Conflicting testimony by the current and former directors of the State Ethics Commission before a Senate committee earlier this month exposed different perspectives on the interpretation of a key conflict of interest provision and of the ethics laws more generally. The differences between the two approaches to interpreting and implementing the ethics law also suggests why the commission’s more aggressive stance over the past two years has drawn repeated push-back from legislators.

Ethics Commission Executive Director Les Kondo and former director Dan Mollway both testified on SB893, a bill to clarify a previous measure exempting certain temporary advisory task forces or committees from conflict of interest provisions of the state’s ethics law. It amended a bill passed last year by extending it retroactively to June 30, 2010, in order to clearly cover members of the legislatively-created mortgage foreclosure task force.

Last year’s measure was explicitly intended to overturn a commission opinion which had advised members of the mortgage task force that accepting compensation for subsequent lobbying on the issue would be barred by the conflict of interest laws, a position legislators said was directly contrary to their intent in establishing the membership of the task force.

Kondo, testifying on behalf of the commission, strongly opposed SB893, and told members of the Senate Committee on Judiciary and Labor that it “is neither a reasonable nor a prudent exercise of legislative power.”

Kondo told the committee that the bill would encourage other ethics violators to seek special legislative exemptions in the future to “excuse” violations of the ethics code.

Mollway called Kondo’s position on the task force issue “clearly incorrect,” and argued the conflict provisions “had been misapplied” to advisory task forces in general and to the mortgage foreclosure task force in particular.

The committee voted to approve the measure despite Kondo’s opposition. Chairman Clayton Hee said Mollway’s testimony was “more convincing,” according to Civil Beat’s account of the committee’s decision making.

This was definitely a politically awkward moment. Mollway, who served as ethics director from 1986 to 2010, was placed on administrative leave in February 2010 and terminated by a unanimous vote of the commission four months later. Kondo was appointed to succeed Mollway in January 2011.

After assuming leadership of the commission, Kondo raised legislators’ hackles with a series of quick opinions that staked out stricter limits on gifts, including restrictions on legislators’ acceptance of invitations to attend charitable events and industry functions which had previously been allowed.

Although Mollway has commented on ethics issues in online discussions since leaving the ethics post, his testimony on SB893 was a somewhat surprising public challenge to Kondo and the commission.

Mollway expanded his testimony in a more detailed letter to committee chairman Clayton Hee on February 14, 2013.

The state ethics law is difficult to apply and must be interpreted with attention to the facts of each specific case, Mollway argued.

For example, Mollway said the range of powers exercised by different state agencies, boards, and commissions calls for different applications of the ethics code.

“Some (state agencies) are solely advisory, and exercise no sovereign power whatsoever,” Mollway wrote. “Some boards have tremendous sovereign powers, like the Land Use Commission or the Board of Regents of the University of Hawaii.”

And these differences count. For example, Mollway pointed out that University of Hawaii professors can require students to buy their books for class, while other state employees are barred from any financial dealings with subordinates or those they regulate.

Regarding the mortgage foreclosure task force, Mollway observed that its members “exercised no sovereign power of the state government whatsoever.”

“The purpose of the task force was to basically brainstorm and exchange ideas in order to come up with a proposed bill for the Legislature,” Mollway wrote. “Whatever the proposed bill, it would wend its way through the two Houses of the Legislature comprised of 76 legislators, along with anyone who wished to testify or comment on the bill.”

The Legislature named certain members of the task force to represent their companies or industries, clearly intending them to bring those perspectives to the discussion. And, Mollway argued, Kondo and the commission understood this legislative intent and did not try to stifle the task force’s deliberations by insisting on a strict application of conflict of interest provisions to its work.

If it had done so, Mollway argues, task force members could not have taken any official action affecting their own businesses, which would have undercut their ability to contribute.

However, Mollway wrote, it makes little sense to have allowed members of the task force to take action “as state officials” (i.e., members of an appointed task force) that would ultimately benefit their own companies, but then attempt to crack down on actions they would later take as private individuals lobbying on behalf of their employers or clients.

“This makes no sense,” Mollway wrote.

Mollway also explained that in applying the law to specific situations, the ethics commission must examine the legislative intent by asking, “What ‘evil’ did the Legislature seek to prohibit?”

The conflict of interest provision at the heart of the task force dispute was intended to prohibit “influence-peddling,” Mollway argued.

“Thus, the obvious legislative intent is to bar state employees from unjustly enriching themselves by assisting or representing persons or business for pay contrary to their state duties,” Mollway wrote. “Further, the law also bars businesses from being able to hire employees to give themselves an unfair advantage in dealing with the State.”

But these factors did not exist with the mortgage foreclosure task force, because the Legislature specifically wanted diverse but directly interested parties at the table. It was seen as being in the best interest of the public because it would generate the most robust legislative recommendations.

Mollway pointed to dozens of prior commission opinions in which the same conflict of interest provisions “could have been applied to bar certain conduct, but was not, after a look at the unique circumstances of particular cases.”

The commission’s attempt to strictly apply the conflict provisions to task forces diverged dramatically from these prior opinions, which Mollway described as providing the equivalent of “a body of case law” for interpreting the ethics code.

Finally, Mollway chided Kondo for claiming approval of SB893 would encourage future ethics violators to simply seek retroactive law changes from willing legislators, and in the process undermine the authority of the commission.

“What weakens the commission is poor interpretations of the law,” Mollway concluded.

“For this reason, the Commission must be sensitive when people disagree with it. This does not mean caving in — it means having an open mind. It also means reviewing facts and precedent.”

This certainly isn’t the end of this drama.

In the meantime, the disagreement between the Legislature and the commission hasn’t completely soured their relations, judging from key indicators.

The commission’s annual budget was bumped up by $60,000 (to $909,531) in the budget for legislative agencies signed into law this week (HB26 HD1).

In addition, three of the eight bills included in the commission’s legislative package are still alive in the House, including a measure to require members of seven major state boards and commissions, including the UH Board of Regents, the state land board, and the Public Utilities Commission, to file public financial disclosure statements.

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