Assembly Bill 10, authored by Assemblyman Mike Gatto, D-Glendale, modernizes the Form 500 disclosure document in five ways:

1. “Clarify the reporting ranges for investments, property and income to be more specific and more in line with modern property-value ranges, providing more accurate information of the financial interests of an elected official;
2. “Require elected officials to disclose who their business partners are;
3. “Require elected officials to disclose what exactly their businesses do;
4. “Require elected officials to report the specific instances when they recused themselves from a vote because of a conflict of interest; and
5. “Extend the behested payment reporting requirements to include candidates, and elected officials for one year after leaving elective office, so that elected officials must disclose if they solicit funds from outside institutions during their term in order to pay their own salaries on their way out of office.”

“Increased transparency is essential to protecting public resources, preventing corruption and restoring public trust,” said Gatto in a prepared statement. “This legislation will modernize disclosure forms to reveal the business dealings of political insiders and give Californians greater access to information about their representatives.”

As Jeff Mitchell of the Salinas Californian previously reported, the current Form 700 documents are “completely undemanding and lax … in compelling local, county and state officials to tell us the actual nature of their personal financial affairs.” Without this information, he said, constituents “would never know when our electeds and key civil ministers are acting in the best interests of themselves or their friends and not of the public.”

AB10 has been ordered to the state Senate for consideration.

Richard Pan, a physician, took in just over $2,800 in gifts and travel payments, including a $440 outing at a San Francisco Giants baseball game, compliments of the Pacific Gas and Electric Co. Pan is now a Democratic state senator representing a Sacramento district.

And Jeff Stone, whose business, Innovative Compounding Pharmacy, is worth over $1 million, took 25 pages to document his property holdings, including a number of manufactured home rentals. The Riverside County Republican, too, is part of the state Senate’s freshman class.

Their financial information is part of the new filings of statements of economic interest for 2014, which went online Tuesday and are available for public perusal.

It’s the first filing for the freshman class of both the Assembly and the Senate — and for the public, it’s the first time to get a glimpse of their wealth as well as their perks.

Elected in November, taking gifts in December

Some got off to a quick start. Ling-Ling Chang, a new Republican assemblywoman from Chino Hills, declared $2,433 in travel payments over four days in December. In that period, she participated in an education symposium for the California Charter Schools Association for $1,258 and a policy summit for TechNet, a group that lobbies for tech giants with a hub in Los Altos, for which she claimed $1,175.

At the same TechNet event, freshman Assemblyman Bill Dodd, a Napa County Democrat, received $340. Both Chang and Dodd noted the money was for speech/panel participation.

Some like gifts in keeping with their interests. State Sen. Bob Hertzberg, a Los Angeles Democrat referred to as a “deal-making, cigar-smoking” guy in a 2004 L.A. Times profile, disclosed $765 in gifts involving cigars.

Hertzberg, a former speaker of the Assembly, is back in Sacramento after spending 13 years in the private sector.

Some of the financial disclosures are on the quirky side: Kansen Chu, a San Jose Democrat Assembly member, holds a financial interest of between $10,000 and $100,000 in NeuroSky, a company that sells a product that claims to use electrodes on your forehead to interpret brainwave electricity – and, yes, to read your mind.

Like most states, California requires annual disclosure of gifts as well as income and property interests. They are submitted to the state’s Fair Political Practices Commission, or FPPC, which also polices alleged violations of the state’s campaign laws.

At the state Assembly level, 18 of the 27 new state Assembly members come from the ranks of city councils. At the upper ranks, five of the 10 new senators are former Assembly members.

Lawmakers with a history of having hands slapped

The FPPC sends warnings to lawmakers who have violated the rules in the form of a public letter. And some taking new offices have already been warned of potential malfeasance.

Jeff Stone received a warning in 2010 about a 2009 vote when he was a supervisor in Riverside County, in which he “may” have violated conflict of interest provisions by awarding funds to a nonprofit that stood to benefit him.

