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House | March 18, 2015 | Chamber | Ethics Committee Meeting

Full MP3 Audio File

Ladies and gentlemen, we will call the meeting to order. This is the House Ethics Committee. We have some folks with us that are helping us out today in conducting this committee and the sergeant at arms are Marvin Lee and Reggie Sills and Terry McCraw, and Chris McCracken. Thank you, gentlemen, for helping us out today. We also have one of our pages with us, Tabby Zorn, where is Tabby, over here? Tell us a little bit about you, Tabby, where are you from and so forth, where do you go to school? You don't get many opportunities to do this, now. [SPEAKER CHANGES] I am a [??], but actually I am an exchange student from Germany. [SPEAKER CHANGES] Germany? [SPEAKER CHANGES] Yeah, it was a program, if you were [??] exchanged [??]. [SPEAKER CHANGES] Well, we're glad to have you. What part of Germany are you from? [SPEAKER CHANGES] The West of Germany, nearby Dusseldorf. [SPEAKER CHANGES] Oh, yes. Well, welcome, we're glad to have you with us. [SPEAKER CHANGES] Thank you very much. [SPEAKER CHANGES] Can I ask her a question? I [??] what school in [??] [SPEAKER CHANGES] [??] [SPEAKER CHANGES] Thank you, appreciate you being with us. I'm John Faircloth and one of the chairs of this committee and Representative Glazier, Chairman Glazier is the other chair and I'll start out by saying that we consider this a very, very important committee. Everyone knows that when you take on the responsibility of representing the people back home who thought enough of us to put us here, that you also take on the responsibility of doing things int he right way and we are definitely committed to that. This will be a relatively straightforward meeting, we're not taking up any controversial subjects or anything today. We wanted to be able to get together and talk about the committee, what our responsibilities are, and how we interact with the other parts of the system here. This is a matter that's obviously the concern of every legislator and certainly every House member and weh ave some folks here who have been around a good while and have served on this committee before and we have others who are relatively new to the legislature, perhaps, and certainly new to the committee. So you will have some handouts, committee members, that were passed around I think. What we will do, we will have three presentations, the first of these is from Brad, is it Krehely, Brad? Brad will talk to us about a brief overview of this committee so, Brad, come on up. I'll remind you that the lights that you see ont he desk are, if you have a question or something, that light should be green. If it's on green you're being heard, if it's on red you're not being heard. [SPEAKER CHANGES] Thank you, Mr. Chairman, and members of the committee. I'm Brad Krehely, I'm a staff attorney with the research division and I'm counsel to the House Ethics Committee. The Chair has asked me to give you just a brief overview of this committee and how it works, how it's different from the Legislative Ethics Committee, and just how our staff at the General Assembly is organized to deal with ethics issues. So what's the House Ethics Committee? The House Ethics Committee is a standing committee of the General Assembly and like other standing committees, bills are referred to the committee and heard. The House Ethics Committee should not be confused with the Legislative Ethics Committee. As a standing committee we sometimes have substantive presentations like we do today. The Legislative Ethics Committee is a little bit different, it is a joint committee with House and Senate members, it is bipartisan in equal number, so there are six democrats, six republicans, twelve people total, it's also bicameral in equal numbers. So you have six senators and six representatives on the Legislative Ethics Committee. The Legislative Ethics Committee is different because it is involved in some different responsibilities. It issues advice. So it does formal advisory opinions when a legislator comes directly to the Legislative Ethics Committee. It also takes recommended advisory opinions from the State Ethics Commission and either approves or modifies them. Those recommended advisory opinions become final advisory opinions. The other thing the committee is it investigates complaints. The Legislative Ethics Committee has occasionally made suggested changes to the ethics laws. So if you're on both of those committees, understand that they are different committees with different functions. In terms of how our staff is organized, we have an ethics training and advising staff that consists of Tim Hovis, Erika Churchill, and Denise Adams. If you've done your ethics training

