Adopt Resolution #12-10-XXX Authorizing Acceptance of the Office Of the State Auditor's Finding
Council was updated regarding this finding through a letter received from the Office of the State Auditor, dated September 24, 2012.
State law requires that the city respond back to the Office of the State Auditor within sixty days on whether they accept this finding.
All information relating to this finding is strictly confidential at this time and will not become public until the Office of the State Auditor issues their final report per State Statute 6.715.
[link added] Interestingly, in this instance a relevant statute was not only mentioned, but cited so we could read it for ourselves. A good practice, in this instance, absent in other agenda places for that day.
I have to presume this is the conflict of interest - ask the auditor situation Sakry reported, here. Also, this crabgrass post.
Because detail is being held secret, I have no idea whether I correctly presume this.
What I do recall from that Sept. 5 meeting, and earlier, Jason Tossey has a bug in his bonnet over what he says he perceives to be conflicted situations, one of which concerns a present candidate in Ward 4, (where I believe he also favors another in that election). He complains of Chris Riley, with Tossey seeing him as having provided accounting services for Wells interests, while voting on the EDA about SAC and WAC compromises granted to Wells' landlord for "The Falls Cafe," Jim Deal.
Wells indirectly but substantially did benefit, but I have seen nothing suggesting any professional services provider, be it lawyer, engineer, architect or accountant, had any direct stake in concessions granted Deal. Tossey also notes Jim Steffen is presently a tenant of Deal, in his Plaza building diagonally across Sunwood from city hall. The same building that houses The Falls Cafe.
MS Sect. 469.098 governs EDA conflicts of interests, and an argument can be made that if Riley was materially conflicted he should have put a disclosure statement in EDA minutes and did not; with the same thing applying re Jim Steffen. The point is whether either was materially conflicted.
Materiality. Tossey, himself, has been open about living in a Town Center home and owing a Town Center town-home rental; so does that mean that under MS Sect. 469.009 governing HRA conflicts of interest, he should enter a writing into minutes saying so at every meeting an issue about Town Center comes up with the HRA, which does little but hold Darren's hand on Town Center, in a matchmakers' bliss? That would mean he'd arguably be conflicted every single HRA meeting, without exception, since impact on fiscal success of Town Center impacts property values of owners there.
Again the point is being sensible, and looking at whether any material conflict of interest exists. This is separate and apart from the Colin McGlone - Emily McGlone - Flaherty job situation; where after McGlone was the deciding vote on whether to go through with $7-8 million dollar financing junior to a $26 million bank loan, on the rail-rental thing, and where also free tax-financed ramp space was given Flaherty, and SAC and WAC amounts well beyond those involving Deal's place, also were supplied when Flaherty put his hand out.
Regarding McGlone's situation, materiality is the whole story. Add to that how McGlone knew how he should be behaving when he behaved quite questionably about that presumably lucrative job spouse Emily attained subsequent to key HRA voting. Check out the agenda and minutes of May 8, 2012, on the piddling little Eastside Oil recycling thing, this screen capture duo -- McGlone discloses a conflict and demurs:
Putting May 8, of this year into a proper time frame; May 16 is the date of the inadequate legal opinion procured by Goodrich from the LMC about the McGlone-Flaherty employment situation. I term it inadequate because there was no mention or analysis of HRA law. Also, May 8 oil tank decision making was shortly before the weekend of May 21-23, when Colin McGlone was schmoozing in Las Vegas with Ryan Cronk. He then had the opportunity and motive from which we can circumstantially infer that discussing job possibilities presented itself as timely, given the LMC opinion dated May 16, and that such a Cronk-McGlone discussion likely happened.
McGlone is stonewalling, so we must make rational circumstantial inferences from the evidence we have. Cronk also has not responded to email inquiry.
Consider: May 8, no real pecuniary stake in a recycle oil barrel, and Colin dances a noteworthy straight line; but weeks later he is looking to keep silent and have his spouse take money from Flaherty's folks.
It does not hang together well and suggests a willing silence while knowing well (as documented in city records from days earlier) of having a reasonable duty to disclose which he met in an inconsequential situation.
How else can you read that juxtaposition? He knew. And despite a known duty, he kept silent.
Back to Chris Riley, Jim Steffen, Tossey owning real property in Town Center, and materiality. The definitive case appears to be Nolan v. City of Eden Prairie, 610 NW 2d 697 (Minn.App 2000) (property variance decision not stricken over council member having brother in same law firm, who previously represented the variance applicant in a different matter -and- the challenged person cast the 3-2 key vote).
Professional services in Nolan were at issue, much as Tossey questions Riley's role - except Riley himself provided the professional services, but never cast any deciding vote on anything involving Jim Deal or Wells.
