Money Bait
Ethics Commission Revisits City’s Pay-to-Play Culture
Yvonne Lee
Acting Chair Yvonne Lee

Awakened by federal prosecutions of City officials and contractors for corruption, the Ethics Commission (Ethics) has once-again been digging into governmental pay-to-play culture. Ethics cannot easily lead this endeavor because it’s dependent upon the same officials it supposedly oversees. For example, Ethics’ budget is subject to approval by the Mayor and the Board of Supervisors. Its 5 Commissioners are appointed by the Mayor, Board of Supervisors, District Attorney, City Attorney and Assessor. It’s all in the City Family.

 As described in the June 2019 Westside Observer, the Ethics Commission had previously fractured when it came to independently fighting pay-to-play corruption. Commissioners Yvonne Lee and Daina Chiu torpedoed an “Anti-Corruption and Accountability Ordinance” that Ethics staff and then-Commissioners Peter Keane, Quentin Kopp and Paul Renne wanted to bring to the voters. Commissioner Lee had dismissed the “perception of corruption,” calling it “anecdotal.” Dismayed, Commissioners Keane and Kopp resigned. City Family interests seemed secure.

However, 2020 saw the FBI and the US Attorney’s Office probing every City Hall orifice, and the Media avidly pursuing federal findings and related tips. Evidence of corruption was no longer “anecdotal.” So, the Ethics Commission has been forced to act. In September 2020, Ethics embarked on a review of government ethics laws to better restrain pay-to-play machinations. 

Another Crack at Behested Payments

In November 2020, Ethics released a report on behested payments whereby City officials solicit donations to favored charities and non-profits. When such donations are sought from entities doing business with the City it becomes a “shakedown” – of money for official support. Worse, those funds may go to non-profit accounts that are controlled by a City official. That was the case with Mohammed Nuru who asked DPW contractors like Recology to donate to a Parks Alliance account from which $980,000 was accessed over 5 years for holiday parties and the like.

The report includes a set of damning attachments showing how much money flowed through behested payments and how abuses ensued. To curb the pay-to-play dynamic of behested donations, Ethics offered recommendations and a proposed Ordinance. One year later, legislation based on these recommendations (File no. 201132) awaits approval from the Board of Supervisors’ Rules Committee.

quote marks

Ethics staff concluded that current gift disclosure mechanisms are “ineffective”. They proposed remedies to deter pay-to-play transactions. Their thoughtful analyses and recommendations must weather the appeals of gift recipients and the sausage-making of their Commissioners and City Hall. If the end-product is baloney, concerned citizens can still get results by reporting governmental corruption to the FBI or the Media.”

The Give and Take of Gifts

In August 2021, Ethics issued a ”Report on Gift Laws: Gifts to Individuals.” It found that some City officials — not just Mohammed Nuru and Harlan Kelly — enjoyed gifts from entities that did or sought business with their departments. Moreover, Mayor London Breed accepted $5,528 for car repairs and rental fees from her subordinate Mohammed Nuru. The City prohibits this practice to prevent bosses from extorting their underlings. Such workplace extortion has plagued City janitors, as reported in the March 2017 Westside Observer.

London Breed

In a Stipulation partly related to misbegotten gifts, Mayor Breed agreed to pay a $22,792 fine levied by the Ethics Commission. Here, we learn that in 2015, then-Supervisor Breed had “requested” that Nick Bovis, owner of Lefty O’Doul’s, and John Konstin of John’s Grill each contribute $1,250 toward her Pride Parade float, and failed to disclose the gifts as campaign contributions.

Ethics found that from 2013 through 2020, City officials using electronic Form 700 filings reported receiving 1,839 gifts valued at $899,991. Gifts of travel accounted for $649,931 or 72% of the total. Most of the remainder was for tickets, meals and events. However, this survey did not cover all gifts received, estimated to be $1 million – roughly $125,000 annually. Ethics then sampled 65 e-filers within the 6 City departments undergoing federal investigations. Six or almost 10% had accepted impermissible gifts from persons who had a financial connection to them. Ethics recommended closing loop-holes that allow tainted gifting, regardless of friendly or romantic relationships.

Gift Laundering

This September, the Ethics Commission released a fascinating report on “Gifts to City Departments." It details the crafty distribution of gifts through departments and other intermediaries, rather than directly to individuals. This report complements the September 2020 Controller’s Office report on indirect donations titled; “Gifts to Departments Through Non-City Organizations Lack Transparency and Create Pay-to-Play Risk.”

