Thursday, Nov. 6, 2008 | The Centre City Development Corp. is considering requiring its next top executive to submit to a rigorous financial audit to ensure that whoever is chosen to replace its former president does not repeat her mistakes.
Nancy Graham, CCDC’s former president, resigned in July and now faces criminal charges stemming from her failure to disclose $125,000 in income from developers with business pending downtown. She admitted receiving the money in 2007 while testifying under oath in a Florida court deposition; she didn’t disclose it when filling out her annual conflict-of-interest forms at the city.
If the board of CCDC, the city’s downtown redevelopment agency, decides to approve the measure when it meets Nov. 19, it would be one of the only local governmental bodies in the country to require such scrutiny.
The recommendation stems from a review of CCDC’s conflict-of-interest and ethics policies launched in the wake of Graham’s problems. It comes from Bob Stern, the president of the nonpartisan, Los Angeles-based Center for Governmental Studies, whom CCDC hired for $50,000 to examine the agency’s internal policies.
Stern, former general counsel for the state Fair Political Practices Commission, told CCDC’s board Wednesday morning that it should require its next president to agree to the disclosure.
“It would put your agency in the forefront in the country,” Stern said. “Let’s be candid about this: This is somewhat of an invasion of privacy. But it would somewhat increase confidence in the corporation. It is groundbreaking.”
Stern said the recommended audit should include an annual examination of tax records, investment brokerage statements and other financial records. Such a step would require CCDC’s next president to waive privacy rights that entitle citizens to keep their tax returns confidential. Orly Lobel, associate professor of law at University of San Diego School of Law, said in an interview that she did not think the privacy issue would present a legal problem for CCDC.
When it hired Graham, CCDC did a background check that didn’t find anything amiss. Her problems arose once she was working in San Diego heading the organization, which subsidizes and permits downtown development on behalf of the public.
Her work as a private developer in Florida left her with business connections to two nationwide development companies — Lennar Corp. and The Related Group.
Once here, she never reported her ongoing relationship with them. She did not recuse herself from negotiations with a Related affiliate about a $409-million condominium and hotel project that stood to benefit from $8.7 million in public subsidies.
Fred Maas, CCDC’s chairman, said the audits should include a forensic analysis that would allow an accountant or lawyer to investigate and thoroughly vet the prospective hire’s financial interests. “I don’t want to do something that’s just cosmetic,” Maas told Stern.
Public officials in San Diego and throughout California are required each year to complete conflict-of-interest forms, which offer the public one of the most revealing windows into government officials’ finances. Depending on an official’s 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.
Graham completed those forms annually, signed them under the penalty of perjury and submitted them on time, just as hundreds of city employees do. There they sat, in the City Clerk’s Office, open for inspection to any curious member of the public.
The discrepancy in what Graham reported and what she received was uncovered by a voiceofsandiego.org investigation. Unless a complaint is made, no governmental agency verifies the disclosure form’s honesty. 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 barring a red flag, neither check to make sure public officials are being honest in their disclosures.
Stern said a trained auditor should be able to determine when an employee isn’t disclosing income. While the audit’s findings would be released publicly, he said the official’s financial documents would remain confidential.
He did not recommend financial audits for any other high-level employees or for board members. He said it could make board members reluctant to serve and have a chilling effect on recruitment for new board appointees, who serve in a part-time volunteer capacity.
Stern does recommend other steps for CCDC. The agency should keep its employees’ conflict-of-interest forms on hand for public review, he said. Currently, they are available only at the City Clerk’s Office.
And he said conflict disclosure requirements should be increased for the agency’s board members and corporate counsel. Currently, they do not have to disclose income or gifts received from all companies that supply goods and services to CCDC.
Maas said he wanted to boost whistleblower training and possibly designate one CCDC board member as an ombudsman for staff.
Stern said any whistleblower would be unlikely to report concerns to someone in the organization, but called the training important.
The board will address the whole ethics and conflicts package when it meets Nov. 19.
Please contact Rob Davis directly at rob.davis@voiceofsandiego.org with your thoughts, ideas, personal stories or tips. Or set the tone of the debate with a letter to the editor.