text: In the elections last November 6, citizens in New Mexico and North Dakota voted to amend their state constitutions to establish state anticorruption commissions. In doing so, they joined the vast majority of American states (currently 44 out of 50) that have created similar (or at least similarly-named) commissions—starting with Hawaii back in 1968. The impulse to create a special commission to deal with a significant problem like public corruption is certainly understandable. Indeed, many state commissions were created immediately after a major public corruption scandal, when public frustration was running high. At the same time, though, the record of such state-level anticorruption commissions in the US is mixed at best (see, for example, here, here, and here). And despite the similarities in their names, many of these commissions actually do quite different things—with some functioning like ethics commissions that publish quasi-legislative standards and others functioning more like mini-prosecutors’ offices. Indeed, it’s not entirely clear that voters in New Mexico or North Dakota knew exactly what they were voting for when they went to the ballot boxes. In New Mexico, the referendum measure left to it to the state legislature to determine how the commission would operate, while the language in the North Dakota referendum suggested that the commission’s duties would be largely optional.
  Despite their diversity and admittedly mixed track record, state anticorruption commissions have many potential benefits. They can provide clear reporting channels for individuals who have witnessed corruption; they can evaluate systemic corruption risks by sector and recommend more targeted reforms to state legislators; and they can enhance accountability by investigating ethics complaints and corruption allegations, and referring appropriate cases to state prosecutors’ offices. But in order to be effective, state commissions need to have certain institutional features and safeguards.
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  Posted in Commentary | Tagged American elections, anti-corruption commission, California, corruption, New Mexico, North Dakota, state law | 4 Replies
  Stealing a City: Lessons from Bell, California
  Posted on August 11, 2017 by Jetson Leder-Luis
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  In 2010, a corruption scandal rocked the city of Bell, California, as eight top city officials were arrested for what the Los Angeles Country District Attorney called “corruption on steroids.” The officials were charged with misappropriating funds from city government to the tune of $5.5 million, and garnering salaries as high $800,000, more than quadruple the California governor’s salary. In a series of trials that stretched on for more than three years, the mayor ultimately pled no contest to 69 felonies, and the trials of the various city officials have been riddled with allegations of voter fraud, extortion of local businesses, taking of illegal loans from the city, and manipulation of the pension system. Bell officials even used (and likely tampered with) a referendum to change the city’s legal structure to a chartered city which allowed them to raise their own salaries.
  The United States generally experiences very low levels of corruption convictions, around 1,000 per year across the nation. One might expect that some level of state, federal, or citizen oversight would have prevented the Bell incident. Yet this massive scandal was only uncovered due to quality investigative journalism by the Los Angeles Times, and only after five full years of consistent wrongdoing by city officials. How did this happen, and how can similar misconduct be prevented in the future?
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  Posted in Commentary | Tagged audits, Bell, California, cities, data, election fraud, Los Angeles Times, State Controller Office | 2 Replies
  Is Going After Trump’s Businesses Under State Law Such a Good Idea?–Some Criticisms To Consider
  Posted on April 4, 2017 by Matthew Stephenson
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  As regular readers of this blog are aware, although I share the concern that the Trump family’s extensive private business interests pose significant corruption risks, I’m skeptical that existing federal law supplies the tools needed to attack this problem. Some of the most important federal conflict-of-interest laws don’t apply to the President, and some of the creative attempts to sue the President in federal court for alleged violations of the Constitution’s Foreign Emoluments Clause face what I fear are insurmountable legal obstacles. Several commentators have proposed reforms to federal law that would deal with the presidential conflict-of-interest problems more effectively, and some Members of Congress have introduced such legislation. But as a practical matter, given Republican control of Congress, these proposals—whatever their symbolic value—are not going anywhere.
