By Tom Durham and Betty Janik —
The Scottsdale Ethics Code has been in the news lately, largely due to the ethics complaint filed against Council member Guy Phillips. On May 5, 2020 a panel of three independent judges (the “Ethics Panel”) held that Mr. Phillips had not committed any ethical violations. At the May 19 meeting of the City Council, the City Council adopted the panel’s conclusion by a 5-1 vote, with Council member Korte dissenting.
Following the decision by the Ethics Panel, several critics (including Mike Norton, who filed the original complaint against Mr. Phillips) have argued that the Ethics Code needs to be modified. In fact, the Ethics Panel agreed, stating that the Ethics Code contains ambiguities and problems which “need to be addressed.” In order to understand these criticisms, we are going to review Count 2 of the complaint, which was the focus of the Panel’s decision.
Count 2 centered around a GoFundMe account set up to help Council member Phillips with medical bills following an accident. On September 17, 2019, Mr. Phillips broke his leg, which prevented him from operating his air conditioning business. Susan Woods, an acquaintance of Mr. Phillips, set up a GoFundMe account to help pay Mr. Phillips’ medical bills. The account eventually received about $2,400 in contributions. The GoFundMe account was set so that payments would go directly to Mr. Phillips’ medical providers and the contributors to the account would be anonymous (although as beneficiary of the account, Mr. Phillips could have learned the contributors’ identity, he chose not to). On December 4, 2019, at a City Council meeting on the Southbridge II project, Council member Phillips voted against the zoning approvals necessary to construct the project. Ms. Woods, along with thousands of other Scottsdale residents, also opposed the Southbridge II project.
The gist of the complaint filed by Mr. Norton was that Mr. Phillips “sold” his vote on the Southbridge II in exchange for the $2,400 in the GoFundMe account. The Ethics Panel held that there was no evidence to substantiate the violation alleged in Count 2. A “gift” will present an Ethics Code violation if it is made by a person “engaged in a general practice or specific situation that involves the city’s decision making or permitting processes.” Mr. Norton provided no evidence that Ms. Woods was involved in any situation involving the “city’s decision-making process” on Southbridge II. The Ethics Panel correctly held that the Ethics Code requires a “corrupt intent;” i.e., making a gift to influence the decision-making process. The Panel could not find any evidence that the GoFundMe account was created for the corrupt purpose of influencing Mr. Phillips’ decision making on Southbridge II. To the contrary, the fund was created solely for the “benign purpose” of assisting Mr. Phillips with his medical bills. The Ethics Panel accordingly concluded that Mr. Phillips had not engaged in an ethical violation.
Some critics have complained that the Ethics Code does not contain a definition for “benign purpose,” a concept the Ethics Panel relied upon. While technically true, this claim misses the point. A gift is made for a “corrupt purpose” when it fits the code’s definition of a payment made “as an attempt to exert improper influence.” A “benign purpose” is simply the flip side of this definition: when a gift lacks a “corrupt purpose” of influencing an official decision, it is made for a “benign purpose.” Here, the uncontroverted evidence showed that the “benign purpose” was helping Mr. Phillips with medical bills.
Another important fact in the Ethics Panel’s decision was the poor drafting of the Ethics Code, which includes several ambiguities. The complaint against Mr. Phillips involved punitive measures, and it is a well-known maxim of the law that punitive provisions must be strictly construed. Therefore, when the law contains “ambiguities,” these must be construed in favor of the accused; no one should be found guilty of violating an unclear provision. The Ethics Panel was not free to rewrite the law to cover behavior not clearly described in the law.
Some critics of the Ethics Panel’s decision, including Council member Virginia Korte, have claimed the decision created a “precedent” which would allow the unlimited use of anonymous contributions. This is not true. The Ethics Panel clearly stated its decision was based on “all the facts and circumstances,” particularly the clear connection between the GoFundMe account and Mr. Phillips’ injury. The Ethics Panel decision does not allow for anonymous contributions outside the narrow facts of this case.
We agree, however, that the provisions of the Ethics Code need to revised, and the City Attorney Sherry Scott has indicated she is going to start that process. We have some suggestions for that process. First, we agree that the subject of anonymous contributions should be addressed. Obviously, a Council member cannot “sell” his vote by taking money from an anonymous person, whose desires and identity are unknown. But for purposes of clarity, this drafting error in the Code should be fixed.
