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One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors. -- Plato (429-347 BC)

Tuesday, July 11, 2017

Sham Ethics Rules for AR Legislature & Lots of Loopholes

by David Ferguson: Every Senator and Representative in the Arkansas General Assembly will have personal conflicts of interest on some legislation. For example, a farmer will have an interest in promoting pro farm legislation, and a banker will have an interest in promoting pro banking legislation.

Obviously ethics rules do not try to address every possible conflict a legislator may have – only the more significant financial conflicts.

Sometimes the ethics rules are in the form of prohibitions and sometimes they are in the form of disclosure requirements.

Arkansas’ ethics rules for legislators have largely been a failure, and, in some instances, a sham. If you are not familiar with the ethics rules for Arkansas legislators, you will be surprised how easily rules have been avoided.

You might think legislators would be eager to strengthen ethics rules now that two former legislators are under indictment for corruption, but that has not been the case.

Failures and Weaknesses of Arkansas’ Legislative Ethics Rules

This is not an exhaustive list of ethics rules but these are addressed here because of significant deficiencies:
  1. Financial disclosure
  2. Prohibiting a legislator from being paid for lobbying
  3. Rules on legislators who are attorneys, consultants, or have certain other financial interests.
  4. General laws on bribery and abuse of office
1. Financial Disclosure
Legislators and many other elected or appointed officials must file an annual “Statement of Financial Interest.” Having some basic financial information about an official is valuable to the public and should make the officials more cautious about financial conflicts of interests. The legislator must report their sources of income in two categories: Sources of income of at least $1,000 and sources of over $12,500. They don’t have to report how much income, just whether the source exceeds one or the other threshold.

The weakness of the rule is a legislator reports his business receives over $12,500 but you will not know if the legislator’s business receives a huge sum from a client. For example, an attorney will list his law firm as the source of over $12,500 but you will not know he has a client who pays him $300,000 and just happens to be pushing for legislation to help its business. If a legislator receives huge sums from a client who is a government contractor, you will not know that either. You will only know he received over $12,500 from his business.

The purpose of financial disclosure was to keep the public informed and bring financial conflicts out of the shadows. The financial disclosure law fails in those regards

This year, Senator Bryan King tried to bring some financial relations out of the shadows. His disclosure bill SB175 of 2017 addressed financial relations with Medicaid Providers, since Medicaid related contracts are the most significant government cash cow in Arkansas. His bill died in the House Committee on State Agencies and Government Affairs.

2. Prohibiting a legislator from being paid for lobbying
In 1995, a new law tried to prohibit legislators from receiving compensation to lobby other legislators. Act 1111 of 1995 prohibited legislators from receiving outside compensation for lobbying other legislators. The new legislation was of concern to legislators who had essentially served as lobbyists for a big business interest, but who called themselves by other titles such as: “public relations officer,” “governmental relations officer,” or “consultant.”

Before the law was passed some legislators realized they could vote for it and escape through a loophole. Once the bill passed, I was told about the loophole. The loophole? Legislators would continue to do business as normal but write into their contracts a statement excluding lobbying other legislators from their duties. That way if they lobbyed their colleagues to benefit their client, they would be able to claim they received no compensation for lobbying and there was no violation.

Later the legislature extended the lobbying provision to one year after leaving the legislature and then more recently to two years. These extensions had little effect. For example one legislator who failed in his primary election became a “consultant” for a big business interest after leaving the legislature and then when the two years expired registered as a lobbyist.

Once the Governor set the new precedent of giving state jobs to legislators before their term was up, some legislators resigned from the legislature to go to work for Governor Asa Hutchinson in what essentially includes the duty to lobby the legislature on behalf of their state agency. But these government jobs are excluded from the definition of lobbyist.[§ 21-8-601 (a)(3)(C)]

3. Rules on legislators who are attorneys, consultants, or have certain other financial interests.
“We don’t need this ethics bill. We already have a Senate Rule on it.” That was the argument against SB726 of 2017 by Senator Linda-Collins Smith to prohibit Arkansas legislators who are attorneys or consultants from representing their clients before the legislature. One problem with their argument … the ethics rule is a sham.

The rule they referred to, Senate Rule 24.07, is not just about legislators who are attorneys or consultants but the rule specifically mentioned them by name. Before discussing the rule, some background information will be helpful.

BACKGROUND. The appearance that some attorney-legislators were using their office for financial gain has long been an issue in Arkansas. For example, not long after I started working for the legislature in 1980 I began to hear from legislators, staff, and lobbyists, that if you wanted a liquor permit you better get a certain legislator’s law firm to handle it. Whether it was true or not, the perception persisted as the law firm handled a number of liquor permit applications.

