Editor’s Note: This article is the second in an occasional series on Hawaii ethics laws. Read the first: Today’s Disclosure, Yesterday’s News
Hawaii’s ethics code is too loose, some lawmakers say. So loose, that a politician can receive income from a firm or lobbyist doing business before the Legislature without disclosing the financial relationship.
It’s a problem that new Senate President Shan Tsutsui wants to fix.
“That is definitely something we’ll be looking at,” Tsutsui told Civil Beat recently. “We want to make sure there’s as much transparency as possible. To make sure that there isn’t a potential conflict or a conflict that’s not known by other members as well as the general public.”
Each year, elected and appointed officials are required to file a financial disclosure with the Hawaii State Ethics Commission. The disclosure lists all of a public figure’s major assets and affords voters a means to ensure their representative is acting in the public’s best interest.
But while the Hawaii Constitution calls for all “sources and amounts of income,” to be disclosed, public officials are not required to disclose the individual clients supplying the income. For example, politicians who are also lawyers must say they received income from their law firm, but can leave out the names of their clients, some of whom have issues before the Legislature.
The same goes for Realtors, certified personal accountants, consultants, etc.
Currently, when there is a potential conflict, politicians are required to stand and ask the president or speaker for a ruling on whether or not the legislator should be allowed to vote on a particular issue. Since working in the Legislature is considered part-time work, many lawmakers hold separate jobs, which can lead to votes that might require politicians to recuse themselves to avoid a conflict.
“I’ve always heard the president say, ‘no conflict,'” Tsutsui said. “But, you know, I’m sure at times there must be conflicts. How do I better know so that I can make the correct ruling now? I don’t want to say no conflict when there could potentially be, if I don’t have a firm understanding of what the situation is.”
Sen. Les Ihara, a longtime open government advocate, says he will introduce legislation this session to try to close the loophole. If he’s successful, Hawaii would join 15 other states that require disclosure of clients. But his track record isn’t encouraging.
What may be different this time is the presence of Tsutsui.
According to the State Ethics Commission’s financial disclosure instructions, just about everything politicians earn or own must be reported once they make the leap into public life. The screenshot below details what’s required.
Ihara, who represents portions of Palolo, Kaimuki and West Diamond Head, says the rules aren’t tight enough.
“I found some loopholes in the law,” he told Civil Beat. “To me, large loopholes that in effect thwart the intent of the law.”
Ihara says the way the ethics code is drafted could make it difficult for the public to identify possible conflicts of interest.
In 2009, he introduced a bill that called on the Legislature to address the loophole. It would have required lawmakers to disclose each source of annual income derived from a single source of $25,000 or more, or that represented an amount equal to 25 percent or more of the legislator’s total annual income, excluding legislative salary.
Legislation such as this would have ensured that clients that provided substantial income would have been disclosed to the public.
The bill had a quick death in committee.
Ihara tried again in 2010 with Senate Bill 2916.
“Public disclosure and transparency of lobbying activities of all types is critical to provide accountability, enhance public trust, and reduce the existence and perception of undue influence in government policy making,” the bill stated. “Lobbyist and public official financial disclosure laws do not require lobbyists or public officials to report contracts for work between lobbyists and public officials if they are business professionals.”
One of the purposes of the bill was to, “Require lobbyists and public officials to report their financial and contractual relationships and transaction amounts.”
Again, the bill died.
State Ethics Commission Associate Director Susan Yoza told Civil Beat that so long as lawmakers aren’t pushing the Legislature on the specific issue of a lobbyist client, they’re in the clear.
“As long as the legislator is not being paid to assist or represent the client on that particular matter – let’s say they’re doing some totally unrelated work for the client, it has nothing to do with their lobbying activities – as long as they’re confining their activities to that kind of work and not with regard to the matter the client is lobbying on, then that would be permissible under our law,” Yoza said.
In 1998, Rep. Joe Souki, who represents Wailuku, Waihee and Waiehu on Maui, was called out for voting on a measure that would have limited the pay of Bishop Estate Trustees. Earlier that year, Souki, who was at the time speaker of the House, was paid $132,000 by Maui developer Everett Dowling for a consultant fee for his role in helping sell a $5.3 million property to the Bishop Estate.
Critics said that Souki led the opposition to the bill and that his involvement was a conflict of interest.
Civil Beat spoke with Souki who said he voluntarily disclosed his payment from Dowling, despite not being required to by the ethics code. Souki, a Realtor, said there was no actual conflict of interest and that the media inflated the issue.
“The press made it sticky,” Souki said. “I felt that I acted in good faith all the time… I was cleared by the ethics commission, even the attorney general came and did an investigation. I got cleared by them.”
Authors Randall Roth and Samuel King of the book, “Broken Trust,” saw Souki’s relationship with the Bishop Estate as more nefarious.
