Legislature(2005 - 2006)CAPITOL 106
01/31/2006 08:00 AM STATE AFFAIRS
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* first hearing in first committee of referral
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SB 186-EXECUTIVE BRANCH ETHICS [Contains brief mention of SB 187.] 8:05:28 AM CHAIR SEATON announced that the first order of business was CS FOR SENATE BILL NO. 186(JUD), "An Act relating to the Alaska Executive Branch Ethics Act; and providing for an effective date." 8:05:31 AM SENATOR RALPH SEEKINS, Alaska State Legislature, as sponsor of SB 186, said there are two bills addressing the Ethics Act: SB 186 and SB 187. The former addresses the executive branch Ethics Act [while the latter addresses ethics issues surrounding legislators and all legislative employees]. Senator Seekins presented a committee substitute (CS) for SB 186, Version 24- LS0874\X, Wayne, 1/30/06. 8:07:03 AM CHAIR SEATON noted that the committee had just received Version X and asked Senator Seekins to compare it to Version S. 8:07:15 AM SENATOR SEEKINS reviewed that last year the matter [that brought this issue to light] was in regard to State Attorney General Greg Renkes. The Senate reviewed current statutes and concluded that there was not a measurable violation level or clear bright line beyond which someone in the administration would be in violation of certain portions of the Ethics Act. He said there were other areas of the Ethics Act that were unclear, as well, and he was charged with looking at both the administrative and legislative Ethics Acts and to "go through them so that we didn't have to go through them again." SENATOR SEEKINS noted that when a complaint is filed, there are confidentiality requirements; however, he indicated that there are no clear lines as to those requirements. He stated that one consideration was if there was to be a confidentiality requirement, it would be reasonable to pattern it after the grand jury process, which is that the matter remains confidential until there is a finding of probable cause. At the point of probable cause, where it's clear to the investigating body that there has been a violation and further formal action should be taken, then everything becomes public. 8:10:32 AM SENATOR SEEKINS said other states' systems were observed to see what they do if there is a violation of confidentiality. He said, "If we're going to have a confidentiality requirement, then there should be a penalty for someone who breaks it." He noted that in some states, breaking the confidentiality requirement results in a felony, in others a misdemeanor, and in still others, a civil fine. The proposed legislation would make breaking the confidentiality a civil fine, "regardless of what you may read in various publications," he said. Senator Seekins said the desire was to make this intent more clear. He highlighted the new language [beginning on page 7, line 12, through page 8, line 15, which read as follows: The attorney general, complainant, subject of the complaint, and all persons contacted during the course of an investigation shall maintain confidentiality regarding the existence of the investigation or proceeding. In a proceeding conducted or an action taken under this chapter, (1) a person may not disclose the filing of a complaint, its contents, or related matters until after the personnel board makes a finding of probable cause or unless the disclosure is made while the person is (A) communicating with personnel board members or staff; (B) seeking advice from an attorney; or (C) lawfully representing the person or the person's client in defense of a complaint that has been filed and the disclosure is necessary; (2) personnel board proceedings related to a complaint that has been filed are closed to all persons except board members and staff until after the board makes a finding of probable cause unless (A) the board permits otherwise after finding that fairness to the subject of the complaint may be advanced by the permission; or (B) the subject of the complaint waives confidentiality; (3) the complaint document and each related record are confidential and are not available for public inspection unless (A) the personnel board makes a finding of probable cause; or (B) the subject of the complaint waives confidentiality; (4) under this section, if the subject of a complaint waives confidentiality of a proceeding or a document, the entire proceeding is open to the public, and the entire document is available for public inspection; (5) the personnel board shall make appropriate efforts to provide notice of the confidentiality requirements of this section; (6) this section governs confidentiality only for complaints filed under this chapter and does not alter confidentiality or the rights of any person for matters not connected with this chapter; (7) this subsection does not prevent a person from obtaining