“However, we have determined that an enforcement action for a violation is not warranted, because the funds awarded were restricted and could not be used for administrative costs of your source of income,” the note from the commission stated.

Pan has also received a warning about political behavior when he allegedly received services worth over $500 from a lobbyist who hosted a fundraiser for him in 2012.

Much is made of the staggering wealth of members of Congress, where California Sen. Dianne Feinstein is among the richest senators and Rep. Darrell Issa, R-Vista, is noted as the wealthiest among U.S. representatives.

At the state legislator level, wealth is not so easily tracked in California. Filers must note holdings in both real estate and stock ownership, which can indicate in increase in wealth.

Gifts, though, are more readily tracked. In California, the gift limit for 2013-14 was $440 for goods from a single source.

State Attorney General Kamala Harris in her filing for her final year in 2010 as district attorney in San Francisco reported no personal stock holdings. It was her last year before taking her current office and she received $1,869 in gifts, mostly flowers as a departure present.

In the previous year, 2009, she noted that her book, “Smart on Crime,” had earned her between $10,000 and $100,000 in royalties, although the book was released in October.

Book royalties are usually paid on a semi-annual or quarterly basis.

Newsom likes gifts; Harris, not so much

This year, Harris, the leading Democratic nominee in the race to replace retiring U.S. Sen. Barbara Boxer, has more holdings to declare due to her marriage in August to fellow attorney Douglas Emhoff.

Harris’ filing shows holdings in Comcast, Costco, Home Depot, Nike, Verizon and Visa, which she notes were held in Emhoff’s IRA and are held separately. Harris, as the state’s chief law enforcement officer, could potentially oversee activity involving some of those companies.

Her gifts this time around are more modest: just one receipt of flowers, from Fox Entertainment, declared at $101.

The man initially seen as her rival for Boxer’s U.S. Senate seat, Lt. Gov. Gavin Newsom, has for years accepted more lucrative gifts.

In 2010, Newsom’s last year as mayor of San Francisco, he declared $3,512 in gifts, including tickets to the opera, symphony, sporting events and Cirque du Soleil.

Last year, Newsom, who declared in January that he would not run for Senate, reported $3,781 that again included tickets to sporting events, a crystal trophy and a Christofle tray.

Legislative gift-taking eroding public trust

In an effort to stem the damaging headlines, Senate Democrats announced on Thursday their plans to introduce a package of bills to reform the gift rules for elected officials. The proposals include a ban on receiving any gifts from lobbyists, an overall reduction in the annual gift limit from $440 to $200 and an outright prohibition on accepting gifts of spa treatments, golf games and tickets to theme parks, concerts and sporting events.

“There is no question that recent events are testing the public’s faith in how our government does its work,” Sen. Ricardo Lara, D-Bell Gardens, said at the press conference. “We need to restore the public trust.” Of course, legislative leaders wouldn’t need more laws if they followed the best practices of their colleagues.

In the Assembly, Gatto has set the standard for ethics and transparency. He not only declined all international junkets, but disclosed gifts that even the state’s political watchdog would find unnecessary to report. His disclosure reports even include footnotes. 

Gatto follows spirit and letter of the law

“Giving and receiving small tokens are part of life,” Gatto said. “I try to follow the letter and spirit of the law, and that’s anything over $50.” In explanation of the gift certificate given to his daughter, Gatto said, “The rules are very clear that we have to report anything over $50.” 

Technically, Gatto’s interpretation of the law is correct. According to Fair Political Practices Commission’s instructions for the Form 700, the annual statement of economic interests, elected officials must report “gifts given to members of your immediate family” if the official can “exercise discretion or control over the use or disposition of the gift.” This “control over the use or disposition of the gift” also includes tickets to concerts and sporting events. It explains why Gatto reported tickets to the Rose Parade and Rose Bowl that he gave away to local high school students who had overcome adversity.

