An Upside-Down Conflict of Interest

According to a recent article in the San Diego Union-Tribune, the chair of one of the city's economic development commissions made an unusual deal with, and a half-million-dollar instant profit from (the purchase and sale transactions were filed at the same time), the commission three years before he became a member.

Assuming this article is accurately describing the situation, this creates an unusual conflict of interest.  Clearly, the commission chair was not using his position to give himself a financial benefit, because he obtained the financial benefit three years before he joined the commission.  He also did nothing that would make it more likely for him to join the commission, all things being rational, because he had essentially cost the commission a half million dollars.  This is the opposite of the usual quid pro quo.

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Should this person have refused the offer to join the commission?  I think so, because he apparently had a rather unusual relationship with it already, and if this relationship were to come out, it would look bad for the commission, if not for him.

The article does not consider where the actual conflict might be, that is, whether the commission members or staff had a conflict, but there is something that implies some sort of problem with the commission staff. Two statements appear separately in the article:

"After Flannery's blog posting on July 3, 2007 [disclosing the transaction], James Waring, the mayor's top land-use official at the time, requested explanations from Smith [president of the commission]." [and]

"Mayor Jerry Sanders and four members of the City Council have demanded the resignation of longtime SEDC President Carolyn Smith. Smith and her staff received more than $1 million in extra compensation over the past five years." More information about this issue can be found here.

The transaction with the commission chair occurred eight years ago, and he joined the commission five years ago.

The article reports that the city attorney is looking into a possible conflict of interest regarding the chair, but the implication is that this apparently upside-down conflict may be something more. According to the second article, county grand jury recently questioned why three sets of highly-paid executives are required for urban development in San Diego. And a special audit of the economic development commission is being done.

Robert Wechsler
Director of Research-Retired, City Ethics

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