December 26, 2014

State Ethics Agency Fails to Collect Most Fees

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The state agency that enforces campaign-finance rules has failed to collect a large majority of late-filing fees from political groups and candidates and this year stopped assessing the fees altogether, according to state records and interviews.

Non-Payers ChartAs of early 2014, candidates, their campaigns and other organizations owed the Oklahoma Ethics Commission more than $200,000 in unpaid fees for late or no filing of statements of income and spending, commission records show. Many fees probably won’t ever be collected because of a lack of resources, the commission’s executive director said.

The commission decided to stop assessing late fees this year partly because it needed to establish new rules for imposing fees. Dozens of political groups and campaigns in the 2014 election failed to meet deadlines for filing their statements, commission records show.

From 1990 to 2011, the Oklahoma Ethics Commission assessed $942,504 in late-filing fees and collected $394,553 of those, or about 42 percent. During that time, the commission wrote off $453,363 in late fees, leaving about $93,558 past due.

In October 2013, then-General Counsel Rebecca Frazier told the commission’s board that about $225,000 in late fees was owed by 241 PACs, 185 state candidates, 115 county candidates, two state-question committees and 2,100 state officers and employees. In subsequent months, the commission sent out demand letters and collected a portion of the money.

Executive Director Lee Slater said all past-due fees are now being waived, pending new rules that will take effect in 2015.

Lee Slater, executive director of Oklahoma Ethics Commission

Lee Slater, executive director of Oklahoma Ethics Commission

“The Ethics Commission currently is not assessing late-filing fees,” Slater said. “We will begin a comprehensive program of compliance and enforcement when the new ethics rules become effective after January 1, 2015,” he said.

Slater, who became executive director in early 2013, attributed the commission’s inability to collect many fees to “mainly a lack of resources.”

“We would have to spend thousands (of dollars) per employee to collect hundreds. Then some people pay, and some people don’t,” Slater said. “We only have five people on staff.”

The failure of the commission to penalize and collect from those who violated state campaign disclosure laws is a cause for concern about campaign oversight, said Ryan Kiesel, executive director the Oklahoma branch of the American Civil Liberties Union.

“Our ethics rules need to be evenly applied to everyone,” Kiesel said.

Kiesel said the need to strictly enforce campaign laws is greater than ever because larger amounts of money are being spent on campaigns in the wake of a U.S. Supreme Court ruling and new Ethics Commission rules.

Failure to Collect

Authorized by the Oklahoma Constitution, the five-member Ethics Commission is charged with developing and administering rules of ethical conduct for state officers and employees and campaigns for elective state offices, state initiatives and referenda.

The commission is also responsible for investigating and prosecuting violations of campaign financial disclosure laws and recommending civil penalties in district court.

Marilyn Hughes, who retired as Ethics Commission executive director in 2012, said that during her tenure the agency faced various obstacles in collecting late fees.

“The bulk of what was uncollected came from candidates who completely disappeared,” Hughes said. “These were people who lost an election and you couldn’t find them again.”

Hughes said many candidates who lost primary elections would drop out of sight and could not be contacted after the election. The agency tried working with other state agencies to outsource the collection of past due fees, but the cost of those efforts was higher than the return.

“It was costing us more than we collected,” she said.

Hughes said other political groups, such as lobbyists and PACs, were “pretty good” about paying their fees. Penalties and settlements assessed by the commission were also paid promptly, she said.

“The penalties were paid because there was either a hearing or the person agreed to a settlement,” she said.

John Raley, a retired federal prosecutor and former member of the Ethics Commission, said he was unaware that thousands of dollars in late fees had been written off as uncollectible.

“I wasn’t aware of those figures,” said Raley, who served two five-year terms on the commission before retiring in 2012. “But on a case-by-case basis, we did reduce and waive some fines over a period of time.”

Failure to Assess

Collecting late fees hasn’t been the agency’s only problem. Over the past decade the commission also faced difficulty in assessing fines for campaign violations.

The agency’s problems were detailed in a 2010 audit conducted by then-State Auditor and Inspector Steve Burrage. That report showed the commission didn’t assess any fines or late filing fees between 2006 and 2008, when Hughes was director.