For several years, unlike many of his colleagues, Gatto has worked with teachers and administrators and found deserving students to take his spot at the big game.  And don’t think Gatto does it for the positive publicity. He’s been doing it for years and never told the press. The only place you’ll find it: on Gatto’s financial disclosure report, in compliance with state law.

Ethics: Appearance of impropriety

Jessica Levinson, a Loyola Law School professor who specializes in governmental ethics, said that the issue of elected officials accepting gifts is a balance between what is allowed versus what appears to cross the line of undue influence. “If the laws allows legislators to accept gifts, then is it improper or indecent for them to do so?” she asked. “While some gifts are permissible, it can intuitively feel problematic when our elected lawmakers accept gifts when we all strongly suspect they would not receive those gifts were it not for their official roles, and the power they wield in those roles.”

That appearance of impropriety is exacerbated when lawmakers travel with lobbyists on extravagant junkets to exotic locales. Last year, California lawmakers collected passport stamps from Germany, Switzerland, Cuba, Mexico, Poland, Norway, Taiwan, Israel, China, Armenia, Sweden, Canada and South Korea, much of it on the dime of special interest groups.

“When it comes to traveling and attending conferences, I want our officials to leave the Capitol and learn from others,” Levinson said.  “I don’t necessarily want them to do all of that on the public’s dime. When the conferences look fishy, or the sources of the funds have substantial business before the state, it is certainly fair to ask questions.”

Some legislators have avoided the questions altogether. During the Legislature’s 2013 spring break, while dozens of lawmakers were relaxing in Taiwan, Eastern Europe and Cuba, state Sen. Ted Lieu, D-Torrance, fulfilled his monthly Air Force reserve duty. In addition to Lieu, state Sen. Jim Beall, D-San Jose, and Assemblywoman Lorena Gonzalez, D-San Diego, have declined to participate in junkets. And, of course, so did the Legislature’s ethical leader, Mike Gatto. “We are a big state with international implications, but I choose to stay in California,” he said. “My policy is simple: I will travel for limited circumstances but only in California. I am a California official.”

Specifically, Form 700 is a Statement of Economic Interests required of “designated” government employees, meaning the governor’s top aides and consultants. Some, but not all, of Brown’s “designated” appointees have filed Form 700s with the Fair Political Practices Commission.

As CalWatchdog.com detailed, the FPPC included in its files Form 700 from Fish and Game Commissioner Mike Sutton.

But for new Labor Secretary David Lanier, the FPPC did not comply with CalWatchdog.com’s request for copies of his Form 700.

Because of the discrepancy, CalWatchdog.com asked Brown’s press secretary, Evan Westrup, “What is the Brown administration policy on Form 700s, gifts, travel expense claims, and conflicts of interest?”

Westrup replied:

“Pursuant to the Political Reform Act (Government Code section 81000 et seq.), the Governor’s Office maintains a Conflict of Interest Code, which lists the designated employees that are required to file statements of economic interest. A copy of the Conflict of Interest Code is attached. All employees of the Governor’s Office maintain strict adherence to the requirements of the Political Reform Act.”

The code requires Brown administration employees first to file their statements of economic interest with the governor’s office. The governor’s office then sends only some of the statements to the FPPC, and retains others. Government Code Section 81000 et seq. can be found here.

Schwarzenegger administration

A March 2009 Los Angeles Times story found that Gov. Arnold Schwarzenegger banned nonessential travel in his administration. But records showed members of his administration ran up significant commuting travel expenses that were paid at the taxpayers’ expense.

In the story, Michael Josephson, president of the nonprofit Josephson Institute of Ethics in Los Angeles, accused the Schwarzenegger administration of lackadaisical oversight of its required reporting.

“Is anybody at the wheel here?” asked Josephson. “The best possible case for this, which is still not a good case, is [that] nobody is providing oversight. . . . The worst case is that you have some people who are knowingly taking advantage.”

Transparency: word du jour

When Arnold Schwarzenegger was governor 2003-2011, his administration created a transparency website that Brown shut down upon taking office in 2011.

