From the Houston Chronicle: Houston senator’s work raises questions of conflict of interests

In 2306 we discussed a central problem in amateur legislatures. where the general session s very short and legislators paid very little, the expectation being that they work full time in the real world. Legislators often have conflicts of interest. The work they do as part time legislators can go hand in hand with the work they do in their full time jobs.

This may be an example.

- Click here for the article.

Over the past 26 years, state Sen. Rodney Ellis, D-Houston, has voted to confirm gubernatorial appointments to the Lower Colorado River Authority, a powerful electric utility in central Texas.

During the same time, financial firms he either owned, worked for, or owned stock in have profited handsomely by helping underwrite $3.7 billion in bonds sold by the authority.

His impressive legislative record is well-known — 676 bills he has authored or served as the lead Senate sponsor have become law, including major reforms to Texas’ criminal justice system, schools and community colleges.

But because of Texas’ lax ethics law, much less is known about Ellis’ equally impressive career in the lucrative government bond business, which has repeatedly placed him in a position to exercise authority over local governments and public agencies whose bond proceeds were being used to pay Ellis’ firms.

His dual role as lawmaker and bond underwriter has left him straddling the line between politics, municipal finance and public policy, raising questions about potential or actual conflicts of interest, or the appearance of conflicts.

Since first being elected to the Texas Senate in 1990, Ellis has been involved directly or indirectly in municipal bond deals totaling $120 billion in Texas, an analysis by the Houston Chronicle has found. Nearly all of those deals have involved several firms doing “underwriting” — when firms are chosen or bid to buy bonds from a government agency and then sell them to investors.

The cost of issuing government bonds is about 1 percent of the bond’s principal amount, or $1 million for every $100 million in bonds sold. About half that issuance cost, or $500,000, would go to underwriters’ fees, according to Public Sector Credit Solutions, a California-based research firm which examined 800 bond deals nationwide since 2012.

Catching up with Texas Tribune's Bidness as Usual Project

Since I last linked to the series, several more articles have been added:

- Texas Ethics Reform: A Long, Tortured History. The story highlights the impact the Sharpstown Scandal had on the legislature, as well as scandals that preceded and followed it.


- Some Public Business Remains in the Shadows. It is very difficult to get the information necessary to determine if a conflict of interest exists regarding a member's vote on a bill because relevant information is difficult to obtain.

- Most State Lawmakers Won't Disclose Tax Returns. Tax returns are the best way to see where legislators earn their money - and how much of it - but most think this is too much transparency.

- Legislators Can Carry Bills That Benefit Them. There are no rules in place that limit the ability of a legislator to guide legislation through the chamber if the bill personally benefits them.

More to come, its a great series.

Lawmaker Explorer

The Texas Tribune has unveiled a webpage that allows you to connect the sources of income, property holdings, and top contributors of all members of the 83rd Texas Legislature. It explains the project here.

Its part of their Bidness as Usual project - and effort to increase transparency in the legislature.

Does a part-time legislature invite conflicts of interest? Maybe even corruption?

We discuss this in class from time to time. The Texas Tribune suggests that the lack of transparency in the Texas Legislature makes it difficult for us to determien which legislators are looking out for thebest interest of the state and their constituents, and which are serving themselves.

On the presidential campaign trail, Gov. Rick Perry waxed eloquent about the merits of Texas’ part-time Legislature, saying that Congress would be more effective if its members had “real jobs back at home.”

“We’re the 13th-largest economy in the world in Texas,” Perry said, “and we come to Austin for 140 days every other year, and it works wonderfully.”

Wonderfully, it turns out, for many of those elected. Paid a pittance by taxpayers for their official state duties, lawmakers need to make a living elsewhere, and the prestige and influence of their elective office often helps them do it.

But with a conflict disclosure system rife with holes, virtually toothless ethics laws often left to the interpretation of the lawmakers they are supposed to regulate, and a Legislature historically unwilling to make itself more transparent, the reality is Texans know exceedingly little about who or what influences the people elected to represent them. They have no way to differentiate between lawmakers motivated entirely by the interests of their constituents and those in it for their own enrichment.

"Ostensibly, there is a defined level of disclosure and an agreed code of conduct,” said Jack Gullahorn, a Texas ethics expert who represents the state’s trade association for lobbyists. “But in general, either the sanctions aren’t there or the provisions aren’t clear enough to give people that don’t want to play by the rules any incentive to avoid the consequences for their actions.”
They are staring a series that look into conflicts of interest, We'll follow it along.

Conflict of Interest on the Supreme Court

Justice Clarence Thomas has an interesting relationship with a wealthy Dallas businessman. Is it problematic? And if so, is there anything that can be done about it? Not really.

Wall Street, the SEC and the Justice Department

Matt Taibbi continues to expose the relationship between Wall Street, the SEC, and the Justice Department. He explores why no one went to jail for any of the fraud that was rampant for years and finds that the revolving door between Wall Street and the federal regulatory agencies protects those responsible for the abuse. The one exception, Bernie Madoff, made the mistake of bilking the wealthy. Had he stuck to simple, nameless homeowners we would have never heard of him.

More on Investments and Committee Assignments

Following the recent post on Ron Paul's investments in gold mining operations, and speculation about whether his position on the House Financial Services committee presents a conflict of interest, here is a similar story regarding the investments members of Congress, who are members of committees with jurisdiction over oil and gas companies, have in the industry.

Nearly 30 members of the congressional committees overseeing oil and gas companies held personal assets in the industry totaling $9 million to $14.5 million late last year. That included at least $400,000 in the three companies at the heart of the Gulf of Mexico oil-drilling disaster, according to a Washington Post analysis of financial disclosure forms released
Wednesday.

Ought there be limits on such investments? If not, how would you address this conflict of interests? Perhaps its no conflict at all.

Ron Paul, Subcommittee Asssignments, and Investments

Just in time for our discussion of committee assignments comes this Washington Post story on Ron Paul.

As we saw in class, he a member of the House Financial Services subcommittee on Domestic Monetary Policy and Technology. He uses this post to advocate for a return to the gold standard, but he also invests heavily in companies that mine for gold. He doesn't consider this a conflict of interest, but the articles author isn't quite sure. What's more, nothing he is doing is unethical under Congressional guidelines, though it is illegal for executive officials and others.

Though Paul is the subject of the piece, he is far from the only member of Congress in a position to pass laws that benefit their investments:

In both houses of Congress, a host of other committee chairmen and ranking members have reported that they have millions invested in business sectors that their panels oversee, according to a Post analysis of financial disclosure records through 2008, committee assignments and lawmaker investments by industry.

The disclosure reports covering 2009 will be made public in the coming days. But because lawmakers still use a pen-and-paper method of reporting, it will be months before the information is entered into a database by the Center for Responsive Politics and then made available for analysis by The Post.

For more information about Dr. Paul's gold standard positions:

- What was the gold standard?
- Gold standard - Wikipedia, the free encyclopedia
- Monetary policy - Wikipedia, the free encyclopedia
- FRB: Monetary Policy