Legislature(2007 - 2008)BELTZ 211
01/22/2007 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB19 | |
| SB20 | |
| SB13 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 19 | TELECONFERENCED | |
| *+ | SB 20 | TELECONFERENCED | |
| *+ | SB 13 | TELECONFERENCED | |
SB 19-EXEC. BRANCH ETHICS:INTERESTS & ACTIONS
CHAIR HOLLIS FRENCH announced SB 19 to be up for consideration
and asked for a motion to adopt Version M committee substitute
(CS), labeled 25-LS0160\M.
1:35:02 PM
SENATOR CHARLIE HUGGINS so moved. There being no objection, CSSB
19, Version M, was before the committee.
CHAIR FRENCH explained that the bill, relating to executive
branch ethics, rewords AS 39.52.110(b). The idea is to prohibit
an executive branch employee from taking official action on
behalf of his or her personal investments and benefiting from
that action through the use of their official position. On page
2, line 2, subparagraph (C)(i) through (viii) lays out the
different ways an employee would be prohibited from taking
official action.
Section 2 expands the definition of "official action" to better
capture executive branch employees' day-to-day work and clarify
that the activities mean official action with respect to an
investment the employee may have in an outside business.
1:37:47 PM
CHAIR FRENCH related that the current subsection (a) lays out
the general duty of a public officer and the new subsection (b)
lays out a series of exceptions. The exception in paragraph (1)
states that if the action or influence is insignificant or it
would have a conjectural effect, then it is not a violation.
Chair French hypothesized that an executive branch employee
could own and take action on $1 million in IBM stock without
violating the law because the action would have an insignificant
or conjectural effect on the value of that stock.
Likewise, the exception outlined in paragraph (2)(A) says that
if the public officer's personal or financial interest is
generally owned by the public, then it is not a violation to
take action on that investment. Thus, a public official who
takes action to increase the size of his or her Permanent Fund
dividend would also increase the size of all other dividend
recipients. Similarly, if a public officer were to take an
action to route the gas pipeline close to his or her home, it
would effectively increase the value of all homes in the area so
the action would not run afoul of the law.
On page 2, line 1, paragraph (2)(B) lays out an exception if the
public officer's personal interest is insignificant. Chair
French noted that definition is probably not perfect, but it
would be difficult to do better.
On page 2, line 2, paragraph (2)(C) addresses financial interest
with respect to a business. He noted that that particular
section, which has the subheadings (i) through (viii) has been
problematic in the past.
CHAIR FRENCH asked Mr. Jones to comment on the bill.
1:40:54 PM
DAVID JONES, Assistant Attorney General, Civil Division,
Department of Law (DOL), said he hadn't seen Version M so his
comments would be directed to the original bill.
MR. JONES expressed concern with the percentage ownership
standard saying it could be difficult to calculate a one percent
interest given the variety of stock classifications. He argued
that, in terms of ethics, the significant interest standard is
preferable. It won't matter to the DOL or to the public whether
the interest amounts to one percent or 50 percent; what matters
is whether or not the interest is significant. He suggested that
the $5,000 standard would be a better measure than the one
percent ownership standard.
MR. JONES posed the hypothetical situation of funding a child's
lemonade stand and noted that because he has a 100 percent
interest in the stand he would be prohibited from taking action
to benefit that child's business even though his investment
might only have been $50. He argued that it's not the percentage
ownership that matters to the public; it's whether it's a
significant interest and it seems that the $5,000 standard would
be preferable, he said.
CHAIR FRENCH asked if he had language to suggest if he was
proposing that the standard be listed in something other than
dollar terms. He noted that the significance standard had been
removed in SB 19 because it wasn't defined very well and created
problems two years ago.
MR. JONES clarified that he was suggesting that a flat dollar
measure is preferable to the either or standard, which is either
a dollar amount or a one percent interest in the value of a
company.
CHAIR FRENCH used the lemonade stand example and asked why it
would ever be valued at more than $5,000.
MR. JONES replied it would not.
CHAIR FRENCH questioned how someone could run afoul of the
statute if it was written as proposed.
MR. JONES acknowledged that there probably wouldn't be stock in
a lemonade stand, but if a person owned a controlling interest
in the lemonade stand or more than one percent of the value of
the stand, then that would seem to run afoul of subparagraph
(2)(B) and (2)(C)(i) and (ii), on page 2, lines through 19.
CHAIR FRENCH asked if his concern could be addressed if language
was adopted in sub-subparagraph (i) on page 2, line 5 to say
that the controlling interest in the business is worth more than
$10,000.
MR. JONES agreed that would make sense, but he'd also like the
reference to one percent interest in a business in sub-
subparagraphs (ii) and (iii) to be deleted so there is just a
dollar standard.
CHAIR FRENCH asked if it is difficult to value some businesses
and relayed that he was reluctant to simply toss out the
percentage of ownership standard.
MR. JONES theorized that for some businesses there would always
be some difficulty in determining valuation. But the process is
further complicated if a percentage valuation is required. For
example, would stock options be included or excluded from the
percentage interest calculation. Although it wouldn't always be
simple, a flat dollar figure would always be simpler.
