In The News › Ethics code has puzzling loophole

Jul 30, 2007

Source: Times-Picayune

Ethics code has puzzling loophole

Ethics code has puzzling loophole
City official wins contract with HANO
Monday, July 30, 2007
By Gordon Russell
Staff writer

As president of the city’s Industrial Development Board, Jimmie Thorns can heavily influence decisions on tax abatements sought by landowners, including the Housing Authority of New Orleans, which awaits action on 19 such requests.

With those applications pending, the housing authority at its last meeting awarded Thorns a contract worth nearly $500,000 for appraisal and “property insurance analysis” work.

Sound like a conflict of interest? Under Louisiana law, it’s not, according to Thorns and several lawyers familiar with state ethics rules.

Thorns said he checked with the Industrial Development Board’s attorney, O. Ray Cornelius of Adams and Reese, before responding to the housing authority’s solicitation. Cornelius confirmed that, saying he, in turn, checked in with lawyers at the state ethics board, who advised him the situation didn’t appear to present a problem.

In approving the deal, HANO staff rendered Thorns’ submission the best of the four proposals the agency received, and also the cheapest, according to the staff recommendation. The agency was not required to give the work to the lowest bidder, because it is considered a professional service.

Authority officials said they could not immediately provide copies of the proposals submitted.

HANO regulators, meanwhile, had flagged Thorns’ proposal and asked him to provide documentation indicating that the development board, an obscure but influential body created by the City Council, knew about and did not object to Thorns taking on HANO as a client.

Cornelius sent Thorns a letter explaining that ethics board lawyers had opined that “there is no restriction in your being involved in transactions with HANO” because the authority is a “governmental entity.”

Thorns, who forwarded the letter to the housing authority, would have had a conflict under the ethics code only if HANO was a person rather than a public entity, Cornelius said, again citing his conversations with the ethics board’s lawyers.

The situation highlights a loophole of sorts in the ethics code, which generally bars public officials from having private dealings with people or entities with business before them.

The code says a public servant, such as Thorns, cannot receive anything of value from a “person” seeking a contractual or other relationship with the entity he represents, in this case the Industrial Development Board. But the code defines “person” as “an individual or legal entity” and exempts government agencies.

In the view of Loyola Law School professor and ethics expert Dane Ciolino, Thorns’ arrangement “runs afoul of the spirit but not the letter of the governmental ethics code.”

Cornelius said this week that he did not seek a formal ethics opinion because the board’s lawyers raised no objection to the business relationship.

In an interview, Thorns emphasized he would have dropped his bid for the work if anyone he consulted raised a concern.

HANO staff ranked the four proposals the authority received for appraisal services on a 100-point scale. Of the 100 points, the staff assigned a maximum of 25 points for cost and 75 for the proposal’s “technical” merits.

Thorns had the top score in both categories, according to the staff review, receiving 20 of 25 points for cost and 67 of 75 points for technical merit. His overall score of 87 was 21 points higher than the No. 2 proposal, submitted by Duff & Phelps.

The applications that HANO has pending before the development board involve six public housing complexes and four other properties that the authority wants to redevelop.

The authority-owned properties, currently untaxed, could wind up on the tax roll as a result of the rebuilding, several complexes, for instance, are slated to be replaced with mixed-income housing.

HANO hopes to shield the improvements from new taxes by negotiating a payment in lieu of taxes, or PILOT, through the development board. Typically, such agreements freeze the owner’s pre-improvement tax liability for a number of years as a way of encouraging the developer to proceed.

Janet Howard, president of the Bureau of Governmental Research, said that if ethics laws don’t prevent arrangements such as Thorns’ deal, perhaps the laws should be modified.

“The situation raises questions about the ability of a key member of the IDB to deal completely objectively with HANO’s application,” Howard said. “IDB members shouldn’t be working for someone who has an application pending before them.”

In recent months, the Bureau of Governmental Research has issued two reports critical of the development board.

One report noted that the board lacks policies or guidelines to inform its decisions to subsidize one project versus another. Another report questioned its award of additional breaks to already heavily subsidized projects.

. . . . . . .

Gordon Russell can be reached at or (504) 826-3347.

Jul 30, 2007

Source: Times-Picayune

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