The Massachusetts EC Fixes a Poor Conflict Provision with an Exemption
Ethics commissions are often stuck with one or more ethics
provisions that they are know are, in some ways, irresponsible. They
can recommend amendments to the provisions, but the legislative body
is free to ignore such recommendations.<br>
<br>
If this happens, an EC is not always powerless. It can often promulgate a
regulation that can interpret the language in a provision, or
provide exemptions, so that the provision is more responsible. The
Massachusetts EC, which has jurisdiction over local officials, has
done just this with a draft exemption (attached; see below) to a provision that
effectively makes it a violation to have a conflict of interest, including a pre-existing contract with the government.<br>
<br>
Two months ago, I wrote <a href="http://www.cityethics.org/content/perils-prohibiting-officials-having-c…; target="”_blank”">a
blog post about this provision</a>, and the conflict situation
that gave rise to this particular exemption. The conflict provision
is so problematic that <a href="http://www.mass.gov/ethics/laws-and-regulations-/rules-and-regulations-…; target="”_blank”">the
Massachusetts EC has already created 31 exemptions to it</a>. What
is good about the new draft amendment to the EC's Rules and
Regulations is that it goes well beyond the
particular situation. It effectively turns a wrongheaded provision
into one that is far more fair and responsible, at least with
respect to pre-existing contracts.<br>
<br>
The stated Purpose is a good one: "to allow public employees
who had business interests involving government before they entered
public service to retain those interests, while providing safeguards
to ensure that they do not use their public positions to advance
their business interests." In other words, having a conflict – in
this case a contract – is not a problem, but it is important that
officials with a pre-existing contract are not able to misuse their
office with respect to that contract.<br>
<br>
This is not an optimal solution, but it is better than leaving the
law as it is, because a law that prohibits having a contract keeps
many officials from running for office or taking a government job,
or requires an unnecessary sacrifice, when they can deal with their
contract by disclosing it and withdrawing from participation in
anything that relates to it. Especially at the local level, the public loses many good government
officials due to such laws.<br>
<br>
A good thing about an exemption like this is that it goes into more
detail than most ethics codes with respect to the responsible
handling of a pre-existing contract. The second part of the basic
exemption provision states:<blockquote>
The public employee may retain the financial interest for the
remainder of the pre-existing contract term ... if that contract, by
its own terms, automatically renews on identical terms without any
action required by either party to the contract.</blockquote>
This is good language. However, it would be good if there were a
review of each such contract at the time a contractor was hired or
took office, so that the EC could consider whether the terms of the
contract were normal and fair and, if they were not clearly both,
require that the contractor and the contracting agency sufficiently
explain any abnormalities or possible unfair (to the public) aspects
of the contract. If the EC is not satisfied, it should be allowed to
require that the contract be amended so that there is no question
that a candidate for office or a government job did not use the
power of the future position to get special terms.<br>
<br>
Such special terms might include a longer term than usual, renewal
provisions that are consistent with the regulation but do not allow
re-bidding of the contract, and the possibility of change orders,
which allow an official who is also a contractor to use his
influence to benefit further from a pre-existing contract.<br>
<br>
<b>Restrictions on Use of Exemptions</b><br>
The final section of the regulation, entitled "Restrictions on
Persons Using Exemption," is especially good. There are two
principal restrictions. One, the official may not, as an official,
"participate in or have official responsibility for any activities
of the contracting public agency." That is, an official cannot have
a contract with her own agency, or with any agency over which she
has official responsibility, which I assume means that a city
manager cannot have a contract with any executive agency. In other
words, withdrawal is not enough where an official has influence.<br>
<br>
The only problem here is the one that I see so often: nothing
is said about oversight. The same restriction should apply to any
agency that has oversight responsibility over the contracting public
agency or any aspect of the contract itself. For example, if a
council, inspector general, auditor, or the like has any oversight
responsibility over contracts, council members and officials in
these offices should not enter into any contracts with their
governments. Yes, these officials may withdraw from participation in
oversight of their contracts, but their colleagues and subordinates
are placed in an uncomfortable position having to oversee their
colleagues and superiors. And to the public, oversight by an
official's colleagues and subordinates looks very much like
oversight by the contracting official herself.<br>
<br>
The second restriction (§6.26(4)) prohibits ex parte
communications between the contracting official "in his official or
private capacity, ... directly or indirectly, with any public agency
concerning any public contract in which he or she has a financial
interest, or with any public agency which is a party to any contract
in which he or she has a financial interest." The official can
communicate with such agencies, but not with respect to the
particular matter.<br>
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<b>The "Substantially Similar" Exemption and a Waiver Process</b><br>
The most problematic part of the regulation is the second exemption,
for contracts that are "substantially similar" to the pre-existing
contract. A contract is "substantially similar" to another
contract "if the two contracts involve the same, or substantially
the same, provision of services, goods, benefits, opportunities, or
access to premises. Contracts may be substantially similar even
though the parties are not the same."<br>
<br>
I'm sure that, in most cases, this is a reasonable exemption. And
there are several criteria that have to be met for a
"substantially similar" contract to be allowable. But I wonder if
this could not be employed as a loophole to allow contracting officials
to use the influence of their position to expand their contracts. As
with pre-existing contracts, it would be valuable not only to have
criteria that have to be met, but also for the agency to have to
make a case to the EC for "substantially similar" contracts and
receive the EC's approval.<br>
<br>
The approval process that I recommend with respect to both
exemptions is nothing more than a recognition that an exemption is
essentially a waiver. It could be argued that a pre-existing
contract is not a violation and, therefore, the exemption is not
really an exemption, but rather an improvement on the ethics
provision that applies to such contracts. But "substantially similar"
contracts are new contracts and, therefore, would be violations to
the extent they are not "substantially similar." Therefore, a waiver
process is definitely appropriate here.<br>
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<b>The EC Is Seeking Comments</b><br>
The Massachusetts EC is seeking comments on the draft regulation.
Comments on the draft regulation may be submitted to Deirdre Roney,
the EC's General Counsel, at <a href="mailto:[email protected]?subject=Request%20for%20Public%20Comment%…;,
or at the following address: State Ethics Commission, One
Ashburton Room 619, Boston, MA 02108. Hearings will be held on
December 13 and 17. For more, see <a href="http://www.mass.gov/ethics/draft-new-regulatory-exemption-november-2013…; target="”_blank”">the
notice on the EC's website</a>.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
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