The Morning Report
Subscribe now. Get smarter tomorrow.
Thursday, Aug. 21, 2008 | During her tenure as president of the Centre City Development Corp., Nancy Graham repeatedly filled out three forms that were supposed to disclose her economic interests, including any income she’d received from developers working downtown.
But if anyone went to check Graham’s disclosures, they would have found only that she received $1,623.06 in gifts during 2006 and 2007: Bottles of wine, Padres tickets, free lunches. The forms include no mention of the almost $3 million in income Graham admitted receiving from a development deal she’d done in Florida.
She didn’t disclose the income, even though one business partner had a project before CCDC and the other had an affiliate proposing a condominium project downtown.
Graham resigned July 24, after having publicly denied having any ongoing business connection to the developer. She left office eight days after discrepancies were identified in her account of her involvement in a related project at CCDC. She was involved in negotiations, despite saying she had recused herself.
Graham testified under oath about her Florida real-estate development deal with The Related Group and Lennar Corp. during a 2007 deposition. She specifically referenced a 2007 payment of $125,000 from the developers as “just mine.” But she didn’t disclose it in her conflict forms, even though such income is required to be divulged.
Statements of economic interest, as the disclosure forms are called, offer the public one of the most revealing windows into government officials’ finances. Depending on their position, they must disclose holdings such as property, stock and other income sources, a step taken to prevent them from influencing decisions they could personally benefit from.
An affiliate of The Related Group has proposed a $409 million condominium and hotel project in downtown San Diego. Graham attended negotiations and staff meetings about the project at the same time she receiving money from its affiliate, she admitted in a deposition. Graham also did not disclose her financial relationship with Lennar, even though the company had a downtown project under construction while she was in office. Her agency’s internal policies require disclosure in those circumstances.
Why those discrepancies were uncovered by voiceofsandiego.org but not by anyone at CCDC or City Hall is simple: Unless a complaint is made, no one looks. Public officials are trusted to follow the law.
Neither the San Diego Ethics Commission nor the state Fair Political Practices Commission audits public officials’ disclosures to ensure they’re being honest. The two agencies, which regulate political influence, investigate when the public files complaints and assess fines when forms are incomplete. They also review late-filed forms to ensure they’re complete. But neither routinely investigates to make sure public officials are being honest in their disclosures.
“To some degree there is an honor system,” said Stacey Fulhorst, executive director of the San Diego Ethics Commission. “There is no viable means for the commission staff to initiate an investigation into every single filer and compel production of their financial records without reason.”
At random, the commission examines election campaigns’ financial disclosures as well as lobbyist disclosure forms. But it does not conduct a similar audit of the 1,230 conflict disclosure forms submitted by city employees, elected officials, consultants and board members.
In response to questions from voiceofsandiego.org, Fulhorst said the commission would begin researching whether it can legally obtain the financial records it would need to verify information in conflict disclosure forms. Such a step, which would require City Council approval, could serve two purposes, she said: Identifying cases that merit an investigation and educating city officials who may overlook disclosure requirements.
“In the early stages of our evolution, we looked to the state and other agencies as models,” Fulhorst said, referring to the commission’s 2001 formation. “It may be time for the city of San Diego to consider whether they want to be the first jurisdiction to include statements of economic interest in their audit program.”
Bob Stern, a former Fair Political Practices Commission attorney who helped draft the state’s conflict-of-interest laws, said San Diego could choose certain boards, commissions or groups of officials on which to focus audit attention.
“If it felt it was important to restore public confidence, it could do it,” Stern said.
Stern said auditing every financial disclosure form filed in San Diego would likely be too onerous to justify the cost. “The question is whether it would be worth it,” he said. “I’d say no, since 95 to 99 percent of people are complying with the law.”
Across California, about 100,000 public officials file conflict forms, said Roman Porter, executive director of the state Fair Political Practices Commission. Unlike many public records, which can only be obtained by making a formal legal request, the conflict forms are instantly available when the public visits an agency.
That openness, Porter said, is one of the greatest safeguards to ensure public officials accurately disclose their economic interests.
“There’s a greater ability for the public and media to scrutinize statements of economic interest,” Porter said. “There’s less red tape.”
Any auditing of disclosure forms, which would require bank records, stock brokerage statements and other personal data, must balance concerns for public privacy with public access to officials’ economic interests, Porter said. He said the economic disclosure forms primarily act to put information in the public’s hands and allow them to serve as watchdogs.
“The process is designed for the public official to disclose their economic interests so that the public can determine for themselves whether or not those interests are appropriate based on the decisions the public official is making,” Porter said.
Enforcement actions taken when public officials are found to have violated the conflict of interest disclosure requirements serve as motivation for complete disclosure, Stern said. In San Diego, the Ethics Commission has previously fined two CCDC officials for incomplete disclosures: former board member Hal Sadler, who was fined $6,000 and David Allsbrook, the agency’s vice president in charge of contracting. He was fined $1,500.
“There is a big deterrent,” Stern said. “Every year you have to fill it out, and you’re on notice that you’re signing it under penalty of perjury. Most people are going to take it seriously, and most people are aware that there are reporters and potential rivals out there looking at these things. Most people.”