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Being Indirect -- A Gift Loophole to Watch Out For
Friday, May 8th, 2009
Robert Wechsler
Earlier this week, I wrote
about an application of Louisiana ethics law that I felt was too
severe. Today I'm going to write about a Louisiana ethics provision, a fairly typical gift provision that applies to local government officials,
which is too weak, because it has a big loophole in it.
Ethical Leadership
But before identifying this common loophole, I want to make it clear that New Orleans' mayor, by taking advantage of the loophole and by acting as if ethics stops at the end of an ethics provision sentence, has shown extremely poor ethical leadership. No wonder there are so many ethics problems in New Orleans. What he did is not only the fault of the state legislature, but moreso the fault of the mayor.
The Gift Provision
The gift provision of the Louisiana Ethics in Government Act, which is also the controlling provision for doing business, as discussed in my recent blog entry, reads as follows:
The Loophole
According to an ethics complaint filed by the Metropolitan Crime Commission, "a non-profit, privately funded, citizen’s organization dedicated to exposing and eliminating public corruption ... in the Baton Rouge and New Orleans metropolitan areas and throughout Louisiana," two trips taken by Mayor Nagin and his family were funded by a firm owned by a city technology vendor's owner.
Note that: not by the vendor, not by a firm owned by the vendor, but by a firm owned by the individual who owns the vendor. In the real world, beyond corporate fictions, the trips were paid for with the vendor's money. But since they weren't paid for by the vendor, they're kosher. That's the loophole.
Plugging the Loophole
How is this loophole plugged? Very easily, with the words "directly or indirectly." Well, not all that easily, because the placement of these words is crucial.
In the City Ethics Model Code, these words (actually "directly or through a relationship with another person or entity") relate only to the person or entity that "has received or sought a financial benefit" from the city. It does not relate to the person giving the gift. Both are necessary to plug both indirect ways of getting around the gift law.
In other words, a gift provision should prohibit anyone to give anything to an official when the gift, directly or indirectly, is coming from anyone that, directly or indirectly, is doing business with the city. I will have to rework the City Ethics Model Code gift provision, and I thank Mayor Nagin for the heads up.
Section B of the Louisiana provision arguably does fill the loophole by including a gift from an "agent" of someone who has substantial economic interests which might be affected by the official's action or inaction. Thus one could argue that, using the credit card of a company owned by someone whose company is a city vendor, the then city chief technology officer, who paid for the mayor's vacations with this credit card, was acting as the vendor's (not the corporate vendor, but its owner's) agent. But it is likely that this would not hold up in court. It's better to have language that clearly includes indirect gifts.
The Role of the Government Lawyer
Above, I said that this is the fault of the mayor. But I'd like to add the lawyers who recommended this solution and/or told the mayor that it was legal (assuming such lawyers did not also say it was unethical, even if legal, and the vendor and mayor weren't interested in the ethics part of the advice). This would be especially bad were one of the lawyers a government lawyer.
It's one thing when a politician wants to accept a gift, it's another when a government lawyer who knows the gift is wrong finds the politician and/or the city vendor a loophole, or approves what another lawyer found. This is not acting in the public interest, which is what government lawyers should do; it is acting in an official's personal interest and, therefore, in the lawyer's personal interest, as well.
For More Information
Some of the information here comes from two Times-Picayune articles: 1, 2. There are some fascinating details to this case, which weren't relevant to my blog entry.
Robert Wechsler
Director of Research-Retired, City Ethics
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Ethical Leadership
But before identifying this common loophole, I want to make it clear that New Orleans' mayor, by taking advantage of the loophole and by acting as if ethics stops at the end of an ethics provision sentence, has shown extremely poor ethical leadership. No wonder there are so many ethics problems in New Orleans. What he did is not only the fault of the state legislature, but moreso the fault of the mayor.
