Subcontractors and Indirect Benefits
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.<br>
<br>
According to <a href="http://www.stlbeacon.org/?_escaped_fragment_=/content/32605/subcontract…; target="”_blank”">an
article put up last night on the St. Louis Beacon website</a>,
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).<br>
<br>
St. Louis County has a <a href="http://ww5.stlouisco.com/county_charter/char11.html" target="”_blank”">charter</a>
provision (§11.080.1) that reads as follows:<blockquote>
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.</blockquote>
According to <a href="http://www.stltoday.com/news/local/crime-and-courts/crime-lab-subcontra…; target="”_blank”">an
article in the St. Louis <i>Post-Dispatch</i></a> 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.<br>
<br>
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.<br>
<br>
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:<blockquote>
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.</blockquote>
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.<br>
<br>
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.<br>
<br>
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.<br>
<br>
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 <a href="http://www.stltoday.com/news/local/metro/st-louis-county-chief-asks-fbi…; target="”_blank”">another
<i>Post-Dispatch</i> article</a>, 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 <a href="http://www.stltoday.com/news/local/metro/how-did-a-fledgling-firm-win-t…; target="”_blank”">another
<i>Post-Dispatch</i> article</a>, 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.<br>
<br>
An independent government ethics program would likely have prevented
this mess from having occurred.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
<br>
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