  If federal law isn’t going to help, might state law be the answer? Shortly after Donald Trump tweeted critical comments about Nordstrom’s department store’s decision to drop his daughter Ivanka’s clothing line, ethics expert Norm Eisen suggested that this tweet might be a violation of California’s unfair competition law (UCL), which prohibits “any unlawful, unfair or fraudulent business act or practice.” Around the same time, Fordham Law Professor Jed Shugerman wrote a lengthy blog post, which got quite a bit of well-deserved attention, suggesting that state corporate law tools could be used to go after alleged violations of the Emoluments Clause by Trump’s businesses. Picking up on some of these suggestions, I argued in previous posts that the California UCL, or others with similarly broad phrasing, might be a viable basis for an Emoluments Clause suit, and further that states could amend their UCLs, consumer protection laws, business organization laws, and anticorruption laws in ways that would make it harder for businesses owned or controlled by the President of the United States (or his immediate family) to leverage political power for private commercial gain in ways that would adversely affect the interests of the states’ citizens.
  The idea that state (or local) laws might be used in this way is not purely hypothetical or speculative. A couple of lawsuits are already invoking UCLs as a basis for going after allegedly unlawful overlap between the Trump family’s business interests and their political power. First, a Washington, D.C. restaurant brought a private suit alleging that Trump’s ownership interest in the Trump International Hotel in Washington, D.C., which occupies a building leased from the federal government’s General Services Administration (GSA), violates the terms of the lease, and that this in turn gives rise to a violation of D.C.’s UCL. (That suit, however, was dealt a major blow when the GSA ruled—implausibly—that Trump is not in violation of the lease.) Second, a San Francisco clothing retailer has sued Ivanka Trump under California’s UCL, alleging that various actions by Donald and Ivanka Trump, and others, to promote Ivanka’s brand have unlawfully hurt competitors such as the plaintiff. And in what many took as an encouraging sign, the New York State Attorney General Eric Schneiderman recently hired former Assistant United States Attorney Howard Master, who handled public corruption prosecutions under recently-fired U.S. Attorney Preet Bharara, and news reports indicate that Mr. Schneiderman is looking into the possibility that Trump’s alleged Emoluments Clause violations also put him in violation of state law.
  I’m cautiously optimistic about this line of attack, particularly if state attorneys general and state legislators get involved, and I’m currently working on developing some more concrete proposals along these lines. (As the modern cliché goes, “Watch this space.”) At the same time, though, I’ve talked to a number of smart, thoughtful people who are skeptical that pushing for state-level responses—particularly by aggressive state attorneys general—is such a good idea. While these criticisms haven’t yet convinced me to change my mind, they’re important enough that those of us attracted to the state law approach ought to take them seriously and reflect carefully before we charge ahead. So, let me try to summarize what I take as the three most important arguments against trying to use state law tools to make it more difficult for the Trump family to profit from the presidency: Continue reading →
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  Posted in Commentary | Tagged business organization law, California, conflict of interest, consumer protection law, corporate law, Donald Trump, Eric Schneiderman, Foreign Emoluments Clause, General Services Administration, Howard Master, Jed Shugerman, New York, Norm Eisen, pre-emption of state law, unfair competition law | 3 Replies
  State-Level Responses to Trump’s Corrupt Mix of Business and Politics: Some Preliminary Proposals
  Posted on February 28, 2017 by Matthew Stephenson
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  In my last post, I suggested that legal responses to concerns about corruption in the Trump Administration—in particular, concerns about Trump’s use of the presidency to enrich his family—might be more successful at the state level than at the federal level, and might be more viable if they do not attempt to target Trump directly, but rather deploy state law tools to limit the Trump family’s ability to leverage Trump’s position for commercial gain. My last post noted two proposals for lines of legal attack that could be initiated by state attorneys general (or possibly by private parties) under existing bodies of state law: state unfair competition laws (some of which are framed very broadly) and state corporate laws (which give states considerable power to regulate corporations, and possibly limited liability companies (LLCs), operating pursuant to state charters).
