Tuesday, March 27, 2001
Page 8
PERSPECTIVES (Column)
Must
Free Legal Services to Elected Officials Be Reported?
By ROGER M. GRACE
True or false—a lobbyist who is also an attorney may supply unlimited free legal services to a City Council member and no one has to report it?
Before answering, read the following press release, issued Oct. 30 by the Los Angeles City Ethics Commission:
COUNCILMAN HAL BERNSON AND LAW FIRM OF IVERSON, YOAKUM, PAPIANO & HATCH FINED FOR VIOLATING CITY OFFICEHOLDER ACCOUNT CONTRIBUTION LIMITS
The Los Angeles City Ethics Commission today levied $7,000 in fines against Twelfth District City Councilman Hal Bernson and the law firm of Iverson, Yoakum, Papiano & Hatch for violating City officeholder account contribution limits. The enforcement action stems from $4,700.79 in contributions made above the legal limit between 1996 and 1997 to the Councilman’s officeholder account in the form of free legal services provided by the law firm of well-known City hall lobbyist Neil Papiano in connection with a prior City Ethics Commission enforcement matter. In the prior matter, Bernson was fined $1,500 in 1997 for misusing his officeholder account funds to purchase Hollywood Bowl tickets for personal use. The current fines were reached as part of a stipulated settlement with the Commission. The firm, which, according to Council records, has periodically held City contracts, and the Councilman will pay $4,000 and $3,000 respectively.
In approving the settlement, Commission President Miriam Krinsky stated, "The Commission takes very seriously its responsibility to uphold all of the City’s contribution limits—whether those limits apply to campaign committees or to officeholder account funds." "Those who provide free or discounted legal services to candidates and elected officials," Krinsky added, "should be treated no differently than those who contribute any other services or monetary sums to elected officials. This enforcement action puts any provider of services, including those who provide legal services, on notice that they, too, are be subject to contribution limits under City law."...
So, what’s the answer to the question posed above?
Clearly, from the press release, and especially from Krinsky’s comment, it must be inferred that the donation of legal services is proscribed to the extent the monetary value of them exceeds legal contribution limits.
Not so.
The truth of the matter is that an individual attorney—including an attorney who, like Papiano, is a lobbyist—may secretly donate to a City Council member, or other elected city, county or state officeholder or candidate, free, volunteer legal services to an unlimited extent. The only proviso is that the services be donated to the client in his or her capacity as a candidate or officeholder, and not to the client, personally. That the press release issued by the Ethics Commission intimates to the contrary is to the discredit of that body.
More significant than the commission disseminating misinformation is, of course, the matter of the loophole. And a big loophole it is. Lobbyists may provide limitless uncompensated services to a person whom the lobbyist lobbies with no obligation on the part of the lobbyist or the recipient to report the in-kind contributions.* Naturally, where the lobbyist has a bar card—as many of them do—and performs free legal services, that lobbyist will ingratiate himself or herself with the politician in a big way.
During the time period when Papiano’s firm was donating legal services to Bernson, Los Angeles Municipal Code Sec. 49.7.12.A provided: "No person shall make, and no elected City officer or officeholder shall solicit or accept from any person, a contribution or contributions to the officeholder expense fund totaling more than $1,000 during any fiscal year." (The limit for Council members has since been lowered to $500.) Officeholder funds are to be used to defray the costs of serving or communicating with constituents.
At the time the press release was issued, copies of a stipulation entered into by the commission, the law firm, and the councilman were also made available to the press. It reflects the following:
During the 1996-97 fiscal year, the Iverson firm donated $500 to Bernson’s officeholder account and made unremunerated disbursements on Bernson’s behalf in the amount of $596.79 in connection with the administrative proceeding against him.
Additionally, there were $4,604 worth of legal services donated to the politico. Under California administrative regulations, once an employee has devoted 10 percent of his or her compensated time in any month to the performance of services for a political purpose, any salary paid to the employee from that point on for time spent that month on the political cause constitutes a contribution by the employer.
Adding $500, $596.79 and $4,606, the contributions were set at $5,700.79.
Not reflected by the materials publicly released by the commission—and ascertained only after a Public Records Act request was made and honored—are the facts that follow.
Notwithstanding that extensive legal services were personally provided by Papiano in connection with proceedings related to the Hollywood Bowl tickets, not one minute of time spent by him in representing Bernson was taken into account in reckoning the value of the law firm’s donation. What was considered was a portion of the value of services provided by three members of the firm—attorneys Frederick B. Hayes and Denise R. Sutherland and paralegal Rosa M. Kezra.
