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Disclosure of Potential Conflicts

This is the place to discuss disclosure of possible conflicts of interest at the point where they arise, that is, where an official or employee's continuing participation in a matter becomes a matter of concern because of a conflict between his or her government role and his or her other roles, business, professional, or personal.

Withdrawal (recusal) is the central act in a conflict of interest situation. Important issues include: whom to inform of a potential conflict, when to recuse oneself, when to allow others to insist on recusal, how open and detailed transactional disclosure should be, and how much to take into account the appearance of impropriety.

Please share your experiences with recusal and the failure to recuse.

101. Transactional Disclosure.

1. Whenever an official or employee* has reason to believe that he or she should recuse himself or herself under 100(3) of this code, he or she must:

immediately refrain from participating further in the matter, formally or informally;

promptly inform the appropriate individual or body, pursuant to subsection 3 below, that he or she has a conflict; and

promptly file with the city clerk a signed statement disclosing the reasons for recusal or, if a member of a board or commission, state this information on the public record of that board or commission.

Comment: In subsection 1(c) and in 104(2) there are references to placing information on the public record. This appears to assume that municipal meetings have a published transcript or, at least, a recording, video or aural, that is available to the public. But especially in smaller cities and towns, and in less important meetings, this is not the case. How have cities dealt with this problem of not having a public record to place disclosures on? Is it required that minutes include all disclosures?

2. Whenever someone suggests or requests (privately or publicly) that an official or employee* recuse himself or herself under 100(3) of this code, and he or she chooses not to do so, he or she must promptly file with the city clerk a signed statement disclosing the reasons for refusing to recuse himself or herself or, if a member of a board or commission and if the suggestion was made publicly at a meeting of that board of commission, state this information upon the public record of that board or commission.

Comment: See the comment to 100(3) for more information.

3. An official or employee* is required to inform the appropriate individual or body pursuant to subsection 1b, as follows:

If a member of a board, commission, committee, or authority, inform the chair or the entire body at a public or executive session; if the chair, inform the secretary;

If not on such a body and appointed by the city manager/director of administration/mayor, inform the city manager/director of administration/mayor;

If an employee of the Board of Education, inform the Superintendent of Schools;

If the Superintendent of Schools, inform the chair of the Board of Education;

If an elected official, inform the mayor;

If a consultant,* inform the chair or head of the board, department, or agency that hired the consultant.

4. An official or employee* need not file a disclosure statement pursuant to this section if he or she, with respect to the same matter, has, with respect to an interest in a contract* with the city, filed a disclosure statement pursuant to 100(9)(b) of this code.

Comment: Transactional disclosure provides specific disclosure when a conflict arises, that is, when an official or employee*'s personal relationship or interest actually creates a conflict with the public interest. It is at this point that it is most important that the official or employee* seriously consider the effects of this conflict on his or her actions or judgment, as well as the effects on how his or her involvement would appear to the public if it knew about the conflict.

Subsection 3: These specific guidelines to informing of conflicts should be adapted to each city's particular form and structure.

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Often referred to as "Financial Disclosure," a term that makes it seem more invasive than it actually is, annual disclosure is an important, but controversial way to get officials and employees to consider their potential conflicts of interest on an annual basis, and to let the public know about such potential conflicts.

This is the place to share your opinions and experiences with annual disclosure. Experiences with attempts to require annual disclosure are as important as experiences with its use, both in terms of its usefulness to officials and its usefulness to the public.

The extent of information required is an important topic for discussion. Other topics include who should file annual disclosure forms, and what to do when officials fail to file.

A sample disclosure form appears as an appendix to the Model Code, as well as below.

103. Annual Disclosure.

1. Officials, Employees, and Others Who Are Required to File.

Those holding the following job titles or positions are required to file a signed annual disclosure statement:

Elected officials;
Department heads and those authorized to act on their behalf (e.g., first deputies);
Officials and employees who hold policymaking positions, including members of municipal boards, such as ethics commissions, finance boards, planning and zoning boards, boards of zoning, buildings, and assessment appeals, wetlands and conservation boards, economic development boards, and parks and recreation boards;
Officials whose job descriptions or whose actual duties involve:

The negotiation, authorization, or approval of contracts, leases, franchises, revocable consents, concessions, variances, special permits, or licenses;
The purchase, sale, rental, or lease of real property, personal property, or services, or a contract for any of these;
The obtaining of grants of money or loans; or
The adoption or repeal of any rule or regulation having the force and effect of law;
candidates for elected office;
political party committee officers; and
relatives of officials and employees who, pursuant to subsection 5(d) of this section, are required to file because they are employed by the city, but who would not otherwise be required to file.

