Category Archives: lobbyists

State Ethics Commission staff recommend closing lobbyist disclosure loopholes

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One of the matters considered by the State Ethics Commission at its meeting this past week was a recap of their interpretations of the provision for lobbyist registration and reporting (“State Ethics Commission Staff Recommendation Regarding Registration And Reporting Requirements For Lobbyists And Organizations That Engage In Lobbying Activities“).

Hawaii law requires lobbyists to register with the commission and report on their expenditures if they meet a combination of conditions: (a) they are paid to lobby; and either (b) spend more than five hours in any month lobbying, or (c) spend more than $750 in a reporting period. Whether a person is paid as a professional lobbyist, or lobbies as part of their regular paid employment, doesn’t matter. If you’re paid, you meet the first condition.

Volunteer lobbyists, such as those who represent community groups or nonprofit organizations at the legislature, are not required to lobby.

However, organizations that rely on volunteer lobbyists, or engage in grassroots lobbying (urging members of the public to communicate with legislators about legislation), would be required to register and report their lobbying costs if the organization hits either the 5-hours or $750 threshold.

The commission presented an example:

A grassroots organization does not employ a lobbyist, but the organization spends $1,000 for newspaper and television ads urging the public to contact their legislators about a bill. The organization pays for the ads using contributions received from its members for its lobbying activities. The organization must file a lobbying report. The report must include the organization’s advertising expenditures and contributions received by the organization for the purpose of lobbying.

The state lobbyist law exempts anyone who has special knowledge about an issue and is “occasionally” requested to appear at the legislature by a member, and administrative agency, or even a lobbyist.

The ethics staff are recommending that this exemption be narrowly construed.

The Commission has determined that it construes this exemption narrowly and believes that it applies to persons who provide expert information to the legislature, but does not apply to lobbyists or other persons who attempt to advocate for a position, encourage a particular result, or otherwise influence legislative action. Persons who provide information to the legislature or attempt to “educate” the legislature for the purpose of advocating for a position are not exempt from the requirements of the Lobbyists Law.

Another staff interpretation helps to close a reporting loophole. Lobbyists are required to publicly disclose their expenditures, but the statute exempts “the expenses of preparing written testimony and exhibits for a hearing before the legislature or an administrative agency.”

This has been used by some lobbyists or organizations to avoid reporting substantial costs. The commission notes, for example, “it appears that some lobbyists or organizations that employ lobbyists do not report lobbying expenses relating to the research, drafting, and submission of written testimony and exhibits for a hearing.”

This is not the intent of the law, according to the staff recommendation. Instead, the exemption is only for “administrative expenses incurred to prepare and submit written testimony.” Essentially, clerical services to prepare copies and actual copying costs are what they’re talking about.

On the other hand, according to the staff recommendation, “compensation paid to a lobbyist for researching or drafting testimony or exhibits for a hearing must be reported as a lobbying expenditure.”

The staff recommendation also clarifies that in-kind or non monetary contributions received by an organization engaged in grassroots lobbying must be reported if they meet the other reporting conditions.

The commission gave this example:

A grassroots organization organizes its members to rally the public to urge legislators to vote against a bill. One of the members owns a sign company and donates 50 signs for members to use at the rally. The signs are considered a contribution and the organization must report the name of the person who contributed the signs and the fair market value of the signs on the organization’s lobbying report.

Under current state law, responsibility for reporting of lobbying expenditures is split between the organization that employs a lobbyist, and the lobbyist. Money spent by a lobbyist but reimbursed by the client should be reported by the client organization, while lobbyists are required to disclose their out of pocket expenditures which are not reimbursed.

The commission staff have now proposed closing another loophole in this disclosure provision.

In some cases, organizations provide lump sum payments to lobbyists to cover the lobbyists’ fees and all lobbying expenses. The lobbyists uses some of this amount to pay for lobbying expenses and retain the rest as fees for their lobbying services. Where these payments are not itemized or attributed as payments by the organizations for specific expenses, staff believes the lobbyists must report the lobbying expenses on their individual lobbying reports. Staff recommends the Commission adopt this interpretation of the Lobbyists Law’s reporting requirement.

Another loophole involves travel costs. When calculating whether an organization or a lobbyist expend more than $750 in a reporting period, travel costs do not have to be counted.

