making local government more ethical

Total Gift Bans and Legal Defense Funds

A February draft advisory opinion from the Colorado Independent Ethics Commission (attached; see below) raises two different issues. One is the problematic nature of a total gift ban, that is, a ban on all gifts from anyone, accompanied by a whole host of exceptions. The other is the important differences among gifts, campaign contributions, and contributions to an official's legal defense fund.

The draft advisory opinion relates to the solicitation of contributions to the secretary of state's legal defense fund. The defense involves a criminal investigation.

Total Gift Bans
A total gift ban misses the point involved in restricting gifts to officials as part of a government ethics program. Gifts are restricted because they create and deepen (and appear to create and deepen) relationships and obligations between government officials and those who seek benefits from the official's government ("restricted sources"). If someone making a gift has nothing to gain from the government, then the obligation that is created or deepened is purely personal, and there is only one reason to restrict it:  it may be an indirect gift from a restricted source.

A total gift ban with numerous exceptions opens up many loopholes in order to prevent indirect gifts. The possibility of indirect gifts can be better dealt with by a requirement that officials inquire about the original source of questionable gifts, that is, any substantial gift that is not from someone who would normally give them a substantial gift (and how many people is that?!). If the official is not certain that the gift is not from a restricted source, she should refuse the gift. If she accepts the gift and it is an indirect gift from a restricted source, then she is responsible for accepting it.

You can also see the weakness of a total gift ban by looking at another sort of indirect gift, that is, a gift to an immediate family member. The law cannot place a total gift ban on these gifts, and yet they are a great way to give something to an official's household or someone very important to the official. A gift provision based on restricted sources can prohibit gifts from restricted sources to an official's family, business, and even a pet charity. A total ban cannot.

The many exceptions required by total gift bans also have unintended consequences, requiring numerous requests for interpretations and waivers. For example, a total gift ban in Alaska has a compassionate gift exception, but this only applies to gifts up to the gift limit of $250. A few years ago, a state representative needed a kidney transplant. But the law wouldn’t let him have one. That’s ridiculous because gifts should only be banned from people and entities that have something to gain by making a gift.

Also, officials see total gift bans as intrusive into their personal life, and their anger at gift bans can fuel their opposition to an ethics program.

Finally, total gift bans are hard to remove because it can be argued that they're the toughest. But the toughest doesn't always mean the best or most responsible.

In the Colorado situation, the secretary of state is forced to argue that contributions to his legal defense fund aren't gifts to an official, because the fund has a trustee and the secretary of state does not solicit contributions directly. If this argument was accepted, it would be considered by the public an unethical interpretation of the gift ban. Contributions to an official's defense fund are clearly gifts made in the official's interest.

A ban on gifts, directly or indirectly, from restricted sources would allow an official's legal defense fund to solicit contributions from others.

How to Deal with a Total Gift Ban
The ethics commission is put in an uncomfortable position by the total gift ban, especially since the ban is in the state constitution. The EC has little choice but to allow the secretary of state to have a legal defense fund. The problem is that the EC has to do this consistent with a wrongheaded law. So the draft advisory opinion forces the situation into one of the many exceptions, the "special occasion" exception, which reads, "The prohibitions in ... this section do not apply if the gift or thing of value is: ... (g) Given by an individual who is a relative or personal friend of the recipient on a special occasion."

As the commission chair says in his dissent (included with the attached draft opinion), "it is doubtful that the people of Colorado, in adopting Article XXIX [of the state constitution], intended that term ["special occasion"] to include criminal indictments or informations. Moreover, even if a criminal prosecution can be shoe-horned into the special occasion exception, the section specifically limits the exception to gifts from relatives and personal friends of the recipient. All other contributors must be limited to gifts of $53." The total gift ban allows gifts up to $53 from anyone.

Of course this exception was not intended for this situation. It was intended for birthdays and anniversaries. But then, allowing legal defense funds to which only relatives and friends who are not restricted sources could give (with others limited to $53) would effectively mean that such funds could not be formed, unless one has rich family and very devoted friends who would not be seen to be seeking financial benefits (that is, for the most part, other politicians).

