Thursday, February 21, 2013

Ethics Investigation Called Off

The ethics committee investigation into allegations against Shelby County School Board Commissioner David Pickler made by Martavius Jones has completed its work.  Here's an article, but the headline doesn't exactly match the contents of the article.

Commissioner Pickler has taken the opportunity to claim that he has been "exonerated", and to carefully not comment on any action he might pursue against Commissioner Jones.  Commissioner Pickler believes that his business and his family have been affected by the allegations.  This information might match the headline "Panel in Memphis Clears School Board Member of Ethics Charge."

In fact, the committee declined to investigate the allegations against Commissioner Pickler because "it has neither the evidence nor the power to investigate the accusations."  It sounds like the committee needed some more information about the allegations but did not have the power (or ability) to get that information.  No ability to subpoena records or take sworn testimony likely posed a problem.  The chair of the committee explained that the committee's recommendation is to revise the policy - ostensibly, so that a future committee could complete an investigation.

This is a good news/bad news situation for Commissioner Pickler.  "Committee member David Reaves and school board attorney Valerie Speakman noted that Pickler had carefully disclosed his brokerage connections in business with Shelby County Schools. Speakman also noted that Pickler could not have been expected to disclose in this case because there wasn't a way for him to know what the expense was when the budget was presented to the board last June."  This is good for Commissioner Pickler:  in the past, he "carefully disclosed" the conflict of interest.  The SCS General Counsel squarely supports Commissioner Pickler when she says that the investment as itemized in the budget approved in June would not have reasonably indicated to Commissioner Pickler that the investment would end up with his firm, or that he should disclose his conflict of interest.  All fair, and it resolves some of the concerns that I've raised in previous posts.

The bad news for Commissioner Pickler is that the Committee was not able to get to the actual allegations and issue an opinion one way or the other.  Two of the three members of the committee pretty clearly thought there was some smoke, but didn't get to investigate whether there was fire.

But let's take Commissioner Pickler's word for it.  He's an honest guy.  He previously disclosed his business relationship with the TSBA accounts.  And he didn't know that when he voted on the budget, he was voting in favor of a $12 million investment with his firm.

This should be a major lesson for the school district and for the staff (or highly-paid consultants) who put together the budget.  The line items for expenditures, contracts, investments, whatever should be detailed enough that Board members who do business with the district, or business near the district, can reasonably determine whether their business will be affected by the budget.  This would allow Board members to appropriately disclose their conflicts of interest, and recuse themselves from any votes if necessary.

This is a different problem than Commissioners not reading the budget or the supporting information that they are provided.  It should not be up to district staff to flag conflicts for Board commissioners - each Board commissioner should be on top of their business relationships with the district (or near the district) and review the budget for any possible conflicts of interest.

Recently, Commissioner Joe Clayton raised the issue that several Board commissioners are retirees of either MCS or SCS, and therefore have a very personal financial interest in some of the TPC recommendations related to district benefits, mainly health insurance, for retirees.  He asked if recusal would be necessary.  SCS General Counsel explained that if MCS and SCS retirees were required to recuse themselves, that it is unlikely that the Board would even be able to achieve a quorum to vote on any proposals.  That's a tough situation, but at least the conflict has been publicly discussed.  We should hope that as these matters come up for votes that each Board member with a personal financial interest will explicitly disclose the conflict.

Given all of that, Commissioner Pickler still might have a problem.  Obviously, best case scenario is that you disclose your conflict of interest on the front end - prior to the vote.  But what if you didn't know you were voting in favor of your financial interest?  Does your duty to disclose expire?  Or do you have a duty to disclose the conflict of interest at the point that you become aware of the conflict of interest?  I don't know anything about wealth management, but just the name of the profession seems to imply that you're dealing with large amounts of money.  When you're in that profession, is it fair to assume that as the owner of a wealth management firm, you would be aware of a new $12 million investment?  My sense is that in this area of the country, a $12 million investment would be notable.

Certainly, in a monthly or quarterly review of the accounts, a new $12 million investment seems like it would cross the purview of the owner of the business.  It would be up to the owner to make sure that commissions and account fees are distributed appropriately to his or her employees, at the very least.  We could suppose that it would be possible that the first that Commissioner Pickler heard about the $12 million investment was in Commissioner Jones' resolution, but we should probably consider how likely that is.  It probably still matters what Commissioner Pickler knew, and when he knew it.

In an editorial, the Commercial Appeal argues for a ethics policy that would empower an ethics committee to investigate and gather information in order to investigate ethics allegations.  Well, now that we know that the current policy did not allow either to take place in this case, we can hope that the attorneys or the policy people are working on a re-write.  Now that we know, we should respond appropriately.  Because when you find out about a potential problem, you should seek to remedy it.

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