But the commission staff note that once a person or organization hits the threshold for registering or reporting expenses, those reports must include all expenditures, including any travel costs. This is a sea change and, if approved, will result in more complete disclosure.

Now I’ve got to backtrack and determine what action, if any, the commission itself took on these recommendations.

Aloha United Way flexes political muscle to rebuff ethics recommendation

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I’m sorry that I wasn’t able to attend this week’s State Ethics Commission meeting on December 17th, since it was filled with important and interesting topics.

The items up for review included interpretations of several ethics provisions.

It was a heavy load for a commission with a relatively new chairman and two relatively new members.

Among the agenda items:

Commission to Consider Issuing Guidance to the State Administration Regarding Fundraising for Private Charities in State Offices. See staff recommendations.

Commission to Reconsider Current Interpretation of Hawaii Revised Statutes Sections 84-14(d), 84-18(b), and 84-18(c). See staff recommendations.

Commission to Consider Issues Relating to the Registration and Reporting Requirements for Lobbyists and Organizations that Engage in Lobbying Activities. See staff recommendations.

The only item to draw news coverage was the commission’s rejection of a staff recommendation that the state shift its support from the Aloha United Way as a central charitable fundraising program with a “combined campaign” that relies primarily on donor choice (see the Honolulu Star-Advertiser, “Officials dismiss proposal by staffers to cut AUW“).

The staff recommendation was bound to be controversial because it took the position that aspects of the AUW fundraising violate key provisions of the State Ethics Law because it provides an unwarranted advantage to AUW over competing nonprofit organizations.

During the meeting, however, the staff recommendations were set aside when none of the commissioners would offer a motion to adopt them, and the chairman spoke in favor of AUW.

Although commission meetings often include wide-ranging discussions of staff recommendations, it’s relatively unusual for them to be rejected in total, as in this case.

It may be that this was an isolated situation involving a politically very well connected nonprofit organization, since the AUW board of directors is like a Who’s Who of the business and labor power elite. But the commission’s action could also be an indication an unwillingness by the current commissioners to back up the relatively hard-line positions taken by the commission’s executive director, Les Kondo. This is a situation that deserves careful monitoring in the months ahead.

Civil Beat column tracks finances of gubernatorial candidates

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I was kind of at a loss yesterday morning. Tuesday is my weekly deadline to turn in a column to Civil Beat, and I had no good ideas of what to write about. An occupational hazard.

So I settled down, thought some calm thoughts, and started looking for topics off the beaten path. Preferably with some documents to provide an anchor.

Aha. I decided to browse the personal financial disclosure statements filed by candidates running for public office. I soon found a topic for my column in the disclosures filed by the candidates for governor (“Hawaii Monitor: Perusing the Financial Disclosures of Hawaii Gov Candidates“).

The personal disclosures filed by Aiona and Ige are, in short, pretty boring.

But Hannemann’s has some zing to it. He reported receiving as much as $185,000 in consulting fees from the owner of several Waikiki convenience stores, the developers of the two Ritz-Carlton luxury condo-hotels in Waikiki, a drug treatment center on Sand Island, and a Saipan conglomerate which has been one of the largest garment manufacturers in Saipan.

The rest of the column digs through the details found in the disclosure reports.

Along the way, I saw a few other things of note.

Hannemann’s Hawaii Independent Party reported receiving contributions totaling $66,000 during the period from January 1, 2014 through June 30, 2014.

Of that amount, $40,000 was contributed by Hannemann’s sister and her husband, Vaofua and Deryck Maughan, with another $25,000 coming from Signature Cab Holdings, Inc., owners of TheCab. Hannemann himself added the final $1,000.

The contribution from Signature Cab was dated June 19. On the same day, the company’s president and CEO, Howard Higa, contributed $6,000, the maximum allowed by law, directly to Hannemann’s campaign. Two weeks later, Higa’s wife also gave $6,000. The Maughans also each contributed $6,000 to Hannemann, in addition to the $40,000 to the party.

And what did the Independent Party do with the cash infusion? Almost all of it, $64,000, was transferred to a savings account in the party’s name at First Hawaiian Bank. Just over $1,000 was reportedly spent on party expenses, including food for volunteers and inter island travel.

A reader questioned whether Hannemann’s consulting for Pacrep LLC, developers of the Ritz Carlton dual towers in Waikiki, included preparation and presentation of his February 26, 2014 testimony before the City Council in favor of the project. If it did, would it constitute “lobbying” under the city’s ethics law?