So the draft opinion tries to square this circle:
To avoid questions of improper influence, donations may only be accepted from persons who:

Are individuals, not legal “persons” such as corporations, government agencies, partnerships, or any other legal entity;

Are not regulated by the Secretary of State; (including candidates for public office and registered agents):

Do not have any matters currently pending or expected within the next two years before the Secretary of State;

Are not employed by the Secretary of State’s Office.

Are not professional lobbyists, because they are prohibited from giving any gift to a public official or employee.
In addition, since there would be no limit on these gifts, the draft opinion recommends that the gifts be disclosed to the public and that a limit be placed on these gifts.

This is a well thought out, responsible solution to the problem. But since the idea of restricted source is not part of the law, there are big holes in the solution. Let's say X Co. is seeking a big IT contract from the Secretary of State. It cannot make a contribution to the legal defense fund because it is a company and expects to have a matter pending before the Secretary of State. But what about the company's executives? And their wives and children and siblings? And anyone else through whom the company may want to make contributions indirectly?

Remember. It isn't just a matter of evil X Co. bribing its way to a contract. It is more likely that the word will get out that if you want to stay in an official's good graces, you will make big contributions to his legal defense fund, in a way that is legal. No coercion, quid pro quo arrangement, or even an e-mail is required.

The Difference Between Gifts and Contributions to Legal Defense Funds
The draft dissent to the draft advisory opinion begins, "It is beyond reasonable dispute that contributions to a legal defense fund for a public official will inure to the personal benefit of the public official. Therefore, the gift ban of Article XXIX precludes such contributions."

Let me make a reasonable dispute. A contribution to a legal defense fund sometimes is expressly excepted from a gift provision, sometimes treated in a separate law, or sometimes both. This is the same case with campaign contributions, except that they are always excepted from gift provisions and almost always have their own laws.

Contributions to a campaign committee do not go directly to an official any more than contributions to a legal defense fund. They are different animals from gifts, and yet also different from each other.

They are similar in that there appears to be a reason for the contributions:  the election of a candidate, which helps both the candidate and, presumably, the public; and the defense of an official which, if the official is not guilty, also helps both the candidate and the public. The public does not presumably make contributions to the defense fund of an official they feel is guilty (more cynically, no one is going to support someone whose political career they think is finished).

Campaign and legal defense contributions can be justified with arguments that have nothing to do with personal benefits to an official. On the other hand, it is hard to justify a new kitchen or a week in Hawaii (except when a government-oriented seminar is being held there, because it's so convenient) without recognizing the personal benefit to the lucky official.

More simply, there is nothing lucky about an official under criminal investigation. And everyone has the right to defend himself (although those without the necessary status, which means the great majority of government officials and employees, lack the ability to set up a legal defense fund).

Contributions to a defense fund differ from campaign contributions in that there is no campaign, that is, no argument that the contributions are being made because the contributors want the candidate to win. Those who give to a legal defense fund generally are doing it for a reason other than supporting a candidate who shares their views. They tend to be people who are politically connected to the official (and want his support) or who seek special benefits from the government in areas where they believe the official has influence to help their cause (and are concerned that, if they do not give, the official will not provide them with any help).

In other words, while a campaign committee is often employed for influence, pay to play, and mutual political backscratching, it is also a central element of our democracy, even in jurisdictions that have a public campaign financing program. A legal defense fund is not a central element of our democracy, but it is a perfect vehicle for influence, pay to play, and mutual political backscratching.

Legal defense funds are a very special thing, and should be given their own laws and oversight process, although the oversight office or body need not be different. It may be an ethics commission or a campaign finance board.

The Colorado ethics commission is stuck with a total gift ban and no special laws for legal defense funds. Therefore, it has to fudge and do the best it can.

What it could do is openly state the limitations of the total gift ban, and admit that the problem is not best solved by fudging and doing the best it can with what it has. It could point out the better alternative: (1) a change in the gift ban to one based on restricted sources and gifts given directly or indirectly, and (2) special laws for legal defense funds that recognize the right of defense, the likelihood of abuse, and the inability of the great majority of officials and employees to set up such a fund, and what this says about legal defense funds.

For more on legal defense funds, see:

the section in my book Local Government Ethics Programs

my blog post Local Government Legal Defense Funds

Robert Wechsler
Director of Research, City Ethics