of you already know them if you haven't done it yet you'll get to work with them. They also give informal advice so if you don't want to get a formal advisory opinion from the state ethics commission or the legislative ethics committee go to Erika, Tim, and Deniese and they're happy to help. We also have a group that primarily staffs the legislative ethics committee that's Bill Patterson, Susan Barem, and me. And our job is to assist the chairs there when we have things before us like advisory opinions or investigations. And then finally the House ethics committee which is this committee is kind of a hybrid of the two staffs. Bill Patterson, Denise Adams and I are assigned to the committee. But as a practical matter you may be working with Erika, Tim, and Susan Barem as well. So Mr. Chairman that kind of concludes the brief overview of how we're organized and what this committee does we look forward to working with you and just let us know how we can help you. [SPEAKER CHANGES] Thank you are there any questions? Representative Glazier. [SPEAKER CHANGES] It's just one and ?? as well. Part of the function of this committee is to handle bills that are referred to it and ethics bills on changes in legislation that either it initiates or that are referred to it. Would that be accurate? [SPEAKER CHANGES] That's correct. And committees and house committees can also introduce their own bills as well. But certainly bills that are referred to here as we're doing today informational presentations for interested parties all of that is appropriate and the committees can do that. [SPEAKER CHANGES] Any other questions? Thank you very much. [SPEAKER CHANGES] Now we'll go to the state ethics commission and talk about some recommended revisions they may have. And this is presented by Perry Newsome who is the executive director of the North Carolina state ethics commission. Welcome to the committee. [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] Glad to have you with us. [SPEAKER CHANGES] Thank you Mr. Chairman, members of the committee. Thank you for having us I am the executive director for the ethics commission. I'd like to introduce two staff members I have with me today. You probably have or may deal with either of these people in the future. I have our assistant director Pam Cashwell and our advice attorney Cathy Edwards. Just very very briefly because I know the time is short and the marching orders today as I understand them are to give a brief ten minute overview of the commission what it does and then talk about any kind of special requests or issues there may be on the table right now. And I'll try to do that as quickly as I can. For those of you that don't recall the commission consists of eight members. Four appointed by the governor four by the general assembly two of those members by recommendation by the speaker of the house and the other two by the president pro tem of the Senate. We have a staff of thirteen members and the ethics commission administers primarily two laws the ethics laws the state government ethics act chapter one thirty eight A and the lobbying law. Everything the commission does is mandated by law. We follow it's a the older version from 2012 because we haven't reprinted them. But we basically administer the laws contained in that book. And trying to fulfil our statutory mission along those lines. I'm going to talk about the four primary functions that the commission performs pursuant to that law. Every single one of them mandated by the ethics act or the lobbying law or both. First is the financial personal interest disclosure process. The statements of economic interest now that's the one thing that I know that every one of you is familiar with because you have filed one or more in your careers. And just as a side note or reminder you have to do another one very soon the deadline is coming up in less than a month. So please keep that in mind. There are two options for filing now manual and online filing. There are approximately seven thousand you are among seven thousand filers that we have. However last year we had over ten thousand filings. How does that happen you might ask the reason is some people file multiple forms there is turn over during the year on covered boards. Even sometimes in the legislature as you know. And so some people file more than one document as the year go on. Electronic filing is becoming much more prevalent and we're very happy about that. That was instituted in 2012 and last year four thousand people took advantage of online filing. Leaving a difference of four thousand filing manually. Once an SCI is filed then we have a legal duty per the law to evaluate those statements of economic interest for most filers not for all of them but for most. And what that means is we take the disclosures in those forms and we look

NRLURF [0:00:00.0] Those who analyze that and do as much research into that as we need to, to try to identify areas of intersection or overlap between the private interest and holdings that are reveal there in your public duties. So the purpose of that is evaluations is to identify those areas of possible or potential as it’s called “Conflicts of Interest” doesn’t mean there is anything wrong it just means that is the potential that people have to be careful of that. Now, you all don’t skip us, we do not evaluate, the law is not require us to evaluate legislators or judicial officials and for good reason so that’s why sometimes this concept is important to legislators but it is a big part of what we do and it involves a whole bunch of people. Another recent development for the disclosure process is online access to statements of economic interest starting last month 2015 and future statements of economic interest will be available online that is excluding personal contact information. We revise the forms this year starting 2015 to separate the personal contact information from the substantive disclosures in the statement of economic interest for various reasons and only the substantive information is available online is still in public records that people can gain in another way but it’s not just gonna be available on the website. Second, main legal function that we perform is advice and that’s Cathy Edwards just introduced