Crangle: What Should ‘Ethics Reform’ Look Like in 2015?

October 20, 2014

Inside Insight

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crangle and ethics reformLET’S BEGIN WHERE THE 1991 ETHICS ACT LEFT OFF

The current scandal involving Speaker Bobby Harrell’s nine-count indictment is probably not the end of Harrell investigation. In my view, Harrell has probably agreed to cooperate with Solicitor David Pascoe and is telling the prosecutor about the other bad guys at the State House.

But whether Harrell is acquitted, pleads guilty, or is found guilty at trial, the fact remains that the 1991 Ethics Act with which Harrell is entangled was always too permissive and has always been ineffectively enforced.

The 1991 Ethics Act was the result of the Operation Lost Trust scandal of 1990-1991. That scandal showed how the previous 1975 Ethics Act had failed abysmally: it had allowed lobbyists and special interests to give legislators unlimited amounts of cash money which they could convert to personal uses. The 1975 Act was an open invitation to corruption, and in the end 16 legislators were convicted of bribery and related charges.

The 1991 Act was focused on the problem of lobbyists’ abuses, unlimited gifts of free meals, free liquor, free trips, cash to legislators, and the conversion of cash bribes to personal use by corrupt legislators. The Act imposed a flat ban on lobbyists’ gifts and handouts to legislators and it banned the use of campaign funds for personal use. The Act was also designed to compel disclosure of campaign finance expenditures, including the amounts and sources of campaign contributions and the use of the money. In addition, the Act required the disclosure of public officials’ dealings with public agencies and entities that hired lobbyists to push their agendas at the State House.

The 1991 Act was good as far as it went, but it did not clearly provide for a strict enforcement system, relying too much on legislative ethics committees and the State Ethics Commission rather than ordinary law enforcement – the attorney general, solicitors, and police agencies such as SLED, sheriffs, and local police departments.

In early years the Act was ignored and the legislative ethics committees were in a torpid state. When the House Ethics Committee finally got a serious complaint against former Rep. Nikki Haley, it floundered badly, announcing probable cause and dismissal at the same five-minute meeting, and then convening a second hearing under a new acting chairman who conducted a day-long hearing but refused to hear testimony from the complaining witness, John Rainey.

Then the House Ethics Committee ignored the out-of-control spending of campaign funds by Speaker Bobby Harrell from 2006 onward and never took action against Harrell even after his September indictment on nine counts of violating the 1991 Ethics Act and related matters.

The generation after the 1991 Ethics Act took effect also revealed a problem. Not only did the Act have a designed-to-fail enforcement mechanism – it also lacked substantive restrictions to control or stop the creative ways special interests and politicians figured out how to exploit political money and conflicts of interest for their mutual benefit. The interests and politicians both preferred powers and advantages that a corrupt system provided, especially if it was permitted by weak laws that weren’t even enforced.

The leadership political action committee (PAC) was not even in existence in South Carolina state politics when the 1991 Ethics Act was passed, but it existed in Washington where congressmen and senators used such PACs to hand huge sums of political money to fellow legislators – money that had been collected from willing or unwilling special interests, including lobbyists, corporations, and big money PACs.

But the “leadership PAC” idea came to South Carolina in the years after 2000. The most aggressive and uninhibited operator of a leadership PAC was Speaker Bobby Harrell, who ran some $2,000,000 through his leadership PAC after it got going. The leadership PAC was the ultimate weapon for pressuring special interests to give political influence money and payola, and it was the ideal way to hand out slush funds to other legislators or to use it for personally profitable purposes.

The next scheme to appear in the last decade was the use of multiple LLCs to collect special interest money and hand it out to politicians. The benefit of multiple LLCs was that there was no limit on the number a single person or entity could create, and therefore there was no limit on the amount of money multiple LLCs could donate the candidates for state offices. Using LLC’s, a single person could form an unlimited number of puppet LLCs and direct each one of them to donate the maximum amount permitted by the 1991 Ethics Act to a candidate. Theoretically, there is no limit on the amount of money a single operator of multiple LLC’s could donate to a candidate.

The next scheme to circumvent the campaign finance limits of the 1991 Ethics Act was the appearance of the independent campaign committee. These committees collected political money from special interests and then spent it on promoting or opposing certain candidates without giving the money to the candidates themselves. Such committees were not limited as to how much they could take from individual donors, nor were their expenditures limited. They often bought big blocks of television ads. The 1991 Ethics Act required such committees to file and disclose, but the federal courts struck down the relevant portions of the Act in recent years.

In order to benefit financially from their public office, many politicians hire themselves out as “consultants”; others obtain employment as lawyers to special interests. Such employment can convert the public official – especially legislators, city and county councilmen, and other part-time public officials – into sources of inside information and even into lobbyists for the employing special interest. The consulting, information-gathering, and legal services paid for may, in fact, be little more than vote-buying from those holding office. Senator Larry Martin (R-Pickens) actually said, in a committee hearing in 2013, that some legislators were really lobbyists working for special interests at the State House.

The fact that some legislators are lawyers practicing before state and local governmental entities is another problem that the 1991 Ethics Act failed to address effectively. The issue was discussed at the time the Act was written and debated, but the Act failed to deal with it. A state senator who represents a client before a magistrate that the same senator appoints to office means that the magistrate will be under great pressure to please the senator-lawyer at the expense of the rule of law. The same problem of lawyer-legislators electing all circuit court, Court of Appeals Court, and Supreme Court judges applies when such lawyer-legislator appear in such courts.

Obviously, there are many issues to be considered when the 2015 session of the Legislature writes new ethics reform legislation. The solutions to the problems of conflicts of interest, abuse of office, and misuse of political money are difficult in a system of government and politics where hundreds of state officials, including legislators, are part-time state employees and need to make a living in the private sector. That can generate conflicts of interest and abuse. The same is true with the privately-funded system of election campaigns used in South Carolina, where candidates for office raise much if not most of the campaign funds from big money special interests such as corporations, political action committees, and wealthy donors pushing their own political agendas and expecting payback form the donations to candidates.

Any real attempt to prevent or control these problems will meet with aggressive opposition from those who benefit from the the present system. Even so, many private businesses are not keen to preserve a system in which shakedowns by candidates and their PACs not only cost big money but also result in government policies driven by campaign donations rather than facts, reason, and the public interest.

Has the time for reform come again, as it did in 1991? One hopes it has.

John Crangle is executive director of Common Cause South Carolina. The present article is the first in a series of guest columns from a variety of organizations and points of view.