On October 26, 2011, the Illinois legislature passed a bill that authorized construction of a multi-billion-dollar smart grid and reshaped how utility companies seek approval for raising electricity rates. Consumer groups opposed the measure, saying it was a handout to utilities.
But the final blow for opponents came three months later when former state Rep. Kevin McCarthy, who had pushed the bill through the legislature only to resign after winning its passage, registered his own lobbying firm and signed his first clients. Prominent among them: Commonwealth Edison, one of the state’s largest utilities.
“It’s hard to believe that there wasn’t a quid pro quo for this,” said Scott Musser, an Illinois lobbyist for AARP, which opposed the bill.
McCarthy declined to comment. And despite the potential conflict of interest, his move seems to have been in full compliance with state ethics laws. In Illinois and 14 other states, there aren’t any laws preventing legislators from resigning one day and registering as lobbyists the next, according to data compiled by the National Conference of State Legislatures.
Most other states impose “cooling off” periods of one or two years during which legislators or government officials are restricted from lobbying or taking certain private-sector jobs. But a review by the State Integrity Investigation found that in several of those states, including Florida, Indiana and Utah, to name a few, the rules are riddled with loopholes, narrowly written or loosely enforced.
And so in many states, it is simply common practice for lawmakers and other officials to cash in on their expertise and connections by lobbying or consulting for the private sector immediately after leaving office. Ethics experts say this “revolving door” erodes public trust in government and corrupts policy-making.
In the most egregious cases, legislators or regulators have written laws or set policy that helps a business or industry with whom they have been negotiating for a job once they leave office. Some states do not ban this practice.
“It smells bad, I guess is about the nicest way I can say it,” said Peggy Kerns, director of the Center for Ethics in Government at the National Conference of State Legislatures.
Need for balance
Even advocates of stricter revolving-door laws caution that a balance must be struck. A complete ban on post-employment lobbying or overly restrictive laws preventing other private-sector work could discourage qualified people from serving in public office and unfairly penalize them for their work. The issue can be particularly complicated at the state level, where many legislatures meet for just a few months a year and pay lawmakers modest salaries. Those calling for stronger laws generally support one- or two-year cooling off periods.
But in the absence of such temporary bans, ethics experts say the revolving door between government and the private sector helps elevate the interests of wealthy private clients above those of the public.
“Legislators build up relationships with one another,” said Jason Kander, Missouri’s new secretary of state, who pushed unsuccessfully for ethics reforms as a state legislator. “It’s one thing when that working relationship is beneficial to your constituents — that’s how the process is supposed to work. But when that relationship becomes beneficial to paid interests, that’s when you cross the ethical line.”
From legislator to lobbyist
In 2003, Illinois Gov. Rod Blagojevich signed an ethics reform bill that placed limits on post-government employment for certain public officials. The law prevents officials from taking a job if they oversaw a contract with their potential employer while in government. The reform came after the administrator of the Illinois Gaming Board started working for Harrah’s casino immediately after resigning from office in 2003. But the law does not prevent a legislator from sponsoring a bill that benefits a company and then resigning in order to work for the firm.
McCarthy’s case was perhaps the most dramatic example of this, but he is not alone. Over the past year, several other lawmakers have stepped down to begin lobbying careers. In a March editorial, the Chicago Tribune wrote that legislators should “be embarrassed” by the common practice.
The Senate sponsor of the electrical utility bill, Mike Jacobs, is the son of a former legislator who now lobbies for ComEd, the utility, among other clients. ComEd also hired Rep. Marlow Colvin, who had actually proposed another piece of legislation that the utility opposed, after he resigned in March. Colvin told an Illinois newspaper he had been talking with ComEd about the position for months before his retirement. Another representative stepped down in November and will head the Illinois Petroleum Council, an industry lobbying group.
“It’s akin to insider trading,” said David Morrison, deputy director of the Illinois Campaign for Political Reform, a good-government group. Morrison said companies that can afford to hire former legislators as lobbyists gain an advantage when promoting their interests in the capital.