directly from a state agency a public record of that agency that has also been made available in connection with an investigation or a formal proceeding under AS 39.52.310-39.52.390. SENATOR SEEKINS said the new language clarifies that there is a timeframe of confidentiality that must be observed. He said, "This is exactly the same requirement of confidentiality that is required of the personnel board and of the investigators that are hired by the personnel board." The bill would bring the person bringing the complaint into the same requirements of confidentiality required of those doing the investigation. If there is a finding of probable cause, that person is relieved of the "burden of confidentiality." Senator Seekins said it's not uncommon for someone to bring an ethics complaint against another person "simply to get at them." For example, he said two people may be competing for the same job and, by filing an ethics complaint, the one person can put a black mark against the other "for the period of time that it takes to be able to consider who gets the promotion." He offered other examples. He asked the committee to consider what the impression is upon people when they read a charge against someone, even if that charge ends up being dismissed. He offered an example involving Commissioner Joel Gilbertson that he said could have been avoided had a period of confidentiality been observed. 8:17:40 AM SENATOR SEEKINS noted that a "wrongful use of complaint" section was added beginning on page 8, [line 26], which read as follows: Sec.39.52.352. Wrongful use of complaint. (a) The board shall find there has been wrongful use of an executive branch ethics complaint if it determines, after compliance with due process requirements, including a hearing and a majority vote, that the complainant (1) shall order the employee to stop engaging in any official action related to the violation; (2) may order divestiture, establishment of a blind trust for a period of time or under conditions determined appropriate, placement of the financial interest into an investment where the employee does not have management control over the financial interest, restitution, or forfeiture; and (3) may recommend that the employee's agency take disciplinary action, including dismissal. SENATOR SEEKINS stated the intent of the bill is not to penalize someone who has a complaint. He said he has read some of the most outrageous statements predicting the bill intent, including that a person bringing a complaint will get fined. He said that is "absolute poppycock." He clarified that what the bill says is that if someone were to misuse the statute, he/she would be in violation of the law. He stated, "All we're asking in the bill is that the person bringing in the complaint [forgoes] the 24-hour news cycle until after there's a finding of probable cause." He said there must be some kind of meaningful penalty when the law is abused. 8:20:51 AM SENATOR SEEKINS pointed to the penalty on page 9, line 16: "may impose a civil fine of $5,000 or less for complainants who are not state employees, current public officers or former public officers." He concluded: This person can go home and talk to their wife, or their husband, or their best friend, but they can't run to the press; they can't knowingly disclose publicly or cause to be made public the fact that there's a complaint or the facts of the complaint. They can still go down on the corner and waive a sign and say the governor, lieutenant governor, the attorney general, or whoever, is a crook and has violated all kinds of ethics laws; [they] just cannot talk about the specifics of the complaint, or that the complaint has been filed until after there's a finding of probable cause. 8:22:37 AM SENATOR SEEKINS, in response to a question from Chair Seaton, reviewed the areas in Version X where new language was added. 8:26:09 AM REPRESENTATIVE GARDNER noted that, on page 7, beginning on line  of Version S, a provision for intent to file a claim is included that is not included in Version X. The provision in Version S read as follows: A person may not disclose to any other person the filing of or intention to file a complaint under AS 39.52.310 except to a person assisting in the filing of the complaint. 8:26:43 AM SENATOR SEEKINS responded that the intent to file a complaint comes right from Oklahoma law. The original intent of the language was to prevent a person from notifying the press on his/her way to file the complaint so that the press could get a good story. He said the new language in Version X would start the confidentiality requirement at the point of filing the complaint, which he said is a better starting point. 8:28:36 AM CHAIR SEATON stated his understanding that Version X "removes the prohibition on the disclosure of intent to file a complaint." 