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.

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.

According to an article in Saturday's Los Angeles Times, 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.

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.

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).

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?

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.

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.

The City Ethics Model Code has a relatively weak applicant disclosure provision, 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.

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 New York attorney general's investigation into kickbacks relating to the New York pension fund, which involved abuses by intermediaries such as the contributors' firm.

Robert Wechsler
Director of Research-Retired, City Ethics

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