Thursday, January 16, 2014

BOSTON, JAN. 16, 2014……The State Ethics Commission added a major exemption to its regulations Thursday, permitting state and municipal employees and elected officials to hold financial interest in public contracts as long as they do not participate in negotiations and the contract meets certain specifications.

Unlike a draft version that specifically excluded publicly bid contracts from the exemption, the new version would allow for publicly bid contracts – which are generally the largest and most lucrative – to be included in the exemption as long as certain conditions are met.

The five-member commission’s decision was made in response to a petition from Sen. Dan Wolf and other ethics law specialists after his gubernatorial bid was scuttled by the watchdog agency which cited his financial interest in Cape Air, which has long leased space at Logan International Airport.

“We do not want to discourage people who are actively in business from running for public office,” said Ethics Commissioner William Trach, who is a former federal prosecutor and partner with the firm Latham & Watkins.

The new exemption applies to business interests that pre-dated an individual’s public service or were inherited during their public service. The exemption allows for a gap of as many as five years between public contracts for the new contract to be considered a continuation of past business and covered under the exemption to the conflict of interest law.

The new rule will newly allow public employees from the governor to a receptionist to have a financial stake in a non-competitively bid, ongoing state contract. The employees would be required to disclose their interests.

In Wolf’s case, the Harwich Democrat argued there were no negotiations involved in Cape Air’s contract with the Massachusetts Port Authority, and he said that he ceased involvement in the company’s regular operations when he turned toward politics.

Wolf, a one-time mechanic turned successful airline executive who first won office in 2010, was supported in his bid to relax the restrictions by Common Cause, a good-government advocacy group.

“The public employee – whether it’s a municipal or a state or an elected or appointed official – is still not able to participate in the matter, is still not able to use his position in some way to benefit something. Those prohibitions are still there,” said Peter Sturges, of Common Cause. He said required disclosures provide a check as well, saying, “The press and others get to see what the financial interest is, and what the conflict might be, and to monitor that.”

Wolf, who with disappointment suspended his campaign in August 2013 after receiving an opinion from the Ethics Commission, eventually dropped out of the governor’s race, saying the regulatory process would eat up too much time for him to feasibly start up a campaign after its conclusion.

“I think it will result in more people being able to serve in government,” Wolf’s attorney Carl Valvo told reporters after the decision. “There hasn’t been that much litigation, frankly, over time. It’s because people are told you can’t do something, and they just accept it.”

Valvo said the commission has the authority to make such broad changes.

“The Legislature actually saw the need for this kind of procedure by the Ethics Commission in 2004, and it specifically granted authority to enact or to promulgate regulations that would exempt certain situations from the prohibitions of the conflict law where they really didn’t present the kinds of conflicts that threaten the public integrity,” Valvo said.

State law already allows state employees to have interest in publicly bid contracts. The draft regulations excluded publicly bid contracts from the exemption.

“I think this is a very good idea,” said Ethics Commission Chairwoman Barbara Dortch-Okara. Ethics commission staff told commissioners publicly bid contracts are already insulated from political influence.

Before unanimously adopting the new regulation, the five commissioners adopted a proposal by Commissioner Martin Murphy, a partner at Foley Hoag, that would expand the requirement that the contracts use a “set price” or “fixed formula.” Murphy’s amendment allows the contracts to use “objective criteria” as well.

The commission rejected another effort by Murphy to allow for cost increases in a contract if the contractor encounters “unforeseen events” such as a construction company that digs up a “Native American burial ground.”

“I wonder how this kind of approach would be enforced,” said Dortch-Okara, a former Superior Court judge appointed to the post in December. Ethics Commission Executive Director Karen Nober said most contract re-negotiations are blamed on “unforeseen circumstances.”

Commissioners declined to comment on the decision outside the meeting space Thursday morning.

“We are very pleased with the final result, as we believe it protects the underlying concerns of the conflict of interest law by preventing the use of an ‘inside track’ to obtain contracts or favorable treatment, while ensuring a fair and reasonable application of the law,” Dortch-Okara said in a statement.

Spokesman David Giannotti said the legal division is preparing a final version of the exemption regulation, and said officials believe it will be published in the Massachusetts Central Register and take effect in a couple of weeks.