California SBOE Members Debate Potential for Ethical Breaches Tied to Outreach Events Undertaken With Outside Organizations

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SACRAMENTO, Calif.—Sensitive to the appearance of conflict but hesitant to point fingers at one another, members of the California State Board of Equalization have launched a heated debate about whether they should strengthen rules to avoid ethical breaches when they team up with outside organizations to reach out to the public.

During a board debate April 26 and later in interviews with BNA, each of the five board members declined to name specific events that are prompting a charged discussion on potential conflicts of interest stemming from outreach events. However, a BNA examination of dozens of recent events found a few that appear to involve concerns the members have raised, including partnerships with a nonprofit organization run by a board member's wife, and with corporations or interest groups that have business before the board.

While the events appear to be legal, the tension among board members is based on disagreements about the appropriate scope of the partnership events, and use of board resources from the placement of logos on fliers to deployment of staff.

The five-member elected board took up the issue at the request of State Controller John Chiang (D), who serves on the board along with four members elected from geographic districts within the state. The board debated Chiang's request at the April 26 meeting and agreed to revisit the issue in July when members expect staff to make formal recommendations about rule changes they could adopt.

Promotional Partnerships
With Private Businesses

In an April 13 letter to SBOE Chair Jerome Horton (D), Chiang asked that the board “explore potential conflicts of interest that can arise when a board office enters into a promotional partnership with a private business.” He said he would like the board to pursue policies or guidelines for outreach partnerships, development and distribution of promotional materials, and staffing of external events.

Chiang also asked the board to consider posting mandatory statements of economic interest, as well as travel claim schedules for members, their personal staff, and SBOE executive staff in a timely manner to increase transparency.

Chiang told BNA after the meeting he is pushing for clear guidelines because he wants to avoid using the tax agency's limited staff and resources for events that do not have a clear governmental purpose tied to the agency's mission of tax administration. Further, he wants to avoid links between the board and other organizations involved in the events that can be troubling, he said.

“When you have these instances you want to be sure the money is used for public good and public benefit, that it's above board and transparent,” he said. “I don't want my colleagues to be involved in any activities that would call into question our integrity.”

Chiang told BNA that no specific events prompted him to raise the issue with the board.

“When you have these instances you want to be sure the money is used for public good and public benefit, that it's above board and transparent. I don't want my colleagues to be involved in any activities that would call into question our integrity.”

State Controller John Chiang

Although the other board members also declined to name specific events they believed were provoking the discussion, they said they are looking forward to continuing the debate at the board's July meeting.

“I'm looking forward to a more detailed conversation, to see what the problem is that we're trying to solve,” SBOE member George Runner (R) told BNA in May.

“It is important to have clear guidelines for outreach partnerships,” board member Michelle Steel (R) told BNA in an e-mail in June. “Currently we have clear guidelines for outreach events, and we adhere to a strict code of ethics. I encourage anyone who has suggestions to clarify and improve our current policies to share those with the board.”

SBOE Unique Among State Tax Agencies

SBOE is unlike any other tax agency in the country, and its structure has prompted questions about conflicts of interest, both real and perceived, since at least the 1920s. The five-member elected board both administers state tax programs and adjudicates disputes between taxpayers and the state regarding those same programs it administers. No other state uses elected officials to both administer and adjudicate state taxes.

Unlike other elected officials in California, SBOE members act in a quasi-judicial capacity when they adjudicate disputes between individual taxpayers and the state. This function of the board is most frequently what raises questions about the appearance of conflict.

BNA published a series of stories in August 2010 that found taxpayers with complex cases were more likely to win their tax disputes appealed to the board if they or their representatives made campaign contributions to board members (164 DTR S-5, 8/26/10).

Marcy Jo Mandel, who represents Chiang on the board as his deputy state controller for taxation, framed Chiang's concerns about outreach events to start debate at the April 26 board meeting. She said the board's adjudicatory function is usually what comes to mind when people talk about potential conflicts.

“But that's not the only way in which the board interacts with taxpayers,” she said.

Networking a Priority?

It is important to reach out to taxpayers and to educate them in order to improve public trust and compliance with tax laws, and those outreach efforts should focus on SBOE's role as a tax agency, she said. As the state is facing chronic deficits and limited resources, it may be tempting to partner with outside organizations to reach out to the public—but use of SBOE resources for such events can create perception issues, for example if the agency's logo appears alongside another organization's logo.

