Appearance of Impropriety 1: Citizens Insurance and Private Employment Opportunities

Appearance of Impropriety 1: Citizens Insurance and Private Employment Opportunities

Two stories out of Tallahassee this past week have raised concerns about the appearance of impropriety in dramatic and at the same time complex ways. I’ll cover one today, one Wednesday.

Today’s story concerns Citizens Insurance, the state-sponsored entity that was designed as a property insurer of last resort but plays a major role in the state insurance market in a variety of ways.

The story reported in the Tampa Bay Times and elsewhere, is that several prominent executives of Citizens have become prominent executives in companies with which Citizens has been doing business. The examples include situations where the company received a contract from Citizens and then, some months later, the Citizens’ executive went to work for the company.

Let’s be clear here: what has been reported indicates that there are nuances to each of these stories. There also isn’t a “smoking gun.” All parties directly involved have affirmed that the decision to award a contract and the decision to hire the public official by the private company were completely independent of each other. And the general counsel for Citizens has stated that none of these transitions from the public to private sector violate state regulations about state employees going to work for companies with which they have done business as public employees.

I’m not questioning any of these claims.

I simply want to note that this would seem to be a classic example of an “appearance of impropriety,” and that some of the efforts to argue that it is not show a misunderstanding of the problem of appearance.

The appearance problem is simply stated. So let’s imagine I’m a public sector executive, and see how I might create a problem of appearance.

Government contracts are to be awarded to private entities so as to best serve the needs of the public. If I have a role in awarding contracts, I’m not supposed to derive a unique personal benefit from the award of the contract. That means no free golf outings. No expensive dinners. No trips.

No jobs.

If I leave the public sector (as, of course, I am free to do), it should be clear that I didn’t use my power of contracting to curry favor with my new employer. The best way for me to do this is to go to work for some company with which I did not, in any way, do business and over which I did not exercise any authority during public service. No contracts, no oversight power, no appearance of impropriety.

If, on the other hand, I leave for a private sector job with a company that benefitted from its relationship with the agency where I worked and exercised authority  . . . well, that’s an appearance problem, plain and simple. I can be accused of having secured my new job by doing favors for my new employer while I worked for the public.

Under this latter set of conditions, refuting the charge of impropriety is very difficult. Too many of the awkward questions have “yes” for an answer, even if the answer to the ultimate question (“Did you use your office in any way to help you secure this job?”) actually is no.

Unfortunately, former public officials faced with this accusation frequently make their situation worse by their answers, as has happened in this case. To “prove” that there was nothing unethical about these transactions, more than one individual has commented on how little value was extracted by the company from the contract. For example, Eric Ordway, who now works for a subsidiary of a company that received a contract for as much as $8 million (a contract, according to the Miami Herald, Mr. Ordway would have supervised) dismissed the significance of the contract by noting that another company received the bulk of the payments under the approval and that the total amount paid out actually was “less than $300,000.”

Again, I’m not suggesting that this isn’t true. And I understand how this seems like a reasonable defense.

But here’s the problem.

Suppose I am accused of taking a direct bribe. Say the allegation is that I took a $10,000 bribe to award a contract.

If I respond to the charge by saying something like, “You can’t buy me for $10,000,” the instinctive response of the skeptical and cynical will be, “Okay, how much can I buy you for?”

Similarly, if I respond to the charge that I awarded a contract in order to secure a job by saying the contract wasn’t worth that much, I’m inviting a debate about the value of the deal that got me my job, rather than refuting that a deal was done.

The issue of conflict of interest and misuse of public office isn’t about how much the alleged benefit was. The appearance of improper conduct isn’t either.

It’s simply the question, Will the public believe that they weren’t betrayed when this particular deal went down?

If the answer is no, then our answer to the offer of that job probably should be no, too.

4 Responses to Appearance of Impropriety 1: Citizens Insurance and Private Employment Opportunities

  • jimfrishe

    Scott, you left out some pertinent details that were part of the article. The individuals involved administered the contracts but had no role in evaluating the bids submitted nor were in a position to influence the awarding of the contracts. Granted that information was buried in the article, but was there never the less.
    There is a huge difference between hiring someone who was in a position to benefit the private company in the awarding of the contracts and hiring someone who was a good administrator of the contract.
    The first instance is fraught with nuances and subtleties and yes, appearance of impropriety if the person subsequently got hired by the private firm that was awarded the contract. Thus we have prohibitions against that happening for executives that exercise that authority.
    The second instance is an administrator who was not involved in the awarding of the contract and whose job performance can be measured by the execution of the contract. If he violates the contract to favor a company, he can (and should be) be punished. There is no “appearance of impropriety”. His judgment is not an issue. He is either a good administrator or he is not. If he is, should we foreclose, for two years, private sector employment in his career field as we do for the executives who awarded the contract?

    • Dr. Scott Paine

      Jim,

      My focus was on appearance, not reality. There are appearance problems in this instance (as evidenced by the prominence and depth the story was given in both the Miami Herald and the Tampa Bay Times, as well as comments quoted in the paper). The details you highlight are important to a determination of the presence of an actual ethical breach, of course.

      My next post takes on another situation in which one could readily argue that there aren’t any real problems, but there are appearance problems. That’s what I’m trying to highlight.

      Thanks for writing!

  • jimfrishe

    So you are saying you have allowed the press article to mislead you? The details I highlighted are important to the actual situation. The innuendo of the press is not – or at least should not – be pertinent. The appearance of impropriety should at the least, include the possibility of it happening.

    • Dr. Scott Paine

      Of course not, Jim. I understand your point. But appearance doesn’t have to be about actual impropriety, or even the serious potential. Appearance concerns relate to how something could be characterized, incompletely (even somewhat, but not totally, inaccurately). Go back and read that article again, focusing on how the companies and former Citizens executives defended themselves. Talking about how the contract didn’t make them much money suggests that the issue wasn’t whether or not there could have been improper influence, but whether the influence that might have been exerted was valuable enough to the company to reward the executive for having exercised it. Wrong standard, bad impression.

      Undoubtedly, what is quoted by the article isn’t everything that was said. It may have been the only thing said that raises questions. But apparently it was said, and the point here is that addressing these sorts of allegations in this way makes the situation worse.

      But you don’t have to agree with me. We may just have to agree that we see this differently.

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