Derouin: Time to Outlaw Dark Money for Councilmembers

By James Derouin —

The Scottsdale City Council did the wrong thing when it accepted the Independent Ethics Panel report in the Guy Phillips’ matter.  That is because the report created two immense loopholes in the City’s Ethics Code, thereby creating new vehicles for “dark money” for Councilmembers and Council candidates as well.

The Panel was applying an ordinance that is “intended to promote ethical conduct and public trust in the integrity of Scottsdale municipal government.”  The Panel’s decision did neither. The Panel found that a member of the Council (and a member of any Council board, commission, committee or task force) can accept limitless gifts in limitless amounts from anonymous donors in not one, but in two ways.

The public needs to know what happened.

  1. Phillips was represented by the City’s immediate past city attorney; the same guy who advised Phillips on ethics last year. Citizens should realize that all of the statements about “Phillips said this and that” is misleading.  Phillips said nothing.  His (ostensibly free) attorney in the ethics matter was Bruce Washburn, the immediate past Scottsdale City Attorney.  He is the guy who advised Phillips on the ethics code as recently as last year; now he came back to argue that two enormous new ways exist for directing dark money to members of the Council.  Some would consider that a conflict of interest.
  2. The GoFundMe anonymous account was set up intentionally to hide the sources of the gifts to Phillips. Affidavits before the Panel established irrefutably that Bob Littlefield, the husband of Councilmember Kathy Littlefield, specifically advised that the GoFundMe account be set up so that the all contributors would remain anonymous—in other words, the thousands of dollars contributed to it would be “dark money.” Bob Littlefield has been silent on the subject.  GoFundMe says that Phillips had access to the names—but the names remain secret.  Anonymous money is dark money.
  3. The “benign purpose” GoFundMe dark money loophole. The first Washburn/Phillips loophole allows unlimited anonymous gifts in unlimited amounts to be made through GoFundMe to a Councilmember for a “benign purpose.” The term “benign purpose” is not defined; it can be anything.  And, on top of that, the money collected for the “benign purpose” doesn’t even need to be spent for the “benign” purpose.  Thousands of dollars were raised for Phillips for, supposedly, medical purposes, yet the money was mostly spent for non-medical private and business expenses.  Anonymous money is dark money.
  4. The “personal gift” dark money loophole. The second Washburn/Phillips loophole allows a Councilmember to legally accept unlimited anonymous gifts in unlimited amounts as long as the recipient considers it to be a “personal gift.”  The term “personal gift” is, again, not defined. It can be anything as long as the recipient puts that label on it—and then doesn’t need to disclose it.   Anonymous money is dark money.
  5. The ethics code cannot be applied to candidates for office. Two candidates for Council suggested that the city’s ethics code be applied to candidates for office.  That is not possible:  ethics codes are applicable to elected and appointed officials.  There is no way to apply them to candidates for office.  Besides that, the ethics code today is useless and, for all practical purposes, non-existent.
  6. Campaign contributions from individuals must be disclosed, but they cannot be prohibited. Another suggestion made is that contributions from certain categories of people be prohibited. The US Supreme Court in its Citizens United decision ruled that you cannot do that.  It said that the cure for receiving a campaign contribution is disclosure; report it.   I, personally, don’t like Citizens United, but it is the law. Anonymous “gifts,” however, are a dark money alternative to having to disclose campaign contributions.
  7. Hypocrisy is afoot. While there is a lot of hullabaloo about how bad public, disclosed constitutions from developers are, Guy Phillips just attended a fundraiser sponsored by developers.  I’m waiting to see if and when Phillips returns those campaign contributions.
  8. There are quick, simple fixes. The fixes to the newly created dark money loopholes are simple.  Prohibit anonymous gifts.  Prohibit GoFundMe conduits for anonymous gifts.  Prohibit the ridiculous “benign purpose” and “personal gift” loopholes.  They didn’t exist before the Phillips case.  Eliminate them.  Keep in mind that, today, because of the Phillips’  decision, any member of the City Council (or its boards, commissions, committees or task forces) can accept unlimited amounts of gifts from unlimited anonymous donors without disclosing the gifts.  That’s the deal.  The fixes are simple and can be done quickly.  Until fixed, however, the gates for dark money are wide open.

Give Scottsdale what it deserves.

Scottsdale deserves honest government.  It deserves public servants who serve with honor and a sense of duty.  When I raised such a thought to the Panel, it was called “sanctimonious” by Phillips in a brief prepared by Mr. Washburn.  If that is sanctimonious, then make the most of it.  I am a citizen not seeking public office and with no business before the City Council.  Mr. Phillips, with the help of Mr. Washburn, created, then took advantage of, two manufactured loopholes which the Panel, after the fact, found to exist.

Phillips was acquitted, but the job now is to make sure that nobody else can take advantage of the dark money loopholes.  Give the public the assurance that unlimited anonymous gifts from an unlimited number of unknown persons cannot legally be given to the members of the City Council (and the members of its boards, commissions, committees and task forces).  Eliminate the dark money; restore the ethics code.  Sanctimonious or not.

James Derouin is an attorney who has lived in Scottsdale since 1985.  He does not represent developers and has never represented a client before the city of Scottsdale.  He was one of the authors of the City’s Ethics Code unanimously adopted by the City Council in 2006 and has served on various city task forces.