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Saturday, October 19, 2013
$381K in Prohibited Gifts: Ethics Commission Compares Kirk Caldwell to Rod Tam -- Then Lets him off Hook
By News Release @ 3:14 AM :: 8215 Views :: Honolulu County, Democratic Party, Ethics, Politicians

Excerpts from Honolulu Ethics Commission Proposed Advisory Opinion 2013-3 (with appropriate commentary and emphasis added)

Signed October 7 & 8, 2013, set for release Saturday, October 19, 2013:

This case stems from complaints concerning the possible influence of $381,000 of private donations over Mayor Kirk Caldwell and his new administration. The Mayoral Transition Committee ("Committee"), a 501(c)(4) entity formed in December 2012, paid for costs associated with the transition from the Carlisle to the Caldwell administrations ($51,000), the Mayor's official inaugural ceremony ($11,000), as well as the unofficial luau in Mayor Caldwell's honor ($145,000)....

To be tax exempt under Internal Revenue Code Sec. 501(c)(4), an organization must not be organized for profit and must be operated exclusively to promote social welfare. The earnings of a section 501(c)(4) organization may not inure to the benefit of any private shareholder or individual. To be operated exclusively to promote social welfare, an organization must operate primarily to further the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements). 26 U.S.C. Sec. 501(c)(4)....

(Translation: They may be in violation of federal law.)

A city officer or employee may not accept a personal gift if a reasonable person could conclude that the gift is intended to influence or reward the officer or employee in discharging his or her official city duties. Under the facts of this case, the Commission finds that the contributions made by some of the Committee donors constituted prohibited gifts under the ethics laws. In determining that the gifts were prohibited, the Commission notes that:

(a) At least 25 of the Committee's Donors (the "25 Donors") had matters pending with the city, including open contracts with city agencies, personal employment or appointments as city officials, or use registered city lobbyists to represent them. Together these 25 Donors provided $127,000 or about 33% of all funds donated to the Committee. The one-third contribution for the Luau from the 25 Donors was $42,000.

(b) The Mayor has the highest and broadest level of fiscal power and discretionary authority possessed by any city official, giving him the latitude to favor or disfavor the interests of the 25 Donors, if he were so disposed; and

(c) The public may reasonably perceive that the Mayor is the ultimate beneficiary of the donations to the Committee and that some contributors are able to effectively donate far in excess of gift law and campaign contribution limits, all of which undermines the public confidence and trust in the Office of the Mayor.

This case underscores serious concerns about the integrity of city government when large donations are made for a mayor's benefit from those who have much to gain or lose from their business relationships with the city administration. Government officials are restricted in receiving gifts because of the reasonable concern that gifts to an official may lead to the appearance or reality of preferential treatment by the official to the donor. Preferential treatment is inconsistent with the official's ethical duty to treat all members of the public fairly and equally.

(Then they let Caldwell and his cronies all off the hook.)

The Commission, however, finds no gift law violation by the Mayor because he neither knew nor should have known that acceptance of the Luau tickets or the intangible benefit of the Luau in his honor would violate city gift laws. At the time of the contributions to pay for the transition, official inauguration and Luau costs, there were no ethical guidelines or legislation in place establishing limits on contributions to inaugural or transitional committees.  

(WRONG.  This report cites several Municipal ordinances and Federal laws which apply.  Do they really think anybody --besides the media-- will be fooled by this "the mayor didn't know" stuff?  Do they think this weekend document dump will diffuse public attention?  For the answer see the 'media' coverage below.)

...

C. Sources of Committee's Accrued Donations

As of May 24, 2013, the Committee had deposited $380,869 in donations from 102 donors. Among the 102 donors to the Committee, there are 25 with significant business relationships with city government:

  • 9 donors who pay lobbyists (registered with the Commission) to represent them;
  • 12 donors who have contracts with the city to provide services;
  • 2 donors who are cabinet members;
  • 3 donors who are in appointed positions with the city;
  • 1 donor who is a lobbyist currently registered with the Commission; and
  • 10 donors who made contributions (totaling $71,000) to the Committee when campaign spending laws apparently would have prevented the contributions to the Caldwell campaign fund.

The 25 identified donors (collectively, the "25 Donors") contributed $127,325 to the Committee, or about 33% of the total contributions. The Commission has not investigated and has not determined whether any of the other 77 donors have had or will have matters before the city that the Mayor could affect in doing his job.

...

The Committee intends to donate the remaining unexpended $174,245 to one or more 501(c)(3) organization(s) of the Committee's choosing. As of June 10, 2013, the Committee had not yet decided which organization(s) will receive the money.

(TRANSLATION:  The Mayor has a slush fund and he's waiting for 2016.)

A free or below-cost ticket to attend an unofficial inaugural ceremony is ... a personal gift to the attendee. In addition, the Commission has recognized that there is a value to an elected official's enhanced goodwill and reputation in the community. Advisory Opinion No. 2010-2 (Mar. 3, 2010) at Sec. V(I) ("By using the fund to treat voters, community leaders, his family and his business associates to meals, Councilmember Tam enhanced his goodwill with these groups at the taxpayers' expense. This likely increased his stature in the community and inured to his political benefit.")

(Yes, they just compared Kirk Caldwell to Rod Tam.)

...

2. Contributions to the Committee from the 25 Donors that were Spent on Luau Expenses Constituted Prohibited Personal Gifts to the Mayor.

Certain contributions to the Committee expended on the Luau are, for ethics law analysis purposes, personal gifts, not gifts to the city....

Personal gifts to city officers and employees are regulated by RCH Sec. 11-102.1(a), RCH Secs. 3-8.7 and 3-8.8. The city's gift laws have two major restrictions.

First, the gift cap prohibits receiving gifts valued in excess of $200 per year from a source whose interests the recipient may affect in carrying out his or her city duties.  (Annual bribes must be small.)

Second, even if a gift fails to reach the $200 value threshold, it is still prohibited if a reasonable person would conclude that the gift is intended to influence or reward the recipient in the performance of their official city duties.  The donor must have an interest-- such as a pending or likely future contract, license application, bill or other factual connection -- that has been before, is pending or is reasonably predictable to come before the receiving official in the course of discharging his or her duties. ... Federal law also follows this approach by defining as "prohibited sources" those who have an interest that may be affected by the official action of the recipient. 5 CFR Sec. 2635.203(d).

The factors described below show that contributions made to the Committee by the 25 Donors and from the Committee to benefit the Luau were prohibited under the gift laws as a reasonable person could conclude that they were intended to influence or reward the Mayor.

(Which completely contradicts our earlier statement claiming the Mayor is not in violation--unless we find that the Mayor is not "a reasonable person.")  

read ... The Entire Report  ... and ... The Cover Letter

‘Media’ coverage is dictated by the one line of pure horse manure in the Ethics Commission report:

Caldwell news release admits that all mayors and governors are as dirty as he is: "I am gratified that the Commission found that I did nothing wrong while transitioning into the office of the Mayor.  Frankly, I was surprised that there was even an investigation to begin with as the Mayoral Transition Committee followed the traditional practices used by our mayors and governors for as long as any of us can remember."

Bonus: Brief of mayoral transition committee to the Honolulu ethics commission

Totally Related:  Caldwell Secretly Appoints ‘Chief of Staff’--Convicted Criminal Harry Mattson

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