Arkansas’ attorney-legislators came under heavy scrutiny in the late 1990’s as some attorney-legislators arranged to obtain legal contracts for themselves and friends from a new state program. Before the federal investigation was over, there were several incitements and some convictions.

More recently in 2015, the media reported former Senator Michael Lamoureux had obtained a $120,000 “consulting” contract from the Arkansas Faith and Freedom Coalition while he was the Senate President Pro Tempore. The Coalition only raised $140,000 and nearly all was spent on Lamoureux. The consulting deal renewed concern by some legislators over the business dealings of some of their attorney-legislator colleagues.

Last year, state Senator Jeremy Hutchinson, who is an attorney, also drew attention when he represented a company that had wanted a contract from a state agency. South Arkansas Youth Service did not receive the nearly $160 million contract, and Hutchinson represented them in their protest to the Youth Services Division of the Department of Human Services.

The recent publicity may have been why Senator Linda Collins-Smith and her cosponsor Senator Terry Rice introduced the bill on attorneys and consultants.

THE SENATE RULE. Because of the scandal in the late 1990s involving attorney-legislators, public trust of Arkansas legislators was very low. The Arkansas Senate responded with the adoption of Senate Rule 24.07. The rule specifically addressed attorneys, consultants, and other business dealings of Senators. The House of Representatives does not appear to have adopted a similar ethics rule.

Senate Rule 24.07 begins by saying a Senator cannot participate in Senate discussion on a matter in which he has a financial conflict, but when you get a few paragraphs in, it reverses course and says a Senator can participate despite a conflict if he divulges the conflict on record. By the way, the public may not be made aware of the statement of conflict, unless someone just happens to check the Senate Journal.

What makes the rule a sham is the exception included in the rule. The rule doesn’t apply when “the matter provides a benefit which accrues generally to other like businesses, professions, occupations, or other groups.” Sounds reasonable, but what the public doesn’t realize is ALL legislation should have general application and therefore actions on ALL legislation should be exempt. Why? Because the Arkansas Constitution prohibits legislation that is not of general application. Amendment 14 to the Arkansas Constitution says in part, “The General Assembly shall not pass any local or special act.

Here are illustrations of how that works:
  • A legislator’s client may be the prime beneficiary of a change in tort laws because the client is facing millions of dollars in damages in a court case, but because some other company might also benefit from the legislation in the future, no disclosure is required.
  • A legislator’s client may benefit from a new law to authorize a new Medicaid provider program of the type the client provides, but because it is possible other companies could benefit, no disclosure is required.
Every attorney in the Senate should know special acts are prohibited and therefore Senate Rule 24.07 is meaningless.

Do any Senators file a disclosure statement under the rule? Yes. When they want to. This can work to the advantage of the Senator. When the public has become aware of a conflict it is simple to file a disclosure to avoid some of the criticism by saying, “I am following the rules in disclosing a potential conflict.” If the public discovers the Senator’s conflict after the fact the response can be: “I wasn’t required to file a statement because the legislation applies generally. I am following the rules.

I repeat myself but …. the Senate rule is a sham.

4. General laws on bribery and abuse of office
Whenever a new ethics rule is proposed there are always some who say, “Why do we need new rules? We already have laws on bribery and abuse of office.

Sure, when former State Treasure Martha Shoffner took thousands of dollars stuffed in a pie box, it is obvious she took a bribe. But, when a legislator’s client pays him tens or hundreds of thousands of dollars as an attorney or consultant, it is going to be a lot harder to prove there was influence peddling. The purpose of ethics rules is to avoid conflicts.

Final thoughts
Based on the failure of Senator Bryan King’s ethics bill and the failure of Senator Linda Collin-Smith’s ethics bill it seems clear the General Assembly still doesn’t want to limit itself with new ethics rules.

What ethics standards should apply to the Arkansas legislature? I will leave that for someone else to decide.

I wrote this because I was offended by legislative deception. It frustrated me when I was told attorney legislators had used the sham Senate Rule as an argument to say Senator Collin-Smith’s bill was unnecessary. Be “for” ethics legislation, be “against” ethics legislation, but quit deceiving the public with sham rules and laws with more loopholes than restrictions.
David Ferguson is a former Director of Arkansas’ Bureau of Legislative Research, having a thirty-two-year career as an attorney for the Arkansas legislature. After retirement from state service his primary focus has been beef cattle farming. He is also a former officer of Conduit for Action.

Tags: Daqvid Feruson, Conduit for Action, offended, Sham Ethics Rules, Arkansas, Legislature, Loopholes To share or post to your site, click on "Post Link". Please mention / link to the ARRA News Service and "Like" Facebook Page - Thanks!
Posted by Bill Smith at 8:30 AM - Post Link


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