A Lobbying Firm Wears Two Hats in Its Relationship with NYC Council Speaker
<a href="http://www.nydailynews.com/new-york/exclusive-speaker-melissa-mark-vive…; target="”_blank”">A
New York <i>Daily News</i> article yesterday</a> describes an
interesting conflict situation. At least one lobbying
firm has worn two hats in its relationship with the speaker of the
New York City council. One hat was that of a campaign and appointments consultant,
the other was that of a contract lobbyist for multiple clients. See
<a href="http://www.crainsnewyork.com/article/20140115/BLOGS04/140119935/lobbyis…; target="”_blank”">a
<i>Crain's New York</i> Insider blog post from January</a> for more about
such relationships with the speaker.<br>
<br>
This is legal, as the speaker's spokesperson insists, but there is still a serious conflict situation that
needs to be handled responsibly. As Susan Lerner, head of
New York Common Cause, is quoted as saying, “The merger between
campaign consultant and lobbyist by the same entity raises
significant problems and concerns.” In other words, the problem lies
in having one firm wearing multiple hats in its relationship with a high-level official.<br>
<br>
What specific problems does wearing these two hats cause? One,
consulting creates a special relationship that goes beyond
the usual meals and meetings with lobbyists. A special relationship
leads to special access and favoritism, or the appearance of these.
Lobbying is all about relationships, and lobbyists are obligated to
do anything they can to further their relationships, especially with
someone as important as the head of a major city's council.<br>
<br>
Two, any business relationship with an official creates the
possibility of secret gifts. For example, a lobbyist can make gifts
to a campaign by charging less than its usual fee or doing more work
than is reported on campaign disclosures. There would be no way of
finding out, but people may reasonably suspect this is occurring
since, as I said, lobbyists are obligated to do anything they can to
further their relationships with high-level officials, and gifts are an important element of this relationship. One could
even argue that a lobbyist who didn't manage to go above and beyond
the call of duty in consulting to the target of his lobbying efforts would be not be doing his job for his firm's
lobbying clients.<br>
<br>
What can a government official do? The speaker might have said to
the lobbyist/consultant, "I'd like you to be my consultant, but if you
accept the job, you can't lobby me for at least a couple of years
or, if I'm elected speaker, while I'm the speaker." Or the speaker
could have made the decision herself, choosing not to hire the
lobbying firm to consult with her.<br>
<br>
As for the lobbying firm, if an official or the campaign of an official that it lobbies comes to it
for consulting services, does it have an obligation to say that it
can only wear one hat with respect to the official? Lobbying firms
do not have a fiduciary obligation to the communities whose
officials they lobby, but they do have obligations to their clients,
who do not want their names associated with scandals that arise from conflict situations.<br>
<br>
In more common situations, a lobbying firm should, at the very
least, ask the official to get the ethics adviser's permission. But
since this situation falls outside most, if not all ethics and
lobbying codes, a firm should point out to the official the fact
that it would be conflicted, that this conflict cannot be cured by disclosure (contrary to the speaker's position), and that this conflict not only may put
the official in a compromised position, but it may also affect the
firm's reputation and, therefore, its clients' reputations.<br>
<br>
Wearing two hats, although lucrative for the firm in the short run,
may be harmful to the firm in the long run, because it will cause
its other clients to question the firm's judgment, it will cause
other officials to steer clear of the firm, and it will cause
regulators to pay more attention to everything the firm does, as if
it were driving a bright red Corvette down the government ethics
highway.<br>
<br>
It's not a good idea for one firm to represent both
officials and those seeking special benefits from them. If a firm is
going to do this, it should be extra careful not to wear two hats
with respect to any official. If this is impossible, then it should
split up into two firms, not just in name, but in all ways. This is
what was required of accounting firms that also did consulting, and
in that case the firms were representing the same clients (but had
special professional obligations as accountants).<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
<br>
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