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Loophole B: Business disclosure rules baffling, often ignored


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Nov. 4, 2015 — Since Rep. James Beverly took office in 2011, his Macon optometry practice has collected more than $132,000 from Medicaid and the Department of Juvenile Justice for eye exams and treatment, services he provided for many years before seeking public office.

A consulting firm whose owners include Sen. John Albers earned $284,000 in 2014 to help with reorganizing the Department of Behavioral Health.

And Fort Valley State University, the prison system and other state institutions forked over $419,000 in 2013 and 2014 to Rep. Jimmy Pruett’s middle Georgia air-conditioning business.

None of those transactions turn up on the three lawmakers’ personal financial disclosures, the forms that purportedly show how elected officials’ businesses benefit from taxpayer dollars.

The reason: Georgia’s financial disclosure laws are confusing, subject to varying interpretations and routinely ignored. Some legislators don’t seem to know they should report business dealings with the state. Others, for different reasons, say it doesn’t apply to their situations.

“I never even thought about that being a state requirement,” Beverly told me recently. “It never even registered.”

It makes little difference, since regulators don’t audit lawmakers’ disclosures to see if such transactions are reported properly. The Campaign Finance Commission last cited it in 2002, when then-Senate Majority Leader Charles Walker paid a fine for failing to disclose his businesses’ dealings with Grady Hospital and the Medical College of Georgia.

Georgia’s Ethics in Government Act touts transparency as the key to monitoring potential conflicts of interest:

“… the state’s public affairs will be best served by disclosures of significant private interests of public officers and officials which may influence the discharge of their public duties and responsibilities. … [I]t is for the public to determine whether significant private interests of public officers have influenced the state’s public officers to the detriment of their public duties and responsibilities.”

To give Georgians access to the necessary information, the Act requires that elected officials disclose details of their personal finances once a year. Under Section III of that disclosure, they must list companies or partnerships in which they own an interest that’s worth more than $5,000 or more than 5 percent of the business. Under Section IX, legislators and other state officials must disclose certain transactions between those businesses and any state agency that exceed $10,000 a year.

Or so it’s generally believed. A closer look at the Act suggests that legislators may not have to report much of anything regarding payments from state agencies on personal disclosures.

Bear with me. Explaining this loophole will require a shot or two of legalese.

Section 21-5-50(b)(8) of the Ethics in Government Act requires that lawmakers’ personal financial disclosures list transactions “authorized and exempted from disclosure under Code Section 45-10-25,” which is a part of the Codes of Ethics and Conflicts of Interest for all state employees — elected and non-elected alike.

The latter code section limits the circumstances – such as competitive bidding and the sale of real estate through eminent domain – in which a legislator’s company may do business with a state agency. Transactions meeting those criteria must be reported on a form known as a Business Transaction Report. Failure to do so is punishable by a fine of up to $10,000.

The catch, though, is that 45-10-25 applies to businesses in which a legislator owns a “substantial” interest, which is defined as more than 25 percent, not the 5 percent cited in the Ethics in Government Act. Other companies in which a lawmaker owns a lesser interest would have no such restrictions and no duty to disclose their transactions with the state.

Neither law requires a filer to identify which businesses he owns a 25 percent stake in, making it impossible to know from the public record whether a legislator has complied.

Both Personal Financial Disclosures and Business Transaction Reports are posted on the Campaign Finance Commission’s website.

Some ethics lawyers believe legislators’ transactions with state agencies should be reported on both forms, as some legislators do just to be on the safe side. Others contend that the Business Transaction Report alone should suffice.

Stefan Ritter, the new executive secretary of the Campaign Finance Commission, acknowledged the agency hasn’t enforced these disclosure requirements. He said he’s trying to clarify whether it has the authority to do so.

“If we do, we will,” he said.

Untangling the law’s reference to transactions that are “exempted from disclosure” becomes even more difficult. Section 45-10-25 doesn’t exempt anything, but 45-10-26 does, excluding single transactions less than $250 and total annual transactions less than $9,000 from the disclosure requirement.

That would seem to leave little to disclose on a legislator’s Personal Financial Disclosure. I’m no mathematician, but I’m pretty sure there’s no way for transactions that amount to less than $9,000 a year, as cited in Title 45, to exceed the $10,000 threshold for disclosure cited under the Ethics in Government Act.

A state agency, of course, could pay a legislator’s business less than $250 for a single purchase – box lunches for the office, say, or a bag of doughnuts and a tank of gas. The law seems to be saying that only those $250-or-less purchases need to be reported on a legislator’s Financial Disclosure.

And yet, many lawmakers own an interest in companies that do hundreds of thousands of dollars in business – sometimes millions – with state government. Often, those dealings can be unearthed only by digging through the details of each agency’s payments to its vendors.

Which I did (a task made less tedious, I found, by simultaneously bingeing on Season One of How to Get Away with Murder.)

Friday, I’ll tell you about the dozen or so lawmakers who didn’t fully disclose business deals with the state, and why the law says many of them may not have had to.

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