Summary of Recommendations

Investigative resources of the EC do not appear to be adequate because they are primarily responding to complaints rather than initiating their own investigations. Furthermore, they are not able to complete investigations in a timely manner.

The EC has attempted to respond to the fact that it has inadequate resources by prioritizing complaints and closing investigations that are unlikely to be resolved 6

There are no random audits of the content of SEIs. Therefore, the content of the SEIs is not questioned unless there is a specific complaint from the public.

If the staff of the EC is expanded, random audits of the content of those SEIs on file in the EC should be conducted.

The Board of Supervisors must initiate an independent, rigorous, and ongoing evaluation of Campaign Finance Reform and the voluntary public campaign financing program.

The Ethics Commission should hire a well-qualified Education and Training Officer. GLOSSARY CFRO Campaign Finance Reform Ordinance CGJ 2004-2005 San Francisco Civil Grand Jury EC Ethics Commission FPPC Fair Political Practice Commission Proposition C passed 11/03; transferred the task of handling the whistleblower telephone hotline to the Controller’s Office Proposition E passed 11/03; revised and updated the City’s conflict of interest laws, requiring all City departments, boards, and commissions to develop statements identifying “incompatible activities.” Proposition G passed 11/97; Campaign Consultants Ordinance; mandated, expanded audits of financial statements filed by candidates and political committees. Proposition J passed 11/00; ‘the taxpayer protection amendment’ was intended to reduce the influence of gifts and prospective campaign contributions on the decisions of public officials. Proposition K passed 11/93; created the Ethics Commission, transferring ethics functions then divided among five city departments to a single Ethics Commission Proposition N passed 11/95; called for the enforcement and administration of the CFRO. Proposition O passed 11/00; amended the San Francisco Campaign Finance Reform Ordinance (CRFO), by providing for the limited public campaign financing of candidates for the Board of Supervisors. San Francisco City Charter The fundamental law of the City of San Francisco SEI Statement of Economic Interest; required by CA Codes, Gov’t. Code Section 87100 1 SIA Statement of Incompatible Activity; required by San Francisco Government Code Section 1126 Administration Code XIIB Section 16.535-539 Mandates electronic filing for certain campaign filing entities. State Proposition 208 went into effect 1/97; required the Ethics Commission to implement further campaign reform provisions to be in compliance. INTRODUCTION Eleven years ago, the San Francisco Board of Supervisors voted to place on the November 1993 ballot Proposition K, which would, through a charter amendment, create an Ethics Commission (EC). When arguing in favor of this proposition, the Board of Supervisors noted, “the people of San Francisco are in danger of losing faith in our city government. Every few weeks another scandal arises and public confidence sinks to new lows. We need an Ethics Commission to turn things around at City Hall. Proposition K will establish an independent body to clean up our city government.”1 “The Ethics Commission will: investigate and punish wrongdoing… establish tougher rules for city lobbyists… strengthen the city’s whistle blower program…draft stricter guidelines for city officials…educate and advise on ethics laws.”2 Prior to approval of Proposition K in November 1993, five city departments administered ethics functions: the Registrar of Voters (later known as the Department of Elections) administered campaign finance disclosure and audits; the Clerk of the Board of Supervisors handled lobbyist rules and regulations as well as conflict of interest reporting; the District Attorney and City Attorney gave advice and wrote opinions, dealt with complaint investigations and enforcement; the Mayor’s Office handled issues relating to improper government activities and the whistleblower program. Following the initial appointment of five commissioners (one each by the Mayor, Board of Supervisors, Controller, City Attorney, and District Attorney), the Ethics Commission opened its office in 1994 with interim and part-time staffing. Budgeting allowed for a permanent staff of four (executive director, administrative assistant, whistleblower-investigator/educator, and investigator/auditor) to be hired in the spring and summer of 1995. A pro bono consultant and student interns augmented the staff. It is worth noting that “…the total cost of ethics related functions administrated by the five City Departments is $481,438… $123,093 of ethics related functions will be transferred to the Ethics Commission… The available funding in the Ethics Commission budget to administer these functions is $97,868 or $25,225 less than is currently allocated… to the City departments to perform these functions.” 