Burrage wrote that a commission staffer told the auditor’s office, “The fines had not been assessed because the commission does not have the time.”

The audit also criticized the commission’s internal controls, saying the agency did not “provide reasonable assurance that revenues and expenditures were accurately reported in the accounting records.”

In 2009, commission officials said they had returned to assessing late fees. According to an administrative report by Hughes, the commission assessed late fees totaling $238,180 in 2009, 2010 and 2011.

Funding Levels

A persistent issue at the Ethics Commission is whether it has enough funding to enforce campaign and ethical laws.

The 2010 audit followed complaints about the commission’s funding level by its former chairman Donald Bingham. In 2008, Bingham wrote a letter to then-Gov. Brad Henry, telling Henry the agency didn’t have enough funds to do its job.

“Suffice it to say that the Legislature has not provided, and does not provide for the coming fiscal year, ‘sufficient’ funding for the commission,” Bingham wrote.

In fiscal 2009, the commission saw a nearly 30 percent boost in funds from the legislature, increasing its total budget to about $746,000. During the next two years, its budget dropped by 14 percent, then climbed back gradually to $738,129 in fiscal 2015. It also received more than $700,000 for new software to upgrade its online campaign filing system.

In 2010, then-Rep. Ken Miller, House budget committee chairman, authored legislation to allow the commission to keep the first $25,000 of the fees it collected. Previously, all the funds collected by the commission flowed into the state’s general revenue fund.

Miller, now state treasurer, said he developed the legislation because the commission had no incentive to collect the fines it assessed.

“It’s a balancing act,” Miller told Oklahoma Watch. “I don’t want the commission dependent on fines because that could get nitpicky. However, they should be allowed to keep a portion of the fines levied so there is incentive to collect.”

Slater took over the agency’s reins on Feb. 1, 2013. He told the commission board members that he “intended to take corrective action to ensure that late fees would be assessed routinely in the future.”

In spring 2013, the commission announced it had assessed about $41,000 in combined late fees against state and legislative candidates, PACs and county candidates.

Yet even with new rules and new leadership, thousands of dollars in fines and fees assessed by the commission remain uncollected.

A Reset Button

New rules approved by the legislature will revamp the commission’s ability to assess and collect fines, Slater said. Legal issues had hampered the previous rules.

“Questions have been raised about the Ethics Commission’s ability to assess fees,” Slater said. “We consulted with (Attorney General Scott Pruitt’s) office. It goes back to a previous court case, Cullison v. State of Oklahoma from the 1990s. The commission feels more comfortable with the ability to assess and collect via rule than by statute. New rules will allow us to collect and assess.”

Slater said the agency would return to assessing fines, but added that he doubted the past due fines would ever be collected.

“Probably not,” he said. “Those claims are stale. Many are very old and there would be a steep burden of proof.”

Slater said the commission has yet to prosecute a case against a political action committee in district court. The agency’s most recent case was a $10,000 settlement with the advocacy group, Stand for Children.

That settlement was reached shortly after the general election. In a written statement, Slater said the negotiated fine was lower than it might otherwise have been because Stand for Children’s conduct was neither willful nor intentional.

State records show the commission settled two other cases as well in 2014, both involving fines. One was against the Oklahoma Secondary School Activities Association over free high school athletic playoff passes given to legislators. The other involved state Rep. Seneca Scott, D-Tulsa, who was accused of using campaign funds for personal expenses.

Meanwhile, scores of late-filing candidates, campaigns and political organizations were not assessed late filing fees. An example is Oklahomans for Public School Excellence, an independent expenditure group that opposed State Schools Superintendent Janet Barresi. The group did not file required paperwork until more than a month after the deadline, the June 24 primary; the filing came days after Oklahoma Watch published a story about the organization.

When asked why Stand for Children paid $10,000 for filing late while others paid nothing, Slater said it was because Stand Up For Children voluntarily came forward.

“You always settle debts more economically than (when) you can litigate. (We) have a staff of only five people. It would costs thousands to litigate.”

Reach reporter M. Scott Carter at scarter@oklahomawatch.org.


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