Ethics and the Unpaid (By Government) Adviser

The controversy surrounding the New York State pension fund returned to the front page of the New York Times today. The players are former state comptroller Alan Hevesi, his political adviser Hank Morris, and pension fund investment officer David Loglisci.

The occasion is the indictment by the state attorney general of Morris and Loglisci, along with charges brought by the SEC. The charges involve kickbacks from Morris's acting as an intermediary between investment firms and his close friend Alan Hevesi, who is the pension fund's sole trustee. But I'm more interested in the ethics status of Hank Morris, a man without any formal position in government who was actually a major government mover and shaker. What can an ethics program do about someone like him?

Morris's lawyer put his finger on the problem: "the pension fund had made 'hundreds of millions, if not billions, of dollars on investments Hank Morris lawfully introduced to it, and the fund did not pay him one penny.'" Wow, you might wonder, why not? How generous can a guy get?

This appears to be Morris's modus operandi. Back in 2001, according to an article in the New York Times, Morris was the campaign manager for Hevesi's unsuccessful run for New York mayor (he was also campaign manager for Hevesi's successful runs for city and state comptroller). Hevesi and Morris worked out a deal whereby Morris wouldn't get paid for his services so that more public money would be available for advertising and other purposes. The city's Campaign Finance Board put a stop to that. ''I think they tried, as every campaign does, to test the boundaries of the law,'' said the Rev. Joseph A. O'Hare, chairman of the Campaign Finance Board. ''They tried in a way that may have been a little more inventive and creative than some others, but which in the end proved to be unpersuasive.''

On both occasions, Morris was not a public servant, but he was involved in an underhanded scheme affecting government. And both times he took no money. Ethics laws don't anticipate someone like him.

And this is a serious problem. Political operators who have no government position and receive no money from the government are often in a position to do very well out of the government as well as to wield a great deal of power. Party bosses are the most common instance of this. They may have nothing but a party position, but they call the shots, select appointees, contractors, and developers, as well as who's going to run for office. The government pays them nothing, but they make a lot of money off government and have a great effect on it.

I've written about two other versions of this problem, consultants and brokers who arrange bonds, and lawyers (again in New York State) setting themselves up to get pensions, despite the fact that they were just consultants.

Consultants are sometimes covered by ethics codes, but unpaid advisers are not. I am an unpaid adviser to officials in my own town's government, as well as to officials throughout the country, with respect to ethics issues. Aren't I acting in a governmental role, even if indirectly (just as a paid adviser is)? Shouldn't I be required to respect the rules on confidential information and conflicts, etc?

The City Ethics Model Code does include consultants, defining a consultant as "an independent contractor or professional person or entity engaged by the city and in a position to influence a city decision or action, or have access to confidential information." The problem here is the phrase "engaged by the city." Why not add something to include unpaid advisers: "...person or entity engaged by the city or advising a city official, and in a position to influence a city decision..."? Sounds like a change worth making.

Robert Wechsler
Director of Research-Retired, City Ethics

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