The Pretzel Logic Required by Limiting Conflicts to Financial Interests. And the Ultimate Defense.

Update: August 2, 2010 (see below)

I've long said that conflicts of interest should not be limited to financial interests or, in other terms, situations where a possible financial benefit or loss is involved (see, for example, this 2009 blog post). My position is confirmed by the twisted yet necessary logic in a July 28 decision of the California Fair Political Practices Commission (FPCC), the state ethics body, with jurisdiction over state and local officials. And then the whole thing is undermined by wrongly allowing the use of a city attorney's advice as a defense.

A Redwood City council member is the acting president and CEO of the San Mateo County Economic Development Association (SAMCEDA), which lobbies for area companies on issues such as development projects. She was also named by SAMCEDA as its member on the county's 2010 charter review committee.

The council member voted on a big development project endorsed by SAMCEDA and for which it has lobbied aggressively.

Involvement vs. Employment with an Issues Organization
It's okay for an elected official to be a member, even a leader, of an organization that, for example, supports or criticizes development in the city or county. The official's involvement with the organization, and the organization's positions, are most likely an important reason the official was elected. No one would want pro- and anti-development advocates left out of local government development decisions, as long as they are not taking the positions to benefit themselves. It's a matter of ideology, not interest.

This council member is a paid employee of a pro-development organization. Whether or not the organization itself benefits financially or not from decisions before the council is, I think, irrelevant to whether she recuses herself on matters in which the organization has been involved. In fact, if the organization is involved in a number of matters before the council, or in a few matters that repeatedly come before the council, such an employee should not sit on the council at all, because she is depriving her constituents of a representative who lacks an interest in the matter.

How Limiting Conflicts to Financial Interests Undermines an Ethics Program
Unfortunately, in California, as in so many jurisdictions, the employer as well as the employee must benefit financially for there to be a conflict of interest. So here's what the FPCC was forced to reason in order to find a conflict in this matter:

Your actions violated the Act because it was reasonably forseeable that your vote to hire an environmental firm to review the Saltworks project, a vote that moved the project along on its path toward potential approval, could affect SAMCEDA, an organization so interested in the Saltworks project it held a vote to endorse the project and has sent its employees as advocates on the Saltworks project to the Redwood City council's meetings. Further, the developers involved in the Saltworks project are dues-paying members to SAMCEDA. It is reasonably forseeable that other developers, encouraged that projects endorsed by SAMCEDA are successfully moving forward, will join SAMCEDA as dues-paying members. The reasonable forseeability of so much as a penny's worth of increased dues revenue to SAMCEDA because of the advancement of the Saltworks project should have disqualified you from your decision regarding the environmental review.

This kind of reasoning undermines the credibility of an ethics program. It almost makes me sympathize with an organization that not only lobbies its own CEO, but also hires a council member as its VP and nominates her for its position on the county's charter review committee. Why? Because the CEO had no reason to believe that her employer would benefit financially from her support of the Saltworks project. But she did have every reason to believe that she was, at least in part, hired to support SAMCEDA's goals on the council and the charter review committee, and that this is how her participation would be seen by the public — effectively as ongoing bribery.

Here's what a lawyer who represents officials before the FPCC said about the decision, according to an article in the Bay Citizen:

That's stretching the concept of reasonable foreseeability. What is she up there thinking, that "I should approve this project so I can get more members so I can get a raise?"

As for the other side of the development issue, the director of an anti-development organization is quoted by The Pelican Eye as saying that it is the council member's job "to advance SAMCEDA's interests." That describes the conflict perfectly. It's damaging to the state ethics program that the FPCC wasn't allowed to describe it that way.

City Attorney Advice
To further undermine the credibility of the ethics program, the very next sentence of the FPCC's decision is as follows:

Because, however, you consulted with the interim Redwood City attorney on this matter and were advised you did not have a conflict of interest, we have decided to close this case.

As I wrote in a blog post, the California supreme court determined back in 2007 that a council member charged with a conflict of interest could not use the defense that she had acted upon the advice of the city attorney. The reasoning was, "An official cannot escape liability for conflict of interest violations by claiming to have been misinformed by an employee serving at her pleasure." As in the 2007 case, the Redwood City attorney is appointed by the council.

The city attorney's advice was not a defense, and the FPCC should have let both this council member, and all council members, know this by proceeding with this ethics matter.

The two city attorneys who advised the council member that she had no conflict were, for their part, sticking too close to the law and ignoring the appearance of impropriety arising from a council member advancing her employer's interests. Too often, local government attorneys are too legalistic, too partisan, too personally loyal, or simply too ignorant about government ethics to be able to give neutral, competent advice. That's what ethics officers and ethics commission staff are for.

In addition, local government attorneys know that nothing will happen to them if they tell an official there is no conflict. They know that they are part of the ultimate Catch 22 in government ethics:  tell the official it's okay, the official does it, and enforcement is impossible. There might as well be no official ethics advice and no enforcement. Even disclosure is often undermined by local government attorney advice.

Officials must be encouraged not to turn to local government attorneys for ethics advice. They need to know that, if they choose a local government attorney over an ethics officer or ethics commission, the advice will not be a defense, for all the reasons given above. Otherwise, it is the ultimate defense.

Update: August 2, 2010
I was informed today by the FPPC's executive director that the city attorney advice was not treated as a defense, but rather as a mitigating circumstance. In California, there are two kinds of letter that constitute enforcement short of a commission hearing and possible fine: the advisory letter, where there is insufficient evidence of a violation, but where "the subject of a complaint should be made aware of potential future responsibilities"; and the warning letter, as in this matter, where there is sufficient evidence of a violation, but where "it is not in the best interest of the People of California to issue a fine." The majority of complaints investigated by commission staff end in a warning letter.

I agree that, in this case, especially considering the necessarily pretzel logic of the decision, it was better not to waste (for the commission and the council member) the time and money involved in a full-scale hearing. I just wish that the city attorney advice was not presented as the sole reason for not going forward with the case, and I also wish that it was made clear that this was not a defense, but rather a mitigating factor.

In fact, I don't think government attorney advice should ever be the sole mitigating factor, because it sends the message that even if there may still be enforcement by the FPPC, there will not be a public hearing, nor will there be a fine. Even though there is a finding of a violation, the official can say she was depending on counsel, and it is hard to fault her for that, unless you know the law in California.

By the way, it's worth knowing that you can subscribe to FPPC meeting agendas, monthly press releases, and various other notices. Go here to sign up.

Robert Wechsler
Director of Research-Retired, City Ethics

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