Income disclosure not quite right in House report

Posted by Cindi Ross Scoppe on May 21, 2014 

Back before Circuit Judge Casey Manning’s order granting immunity from prosecution to legislators upended the whole debate about ethics reform, I was trying to wrap my head around the House Judiciary Committee’s proposed rewrite of the House’s 2013 ethics bill, which the House might finally debate today. And specifically, its income disclosure requirement.

The legislation requires legislators to identify the source (but not amount) of most of their income. But then the next two subsections add much more limited reporting requirements for legislators and their family and business partners. It was those sections that had me confused. So I put the question to former attorneys general and ethics-reform advocates Henry McMaster and Travis Medlock: Is there a problem with these other two subsections? Don’t actually reduce what the first section seems to require?

Mr. McMaster, in the middle of a statewide primary campaign for lieutenant governor, begged off, but Mr. Medlock reviewed the proposal and agreed that there was a problem, though not precisely what I had thought I saw. Beyond just seeing the problem, he explained the solution.

He also did a very nice job of explaining how legislators can profit from their office without violating the law.

Here, let’s just let him explain:

Section 8-13-1120 (11) seems problematic. I refer to the paragraph beginning: “For purposes of item (11)…..” positioned under (11) (iii). The provision could be used in attempting to nullify (10) (i) (ii) and (iii). At the very least it may create an ambiguity argument adversely affecting the good provisions in (11). Taken on its face, it is bad policy. Obviously, the issue at hand is not the fair market value of income or goods. It is the source. Presuming a legislator sells tires to an automobile manufacturer for a fair return of $300,000 per year, the fact that they are sold at “fair market value” does not negate the influence such sales might have on the legislator-seller. The fact that a legislator-lawyer charges a utility a “fair market value” fee for his consultation services does not negate the influence that business arrangement may have upon his duties as a legislator. It’s not a great stretch to imagine a lot of payola being transferred under the guise of a subjective evaluation by a buyer and seller; and an attorney and client, as to what “fair market value” is under their business arrangements. $300,000 per year for public relations work and consultations may well be “fair market value” in the eyes of the parties involved and, even, under a more objective analysis. All of it should be disclosed as to source.

I think an effort should be made to strike the paragraph. It could become a loophole in the core area of income disclosure. A compromise would be to strike the words “or services rendered” to assure that, at least, the source disclosure of consultant-type retainers is not weakened by statutory construction issues at some future time. Another would be to provide an annual amount below which disclosure would not be required. Also, I think (10) and (11) should be re-drafted to resolve confusion between those two provisions- but that may complicate the effort.

I understand what they are trying to do by differentiating “commercial” transactions from other forms of income, but it seems to open the door for income disclosure avoidance- whether or not intended.

Mr. Medlock told me later that the governor’s office was confident that the problem could be worked out without amendment, through regulations the Ethics Committee would write. But why not just fix the problem in the statute, the way it ought to be done? Here’s hoping someone in the House will do that.

You know, after they do the really important stuff to the bill.

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