Withdrawal, Secrecy, and Misuse of Confidential Information Issues in an Economic Incentive Matter

Providing incentives to attract companies or get them to expand
their operations in a city or county has always been a controversial
issue. Incentives are seen as necessary to attract, keep, or expand
jobs locally, but they can also be an unnecessary way to get local
governments into bidding wars (or what is presented to them as a
bidding war) with other local governments, to the benefit of
companies who are going to build or expand no matter what local
governments offer.<br>
<br>
Providing incentives can also lead to ethical misconduct, or the
appearance of impropriety. This is the case in High Point, NC, where
Ralph Lauren was given both a sizeable incentive to expand (by both
city and county) and land use changes,
according to <a href="http://greensboro.rhinotimes.com/Articles-Articles-c-2012-06-20-212244…; target="”_blank”">an
article this week in the Greensboro <i>Rhino Times</i></a>.<br>
<br>
A dispute arose when a council member provided a market survey to
Ralph Lauren before the council met on its requests, but after the
High Point Economic Development Corp, which recommends incentives to
the council, had been dealing with the incentive request.<br>
<br>

Upon advice from the city manager, mayor, and city attorney, the
council member did not vote on any of Ralph Lauren's requests. But
there is no information about the extent to which the council member
otherwise participated in the matter.<br>
<br>
<b>The Definition of Withdrawal</b><br>
There are three problems here. One is that everyone involved in this situation believes
that withdrawing from a vote is all that is necessary. Even state
laws appear to require nothing but withdrawal from votes where this
a conflict. This means that a council member or other official could
do everything possible to arrange for incentives and land use
permits for a company it sought business from, or was even doing
business with, as long as he didn't vote. I would like to see
someone defend any law that would allow this to happen.<br>
<br>
<b>Secrecy</b><br>
The second problem is that the provision of advice by high-level officials in this matter appears to have been kept secret from the public. And the council member
refuses to provide further information about his involvement in the
matter. According to the article, the council
member "would not provide the market survey or any written
communications between the company and himself. He would not
describe the contents of any contacts he had with the company.
Asked to identify the person at Ralph Lauren Corp. who approached
him asking for the property market survey, he first asked, 'Why
should I?' Then he cited confidentiality between himself and his
Ralph Lauren contact.</span>"<br>
<br>
So the public can only assume the worst.<br>
<br>
<b>Misuse of Confidential Information</b><br>
The third problem is that, even while withdrawing from the votes,
the council member insisted that he had no conflict:  "The reason for my [decision not to vote] has to do
not with an existing conflict of interest but with appearance of a
possible conflict," he wrote.<br>
<br>
And the council member denied a conflict the mayor pointed out,
which could not be cured by withdrawal. The
mayor said that the council member knew that Ralph Lauren was
going to expand and seek incentives, that it was kept confidential only from the
press, not from officials. The council member said he
didn't know about Ralph Lauren's request for an incentive, even
though the company had asked him to look into expansion and it
had asked for, and received, an incentive the last time it had
expanded in High Point (in November 2010). According to the article,
"Dozens of public officials were aware of the
potential Ralph Lauren Corp. expansion at all levels of
government."</span><br>
<br>
If the council member sought business with a company based on
information known only to public officials, this is a serious misuse
of office to benefit himself. In his defense, he insists he never
made a penny. But that isn't relevant. Seeking a benefit is
sufficient. Failure to obtain the benefit would affect any
penalty, however, because there would be no seeking of restitution.<br>
<br>
<b>What Needs to Be Done</b><br>
It is impossible to know what the council member knew without an
investigation. It would certainly help clear the air if the council
member was to make documents available and provide the names of his
contacts at Ralph Lauren. When a public official does business with
a company that is receiving and seeking substantial benefits from
his city, it is not private business, and both the company and the
public official should realize this.<br>
<br>
The city should establish a policy for providing independent ethics
advice rather than turning it into a dispute among high-level
officials. And the state should expand its definition of withdrawal
from voting to any participation in a matter.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
<br>
203-859-1959