The Nolan court opined:
Appellants argue that council member Thorfinnson had a disqualifying conflict of interest because he shared office space with his brother's law firm, which was representing Perkins in appellants' challenge to the earlier 1989 plat. In Lenz, our supreme court addressed the issue of a disqualifying conflict of interest:
The purpose behind the creation of a rule which would disqualify public officials from participating in proceedings in a decision-making capacity when they have a direct interest in its outcome is to insure that their decision will not be an arbitrary reflection of their own selfish interests. There is no settled general rule as to whether such an interest will disqualify an official. Each case must be decided on the basis of the particular facts present. Among the relevant factors that should be considered in making this determination are: (1) The nature of the decision being made; (2) the nature of the pecuniary interest; (3) the number of officials making the decision who are interested; (4) the need, if any, to have interested persons make the decision; and (5) the other means available, if any, such as the opportunity for review, that serve to insure that the officials will not act arbitrarily to further their selfish interests.
Lenz v. Coon Creek Watershed Dist., 278 Minn. 1, 15, 153 N.W.2d 209, 219 (1967).
In this case, there is no evidence that council member Thorfinnson had a direct interest in the preliminary plat application. According to his deposition testimony, he did not know that his brother's firm was representing the Perkins in the 1989 plat litigation until he was so informed on the day of the March 2 vote. Even if he did have a direct interest in the preliminary plat approval, application of the Lenz factors does not lead to the conclusion that he should be disqualified. He has no obvious pecuniary interest and he is not involved in any contractual way. We conclude that there is no evidence supporting any reasonable argument that a conflict occurred here.
610 N.W.2d at 700 (link added). Lenz is the leading case, in having fashioned its five-pronged balancing test in a situation where too many watershed board members owned property that would have been impacted in value by the matter before the board, so that getting a meaningful majority decision trumped looking at remote possible pecuniary impacts suggesting disqualification over remote conflict likelihoods. The five Lenz criteria clearly show a focus on materiality.
Tossey's situation is directly akin to the Lenz board members. He represents Ward 3, which by its boundaries includes all of Town Center. Any argument against Tossey's regular participation in HRA/council decision making impacting property values in Town Center would likewise disqualify all who live there as council members or HRA commissioners. It would disenfranchise them of civil rights unreasonably, and the legislature should not be viewed as intending any such result.
Now, Riley: Lenz prongs 2, 4 and 5 show immateriality.
Riley had no pecuniary stake in decisions affecting Deal or Wells; he provided professional services in the past on what presumably was a fair fee for services basis. Tossey is not saying Riley somehow sold his EDA vote. However, even if he had, it proves immaterial in the outcome, under Lenz prong 5. The EDA only recommended things. The council decided all Deal, Wells, and Falls Cafe matters.
The council does not rubberstamp EDA opinion. Indeed, the council declined to route sewer/water to the commercial note at Hwy 47 and 177th Street at city expense, despite an EDA recommendation to that effect.
There is no causal chain between how Riley, LeTourneau, or Steffen, or any other EDA member voted, and the ultimate outcome, that is not broken by council authority and actions, as the ultimate decision maker.
Prong 4 of Lenz is in play because nobody is saying that had Riley and Steffen abstained, the remainder of the EDA vote would have been different. The outcome did not hinge on their votes.
And their votes would not have been needed for getting quorum/voting counts; the rule being you count the votes of the non-conflicted. Compare, 1989 Street Improvement Program v. Denmark Township, 483 NW 2d 508, 510-11 (Minn.App. 1992).
BOTTOM LINE: Riley and Steffen purported conflicts are like Tossey's own situation; immaterial and hinging on remote suggestion with no direct pecuniary exchange or benefit, past or present, tied to the matters the EDA was acting upon.
That is so, whatever (presently secret) State Auditor opinion is ultimately issued on the McGlone situation (with its clearly material conflict of interest and direct, nonspeculative pecuniary benefit). There is little more direct and pecuniary than arranging a job with paychecks and benefits (a situation only possible after key HRA votes by McGlone made the job feasible).
Steffen had a landlord-tenant contract with Deal for space in his Town Center building. Riley was a previous (and presumably ongoing) professional service provider for Wells - specifically an accountant, not a lawyer advising on the restaurant deal, nor an engineer, architect, or land development consultant, nor a restaurant equipment vendor. The relationships carried no pecuniary gain consequent to SAC and WAC concessions to Deal (which indirectly benefited Wells). No one has pointed out a scintilla of circumstantial or direct evidence of any possible quid pro quo exchange, or kickback, in either Riley's or Steffen's situation.
Serious actual conflicts need to be curbed, but rules cannot be so tight that the proper functioning of government is halted. The Lenz court noted a case-by-case review of particular circumstances is almost always necessary.