Weak laws leave ethics gap
Critics accuse legislators of mixing personal, state business
When a prominent Texas tax consulting firm employed state Rep. John Otto as vice president of business development in 2006, its principal owner touted the prestigious hire in a press release. After all, Otto, R- Dayton, authored the bill reforming the state business franchise tax. Now, tax consultant Ryan & Co., which earns fees for reducing its clients’ tax bills, would benefit from Otto’s invaluable insider’s perspective.
“We are proud to add another respected state legislator with John’s depth of leadership and tax expertise to our firm,” said G. Brint Ryan, managing principal of Ryan & Co., in the 2006 press statement.
Otto, who serves as vice chair of the House committee with jurisdiction over all tax legislation, has filed several bills affecting tax policy to be considered by the Texas Legislature this spring. The Liberty County lawmaker, still employed byRyan& Co., is far from alone in blurring his personal financial activities with his public duties as a state legislator.
When Texas’ 181 citizen- legislators convene under the dome of the pink granite Capitol on Tuesday, they come — by design of the state constitution— from jobs in their communities as lawyers, doctors, real estate agents, farmers, business owners, accountants and other professions. After all, they are paid only $ 7,200 a year for their service, though most will earn a handsome retirement, andmust earn a living outside government.
Payday loan fight
Advocates of a parttime legislature say the system keeps lawmakers in touch with their constituents. Lawmakers are expected to serve their communities, and check their personal interests at the Capitol’s massive oak doors.
Astudy of the personal financial statements filed annually by lawmakers with the Texas Ethics Commission shows most lawmakers’ professional lives are deeply intertwined with their government service, or are directly affected by legislation debated each session.
For example, last session saw Rep. Gary Elkins, R- Houston, lead a fight against payday loan controls while candidly acknowledging that the proposed restrictions would hurt his personal payday loan businesses. When pressed during debate whether his vocal opposition constituted a conflict of interest, Elkins replied, “On this particular issue, I amprobably as knowledgeable as anybody, and I think the body ( the House) needs to hear the expertise.”
Knowledgeable legislators also weighed in last session on reform of the TexasWindstorm Insurance Agency: Rep. Craig Eiland, D- Galveston, a lawyer who handled hundreds of thousands of dollars’ worth of claims against the insurance agency, and then- Rep. Larry Taylor, R- Friendswood, an insurance agent who has sold windstorm policies. Taylor, recently elected to the Texas Senate, chaired the committee overseeing TWIA; Eiland was vice chair. Both weathered a storm of criticism for their involvement in legislation with a direct impact on their private livelihoods.
What exactly constitutes a conflict of interest for a Texas legislator?
“The laws are too weak to provide any meaningful guidance for legislators and there is no meaningful enforcement,” said Tom “Smitty” Smith, director of the Texas office of Public Citizen.
One solution, Smith said, would be for lawmakers to followthe Texas Local Government Code, which advises local elected officials to abstain from issues affecting businesses inwhich they have more than a $ 15,000 investment or receive 10 percent of their income. “That bright linewould be more effective,” he said. Currently, lawmakers do not have to disclose a dollar amount for each source of occupational income.
‘ Rule of thumb’
According to Rep. Charlie Geren, R- Fort Worth, chairman of the House Administration Committee, lawmakers are not considered to have a conflict of interest if they vote on legislation that affects an entire industry, and not just their own specific businesses. “That’s the rule of thumb,” he said. While that definition is included in the House’s rules, Geren acknowledged, “There are no checks and balances.”
In some cases, a legislator does not escape criticism, even when pledging not to vote on legislation that presents a conflict. Case in point: House Speaker Joe Straus, acknowledging his family’s long investment in horse racing and racetracks, has recused himself from gambling legislation. Critics have noted that he appointed a longtime ally to chair the committee considering gambling bills.
The appearance of conflicts of interest, said University of Texas government professor JimHenson, “is endemic to the Legislature as an unintended consequence of the notion of a citizen legislator.” Attempts to make lawmakers full- time legislators have met with resistance historically, he noted.
“We don’t want more professional politicians. But the truth is you now have professional politicians, and they have to make a living,” he said.
While legislators bemoan the poor pay they receive for their public service, the personal financial disclosures suggest many benefit professionally from having “Representative” or “Sen-
“I vote what is in the best interest of my constituents, and that is not always what is best for my clients.” Rep. Garnet Coleman, D- Houston
ator” appear before their names. Particularly for a growing breed of professionals— consultants — status as a lawmaker provides an essential résumé highlight for the service they say they are selling: an insider’s view of how government works.