The other states without laws restricting legislators’ post-government employment are Arkansas, Delaware, Idaho, Maine, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Ohio, Texas, Vermont and Wyoming. Some states have different rules for members of the legislative and executive branches. Missouri, for example, does impose restrictions on executive officials. Lawmakers in Michigan are prohibited from lobbying immediately if they resign before the end of a session, but are free to lobby once a new session begins.
Resigning early
As Illinois shows, some outgoing legislators resign early rather than serve their full terms. The move usually has little effect on governance as long as the session has ended (most legislatures meet for only part of the year). But in North Carolina, the timing can help circumnavigate the state’s six-month cooling off period.
Harold Brubaker, a Republican who had been speaker of the House when the party controlled the legislature in the 1990s, ended his long legislative career by resigning last July after the session ended. “You know when it’s time to go,” he said in a statement at the time. But the statement also mentioned that he planned to begin lobbying. By stepping down in July, Brubaker will be eligible to lobby his former colleagues as soon as the next legislative session begins, later this month.
Brubaker did not respond to requests for comment.
In September, a local Republican group held an event to honor Brubaker and several legislators attended, including Speaker Thom Tillis, who presented him with an award. A local paper reported that Brubaker’s acceptance speech included one request for his former colleagues. “Just remember one thing,” Brubaker said, “When I come visit you in the future, just say ‘Yes.’”
The move shows that North Carolina’s six-month cooling off period, which advocates won only after a hard battle in 2005, is “badly in need of change,” said Jane Pinsky, who heads the North Carolina Coalition for Lobbying and Government Reform. State Sen. Richard Stevens stepped down in September and announced he would join a Raleigh law firm, though he said he wasn’t sure whether he would lobby the legislature. Such moves “undermine confidence in state government,” Pinsky said.
As for Brubaker, by resigning early he was also able to straddle the line with his campaign funds. Lobbyists are barred from making campaign contributions in North Carolina, but there’s nothing saying a future lobbyist can’t. Brubaker still had about $37,000 left in his campaign account when he announced his intentions, according to campaign finance records, and about six weeks later he sent $6,800 to three former colleagues.
Narrow rules
Most states do have laws limiting what type of private work public officials can immediately turn to after leaving office, even beyond restrictions on lobbying. But in some states the laws are so narrow or are interpreted so loosely that good-government groups say they fail to prevent many conflicts of interest.
In Indiana, for example, a post-employment rule prohibits officials in the executive branch from taking certain jobs within a year of leaving office and bans for life work on matters they “substantially participated” in while in office. In a 2010 report, TheIndianapolis Business Journal examined 27 cases since 2006 and found that the state Ethics Commission enforced the one-year cooling off period in only three of those cases. The commission allowed all the rest to begin their next job immediately, though it did limit the officials from working on certain contracts in 12 cases. Two budget directors, for example, were allowed to work for companies even though they voted on the issuance of bonds involving those companies while in office.
The Journal report was spurred by a revolving-door scandal that led to fines, resignations and even an indictment that is still not settled. In September 2010, Scott Storms left his job as a lawyer and administrative law judge for the Indiana Utility Regulatory Commission to work for Duke Energy, which had been negotiating with the commission over the construction of a cutting-edge coal-powered plant and the deployment of a smart-grid system.
A consumer group raised alarm over the move, and it soon emerged that Storms had conducted hearings involving Duke in the days after the company had offered him a job, in July of 2010. Duke put Storms on leave and Gov. Mitch Daniels fired David Lott Hardy, Storms’s boss at the utility commission, after it became clear that Hardy had known of the Duke dealings. After a complaint was brought, the same Ethics Commission that had allowed Storms to go to Duke ended up fining him $12,000 and barring him from future state employment, ruling that Storms had violated conflict of interest rules by working on matters involving Duke while negotiating with the company for a job. Storms denied wrongdoing. Hardy is now awaiting trial on charges of misconduct over the case.