earlier Advice Attorney, we are very, very fortunate to have and she has been doing this since 2006 and so she has a lot of experience doing that and she does a good job heading up that section and this is where we provide specific guidance to people, public servants, legislators, anybody who is affected or covered by the lobbying law with regard to a specific situation or a specific conduct that they have a question about. And it is our legal duty to issue this advice, if someone asked us we have a legal duty to respond and comply with the law by doing that. As you might imagine, the types of request we get very greatly from the simple answers to which we can give on the spot immediately to very complex, some very complex difficult questions that take a long time to answer. There are two types of advice—Informal Advice and Formal Opinions, the informal advice is given by staff some of that what Brad described, you can call the Ethics Commission and staff can give you informal advice or their formal opinions they are issued by the Full Ethics Commission and consideration at a meeting. All forms of advice whether it will be informal or formal is strictly confidential, none of that is made public unless the requester makes it that way. We have found that request for advice are very ___[03:20] in nature and you folks generate a spike in request when you are in town we get more request for advice, when you leave town those requests get down a little bit and that’s completely understandable, there is more going on, there is more interactions, and there are more questions about what people should or should not do, and it also bring a spike in advice request. In 2014, we address nearly 600 requests for advice. The third major function that we perform is inquiries and complaints. The commission handles complaints under both the ethic side and lobbying law and there are very specific requirements as to how those complaints must be filled and move forward under the Ethics Act not so much on the lobbying law but under the Ethics Act is one of the more extensive sections in the statue and it fills out fairly precisely what has to happen at each stage. For example, complaints under the Ethics Act have to be signed and anonymous complaints so they have to be meet those formality requirements. Once those objective standards are met however it’s a very low threshold for moving beyond the first stage and that is it’s pretty much an allegation standard if someone allegedly says the right thing or the right gives right facts then we take that for granted, we take those as true and then move to the second phase of the complaint investigation. Last year we handled 190… [0:05:00.3] [End of file…]

It's an increase. Finally, the education function is the fourth main function that we perform. You're also aware of that from past experience. And we help educate not only yourselves, or assist the Legislative Ethics Committee with that function, but also public servants. That's their largest number of people that take part in the education program. But also lobbyists as well. We do at least one dedicated lobbying program per year just for them. And then there are components of the lobbying law, as you know, that are covered in the other basic presentations. Okay, finally. I wanna use the last bit of time that I have to talk about the subject that is mentioned on the agenda. And that is proposed statutory changes. I have to give you some background on this in order to kind of introduce it. And I am, I know we don't have time to go into the specific proposed changes today. Because there are too many of them. And this is just an introductory meeting. But going back to when the ethics law was passed in 2006. And really starting, it was effective 2007. We had just been encountering situations, issues, questions in administering this thing for now going on nine years, where we would find areas that we think might benefit from some changes. Some of those changes are, most of the changes actually, are of the technical or minor nature. Some are more substantive than that. But these are born of an actual experience of dealing with this law for over eight years. Several years ago, we started, staff started it and then the commission was definitely involved towards the end of this process, but we started identifying these areas that we thought, going to both the ethics act and the lobbying law provisions that would benefit from changes. Again, some minor some not. It culminated last year with the ethics commission actually taking up proposed, possible proposed changes and approving submission of those to the general assembly for its consideration. And there, it's a fairly imposing looking document. And it's something I ?? Got a lot of pages. That's why I said I'm not prepared to go over this this afternoon. I don't think you want me to. And more recently, last month, the commission revisited those proposed changes. Added a few and then prioritized some and authorized that those be presented this session. And that's what we are doing currently. I would offer to come back at a later time and present those in whatever detail that you would like. Answer any questions that you might have, and in any. Just basically address those in any way that you would deem fit. So I think that's probably more time than I was alloted. I apologize for that. But, any questions, I'll be happy to ?? at your discretion. [SPEAKER CHANGES] Thank you sir ?? questions. [SPEAKER CHANGES] Yes Mr. Chairman. So I