3 Over the years, newly passed state or local propositions and ordinances have added to the responsibilities shouldered by the EC. The 2004-2005 Civil Grand Jury (CGJ) believes that the EC was under-funded from its beginning, as evidenced by its inability to fulfill mandates and investigations, resulting in the need to triage tasks. Should they: • Focus on duties with seemingly greater importance and let the others remain undone, • Transfer some of their duties to another agency to execute, or • Request additional resources so that they can complete all of their mandates in a timely manner? 2 The voters demonstrated a commitment to the promulgation and enforcement of high ethical standards when they passed Proposition K. The measure of the EC’s importance is in our willingness to properly fund it, thereby allowing it to complete all mandates. The CGJ decided to examine the operations of the Ethics Commission. This report is the result of that examination and represents the first report ever issued by a civil grand jury on the state of the San Francisco Ethics Commission. CGJ inquiries focused on those areas that occupy most of the Ethics Commission staff’s time: • Complaints and Investigations, • Statement of Incompatible Activities/Statement of Economic Interest, • Lobbyists and Campaign Consultants, • Campaign Finance Reform. The CGJ identified several common threads that ran through each area of the investigation. These common threads were staffing and workload, training, and budgeting/funding. This report presupposes the Ethics Commission has central and crucial mandated duties. All other assignments, though important and necessary, are less central to the mission of the Ethics Commission and are transferable to other agencies. COMPLAINTS AND INVESTIGATIONS The duty and responsibility of the Ethics Commission (EC) to investigate allegations of violations of laws within its jurisdiction is defined by City Charter section C3.699-13. Charter and city ordinances within its jurisdiction are those relating to campaign finance, lobbying, conflicts of interest and governmental ethics. This Charter section also defines the investigative process and the penalties for violations that are substantiated by investigations. The investigative process and the procedures for filing complaints are described in detail on the EC website.4 3 Ethics Commission Status of Investigations, 1999-2004 % Increase 1999 Source of Investigation: 1999-00 2000-01 2001-02 2002-03 2003-04 Total 2004 External Complaint 18 28 33 48 43 170 139% Initiated by Ethics Commission 1 0 1 2 3 7 Total Investigations 19 28 34 50 46 177 142% % of Total 1999- Status of Investigation*: 2004 Resolved 19 28 31 43 24 145 82% Pending 0 0 3 7 22 32 18% *as of November 16, 2004 Source: Ethics Commission Staff The volume of complaints that the EC has received has increased in the past five years from 18 in FY 1999-2000 to 43 in FY 2003-04. During this five-year period, only seven investigations were conducted on the EC’s initiative, rather than in response to complaints. These self-initiated investigations were only 4% of the total of 177 investigations during this period. Thirty-two of the 177 (18%) investigations initiated between FY 1999 and 2004 were still pending in November 2004. Three of the pending investigations were initiated in FY 2001-02 and 7 in FY 2002-03.5 These 10 investigations are in jeopardy of being invalidated by statutes of limitation. The following are indicators of inadequate investigative resources: • The number of complaints is increasing • The EC is initiating few investigations. Most investigations are instigated by complaints • The EC has been unable to complete all investigations in a timely manner because of inadequate staff resources The EC has only one investigator. However, this investigator is also responsible for two unrelated duties: the administration of both the Campaign Consultant and Lobbyist Ordinances, for which he responds to inquiries regarding the ordinances, prepares reports, maintains a database tracking system, and provides quarterly training to lobbyists.7 The EC investigator is responsible for all phases of the investigation, from the initiation to the resolution of the complaints. He may be required to participate in the closed hearings of the 4 complaint and he may be involved in negotiating a settlement when violations of law are substantiated.8 Many other City departments conduct investigations in the course of executing their responsibilities, e.g., City Attorney, Office of Citizen’s Complaints, Controller’s Office, etc. However, the duties of investigators in these departments are often confined to the investigative process only. The prosecutorial and settlement phases of investigations in those departments are often delegated to others with expertise in those areas.9 As an example, Proposition C, passed by the voters in November 2003, gave the Controller many new audit functions, including the creation of a whistleblower hotline. The whistleblower hotline was moved from the Ethics Commission to the Controller’s Office at the beginning of August 2004. The Controller’s Office forwards to the EC those complaints within their jurisdiction (campaign finance, conflicts of interest, lobbyists, campaign consultants, and other governmental