However, the Ethics Commission did not find Storms to have violated the post-employment rule. While he did oversee issues involving Duke, Storms did not directly regulate the company or issue contracts.
“I’m not going to say the words ‘there’s nothing wrong with it,’” said David Thomas, the state’s inspector general, who investigates ethics issues in the executive branch. But, he added, “The post-employment rule wasn’t violated.”
TheIndianapolis Star said in an August 2011 editorial that the scandal revealed a “pervasive pattern of intimacy between regulatory officers” and Duke, adding that the arrangements were, “unjustifiable by any measure of common sense.”
IG Thomas says his office has effectively enforced the law, pointing to 47 cases in which his office, which staffs the Ethics Commission, has issued 117 restrictions since the revolving-door law was enacted in 2005. He said that accusations that his office is too lenient indicate a misunderstanding of the law, which he says imposes a one-year waiting period only if an employee was directly regulating a company or involved in issuing contracts. In a report to the state legislature last year, Thomas recommended against making the revolving-door law more restrictive, pointing to a 2010 federal court ruling that struck down Ohio’s cooling off period as too broad.
Julia Vaughn, policy director for Common Cause Indiana, disagrees. She said the attitude that led to the Storms scandal has continued throughout the Daniels administration. “This does go all the way to the top,” she said. “It reveals a conspiracy to just get around these laws, that they were considered an inconvenience and that they stood in the way of people who wanted to use their public influence for private gain.”
Last summer, Purdue University’s board of trustees, most of whom Daniels had appointed, named him the next university president. The inspector general’s office said the move would not violate ethics laws. But Vaughn and others have said the case presents clear conflicts of interest and shows the weakness of the state’s laws and the Ethics Commission.
“It’s been a rubber stamp agency for a long time,” Vaughn said. “The law’s only as good as the enforcement of it.”
The Daniels administration declined to comment for this story, referring questions to the inspector general. But after a Democratic lawmaker filed an ethics complaint in response to Daniels’ appointment as Purdue president, a spokeswoman for the governor called it “partisan nonsense.”
Loopholes abound
Even where laws on post-government lobbying exist and are enforced, outgoing public officials have found ways to comply while violating the spirit, government watchdog groups argue. In many cases, lawmakers are prevented from registering as lobbyists for a certain time frame but not from working in an office full of lobbyists and advising them.
“I think that’s a slippery area that needs to be closed,” said Kerns, of the Center for Ethics in Government. “I don’t think any public official should have any kind of a job from a lobbying firm.”
Florida has a two-year cooling off period during which ex-legislators cannot lobby their former colleagues. But this hasn’t stopped them from working for lobbying firms or from lobbying the executive branch. According to the Orlando Sentinel, at least eight former speakers of the Florida House went on to lobby after leaving the legislature. One of them, John Thrasher, pulled in $1.6 million as a lobbyist in 2008, according to the Sentinel, compared to a state lawmaker’s salary of just under $30,000 a year (Thrasher subsequently returned to government as a state senator).
The most recent example is Dean Cannon, who formed his own firm even before leaving office in November, though the firm is not yet registered to lobby. In order to comply with state law, Cannon has said he will focus on lobbying the executive branch and working as a consultant to local governments on political and legislative strategies. His colleague and predecessor as speaker, Larry Cretul, will handle the firm’s legislative lobbying.
The arrangement has led some to question the law’s effectiveness. Cannon was a strong ally of the Orlando-Orange County Expressway Authority, for example, as it fought last session against a proposal that would have consolidated the agency with several others. Before he left office, the authority invited Cannon to a November meeting to help the agency prepare for the next legislative session. A spokeswoman for the agency told the Sentinel that her company invited Cannon as the outgoing speaker, but by the time the meeting occurred he had already announced he would soon be lobbying. He has also acknowledged he is seeking a lobbying contract with the authority.