wonder if it would be useful for us to, prior to, I think the next meeting we have the targeted bill to look at. But the following meeting was the one they're after to sit down and go through the document. But to get the document out to committee members and staff maybe in this next week. So they'd have a week or two to look at it before we started in on it. Would that make some sense? [SPEAKER CHANGES] Representative ?? [SPEAKER CHANGES] Thank you Mr. Chairman. Would it be possible to just give a brief oral overview of some of the ?? the changes right now? [SPEAKER CHANGES] Sure. [SPEAKER CHANGES] Would that be possible right now? [SPEAKER CHANGES] Sure. I think we have time. [SPEAKER CHANGES] I dunno ?? [SPEAKER CHANGES] I could very briefly go over the commissions. ?? The top. What they've identified as a top priority. And again when you see these, you'll go through a lot of them. It's change this name to that name. Things of that minor in nature. So you know they're not all, don't think that they're all of, you know, momentous impact in going through the act. But just things that we've encountered that might make it better. But the top ones, the first one is actually a complete rewrite of the complaints section. And we have found that in administering that there are some, again, some terminology issues. Some things might be a little bit confusing as to the names of stages of the process. And so just going through that, we have proposed a complete rewrite of the complaints section. We've actually, that's one of the ones we have actually written the proposed changes. So there is a section when you see it, it will be as rewritten. I'm sure bill drafting will have a lot to say about what that looks like. But you can get the gist of what we're going for on those. And so that's a fair.

Comprehensive one and it includes a lot of specific changes. Another one is clarifying for the Commission what it means to be associated with the Department of Administration for administrative purposes, that’s what the law says and it really is a fiscal issue as to whether or not being associated with the Department of Administration means that they are to provide Human Resources and fiscal services for us incident to that cest we charge as opposed to being able to charge independently for that. That is in most respects not a tremendously large issue except for us in these tight budget times. Another one is provisional appointments and evaluations. Right now the way the law is, certain public servants can be appointed provisionally, meaning that they can be appointed if they just file their SEI, their Statement of Economic Interest with us and then we will evaluate it as soon as we can, but they go ahead and take their position. These are primarily Community College Trustees and University Trustees and that was put in there for a very good reason. The proposal was to make everybody provisional in that way and pretty much the practical reason for that is because in the appointment process and the way these people get covered sometimes we get large, large groups at one time, so for example when the appointments bill comes down there are just hundreds of people on that. These metropolitan planning organizations and rural transportation planning organizations, they have large blocks of turnover at a given time and what we want to avoid is a situation where we just cannot physically with the staff we have do those before those people need to take their seats or they are found to be in some technical or worse violation of the law because they are taking their positions and taking official actions without being evaluated so we that that that’s a good change that basically just makes it the same for some appointees as others. Another one is what we call the board to board SEI filings provision. There was a law passed last year that implemented by any old SEI evaluation, those evaluations I told you about with those 6,000 evaluations that we had to do was just a little bit much to handle and so in response to that a bill was passed that established biannual, every other year evaluations for people and we’ve established a schedule for that but there’s an exception in there that if someone is serving on one board and they are appointed to another board, a totally different board, it could be the Electrolysis Board Member that’s appointed to the Board of Governors, could not be any different. Could not be any diverse in the nature of those duties but the law says that that second one, the appointment to the second one they do not have to file a second statement of economic interest which I understand from a burden standpoint. I wouldn’t want to fill out another one either but the problem is that when we evaluate those statements as we have to they do not get a true evaluation for the second one because they’re exempt from that process, so what it could lead to, we have not encountered problems necessarily along this line, but what it could lead to is someone being appointed to that second board and there’s no warning of what the potential pitfalls might be from a conflict standpoint. And then the last one has to deal with SEI compliance and that is in the process of enforcing the filing of those SEIs. There are certain time deadlines for people. One the filing deadline reaches there are 30 days, then 30 days after receipt of a notice from us they’re subject to a $250 fine. 60 days after that receipt they’re subject to being removed from their position and the recommendation is to just shorten that schedule and tie those 30 day and 60 day periods to the date of our notices, the letters, as opposed to the receipt Sometimes receipt is difficult I guess to show in some cases. So those are the top five that have been identified but again there are many more, a lot of which are technical in nature. [SPEAKER CHANGES] Any further questions? Thank you so much for being with us. I appreciate that and as you can tell from that presentation we’ve got some work ahead of us. We have one ore presentation but before I get to that I’d like to recognize a couple of folks, Kim, is it Straight, Straich, Kim Straich over here with the Board of Elections I believe and