ethics issues).10 Only 4 complaints to the whistleblower hotline were referred to the EC during the period August 2004 to February 2005. Although the whistleblower hotline has received a total of 144 complaints from August 2004 to February 2005 (including those referred to the Ethics Commission), the Controller’s Office estimates that only a third of those complaints are truly whistleblower complaints. Others are “political matters, grievance issues, or miscellaneous informational questions,” according to the Controller’s Office. The Controller’s Office also cautions that they anticipate many more complaints when they begin to advertise the existence of the hotline in March 2005. The Controller’s Office has hired two full-time investigators to investigate the complaints to the hotline. Unlike the new voter mandates to the EC, Proposition C provided the funding necessary to provide the new mandated services. We understand that there are two vacancies in the EC for two Assistant Investigators.11 These vacancies were created by reductions in the EC budget at a time when the number of complaints is increasing and the duties of the EC are expanding. For example, the Statements of Incompatible Activities (SIAs) are in the process of being completed and approved by the EC, as described in another section of this report. New complaints are likely to result when the SIAs are approved because they will establish many new prohibitions against actions by City employees and officials. The fact that the EC has inadequate resources to fulfill its responsibilities is documented in the EC’s annual report for FY 2003-04: “…the Commission remains severely constrained in its ability to process and finalize complaints because it has only one investigator whose time is also consumed by the administration of both the Campaign Consultant and Lobbyist Ordinances. Unless the Commission is able to achieve full funding for its enforcement program, the current backlog of complaints will likely increase.” The inadequacy of the EC budget has been reported in the press: 5 “A decade into its existence, the San Francisco Ethics Commission is entering a ‘downward spiral’ due to unfunded mandates and budget cuts, according to the agency’s annual report.”12 Bob Stern, President of the Los Angeles-based Center for Governmental Studies, recommends in the same article, that San Francisco “amend its charter to provide guaranteed funding for the Commission, as in LA.” 13 Mr. Stern concludes with the observation that the EC is responsible for investigating allegations of misconduct of the same City officials who now have authority over the funding of these investigations, “It’s the people they are monitoring who set their budgets, and that’s always a problem.”14 The new Executive Director of the EC, John St. Croix, has been creative in addressing these staffing issues. He has reviewed all pending investigations and recommended to the Commission that those cases no longer viable be closed. Complaints were, until recently, investigated on a first-in-first-out basis.15 The Executive Director has also recommended a policy to the EC to prioritize investigations to optimize the use of scarce investigative resources: “The Commission refined its guidelines for determining priority among complaints for purposes of timely action. Where a complaint alleges failure to report information, Commission investigative staff will now consider – among other things – the importance to the public of the omitted information. Where a complaint alleges other violations, investigators will consider – among other things – whether the respondent is a candidate in the current election.” 16 The cost of investigating complaints is often partially covered by the settlements that result from investigations. Revenues generated by settlements are deposited to the City’s general fund rather than directly credited to the budget of the EC as required by law.17 This ensures that investigations are initiated and pursued without regard to their potential to generate revenue. The City is essentially partially reimbursed for the increased expense of increasing investigative resources through the collection of fees, fines, and settlements. For example, a settlement of $100,000 was reached in Fall 2004 with PG&E for violations of the campaign ordinance. This is another justification for providing the EC with adequate staffing to conduct investigations. In conclusion, laws do not, in and of themselves, prevent their violation. If the EC does not have the ability to enforce the laws that have been created to protect the citizens of San Francisco from unethical conduct in political campaigns and amongst City employees and officials, the laws are far less effective. New laws should be accompanied by the funding to implement them. Without such funding, the public should conclude that the laws are unlikely to produce the desired outcome. Findings 1. Investigative resources of the EC do not appear to be adequate because they are primarily responding to complaints rather than initiating their own investigations. Furthermore, they are not able to complete investigations in a timely manner.