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HomeMy WebLinkAbout2005 08 31.minutes.Board of Ethics MINUTES LANSING CITY BOARD OF ETHICS SPECIAL MEETING COMPLAINT #2005-1 AUGUST 31, 2005 - 5:30 P.M. TENTH FLOOR COUNCIL CONFERENCE ROOM, LANSING CITY HALL The meeting was called to order at 5:30 P.M. in the Tenth Floor Council Conference Room, City Hall, Lansing, Michigan. BOARD MEMBERS PRESENT: Ellen Sullivan, Ph.D Chairperson Rev. John Folkers, Vice-Chairperson Jason Amen Hetep Ronald Frybort LaSandra Jones David Merchant ABSENT: Mary Estes A QUORUM WAS PRESENT Yes OTHERS PRESENT: Paul Novak, City Attorney Jack Roberts, Chief Deputy City Attorney Debbie Miner, City Clerk M. Denise Griffin, Deputy City Clerk APPROVAL OF AGENDA: Motion by Vice Chair Fokers to approve the agenda as submitted. MOTION CARRIED 6/0 PUBLIC COMMENT: Chairperson Sullivan asked if anyone present at this meeting is representing the complainant. There was no response. Chairperson Sullivan asked if anyone present is representing the subject of the complaint. City Attorney Novak indicated that he is present to represent Glenn Kirk who had a scheduling conflict and could not attend in person. Mr. Kirk has sent the message that he would be happy to meet with the Board at another time, should they find it necessary. Attorney Novak stated that he is aware of this case because a similar threat of lawsuit has been filed in the City Attorney’s Office, stating that litigation may be filed on behalf of a former city employee who was fired. This first came to his attention and to Mr. Kirk’s attention around July 8, 2005 when they received a letter from Mark Canady, legal counsel to Jeff Burnham. The letter from Mr. Canady stated that if Mr. Burnham was not immediately reinstated to his position they would file a ‘whistle blowers’ suit on his behalf. This information has been distributed in several forms; at Teamster 2 meetings and in the form of a letter filed in the City Attorney’s Office. To date, no lawsuit has been filed against the City, though it is still possible that one will be filed. The Board should keep that in mind while deliberating on this issue. Allegations of activities under the whistle blower act are taken very seriously and are usually referred to outside legal counsel. That is what they did in this case on July 8, 2005 when they received the letter from Attorney Canady, it was referred to Foster, Swift, Collins & Smith. They have made requests to them in writing regarding the issues brought up by Attorney Canady on Mr. Burnham’s behalf. Their review is ongoing. As the Department Head, he would be the individual who is presumably getting benefits that are referred to in the letter from Mike Parker in which he alleges that all directors are getting benefits 5% higher than their annual salaries. In this discussion he must raise the point that, in that respect, he has a conflict for purposes of giving legal advice on this issue. The Charter creates a specific exemption in section 5-505.1 when they relate to compensation, otherwise, the Attorney and Finance Director could never be involved in negotiating contracts for employees. The fundamental complaint raised is that Department Heads back in March 2005 voluntarily reduced their pay by 5% and as a result one of the things they should have done is to also reduce, for purposes of compensation the amount on which retirement is based. They should have reduced it there as well. Because they did not do that, it results in an illegal retirement inducement that is higher than it would otherwise have been. To the extent that anyone considers this would be an ethical violation, Department Heads would be willing to take back the 5% of their salaries that they returned. There are however, wrinkles in manner. When this discussion took place with department heads, they were willing to give back 5% of their retirement also. Mr. Kirk is not subject to this, because he is not vested in the retirement system, and when he becomes vested, any retirement would not include the year in which that 5% was at issue. Part of what led to the initial conclusion that department heads could give back 5%, but not be hit by a retirement decrease was his experience at the State of Michigan where they looked at furlough days for employees and determined that compensation would not affect their retirement situation. They have made disclosures of all of this to outside counsel. They have discussed a couple of ways that voluntary give backs could be implemented. 1. Have the give back be a gift. The problem with that is that they might have to pay taxes on income they would not have received. They would be taxed on income they did not accept. If they decided to do that they will place taxes on that 5% they gave back to the City. 2. Amend the retirement ordinance to contemplate the fact that even though their take home salary was reduced by 5% for retirement purposed that 5% was not included. This would require passage of an ordinance. The benefit of doing it that way is that the employee would not incur a tax liability and still not suffer on their retirement. 3. Give the employee the option of the first method or have the employee elect to reduce their income by 5% to be treated for all purposes, including retirement purposes as a 5% reduction. In this case, employees could decide to handle it one way or the other. This would be left up to the employee. 