Rep. Carol Alvarado, D- Houston, earned $ 24,000 as a consultant for the campaign favoring passage of the Houston Independent School District’s $ 1.9 billion bond proposal last November. Her personal financial statement also lists income from three large firms that compete fiercely for government contracts on both the state and local level. One, The DRC Group, won a contract to clean Galveston Bay after Hurricane Ike, and also to remove drought- stricken trees fromMemorial Park. Another client, Entech, claims HISD, the city of Houston and the Harris County Toll Road Authority as clients.
“I do general consulting. I give them guidance and strategy,” explained Alvarado, who is running in the special election to replace Sen. Mario Gallegos. “I brief them on the bidding processes, the governance structure. … I help them keep a pulse on the Latino community, what issues are important.”
Lawmaker’s policy
Similarly, another lawmaker- consultant, Rep. Garnet Coleman, D- Houston, disclosed receiving at least $ 25,000 from Community Loans of America Inc., a payday lender.
“I advise them how to maneuver in a world they don’t understand, the world of public policy,” said Coleman. “I do strategy and tactics. I don’t talk to people for them.”
Coleman said he strives to keep his legislative duties and private consulting separate, advising his clients that he will not contact anyone in state government on their behalf. And if his clients are affected by legislation, for instance, in the effort to control payday loans?
“I vote what is in the best interest ofmy constituents, and that is not always what is best formy clients,” Coleman said. “I voted yes on every bill” last session restricting payday loans.
There were twomajor pieces of legislation restricting payday lending last session. According to House records, Coleman supported one bill, but voted with Elkins on an amendment to kill the other, and was absent for later votes on the bill.
Security firms
Many lawmakers, according to the financial statements, are employed by businesses closely tied to their public service.
Rep. Allen Fletcher, R- Cypress, disclosed that he receives income from La Salle Management Co., a private corrections firm that operates several local jails in Texas, including in Jefferson County.
Fletcher, amember of the House Homeland Security Committee, represented the company this year at the Sheriffs’ Association of Texas’ 2012 conference. Many of the local officials who attended that convention likely will appear before Fletcher’s committee supporting or opposing legislation.
Fletcher also disclosed that he operates Security on Site, a Tomball private security firm. Last month, he filed HB 75, a proposal to restructure the Texas Private Security Board, which regulates security firms like his.
Rep. JimMurphy, RHouston, earns his income as a consultant for special management districts, which are created by the Texas Legislature to promote economic development in distinct neighborhoods. The Legislature prescribes the powers and financing authority of management districts.
Before he was elected to the Legislature, Murphy served as theWestchase District’s general manager. Because of the direct power lawmakers have over special districts, Texas Attorney General Greg Abbott ruled in 2005 that an employee of a special district may not serve in the Legislature.
Murphy resigned his job, but continued to serve as general manager as an independent contractor through a new firm he created, District Management Services.
“We structured it that way to avoid any problems,” he said in a phone interview. If all House members recused themselves from every bill affecting their livelihood, the “House would lose valuable real- world experience.”
This session, Murphy has filed HB 258, which would permit management districts to contract with utility companies to use right of way for recreation purposes, while granting lawsuit immunity to the utilities. Murphy said he filed the bill as a “placeholder” and does not think the final version will have any effect on the Westchase District.
It’s difficult to determine which lawmakers have conflicts of interest, especially consultants and lawyers, because state law does not require them to list their clients.
Client list withheld
For instance, Rep. Ruth McClendon, D- San Antonio, lists her occupation as “consultant,” but she gives no indication what clientsmay be providing her income. Likewise, Sen. Judith Zaffirini, D- Laredo, works as a “communications consultant,” she but does not list her clients. The same is true of the many lawyer legislators, like Houston Democratic Sens. John Whitmire and Rodney Ellis, or San Antonio Democratic Reps. Trey Martinez Fischer and Rolando Gutierrez.
Zaffirini said her communications coaching and consulting are considered “a confidential nature” by many of her clients. Disclosing their names would breach that confidentiality, she said.
Some lawmakers, like Sen. Glenn Hegar, R- Katy, do not disclose their spouse’s income; the form stipulates that itmust be disclosed only if they have substantial control over the money. Thus, Hegar lists his occupation as farming, and makes no mention that his wife, Dara, is a lawyer with theMark Lanier Firm, a prominent Houston plaintiff’s law firm.
“The law requiresme to disclose whatever I have control over and that’s what I do,” Hegar said. “I think everybody is trying really hard to operate within the framework of the law.”