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Local Government Legal Defense Funds
Wednesday, October 28th, 2009
Robert Wechsler
I've
talked about legal defense funds in the past as a way to accept
large gifts from those doing business with a local government, but I
referred, tangentially, to only one local government legal
defense fund, that of
former Detroit mayor Kwame Kilpatrick. So I did some research and
came up with a few other examples, which are worth knowing about if the
issue arises in your city or county.
Legal defense funds can mean trouble if they're misused. According to northjersey.com, in July 2009 the mayor of Ridgefield (NJ) was "arrested on federal corruption charges for allegedly agreeing to accept $10,000 in corrupt cash payments for his legal defense fund. The fund was set up to defray the cost of a longtime court battle with a Ridgefield resident. ... [the mayor] agreed to accept the cash from a government cooperator posing as a developer who wanted preferential treatment for his building projects, authorities said."
According to a Los Angeles Times article, former Los Angeles mayor Jim Hahn used a legal defense fund to pay off a $53,522 city ethics fine for improper fund-raising in the 2001 campaign "with contributions from contractors and Hahn-appointed city commissioners." The moral of the story is that it is proper to do something improper in order to pay off a fine for doing something improper, as long as your fund-raising is done under a different guise.
As for former Detroit mayor Kwame Kilpatrick, a Detroit News editorial from 2008 says that "fundraisers for the operation have at least $5 million in current or pending city contracts. Of the 13 known committee members on the mayor's defense fund, five have either city contracts or other financial ties to the city or mayor. Among them ... are attorney David Baker Lewis, whose firm the mayor wants to handle bond sales for his $300 million economic stimulus package; banker Donald Davis, who has two proposals pending before the city, and the Rev. Horace Sheffield III, who already has city contracts." Among the original members on the legal defense committee was the chair of the city's ethics board.
Note the theme here: the people who give the most money and time to help out a government official are those who have the most to gain from the gifts. A solution to that would be to somehow separate the fund from the official, so that the official doesn't know who's making the contributions, or how much.
An article in the Cincinnati Enquirer raises this issue with respect to a mayor's legal defense fund: "People receiving a fund-raising letter ... were told the donors' names would not be disclosed, but that may not be the case. ... Elected officials must list the donors of $75 or more on the personal financial disclosure forms they are required to file with the Ohio Ethics Commission each year." In other words, advances in campaign finance transparency make it impossible to hide the names of contributors from officials.
The same issue was, effectively, raised this week by the Albany Times-Union with respect to the legal defense fund of a state senator who was convicted of assault on his girlfriend. An opinion of the Legislative Ethics Committee (the predecessor of the current Legislative Ethics Commission and, according to another Times Union article, the opinion is not applicable to the current situation) came up with some good rules for such a fund. "To not be considered an illegal gift, the defense dollars must go into a trust solely for the purpose of defraying pending legal expenses. The money must be managed by a custodian who cannot be a legislative employee, and who must maintain records and pay bills by check. Checks must be signed by the fund manager and countersigned by another non-legislative employee. The defendant cannot have any say over the account or ability to draw from it, and cannot be told who is contributing."
However, according to the article, the senator's spokesman said "that he didn't think it was a secret who the contributors to the fund are." Whoops!
Let's face it: who's going to give big bucks to a legal defense fund if the official truly won't know about the gift? As long as such gifts are considered exceptions to gift and campaign finance provisions, they will be misused by local government officials who find themselves before ethics commissions or judges. Although innocent until proven guilty, they are generally not the last people to take advantage of a loophole.
The only solution is to use the same restrictions on legal defense funds gifts as there are on any gifts. One advantage is that, as gifts rather than campaign contributions, they can be limited without first amendment speech issues arising.
A couple more local government legal defense fund examples. In 2008, the mayor of Buena Vista (CO) faced a council that was trying to throw her out for writing a column about a ballot question. Her fund is run by a trustee, although from the fund's website (the mayor hogged the URL www.mayordefensefund.org) it appears that she participated. And here's a website for the legal defense fund created to help a former police chief in Greensboro (NC).
