Gaming Commission’s Enhanced Ethics Code
On October 24, 2013, Dierdre Roney, General Counsel of the State Ethics Commission, responded to a request for advice from Stephen Crosby, Chairman of the Massachusetts Gaming Commission, about whether Mr. Crosby should recuse himself from participating in matters concerning the awarding of a casino license in Everett Massachusetts. Chairman Crosby had previously filed disclosures on August 22, 2013 and October 25, 2013 stating in relevant part that “[Paul Lohnes], a part owner of a property in Everett that would be purchased by a casino developer if that property is awarded a license” had “invested in my company about 30 years ago; that business relationship ended 23 years ago.”
General Counsel Roney’s letter in response to Chairman Crosby stated:
“As you know, the relevant provisions of the conflict of interest law when a public employee must act in a matter in which friends or acquaintances are involved are G.L. c. 268A, § 23(b)(2) and § 23(b)(3).”
The General Counsel Roney also advised as follows:
“Approaching any decisions involving . . . Mr. Lohnes in an objective, unbiased manner, without allowing your relationships with them to affect your decision-making, is the correct approach under § 23(b)(2);”
“If there is an appearance of a conflict under § 23(b)(3), the public employee must file a written disclosure in advance to his appointing authority of all the facts and circumstances about the matter and continue to perform his official duties using objective criteria.”
Why isn’t anyone enforcing the new Enhanced Ethics Code?
There is one very big and other rather big problems with General Counsel Roney’s response. The very big one is that it does not recognize the fact that the Massachusetts Gaming Commission is subject to an “Enhanced Ethics Code” that is far stricter than G.L. c. 268A, § 23(b)(2) and § 23(b)(3). That “enhanced” (translation: far more restrictive) code was a central part of the legislative act that authorized casino gambling in Massachusetts. The enabling gaming legislation includes three framing provisions:
“Chapters 268A and 268B shall apply to the commissioners and to employees of the commission; provided, however, that the commission shall establish a code of ethics for all members and employees that shall be more restrictive than said chapters 268A and 268B.” (Emphasis added.)
“The code shall include provisions . . . prohibiting the participation by commissioners and employees in a particular matter as defined in section 1 of said chapter 268A that affects the financial interest of . . . a person with whom such commissioner or employee has a significant relationship as defined in the code.” (Emphasis added.)
“In the event that a provision of this Code addresses a matter covered by G.L. c.268A, G.L. c.268B, or 930 CMR, the provision found in this Code shall control to the extent that it is more restrictive.” (Emphasis added.)
The casino gambling legislation mandated that the Massachusetts Gaming Commission establish a code of ethics that supersedes G.L. c.268A, G.L. c.268B. The above-mentioned provisions are highly significant when it comes to interpreting Chairman Crosby’s relationship with Mr. Lohnes. Here are three reasons why:
1. The Massachusetts Gaming Commission’s Enhanced Code of Ethics unanimously adopted on February 21, 2013 established an outright prohibition –as required by the statute- on a commissioner’s participation in matters before the commission that may affect the financial interest of a person with whom he has a “significant relationship.”
2. The Enhanced Code of Ethics defines a “significant relationship” as “anyone with whom a person shared an influential or intimate relationship that could reasonably be characterized as important.” (Emphasis added.)
3. The term “shared an influential or intimate relationship” refers to relationships in the past. This is highly significant given Chairman Crosby’s disclosure that he and Mr. Lohnes shared a past relationship as business partners.
The Gaming Commissions’ Enhanced Code of Ethics is more restrictive than G.L. c.268A, G.L. c.268B, the code of ethics for regular state employee, which allows employees to participate in matters involving former associates so long as they disclose potential conflicts of interest to their appointing authorities and indicate that they feel that they can perform their duties objectively and fairly.
All of this leads us to two important questions:
- Why did Chairman Crosby ask the State Ethics Commission for an opinion letter about whether Chapters 268A and 268B require him to recuse himself from matters affecting Mr. Lohnes when Chapters 268A and 268B do not govern the Gaming Commission? The more restrictive Enhanced Code of Ethics provision governs their conduct, according to the enabling statute.
- Why did the State Ethics Commission general counsel’s letter give an opinion based exclusively on Chapters 268A and 268B and not make any reference to or otherwise take cognizance of the more restrictive standards contained in the Enhanced Code of Ethics? Instead, the advisory letter stated that “the relevant provisions of the conflict of interest law when a public employee must act in a matter in which friends or acquaintances are involved are G.L. c. 268A, § 23(b)(2) and § 23(b)(3).”
By side-stepping the Gaming Commission’s Enhanced Code of Ethics and asking the Ethics Commission for an interpretation of the regular state employee code of ethics, Chairman Crosby has accomplished an amazing sleight of hand worthy of a magician: he has made the Enhanced Code of Ethics apparently disappear.
The Enhanced Code of Ethics requires Commissioners to do the following things above and beyond G.L. c. 268A, § 23(b)(2) and § 23(b)(3):
- Recuse themselves from any licensing decision in which a potential conflict of interest exists;
- Disqualify and recuse themselves, and abstain from participating or voting in any proceeding in which their impartiality may reasonably be questioned;
- Disclose to the Executive Director or, in the case of the Executive Director or a Commissioner, to the Chair of the Commission the nature of their disqualifying interest, including but not limited to instances where they have a personal bias or prejudice concerning a party or personal knowledge of disputed evidentiary facts concerning the proceeding.