1:47:35 PM
SENATOR LESIL McGUIRE said the concern she has with removing the
percentage relates to options to buy and to new or speculative
companies where the valuation hasn't been established. Someone
could use his or her official title to steer activity in a
direction to gain substantial personal benefit, but not be
measured by the $5,000 measure.
MR. JONES acknowledged that is possible, but the root of the
trouble is substantiality and using the one percent measure
might not achieve the goal. A flat dollar figure is more likely
to achieve the goal, he said.
1:49:10 PM
CHAIR FRENCH asked Mr. Jones to send proposed language to his
office so the committee could make a reasoned decision.
MR. JONES agreed to suggest language and further advised that he
would comment on the CS on Wednesday.
1:50:16 PM
SENATOR BILL WIELECHOWSKI asked whether his comments were on
behalf of the administration.
MR. JONES said yes.
SENATOR WIELECHOWSKI asked if the administration supports the
bill with the amendment he is suggesting.
MR. JONES replied he is not authorized to indicate the
Governor's position on the bill. He is authorized to speak on
the effects of the bill as well as any enforcement challenges.
1:51:13 PM
DON ROBERTS, a Kodiak citizen, introduced himself and said when
he began preparing his testimony about ethics he came to the
conclusion that this is more about fairness in the decision
making process and helping legislators and others avoid
conflict-of-interest situations that are likely to be
encountered.
Having done advocacy work for eight or nine years he has
determined that the whole system is unfair in that a single
person can't be heard above the din of money and power. He
suggested the committee look at how an average person can
influence legislation before the law is enacted instead of
finding out about a new law after the fact. The problem isn't
that legislators are unethical; it's more that they are unfair.
Finally, he asked that borough and city governments to be
included because there are problems at that level as well.
CHAIR FRENCH recognized the bill drafter.
1:54:34 PM
DAN WAYNE, Legislative Counsel, Legal and Research Services
Division, Legislative Affairs Agency, introduced himself.
SENATOR GENE THERRIAULT referenced page 2 and questioned the
need for the language in subparagraph (B) because the language
in subparagraphs (A) and (C) seems to encapsulate it all.
MR. WAYNE responded he couldn't say. Subparagraph (B) has a
function, but it might work without it.
SENATOR THERRIAULT referenced page 2, line 8 and suggested
inserting language about "fair market value" since the term
"value" is somewhat subjective.
MR. WAYNE replied any term relating to value is somewhat
subjective. Using total value leaves it to the person who is
trying to comply with the law to make an interpretation or get
an opinion from the Personnel Board. Then if a complaint is
lodged the Personnel Board would make an interpretation just as
it does for any subjective question.
SENATOR THERRIAULT commented he would like to screw that kind of
thing down as tightly as possible.
He questioned why page 2, line 14, shouldn't be any officer in
the business rather than just an elected officer. Finally, he
noted that page 2, line 5, talks about owning a controlling
interest and he would suggest that that could be subjective as
well.
SENATOR THERRIAULT said he highlighted those issues because some
needed to be more specific and another needed a broader
interpretation.
CHAIR FRENCH asked if he was musing or did he have specific
language to suggest.
SENATOR THERRIAULT said he was musing, but he believes the
committee should be more specific in how to place value. Fair
market value can be tracked if the company is publicly traded
and assets of a business can be appraised based on a fair market
valuation. With regard to an elected officer, he said it should
be any officer, elected or not.
CHAIR FRENCH questioned whether that wouldn't be captured by the
language on page 2, line 19, which addresses an employee of the
business. He questioned whether a person could be an officer
without being an employee.
SENATOR THERRIAULT replied an employee is different and implies
remuneration of some sort. Using his family business as an
example, he said he doesn't believe that "employee of the
business" would automatically sweep everyone in.
2:00:02 PM
SENATOR WIELECHOWSKI advised that the definition of "business"
includes for profit and non-profit businesses.
MR. WAYNE noted that that definition was used in drafting the
bill.
CHAIR FRENCH addressed Senator Therriault's first question and
read the definition of "personal interest" into the record to
demonstrate that it's a little broader than financial interest.
Sec. 39.52.960. Definitions.
(18) "personal interest" means an interest held
or involvement by a public officer, or the officer's
immediate family member or parent, including
membership, in any organization, whether fraternal,
nonprofit, for profit, charitable, or political, from
which, or as a result of which, a person or
organization receives a benefit;
SENATOR THERRIAULT agreed.
2:01:42 PM
SENATOR WIELECHOWSKI added that subparagraph (B) on page 2 is a
catch all. The other provisions wouldn't necessarily apply to
non-profits, but subparagraph (B) would capture them.
CHAIR FRENCH hypothesized that a Boys and Girls Club board
member could drive a state decision to steer money to that club
and said that they aren't deriving any personal gain, but it
still isn't right.
CHAIR FRENCH announced he would set SB 19 aside and the proposed
amendments would be reviewed on Wednesday.
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