The State Ethics Commission took another beating in court this month, when the Hawaii Supreme Court threw out the commission’s case against a Big Island charter school administrator who it had charged with numerous counts of conflict of interest and self-dealing.

The July 19 ruling by the Supreme Court shredded what had been one of the commission’s most extensive and significant enforcement actions in decades.

William Eric Boyd, an assistant administrator at the Connections New Century Public Charter School in Hilo, had been charged with violating the state ethics code by approving or processing purchases of supplies, equipment and school lunches from two companies controlled by Boyd and his wife.

In tossing out the charges, the high court ruled that Boyd and other charter school employees had been exempt from the code’s conflict-of-interest provisions at the time of the alleged violations, which occurred in 2006 and 2007. The court, citing the comprehensive law passed by the Legislature to allow charter schools to operate outside of regular state channels, rejected the commission’s simple view that the ethics law trumps other considerations and always overrides conflicting statutes.

The charter school law was amended in 2011 to require that internal procedures be consistent with the ethics law. But during the earlier period in which the charges against Boyd originated, the court found that charter schools could have adopted policies that were “identical, more expansive, or less restrictive” than comparable provisions of the ethics code.

The high court opinion reversed rulings by Circuit Court Judge Greg K. Nakamura and by the Intermediate Court of Appeals, both of which upheld the authority of the ethics commission to bring the charges against Boyd.

A Unanimous Ruling

Hilo attorney Ted H.S. Hong, who represented Boyd, welcomed the court’s unanimous decision.

“It shows the legal system works. It doesn’t work for everyone and it doesn’t work 100 percent of the time. But, in this case, it worked,” Hong said. “It made me proud to be a lawyer.” 

But Hong said his client has suffered in many ways, including health consequences, from having his name “dragged through the mud” during the original commission proceedings and the years of legal appeals.

The court’s decision came just a month after Circuit Court Judge Rhonda Nishimura overturned commission guidelines that had effectively put an end to educational travel for groups of public school students.

In both cases, the ethics commission asserted that it was simply following its constitutional mandate to enforce high ethical standards and that its interpretation of the ethics code had to be applied strictly to all state employees and officials in order to promote public confidence in the government.

The two rulings are likely to strengthen the hand of critics who have accused the commission in recent years of being overly aggressive, ignoring common sense in applying the ethics code and exceeding its legal authority.

Cut And Dried?

For the ethics commission, the case against Boyd was cut and dried.

The commission argued charter schools are agencies of the state and that, as a result, school employees are state employees. As state employees, they are subject to the provisions of the state ethics code, which provides “a baseline standard of conduct that applies to all State employees.”

“This Code is necessary – indeed, constitutionally mandated — in order to preserve the public’s confidence in public servants, and to promote fairness by avoiding conflicts of interest,” the commission argued in a court filing.

Further, the commission argued, charter school policies could not exempt Boyd “from his constitutionally mandated ethical obligations.”

The commission felt that Boyd’s violations were obvious. There was a clear conflict in Boyd acting on both sides in the several transactions, as a school official and as someone with a financial interest in companies providing goods and services, the commission said.

The commission cited two relevant provisions of the ethics code. The first prohibits any state official or employee from taking official action involving a business in which the employee “has a substantial financial interest” or serves as a representative or adviser. A separate provision prohibits a state employee or official from assisting any person or business in obtaining approval for any transaction in which the employee also will participate in his or her official capacity.

The commission charged Boyd with 20 violations involving these provisions. It found against him in each case. According to the commission, Boyd first violated the law when, as a school administrator, he recommended or approved buying equipment and supplies from his family company. Later, Boyd helped prepare or process invoices for school lunches sold to the Connections charter school by a company operated by his wife.

The Boyd case marked the first time since 1989 the commission pursued an ethics charge all the way through to the conclusion of a formal contested-case process. The resulting $10,000 fine was among the largest ever levied by the commission.

Special Rules For Charter Schools

From the beginning, and at each level in the legal process, Boyd argued that charter-school employees should not be considered state employees and that they are exempt from the ethics code and outside the ethics commission’s jurisdiction.

The Hawaii Supreme Court, in its ruling, sidestepped the question of whether those working at charter schools are state employees.

Instead, it focused narrowly on whether the ethics law applied to charter schools during the 2006-2007 period.

The court found that the comprehensive framework for charter schools, adopted by the Legislature, gave the schools wide leeway in adopting their own internal procedures and policies.

The charter-school law explicitly provided exemptions from state personnel-management laws, procurement laws and open-meeting laws. In addition, it provided that “charter schools shall be exempt from … all other state laws in conflict with this charter.”

The court concluded that Boyd had followed all of the Connections school’s procurement policies and procedures, which complied with the mandates of the law authorizing charter schools.

In a footnote, the Supreme Court decision noted that Boyd fully disclosed the information about the transactions and submitted the paperwork to top school officials for their review and approval.

“All approvals were obtained prior to purchasing the requested materials, which included reviewing whether the school materials and lunches were obtained at the lowest possible price,” the court observed.

Following Procedures

The court noted that even though Boyd followed all the school’s procedures, the ethics commission found him in violation of the ethics law and imposed the maximum fine allowed by law.

The ethics commission subjected Boyd to punishment for actions that fully complied with the school’s authorized conflict-of-interest policy, according to the footnote.

And despite the commission’s claims of a constitutional mandate, the court held that this was a matter of statutory construction, not constitutional law. The law provided that charter schools would be exempt from conflicting statutes and, clearly, in this matter the ethics law was a conflicting statute. Case closed.

Hong credited the Supreme Court with treating this case so seriously, despite the fact that it involved a single person in circumstances that will not occur again because the specific charter-school law has now been amended so that it no longer conflicts with the ethics code.

But the attorney was highly critical of the apparent arbitrariness of the commission’s own procedures.

During oral arguments before the Supreme Court, Hong decried being reduced to the role of a “potted plant” during a hearing before the ethics commission.

‘Sit There And Be Quiet’

Hong later described that commission hearing as like a “Star Chamber,” a reference to proceedings relying on secret procedures and arbitrary rulings.

During the hearing, three ethics commission attorneys questioned the school’s principal about statements made during an earlier sworn deposition.

Hong complained that he was told he could not see a copy of the deposition and was not allowed to ask questions, raise objections or advise the witness during the proceedings, which he characterized as “an interrogation.”

“I was told to sit there and be quiet,” Hong complains.

That’s not a flattering picture.

Following losses in two high-profile legal cases, as well as widespread public criticism of its approach to the the educational travel matter, it appears that the State Ethics Commission and its newly appointed executive director, Dan Gluck, could benefit from reappraising how best to promote and ensure high standards of ethics in state government.