Audit's Unanswered Questions:

Does the Ethics Commission Fight Corruption?
Ethics Executive Director LeeAnn Pelham
Ethics Executive Director LeeAnn Pelham
Ethics Executive Director LeeAnn Pelham
Ethics Executive Director LeeAnn Pelham
Man with fingers crossed behind his back

Expectations ran high after voters approved Prop K in 1993, launching the City’s Ethics Commission (Ethics). Finally: an official agency to counter corruption in government and political campaigns. But between intent and execution lurks a shadow – human nature. So, the quest for good government has vied with the pursuit of self-interest. Scandals and failings have repeatedly dashed public expectations. Civil Grand Juries pushed to strengthen Ethics in 2005, 2011 and 2014. Lapses prompted initiatives by the public, the Board of Supervisors, and the Commission itself to amend the Campaign & Governmental Conduct Code and redefine Ethics’ responsibilities.  

Curiously Coincidental Timing

One way that governments blunt the impact of scandals is to show that remedial measures were already underway. On 11/5/19 Supervisor Norman Yee introduced a Motion (File No. 191133) requesting a performance audit of the Ethics Commission by the Board’s Budget & Legislative Analyst (BLA) – “as a priority.”  No explanation for the “priority.” Meanwhile, the FBI had been investigating corruption at City Hall.

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The audit fails to mention that no retaliation claims have ever been sustained by the Ethics Commission. That startling fact has been hidden by reporting only that cases are “dismissed” or “closed.” The public is never told if a case was substantiated, partially-substantiated or not substantiated.”

On 1/15/20, the FBI filed a sealed Criminal Complaint in US District Court alleging that former DPW chief Mohammed Nuru had pursued 5 corrupt “schemes” since 2018. The following day, on 1/16/20, the Board’s Government Audits & Oversight Committee approved Supervisor Yee’s audit request. The rationale, as stated by Supervisor Gordon Mar, was to check if recent changes in campaign finance and lobbying laws were being addressed and to improve the timeliness of investigations and enforcements, given “a political landscape like the one we are in.” He added that “it seems as though the lowest hanging fruit are the targets of investigation rather than the more sophisticated operations.” Neither the “more sophisticated operations” nor the current “political landscape” were described.

Supervisor Norman Yee.
Supervisor Norman Yee

 On 1/21/20 the FBI arrested Nuru. After promising to keep mum about the FBI’s ongoing probe, Nuru alerted his boss, City Administrator Naomi Kelly. Soon, everyone knew – including FBI wire-tappers. On 1/28/20, the full Board unanimously adopted Supervisor Yee’s Motion, without mentioning the explosive scandal then rattling City Hall. The Motion cites extraneous and anodyne reasons for the audit, plus the Board’s policy that each City program “be the subject of a performance audit at least once every eight years.”  True, the Buget and Legislative Aanalyst last reviewed Ethics Commission practices in 2012. Still, the audit’s urgency and timing makes one wonder if Supervisor Yee was clairvoyant or tipped off.  

Audit Findings

Budget and Legislative Analyst Harvey Rose
Budget Analyst Harvey Rose / Courtesy Commonwealth Club.

The BLA’s 81-page “Performance Audit of the Ethics Commission” was released on 8/10/20. It contains 5 findings and 16 recommendations. The recommendations are largely directed at Executive Director LeeAnn Pelham who introduced many upgrades since January 2016. The findings are summarized below;

Assessing Effectiveness and Risks

The Ethics Commission needs to improve the way it assesses its own performance. For example, it hasn’t produced an Annual Report since 2014-15 and lacks consistent performance metrics. While Ethics has set priorities, it hasn’t adequately tracked and reported progress toward reaching its goals.

The risk of violating ethics laws varies among City officials and employees, depending on their jobs. However, Ethics does not tailor its training programs based on risk assessments. Doing so would promote compliance and reduce the need for enforcement measures.

Staffing

Ethics “has never been fully staffed.” Since 2016, it has struggled with a “high vacancy rate” - 19% or about 4.5 vacancies annually. Meanwhile, there have been 15 changes to the Campaign & Governmental Conduct Code that required additional administration and programming. Understaffing is largely due to slow hiring; it takes 6 months to hire a new Ethics employee. Ethics relies on the City’s Department of Human Resources to conduct its hiring – at a cost of $90/hour. Because Ethics lacks the funds to optimize DHR’s hiring, staff shortages persist and impede every program.

Audits

Audits of election campaign committees have taken almost 2 years to complete, thereby reducing their public relevance and hindering enforcement within the statute of limitations. Investigators lack audit training and the Audit Manual is way out of date. Also, Ethics has yet to conduct mandated lobbyist audits.