VPGQIN [0:00:00.0] And Amy Strange, Board of Elections I appreciate you are coming by and we will have some interaction with you I’m sure along the way so thank you for being here. Before I move to our last topic let’s have each person to across the ?? here introduce themselves and tell us who you are with and you get met some but let’s start right there and go across. [SPEAKER CHANGES] ?? Communications Secretary. [SPEAKER CHANGES] ?? Brown [inaudible] Secretary of State. [SPEAKER CHANGES] Good afternoon Mike ?? Head of Governor…?? [SPEAKER CHANGES] Thank you. [inaudible] ?? [SPEAKER CHANGES] Normal. [SPEAKER CHANGES] Believe me other people are welcome too. [SPEAKER CHANGES] Mr. Chairman I’m Donald ?? from North Carolina ?? Association, we are primarily here in this committee today, ?? Chairman of North Carolina Professional lobby. [SPEAKER CHANGES] Excuse me! [SPEAKER CHANGES] [inaudible] ?? [SPEAKER CHANGES] Next? [SPEAKER CHANGES] ?? from North Carolina ?? [inaudible] [SPEAKER CHANGES] Okay, next? [SPEAKER CHANGES] ?? from North Carolina [inaudible] ?? [SPEAKER CHANGES] Thank you. [SPEAKER CHANGES] [inaudible] ?? [SPEAKER CHANGES] Oh! Okay, thank you very much. Have we missed any others, okay? Overview of the Lobbying Compliance Division the Secretary of States Office and recommended revisions, we have first of all Joe O’Brien. [SPEAKER CHANGES] ?? and I would speak first for… [SPEAKER CHANGES] That will be fine, that will be fine. Mr. ?? [SPEAKER CHANGES] Mr. Chairman, before we start we want to make sure about, I have to leave for a quick caucus presentation. So I will take my leave and Chairman Faircloth govern but just to notice ?? it looks like probably weekly meetings and the next one that might will be the next week will be the first day of hearing which was file the other day so at least that’s a likely agenda for next time and I just wanna to announce that but thank you and to say we have incredible staff and incredible clerks, and it’s an honor to work with Representative Faircloth and this committee is one of the committees where we work together and there is really ever any partisanship and it’s safe for us all to try to make the working conditions for all of us to work in the public interest and all of that stuff. [SPEAKER CHANGES] Thank you. Mr. Rob D ?? would you come up and take the mic and introduce yourself? [SPEAKER CHANGES] Thank you Mr. Chairman again, I’m name is Rob D ?? I’m the Chief staff, the Secretary of the State, and I want to thank the members of the committee for letting me be with you today, I see some familiar faces and it’s always a comfort to do so. Briefly I want to talk about three things, we were asked to speak about what our program does, to talk about concerns, to talk about solutions and that sort of thing. Secretary of States Lobbying Compliance Division role here is basically to look to the folks who are being paid by someone else to influence public policy development. And the way that is done within the framework of the law is that these folks are to identify themselves and primarily that’s done through a registration or function with our office and their employers are to also do the same and to assure us publicly that they have authorized people do to lobbyist to speak with you on their behalf. In addition these folks are obligated by… [0:05:00.3] [End of file…]

Well, to make regular expense reports and what then happens to this registration information and what happens to these expense reports is that we put it up on our public website for the various folks involved in public policy development and even the observers to look in and see this information and to make of it what they wish to do so. The information is not really there for Secretary of State’s office. It is provided to us to make available to other people. To show you some measure of how much interest there is in this information on the Lobbying Compliance Division website of the Secretary of State’s office, in the last 12 months there were 992,000 hits. That is a lot. Now, my colleague Miss Brown is going to speak in a moment about the mechanics of how we do things. But basically, the function of this information is to identify at the highest level to the public servants who it is that is being employed and who is employing them, so that servants who all lobbied recognize that it is a situation where somebody’s a paid advocate. And, the public servants are then in a better position to weigh the relative significance of the information that’s provided in whatever way they were to see fit to do so. But, you are some of the primary beneficiaries of this system. Miss Brown is going to speak about what we do and how we do it and what the resources are and then I’d like to speak to you a little bit more about another few dimensions of this process. Yes ma’am. [SPEAKER