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November 21, 2006 > Statements of Economic Interest

Statements of Economic Interest

by Steve Warga

In the wake of the scandal commonly known as Watergate, California voters considered a proposition titled, The Political Reform Act of 1974 (PRA). The Act stated, in part, “Assets and income of public officials which may be materially affected by their official actions should be disclosed and in appropriate circumstances the officials should be disqualified from acting in order that conflicts of interest may be avoided.” Apparently Californians were in the mood for more complete disclosure from their public officials; the proposition passed with over 70 percent in favor.

Since then, the Fair Political Practices Commission (FPPC), established by the Act, has overseen disclosure of both campaign and personal financial information of tens of thousands of public officials running for office, in office, or employed in positions of power and influence. All covered persons must complete a series of forms and supporting schedules at certain times before, during and at the conclusion of their public careers. And that information must be available to any person wishing to review it.

The FPPC administers a decentralized system of oversight that has evolved since 1974. Rather than attempting to directly manage more than 7,000 state and local agencies covered by the Act, local jurisdictions are required by the commission to establish a biennially-renewable “Conflict of Interest Code” and to appoint a “filing officer” who collects, reviews and maintains the various forms required by the Act. Candidates, officeholders and certain “designated officials and employees” must file any one of the forms that applies to their individual circumstance.

In our review of disclosure filings in the greater Tri-City area, TCV focused on Form 700, Statement of Economic Interests (SEI) where we found anomalies of interest. Candidates must file this form and any applicable supporting schedules to publicly disclose their personal financial interests and holdings. Officeholders must file SEIs annually during their time in office and a “leaving office” SEI upon retirement from office.

A variety of punishments may be applied to those who fail to file all forms and schedules; to those who file late; or to those who fail to fully disclose required information. On the civil side, fines up to $5,000 may be levied after an FPPC investigation. The commission may also refer a case to a prosecutor for consideration of criminal proceedings. Government Code Section 91000 (a) states: “Any person who knowingly or willfully violates any provision of this title is guilty of a misdemeanor.” A person so-convicted could face time in jail plus “the greater of ten thousand dollars ($10,000) or three times the amount the person failed to report properly …” The PRA is not a paper tiger.

Typically, a media outlet or a private citizen initiates a specific investigation by filing a complaint with the FPPC, but only after the person in question has a chance to re-file a deficient or late SEI. Completion or corrections made within a specified time period after a complaint is filed, is considered a “good faith effort” and the complaint is dismissed. Otherwise, the commission may accept the complaint for investigation.

A number of Tri-City area officeholders and candidates at the city council and mayoral level did not disclose spousal financial interests, income or holdings in their current filings. This information must be disclosed on Schedule C of the Form 700. The schedule includes a specific box labeled “Spouse’s income.” Instructions included with the SEI clearly define the filer’s obligation in this regard: “Commonly reportable income and loans include: … Community property interest (50%) in your spouse’s or registered domestic partner’s income – report the employer’s name and all other required information …” (note: bold type is in the original.)

Are local candidates and officeholders who do not disclose spousal interests simply unaware of this provision in the PRA? Whitney Barazato, FPPC spokeswoman in Sacramento, dispels this notion. “We provide complete instructions with all the 700s; we maintain an extensive website available to everyone; and we provide a toll-free number to all filers who may have questions.” Asked if ignorance might be a reasonable explanation for those who fail to disclose spousal interests, Barazato replied, “Ignorance is not part of the Political Reform Act!” If Barazato’s assistance is any indication, inquiries to the FPPC receive prompt, professional and thorough replies.

In upcoming issues, TCV will report specific disclosure lapses, if any, in SEIs filed by councilmembers and mayors in Hayward, Union City, Newark, Fremont and Milpitas. We’ll also examine whether various filing officers are discharging their legal obligations. This appears to be an area with lax oversight; filing officers are also subject provisions of the PRA.

Why should anyone care? The PRA provided the answer as 7 out of every 10 voters wanted. “Public officials, whether elected or appointed, should perform their duties in an impartial manner, free from bias caused by their own financial interests or the financial interests of persons who have supported them.” Public officials hold a trusted position with the citizens. They accept responsibility for administering public monies, laws and regulations. They influence all aspects of public affairs from mundane matters like pet licenses to considerably weightier issues like public safety.

In essence, voters entrust their leaders to make and enforce those rules and regulations that affect the common good. If leaders, so entrusted, ignore certain rules they deem inconvenient or too personal, why should we trust them in any other area?

That is why full disclosure matters and why we are reporting this story to our readers.

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