“Particularly as a tax administrator, BOE should set a high ethical standard as to whether or how BOE partners with entities and people who might have business before the board,” Mandel said. “What we are focused on is making sure that we avoid even the appearance of impropriety. We don't want to do anything to create the impression that any person is in a special position to influence or receive any preferential treatment.”

Board member Betty Yee (D) agreed with Mandel, saying she wants SBOE outreach efforts to have a clear governmental purpose, and she wants guidelines on the use of staff, fiscal, and other SBOE resources for outreach events.

Programs and events that directly address issues such as tax, board procedures, and overall compliance clearly serve a governmental purpose, Yee said. Events that focus on networking, on the other hand, may have some benefit, “but is that a priority governmental purpose?” she asked.

Horton told his fellow members that before the board alters its rules he would like to focus on existing rules and policies for outreach events. The Fair Political Practices Commission and SBOE legal staff have opined on the issues raised, and the rules may need clarification but are already in place, he said.

Other Conflict Rules Could Be Examined

Horton also suggested the board examine other rules that address potential conflicts, such as the Political Reform Act that sets campaign contributions limits and disclosure rules for all state elected officials, the Kopp Act that sets a $249 limit on contributions from parties that have a matter before the board, and the board's own rules that allow unlimited ex parte communications between members and taxpayers or their representatives when they have business pending before the quasi-judicial board.

“I think that's a whole different thing,” Mandel responded.

Board member Runner said he supports transparency as the best way to address questions that always arise about potential conflicts with elected officials. However, he said he could not support the idea that SBOE establish guidelines to “remove even the appearance that some companies could receive preferential treatment,” as Chiang has suggested.

“I don't believe you can draw a line that's clear,” Runner said.

There is room for greater clarity on the rules and disclosures involved, but board members should be able to decide on these matters for themselves, Runner said. It is impossible to convince people that a conflict does not exist if they have already decided one does, he said.


“We are getting to a level of discussion that is going to hurt us. If we don't embrace this and know that we are expected to conduct ourselves and this body with the highest degree of ethical standards, if we don't embrace it, then I think we perpetuate this perception.”

SBOE member Betty Yee

Yee disagreed with Runner, saying the issues go beyond disclosure.

“We are getting to a level of discussion that is going to hurt us,” Yee said. “If we don't embrace this and know that we are expected to conduct ourselves and this body with the highest degree of ethical standards, if we don't embrace it, then I think we perpetuate this perception.”

‘Confidential’ Memo Explains Existing Rules

SBOE attorney Deborah Cooke briefed members at the meeting on existing rules and guidance for outreach events. The oral information she provided to the board members was included in a nine-page memo obtained by BNA.

Despite Cooke's recitation of much of the information in the memo to board members at the public meeting, SBOE staff marked the memo as confidential, and legal staff declined a request from BNA for a copy of the memo because it was a “draft, deliberative document, not yet finalized and therefore not public.”

Use of SBOE resources for outreach events, either sponsored by SBOE or others, is permissible if the event has a governmental purpose, no state funds are used to advocate or promote a member's election to public office, no state funds are paid directly or indirectly to a co-sponsoring nonprofit organization, and the member does not enter the state into contracts in which the member has a personal financial interest, the memo said.

Events sponsored by SBOE are those that are initiated by SBOE program staff or a board member, are coordinated by SBOE and funded wholly or in part by the agency, and include only government or nonprofit agencies as co-sponsor, the memo said. Such events must have a governmental purpose, and must be reviewed and approved by the SBOE Legal Department and External Affairs Department. The executive director must approve use of SBOE resources for events it sponsors.

Board-sponsored events must be free to participants. For-profit entities may contribute to such events but SBOE does not advertise or promote for-profit information, and placement of for-profit information such as logos on SBOE materials should be minimal to avoid the appearance that the board or its members endorse or support a for-profit company, according to the memo.

When SBOE staff or members participate in events sponsored by others, the Legal Department and Outreach Services Division also review them to verify they have a governmental purpose.

Campaign Watchdog,
SBOE Legal Staff Provide Advice

The rules outlined by Cooke were based on advice from SBOE legal staff and several written opinions from the state Fair Political Practices Commission. Three opinions, all issued at the request of Chiang, underpin the legal reasoning behind rules for the board's outreach events.