City officials and employees are prohibited from accepting gifts from restricted sources, like contractors working for their department, or lobbyists that seek their approvals. That keeps government impartial and focused on public interests. But Ethics investigators found that gifts from restricted sources were being accepted by City departments - then distributed to its officials and employees. Alternately, such gifts were passed through some allied non-profit, then transmitted to the department – and to its officials and staff. Here are graphics illustrating the laundering mechanisms;

Prohibited Donation Graphic

Gifts that facilitate official departmental functions, like a copying machine, are generally OK. But when gifts from restricted sources slide through departments and confer personal benefits upon agency officials, reciprocal favors and conflicts of interest emerge. To curb undue influence, the City’s Sunshine Ordinance requires that departments disclose gifts on their websites. Also, the gift-giving entities must disclose their own donors on their websites. Departments, boards and commissions must also report gifts received to the Controller and the Board of Supervisors. However, these disclosures may not reveal the true beneficiaries or the true sources of gifts when they are laundered through a department or non-City intermediary.

Prohibited Donation Graphic

Partying with Laundered Funds

In 2019, the Planning Department held a retirement party for an employee. The 220 attendees were asked to buy tickets; $25 for employees and $125 for outsiders. Among these outsiders were lobbyists, contractors and law firms that did business with or influenced the Planning Department. They ended up paying $15,000 or 85% of the cost of the event, thereby regaling Planning officials and employees. Planning staff are prohibited from accepting food and drink directly from such restricted sources. But because the department let a relative of the feted retiree collect the money, nobody objected to the latent quid pro quo.

Similarly, in 2019 the Airport organized opening celebrations for the Harvey Milk Terminal and the Grand Hyatt at SFO. To pay for these events, the Airport accepted $1,018,000 in gifts – 86% of which came from Airport contractors and tenants. City officials and employees relished free food, drink and entertainment presented by the Airport. But these treats were indirectly furnished by sources that were barred from directly gifting City officials.

Likewise, the Entertainment Commission’s 2019 Holiday Party cost $10,979 – of which 86% came from 4 companies that received entertainment permits from the Commission. As for the Port’s 150th Anniversary Gala, funding came through the non-profit “Friends of the Port” that extracted $97,000 from Port tenants.  

Institutionalized Payola

From 2015 through 2019, the Recreation & Parks Department distributed free tickets worth $430,950 for the Outside Lands Music Festival in Golden Gate Park. Of these 1,855 tickets, 78% went to City officials. And of those, most went to Rec & Park employees – including Commissioners, as shown below;

Outside Lands Tickets Distributed by Rec & Park (2015‐2019)

Year

Total Tickets Distributed

Value of Tickets

Tickets to City Officials

Value of City Official Tickets

Tickets to Rec&Park Employees

Value of Rec & Park  Tickets

2015

348

$68,420

296

$56,920

224

$37,920

2016

346

$76,090

268

$55,420

216

$39,600

2017

354

$86,829

284

$65,689

238

$49,779

2018

409

$100,141

320

$74,140

296

$65,860

2019

398

$99,470

274

$62,850

228

$49,060

Totals

1,855

$430,950

1,442

$315,019

1,202

$242,219

Source: SF Ethics Commission

What’s troubling is that the tickets were donated by Another Planet Entertainment, the company that stages the Outside Lands event — and has a contract with Rec & Parks. That should forbid Rec & Park employees from accepting gifts from Another Planet Entertainment. Although Another Planet donated tickets to the department, Rec & Park’s staff got the goods anyway. A regular one-day ticket costs $155, so this perk is substantial.

Weirdly, Another Planet’s permit agreement with Rec & Parks mandates that free tickets be given to the department. That institutionalizes the quid pro quo. The Ethics report notes; “This practice can create a culture of expectation that is the basis of a pay‐to‐play system: entities doing business with the department may come to believe…that gifts are…necessary in order to secure favorable outcomes from the City.” 

Rec & Parks is not alone in fomenting a culture of expectation. The War Memorial and Performing Arts Center is the City’s venue-keeper for the Opera, Symphony and Ballet. These clients purchase leases that oblige them to provide free tickets to the 11- member War Memorial Board of Trustees. The Trustees, appointed by the Mayor, approve the leases. So they shouldn’t be receiving kick-backs from their clients. Yet, since 2012 the War Memorial has received and distributed 3,392 free tickets worth $516,031. The lucky recipients were War Memorial Trustees and employees – even Supervisors Norman Yee and Catherine Stefani. Needless to say, some of these folks could afford to buy their own tickets. Conflicts of interest abound, not just for the Trustees but for Supervisors who approve the rates for leases issued by the War Memorial.

When tickets are donated to City departments rather than directly to individuals, the ultimate recipients are not required to disclose them as gifts. Astoundingly, Ethics found that free tickets surpassed the value of all other gifts reported by City officials. While departments are required to report their gifted tickets, they do so haphazardly, and without noting to whom they are bestowed.

Ethics staff concluded that current gift disclosure mechanisms are “ineffective”. They proposed remedies to deter pay-to-play transactions. Their thoughtful analyses and recommendations must weather the appeals of gift recipients and the sausage-making of their Commissioners and City Hall. If the end-product is baloney, concerned citizens can still get results by reporting governmental corruption to the FBI or the Media.

Dr. Derek Kerr is a San Francisco investigative reporter for the Westside Observer Contact: watchdogs@westsideobserver.com

October 2021


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