Investigations

Investigations of ethics violations take “more than two years on average” - actually 29 months. The “preliminary review” of complaints takes 6 months. Then, just 1/3 of complaints receive formal investigations. Because the Enforcement Division opens more cases than it resolves, there’s a mounting backlog.  Long-lingering investigations erode public confidence and the deterrent effect of enforcement.

Whistleblower Protection

The Enforcement Division is responsible for investigating whistleblower retaliation claims. On average, these claims have taken 32 months to resolve. Such delays impair the gathering of evidence and witness testimony as well as the integrity of investigations. Further, Enforcement Division staff lack training in whistleblower retaliation investigations since these involve employment law rather than ethics law.

Ethics veils the outcomes of retaliation investigations. When the BLA reviewed 34 retaliation claims filed over 3 years from 2017 through 2019, it found that 20 were dismissed due to “insufficient evidence”, 2 were withdrawn, and 12 were pending. None were substantiated. Importantly, the BLA recommended that staff “…report on whistleblower retaliation case outcomes to the Ethics Commission on an annual basis, including reasons for dismissals and case closures, to enhance transparency of these investigations.”  

Unmentionables

The audit fails to mention that no retaliation claims have ever been sustained by the Ethics Commission. That startling fact has been hidden by reporting only that cases are “dismissed” or “closed.” The public is never told if a case was substantiated, partially-substantiated or not substantiated. Yet the substantiation rate is an important indicator. It reflects the effectiveness of investigative processes as well as quality of the complaints submitted.  Per the 2020 Hotline Benchmark Report by NAVEX Global, a risk and compliance management firm serving 3,255 organizations, the global substantiation rate for whistleblower retaliation claims was 23% in 2019. And in the 9 years from 2011 through 2019, the average substantiation rate was 20%. Compare that with 0% for more than 100 retaliation claims handled by our Ethics Commission since 1995.

The Westside Observer analyzed Ethics’ shifty history of dismissing all whistleblower retaliation complaints back in June, September and October of 2013. Sadly, Ethics remains a dead-end for mistreated whistleblowers. Still germane is former Ethics Commissioner Joe Lynn’s 5/7/09 Fog City Journal revelation that Ethics investigations of Sunshine Ordinance complaints “uncover willful violations only if the respondent decides to confess.” That also explains why retaliation claims are DOA. This failure to enforce the City’s Whistleblower Protection Ordinance renders it meaningless. It also makes it deceptive – a trap for naive complainants. Non-enforcement gives retaliators a green light to pursue whistleblowers without consequences. Ultimately, taxpayers foot the bill when ineffective Ethics investigations force whistleblowers to sue the City.

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That also explains why retaliation claims are DOA. This failure to enforce the City’s Whistleblower Protection Ordinance renders it meaningless. It also makes it deceptive – a trap for naive complainants. Non-enforcement gives retaliators a green light to pursue whistleblowers without consequences.”

 

After the BLA’s call for reporting whistleblower retaliation case outcomes, LeeAnn Pelham produced a table on page 13 of the draft Annual Report.  It lists some outcomes – but not how many cases were substantiated. Withholding that number conceals a zero substantiation rate. Ethics hasn’t explained this shady track record, apart from implying that every retaliation claim is unfounded. More likely, Ethics investigations are superficial and deficient. Too, investigations are tainted when under-trained and over-worked Ethics staff seek counsel or coaching from City Attorneys who are sent copies of complaints.

Whistleblower claims are often denied after consulting with City Attorneys. This practice arouses conflicts of interests. City Attorneys strive to minimize the City’s exposure to civil liability – no matter how damning the facts. They have a duty to defend officials and employees accused of retaliation. They justify their work as protecting taxpayer funds from greedy plaintiffs. Invariably, protecting City officials and the public purse takes priority over protecting whistleblowers. In retaliation cases, relying on advice from City Attorneys favors respondents over complainants - and abets reprisals.     

Also absent from the audit is how Ethics must annually bow and scrape before the Mayor’s Office and the Board of Supervisors to fund its budget. Ethics is thus beholden to, if not controlled by, the very folks it supposedly monitors for unethical conduct. Instead of being independent, Ethics is captured. One solution is to fund Ethics the same way the Controller’s City Services Auditor is financed – by a set portion of the City budget. For example, Ethics’ operating budget of $4.6 million could be covered by an automatic 0.04% cut of the City’s $13.7 billion budget, thereby reducing its fiscal dependency on City Hall.

September 2020

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