County treasurers' debacle is teachable moment for Iowa officials, attorneys

Top officials in the Iowa State County Treasurers Association voted on March 27 to discontinue a controversial scholarship program, Ryan Foley reported for the Associated Press.

Earlier this month, all 99 county treasurers received the latest call for scholarship applications. Since then, longstanding doubts about the program’s legality reached a wider audience after Foley revealed that two county treasurers had vacationed last fall with the owner of a company doing business with their offices.

The bad publicity could have been avoided if treasurers and those advising them had been committed to complying with Iowa’s gift law, even when no one was looking.

A TEXTBOOK CASE FOR THE GIFT LAW

Two companies that provide services to many county treasurer offices had contributed most of the funding for the four $500 scholarships, awarded annually since 2014 to children or grandchildren of county treasurers or their employees.

The Iowa Ethics and Campaign Disclosure Board determined in 2015 that the program violated the state’s gift law, because the vendors who financed the scholarships “are either doing business or seeking to do business with county treasurers across Iowa and are financially impacted by whether a treasurer chooses to contract for their services.”

Nevertheless, the program continued, with the vendors still touting their role in donating $2,000 per year as recently as three weeks ago.

Business owners providing $500 in value to immediate family members of officials who keep their companies profitable is precisely the kind of scenario the gift law was designed to prevent. How did these scholarships ever get off the ground?

BAD LEGAL ADVICE

Some county treasurers had long been troubled by the seemingly illegal gifts. Floyd County Treasurer Frank Rottinghaus was the most outspoken regarding his concerns, warning in 2014 that the situation could become an “embarrassment” for local officials. He raised the issue repeatedly with his Iowa House representative, who requested the ethics board’s opinion.

But Kristi Harshbarger, general counsel for the Iowa State Association of Counties (ISAC), assured Rottinghaus and leaders of the treasurers group that the program was legal because the vendors didn’t select the winning high school seniors and weren’t the sole source of funding.

ISAC’s mission is “to promote effective and responsible county government for the people of Iowa.” When the GovTech Services and SRI corporations offered to fund scholarships for children of people who work in county treasurer offices, the leader of the treasurers association understandably sought Harshbarger’s input. ISAC’s attorney should have shot down the idea immediately.

She did the opposite. As Bleeding Heartland recounted here, upon learning in 2014 that the ethics board’s top staffer viewed the proposed scholarships as illegal gifts, Harshbarger suggested running the companies’ donations through an ISAC fund. The scheme would allow children of county treasurers to receive scholarships funded by vendors selling services to their parents, with an added bonus: the donors would get a tax deduction.

After the ethics board’s 2015 opinion came to Harshbarger’s attention early the following year, ISAC’s attorney argued forcefully against its conclusions. She pushed for permission to keep the scholarships going, with “diversified” funding in addition to $2,000 per year from GovTech and SRI. To that end, treasurers started holding a silent auction at their annual meeting, which has raised $3,271 for the scholarship fund over the past three years, according to Union County Treasurer Kelly Busch.

But every year, GovTech and SRI made sure all county treasurers knew their companies were funding the scholarships.

A TURNING POINT?

I reached out to ISAC and several county treasurers after the association’s executive board voted to terminate the scholarship program. Harshbarger and ISAC executive director Bill Peterson did not respond to my inquiries. Clayton County Treasurer Linda Zuercher, the association’s current president, said by phone on March 27, “I think we all wanted to continue it, but there was too many gray areas.”

The association’s past president Busch told Bleeding Heartland that ISAC had suggested a few “ways that we could tweak it,” such as removing the vendors as a funding source. However, “Everyone was in favor of letting it go by the wayside for now.”

Union County Attorney Timothy Kenyon said earlier this month that he would look into the program. He confirmed to Bleeding Heartland on March 29 that he sees “no current/present potential violation” of the gift law, since no scholarships will be awarded in 2019.

Busch said the treasurers group hasn’t yet determined what to do with the unspent funds allocated for scholarships. One option is to direct the money to an ISAC program providing scholarships to relatives of county employees.

Speaking by phone on March 27, Rottinghaus said he was “pleased” the treasurers ended a program that didn’t conform to rules regarding restricted donors. He wasn’t sure this episode would become a “turning point” for county officials, but he hoped it would help them “understand that this is an important thing, and the public trust is eroded when local elected officials, in this case, take advantage of their position to the benefit of their families.”

Not everyone was happy with the outcome. Responding to Busch’s message informing treasurers of the program’s demise, Winneshiek County Treasurer Wayne Walter e-mailed the following to all 99 county treasurers: “Frank Rottinghaus should be very proud, he has successfully helped put and end to a scholarship program for children and grandchildren of treasurer’s office employees.”

I reached Walter by phone on March 28. Did he disagree with the decision to discontinue the scholarships? “It wasn’t my decision.” His e-mail to colleagues indicated he doesn’t think it was a good thing to end the program. “I think helping children is a good thing.”

Did Walter ever read the ethics board’s 2015 advisory opinion? “I’m not going to comment on that.” Does he understand why some people raised concerns that the scholarships violated the gift law? “I’m sorry, I am not going to comment on that.”

Incidentally, Walter was one of the officials who stayed for free in a vendor’s Florida condo. He told the Associated Press this week that he and Dubuque County Treasurer Eric Stierman have reimbursed GovTech’s owner Marc Carr for the market value of their overnight visits.

NOT AN ISOLATED CASE

The county treasurer scholarship program is not the only example of local officials pursuing unwise or illegal actions with the blessing of their attorneys. When Muscatine’s city manager and city council members clashed with newly-elected Mayor Diana Broderson, city attorney Matthew Brick could have encouraged them to accept the will of the voters and find a way to work with their political opponent. Instead, he drew up absurd “written charges of removal” against the mayor and advised city council members on how they could impeach the mayor through kangaroo court proceedings. A District Court judge later vacated the council’s “fundamentally unfair” actions, which violated Broderson’s due process rights.

Brick and one of his law partners also represented the city of Windsor Heights in its ill-advised attempt to force homeowners to remove signs criticizing city government. He defended the city’s enforcement of a sign ordinance, which was obviously a pretext for a viewpoint-based speech restriction. The American Civil Liberties Union of Iowa had to get involved before the city backed down.

The Brick Gentry law firm provides services to numerous Iowa municipalities and boasts of unrivaled expertise in that area. Yet one of their attorneys was unable or unwilling to tell officials in Muscatine and Windsor Heights that they needed to respect citizens’ constitutional rights. As with Harshbarger and the county treasurer scholarships, the legal advice was aimed at finding a way to let the client do what they wanted.

Lawyers advising government bodies should guide their clients toward best practices, not look for ways to justify circumventing the letter or spirit of any law or constitutional provision.

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