Before he was elected to the controller post, Chiang served two terms as a member of SBOE. He is largely credited with launching SBOE's public outreach efforts through seminars and classes.

In 1998, after Chiang first took office, FPPC issued two letters advising him about his co-sponsorships of several tax seminars he was planning together with the Franchise Tax Board, Employment Development Department, Internal Revenue Service, Pasadena Chamber of Commerce, and a member of the state Assembly. In those letters, FPPC advised that contributions to pay for the events were considered behested payments and not contributions directly to Chiang because they were for a legislative, governmental, or charitable purpose. The letters also advised Chiang regarding mass mailings to promote the events and gifts to public officials related to food and beverages at the events.

State law defines behested payments as those made at the behest of an elected official for legislative, governmental, or charitable purposes. Behested payments are legal as long as state and local officials file reports with FPPC disclosing the payments within 30 days if they exceed $5,000 in the aggregate from a single source in a calendar year.

Old Advice May Not Be
Good Enough, FPPC Says

In 2003, Chiang received an FPPC advice letter about whether behested payments to a nonprofit organization called Community Financial Resource Center to underwrite financial literacy seminars would be considered campaign contributions. Chiang planned to solicit local banks for payments to cover costs of the seminars. FPPC advised again in this letter that contributions to the nonprofit would not be considered contributions to Chiang, and would be reportable as behested payments if they exceeded $5,000 from a single source in a calendar year.

FPPC Executive Director Roman Porter told BNA that advice it has given to SBOE members in the past about outreach events may provide some guidance, but members or SBOE staff should consult with FPPC on current issues that arise.

“Advice letters are intended to provide guidance to a specific individual at a certain point in time,” Porter said. “We caution individuals on relying on old advice letters or letters not written to that individual about their specific situation.”

Which of 400 Events Each Year at Issue?

With board members declining to name specific events that may have prompted their discussion, BNA examined the board's outreach events held in 2010 and planned for 2011.

According to a 2011 Outreach Event Plan presented to the board Jan. 27 by Deputy Director Anita Gore, SBOE participates in more than 400 events a year, and those events fall into several categories.

Board-sponsored outreach events include seminars that are typically aimed at specific types of taxpayers or issues such as small businesses, restaurants, nonprofit organizations, or updates on use of state and federal electronic filing services. Other categories of board-sponsored events include tax seminars offered by the State Controller's Office with SBOE assistance, volunteer income tax assistance days held with FTB and IRS, and a career day held by one board member in 2010 and planned again for 2011, according to the outreach plan. SBOE sponsored 37 events in 2010, and plans to sponsor 71 in 2011, according to the report.

Board members and staff also respond to dozens of requests to speak to outside groups on a variety of tax topics or provide staff for tables at fairs to provide information about SBOE. These events are not sponsored by SBOE. The Sales and Use Tax Department also offers more than 200 classes around the state each year on basic sales and use tax preparation. Both of these categories of events appear to fall outside the definition of outreach events for purposes of the board's discussion.

BNA's review found several recent events held in partnership with outside nonprofit groups that appear to have a broader purpose than the dozens of seminars and classes aimed at issues specific to SBOE or state taxes, or that could create the appearance of conflict because they are events with close ties to taxpayers or interest groups with business before the board. These events involved payments made at the behest of board members to nonprofit organizations that organized the events.

BNA's review was based on information from the board's website, other public materials, and interviews. BNA has filed requests under the state Public Records Act for SBOE staff travel claims, attendee lists, exhibitor lists, promotional materials, and other information related to all outreach events from Jan. 1, 2010, to the present. In response, SBOE said it expects to provide the documents by Aug. 31.

Horton and California Educational Solutions

Horton, the board chair, has co-hosted several events in connection with a nonprofit organization run by his wife, Yvonne Horton. She is president and chief executive officer of California Educational Solutions, and also works as the elected clerk for the city of Inglewood, Calif. The chair, a former state legislator and auditor for SBOE, was appointed by former Gov. Arnold Schwarzenegger (R) to fill a vacant seat on the board in 2009. He was elected to a four-year term in 2010.

The ties between Jerome Horton and his wife's nonprofit go beyond event planning. Horton has reported $80,000 in behested payments to CES from March 2010 to the present. Some of the behested payments came from companies and interest groups that also make contributions to Horton's campaign accounts, and were made for the purpose of sponsoring three events in the past year, according to filings with the Fair Political Practices Commission and the office of the Secretary of State.