Our second suggestion concerns the Ethics Code’s definition of “City Officials,” which currently includes only the Mayor, City Council members, and members of other boards and appointed advisory groups. It does not currently apply to candidates for these offices and positions. This limitation does not make sense and appears to be a drafting error, since gifts made to candidates present the same problems as gifts made to City Officials. Assume for example, that a developer with matters involving the “city’s decision-making processes” made a large gift to a candidate for mayor or City Council, and these candidates were subsequently elected and voted on matters involving the developer’s projects. This situation would present a clear conflict of interest, but the Ethics Code does not address this situation if the gift was made before the candidate was elected. Similarly, candidates are not required to review or receive instruction in the Ethics Code. To fix these issues, the Ethics Code should be expanded to include declared candidates for City office.
Our third and most important suggestion to revise the Ethics Code concerns a “loophole” much bigger than the one for anonymous contributions. If a person with business before the City frames his contribution as a “campaign donation” rather than as a “gift,” the “donation” has exactly the same effect as a “gift.” Such a donation appears to contravene the plain words of the Ethics Code prohibiting “gifts” from anyone engaged in the city’s decision-making processes. Therefore, the Ethics Code should be amended to prevent City Officials and candidates from accepting contributions from persons involved in the city’s decision-making processes.
Following the Ethics Panel decision, Mr. Phillips announced that he would return all “contributions from those givers that have, have had or will have an interest in city-decision making or permitting processes.” Mr. Phillips noted, as we have, that the definition of prohibited “gifts” does not include an exemption for “campaign contributions” when a developer, lawyer, or other person has a financial interest in an issue pending before the Council. Mr. Phillips also challenged his council colleagues and candidates to do the same and return contributions from those with matters pending before the City.
The problem of large donations to candidates and Council members came into sharp focus this week when the Los Angeles developers Shawn and Steven Yari announced plans for a massive redevelopment, to be called the Scottsdale Collective, on the southeast corner of Camelback and Scottsdale Roads. Both of us have toured the site and discussed the project with Mr. Yari. Our comments herein are not directed to the merits of the project but are directed solely at the campaign finance aspects of this proposal.
The Yari brothers have made large contributions to three of the current candidates for the City Council. Whoever wins this November’s election will almost certainly be called upon to make decisions regarding the future of the Scottsdale Collective. These gifts present the precise situation spelled out in the Ethics Code, since the Yari brothers are engaged in a “general practice or specific situation that involves the city’s decision-making processes.” Technically, the three candidates for Council are not currently covered by the Ethics Code, but this would appear to be an enormous loophole, since they may be called upon to make decisions concerning the Yari brothers’ project. As Mr. Norton stated in his complaint against Mr. Phillips, Council members must avoid even the “perception of undue influence or impropriety.” When Council members or candidates accept “campaign donations” from persons having or likely to have business before the city, the perception of undue influence cannot be dispelled.
The Yari brothers are not the only persons engaged in a “general practice…that involves the city’s decision-making process.” Over the years, many developers, lawyers, and other similar persons have made large contributions to the Mayor, City Council members, and candidates for these offices. These donations have the same potential for abuse.
The gist of Mr. Norton’s complaint seems to be that if Mr. Phillips had known the identity of his anonymous contributors, he would have rewarded them with his votes in the Council. In the case of campaign contributions, however, the recipient does know the identity of the person making the contribution. Thus, the concern presented by Mr. Norton’s complaint is squarely presented when persons having business before the City Council make large contributions to Council members and candidates. The public may well view this activity as vote buying.
We have one last suggestion for reform to the Ethics Code, or Scottsdale election law. Scottsdale currently allows individuals to make campaign contributions of up to $6,450. Contribution of this amount are far beyond the means of ordinary citizens and raise the issues of “undue influence and impropriety” which concerned Mr. Norton. Tempe has recently lowered the limit for individual contributions to $520, but we believe a limit of $1,000 would represent a fair compromise.
In opposing the Ethics Panel’s decision, Council member Korte stated that “citizen trust” requires that the Council be “above reproach,” and in view of the upcoming elections, she urged quick action in revising the Ethics Code. We agree. To ensure that the Council remain above reproach, we strongly urge the Council to revise the Ethics Code to include the suggestions made in this article. As has often been stated in the field of campaign finance, “the real scandal isn’t what’s illegal, it’s what is legal.”
Tom Durham and Betty Janik are candidates for Scottsdale City Council.