The Enhanced Code of Ethics establishes a procedure to enforce its provisions, as follows:
- Any Commissioner, employee, or consultant may request a written opinion from the General Counsel relative to the applicability of any provision of this Code and may act in conformance with that opinion.
- An opinion rendered by the General Counsel, until and unless amended or revoked, shall be a defense in any disciplinary action brought under this Code and shall be binding on the Commission in any proceedings concerning the person who requested the opinion and who acted in good faith, unless material facts were omitted or misstated by the person in the request for an opinion.
- Such requests shall be deemed confidential and exempt from disclosure under the personnel and /or privacy exemptions to the Public Records law (See G. L. c. 4, §§ 7(26)(b) and (c)); provided, however, that the Commission may publish such opinions, but the name of the requesting person and any other identifying information shall not be included in such publication unless the requesting person consents to such inclusion.
Problems with Mr. Crosby’s disclosures
By filing an incomplete disclosure with the state ethics commission about the relationship between himself and Paul Lohnes, part owner of the Everett casino land parcel, Chairman Crosby has accomplished another magician’s feat: transforming his former company’s corporate treasurer into a mere investor.
Chairman Crosby disclosed to the State Ethics Commission that Mr. Lohnes had “invested in my company about 30 years ago; that business relationship ended 23 years ago.” Public records indicate that Mr, Lohnes was not only an investor in the company but that he served for seven years as a corporate officer of Crosby Vandenburgh Group, in the position of corporate treasurer. This significant fact was not included in Mr. Crosby’s disclosure.
The distinction between an investor and a corporate officer is significant in this case. By its very nature, the relationship between a corporate treasurer and chairman, which was Mr. Crosby’s position at Crosby Vandenburgh Group, falls well within the definition of “influential relationship” under the Enhanced Code of Ethics, while the relationship between an investor and a chairman could be interpreted as being a less influential one by its nature. The Enhanced Code of Ethics prohibits the participation by commissioners in matters that affect the financial interest of a person with whom the commissioner has had an “influential relationship.” The regular state code of ethics does not prohibit such participation.
The relevant sections of his disclosure are as follows:
- 8/22/2013 disclosure: Q. Explain your relationship or affiliation to the person or organization: A: “Known Paul Lohnes since National Guard in mid-1970’s. He invested in my company about 30 years ago; that business relationship ended 23 years ago. Since then (1990), I have socialized with him (and his family) 5-10 times.”
- 10/25/2013 disclosure: Q. Explain your relationship or affiliation to the person or organization: A. “I’ve known Paul Lohnes since serving in the National Guard in the mid-1970s. He invested in one of my companies, called at the time of the Investment, Jubilee Publications, about 30 years ago; that business relationship ended 23 years ago, when the company, then called Crosby Vandenburgh Group, was sold. Since then (1990), I have socialized with him (and sometimes his family) 5-10 times. I’ve had no contact with him since my August 23rd, 2013 disclosure except to inadvertently see him in our office lobby when he was waiting to see someone else at the Gaming Commission.”
In apparent contradiction of Mr. Crosby’s claim that Mr. Lohnes had been no more than an investor in Crosby Vandenburgh Group, a New York Times article reported that Mr. Lohnes was appointed as the company’s treasurer in October, 1983. In addition, a filing by Crosby Vandenburgh Group, Inc. with the Corporations Division of the Massachusetts Secretary of State’s Office lists Paul R. Lohnes among the officers and directors of the corporation, as Treasurer. These reports combine to indicate that Mr. Lohnes was not merely an investor but served as an officer of Mr. Crosby’s company for approximately seven years.
The same filing by Crosby Vandenburgh Group, Inc., with the Corporations Division of the Massachusetts Secretary of State’s Office, raises another question about Mr. Crosby’s business relationship with Mr. Lohnes. Mr. Crosby’s ethics disclosure states that Crosby Vandenburgh Group was sold 23 years ago, in 1990. The Corporations Division filing does not state that Crosby Vandenburgh Group had been sold, but rather that it had been “merged into TVSM, Inc.” on April 4, 1990. An Associated Press article dated April 4, 1990 reported a merger between Crosby Vandenburgh Group and TVSM Inc., a New York-based company. Given that Mr. Crosby and Mr. Lohnes had been investors in and corporate officers of Crosby Vandenburgh Group, the Massachusetts Gaming Commission should require Chairman Crosby to make further detailed disclosure about what, if any, residual interests Mr. Crosby and Mr. Lohnes shared as a result of the merger.
Let’s not game the law
The members of the Massachusetts Gaming Commission have an obligation to apply the provisions of the Enhanced Ethics Code to Chairman Crosby and insist that all enhanced conflict-of-interest procedures be strictly followed. In order to safeguard the integrity of the casino licensing process, the members should insist that the Chairman not participate in decision about whether the Eastern Massachusetts license will be awarded to the Everett proposal, an outcome that will trigger windfall profits to a person with whom Chairman Crosby shared a significant prior business relationship.
Furthermore, the Gaming Commission should not rely upon a letter from the State Ethics Commission issued to Chairman Crosby without recognition of the Gaming Commission’s Enhanced Code of Ethics. The Gaming Commission itself is responsible to enforce the enhanced provisions it adopted.
The Enhanced Code of Ethics was a critically important element in passage of the casino enabling legislation. The idea that the Chairman would choose to ignore it undermines the public trust.