CHANGES] Thank you. My name is Jill Brown and I’m the director of the Lobbying Compliance Division for the North Carolina Department of the Secretary of State. Mr. Chairman and members of the committee, thank you for having us today. I want to talk about the mechanics of how we do things and how registrations and reports are processed in our division. Registrations are electronically filed. The fee is $250 and that, of course, is paid electronically and goes to the general fund. If you have previously registered, that information is pre-populated. So, if you registered last year, that information is pre-populated. If you are a first time filer, then you have to enter all the information into the database. After we receive them, we examine them. We determine if they have complied with all the information that is required by law and then we publish them on our publicly available website, where people can use either the lobbyist’s first or last name, to find the registration and the principal’s name to find a registration for the principal registration or to see who is representing the principal. For reporting, those are electronically filed as well. There are 2 methods. Some of the information is pre-populated and we have provided to you with examples of some of the forms. If a lobbyist does not have any expenditures that they have to report, then we have a very short form which is a one pager. If they have more than something to report, then that report is a four pager. We review the reports to see if the correct person has signed the report, sometimes that does not happen. We also review it to determine whether not their notarization is proper and if they had added the amounts that they report that they had spent on a designating person is added correctly. Once that is done, that report is placed on the website. The registrations populate the directory. The directory is updated every 24 hours. If someone registers and we process their registration today, it is placed on the website today. The directory is also provided on the public website. It’s updated every 24 hours. We send a directory to every designated person every 20 days, when the General Assembly is in session and every 60 days when you’re not in session. Who does all this work and all this processing? That would be ?? review officers and they review all the documents to determine if they are in compliance with the law. They also provide customer service. That customer service means for example, if someone if having difficulty filing their registration electronically, they will walk them through it, either on telephone or they can come into our office and register as well. We also have a scanner, so people can also file their reports as well if they are having difficulty.

Thank you for the opportunity to explain how the system works and now I will turn it over to back Chief Deputy Mattox. Chief Deputy Mattox : Thank you Mr. Chairman. There are three points that I think anyone who wants to look at this area of the law, keep in mind. In a general sense the laws relating to ethics and lobbying and these functions probably represent the most complex intersection of constitutional rights that any agency is ever going to be faced with trying to administer a program. And that imposes some limitations on the way things are done but they aren't things that we can't work around but I just want to point out to you that almost everybody that's involved in the intersection of these issues has some very specific substantial constitutional rights that have to be taken into account, as these things are adjusted one way or the other and they are periodically adjusted. (Mattox continues): The second thing is, that the portion of the Secretary of State's domain, sort of speak, is primarily dealing with people coming from the private sector commercial environment, while lobbyist interact with the general assembly and executive branch officials that is still basically a competitive business industry with themselves and they compete as you well know, all of that is in sharp contrast to looking at what a public official is doing or needs to be apprised of. In overall, the central theme, at the moment, in the law as we understand it to be for the Secretary of State is that the disclosure of the information is the primary tool for implementing the role that the Secretary of State is supposed to have. So, there are some privacy considerations that are appropriate on the public servant side of the equation that are not always present when you are your dealing on the side that relates to commercial businesses. Mr. Chairman that's pretty much a summary that is the best we can do in ten minutes. We would be available to come back at your pleasure. We appreciate the opportunity to be here today. We would ask that you consider institutionalizing this and having us at least once a year to come back. Change Speaker: Thank you sir, any questions? Thank you so much Mr. Mattox. Are there any other questions from the committee while you are here? Please Keep an eye out for information from our two clerks Becky Bowerban and Megan Lewis. We probably will be, as Chairman Blazer said, we will probably be meeting on a weekly basis at least until we get through the legislative matters we need to handle. And if any of you on the committee have a suggestion of perhaps someone who may need to come and offer information for us please let us know we would love to do that. Are there any other comments? (Silence) If not we stand adjourned