making local government more ethical
An excellent editorial yesterday by Dan Barton, editor of the Kingston (NY) Times, raises a few important issues relating to local government ethics proceedings.

According to Barton, Kingston's new ethics board dismissed a complaint from a city alderman that the mayor had violated the ethics code by hiring as an attorney for the city's local development corporation a lawyer with whom the mayor practiced as "of counsel."

Garbage is the principal regular point of contact between individuals and their local government. If people are happy with their garbage pickup, they are likely to be happy with their local government. For this reason, smart high-level local government officials make sure that garbage pickup is done well.

In Chicago, the members of the board of aldermen wanted to be given credit for garbage pickup. They also wanted to use it as a way to provide their supporters with jobs. To do this meant ward control over garbage collection and a garbage collection map based on wards, not on what was most efficient. This meant more trucks and more employees, more votes for incumbents, and more costs for taxpayers.

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.

It's the end of an era. Last week, according to an article in the Chicago Tribune, a federal magistrate declared that Chicago was released from the 1972 Shakman consent decree, which was supposed to end patronage (for a long time, however, patronage went underground; see my 2006 blog post on this). From now on, there will be no more federal oversight over city hiring.

Many people believe that conflicts of interest are limited to situations where money is involved. When these people write ethics laws, as they often do, the law effectively says that where money isn't involved, any conduct is acceptable.

An investigative piece in yesterday's New York Times raises an interesting issue regarding complicity in ethical misconduct:  is there an obligation not to be complicit with misconduct at a different governmental level when, arguably, that misconduct financially benefits one's own government?

According to the article, when Bayonne, NJ was in deep financial trouble in 2010, with the state talking about bailing it out the way it had bailed out Camden in 2002, the Port Authority of New York and New Jersey purchased a piece of land from the city (1) that the port authority had no use for and (2) at a price substantially higher than it was worth (in fact, the year the purchase was made, the port authority wrote down the value of the property). This apparently fraudulent purchase meant that the city would be in solid financial shape, at least for the short run.

The apparent purpose of this purchase was not only to help the city of Bayonne, but to solve a dilemma for New Jersey's governor, who "was confronting a huge deficit in New Jersey’s budget, while trying to keep a campaign promise to not raise taxes." The purchase shifted the problem from the state to the port authority.