It is possible that a fund will be started to help Baltimore mayor Sheila Dixon, but this doesn't appear to have happened yet.
Robert Wechsler
Director of Research-Retired, City Ethics
---
Legal defense funds can mean trouble if they're misused. According to northjersey.com, in July 2009 the mayor of Ridgefield (NJ) was "arrested on federal corruption charges for allegedly agreeing to accept $10,000 in corrupt cash payments for his legal defense fund. The fund was set up to defray the cost of a longtime court battle with a Ridgefield resident. ... [the mayor] agreed to accept the cash from a government cooperator posing as a developer who wanted preferential treatment for his building projects, authorities said."
According to a Los Angeles Times article, former Los Angeles mayor Jim Hahn used a legal defense fund to pay off a $53,522 city ethics fine for improper fund-raising in the 2001 campaign "with contributions from contractors and Hahn-appointed city commissioners." The moral of the story is that it is proper to do something improper in order to pay off a fine for doing something improper, as long as your fund-raising is done under a different guise.
As for former Detroit mayor Kwame Kilpatrick, a Detroit News editorial from 2008 says that "fundraisers for the operation have at least $5 million in current or pending city contracts. Of the 13 known committee members on the mayor's defense fund, five have either city contracts or other financial ties to the city or mayor. Among them ... are attorney David Baker Lewis, whose firm the mayor wants to handle bond sales for his $300 million economic stimulus package; banker Donald Davis, who has two proposals pending before the city, and the Rev. Horace Sheffield III, who already has city contracts." Among the original members on the legal defense committee was the chair of the city's ethics board.
Note the theme here: the people who give the most money and time to help out a government official are those who have the most to gain from the gifts. A solution to that would be to somehow separate the fund from the official, so that the official doesn't know who's making the contributions, or how much.
An article in the Cincinnati Enquirer raises this issue with respect to a mayor's legal defense fund: "People receiving a fund-raising letter ... were told the donors' names would not be disclosed, but that may not be the case. ... Elected officials must list the donors of $75 or more on the personal financial disclosure forms they are required to file with the Ohio Ethics Commission each year." In other words, advances in campaign finance transparency make it impossible to hide the names of contributors from officials.
The same issue was, effectively, raised this week by the Albany Times-Union with respect to the legal defense fund of a state senator who was convicted of assault on his girlfriend. An opinion of the Legislative Ethics Committee (the predecessor of the current Legislative Ethics Commission and, according to another Times Union article, the opinion is not applicable to the current situation) came up with some good rules for such a fund. "To not be considered an illegal gift, the defense dollars must go into a trust solely for the purpose of defraying pending legal expenses. The money must be managed by a custodian who cannot be a legislative employee, and who must maintain records and pay bills by check. Checks must be signed by the fund manager and countersigned by another non-legislative employee. The defendant cannot have any say over the account or ability to draw from it, and cannot be told who is contributing."
However, according to the article, the senator's spokesman said "that he didn't think it was a secret who the contributors to the fund are." Whoops!
Let's face it: who's going to give big bucks to a legal defense fund if the official truly won't know about the gift? As long as such gifts are considered exceptions to gift and campaign finance provisions, they will be misused by local government officials who find themselves before ethics commissions or judges. Although innocent until proven guilty, they are generally not the last people to take advantage of a loophole.
The only solution is to use the same restrictions on legal defense funds gifts as there are on any gifts. One advantage is that, as gifts rather than campaign contributions, they can be limited without first amendment speech issues arising.
A couple more local government legal defense fund examples. In 2008, the mayor of Buena Vista (CO) faced a council that was trying to throw her out for writing a column about a ballot question. Her fund is run by a trustee, although from the fund's website (the mayor hogged the URL www.mayordefensefund.org) it appears that she participated. And here's a website for the legal defense fund created to help a former police chief in Greensboro (NC).
It is possible that a fund will be started to help Baltimore mayor Sheila Dixon, but this doesn't appear to have happened yet.
Robert Wechsler
Director of Research-Retired, City Ethics
---
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