The Gift Provision
The gift provision of the Louisiana Ethics in Government Act, which is also the controlling provision for doing business, as discussed in my recent blog entry, reads as follows:
§1115. Gifts
A. No public servant shall solicit or accept, directly or indirectly, any thing of economic value as a gift or gratuity from any person or from any officer, director, agent, or employee of such person, if such public servant knows or reasonably should know that such person:
A. No public servant shall solicit or accept, directly or indirectly, any thing of economic value as a gift or gratuity from any person or from any officer, director, agent, or employee of such person, if such public servant knows or reasonably should know that such person:
(1) Has or is seeking to obtain
contractual or other business or financial relationships with the public servant's agency, or
(2) Is seeking, for compensation, to influence the passage or defeat of legislation by the public servant's agency.
B. No public employee shall solicit or accept, directly or indirectly,
anything of economic value as a gift or gratuity from any person or from any officer, director,
agent, or employee of such person, if such public employee knows or reasonably should know that such
person:(2) Is seeking, for compensation, to influence the passage or defeat of legislation by the public servant's agency.
(1) Conducts operations or activities
which are regulated by the public employee's agency.
(2) Has substantial economic interests which may be substantially affected by the performance or nonperformance of the public employee's official duty.
(2) Has substantial economic interests which may be substantially affected by the performance or nonperformance of the public employee's official duty.
The Loophole
According to an ethics complaint filed by the Metropolitan Crime Commission, "a non-profit, privately funded, citizen’s organization dedicated to exposing and eliminating public corruption ... in the Baton Rouge and New Orleans metropolitan areas and throughout Louisiana," two trips taken by Mayor Nagin and his family were funded by a firm owned by a city technology vendor's owner.
Note that: not by the vendor, not by a firm owned by the vendor, but by a firm owned by the individual who owns the vendor. In the real world, beyond corporate fictions, the trips were paid for with the vendor's money. But since they weren't paid for by the vendor, they're kosher. That's the loophole.
Plugging the Loophole
How is this loophole plugged? Very easily, with the words "directly or indirectly." Well, not all that easily, because the placement of these words is crucial.
In the City Ethics Model Code, these words (actually "directly or through a relationship with another person or entity") relate only to the person or entity that "has received or sought a financial benefit" from the city. It does not relate to the person giving the gift. Both are necessary to plug both indirect ways of getting around the gift law.
In other words, a gift provision should prohibit anyone to give anything to an official when the gift, directly or indirectly, is coming from anyone that, directly or indirectly, is doing business with the city. I will have to rework the City Ethics Model Code gift provision, and I thank Mayor Nagin for the heads up.
Section B of the Louisiana provision arguably does fill the loophole by including a gift from an "agent" of someone who has substantial economic interests which might be affected by the official's action or inaction. Thus one could argue that, using the credit card of a company owned by someone whose company is a city vendor, the then city chief technology officer, who paid for the mayor's vacations with this credit card, was acting as the vendor's (not the corporate vendor, but its owner's) agent. But it is likely that this would not hold up in court. It's better to have language that clearly includes indirect gifts.
The Role of the Government Lawyer
Above, I said that this is the fault of the mayor. But I'd like to add the lawyers who recommended this solution and/or told the mayor that it was legal (assuming such lawyers did not also say it was unethical, even if legal, and the vendor and mayor weren't interested in the ethics part of the advice). This would be especially bad were one of the lawyers a government lawyer.
It's one thing when a politician wants to accept a gift, it's another when a government lawyer who knows the gift is wrong finds the politician and/or the city vendor a loophole, or approves what another lawyer found. This is not acting in the public interest, which is what government lawyers should do; it is acting in an official's personal interest and, therefore, in the lawyer's personal interest, as well.
For More Information
Some of the information here comes from two Times-Picayune articles: 1, 2. There are some fascinating details to this case, which weren't relevant to my blog entry.
Robert Wechsler
Director of Research-Retired, City Ethics
---
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