Wednesday, March 02, 2011


The duplicity behind the SB671 ethics bill caper

by Larry Geller

Senator HeeDavid Shapiro’s headline for his March 1 Volcanic Ash article was short and to the point: Hawai‘i lawmakers hunger for free meals (3/1/2011). That’s exactly what seems to have driven the sad machinations around Senate Bill 671 which was heard Tuesday by Senator Hee’s Judiciary and Labor Committee.

The original bill appears to have been used by Senator Hee as a “Trojan horse” to push through a questionable gut-and-replace measure bearing no resemblance to the bill put forth to the public. Even now, the Senate’s status page for SB671 continues the deception. It states: “The committee(s) on JDL recommend(s) that the measure be PASSED, WITH AMENDMENTS.” The truth is that the original bill was not heard nor was it debated. There is still no committee report, and the public record, as of this writing, misrepresents what happened in the hearing room. The only debate was on the proposed “amendment,” which was a possibly unconstitutional gut-and-replace.

The issue appears on the surface to be unhappiness on the part of legislators that they cannot attend a Hawaii Institute for Public Affairs (HIPA) awards dinner because their attendance violates a long-standing ethics law. Using this as a pretext, the Senate Democratic Caucus met on January 26 with the executive director of the Ethics Commission to hash it out. That should have (and probably did) give them clarification of what the limits of non-profit largess are

The Ethics Commission only enforces existing state ethics laws, it does not create anything new. To change the law would require—you guessed it—a new law, one that weakened existing protections. It’s not likely that advocacy groups which are working to increase transparency would welcome introduction of a bill designed to weaken existing law since the pressure is on for even greater transparency in the legislative process.

So the Senate concocted a strategy to pull the wool over the public’s eyes.

On Friday February 25, House members who were available met with the ED of the ethics commission, but meanwhile, a bill was drawn up to accomplish the intended purpose. Whether the language allowing unlimited solicitation of meals and gifts was intended or not is still a question—the language was sent to the Attorney General’s office but the AG declined to respond or to appear at Sen. Hee’s hearing.

But the bill, in all its ugliness,  needed to get moving somehow. There are deadlines, and the strategy seems to have been to use SB671, a fine enough ethics bill (part of which would have required disclosure of the value of these non-profit events) for the purpose. There was likely never any intent to hear that bill—these ethics bills are never or almost never even scheduled for a hearing by the Senate.

And so the deception was underway. While the intended bill was at the AG, on Friday, Senator Hee scheduled the “Trojan horse” vehicle for hearing, and it was posted on the web. Members of the public who might have wanted to support the bill were cheated because it was never going to be heard. The language in the original bill was not even mentioned by the committee.The bill had only a single referral, which gives the chair plenty of opportunity to play with it. No other Senate committee is looking over Hee’s shoulder on this bill.

The process was deceitful and disrespectful of the public, and clearly self-serving on the part of legislators. Surely they are paid enough that they don’t need to sell influence in exchange for handouts at non-profit fundraising events. Even if the intent of the legislator is fully honorable, there’s no reason why the legislator could not have supported the non-profit by purchasing a ticket like everyone else.

Non-profits are often little different than for-profits—they don’t pay taxes, but their executives can be as highly compensated as in the private sector. In Hawaii, non-profits often escape oversight. Some have been going for years, and we’re talking about 20 or more years in some cases, without an outside audit, especially if federal funds are involved. Many have sought and received substantial grants-in-aid from the Legislature. Sure, they often do valuable work for the public, but so do for-profits. It appears that they are also as adept at lobbying the lege as are for-profits.

The historic entanglement of non-profits with legislators

That legislators want unlimited access to non-profit events should come as no surprise. Many of Hawaii’s non-profits have long courted influence at the Legislature. The entanglement is so close that it became a shadowy business enterprise operating within the Legislature itself. Investigative reporter Rob Perez did a three-day series that exposed the extent of the enterprise:

The Legislature has awarded roughly $200 million in grants to Hawai'i nonprofits over the past five years using a loosely structured system in which only a handful of legislators select the charities, and they do so behind closed doors without any formal criteria to guide them.

Although numerous organizations benefit from the system, it fails to adequately protect taxpayer interests, operates with little independent oversight and is so discretionary that many nonprofit executives have no idea how the decisions are made, an Advertiser investigation has found.

[Honolulu Advertiser, Hawaii nonprofit grant funding a mystery, 12/23/2007]

The enterprise was highly profitable for the campaign of Rep. Michael Magaoay in particular, according to Perez’ article:

Over the past two elections, no one in the House has raised more money to bankroll a campaign than Rep. Michael Magaoay.

The low-profile North Shore legislator jumped from the bottom third of fundraising to the top spot even though he has no House leadership position or major committee chairmanship, two roles that typically come with money-raising muscle.

His meteoric rise came after he got the job of managing the House process that helps determine which nonprofits get millions of dollars in grants from the Legislature each year

Of the roughly $85,000 he collected from individuals who gave at least $100 in one or both cycles, more than 70 percent of that support came from people with ties to the nonprofit community. By contrast, Rep. Blake Oshiro, the only other House Democrat first elected in 2000 and still holding a seat, received only 43 percent of his nearly $27,000 in individual support from people with links to the nonprofit sector.

