making local government more ethical
A recent action by the Securities and Exchange Commission (SEC) against the city of Harvey, IL, a poor city of 30,000 just south of Chicago, deals with a different sort of fiduciary duty than the usual government ethics case. In a complaint dated June 24, 2014 (attached; see below), the SEC alleges that the city's comptroller acted as financial adviser in three bond issues for a hotel development, diverted some of the funds to himself, and also diverted funds to the city's general fund. The comptroller is acting as financial adviser for a 2014 bond offering, which the SEC is trying to prevent through a court restraining order.

The action is based on the city's fiduciary duty to disclose to investors how bond proceeds will be used, as well as the risks associated with investing in the city's bonds (but the term "fiduciary duty" is not actually used in the complaint). This is part of the SEC's promised crackdown on disclosure failures related to municipal bonds. Alternatively, the complaint alleges fraud and the making of false and misleading statements.

The Washington state Legislative Ethics Board has been discussing how many meals a state legislator should be able to accept from lobbyists and lobbyist-employers under the "infrequent" meals exception in the state ethics code. The exception allows legislators to accept food and beverage when their attendance is "related to the performance of official duties" on "infrequent occasions." The board has apparently never defined "infrequent."

It's About Perceptions
This discussion has some resemblance to the discussion of how many angels can fit on the end of a pin. Once you believe that one angel can fit on a pin, where do you stop? This is why many in the government ethics world (including me) believe that officials should not be accepting any meals from those seeking special benefits from their government. It isn't because any particular official can be "bought" by the price of a meal. It's about perceptions.

After all, the basic Washington state gift rule prohibits any gift "if it could be reasonably expected that [it] would influence the vote, action, or judgment of the officer or employee, or be considered as part of a reward for action or inaction." I don't think it is possible for an official to convince the public that a restricted source wants to meet with her for any reason other than to influence or reward her vote, action, or judgment.

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).

Alysia Santo wrote an excellent Insider Politics column in the Albany Times-Union last week on the need for a post-employment provision in the city that is the capital of New York state. But the columnist went further than this, looking at some aspects of the city's institutionalized corruption (without actually giving it a name).

She focused on one recent instance involving Albany's commissioner of development and planning, who has accepted a job with a firm that is "responsible for nearly all commercial construction in the city." The company "has sought city approval on several large projects" and been granted incentives, including tax breaks, in recent years. Albany has no post-employment provision that even requires a cooling-off period before an official can take a job with a company he did business with as an official. In fact, it has no ethics code at all. One was discussed in 2009 (see my blog post on it), but it was not passed.

San Francisco's board of supervisors will soon vote on a number of amendments to its lobbying code (attached; see below). According to an article in yesterday's San Francisco Chronicle, the amendments are based on recommendations by local good government groups, which have pointed out that loopholes in the current law allow many lobbyists not to register. The amendments are sponsored by the board's president, David Chiu.

Independent Agencies
It is a good thing that the amendments extend the definition of "lobbyist" to those who lobby independent agencies, offices, and bodies. The officials who work for or sit on these bodies are some of the most lobbied officials, but they generally do not like to be included in government ethic programs and, therefore, are often excluded from them. Here are some of the agencies, offices, and bodies that are currently not covered, but would be:
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.