Indirect Benefits, Expertise, and the Responsibility for Poor Ethics Advice

Update: June 20, 2012 (see below)

The saying goes that there are two sides to every story. But more commonly there is a story and ways to spin the story. The problem is telling them apart.

This week, a Daily Oklahoman editorial took to task the state ethics commission, which has jurisdiction over local officials. The editorial's first sentence says that an EC decision "may dramatically undermine agency oversight without an offsetting benefit to good government." The editorial concluded, "Future board members may need to be as ignorant as possible to avoid reprimands. That's hardly a recipe for competent agency oversight."

What was the horrible decision that led to this future lack of oversight? Here's where the spinning comes in. According to the editorial, a state department of human services (DHS) board member "works at a nonprofit agency offering services subsidized by DHS. Dow's nonprofit position is unpaid."

The EC's letter of public reprimand (its "decision") tells a different story: "you served and continue to serve as Executive Director and chief executive officer of the Community Action Project (CAP), a charitable corporation which operates before-school and after-school daycare and/or child education centers. ... CAP contracted with the Oklahoma Department of Human Services (DHS) while you were an officer of that entity and, at the same time, a member of the DHS governing board."

"Working unpaid" sounds like being a common volunteer. But the official actually was acting as the nonprofit's CEO for no pay. This is a big difference. And the nonprofit's services weren't "subsidized" by the government; the nonprofit entered into a contract with the government, with its CEO on both sides of the transaction.

The editors focus exclusively on two things:  direct financial benefit and the need for expertise on government boards. The fact that the CEO does not receive compensation is highly unusual, but it really shouldn't change a thing. His nonprofit receives a financial benefit, and he heads the nonprofit. That is what is important.

And it is clear that the nonprofit is more important to him than the agency, because after receiving the reprimand, the CEO chose to resign from the agency board rather than to cancel his nonprofit's contract with the agency.

It is good that the nonprofit CEO did not vote on contracts with his organization, but it is not clear whether or not he withdrew completely from these matters. In addition to these matters, there could be a perception that the CEO of one nonprofit may not be unbiased in making decisions regarding the funding of other nonprofits, which may be competing in the same field with the nonprofit he runs. Nonprofits may not make profits, but they do compete, especially during a period such as now, when many are struggling to survive.

Responsibility for Poor Ethics Advice
It is also good that the CEO sought advice about his conflict when he accepted the position on the agency board. The problem is that he sought the advice from the attorney general's office. The AG's office gave him a green light, when it should have instead told him to ask the EC. This is not the CEO's fault.

It would have been more appropriate for the EC to have reprimanded the AG's office, insisting that it never give ethics advice again. Then it should have sat down with the CEO to work out the best solution to the problem caused by the AG giving poor ethics advice.

But this would mean thinking outside the box. The box, in government ethics, is enforcement that follows a criminal format. The EC receives allegations, and acts on them. If it turns out the AG's office was the culprit, what do you do? You either add it to the complaint as an additional respondent, or you effectively make a public reprimand without calling it that.

And you use the letter to the AG as a teaching opportunity, letting officials throughout the government know that, if they have a question about a conflict situation, they should seek advice from the EC, and no one else. If they go elsewhere, the advice they receive cannot be used as a defense.

The ethics commission might also use this occasion to consider creating an effective waiver program. If an official wants to be able to be on two sides of a transaction, he should be able to ask for a waiver. He should have to show, in a public meeting, that there is an exceptional reason to allow him to head a nonprofit that receives money from his agency.

Expertise on Government Boards
The second area of focus in the editorial is expertise on government boards. Without people like this nonprofit CEO, and another nonprofit official who resigned from the agency board at the same time, the editorial says there cannot be effective oversight of government. It insists that people who are not in such a position would be too "ignorant" to provide effective oversight.

There are a lot of knowledgeable people who are not officers of nonprofits receiving grants from the agency they would oversee. And there are other ways people like the nonprofit CEO can be useful to the agency and even to the board. An article from the Tulsa World quotes the CEO as saying that "he will continue to remain active and will advocate 'from a different venue.'" It also says that he thinks the board he sat on should be abolished, because "having nine lay volunteers ... overseeing a multibillion-dollar, complicated human services agency – with the amount of time volunteers have able to spend, without having deep content expertise and knowledge – is a bad model."

A better model, and a better use of expertise, would be an advisory board that would consider just the sort of policy issues that the nonprofit CEO raises in this article. Better that experts be used to discuss policies than that they vote on contracts. There is no reason to give up the expertise of people like this. The issue is how best to employ this expertise, while not creating perceptions of impropriety.

Update: June 20, 2012
According to an article this week in the Tulsa World, the state ethics commission withdrew its reprimand on the basis of newly discovered evidence, on which it would not comment.

Robert Wechsler
Director of Research-Retired, City Ethics

203-859-1959