Determining Whether Something Paid For Has Been Discounted and Is Therefore a Gift

My last blog post raised an interesting question. When an annual financial disclosure form (or, in some jurisdictions a special declaration of gifts received) requires the disclosure of all gifts from restricted sources, what are the expectations of an official who pays rent to a restricted source? How is the official expected to determine whether he has received a gift or not?

Here is the definition of "gift" on White Plains' financial disclosure form:

Gifts include, but are not limited to, tangible items of value, cash in any form, entertainment, any interest, security or item for which the donee paid less than fair consideration or did not pay for, expenses for trip or accommodations, or travel or accommodations provided at a cost of less than full value or at no cost, loans for which interest payments are deferred, no interest is paid, or interest is paid at less than prevailing rates, or other economic benefits, excluding earned income from wages derived from the City of White Plains.

This is typical language, and it leaves it to the official to determine whether he paid "less than fair consideration" for what he received. What is the official is expected to do in order to determine whether or not he has been given a discount? Should the official seek out information on what similar apartments (or goods or loans) are going for? If he discovers that his rent is lower than the average apartment of that size and location, should he ask questions to determine whether the market value has gone down? Should he determine what the questions are and the extent of the research he must do, or should he ask the ethics officer or commission for advice?

Of course, it could be argued that an official should not rent (or accept goods or a loan) from any individual or company over which that official has authority (and that, if he doesn't have authority and rents from the individual or company, he should stay out of any matter that relates to him or it). That would not only solve the problem whether or not there is a discount but, more important, the problem of whether the official can be expected or trusted to determine whether he has obtained a discount.

Short of this, perhaps the best thing would be that if officials do want to rent from a restricted source, the official should declare it, whether he considers it a gift or not, since there is an appearance of impropriety either way. And then the restricted source should be required to prove to the ethics commission that no discount was given. The restricted source could better handle this burden, since it would have better access to the necessary information. And there would be no question about whether the possible gift should be disclosed or not. At the end of the process, there would either be no more appearance of impropriety, or the official would have to find an apartment elsewhere.

Robert Wechsler
Director of Research-Retired, City Ethics

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