Fraud and Ethics Enforcement

Criminal enforcement of ethics violations usually involves fraud, and less so honest services fraud (which was essentially misuse of office) now that it has been essentially limited to bribery. And yet ethics enforcement rarely involves fraud, because ethics codes do not have fraud provisions. This is pretty strange, when you think about it:  the same misconduct being treated as apples and oranges.

Can local government ethics commissions enforce against fraud even without fraud-related provisions? Here's an example of how the Massachusetts EC (which has jurisdiction over local officials) did it this week (the Final Order is attached; see below). The chair of a town Select Board, a New England administrative body, misrepresented to his fellow board members that the Town’s engineering consultant was unavailable to make a road repair and committed the Town to a contract for the work with his own company, which he falsely described as his “former employer.”  The chair did the work under the contract himself.

This is a clear case of fraud, but to prove it in a criminal court would require a lot of time and money. In an ethics proceeding under the Massachusetts ethics code, all that needs to be proved is that the chair participated in a matter while having a financial interest in the matter, or that he used or attempted to use his official position to secure for himself unwarranted privileges of substantial value and not properly available to similarly situated individuals. If he owned the company and was involved in the deal or helped himself secure the contract, he has engaged in an ethics violation. In fact, in this case (due to a catchall clause) he was found to have engaged in three different violations, for which he was fined $12,500.

After a Successful Prosecution
In this particular case, the Select Board chair was also prosecuted and agreed to reimburse the town for the amount his company was paid under the contract. The ethics commission fined him nearly the same amount, effectively double damages, which is appropriate. Reimbursement for work that was done in violation of the ethics code and with the use of fraud certainly deserves at least double damages. It's sad that the chair didn't agree to a settlement, as the great majority of local officials do in Massachusetts.

In many jurisdictions, ethics commissions drop a matter when it is prosecuted and only pick it up if the criminal action is dismissed or unsuccessful, but it appears from the investigation that there is merit to the ethics allegations. This case shows why it can be valuable to pursue an ethics action even when there has been a successful prosecution. Reimbursement is not a sufficient sanction for an ethics violation like this one.

Fraud As an Aggravating Circumstance
Although an ethics commission cannot enforce against fraud, it can certainly take it into account as an aggravating circumstance in deciding whether to pursue an action and in determining sanctions.

Robert Wechsler
Director of Research-Retired, City Ethics