making local government more ethical
The last time I discussed contingency fee arrangements in local government contracting was 2007 (the focus then was on attorneys). A front-page story in today's New York Times shows clearly that I have not been giving this topic the attention it deserves.

Allegations have been made by the U.S. Attorney for the Southern District of New York (disclosure: I worked for this office as a law school intern back in 1977-78) that a New York City department and an IT contractor were engaged in defrauding Medicaid over a five-year period, at a cost of tens of millions of dollars. With respect to government ethics, the central paragraph of the article is as follows:
Gretchen Morgenson's investigative piece in yesterday's New York Times is extremely disturbing. According to her research, local and state government pension funds have taken huge risks, and then allowed them to be hidden from the public, by signing agreements with private equity firms that make their terms confidential, including (1) their high fees and questionable clawback provisions, (2) their provisions for investors to be charged for litigation losses or settlements by the equity firm, and sometimes (3) provisions allowing equity firm general partners to not have a fiduciary duty to the pension funds.

An article today in the New York Times describes a situation that sheds light on pay to play. It involves the Westchester County (NY) county executive, who is getting special scrutiny because he is running for governor and has, throughout his career, as well as in this election, been openly critical of pay to play. He is being accused of hypocrisy, but it may just be that he does not really understand what pay to play is, why it is problematic, or how to prevent it.

According to critics, donors who have given the Westchester county executive $900,000 in campaign contributions over the last four years have received $709 million worth of county work. The executive's campaign "scoffed at any causality, noting that contracts must be competitively bid and approved by legislators."

The former chair of the Venice in Peril Fund wrote a disturbing piece for the September 25 issue of the New York Review of Books about corruption in Venice. This corruption derived largely from a major project:  the building of flood protection barriers, known as MOSE. Although this project was larger than those in most cities, the misuse of funds, the failure to competitively bid, the false invoicing, the nepotism and the cronyism are no different. Similarly, the need for independent oversight is the same whether the project involves the building of a new school, a convention center, a transportation system, or a city dump.

Members of the Consorvio, the contractor, have been charged with (and some have confessed to) buying the support of "anyone they thought would further their cause." The founder of the Consorvio, who resigned a year ago after investigators found that he had made illegal payments, has said "that it was he who was behind the system of buying support and influence and granting contracts without an open bidding process."

This week, California governor Jerry Brown had to go back fifty years to find someone who agreed with his view of government ethics reform. According to an article in the San Diego Mercury-News, in vetoing ethics reforms that "sought to limit the types of gifts politicians can accept and force lawmakers to disclose the names of groups that bankroll their travel junkets," Brown "referred lawmakers to an article written by one of his former law professors [Bayless Manning] that was published by the Federal Bar Journal in 1964: "The Purity Potlatch: An Essay on Conflicts of Interest, American Government and Moral Escalation." According to the article, the essay "argued that there was no evidence that new ethics rules imposed at the time were having any effect on public officials' conduct."

Nepotism is a difficult topic to get a hold of. It is the most generally accepted kind of ethical misconduct, most governments do not keep records (or, at least, public records) of familial relationships, and nepotism provisions are rarely enforced. For all of these reasons, the news media do not give nepotism much coverage. So in many governments, especially those with poor ethics environments, nepotism is common.

Kudos go to David Wickert of the Atlanta Journal-Constitution for doing an investigative piece last weekend about nepotism in the metropolitan Atlanta area (Disclosure: I was interviewed for the article, and I am quoted in it).

Wickert writes, "In the last three years alone, five area city and county governments hired at least 770 relatives of current employees. Those hires took place as thousands of metro residents struggled to find work, raising questions about whether family ties trump good government."

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