Roughly 90 percent of Magaoay's nonprofit supporters started contributing to his campaign only after he got the grants job. Viewed another way, only 12 of the 105 nonprofit supporters contributed to his 2000 or 2002 election bids — before he got the grants job. The rest started giving only after he was in a position to influence who made the grants list.

Magaoay's ability to rake in significant amounts from supporters in the nonprofit world has raised questions about a grants-in-aid system that already is considered flawed by charity executives, lobbyists, legislators and others. No formal criteria are used to decide who gets money and who doesn't, critical decisions happen behind closed doors and only a select few legislators make those calls, leaving many of their colleagues out of the debate.

[Honolulu Advertiser, Hawaii House grants job a lucrative post, 12/24/2007]

The bill that Senator Hee introduced would have opened the floodgates for contributions of all sorts to any legislator. It would have broken the monopoly of the “select few,” which is likely why they grilled the ED of the Ethics Commission so closely to see what could be done. Why not have free meals for everyone (and their staff, and any state worker)?

In fact, the proposed bill could not have passed into law, it was that bad. Perhaps the AG was insulted to have been asked to work on it. In any case, it wasn’t intended to ever be passed.

What the Judiciary committee was looking for was a carve-out from the existing law so that they could go to these non-profit parties. What the several non-profits that testified in favor of the bill wanted (the stealth bill, not the posted “Trojan horse” bill) was to be able to regain the influence that they had before Perez’ article ended the grant-in-aid gravy train.

In the bad old days non-profits worked literally within legislative offices

Entanglements between non-profits and legislators were pretty tight until the 2006 legislative session when this blog revealed that a senior non-profit executive was working as an “intern” in the office of a committee chair who was hearing bills directly related to the guy’s affiliated company.

Mark Forman, Executive Administrator of HMSA Foundation (he’s on their staff list), was working as an “intern” in the office of House Consumer Protection & Commerce Committee chair Robert Herkes. He wass no college kid trying to learn the legislative process. Forman is a knowledgeable and seasoned healthcare executive.

The issue came up because health insurance rate regulation came to an end that session largely as a result of amendments allegedly written by HMSA and passed by Herkes’ committee. Regardless of the circumstances of that outcome, it was clear that non-profits were entirely too close to legislators and needed to be kicked out, as they shortly were.

The infestation was not limited to non-profits. HECO, for example, had similar arrangements. These “interns” were in effect embedded lobbyists working as close to legislators as it was possible to get—right there in the lawmaker’s offices.

Gut-and-replace is an abuse that could be unconstitutional

From information posted by the Legislative Research Bureau:

No bill shall become law unless it shall pass three readings in each house on separate days. No bill shall pass third or final reading in either house unless printed copies of the bill in the form to be passed shall have been made available to the members of that house for at least forty-eight hours. (Hawaii Const. art. III, ß15)


The Hawaii Constitution requires each house, by rule of its proceedings applicable to both houses, to set a date to be established as "cut-off" day after which no new bills may be introduced. (Hawaii Const. art III, ß12) Although the Senate Rules do not specify guidelines for the setting of the "cut-off" date, it authorizes the Senate President to coordinate such date with the Speaker of the House (Senate Rule 3(15)). House Rules, on the other hand, require that the cut-off date precede the mandatory recess and be set in concurrence with the Senate. (House Rule 33.4).

I’m certainly not a constitutional scholar, and to my knowledge there has not yet been a challenge to the Legislature’s gamesmanship with the text of bills, but it appears to this writer that the use of “Trojan horse” bills as we have just seen in this case could be unconstitutional. The original SD671 had one reading before the full Senate, but the new language, the “real” bill masquerading as an amendment, will likely not have the three readings required. Senator Hee said that he would await the results of an Ethics Committee meeting in March to determine his action, but by then the bill will be out of his hands, since the Ethics Commission meets after crossover. We’ll have to see if the full Senate will continue with this caper now that it has received newspaper, TV and blogger attention.

“Gut-and-replace” is standard operating procedure for this legislature, as is the similar abuse of short-form bills. According to the LRB:

Short form bills permit the committees to examine the general idea of the bill before drafting the details in long form.

That’s not usually how they are used. See: The purpose of this title is to have a title, or, How the Legislature plays with the rules (2/4/2011). There’s no examination of the general idea of a bill like that because the short-form bill (as in the example posted with the link) has no discernable idea.

Hawaii’s state legislature usually protects the public interest and leads the nation in some areas, such as health care. We are lucky also to have a relatively open legislative process and can easily speak directly with our representatives. It’s just things like this that need to be challenged to keep the system honest.

This work is licensed under a Creative Commons license.


Great work Larry, corruption knows no bounds. This is another reason we need publicly financed elections.

Iʻm scared now; denigrated to the lowly childishness of stomping their feet >>>>>>>>>> because they canʻt go to the party !!!!!

But it is far more disturbing than that: they have the gaul to waste taxpayer time and money and to put aside important necessity-of-life issues to exert manhours on legislation >>>>>>

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