4. Department heads could take back their 5% 3 pay reduction. A final decision has not been made. There is some sensitivity to this because it is very likely that within 2/3 weeks a law suit calling this whistle blower activity will be filed. Member Frybort asked Mr. Novak if these options were considered because of the potential lawsuit or have you considered that it is a ethics violation. Attorney Novak responded no. To be characterized as an ethics violation they would have to say that Mr. Kirk received a personal benefit which he has not received, because he is not vested in the retirement system for which such a sweetner would exist. Also, what he has implemented is a reduction in compensation, rather than an increase in compensation. Member Amen Hetep asked how long the 5% reduction is in effect. Attorney Novak answered, from March 2005 through the end of the fiscal year, which is June 30, 2006. Member Amen Hetep asked if retirement payments are based on the last two years of service. Attorney Roberts answered that they are based on the highest two years of earnings in the past 10 years of employment. Attorney Novak said that Mr. Kirk will not be eligible for retirement benefits unless he stays in the employment of the City of Lansing until 2012. At that time, if you calculate his final average compensation for the past 10 years and none of those years at a higher compensation than the period of time in which the pay reduction was given, then it could have an impact on him, but he would have to work until 2012 with no pay increases or compensation at levels higher than the 2005/2006 year. Member Merchant asked for confirmation that the current discussion involves Mr. Kirk and all Department Heads. Attorney Novak responded that there will be an additional group of employees who earn salaries in excess of $75,000 who will be asked not to take 2.25% increases they are slated to receive on August 1st. Member Merchant asked for confirmation that it is the Attorney’s statement that since Mr. Kirk receives no financial gain from this situation, it is not a ethics violation. Department Heads could stand to lose their jobs on January 1st. He asked if this is just an attempt to play on the sympathy of voters. Member Frybort asked if the Department Heads do agree to do a give back then when future pay increases are negotiated, would there not continue to be a deviation between their contract and their pay amount and their retirement calculations? 4 Attorney Novak said that when the State of Michigan implemented this type of pay reduction, once that reduction was no longer in place they calculated salary increases not on the pay as it was reduced, but on the pay as it had been contractually established. And, when it was increased it was increased off of that amount. If the City does the same thing, then the discrepancy would disappear. Attorney Roberts said what he did in looking at this to determine the nature of the complaint was to evaluate it consistent with other complaints that come before the Board. He did the same with the affidavit that he filed and the affidavit that the City Treasurer filed. He looked to see if there was an actual conflict in filing the affidavit. The letter from Mike Parker refers to a section of the ordinance, not the Charter itself. Mr. Parker’s letter claims that the Finance Director has used resources or funds under his personal control to obtain personal gain for himself and other department heads in the city. He is stating that the party in violation is the finance director. In looking at the City Charter the governing rule from which the ordinance derives, section 5-505.1 under the conflict of interest subsection states; ”The above provisions shall not apply to individual or collective bargaining agreements pursuant to which a City officer or employee directly or indirectly receives income or benefits in the form of official remuneration as an officer or employee, or any City action pursuant to which a City officer or employee directly or indirectly receives income or benefit as a member as a member of the public at large or any class thereof.” He reads this to mean that the Finance Director is not prohibited from entering into discussion with the Mayor regarding his or her salary. And to mean they are not prohibited from dealing with union employees relative to what their compensation may be. It also does not prevent the union representatives from negotiating their salary compensation. This says to him this does not rise to a conflict of interest. From there he went to the ordinance and read section by section focusing on subsection “g” because this is the circumstance where the alleged financial gain is remuneration. He does not feel that subsection “g” of the ordinance applies to this. He sees this as someone using their computer for private purposes, or using City paper to write private letters, or using City letterhead to accomplish writing a private letter. This section of the ordinance is not meant to apply to this circumstance, and without Mr. Parker here to say where another section of the Charter applies, he does not think Mr. Parker has made a case under the ethics ordinance in the charter that shows him a violation. That is his evaluation of this complaint. Member Frybort asked if Mr. Roberts considered their offer to forgoe 5% of their salary to be designed as individual collective bargaining agreements? Attorney Roberts said that remuneration, whether it be up or down, is an individual agreement. This is someone who has a contract and is agreeing to make a charitable contribution to the City of part of their salary remuneration. In his opinion this includes any fringe benefit. He feels that what is suggested in the letter is that the City is doing 5 something legal, but may be doing it in an illegal manner. His office sought outside counsel to address what is described here and how to do it in a legal manner. He does not see any intent to do something that is improper or incorrect. If it is improper or incorrect their intent is to correct that. Vice Chair Fokers said that this is something they did not intend to get into. Member Frybort said this originally came from the Mayor’s Office. Attorney Roberts said it came from the Mayor and Department Heads because of the City’s financial position and discussion about what could be done to improve that position at a time when there are people in the City who have union jobs that may have to be laid off or take lesser salary amounts. He thinks it came about from the point of view of trying to do something to benefit the City. Member Frybort asked if there