8:28:45 AM SENATOR SEEKINS clarified that the new language was on page 7, [beginning on] line 12, and read as follows: The attorney general, complainant, subject of the complaint, and all persons contacted during the course of an investigation shall maintain confidentiality regarding the existence of the investigation or preceding. 8:29:36 AM REPRESENTATIVE GARDNER offered an example in which she may have concerns about the improper conduct of someone and express an opinion that a complaint should be filed. She asked if she would be in violation of the bill's provisions. 8:29:56 AM SENATOR SEEKINS answered no, and he added that she "wouldn't have been under the old either." 8:30:09 AM REPRESENTATIVE GATTO offered an example in which someone talks about someone else who may be heading downtown to file a complaint, and he asked if that would be a violation. 8:30:44 AM SENATOR SEEKINS said no. He reiterated that the confidentiality requirement begins at the point of filing a complaint. In response to a question from Chair Seaton, he said that means that if someone says they are going to file and then they don't, that person would not have violated the provision. REPRESENTATIVE GRUENBERG questioned that there might be a circumstance where a person would want to announce that he/she has been exonerated, but could not do so because the board had not made a finding of probable cause. SENATOR SEEKINS explained that the minute that person wants to make the complaint public, the entire record becomes public. 8:32:56 AM REPRESENTATIVE GRUENBERG suggested that a complainant, after hearing that there was no finding of probable cause, may want to make that public, but could not. He questioned if the complainant could do so with the permission of the board. 8:33:51 AM SENATOR SEEKINS responded that that is a good point. He said he had not thought about that particular scenario. He said he would take a look at that to see if that issue is covered in other statutes. 8:35:47 AM REPRESENTATIVE LYNN moved to adopt the committee substitute (CS) for SB 186, Version 24-LS0874\X, Wayne, 1/30/06, as a work draft. 8:36:15 AM REPRESENTATIVE GATTO objected. He said he has not had time to see if the changes are instrumental. He said he trusts Senator Seekins to let the committee know if there have been any changes of substance. 8:37:27 AM CHAIR SEATON explained that the committee has been talking about Version X and he wants to make sure it is on the table as an item for discussion before too much longer. He told Representative Gatto that it would be possible to revert back to Version S at a later date. 8:37:37 AM REPRESENTATIVE GATTO said, "With that in mind I remove my objection." CHAIR SEATON announced that there being no further objection, Version X was before the committee. 8:37:48 AM REPRESENTATIVE GRUENBERG directed attention to page 2, line 4, and asked the sponsor if he would be amenable to adding "or stock options" after the word "stock". SENATOR SEEKINS said he would have no problem with the addition of that language. 8:39:28 AM REPRESENTATIVE GRUENBERG noted that the judiciary branch of government has its own Special Ethics for the Council on Judicial Conduct and the Legislature has the Select Committee on Legislative Ethics; however, the executive branch does not have a specific ethics board. He asked Senator Seekins what he would think about establishing an independent executive ethics board that is set up similarly to the legislative ethics board and with similar functions. 8:39:49 AM SENATOR SEEKINS said he has no objection to that idea; however, he said he would have to give it careful consideration, because it would take time to work out. 8:41:10 AM REPRESENTATIVE GRUENBERG directed attention to page 9, line 3, which read as follows: (3) knowingly and intentionally made a disclosure prohibited by AS 39.52.340. REPRESENTATIVE GRUENBERG stated his belief that in Title 11, as a matter of law, the term "intentionally" requires knowledge also. 8:41:58 AM SENATOR SEEKINS said he thinks Representative Gruenberg is right, but the language was drafted that way by Legislative Legal and Research Services to make it clear for the novice. 8:42:58 AM REPRESENTATIVE GARDNER offered an example in which one person faced the up to $5,000 fine to disclose the other person's egregiousness. The other person turns out to be guilty and although he/she could end up with any of the following - reprimand, demotion, suspension, and a possible financial penalty - only ends up with a reprimand. Representative Gardner asked, "Does that seem like a reasonable balance?" 8:43:46 AM SENATOR SEEKINS opined that if a person intentionally misuses the law, then there should be a penalty. 8:44:11 AM CHAIR SEATON interpreted that what Representative Gardner was saying was that the person who correctly identified an ethics violation could be in greater jeopardy by revealing that there was a conflict, even though it was proven correct in the end. 8:45:13 AM SENATOR SEEKINS said the court would have the discretion of how much of a penalty, if any, to impose. He said there should be a penalty for someone who misuses the law "if they don't care." 8:46:19 AM CHAIR SEATON said he thinks the question is whether it was a misuse of the law if someone was found guilty. 8:46:32 AM SENATOR SEEKINS answered that it is a misuse if the person violated the procedure of the law. 8:46:43 AM REPRESENTATIVE RAMRAS, regarding Representative Gardner's previous example, said, "It doesn't feel like the rights of that member of the executive branch would be protected even if it were discovered ... later that this executive branch employee did violate the law." He said he is more interested in protecting the rights of that individual. 8:48:14 AM SENATOR SEEKINS said there are 15,000 state employees, all of whom are subject to this Ethics Act. He stated, "We're just trying to protect that period of time, to allow the investigators to find out whether there's any basis in fact to the charge. ... And then once ... there's probable cause we want them prosecuted; we don't want anybody skating by." He said Representative Ramras is correct about the issue of protection. 8:49:49 AM CHAIR SEATON asked, "If you had $40,000 of ... stock in your company and you put that in a blind trust, would you know that that stock was in there?" 8:50:50 AM SENATOR SEEKINS answered that he absolutely would. 8:50:57 AM CHAIR SEATON [referred to language beginning on page 1, line 12], regarding blind trusts. He said, "It would no longer be ... considered a conflict of interest if you rule on things that would affect the value that's in that blind trust." He suggested that if the function of the blind trust is that the trustee does not know what is in it, then perhaps language should be added requiring a trustor of a blind trust to divest and reinvest the money. 8:52:17 AM SENATOR SEEKINS responded that that might subject the person who owns the stock to huge income tax penalties. He offered an example. He continued: I think what we've done is we've said, "You can put it in a mechanism where you have no control; where the trustee, in effect, can sell it whenever they want to, can reinvest it however they want to, with just the reasonable man requirement." Then I think what we do is we put that person out of control of those holdings. Now, that's an option, but it has to be a public option - I mean, everyone now knows that ... that investment is there, that it is being managed by someone other than the state employee, and it gives them an opportunity to still have ... an investment portfolio, but one over which they have no control. SENATOR SEEKINS said if he owned that type of stock he would simply not get involved with something that could have anything to do with his stock. He stated his understanding that the person with the blind trust receives a quarterly report and that would be the extent of his/her involvement. 8:54:32 AM CHAIR SEATON indicated that the trustee knows the amount of the deposit and, because of the quarterly reports, the investments in the trust are really not blind at all, especially if the account is a managed one. He stated, "It seems like the structure of what we've done is we've said that no matter what you have in there, it's now regarded as a nonconflict, even though you know what's there, ... simply because you can't sell it or buy it. But it could affect the worth of it." 8:55:30 AM SENATOR SEEKINS answered, "It could, and it could be gone tomorrow." He explained, "This is a common option to avoid conflicts of interest in many states." He continued: If the governor were to assign you, as the attorney general, to handle a particular project, and your holdings were in an investment mechanism over which you had no control, then I think it would be incumbent upon you to go to your advisor on ethics and say, "Does this accomplish -- keep me out of conflict with the law?" And there'll be a determination made at that point .... There is the small possibility that you could still have a conflict that you might know about .... 8:56:52 AM CHAIR SEATON indicated that he finds the proposed language regarding blind trusts to be at odds with the language on page 2, lines 3-4, restricting a public officer from owning more than one percent of business-related stock, with a value of less than $10,000. He said the public officer could have $100,000 in a blind trust as long as someone else has "the sales ability on it." 8:57:26 AM SENATOR SEEKINS said that the person with the blind trust doesn't know until he/she gets the quarterly report what is or isn't in the trust. CHAIR SEATON pointed out that in a managed account a person can check his/her account by looking online. SENATOR SEEKINS said he is trying to find "bookends." 