The rationale was that Papiano volunteered his services, while Hayes, Sutherland and Kezra were doing what their employer told them and paid them to do.
It was calculated that those three employees provided Bernson with $19,250 worth of legal services, representing 153 hours of work. However, no cognizance was taken of $14,644 worth of those services because they were performed within the 10 percent zone.
The total value of the services that Papiano’s firm rendered to Bernson is unknown. The amount of time Papiano, himself, devoted to the effort is a question mark. His firm has acknowledged that five employees in addition to Papiano, Hayes, Sutherland and Kerza worked on the Bernson matter, but their identities and the value of their services were apparently never ascertained.
What is known about Papiano’s involvement in the matter is that Papiano personally commanded his firm’s effort. In requesting a continuance of a hearing, Papiano said in a letter to the Ethics Commission’s then-president, Raquelle De La Rocha: "My presence at Councilman’s Bernson’s hearing is important not only due to the severity of the charges and allegations, but due to the fact that I have been in charge of this matter during all of the current proceedings since Councilman Bernson dismissed the attorney who had previously handled the case."
Papiano’s work on the case appears to have spanned the July 1, 1996-June 30, 1997 fiscal year. He had advised the commission by letter of April 24, 1996 that he was now representing Bernson. The councilman paid the $1,500 fine in connection with the Hollywood Bowl tickets on June 6, 1997, but the possibility of a court action—which Bernson threatened in March, 1997 after the commission imposed the penalty on him—lingered. On June 27, 1997, presumably after legal consultations which extended beyond March, Hayes announced that it had been decided legal proceedings would not be instituted.
Hayes, now with the Glendale firm of Bradley & Gmelich, declined to comment on the extent of Papiano’s involvement in the matter. Sutherland, who is reported to be on maternity leave from the Westlake Village firm of Garrett & Tully, was not available for comment. I knew I would not get a straight answer from Papiano (whose wiliness I’ve observed from the other end of the counsel table in court ), so I didn’t bother phoning.
The city’s view that Papiano’s "volunteer" legal services are non-reportable appears to be predicated in part on informal advice rendered in 1995 to Daniel M. Kolkey, legal affairs secretary to Gov. Pete Wilson. The guidance was offered in a letter to Kolkey from Luisa Menchaca, counsel in the Legal Division of the Fair Political Practices Commission. The legal affairs secretary (now a member of the Third District Court of Appeal) had queried whether pro bono legal services to the governor from law firms, some of which were also lobbying firms, were reportable as "gifts." Menchaca responded:
"…[Government Code] Section 82015 and [Code of Regulations] Regulation 18215(e)…provide that the term ‘contribution’ does not include volunteer personal services. Thus, for example, if an attorney wishes to donate his or her legal services (on noncompensated time) in connection with litigation that arises during the course of the Governor’s official duties, no reportable contribution to the Governor would result."
Menchaca went on to caution that "the exemption for ‘volunteer personal services’ does not apply if: (1) a law firm pays an attorney to render the personal services for political purposes, and (2) the attorney spends more than 10 percent of his or her compensated time performing such services in any one month."
Sec. 82015(g) provides that a contribution "does not include volunteer personal services." Regulation 18215(C)(2) is to like effect.
Similar advice was given by the FPPC to a member of the Half Moon Bay Redevelopment Agency in 1994 and to the Los Angeles law firm of Tuttle and Taylor (which did pro bono work for an Inglewood City Council candidate) in 1989.
There are two major loopholes revealed by all this:
•If an attorney works for a law firm and, on company time, provides legal services to an elected officeholder for which the firm does not bill, not one cent of the value of the services needs to be reported if, in a month’s time, the services do not comprise more than one-tenth of the attorney’s time. A multi-attorney firm can parcel work among several members, chalking up a large number of total hours but, so long as no individual lawyer exceeds the 10 percent mark, no reporting is required.
•If an attorney does not do the work on company time, the services are "voluntary," and no reporting is required. However, attorneys are not apt to punch time clocks. Unless they are obliged to put in a specified number of hours a week, or be at the office at specific hours, they can simply claim that the work was done on their own time.
To state the obvious, this is wrong.
In my next column, I’ll continue this discussion.
*The president and executive director of the Ethics Commission, in a letter to the editor published April 5, 2001, disputed the accuracy of this statement. A "Perspectives" column published that same day acknowledged that the position stated in that letter was tenable, but asserted that a close reading of the statutes would more reasonably lead to a conclusion that the reporting of the contributions was not required. [Return to text.]