We spent a good part of our holiday break thinking about this question and doing some reading. The anticipated ethics bill should include meaningful financial disclosure for all public officials. Comprehensive disclosure of private interests would set a new tone in Albany, and be a declaration by lawmakers that their first priority is to the public. Officials should disclose all sources of income that might serve to influence their decision-making: commercial tenants, sources of brokerage fees and commissions and other third-party payments, and business clients of law firms and other professional practices.
Though dull reading, here are a few examples of client and income disclosure from a handful of states that should serve as useful models to bill drafters:
In Wisconsin, public officers are required to disclose commercial customers, clients and tenants who are not individuals:
“For each unincorporated business, subchapter S corporation, service corporation (SC), limited liability company (LLC), partnership, or income-producing real estate (in which the officer or his family owns 10% or more), list businesses, organizations, and lobbyists that paid the enterprise $1000 or more in [the calendar year] Furthermore, please place a checkmark in the appropriate column if an organization listed in Item 3 authorized you to represent it in its dealings with others as an attorney-at-law, agent, spokesperson, or representative.
List: both a third-party payer as well as the customer, client or tenant if the business received income from a third-party payer (such as a fee, commission, or insurance payment received by a realtor, travel agent, or medical practice).
Do not list: an individual (unless the individual was a lobbyist or acting on behalf of a business or organization); a decedent’s estate.
Further, Item 7 requires disclosure of entities that appoint officials as agent, representative or spokespersons to third parties. “List organizations that authorized you or a family member to represent it in its dealings with others as an attorney-at-law, agent, spokesperson, or representative…
List: each business, labor union, association, cooperative, partnership, or other organization for which you or a family member was an authorized representative or legal agent.
In the case of a lawyer, business clients for which you or a family member was authorized to provide representation in dealing with other parties or before a tribunal.”
To read more about Wisconsin’s progressive financial disclosure, visit http://gab.wi.gov/node/205
In California, public officials must disclose “commission income,” defined as “gross payments of $500 or more received …as a broker, agent, or sales person, including insurance brokers or agents, real estate brokers or agents, travel agents or salespersons, stockbrokers, and retail or wholesale salespersons…The “source” of commission income generally includes all parties to a transaction, and each is attributed the full value of the commission.”
Officials must disclose “the name of each reportable single source of income of $10,000 or more.” This includes clients, and, as interpreted by California’s Fair Political Practices Commission: “A person's name is not ordinarily protected from disclosure by the law of privilege in California. Under current law, for example, a name is protected by the attorney client privilege only when facts concerning an attorney's representation of an anonymous client are publicly known and those facts, when coupled with disclosure of the client's identity, might expose the client to an official investigation or to civil or criminal liability.” http://www.fppc.ca.gov/Legal/Regs/18740.htm Regulations set out a procedure that must be followed in order to omit a source of income on the basis of privilege. (id.)
In Washington State, officials must disclose “the name of each governmental unit, corporation, partnership, joint venture, sole proprietorship, association, union or other business or commercial entity from which such entity has received compensation in any form in the amount of $10,000 or more during the preceding twelve months.” (Washington Public Disclosure Commission Personal Financial Affairs Statement, F-1 Supplement.). www.pdc.wa.gov
Washington’s Commission can allow modification of client reporting when a “literal application…works a manifestly unreasonable hardship” and such suspension “will not frustrate the purposes of the chapter.” In PDC Interpretation 02-03, the Commission states: “The Commission shall suspend or modify the reporting requirement or requirements only to the extent necessary to substantially relieve such hardship, and only upon clear and convincing evidence.”
A footnote to this PDC Interpretation provides:
Ordinarily, the identity of a client does not fall within the purview of the information protected by the attorney-client privilege unless there is a “strong probability” that the disclosure would convey the substance of a confidential communication between client and attorney. Splash Design, Inc. v. Lee, 104 Wn.App. 38, 14 P.3d 879 (2001) (describing Rule of Professional Conduct 1.6 and citing to Dietz v. Doe, 131 Wn.2d 835, 935 P.2d 611 (1997)); Tegland, Washington Practice, Vol. 5A, § 501.15 (1999); United States v. Hunton & Williams, 952 F.Supp. 843 (D.C. 1997)(under federal law, absent special circumstances, identity of a client of a lawyer or law firm is not protected by attorney-client privilege); C.K.
In Alaska, officials must disclose each source of income over $1,000 from their sole proprietorships, partnerships, limited liability companies, and professional corporations. The instructions to the APOC Financial Disclosure Statement note that
“Source of income is the origin of the payment, requiring disclosure of:
the client or customer of the sole proprietorship, LLC, partnership, PC, or corporation where filer and/or family hold a controlling interest. If the origin of payment is not the same as the client for whom the service is performed, both are considered the source of income, and both must be reported. Example: A realtor must report the real estate company that pays him/her and the clients the agent represented. … the financial disclosure law requires a detailed description of services rendered”
We especially like the salty instructions to Alaska’s form, which require:
““a description sufficient to make clear to a person of ordinary understanding the nature of each service performed.” Do NOT give one-word answers or vague phrases. One-word answers such as “consultant” or “researcher” are NOT acceptable. Provide a clear, detailed description of the work.”
The law also allows for exceptions:
Filers may be exempt from reporting a source of income if (1) the information is legally confidential and disclosure would violate the source’s legal rights; or (2) a filer meets specific exemption criteria described in detail in APOC regulations. Filers seeking an exemption from disclosing a source of income must submit a written request with facts that show how the filer meets the qualifications for an exemption. Examples: Medical practitioners required by law to protect patient privacy under HIPAA (the federal Health Insurance Portability and Accountability Act); tax preparers adhering to the IRS Code of Confidentiality; lawyers protecting client confidentiality in certain cases, such as those involving a minor. APOC will grant or deny a request based on whether the facts and circumstances qualify the filer for an exemption. For detailed exemption qualifications, criteria and requirements, consult the following APOC regulations. For public officials and candidates: 2 AAC 50.100-102. For legislators: 2 AAC 50.780.