2. Time and Place for Filing.
a. Annual disclosure statements (for the calendar year) are to be filed with the Ethics Commission:

(i) Within one-hundred-and-twenty days after the effective date of this section;

(ii) Within thirty days after taking one of the job titles or positions listed in subsection 1 of this section; and

(iii) No later than May 15 of each year thereafter.

b. For candidates for elected office:

(i) With the filing of the certificate of candidacy or declaration of intent.

(ii) No later than May 15 of each year thereafter. If an annual disclosure statement is overdue and is not filed within 20 days after the candidate receives from the Ethics Commission written notice of the failure to file, the candidate is considered to have withdrawn his or her candidacy.

3. Changes in Disclosed Information.
Within thirty days after a change in the information contained in his or her most recently filed annual disclosure statement, an official, employee, or candidate must file a signed amendment to the statement (as in subsection 2), indicating the change.

4. Contents of Annual Disclosure Statement.

The annual disclosure statement will include:
a. The location of any real property in the city, or within one mile of the boundary of the city, in which the person disclosing, or his or her relative*, has a financial interest*, and the type of financial interest.

b. With respect to each outside employer or business* of the person disclosing:

(i) Its name (if any);

(ii) The nature of its business;

(iii) If it is an entity, the type of entity;

(iv) The person disclosing's relationship to it, such as sole proprietor, owner, partner, official, director, member, employee, bondholder, or shareholder.

c. With respect to each outside employer or business* of the person disclosing's spouse or domestic partner*, the information required by paragraph (b) of this subsection.

d. The names and addresses of all relatives* employed by the city as employees, contractors, or consultants, including relatives* who work for or are subcontractors of contractors, consultants, or subcontractors.

e. Failure to disclose the information required by subsection 4 of this section with respect to a person disclosing's spouse or other relative* does not constitute a violation of that subsection if the person disclosing made a good faith effort to obtain the information and if he or she also sets forth those efforts in his or her disclosure statement.

5. Any person who is subject to the disclosure provisions of this and the following subsection is required to obtain and preserve, for a period of three years following the date of the relevant disclosure statement, all accounts, bills, receipts, and other documents necessary to complete and substantiate such disclosure statement. These documents will be made available for inspection upon request by the Ethics Commission or its agent after reasonable notice.

6. The Director of Finance must certify to the Ethics Commission, no later than May 15 of each year, a list of all business entities doing business with the city, currently bidding for business with the city, or that have done business with the city over the prior three years. This list will be made available to the public at no cost.

Comment: While less significant than transactional disclosure, annual disclosure does fill an important role in an ethics program. In particular, annual disclosure reveals potential conflicts of interest before they arise and thus alerts the official - and the citizenry - to those potential conflicts. Annual disclosure thereby provides a check on transactional disclosure and protects officials by identifying potential ethical pitfalls, which the official can then take steps to avoid.

Politicians often focus their condemnation of ethics codes on annual disclosure statements. They insist that forcing people to disclose their interests will prevent people from getting involved in city government. But the disclosure statements in this model code are far from what, say, U.S. Senators are required to file. No one is being asked to disclose how wealthy or poor they are. They are only being asked to say who their employer is (not what they're paid), what local companies they have financial interests in (not how big their interest is), what land they own in the municipality, and which of their relatives work for the city. The only people who will truly mind disclosing this information are those who have so many interests or involved relatives, or so much land in town, that they probably would face many conflicts of interest and, therefore, should probably not be involved in city government, except in areas that do not deal with businesses, developers, or contractors. After all, the biggest complaint people have about municipal governments is that they're run by local businessmen, developers, and contractors, those who represent them, and their relatives. This problem is only compounded when officials do not want to admit publicly what they do for a living.

Some cities will want to go beyond these minimal disclosure requirements, especially for senior officials. Such cities will want annual disclosure of all information directly relevant to the ethics code, including all interests, direct and indirect, that might conflict with government responsibilities (see 100(1) above). Major debtors and creditors may also be listed, as well as any applications made to the city during the year. It may be specified that the disclosure statement is being filed under oath.

Subsection 1: For the sake of clarity, each municipality should list the job titles or positions of the persons required to file annual disclosure statements.

Subsection 2: May 15 was chosen because it is one month after personal income tax returns are due, providing them with both fresh information and the time to prepare the disclosure statement.

Subsection 4: In the event a person disclosing, after a good faith effort, is unable to obtain the required information from an estranged spouse or from a relative, he or she need only set forth his or her efforts in the disclosure statement; there is no need to review land records.

Subsection 6: Information in disclosure statements is useful only if it can be checked against information. That is the purpose of this subsection: to allow the comparison of an official's business connections with a list of businesses that do business with the city.

