An Open Request to the State Ethics Commission

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When the State Ethics Commission was created in 1978 under Section 2 of Chapter 268B of Massachusetts General Laws, it aimed to establish meaningful transparency. The law required every public official and candidate for public office to submit a yearly Statement of Financial Interest (SFI) and tasked the Ethics Commission with creating and overseeing these forms in accordance with the law.

Today, the Commission’s system of financial disclosure largely lacks relevance and it falls short of the spirit of the law.

The law gives the Commission broad discretion over details of the disclosures. Section 5 (f) states, “the statement of financial interests filed pursuant to the provisions of this section shall be on a form prescribed by the commission…”  Thus, the form of the SFI can be revised without a legislative act.

We believe it’s time for the Commission to foster meaningful transparency by making the following changes to the instructions and form:

 

1) SFI “Instructions”

Change the definition of amount from what currently reads:

“A category of value, rather than an exact dollar figure, as follows:

 

$ 1,000 or less

$ 1,001 to 5,000

$ 5,001 to 10,000

$ 10,001 to 20,000

$ 20,001 to 40,000

$ 40,001 to 60,000

$ 60,001 to 100,000

$100,001 or more”

to:

“Actual amount to the nearest $10,000.”

Note: Instructions regarding dollar amounts are found under the “SFI Resources” tab of the State Ethics Commission website.

 

2) SFI Section 5: “Position Held”

The law mandates that filers of SFIs disclose “the name and address of, the nature of association with, the share of equity in, if applicable, and the amount of income if greater than one thousand dollars derived from each business with which he is associated”.

The point of this provision was to give the public a sense of the extent of each filer’s relationship with private businesses. In practice, the disclosures fall short of that objective because of the anachronistic dollar categories described above – 23 legislators reported outside income in the range above $100,000 in 2011, according to CommonWealth magazine. Changing the way outside income amounts are disclosed would restore transparency for these 23 filers.

Despite the law’s call for disclosure of “the nature of association with… each business with which he is associated”, the SFI form asks only for “position held”, omitting any requirement for elaboration. With this phrasing, the potential for opacity remains, especially for filers bringing in outside income without a formal position in a business. The SFI should adopt the law’s diction on this subject:

In section 5 of the SFI, change:

“Position Held”

to:

“Position Held and Nature of Association with Business.”

The form also exempts disclosure of dollar amounts for the income of a filer’s spouse. Filers’ families should enjoy privacy wherever possible, but when a spouse’s income is significant, it could raise the potential for conflicts of interest on his/her behalf. For example, former Governor Patrick’s wife’s salary, which bridged the gap between the governor’s $132,646 salary and the couple’s $320,000 annual mortgage payment (numbers courtesy of Boston.com), was not required for disclosure. The Commission should require such disclosure by changing:

“Gross Income (Filer Only)”

in section 5 to:

“Gross Income (Filer Only, Unless Immediate Family Member’s Income Exceeds $150,000).”

 

3) SFI Section 22: Real Property Held in Massachusetts

Disclosures of property value are subject to the same shortcomings as those for income, but to a far greater extent. According to CommonWealth, 181 of the 182 home-owning legislators reported their home value with no greater specificity than that it exceeds $100,000.

To fix this issue, the method of dollar disclosure suggested above should be adopted.

 

4) SFI Section 28: “Other Creditor Information”

The SFI form seems to be weaker on debt disclosure than the law demands. According to the statute, debt can be withheld from disclosure only if it is “arising out of retail installment transactions, educational loans, medical and dental expenses, debts incurred in the ordinary course of business, [or] any obligation to make alimony or support payments.”

Massachusetts’ SFI form casts debt disclosure exceptions almost verbatim from the law, with one significant difference. In addition to the five exemptions listed, the form exempts credit card purchases. The incongruity between law and form forces us to question the legal basis for exempting credit card debt from disclosure. It is an important question, considering that in 2009, the then-House Speaker sought private sector kickbacks because of the burden of a legally undisclosed $275,000 debt, which, according to federal prosecutors, resulted from an “extravagant lifestyle”. According to a Boston.com reporter, the debt included large credit card liabilities.

On its surface, omitting credit card debt from disclosure seems rational, as the SFI’s intent is to shine a light on potential conflicts of interest, rather than simply to publicize every aspect of a state employee’s finances. However, even when credit agencies have no interest in influencing legislation, and thus there is no clear conflict of interest for public officials, a large debt may reasonably create motivation for financial improprieties, as in the DiMasi case. The Commission should require large credit card debts to be reported so disclosures are in compliance with the law or clarify why credit card debt is exempted.

Better transparency could be achieved by changing the phrase:

EXCLUDE: Any liability of $1,000 or less; … credit card purchases (other than cash advances)”

in section 28 to:

EXCLUDE: Any liability of $1,000 or less; … credit card debt, other than cash advances, unless exceeding $50,000.”

 

Massachusetts financial disclosures have failed to effectively carry out the intent of the law that created them. In this letter, you will find a number of specific changes that, if adopted, would make Statements of Financial Interest more meaningful and effective in their established goal of informing the public. The State Ethics Commission, having the power to evoke these changes by itself, should consider the proposed edits.

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