Applicant Disclosure, and the Difference It Makes
The two best defenses against dealing responsibly with a conflict are
that the local government attorney told me it was okay, and I didn't
know there was a conflict. The first can be dealt with by getting the local government
attorney out of the government ethics picture. But the second requires
something few local government ethics codes require: applicant
disclosure.<br>
<br>
Applicant disclosure is a disclosure of interests and relationships
when an individual or firm applies for money or a permit from any local
government board or agency. Here's a case where applicant disclosure would have
made a difference.<br>
<br>
According to <a href="http://www.latimes.com/business/la-fi-pension16-2009may16,0,5140500.sto…; target="”_blank”">an
article in Saturday's Los Angeles </a><span><a href="http://www.latimes.com/business/la-fi-pension16-2009may16,0,5140500.sto…; target="”_blank”">Times</a>,</span>
the L.A. mayor asked a board member of the Los Angeles City Employees'
Retirement System to resign because he had accepted a campaign
contribution from someone whose client does business with the board
(the board had made a large investment in the client company), in
violation of the city's ethics code.<br>
<br>
The code's definition of doing business includes this indirect
relationship, so that a company's agent cannot give such
contributions in order to get around the law. But including indirect
relationships opens up the possibility that an official did not know of
the relationship. The ability to deny this knowledge makes the inclusion of indirect
relationships almost meaningless without applicant disclosure.<br>
<br>
Not surprisingly, the board member says that he didn't know about the
relationship. And the campaign contributor says the same thing. And
it's very difficult to prove otherwise, even though they seem to know
each other reasonably well. They co-hosted a fundraiser for a city
attorney candidate, which also violates the ethics code and which is
what brought this relationship to light in the first place. The
contributor also serves on the board of an organization that hired the
board member for a job (although the board member says he didn't make
any money out of the job).<br>
<br>
The campaign contributor's firm "pitches investments to city and state
pension boards." It is an agent for companies seeking business from the
city and it appears to give all sorts of contributions out. What
argument could possibly be made that when a company seeks an investment
from a pension board, it shouldn't be required to disclose the names of those
representing it, so that board members will know whether or not they
can vote on the particular investment?<br>
<br>
And this applies across the board: those seeking zoning changes,
contracts, etc. If they don't put their relationships on the table,
anyone who gets a gift or contribution or business from their agents
will be able to say they didn't know about the relationship, no matter
how well they might know the agent. You can know a person and not know
everyone he or she represents, and proving otherwise is too difficult.<br>
<br>
Also, what is a pension board member doing running for office in the
first place, and being deeply involved in others' campaigns? It's not
that a pension board member should have all his or her political rights
taken away. It's that such a political person probably shouldn't be on
a pension board, because they will be seeking campaign contributions
for themselves and others, and be seen by companies doing business, and by
the public if there is disclosure, as using the pension board to
guarantee themselves and their colleagues large campaign contributions.
Pension board members should be above reproach.<br>
<br>
The City Ethics Model Code has a relatively weak <a href="http://www.cityethics.org/mc/full#TOC56" target="”_blank”">applicant disclosure provision</a>, which would not have made a difference here. Especially with a rule that prohibits contributions from agents for companies doing business, it's important to have a strong applicant disclosure provision that is relevant to this rule.<br>
<br>
Oh yes, for conspiracy theorists and those who just like to see
interrelationships, you might be interested to know that the campaign
contributor is "a subject of interest" in the <a href="http://www.cityethics.org/node/678" target="”_blank”">New York attorney
general's investigation</a> into kickbacks relating to the New York pension
fund, which involved abuses by intermediaries such as the contributors' firm.<br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
<br>
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