The episode prompted the Sentinel to question Florida’s revolving-door law, and its enforcement, in a November editorial. “Floridians can’t be blamed,” the paper wrote, “for wondering if senators and representatives are making decisions to serve the public interest or to please potential employers.”
On Tuesday, the Senate Ethics Committee began work on a sweeping ethics reform bill that could prevent similar moves in the future, either by expanding the cooling off period to include executive branch lobbying or by preventing lawmakers from accepting any work for a firm that lobbies the legislature.
The loophole that allows legislators to work for lobbying firms even applies while they are still in office. One of the side effects of having a part-time legislature, as Florida and nearly all states do, is that many lawmakers often have more lucrative work on the side. According to a report published in July by Integrity Florida, a nonprofit that pushes for ethics reform, 11 lawmakers in the state reported earning money from firms engaged in lobbying in the 2012 session.
Utah’s law, passed in 2009, contains perhaps the biggest loophole. While it bans lawmakers from lobbying for one year after leaving office, it exempts anyone lobbying for themselves or for a business they are associated with, as long as lobbying is not the business’ primary activity. In 2009, a governor’s commission recommended closing the loophole, but a 2010 effort to do just that failed to pass the state House.
Term limits
Some academics and watchdog groups argue that term limits, which several states have enacted over the past two decades, effectively force more legislators into lobbying jobs. Voters in Michigan approved term limits in 1992, restricting members of the state House to three two-year terms and senators and statewide officials to two four-year terms.
In October, the Detroit Free Press tracked the careers of 291 officials elected from 1992-2004 and found that 71 of them, or nearly one-quarter, ended up either registering as lobbyists or working as consultants or paid advocates. Two former chairs of a House energy committee went to work for utility companies. In the 2009-2010 session, Rep. Kathy Angerer sponsored a bill that would have imposed a two-year cooling off period. The bill failed, however, and Angerer joined AT&T as a lobbyist after the session ended.
Florida’s Dean Cannon was limited by term limits, and some proponents of stronger revolving-door laws blame term limits for worsening the revolving door in Missouri and Nebraska as well.
Reforms
Legislators are often reluctant to limit their own options for earning a living. Rep. Jennifer Weiss, a North Carolina Democrat who did not run for re-election in 2012, learned this firsthand when she was part of a group that helped pass the state’s revolving-door law.
“I had wanted a year all along,” Weiss said, but the group met with too much resistance from legislators on both sides of the aisle, she added, and had to settle for a six-month cooling off period. “People wanted to be able to leave the legislature and lobby, to be blunt.”
Similar efforts have failed over the past few years in Idaho, Michigan, Missouri and Illinois, to name a few. Morrison of the Illinois Campaign for Political Reform said his group compromised by pushing for a six-month cooling off period rather than a year, but the initiative has made no progress.
Morrison said Illinois’ laws are effective at slowing the revolving door for executive branch officials. And Weiss stressed that a six-month period is better than nothing. While most states do impose some limits, ethics experts say that laws should not completely restrict lawmakers or other officials from moving to the private sector.
“They need something else to do,” said George Connor, a professor of political science at Missouri State University.
Still, Connor said, loose laws in Missouri allow a pervasive revolving-door culture. The state’s outgoing speaker of the House, Steven Tilley, resigned last summer and immediately began a new career in political consulting and lobbying, a step that Connor said has a corrosive effect on governance. “These kinds of relationships cause people to lose sight of the public interest,” he said.
One of Tilley’s last moves as speaker was to appoint a “blue-ribbon” committee tasked with generating ideas for updating the state’s highway system. Tilley, who did not respond to requests for comment, appointed Rod Jetton, a former speaker and now marketing director of a Missouri engineering firm, as co-chair. Also named to the committee was Thomas Dunne, the outgoing chairman and CEO of Fred Weber, Inc., a highway construction company and also one of the first clients that Tilley signed after leaving office.
“It’s the smell test,” Connor said. “That smells bad.”