The Difference Between Conflicts and Gifts

There is a great deal of misunderstanding concerning the difference between a conflict of interest and a gift. It appears that most people consider them two completely different things. In fact, they represent two kinds of conflicts, pre-existing conflicts and conflicts that are created by an event. The confusion between the two characterizes a situation that led to an ethics complaint in Los Angeles.

According to an article on the KPCC public radio site, from January to May this year, a son of interim general manager of the Los Angeles Department of Building and Safety had a paid internship (while in law school) with the lead law firm representing the developer of a huge project known as the Millenium Towers. The complaint against the general manager characterized the issue as a conflict of interest, and two published reports of the matter do the same (but a comment does suggest it was a gift). However, the general manager was involved in the matter several months before his son was hired by the law firm. There was no pre-existing conflict or relationship, only the hiring of a family member after the law firm and general manager were already involved in the matter.

A principal difference between a conflict and a gift involves how to cure the situation, how to deal with it responsibly. Generally, an official deals responsibly with a conflict by withdrawing from the matter. An alternative way of dealing with a conflict that involves a law firm is to create a firewall in the law firm between an official's relative who is employed there and the matter in which the official is involved. According to a Los Angeles Times article, an attorney at the firm says that the firm made sure there was "an ethical wall" between the son and the Millenium Towers project.

However, this was a solution to a problem that did not exist. No one was concerned that a law student would be involved in any meaningful way with the Millenium Towers project. In fact, even though the general manager should have withdrawn from the project immediately upon the son's hiring (and should withdraw now), even withdrawal would not have sufficiently cured the problem, because the problem was not the official's relationship with the law firm. The problem was that the law firm's hiring of the son could be seen as a gift to the official, which could have been made not only to influence the official's future conduct, but also to reward past conduct. Once the gift was accepted, there was a violation that could only partially be cured. This is why withdrawal is considered a cure only for pre-existing conflicts. Gifts can be cured only by returning them or making restitution.

Unfortunately, although the average person would see the hiring of the son as a gift to the official, most likely intended to reward or influence him, the Los Angeles ethics code, like many ethics codes, does not consider the hiring of someone (at least if they do the work) to be a gift, because there is consideration for the money that is given. Nor does the Los Angeles ethics code consider a gift to a son to be effectively a gift to the father.

The relevant language in the City Ethics Model Code (§100.4.1) covers both types of gift:

An official or employee, his or her spouse or domestic partner, child or step-child, parent, or member of his or her household, may not solicit nor accept anything of value, directly or indirectly, from any person or entity that the official or employee knows, or has reason to believe, has received or sought a financial benefit, directly or through a relationship with another person or entity, from the city within the previous three years, or intends to seek a financial benefit in the future.

Since timing is important to whether a situation involves a conflict or a gift, it is worth noting that the general manager apparently misrepresented the timing of his situation. According to the KPCC article, when asked, on camera, whether the hiring of his son might have influenced him with respect to the development, the general manager said that he hadn't become involved with the Millenium Towers project until July of this year. But emails obtained through an FOI request show that he was involved with the project as early as March 2012.

Characterizing this as a conflict situation, the general manager's representation of the timing would mean that there was no conflict. But characterizing it as a gift situation, the general manager's representation of the timing would mean that the gift could not have been a reward, but could only have been intended to influence him. His subsequent participation in the matter would be seen as influenced by the gift.

If the general manager did misrepresent the timing, it appears that, even if the hiring of the son and the continuing participation of the father were not ethics violations, the father did think there was something wrong enough to defend himself via a misrepresentation.

What should the general manager have done? When his son was offered the job (or, if he knew, when the son applied for the job), he should have immediately sought advice from the Los Angeles ethics commission. At least he could then say that he did what he was told was the responsible way to deal with the situation. I would have told him that his son should turn down the offer of an internship with the law firm. But since this does not appear to be an ethics violation in Los Angeles, it would have been acceptable for the general manager to partially cure the problem by withdrawing from participation in the Millenium Towers project and allowing the son to take the position. The argument for doing this, although not apparently required by law, is that the appearance of a bribe was so great that the general manager's participation, especially if he might take a position that would benefit the law firm's important client, would undermine the public's confidence that decisions were being made in the public interest.

Robert Wechsler
Director of Research-Retired, City Ethics

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