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Subcontractors and Indirect Benefits
Wednesday, September 4th, 2013
Robert Wechsler
Ethics provisions dealing with contracts often ignore
subcontractors. This leaves open a big loophole, through which an
official can get a big piece of a contract by hiding behind a
contractor. This is part of a larger problem: ignoring indirect benefits.
According to an article put up last night on the St. Louis Beacon website, this problem arose this week in St. Louis County, which does not have a government ethics program (the state ethics commission has jurisdiction over county officials).
St. Louis County has a charter provision (§11.080.1) that reads as follows:
It is true that the charter provision expressly mentions contracts but not subcontracts, but it also refers not only to an interest in a contract, but also to the receipt of a benefit from the "profits or emoluments" of a contract ("emoluments" is a fancy word for returns or wages, and has no place in an ethics provision). There is no doubt that the chair was to receive a benefit from what the county paid under the contract.
The county counselor and executive should have apologized for interpreting this provision in a way that ignored both its spirit and its language. But instead the executive proposed to expressly add subcontractors to the provision, so there would be no confusion the next time around. The ordinance would effectively add to the charter provision. Here is the proposed language:
The best form of clarification would have been to have an ordinance make it clear that the charter provision applies to both direct and indirect forms of benefit, including benefits received by an immediate family member.
An important thing to be learned from this matter is that ethics provisions are minimal requirements. Just because something is not expressly stated (e.g., that indirect benefits are prohibited) does not mean that they are allowed. The county clearly does not want its officials to receive special benefits from the government, whether by contract, subcontract, a spouse's contract, a kickback, or whatever.
If the county had had an ethics program, with ethics training and an ethics adviser who would have told the police board chair the subcontract was prohibited, and an ethics commission rather than a county executive or council that would enforce the rules, the county would be much better off. Instead, it has a burgeoning scandal on its hands. According to another Post-Dispatch article, another member of the police board abruptly resigned after the police chief called in the FBI to look into the bidding of the contract. And according to yet another Post-Dispatch article, the police board chair's company was new and had never taken on such a big job. The partner of the police board chair (who had the expertise; the board chair had the money) said, “To be honest, we shouldn’t have gotten the crime lab job.” The partners split, and the work on the crime lab came to at least a temporary halt.
An independent government ethics program would likely have prevented this mess from having occurred.
Robert Wechsler
Director of Research-Retired, City Ethics
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According to an article put up last night on the St. Louis Beacon website, this problem arose this week in St. Louis County, which does not have a government ethics program (the state ethics commission has jurisdiction over county officials).
St. Louis County has a charter provision (§11.080.1) that reads as follows:
No officer or employee of the county, whether elected or appointed, shall in any manner whatsoever be interested in or receive any benefit from the profits or emoluments of any contract, job, work or service for the county.According to an article in the St. Louis Post-Dispatch last month, when it was discovered that the chair of the county's police board was an owner of a subcontractor on a police crime lab construction project, getting 40% of the revenues, the county counselor and the county executive took the position that there was no conflict of interest because the chair did not have a contract with the county, but rather with the contractor.
It is true that the charter provision expressly mentions contracts but not subcontracts, but it also refers not only to an interest in a contract, but also to the receipt of a benefit from the "profits or emoluments" of a contract ("emoluments" is a fancy word for returns or wages, and has no place in an ethics provision). There is no doubt that the chair was to receive a benefit from what the county paid under the contract.
The county counselor and executive should have apologized for interpreting this provision in a way that ignored both its spirit and its language. But instead the executive proposed to expressly add subcontractors to the provision, so there would be no confusion the next time around. The ordinance would effectively add to the charter provision. Here is the proposed language:
No officer or employee of the county, whether elected or appointed, shall in any manner whatsoever be interested in or receive any benefit from the profits of emoluments of any contract with a person or entity seeking to obtain goods and services in connection with a contract between that person or entity and St. Louis County.The proposal did not receive a second. One county council member correctly pointed out that this ordinance would actually dilute the charter. And he's right. By picking out one type of indirect benefit, the ordinance effectively states that officials can receive all other kinds of indirect benefit from the county.
The best form of clarification would have been to have an ordinance make it clear that the charter provision applies to both direct and indirect forms of benefit, including benefits received by an immediate family member.
An important thing to be learned from this matter is that ethics provisions are minimal requirements. Just because something is not expressly stated (e.g., that indirect benefits are prohibited) does not mean that they are allowed. The county clearly does not want its officials to receive special benefits from the government, whether by contract, subcontract, a spouse's contract, a kickback, or whatever.
If the county had had an ethics program, with ethics training and an ethics adviser who would have told the police board chair the subcontract was prohibited, and an ethics commission rather than a county executive or council that would enforce the rules, the county would be much better off. Instead, it has a burgeoning scandal on its hands. According to another Post-Dispatch article, another member of the police board abruptly resigned after the police chief called in the FBI to look into the bidding of the contract. And according to yet another Post-Dispatch article, the police board chair's company was new and had never taken on such a big job. The partner of the police board chair (who had the expertise; the board chair had the money) said, “To be honest, we shouldn’t have gotten the crime lab job.” The partners split, and the work on the crime lab came to at least a temporary halt.
An independent government ethics program would likely have prevented this mess from having occurred.
Robert Wechsler
Director of Research-Retired, City Ethics
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