  These proposals are attractive because they do not require any changes in existing laws. At the same time, and for that same reason, the laws in question are not necessarily well-tailored to the specific and unprecedented corruption/conflict-of-interest problems at issue in the Trump Administration. For that reason, it might be worth exploring potential changes to state law that would give state enforcement agencies, and possibly private litigants, more effective tools to rein in some of the most egregious sorts of potential conflicts, and thereby to enforce a more rigid separation between the Trump Administration and the Trump family’s business interests. Even though Republicans control the large majority of state governments, there are several states where Democrats and sympathetic Republicans might well have enough clout to pass such legislation—including, perhaps most importantly, California, New York, and Delaware. (Many other states have popular ballot initiative processes that might enable the passage of legislation even over the objections of Republican-controlled state legislatures.)
  What might such state-level legislative reforms look like? This is a topic I hope to explore in a series of future posts, but here let me throw out a few relatively simple preliminary ideas: Continue reading →
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  Posted in Commentary | Tagged ballot initiative, California, conflict of interest, corporate charter, Delaware, Donald Trump, Foreign Emoluments Clause, Jed Shugerman, New York, Office of Government Ethics, state attorney general, state law, unfair competition law, unlawful gratuities | 9 Replies
  State-Level Responses to Trump’s Business Conflicts: A More Promising Line of Attack?
  Posted on February 21, 2017 by Matthew Stephenson
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  It is genuinely alarming how much Donald Trump seems intent—in true kleptocratic/crony capitalist style—on using his position as President to advance the commercial and financial interests of himself, his immediate family members, and their various business enterprises. As I’ve written before, this approach to governance (if you can call it that) has plenty of precedents elsewhere in the world, but it’s a new experience for Americans. One hopes the U.S. electorate will come to its senses and throw the bum out in four years, but that’s a long way away. In the meantime, the hope that the President might be impeached over his possibly unconstitutional conflicts of interest seems profoundly unrealistic: Republicans control both the House and the Senate, and most Republicans actually seem quite happy to accommodate themselves to a Trump Administration if it enables them to advance their policy goals. Even those Republicans who find Trump’s conduct inexcusable are far more worried about a primary challenge supported by Trump’s rabid supporters than they are about the general electorate. For the same reason, proposals for new federal legislation that would strengthen ethical restraints on the President, whatever their symbolic value, are likely dead-on-arrival as practical proposals. Perhaps understandably, some anticorruption advocates have placed their hopes in the federal courts, most notably through lawsuits alleging that the Trump Organization’s business dealings with foreign governments violate the U.S. Constitution’s Foreign Emoluments Clause, though for reasons I have explained in previous posts (see here and here), I’m doubtful that such lawsuits have much chance of success.
  This is all very depressing, and I acknowledge that in the short term there’s relatively little that can be done; the ultimate remedy will have to be through the electoral process. Nonetheless, I do think that the ideas of enacting new legislation and pursuing certain forms of litigation do hold some promise as means to impose significant constraints on Trumpian corruption. The problem with the proposals I noted above is that they involve proposed responses at the federal level, and for the most part they target the President himself. There’s an alternative, though: Litigation and legislation at the state level, targeting Trump’s business interests and their potential commercial partners. Though hardly a complete solution, there may be a number of things to do at the state level to constrain at least some of the abuses associated with politically-connected business interests that seek to leverage those political connections for commercial advantage, or to facilitate corrupt or otherwise unlawful conduct. To illustrate, let me note a couple of ideas that other experts have floated about how aggressive state attorneys general (or perhaps private litigants) might make use of existing state laws to target Trumpian corruption: Continue reading →
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  Posted in Commentary | Tagged California, Citizens for Responsibility & Ethics in Washington, conflict of interest, corporate charter, corporations, Donald Trump, Foreign Emoluments Clause, impeachment, Jed Shugerman, Norm Eisen, quo warranto, state attorney general, state law, unfair competition law | 1 Reply