is anything in this section that would prevent the department heads or finance department from including all members of a bargaining team in this? Attorney Roberts said that Member Frybort’s question views department heads as a bargaining unit. There are certain groups in the City that are collective bargaining units that are unions. There are other groups in the City that are non-collective bargaining units that have negotiated salaries. That provision is broad enough to say that if a department head is negotiated with the Mayor as to what their salary should be that is legal. Also, exempt employees who do not have collective bargaining abilities are able to meet with the administration and deal with issues of their compensation. Member Amen Hetep asked if the ability of department heads to negotiate their contract provides a benefit that other exempt employees or non-exempt employees do not have. Attorney Roberts said that the exempt employees group that are non-bargaining groups as a group do not have the ability to strike nor to bargain, so they receive what they are given. Long ago, that group was considered tie-barred to a union. That was before former Mayor Hollister. They then got the same benefit that union employees got. After Mayor Hollister took office it was made clear that group was not tie-barred. The last time around it was determined to look to a particular union benefit and say that same benefit will be offered to an exempt group. Even department heads do not have a lot of bargaining ability. It limits them to whether or not they want to work for the City and whether the Mayor wants them to work for him. Member Amen Hetep asked if the 5% reduction taken could be perceived as a retirement benefit that other employees would not have a chance to get? Attorney Roberts said they did not bump up their salary so as to take a 5% reduction. They had that salary based on their contract. This was a bonafide reduction. Chair Sullivan noted that salaries are set and there is a specific amount agreed to. These individuals who had previously agreed to accept a specific salary have agreed to give back 5% of their salary, but they did not agree that their retirement would be 6 reduced and the City is now looking at how to do this legally. This complaint is primarily directed at the finance director, but other department heads would have the same exclusion as Mr. Kirk under the Charter and the Ethics Ordinance. Attorney Novak said that section 5-505.1 of the Charter would be the same. The difference would be that other department heads do not implement in the payroll department the manner in which this thing is actually handled in terms of paystubs. So they do not use personal property resources or funds to obtain personal financial gain since they do not implement the reduction. Attorney Roberts said the only way this includes other department heads is if there was some indication that department heads then turned around and with whatever gain Mr. Parker thinks they received, they then turned around and gave something back to the finance director. This complaint is direct that the finance director is doing something improper that benefits not only himself but other department directors. Vice Chair Fokers asked if this issue is within the jurisdiction of the Ethics Board. Attorney Roberts said that where there is a violation, if the Board wishes to, they can direct the City Attorney to investigate and give them a preliminary opinion within 30 days based upon the investigation and the information obtained by it. What Chairperson Sullivan has done is that before you have the City Attorney take those steps, she asked for a determination as to whether a case could be made that there is a violation. Because if that case could not be made, they could also determine that they do not believe there is a violation that is in the jurisdiction of the Board. Attorney Roberts asked the Board to dismiss the complaint based on the lack of jurisdiction. If they do feel there is jurisdiction, then they would be required to request investigation including an interview with Mr. Kirk. Member Frybort said that the Board can make a decision as to whether or not there is jurisdiction, or they can ask Mr. Parker to come to the next meeting to make sure that the assumptions of the Board are correct. Member Merchant said that Mr. Parker has stated a complaint, but maybe not a valid complaint. Although this general area is within the jurisdiction of the Ethics Board, based on the conflict of interest definition in 5-505.1 which places it in the purview of this Board, the complainant fails to state a claim under which a violation of the City Charter or law has occurred. Motion by Member Merchant that the City Clerk advise Mr. Parker that: The general area of the complaint is within the jurisdiction of the Board of Ethics, based on the conflict of interest definition contained in 5-505.1 of the City Charter, which places it in the purview of the Board of Ethics. However, Mr. Parker has failed to state a claim under which a violation of the Charter or law has occurred, because the individual identified in the complaint is specifically excluded from a violation of “conflict of interest” for the subject matter of the complaint by the language of this section . . . 7 ”The above provisions shall not apply to individual or collective bargaining agreements pursuant to which a City officer or employee directly or indirectly receives income or benefits in the form of official remuneration as an officer or employee, or any City action pursuant to which a City officer or employee directly or indirectly receives income or benefit as a member as a member of the public at large or any class thereof.” Therefore, the Board of Ethics has elected to dismiss the complaint based on the failure of the claimant to state a violation of the City Charter or law. MOTION CARRIED 6/0 Meeting adjourned at 7:45 P.M. Respectfully submitted, Debbie Miner, Recording Secretary Date Minutes Placed on File: