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House | June 6, 2016 | Chamber | House Ethics

Full MP3 Audio File

We have the house ethics committee to order. I do welcome you those who are hear are guest and members of the house. I don't believe we have any pages today but our sergeant of arms serving today are Berry Moore, Johnson Cherry, Bill Rilley and Ray Cook. Thank you gentlemen and ladies. We have one bill today, it's a house bill 1055 it's state ethics committee revisions. And we have a PCS on a motion by Micheal Ray that PCS is par-ably before us. All in favor say Aye. >> Aye. >> And I will ask representative Faircloth to represent the bill. >> Thank you Mr. Chairman, I appreciate you folks coming in today on early Monday afternoon and I appreciate all the visitors we have with us. I'm going to address each part of each section of the bill, and then ask stuff to explain it to us. I think will save a lot of time. If I try to explain and they try to interpret what I'm saying will be here a long time. So they are gonna help us out on it. This bill deals with a state ethic commission and legislative ethics committee and some changes and the state lobbying laws including the procedures that I do in investigation. Section one has to do and I'll give you the page number, that starts on page one of your bill and so Gastus would you? >> Yes sir. >> Address that for us I think. >> So section one would add the list of exclusions of the definition of a gift to the two things you listed on page one of campaign contributions, properly recorded under federal law, and anything of value given or received between extended family members. Currently the items given and received between extended family members is considered a gift, but it's exempted. So it just have to be reported so the effect of that would be that it's no longer considered a gift therefore it longer needs to be reported. >> Mr. Chairman as we go along, is there any questions [INAUDIBLE] >> [INAUDIBLE] >> We'll go through it and if you just make note if you have a question we'll come back and address those. Okay sir, you may continue on. >> That's section one, you want me to go on through this? >> Yeah, do that. >> So section two is basically just technical changes for the powers and duties of the SUC to conduct inquiries, investigations, and hearings. Section three deals with judicial officers, they're currently not required to participate in mandatory ethics programming provided by FCC. Section three would require if they are a judicial officer, and also some other type of public servants, that they would have to do that training as the public servant. For section four, changes timeline for when the head of the state agency has to provide certain people with the statement of economic interest form that they have to fill out. Currently they have to do that as soon as reasonably practical after that person becomes subject to having to disclose that information. Section five would change that say that, the board chair or the agency head would have to provide that statement of economic interest prior to judging that person as they would require to. I'm sorry section four would do that. On section five, for certain member of the University of North Carolina and community college system, they can be provisionally hire prior to filling out, prior to having Sec evaluate their statement of [UNKNOWN] interest and then yeah there is something that's coming back on that, that could be reseeded. The section five which apply to all public servant not just close they are on the during [UNKNOWN] person that are specified the [UNKNOWN] community college system. Section six clarifies and expands disclosure requirement so to statement economic interest. There are certain items that have to be disclosed and some of those certain items don't apply. to members of that person's immediate family. This goes through and requires if up goes members of immediate family.

It also add to the list of the items that must be disclosed. Stock [UNKNOWN] stock units in the restricted stocks whether vest or unvested as well as a scholarship related to the that person's public service that is valued over $200. Section 7, just make a little minor change in time frame of when the FUC must notify a person who's failed to complete an application. Currently they have 30 days from the receipt of the FUC notifying them, that they have failed to complete it. This would change the timeframe change that of 30 days from the receipt of the notice to the 30 days of actual notice going out. It would also require the FBI The FUC reports they have failed to complete the application to FBI would investigate and forward a copy of it's investigation to the Wake County District Attoney. For Section 8, currently the FUC evaluates folks when we filled statements of economic interest every other year. Except for certain specific public services. Certain specifics public servants who are in certain lifted institutions and they evaluate this annually. This would add to those institutions whether they are evaluated annually. Metropolitan planning organization, road transportation planing organisations in the North Carolina board of transportation. So people on those boards would be evaluated annually instead of every other year. And partly the law is of said if you are on to different, if you are board that would require you to be, to follow statements and you are on another board that also requires you to do a statement you only have to one. Currently that's the way it is now. You would have to do to if you were on two separate boards you need to file through separate statements under section eight. Session nine with technical change that clarifies the permitted exception just add the statutory site their technical change, I'd be happy to answer any question if anybody has one. Section ten we just clarify with an ethics liaison would be subject to disciplinary action if they violate the state government ethics act. Section 11 narrows the the definition of excursive action, lobbying laws. It would exclude a public servant's inquiry about or response to a request for a proposal made under the walls on the state retirement system. State officers currently it would exclude only responses or inquiries from the state government agency section. Section 12 through 14, there are technical and clarifying changes to the body involved and registration but the biggest thing that it does is instead of just to try in registration and clarify i that term is a registration statement, or section 15 under current law for report work expenditures, each report must set forth the name of any designated individual or that designated individual's immediate family member and activate recordable/g expenditure and when there is more than 14 designated individuals to benefit for request or affordable expenditure, the names of the individual dot need to be reported if the report identifies the approximate number after benefiting or requesting in the basis for their selection including the name, the legislative body or other group whose membership is a matter of public record or it's otherwise identifiable. Section 15 will provide that the name of the board may be provided on the report instead of the names of the individuals if they are more than 15 designated individuals who benefit or request the affordable expenditure, section 15 also makes additional clarifying change to note that other groups can be with it instead of individual, if there is description of the group that's really identified as designate individuals. Section 16 just clarifies that as you see here secretary of state can utilize the services of a higher investigator when they are conducting investigations into follow state, login rules, section 17 changes the word person to individual through our article seven, of chapter 122 to the lobbying laws. Section 18 clarifies that for purposes of reporting the terms scholarship also included all event they way they are expensive such as food,

beverage, registration, travel and logging and makes conforming changes to the lobbing walls and why do the changes to the state government ethics act that better in section 6 of [INAUDIBLE]. Section 19 deals with investigatory procedures 19 A deals primarily with the invest [INAUDIBLE] procedures of the SCC and the 19D has got some changes to keep them as consistent as possible with the legislative ethics committee procedures. So the main points are listed in the bullet for the bullet point. It changes the trigger of a ten business state time frame within which the FUC has to initiate hear inquiry and sent a copy of the complaint to the person Subject of the complaint it's currently 10 business stage from the date of the filling of the complaint to set section 19A, will change that o the date that SCC actually accepts the complaint not the date the complaint was filled. It Increases the time frame within which the SCC must complete inquiry into a complain. It's currently 20 business days, it would change it back to 30 business days after the acceptance of the complaint. Once the SCC completes an inquiry this time they are gonna initiate a probable cause investigation. It's no longer gonna be required that they provide notice to the individual who filled the complaint. They would still be required to notify the person who's subject to the complain and they would now have to also notify the person employing entity or appointing authority of the fact that an investigation has been initiated and what the allocations are against that person. It would specify that a public servant who is subject of the inquiry and the SCC if they enter into a settlement of the allocations, it would have to be approved by the SCC which is current law. But they will be required to provide written notice of the fact that settlement occurred to the individual who filled the complaint. To the public servant who is the subject of the inquiry and to the public servant employing agency or appointing authority. It would require the SCC upon a substantial evidence of criminal of a violation of criminal law to refer the matter to the SBI. Which must be investigate and forward a copy to the district attorney for possible prosecution. That more than update from the previous statute would be the current law as an [INAUDIBLE AUDIO] attorney general now that the FBI not only the attorney general James David. To allow the SCC to share related information and document with state and local authorities Matter to an agency or authority. Currently the documents, complaints, responses, reports before us are all confidential is provided that they can be disclosed to law enforcement, but that the law enforcement must keep those confidential. In cases where the agencies referred the matter to another entity, the statute provides that they can refer a matter to the SBI or to the governor, to the chief justice, to the principal clerks, depending on who the public servant is. But currently they would need the recommendation of those people whether you're [INAUDIBLE] say a traditional official, they would need the Chief Justice or they could recommend sanctions of ruling. This would allow the SSC to do that without the recommendation of that entity. It would also give the SSC contingent/g jurisdiction over a public servant or legislative employee for one year after they cease being a public servant, a legislator employee, and if there's any kind of violation that they're aware of. If they could refer it to the SBI and the SBI would be required to investigate and send to the Wayne District attorney. The one year extension, that's current law. It just kinda updates it to to send to the FBI and refer to the district attorney. And as effect previously section 20 makes a number of changes to attempt to form the legislative ethic committee statute with the SCC investigatory statue specifically the provisions on the settlement of inquiry. And then security has to be notified upon the settlement, make the changes to the FBI instead of the attorney general and this sharing of information for law enforcement does confidentiality matters, the effective day section one which is the part on the gifts, that's the second December 1st 2016 Seen and the remainder is effective October 1st [INAUDIBLE]. >> [BLANK_AUDIO] Mr. Chairman, that's an overview of the bill. I'm sure we'd be glad to respond to any questions. >> Any questions from any members of the committee?

[INAUDIBLE] >> Yeah with respect to section 7 My question there is, what is the problem that we're trying to solve? Has there been a problem with 30 days from receipt or what is the issue? >> FCC is here, I'm happy to divert it to them I think it provided some clarification as far as when the person actually received it, there may have been some confusion of when they actually received it versus there is a very clear date of when the notice went out but I'll defer to the FCC. >> [INAUDIBLE] [UNKNOWN] >> Ethics Commission, it's primarily to provide clarity, consistency, in the enforcement process which we're going to right now, this time of year after the April 15 filings and also some of the candidate filings, and I believe some other agencies or provisions in the law provide for the similar type of trigger date for the notices of the date that it's actually sent out and allows us to have some uniform calculation date as opposed to some either constructive receipt date by virtue of the mailing date or some other process that we have to pretty much guess when somebody receives a letter. >> Follow up. Follow up. [LAUGH] Again, has there been a problem? Is there a problem that we need to solve or are we just solving a problem that we think we could have? [BLANK_AUDIO] >> Fairness and Ethics Commission? >> With the use of certified mail letters which we have also used, you have the issue of the recipients refusing to pick up those letters and we believe intentionally because virtually every case we're aware of, they have already received a regular mailed letter and then they know what's coming and they refuse to pick the certified mail, and that since is an issue of both that problem of the will for refusal to pick up the certified letter and also the cost of doing that but no sir, we have not had, it's not like it's a major issue. We haven't had anybody really come in at the fine process where we have the people who're subject to us come in to the commission and discuss whether their situation would warrant an exception to the fine. >> A different question? I think same person. >> [LAUGH] >> This goes now to section, which as I understand it would eliminate the exception on public servants serving on multiple covered boards therefore requiring to file a statement for each board. Again, has there been any issue with that? Why are you requiring what are basic volunteers to do double or triple files? >> That was attempt a few goals, it's an admirable goal was to lessen the burden on volunteers Volunteers like you say. The problem is, the evaluation process is intended to point out potential conflicts for people. It's supposed to help them. So if you're serving on board A and you file a statement of economic interest, the questions are directed to that and you answer the questions according to your service on board A. If you If you then again are appointed to another board, board B, those questions could be totally off and not give us the information that we need to provide you with guidance and warning of what potential conflicts you might have. So basically, what it does is, it undermines if not just totally eliminates the Policy goal for the evaluation in the first place. >> Just a comment on Matt/g, if I could. Having served on all of those entities, I would tell you I wouldn't serve on them if you made file two and three and four forms. I mean, these are This is volunteer work. My job right now is more or less volunteer work but that is really volunteer work. And I understand the need to file the forms, because I do think

they make decisions that need to be transparent, And meant to make sure that they're not conflicts of interest there. But on the other hand, I know it's very hard to get sometimes people to serve on these boards because they feel like they're already opening their life up and now if you're gonna make them file in triplicate for different forms, I just have an adversion to To section A and where we're trying to go there. Thank you. >> [BLANK_AUDIO] Would you like to answer that? >> Yes, if I may Mr. Chairman. This is the Director Pam Cashwell who is much more expert on the SEI process than I, would like to clarify that a little bit. Pam Cashwell, Assistant Director. I'd just like to clarify. When [INAUDIBLE] made a presentation, the comment was that a person who serves on two different boards has to file two statements of economic interest and that's not correct. What this provision is designed to do, so on April the 15th when you file a statement of economic interest, if you serve on two boards you put in those boards as many positions as you serve on you put that on that form so you file one form annually for all boards that you serve on. What this provision was designed to do is we had people who were serving on the board and have been serving for three years on one board on the university trustees for name of goal, whatever and then they are appointed to the banking commission tree years later and they have never found a favor of the economic interest for the banking commission and it's now September and it's not time for them to file a statement of Statement of economic interest yet, and what we need them to do then is before they are appointed to the banking commission they need the power of statement of economic interest for that new board so that they can be evaluated for that role because we don't have any information, when you answer an FTI your answering related to the positions on what you serve and so you may have information that's relevant to the banking commission that's not relevant to the university of trustees and so you don't provided that and we can't complete an evaluation on them without that information so that's really what this provision was designed to take care of Wonder of whether it does. >> Thank you Mr. chairman. One question that I will following ask is this [INAUDIBLE AUDIO] is to clean up from the boards perspective to an ethics commission and the serving state [INAUDIBLE AUDIO]. Cleaned up or tidy up is that the purpose of all the items. deserve credit and that's absolutely correct, the vast majority of these changes are a well kept reminder of a technical, there are clean ups issues that we've seen over the past five, six, seven years, this is an ongoing, long, long ongoing process. [BLANK_AUDIO] section 18. [BLANK_AUDIO]. I have travel as much as some of other members have traveled, I know that something is quite as comfort in this field and they have other organisations, the individual members women's groups or whatever. I see things and I hear things but I just won't you to question [INAUDIBLE] and I know they offer free scholarships, and I know so many individuals in the past when I attended, you were able to pay for your campaign because [INAUDIBLE] and had there been any problem with members not reporting this scholarships? in the past? A simple yes or no I'd follow. >> No, sir. Not that I'm aware of. For the situations that you're talking about, it's very clear in the law that those are Allowed and if you need anybod to expand on that we have Cathy [UNKNOWN] advise to [UNKNOWN]. >> [UNKNOWN] Correct. >> Correct. >> [UNKNOWN] Chairman [UNKNOWN] [UNKNOWN] does this mean that just of all [UNKNOWN] we have to include what is Y path on the closutre state. I'm sorry, just try to get to the section

>> Section 6 and it say and there immediate family. [UNKNOWN] included in these clause of requirement. >> [UNKNOWN] a man just complied and then there's [UNKNOWN] >> I din't get the first part [LAUGH] >> Representative [UNKNOWN] Or anybody. >> Yeah, anybody. >> [LAUGH] >> And I firm that if we had [UNKNOWN] include that. >> [LAUGH] Not sure that we have had that question before. >> So that was [BLANK_AUDIO] I think that was silly crime. >> [UNKNOWN] well section that by its product was the one that I have [UNKNOWN]. >> [UNKNOWN] Thank you sir, I just Just wanted a question on Section one, if somebody could give me example of what this mean, [UNKNOWN] family and the guess [UNKNOWN]. >> I can answer that. The main cause [UNKNOWN] for me is anybody that you advise to win. >> [UNKNOWN] That [UNKNOWN]. For your anybody in your family will advise with is. >> [UNKNOWN] >> You repeat the question please. >>I'm sorry I just wanna clarification as to really kinda do as included in what does it mean, I;m not quite sure I understand Representative Stam I think gets me clear of that exception, not an inclusion correct? In other words in this bill it's left reporting on that point? >> [INAUDIBLE] Okay, alright, thank you. I really didn't wanna invite someone else. >> [LAUGH] >> Representative Stam. >> Section six says, it's expanding but it's not really expanding a lot, it's expanding for who is covered. Is that correct? [BLANK_AUDIO] Representative Daughtry was asking about that. He knows the summary says it expands but it's not expanding a lot, it's expanding in a different way [BLANK_AUDIO] It's reported, it's expanded on page three, lines 26 and 27 in terms of what is covered. It's just not stock options but it's stock grants and stock units for certain stocks, that's the expansion that occurs under number six. [BLANK_AUDIO] >> Any other questions or comments? Representative [INAUDIBLE] >> Thank you and section seven again the date of the statement has to be filed and it doesn't come up, all after 30 days, is there a penalty to the person? >> Yes sir, this is in the context of the FCI fine procedures where if someone fails to follow their statement of economic interest within the requisite time or if they file incompletely, then this is Part of the process that's purely where we have to provide them with first a 30 day notice, give them 30 days to comply and then after that 60 days notice to tell them that there could be further penalties. And so these letters are that particular notice is talking about the initial 30 day notices, so we're telling these people That according to our records you have not filed or you have file insufficiently and you have 30 days to correct that. And so what we're looking for is to be able to calculate that 30 day time period from the date that we send out those letters as opposed to the supposed date that they receive Them which according to legal principles then we would use the mailbox rule, if you mail out a letter addressed to the correct address and it does not return and it's deemed received. But we think it would be simpler and definitely more consistent from a calculation stand point to have those all in the same day, the day we mailed them out for Calculation purposes. >> Excuse me.

For the record each time you speak could you give your name and who you're representing. Thank you. >> [INAUDIBLE] >> In the followup. So if they don't within 30 or to quote the 60 days, is there a fee from your department- >> Yes sir there's a potential 200 pay this in ethics commission Potential $250 fine. >> I would just like to make a comment and no wonder I admire a person that I got ordered to the board resign before all this and they only make twice a year and they got all the threatening letters so um I don't blame him for it, he's [LAUGH] and something else but I forgot what it was. You can go ahead. >> And just one followup on it, so on addition to the letter, addition to the fine, the next step is referred to the district attorney, and FBI upon investigation. >> Only for the group of [CROSSTALK] [LAUGH] >> [INAUDIBLE] >> I learned it for a while, reminds me of going into a hospital you have to give your date of birth all the time. >> [INAUDIBLE] FCC form? >> Fairness and Ethics Commission. >> That is only for the relatively smaller group of filers that are these metropolitan planning organizations [INAUDIBLE] transportation planning organization members, not the separate requirement that was added much later much after the initial passage of the Ethics Act. >> One other follow up. >> Follow up. >> And I guess the other interesting thing is that section five, you then wanna go ahead, and hire [INAUDIBLE] on the SCC form is that correct. >> That is to make the evaluations provisions or like they are right now with all university trusties, and community college trusties [INAUDIBLE AUDIO] and ethics commission. That's the way it is. for us but they are a very huge portion of our covered/g people and it's a practical change because of the cyclical nature of the statement filling that we can be in dated with literally with literally hundred forms they are supposed to be evaluated before that person takes Takes their position. So it's not doesn't do anything to the requirement for filling form it has to do with the back end evaluation of that form by commission staff. And just to follow up comment as interesting the young lady said that she wanted McGrady file the other like in the banking commission cuz you wanna know at this time, and to me it's to your, go ahead and any appointment and [INAUDIBLE] coming back. >> If I may point out in the evaluation process again the purposes to help people is to point out. Point out areas of intersection between their public duties in their private interest so that they can avoid any conflict. In tenure we are in our 10th year now. Their has never been an actual conflict of interest for anybody an actual when they are evaluated for the SBI and we find that you are disqualified. That It's so rare it's almost to say it doesn't happen. And the reason as much us those people are screened out on the front end if it's done correctly. Most people have a potential conflict meaning their is something their they need to be careful of, but it's not o the extent that would disqualify you from your position. >> Representative Serzer. >> Well, I've been here a long time and I've seen a lot come and go in this facility. And the ethics rules are where they are because that's where they need to be, and if someone doesn't wanna serve on the board or commission because of the ethics, recording they need to bow out because is been only thing we need to do, and at the appropriate time I'd like to make a motion for a favorable report. >> Excuse me, Representative McGrady. >> Hearing the response on section eight, I just wonder if we drafted that the way we need to. I think the idea here would be that the Ethics Commission wants a separate statement of economic interest when one joins a new board but then they're after if they're serving on two boards it wouldn't be a problem to have one at the ethics statement edit, but striking all of these between 33 and 38,

39, you're actually just forcing more statements of economic interest to be filed as soon as you get there. Maybe that's the easiest way to do it, but it didn't sound to me like, so I'd have probably kept the first sentence in e there and then put a different if to capture the situation that was described by the gentleman with respect to joining a new board and having some different set of ethics concerns and then I don't know whether this is within the scope of the bill. My ethics issues, let's say I was still a a paid employee of the Sheriff's club who gets elected to the general assembly and then the Sheriff club has whole bunch of legislative issues, and I am out there pushing the legislative agenda of the employer who I now I work with. That's a ethics decision that actually bothers me a lot more than everything else in this bill and as I see that, that is actually permissible under the law right now, that I could be employed by somebody, come to the general assembly, push the agenda end up with my employer without any consequences to it, but I don't have a major problem with the bill I do think there's a drafting issue there, i will certainly support the bill and committee but I would like to see it get fixed before it comes to the floor. >> Representative [INAUDIBLE] if you were giving staff up to prepare an amendment says fix that on the floor. Any other questions or comments representative [INAUDIBLE] I believe this. >>> Yes sir, I moved from favor four for house bill N55 to propose community substitute unfavorable to the original bill. >> Today we refer to floor, all in favor say aye? >> Aye. >> All opposed? Bill passes. That's all the business we have today, this meeting is adjourned. [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO] [BLANK_AUDIO]