making local government more ethical
It's been six years since I last wrote about how asset forfeiture is a serious temptation to engage in ethical misconduct. I was planning to write about it again in light of a recent U.S. Supreme Court decision on the subject, Kaley v. United States, when I read that, according to an article in today's New York Daily News, a former Brooklyn district attorney was found by NYC's Department of Investigation to have improperly used money seized from drug dealers and other criminal defendants (that is, by asset forfeiture) to pay a consultant hundreds of thousands of dollars for work on his re-election campaign last year.

Should any official, especially an elected official with pressures to spend as much money as possible for re-election, have access to this kind of money? It is arguable that assets seized by the criminal justice system should be used for the criminal justice system, as has been allowed since the 1984 passage of the Comprehensive Drug Abuse and Prevention Act. It only seems fair. But that is only from the agency's point of view.

One of the great things about discussions of the conflicts of interest of people in the securities world is that "fiduciary duty" is considered the basis for the rules that govern their relationship with government officials and others. In discussions of the conflicts of interest of those whom they deal with in municipal governments and those who provide other sorts of advice or products to municipal governments, "fiduciary duty" often goes unmentioned.

I say this as an introduction to a discussion of the Municipal Securities Rulemaking Board's (MSRB) draft Rule G-42, entitled "Duties of Non-Solicitor Municipal Advisors" (the MSRB's text webinar on the draft rule is attached; see below). "Municipal advisors" are the people who advise municipalities with respect to their issuance of bonds and related transactions (the definition is complex and outside the bounds of this post).

It all started with a private meeting among three members of the Orlando-Orange County Expressway Authority board, according to an article last week in the Orlando Sentinel. The subject of the informal meeting was the ouster of the executive director, which took place at the next formal meeting.

But after an investigation into the private meeting, a grand jury indicted one of the three members for bribery and soliciting compensation for official behavior. Lesson:  open meeting act violations are sometimes related to government ethics and criminal misuse of office violations.

There are three interesting issues in this one minor matter, involving a Louisiana sheriff's purchase of a house at a foreclosure sale handled by the sheriff's office.

The Application of Ethics Laws to Foreclosure Purchases
The first issue involves the transaction itself, the particular law in Louisiana, and how more common conflict laws may be interpreted in such a situation.

Louisiana has an unusual law that deals with this sort of transaction:
§1113. Prohibited contractual arrangements
A.(1) No public servant ... or member of such a public servant's immediate family, or legal entity in which he has a controlling interest shall bid on or enter into any contract, subcontract, or other transaction that is under the supervision or jurisdiction of the agency of such public servant.
One of the especially good aspects of this language is that it is not limited to situations where an official was personally involved in a transaction. The rule acknowledges that, to the public, it doesn't matter if the sheriff's deputy had handled the auction. What matters is that it was the sheriff's office. Similarly, a deputy should not be allowed to purchase property at an auction run by the sheriff or by another deputy.

Many government ethics professionals don't like waivers. I think they're valuable. Basically, they are requests for an advisory opinion in which the official recognizes that certain conduct would constitute an ethics violation, but wants a determination that he can engage in the conduct due to special circumstances. The result of such a determination is the creation of a new, narrow exception to a rule. This is a good way of preventing bad unforeseen consequences of a rule. But waivers must be given only after a public hearing.

The value of a government ethics waiver is completely different when it is not an independent ethics officer or commission who makes the determination, and when there are no special circumstances that require a new exception. In fact, a waiver given by one or more officials without a very good reason sends the message that officials won't apply ethics rules when they don't feel like it or will favor certain of their colleagues (and, if they are in need of a waiver in the future, themselves). This makes a mockery of an ethics program and undermines the public's trust.

According to a post in the Crain's Insider blog last week, the New York City council hired as deputy general counsel a lobbyist whose firm recently had been the council speaker's campaign consultant (the speaker is the leader of the NY city council, elected by its members). This raises an interesting conflict issue relating not only to hiring, but also to firms that both provide campaign services and lobby local government officials.

When a firm advises a local government official with respect to a campaign, this creates a special relationship — personal, business, and political — that creates the impression that anything that is done for the firm, its members, or its clients involves some level of preferential treatment based on this relationship. It can appear that an official owes her election to such a firm, and she can feel this way about it, too.

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