Here’s a set of questions and answered published by the Honolulu Ethics Commission on its website defining lobbying.

1. What is a “lobbyist”?
Lobbyist is defined as “any individual, partnership, committee, association, corporation, and any other organization or group of individuals who engages oneself for pay or other consideration for the purpose of influencing directly or indirectly, and whether by such person or through any agent or employee or other person in any manner whatsoever, the policy making process of the City and County of Honolulu. ROH Sec. 3-13.2.

2. When have I “engaged” myself to conduct lobbying activities?
An individual, partnership, committee, association, corporation, and any other organization or group of individuals who accepts membership dues or contributions made, or a fee or salary paid, with the understanding that the person accepting the same intends to devote a portion of the funds contributed or the time for which the salary is paid to lobbying activities shall be deemed to have “engaged oneself” to conduct such activities. ROH Sec. 3-13.2.

3. What are “lobbying” activities?
“Lobbying” means certain activities of a person who is included in the definition of a lobbyist as defined above and not specifically excluded under Section 3-13.3(e) and includes the representation by any person, whether or not compensated, of an association, corporation or organization that accepts membership dues or contributions with the understanding that a portion of the funds so received will be used to influence the policy making process of the City and County of Honolulu.

The city’s lobbying law can be found here.

Conflicts can lurk among undisclosed clients

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Here’s one of those areas where the state’s ethics law falls short.

State officials file personal financial disclosures every year, the same disclosure requirement that was recently extended to a number of the most important boards and commissions.

The first item required to be disclosed are sources of income.

Here’s what the law says [Section 84-17(f)(1)]:

The source and amount of all income of $1,000 or more received, for services rendered, by the person in the person’s own name or by any other person for the person’s use or benefit during the preceding calendar year and the nature of the services rendered; provided that information that may be privileged by law or individual items of compensation that constitute a portion of the gross income of the business or profession from which the person derives income need not be disclosed;

I’ve highlighted that last clause. It means that if a person is a lawyer, an insurance agent, real estate agent, or in some similar type of work, they are not required to disclose their individual clients, only their overall business income.

Can lobbyists arrange to put a little business–and a bit of profit–in the way of a legislator or key official? Sure. Does this have to be disclosed? Under current law, no.

Potentials for concealed conflicts? Definitely.

And here’s one prime example.

Bruce Coppa is Governor Abercrombie’s chief of staff. In that position, he also holds the title of administrative director of the state. He’s the top appointed administrator in the executive branch.

And here’s a section from Coppa’s current financial disclosure where he reports earned income.

Financial disclosure 2014

Note, first, that the disclosure is incomplete because it does not include his state salary.

Note, second, that Coppa reports earnings in category “E” for real estate sales as an employee of Hawaii 5-0 Properties.

State licensing records confirm Coppa holds a real estate salesperson license valid through the end of this year. He has held the license since 2001.

That “E” represents a sum of at least $50,000 but less than $100,000. That’s an increase from the $25-49,999 that Coppa reported from real estate sales over the past two reporting periods.

Here’s part of the description of Hawaii 5-0 Properties on its website:

We are one of the top buyers’ agents for high-end developments in Honolulu establishing ourselves as one of the top brokers for Trump Waikiki. Our past sales reflect our success so if you are interested in looking at this or any other high-end developments, we are your team.

I have to wonder when Hawaii’s top administrative officer finds the time to not only continue, but apparently expand his personal real estate activities?

And, yes, I do wonder about whether any of the business steered his way creates potential conflicts of interest?

Financial disclosure is designed to encourage public officials to look at their financial involvements with an eye towards avoiding potential conflicts. But this doesn’t happen when these professionals are exempted from disclosing their client lists, or the income they derive from individual clients, even if those clients are lobbyists or others simultaneously seeking to benefit from state actions.

I think it’s past time for the legislature to take another look at this section of the ethics law and provide additional disclosures so that we are more fully assured that our public officials and employees display the highest standards of ethical behavior?

Perhaps public officials who work as lawyers, real estate salespersons, or insurance agents, should not have to disclose the names of all their clients. But how about reporting business dealings with lobbyists, corporations or others who employ lobbyists, or those who come before any state agency in which the official is involved? In the case of the state’s administrative director, that’s pretty much all the state agencies, isn’t it?