The book describes the relationship this way: “Joe Souki, had his own relationship with Bishop Estate: a $132,000 ‘consulting fee’ for services rendered when the trustees bought land in upcountry Maui. As speaker, Souki had the power to hurry a given bill through to a vote on the floor or bury that bill in a committee. To get his way, Souki could offer individual deals that were hard to refuse, such as his support for a legislator’s favorite bill, or a committee chairmanship.”
Souki told Civil Beat that while he would support – or consider supporting – legislation like Ihara’s 2009 bill, achieving a Legislature without any conflicts of interest is a near impossibility.
“Almost every legislative bill that goes through the judiciary committee, whether it’s a tort reform bill or it has to do with the penal sentencing, in some respect it will affect an attorney,” Souki said. “If you’re an attorney, you’ll be affected by the tort reform and they’ll all vote against tort reform. What’s that? That’s sticky, eh?”
Souki says that being a legislator is part-time work and to make a living, most lawmakers have to have business outside of public service, which creates numerous conflict of interest scenarios.
“Most of them try to work because our pay is not that great,” Souki said. “And so they work part-time and they legislate part-time and so there’s all potential conflict there.”
It’s a point that Speaker of the House Calvin Say agrees with.
“Let me just say this: Because we are a part-time Legislature, I would say all of us have some form of a conflict of interest,” Say told Civil Beat. “I’m a small business man, I have to disclose everything from pharmaceutical drugs to construction materials to all these things that I bring in, so would I be exempt from the general excise tax or a tax credit? I have to disclose that and the decision is rendered “yes”.”
Say said he would consider any legislation that would strengthen ethics laws but from his perspective, a Constitutional amendment might be the most effective method to ensure financial transparency.
“Maybe the best approach – this is just me – we do a Constitutional amendment and then we become full-time legislators if that’s what the public wants,” Say said. “And then there is no conflict of interest whatsoever because you cannot have any other income outside of your legislative income.”
Even Sen. Suzanne Chun Oakland, who co-sponsored Ihara’s 2009 bill, says a Legislature free of conflict is a pipe dream.
“I can see for those that do have other jobs, there will always be a conflict in one form or another,” Chun Oakland told Civil Beat. “I know that at one point in the 1990’s when this conversation took place, one of the legislators asked, ‘How far are we going to go?’ Because, even for public education, at that time there were many people that had children that were going to public school that were legislators. So where do you stop because that’s a direct benefit to your family?”
She said, however, that the issue deserves to be in the public conversation. “I can see the benefit of disclosure,” Chun Oakland said.
Many other states also see the benefit of full disclosure.
According to the National Conference of State Legislatures (NCSL), a bipartisan organization providing “research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues,” a total of 15 legislatures require some form of individual client disclosure.
The organization says that most states do not have the requirement because “such information is considered privileged and revealing it could constitute a breach of a professional ethics code.” For example, consider the attorney-client privilege, though this seems to be primarily in place to protect “communications” between lawyers and clients. Not necessarily, the existence of a relationship.
Some examples of states the NCSL says require client identification and seem to go beyond Hawaii’s disclosure requirements are below. Beneath the screenshot is a more detailed description from the organization regarding the circumstances of disclosure for each state.
Does the Alaska Legislature have to disclose individual clients? “Yes, in some cases: if they have or may have an interest in legislation or if filer has represented a client before a state agency for payment.”
Does the California Legislature have to disclose individual clients? “Yes, in some cases: Names of clients from whom filer’s proportionate share of income was (greater than) $10,000.
Does the Florida Legislature have to disclose individual clients? “Yes, in some cases: Sources paying (greater than) 10 percent of the gross income to a business with which the filer is associated must be named if the amount comprises (greater than) 10 percent of the filer’s gross income and is (greater than) $1,500 OR sources providing (greater than) 10 percent of associated business’s income if that business has paid filer (more than) $5,000. Also, if filer has represented a client before a state agency for payment, that client’s name must be disclosed.”
Does the Pennsylvania Legislature have to disclose individual clients? “Yes, in some cases: Disclose the name and address of any direct or indirect source of income totaling in the aggregate $1,300 or more. However, filer does not have to divulge confidential information protected by statute or professional codes of ethics or common law privileges.”
Does the Oregon Legislature have to disclose individual clients? “Yes, in some cases: Disclose each person for whom the public official has performed services for a fee (greater than) $1,000, except for any disclosure otherwise prohibited by law or professional code of ethics. If client is a lobbyist, he or she may have to be disclosed under other parts of the law as well.”
The NCSL also says that, “More than (two-thirds) of states mandate the release of information about each member’s spouse and dependent children.”
Hawaii’s disclosure law does not have this requirement.
DICSUSSION: What do you think of financial disclosure and the lack of requirement for lawmakers to identify specific sources of their income? Is a conflict-of-interest-free Legislature a possibility? Share your thoughts