Related parties in government UPDATED | Arkansas Blog

Related parties in government UPDATED

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More on the real estate deal I reported yesterday, in which Prosecuting Attorney Marcus Vaden of Conway, after questions were raised by state auditors, has been attempting to remove conflict of interest from his office's renting of office space from MVW Partnership LLC, a partnership in which he has a 25 percent interest. Today: Add another public official to the narrative and more legal complications.

Read on for the update.

The deal, now producing $2,150 a month according to Vaden's 2009 statement of financial interest, dates back to the early 1990s. It became a legal problem when Vaden became elected prosecutor in 2007. Then, the prosecutor was no longer renting space from a deputy prosecutor -- a related transaction, but legal, auditors had long held -- but renting it from himself, a conflict of interest auditors and state Finance and Administration Director Richard Weiss believed.

That improper relationship continued for better than a year and a half. An initial effort to correct the problem -- by a 2008 Faulkner County ordinance approving a lease of the office in return for payment of $24,000 a year from Vaden's hot check division -- was deemed by state audit not sufficient to correct the conflict. An ordinance passed this year provided simply that the county would lease the space, without a required offsetting payment from the prosecutor.

The state audit has not yet been completed. It is expected to say whether the latest ordinance corrected the matter and what, if any, actions should be taken. Sometimes, audit irregularities are referred to prosecutors for review.

According to statute, the Finance and Administration Director may also take action when a state employee has been found to have a conflict of interest. They can range from a warning or reprimand to a forfeiture of pay, suspension or termination of employment.

Another wrinkle in this story: Another partner in the MVW LLC is Conway lawyer and House Speaker Robbie Wills, who owns 25 percent; Wills' parents, who own 25 percent, and Justin Mitchell, who owns 25 percent. Vaden has reported his income from the lease as a sale to a government body on his annual statement of financial interest.

Wills reports his ownership interest in MVW on his annual statement, as well as income of more than $12,500 in 2008. But he does not report it in the section in which public officials are to "list the goods or services sold to the government body for which you serve which have a total value in excess of $1,000." The payment was made, however, not by the legislature but by the prosecutor's office and now by Faulkner County.

UPDATE: Wills got back to me with the full history and notes that this investment was an issue raised by Republicans in one of his early races for office. He joined Vaden in investing in a downtown building for a law office and for space for the hot check division of the prosecutor's office that Vaden ran in 2004, shortly after he completed law school. He paid his rent, Vaden covered his share. Wills was elected to the legislature in 2005, Vaden as prosecutor in 2007. When elected to the legislature, Wills said he inquired of the Ethics Commission of any additional responsibilities on account of his ownership. He said he was told as long as the lease was with the county, he had no obligation beyond reporting his income-producing property.

Was it a county lease before the Faulkner Quorum Court passed the mid-2008 ordinance. Wills said he always thought it was. He said he saw the hot check division as primarily a county office. The county employs many of the employees. It's collecting fines assessed in county courts. "I acted on good faith on what I was being told," he said. "If that is not what it was, it has certainly been corrected."

Longer Wills response here on his blog.

Wills' investment is of some interest because of the 1999 ethics law, passed in the aftermath of the Nick Wilson scandal, that put severe limits on employment of legislators and other top officials by public agencies and similarly limited their business with the state. This statute says legislatorsmay not enter into a contract with a state agency (personally or through an LLC) unless it is a product of competitive bidding, a request-for-proposal process or approved by the Legislative Council or Joint Budget Committee and the governor. Written notice of a constitutional officer's participation in a lease with any state agency is required.

Willful violation of the law is a felony. Possible violations are subject to review by the state Ethics Commission.

All this is moot, of course, if the arrangement with the LLC was not, legally speaking, with a state agency.

At the core, you still have a lease deal in which a public official's office is using space that provides private income to that official and, incidentally even, a state legislator. It might be legal. But it can have complications. It does make you wonder how many other public officials have business deals from which they derive public benefits -- all legally of course, but not necessarily in ways readily apparent to the public. You'd have to have a lot of local knowledge -- or a good tipster -- to know the LLC listed on Will's and Vaden's disclosure documents derives income from a public agency.

For the record, from the statute on disclosure:

21-8-701, a member or a member-elect of the General Assembly shall report any goods or services sold during the previous calendar year having a total annual value in excess of one thousand dollars ($1,000) to an office, department, commission, council, board, bureau, committee, legislative body, agency, or other establishment of the State of Arkansas by the member, his or her spouse, or by any business in which such person or his or her spouse is an officer, director, or stockholder owning more than ten percent (10%) of the stock.

And on sales and leases to the state.

21-1-403.Restrictions on lease agreements, contracts, and grants.

(a)No constitutional officer may enter into any lease agreement, contract, or grant with any state agency unless:

(1)The lease agreement, contract, or grant is awarded as a result of competitive bidding or a request for proposal and the constitutional officer played no role, directly or indirectly, in the administrative:

(A)Determination of specifications for the bid or request for proposal;

(B)Evaluation or consideration of bid or request for proposal; or

(C)Decision to accept the bid or request for proposal; or

(2)If competitive bidding or a request for proposal was not required by law, the lease agreement, contract, or grant has received the prior approval of:

(A)The Joint Budget Committee during legislative sessions or the Legislative Council between legislative sessions; and

(B)The Governor.

(b)No constitutional officer may receive any subgrant, subcontract, or assignment of any lease with a state agency unless the constitutional officer:

(1)Is disclosed as a subgrantee or subcontractor in the competitive bid or request for proposal; or

(2)If competitive bidding or a request for proposal was not required by law, receives prior approval from:

(A)The Joint Budget Committee during legislative sessions or the Legislative Council between legislative sessions; and

(B)The Governor.

(c)(1)Constitutional officers shall not enter into professional and consultant services contracts with state agencies subject to §§ 19-11-1001 — 19-11-1011.

(2)Any professional and consultant services contracts obtained by constitutional officers or their spouses with any state agency exempt from §§ 19-11-1001 — 19-11-1011 must receive prior review of the Joint Budget Committee during legislative sessions and the Legislative Council between legislative sessions.



(d)The restrictions of subsections (a) and (b) of this section also apply to spouses of constitutional officers and to any corporation, limited liability company, partnership, or any other legal entity of which a constitutional officer or the constitutional officer's spouse has an ownership interest of at least ten percent (10%).

(e)If a constitutional officer, a constitutional officer's spouse, or an entity listed in subsection (d) of this section becomes the recipient of a grant, contract, or lease through competitive bidding or a request for proposal, the awarding state agency shall give written notice of the selection of the constitutional officer, constitutional officer's spouse, or entity to:

(1)The Joint Budget Committee during legislative sessions or the Legislative Council between legislative sessions; and

(2)The Governor.

(f)Grants, contracts, and leases entered into prior to the person's becoming a constitutional officer are not subject to the provisions of this section, but renewals and extensions of those grants, contracts, and leases are subject to the provisions of this section.

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