8:58:10 AM CHAIR SEATON responded that he is trying to find "whether the bookends have one end off." 8:58:22 AM SENATOR SEEKINS reiterated that the language regarding the blind trust is common. 8:58:38 AM REPRESENTATIVE GARDNER observed: Section 18 actually addresses post investigation - it's after a violation has been determined. So, if, as a body, we wanted to eliminate blind trusts as one way of reducing potential conflict of interest, this isn't the place to do it. This is a remedy. 8:59:10 AM SENATOR SEEKINS replied, "Yeah, as part of the remedy they could force you to put it in ... a nonmanaged account." 8:59:14 AM CHAIR SEATON asked what the requirement is related to timing and publishing a finding of probable cause. 8:59:32 AM SENATOR SEEKINS said there is a time frame for the personnel board, and he could find out what it is. In response to a follow-up question from Chair Seaton, he said he doesn't recall whether a finding of probable cause has to be immediately published, but he offered his understanding that "it's in close proximity to that timeframe that it ... becomes public." 9:00:02 AM CHAIR SEATON said the committee needs that information, because if there is a situation wherein the complainant doesn't immediately know that the probable cause has been found, he/she is still having to remain confidential. SENATOR SEEKINS, in response to another question from Chair Seaton, said in both Ethics Acts a person cannot knowingly file a false statement, but "it's to the best of your knowledge," he recalled. A complaint on the Ethics Act has to lay out the particulars of the complaint, he said, and has to be signed and "sworn." 9:02:25 AM SENATOR SEEKINS, in response to Chair Seaton, confirmed that the fine that is up to $5,000 is a civil one. He reemphasized that the fine could be zero or any amount up to $5,000, a point which he indicated that the press continues to ignore. He added, "It is not a $5,000 fine for going home and telling your wife that you filed a complaint." 9:03:08 AM REPRESENTATIVE GARDNER recalled that Senator Seekins had previously stated that a person can disclose to friends, but cannot disclose publicly. She said she is unclear as to when a private disclosure becomes public. For example, if she were to have a group of neighbors over for a barbeque and talk about a disclosure, would that be public? 9:04:24 AM CHAIR SEATON suggested that the sponsor could answer that question when he returns to testify on another day. 9:04:35 AM REPRESENTATIVE GRUENBERG said Senator Seekins tried to draw a distinction between a public and nonpublic disclosure. He directed attention to page 8, line 21, which states that a person who discloses confidential information is subject to a fine. He said, "It doesn't draw the distinction that you did." SENATOR SEEKINS said the intent is "public disclosure or cause to be made public," thus he said he would talk to the bill drafter. REPRESENTATIVE GRUENBERG stated that he is not aware of anything in law that draws a distinction like Senator Seekins is making between something that's "public" and something that's not. He said generally "a disclosure is a disclosure." SENATOR SEEKINS proffered, "I would not say that the judge is going to fine you for telling your wife ..., but I would advise you not to have everybody over for a barbeque and tell them." 9:05:56 AM REPRESENTATIVE GRUENBERG directed attention to Section 16. He mentioned an Alaska Supreme Court case, Baker v. the City of Fairbanks, which ruled that a person is entitled to a jury trial if he/she is charged with a crime that either results in imprisonment, substantial fine, or the loss of a license. He said he realizes "this is not a criminal case," but the person would be subject to a substantial fine. He said the supreme court case was grounded on the Alaska State Constitution "and I'm not sure that it would draw the distinction between civil and criminal in this matter." He offered his understanding that the House Judiciary Standing Committee is considering certain amendments to the Human Rights Act. He mentioned a case in Hawaii. He said: The question is here whether the person would be entitled to a jury trial on these issues for wrongful disclosure. Secondly, the question is whether they would be entitled to go before a judge, not just as you state on page 9, lines 18-19, to enforce the determination of the board, but for the actual determination itself. ... And third, what is the standard of proof? Because it's not set here what the standard of proof is. And it's a constitutional question, as well as a policy question I'm raising, whether - if you're talking about a ... substantial civil fine - there is a right to approve beyond a preponderance of the evidence. I don't know that there is, but I certainly think it's an important issue. 