New Orleans Mayor's Indictment Shows Weakness of the City's Ethics Program
The FBI had to work hard for years to get a grand jury indictment of
former New Orleans mayor Ray Nagin yesterday (a searchable PDF of
the indictment is attached; see below).<br>
<br>
A lot of what occurred could have been stopped a long time ago if
the city and state had better ethics laws and the city's ethics
board was able to initiate complaints and hold public hearings on
ethics issues that came to its attention. It appears that every time
I read the indictment of a mayor or council member, the misconduct
is such that a good ethics program might have prevented it from ever
occurring. That's why, unlike many in the good government world, I
don't cheer when I see another indictment. I see it as unfortunate.
Lives were ruined and the public trust was undermined because simple
ethics reforms were not instituted and an ethics commission did not
do its job.<br>
<br>
When I read about the indictment in <a href="http://www.nola.com/crime/index.ssf/2013/01/ray_nagin_becomes_first_new…; target="”_blank”">an
article in yesterday's New Orleans <i>Times-Picayune</i></a>, the two
words that jumped into my mind were "no-bid" and "indirectly." The
word "no-bid" appears twice in the article, but "indirectly" does not
appear at all. In the indictment, neither word appears. But if the
ethics program had dealt with just these two words, all of this
would have been dealt with years ago.<br>
<br>
<b>Indirectly</b><br>
<a href="http://www.cityethics.org/node/739" target="”_blank”">Over three years ago, I
wrote</a> about the word "indirectly" with respect to misconduct
that ended up being one of the counts in the indictment. Two trips
taken by Mayor Nagin and his family were funded
by a firm owned by a city technology vendor's owner. But the law
only prohibits taking money from a contractor or the owner of a
contractor directly. If the owner of the contractor makes the gift
through a different company he owns, even if the company was formed
solely for the purpose of making the gift, that's okay by Louisiana
law. Why? Because the gift law does not use the word "indirectly."
Three little words are all that's needed (see <a href="http://www.cityethics.org/content/full-text-model-ethics-code#0.1_TOC35…; target="”_blank”">the
City Ethics Model Code gift provision</a> for the wording).<br>
<br>
A complaint was filed with respect to this gift, but since it fit
the loophole, all the mayor learned is that he could get away with
doing things indirectly. Payments from one contractor were
indirected through a board member (who is now in prison); another
contractor set up a sham company that bought an interest in the
mayor's family company, as a way of making payments indirectly to
the mayor; another contractor's payment for the mayor's family to go
to New York City was indirected through a third party; and another
contractor created several companies to make it look like the
technology office was spreading contracts around.<br>
<br>
In other words, "indirect" is not good, as the state's gift
provision suggests. It is fraudulent. An indirect gift is actually
worse than a direct gift, not better. This is why a poorly written
gift provision provides guidance not in how to act responsibly, but
in how to act irresponsibly. Instead of a quick finding of an ethics
violation or, better yet, the prevention of misconduct, you end up
with years of investigations and a lot of people going to prison for
fraud, seriously undermining the public trust.<br>
<br>
<b>No-Bid Contracts</b><br>
Local governments need to recognize that the kickbacks Mayor Nagin
has been indicted for are synonymous with no-bid contracts. A city
that allows officials to make or sponsor no-bid contracts is a city
that allows kickbacks. Any statement to the contrary is either
dishonest or naive.<br>
<br>
The indictment simply says that Nagin "awarded" contracts. A mayor
should not award contracts. This should be done solely by a
procurement office.<br>
<br>
Procurement laws should prohibit no-bid contracts and require
officials to seek waivers by going to the ethics commission or
another independent body, before which, in a public hearing, they must provide a detailed
explanation of the extraordinary circumstances that require a no-bid
contract, fully answering all questions directed to them by the
ethics commission and by citizens. All alternatives to a no-bid
contract should be considered. The body may deny the waiver, allow
the waiver, or allow the waiver with requirements such as regular
reports and annual requests to renew the contract.<br>
<br>
The contractor who set up a sham company to invest in the mayor's
family company "received numerous no-bid design and engineering
contracts from the city," according to the <i>Times-Picayune</i> article. And the contractor who paid for the mayor's family trips, which led
to my 2009 blog post, received numerous no-bid technology contracts
approved by the mayor.<br>
<br>
<b>Initiating Investigations and Hearings</b><br>
Besides good laws, an ethics commission needs the authority to
initiate an investigation when its members read in the newspaper or
are told via a hot line about ethical misconduct. When the
misconduct is legal, the ethics commission needs to call a public
hearing (whether authorized or not) to consider the issue, ask
questions of the officials involved, and recommend changes to the
ethics or procurement laws in order to prevent such misconduct in
the future.<br>
<br>
If Nagin had it to do all over again, now that he has been indicted
and will likely go to prison, wouldn't he prefer having had (or
made) a good government ethics program that would have stopped him
many years ago? Why do so many officials not see that a good
government ethics program will protect them or — if they believe
absolutely in the strength of their integrity and knowledge of right
and wrong — at least their weaker colleagues, and the public?<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
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