The council member argued in her suit that the city attorney and
director of community development should have warned her that she had a
conflict, but that instead they withheld this information and
exaggerated the egregiousness of her actions so that she would be
punished and so that her reputation would be seriously harmed. 
 
The court concludes that "the right of elected officials to be free
from retaliation for political speech was not clearly established at
the time of the alleged conduct." In other words, it's not clearly
wrong (or at least actionable) for officials to retaliate against other
officials, especially when the official retaliated against was in a
position of power, as a council member, relative to non-elected
officials. But that concerns the law of retaliation for speech, not
government ethics. 
 
How the Council Member Handled the Conflict Situation 
All the council member gave the developer was the knowledge that
interest-free loans were available, which is the sort of thing council
members are supposed to do to further development in their community
(apparently, no one said that she wasn't telling others about the
loans; in fact, she asked the mayor to advertise them better). She
should not, therefore, have asked that her involvement be kept
confidential, if she actually did (this was in dispute). 
 
It appears that she was at war with the director and the mayor, so she
might have been feeling paranoid. However, the best thing for a council
member to do in such a situation is allow her involvement to be made
public. If she did ask her name to be kept out of the matter, this
showed poor judgment. But since she did nothing wrong, it was not
unethical, at least not by itself. 
 
Should the council member have purchased the property? In other words,
is it a conflict for a council member to purchase a property that was
developed partially with an interest-free government loan that,
although with federal money, came through the city? She had nothing to
do with the property being chosen for a loan. She had no interest in
the property. She had no contract with the developer and, therefore, no
guaranty of a future benefit. The only benefit she could have received
is a price a bit lower than it would otherwise have been had the
developer borrowed the $25,000 from a bank. 
 
No one said that she was preferred over other possible buyers, or that
she paid less than a fair market price for the property. No one said
that she used confidential information or that there was any sort of
quid pro quo or even a gift involved. 
 
The council member could not recuse herself from involvement in the
loan, because her only involvement was informing the developer. The
only way she could have declared her conflict was to do so when she
purchased the property. But what conflict would she have been
declaring? That she had advised the developer about the loan? That
doesn't qualify as a conflict. That she was benefiting from the loan?
Anyone who purchased the property would have benefited equally from
the loan, and she had nothing to do with the loan. 
 
Should she have asked the ethics board for an advisory opinion? In
retrospect, yes. But at the time, it may not have occurred to her. 
 
That leaves only an appearance of impropriety. This is a tough
appearance call. It clearly looked bad to the ethics board. If the
council member were to have thought about how the entirety of the
transaction might look to the public, if she had used her moral
imagination, she would have sought an advisory opinion or decided not to purchase the property. This is why it
is so important that officials, especially those with the most power
and responsibility, be given ethics training that goes beyond the
basics and the laws. They need to be taught how to think through
matters with <a href="http://www.cityethics.org/node/761">a moral
imagination</a>. 
 
How the City Attorney Handled the Conflict Situation 
If a city attorney has been asked for ethics advice from a party to a
transaction with a city official, is the city attorney obligated to
inform the city official of the possible conflict? It's not clear
whether the city attorney gave any advice at all, but assuming he did,
especially since there was no adversarial relationship between the
council member and the official seeking his advice, I think he should
have shared the advice with the council member. 
 
If the city attorney were to have serious personal or political
differences with the council member, so that personally he would not
want to share advice with her, then I think he should have told the
director of community development to seek advice elsewhere. 
 
Even if the city attorney were told about the situation, but not asked
for advice, does he, as the council member asserted, have an obligation
to warn her about the possible conflict involved? I don't think such an
obligation would be actionable, but I do believe it exists. It is no
different than if a city attorney learns that conduct by a city
official would violate any law. A city attorney is not a passive
official waiting to be asked for advice. He or she is required to
protect the city and its officials, at least where their interests are
not in conflict. 
 
But the fact is that many local government attorneys are political
animals. Most high-level local government attorneys are political
appointees, and some are even elected. They have allies and
opponents, as do those who appoint them. It can be difficult for them
to hand out unsought advice to help opponents, unless the opponent's
conduct might harm the local government (as, it turns out, it did
here). But that does not mean that there is no obligation. Only that
such obligations are often ignored, and there is little or nothing that
can be done (which is why these obligations can be so easily ignored
for personal and political reasons). 
 
How the Mayor Handled the Conflict Situation 
When a top official learns of a possible conflict, and the local
government has a formal procedure for dealing with conflicts, the most
the official should do is refer the matter to the body or individual
handling ethics matters. To ask for another official's resignation
before the matter has even been investigated, especially without
talking to the official, is a serious breach of procedure. It
immediately politicizes and thereby undermines the ethics process. It
is the opposite of good ethical leadership, made worse because it is
done in the guise of someone trying to protect the city from unethical
officials. It doesn't get much worse. 
 
But apparently this mayor did get worse. Not only did he act without
hearing the council member's side of the story, but he also apparently
misrepresented the council member's agreeability to a meeting, saying
that she refused to meet with him. This is not a government ethics
matter, but if it is true, it is deeply unethical. It reflects an ethical environment
of personal hatred and vendetta. 
 
How the Director of Community Development Handled the Conflict Situation 
The director could have taken the matter directly to the ethics board,
but instead sought to get a quick letter from HUD in order to make an
argument that the council member be excluded from participating in
other matters involving community development. The goal of this
was not to protect the community development process from her
involvement, because she had apparently done nothing to affect any
development decision to further her own interests. The apparent goal was to humiliate her and undermine
her politically. And in the process the director jeopardized the city,
because the HUD decision was not against the council member, but
against the city. 
 
Here is a perfect example of placing personal interest above public
interest without anyone benefiting financially. And yet the conduct
was unnecessary, harmful to the city, and undermined the city's ethics
process. It is this sort of situation that emphasizes the need to
extend the definition of "interest" to situations where no one benefits
financially. 
 
How the HUD Officials Handled the Conflict Situation 
The HUD officials were wrong to reach a decision without any input from
the council member. They don't even have the excuse of personal
vendetta. They should also have reported to the mayor the pressure
being put on them by the director of community development. They should
not act in furtherance of any local official's personal or political
goals. 
 
How the Developer Handled the Conflict Situation 
If the developer knew it might be against the city's ethics code for him to sell the property to the council member, why did he do it? The council member is the one who would go before the ethics board, but isn't aiding and abetting also wrong? 
 
Robert Wechsler 
Director of Research-Retired, City Ethics 
 
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Irresponsible Handling of a Possible Conflict by Four Local Government Officials

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