9:09:08 AM SENATOR SEEKINS said a $5,000 fine would still be within the confines of small claims court. He referred to the language on [page 9], lines 18-19, which read as follows: (d) The attorney general may enforce (c)(3) of this section by filing an appropriate civil action on the request of the board. SENATOR SEEKINS said the personnel board is the initiator by saying [to the Office of the Attorney General], "This person broke the confidentiality requirements, and we would like you to enforce the confidentiality penalty against them." He said at that point it is not a frivolous action; the personnel board would have had to see the egregiousness of the case. 9:09:59 AM REPRESENTATIVE GRUENBERG said the question then arises whether the person who would be found to have violated the Ethics Act by wrongful disclosure would have a similar right to seek a judicial review of that decision. Representative Gruenberg said he assumes that would happen. 9:10:29 AM SENATOR SEEKINS concurred. 9:10:34 AM REPRESENTATIVE GRUENBERG directed attention to the use of the word "shall" on page 8, line 26. He suggested using the word "may" instead. He said he doesn't think the board can be directed to make a determination; it has the discretion not to do so. 9:11:45 AM MYRL THOMPSON, testifying on behalf of himself, told the committee that he sat through all the Senate's hearings on both [SB 186 and SB 187] last year. He remarked that Senator Seekins was blaming the press, but the press was writing about "what was actually said at the time." Mr. Thompson said when he testified last year he opined that the bill was not addressing "the true problems," was against the First Amendment, and was an insult to Alaskans. He stated, "Pretty much those things are still true today." He revealed that there was a recent poll taken this week in his area of the state that asked, "Should there be any penalty whatsoever on a person that puts out a complaint against an official in the government?" He reported that 96 percent of those polled answered no. He said [SB 186] does not address that; it seems to be protecting the person who has the complaint filed against him/her, more than it does the public's interest and the public's good. In response to a request from Representative Gruenberg, Mr. Thompson said he would produce a copy of the poll. [The copy has since been added to the committee packet.] 9:15:11 AM REPRESENTATIVE LES GARA, Alaska State Legislature, said he has been researching the issue of blind trusts. He offered information he obtained from a stockbroker as follows: Normally in a blind trust, the stockbroker accepts your stocks - the stocks that you transfer to him or her - and keeps them. ... So, if ... you're negotiating a deal with the Pebble Mine, and you own a ton of stock in the company that is going to benefit from the Pebble Mine if that project goes ahead, you transfer let's say ... your $200,000-worth of stock in the Pebble Mine to the stock broker. You probably tell him, "Hey, I'm working on this deal." The stockbroker holds the stock, because [in] the normal cases they hold the stock that you transfer to them. They may make some trades over time, but they won't just sell the stock that they own. And then you're going to sit there knowing I'm negotiating a deal on the Pebble Mine and I'm making money. So, the blind trust provision completely guts the ethics law; it lets you work on a matter that you intend to use for financial benefit and says it's ethical. REPRESENTATIVE GARA said he would attempt to get something in writing from someone in the stockbroker industry. He said the committee's questions have been right on point. 9:16:52 AM REPRESENTATIVE GATTO asked Representative Gara if he believes a person who has those stocks perhaps should divest him/herself, take the profit, pay the tax, and just say, "If I'm going to be involved like this, maybe that's the only resolution to it." 9:17:08 AM REPRESENTATIVE GARA answered, "Not really." He clarified that a person doesn't violate the ethics law unless that person intended to pad his/her pocket. He said, "I think you just don't work on the issue." Using the example of the Pebble Mine again, he said the other option would be to get rid of the stock. He concluded, "You can't have it both ways; you have to do one or the other. The preference really is just don't work on the deal, which is what should have happened on the Renkes case, in my opinion." CHAIR SEATON suggested that in that case, if Mr. Renkes hadn't been negotiating the deal, there wouldn't have been any problem with him owning and having that amount of stock anyway." REPRESENTATIVE GARA replied, "Sure." 9:18:23 AM REPRESENTATIVE GARA, in response to a question from Representative Gruenberg, said, "There is currently no exemption in the executive ethics law that allows you to work on a matter to benefit yourself as long as you put your money in a blind trust. That's just in the bill." 9:18:40 AM CHAIR SEATON closed public testimony. He announced that SB 186 was heard and held.