Should failure to file a disclosure statement be a violation requiring a complaint to be filed, placing the burden on citizens or the ethics commission and requiring an investigation and hearing for a clear-cut violation? Or should the burden be on the person disclosing to file (at least a request for a 30-day extension), requiring from the ethics commission only a notice and a reasonable length of time before a stated penalty is automatically due?

There have been cases, such as in Rhode Island, where a large number of officials did not file disclosure statements, making it almost impossible for the ethics commission to take action against them all (it is my understanding that they chose to go after the governor first). A late fee and serious penalty for not filing would require officials to take the requirement seriously. I would like to know others' experiences with enforcement of annual disclosure.

APPENDIX A: Sample Annual Disclosure Statement

Annual Disclosure Statement for 2007

___________________________________________________________

Last Name First Name Initial

___________________________________________________________

Title Department, Agency, or Body

___________________________________________________________

Work Address Phone No.

___________________________________________________________

Home Address Phone No.

If the answer to any of the following questions is "none," please so indicate. If you have more than one entry for any of the sections, please fill out separate sheets and attach to these sheets. If you could not obtain the required information from a spouse or other relative, set forth your efforts to obtain information on a separate sheet attached to this statement.

1. REAL ESTATE.
List the address or, if there is no address or if the address provides insufficient information to describe a large piece of property, description of each piece of real property in this city, or within one mile outside its boundaries, that you, your spouse, or other relative own or have a financial interest in. "Relative" means your spouse, child, step-child, brother, sister, parent or step-parent, or a person you claimed as a dependent on your latest state income tax return.

____________________________________________________________________

Name of Relative and Relationship to You

____________________________________________________________________

Address or Description of Real Estate

____________________________________________________________________

Type of Financial Interest (e.g., owns or partnership)

2. YOUR OUTSIDE EMPLOYERS OR BUSINESSES.
List the names and address of the principal or local office of any outside employers or businesses from which you receive compensation for services rendered or goods sold or produced, or of which you are a member, official, or employee. Also include any entity in which you have an ownership interest, except a public corporation of which you own less than five percent of the outstanding stock or stock valued at less than $50,000, whichever is less (such a public corporation need be listed only if it does business with or in the city). Identify the type of entity (e.g., partnership, corporation, self-employment, or sole proprietorship), and list your relationship to the employer or business (e.g., employee, owner, partner, official, director, member, or shareholder).

____________________________________________________________________

Name of Employer or Business

____________________________________________________________________

Nature of Business

____________________________________________________________________

Type of Entity

____________________________________________________________________

Your Relationship to Employer or Business

3. YOUR SPOUSE'S OR DOMESTIC PARTNER'S EMPLOYER OR BUSINESS.

List the information in question 2 for your spouse or domestic partner.

____________________________________________________________________

Name of Employer or Business

____________________________________________________________________

Nature of Business

____________________________________________________________________

Type of Entity

____________________________________________________________________

Relationship to Employer or Business

4. EMPLOYED RELATIVES*.
List the names and addresses of all relatives* employed, directly or indirectly, as employees, contractors, or consultants, by the city during the prior year.

____________________________________________________________________

____________________________________________________________________

Date: ______________________________________________________________

Signed: _____________________________________________________________

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Applicant disclosure is the form of disclosure that least often appears in municipal ethics codes, not because it is controversial, but because it is not even discussed (although forms of it might appear in other laws and regulations).

Please share your experiences with applicant disclosure that appears in or outside of ethics codes, and your thoughts about its importance, and form, in ethics codes.

104. Disclosure by Applicants.

1. When a person requests that the city, or a city official or employee*, take or refrain from taking any action (other than a ministerial act*) that may result in a financial benefit* to either any official or employee or to one of the other persons listed in 100(1) of this code, the person requesting must disclose the name of any such person or persons, to the extent of his or her knowledge at the time of the request.

2. If the request is made in writing, the disclosure must accompany the request. If the request is oral and made at the meeting of a public body, the disclosure must be set forth in the public record of the body. If the request is oral and not made at the meeting of a public body, the disclosure must be set forth in writing and filed with the city clerk, who will send a copy to the Ethics Commission.

Comment: An example of how this section works is that an applicant for a zoning variance is required to list the name of any city official or employee, or others listed in 100(1), who might benefit from the granting of the variance. Applicant disclosure provides a check on transactional and annual disclosure.

This section does not require that the applicant research which officials, if any, have an interest in the matter, but only requires that the applicant disclose the names of interested officials to the extent the applicant knows of the interest. Also, the section imposes no burden on the applicant to update the disclosure if the applicant later learns that certain officials have an interest in the application.

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