The Schwarzenegger policy was formalized in April of 2009 with the transparency website launch. On June 4, 2009, Schwarzenegger issued Executive Order S-08-09, directing state agencies and departments to post audits of their operations performed by outside entities dating back to January 1, 2008, and financial and programmatic audits, as well as audits that they have performed on other government entities.

The order said:

“WHEREAS the technical definition of ‘audits’ is too narrow and there is a need to increase transparency in government by posting other types of reports and similar documents on the Reporting Government Transparency web site.”

A 2009 press release said:

“Continuing his commitment to making government more transparent to the people of California, Governor Arnold Schwarzenegger today launched www.reportingtransparency.ca.gov. This Web site makes publicly available the Statement of Economic Interests, Form 700, and the Travel Expense claims for the Governor’s Office Senior Staff and Deputies, Agency Secretaries, Agency Undersecretaries and Department Directors.”

The press release is no longer available on the state’s website. And the transparency site has been reduced to announcing Brown pulling the plug, plus other resources that might be tried to find the information.

The press release, which only remains in a Sacramento Bee story, is pictured below.

Additionally, travel expense claims and Form 700s from the senior staff and deputies in the governor’s office were posted on the Governor’s Office Web site before it was taken down.

Schwarzenegger himself said:

“Since taking office I have taken steps to make government more accountable and responsive to the people. By making the economic, gift and travel information of the senior members of my administration easily available online, we are taking unprecedented steps to open up our government to the people — yet another critical step toward more government transparency.”

Website taken down

“‘The website eliminated more than four months ago was poorly maintained, underutilized and had not been regularly updated by the previous administration,’ Westrup said. He noted that Sunshine Review, a national nonprofit organization dedicated to government transparency, gave California an A grade in its annual report this week, praising the state for posting budgets, contracts and audits on its websites.”

CalWatchdog.com asked Westrup why the Brown administration didn’t just bring the website up-to-date?

He replied with wording similar to what he gave the Times:

“The website, eliminated more than two years ago was poorly maintained, underutilized and had not been regularly updated by the previous administration. The information that was previously posted on that website remains available to the public.”

CalWatchdog.com suggested to Westrup that, while the Sunshine Review gave California an “A” grade in its annual report, posting budgets and contracts is not in the same as reporting conflicts of interest and financial disclosures.

Westrup then forwarded CalWatchdog.com a copy of the Brown administration’s two-page Conflict of interest Code (reproduced below). And he wrote:

“Pursuant to the Political Reform Act (Government Code section 81000 et seq.), the Governor’s Office maintains a Conflict of Interest Code, which lists the designated employees that are required to file statements of economic interest. All employees of the Governor’s Office maintain strict adherence to the requirements of the Political Reform Act.

“Regarding travel, the Governor’s Office follows DGS and CalHR state travel policies (you can read more here, here and here). Regarding: the ‘transparency website,’ the statement you cite below still applies.”

He was referring to his statement about the Schwarzenegger transparency website being poorly maintained.

Meanwhile, Controller John Chiang, using no money above that already allocated to his office, was putting up a widely praised, comprehensive website listing state and local government employees’ compensation. Brown’s notice on the dismantled transparency website even pointed to Chiang’s website as a place to dig for the compensation information no longer easily available on the governor’s site.

References: The Conflict of Interest Code

The FPPC website explains:

“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. No public official at any level of state or local government shall make, participate in making or in any way attempt to use his official position to influence a governmental decision in which he knows or has reason to know he has a financial interest.”

“The Political Reform Act prevents conflicts of interest in two ways — financial disclosure and disqualification. (See Gov. Code Sections 87100–87350.)

“Disclosure: The purpose of financial disclosure is to alert public officials to personal interests that might be affected while they are performing their official duties, i.e., making governmental decisions. Disclosure also helps inform the public about potential conflicts of interest.

“Disqualification: If a public official has a conflict of interest, the official may be required to disqualify himself or herself from making or participating in a governmental decision, or using his or her official position to influence or attempt to influence a governmental decision.”