The ties between Jerome Horton and his wife's nonprofit go beyond event planning. Horton has reported $80,000 in behested payments to CES from March 2010 to the present.

Contributors who made behested payments to CES as well as separate payments to Horton's campaign include AT&T, California Teachers Association, Time Warner Cable, and Sempra Energy. These contributors gave $40,000 combined to CES since March 2010, and $41,900 combined to Horton's campaign from the time he took office in September 2009 through December 2010. Horton's campaign reports for the first half of 2011 are not due to be filed until July.

Time Warner Cable was the largest contributor, with $25,000 on Jan. 3, 2011, to CES.

In a written statement, Time Warner spokeswoman Milinda Martin said the contribution to CES, as well as a $5,000 contribution to a nonprofit organization affiliated with Chiang, are part of the company's efforts to support diversity.

“Time Warner Cable has a long history of supporting community diversity, and there are many organizations we support with financial contributions and in-kind services,” Martin said. “Our commitment to diversity has proven important to both our employees and our customers.”

Others making behested payments to CES, but not appearing on Horton's campaign filings, were Wells Fargo; Farmers Services LLC; Darden Restaurants, owner of the chains Olive Garden and Red Lobster; and the Coalition to Protect California Jobs and the Economy. These organizations made a total of $40,000 in behested payments to CES.

CES Purpose to Help Disadvantaged Students

According to federal tax returns filed by CES in 2007 and 2009 for tax years 2005, 2006, and 2007, the organization's charitable purpose is “to help disadvantaged students attend college and gain access to educational tools and resources to enhance their educational experience.”

The tax returns show CES received total contributions of $23,580 in 2005, $28,577 in 2006, and $10,010 in 2007. In 2006, CES spent $16,924 providing computers to 10 disadvantaged students, and holding educational health seminars and fairs, according to the tax returns.

CES did not file tax returns for 2008 and 2009 because its income was below the $25,000 annual filing threshold under state and federal law, Yvonne Horton and the Attorney General's office told BNA. The organization has an extension until Aug. 15, 2011, to file its 2010 return, Yvonne Horton said.

Yvonne Horton told BNA she and four other women serve on the board of directors as volunteers for CES, and none of them is paid by the organization. All payments to CES are used to pay vendors, she said.

The person who signed the 2006 and 2007 tax returns on behalf of CES was Kinde Durkee, who also served until recently as Jerome Horton's campaign treasurer. Durkee still works as Yvonne Horton's campaign treasurer for her elected post as city clerk in the city of Inglewood, Yvonne Horton told BNA.

Durkee's firm, Durkee & Associates based in Burbank, Calif., provides accounting, reporting, and compliance management for political campaigns and nonprofits, and has “performed accounting and reporting for political campaigns day in and day out since 1972,” according to its website. Durkee is a member of the California Political Treasurers Association, according to the organization's website.

Durkee served as Jerome Horton's campaign treasurer for his legislative races and SBOE races until January 2011, when he terminated her firm in the wake of his being fined $13,000 for campaign finance violations by the Fair Political Practices Commission (70 DTR H-3, 4/12/11).

Durkee did not respond to requests for comment from BNA.

Connecting Women to Power

Most recently, CES co-hosted an event with Jerome Horton and SBOE member Michelle Steel called Connecting Women to Power, held March 30 at California State University Dominguez Hills. The event was aimed at women who are business owners, business professionals, and community leaders, according to an SBOE flier for the event.

After the event, Horton announced it attracted more than 1,000 people who attended seminars on topics including accessing traditional and nontraditional business capital, leveraging technology to enhance success, understanding government stimulus programs, wealth management and financial planning, and mastering work-life balance. Seminars also focused on working with SBOE and other tax agencies.

In addition to Horton, Steel, and CES, the event was sponsored by the National Association of Women Business Owners, according to a flier for the event. Keynote speakers included Rosario Marin, former treasurer of the United States, and Maria Marin, a motivational speaker and negotiation expert.

More than 20 other organizations partnered with the sponsors for the event, many of them state or local chambers of commerce or civic organizations such as the Chinese Chamber of Commerce Los Angeles, German American Business Association, Hadassah Southern California, and National Latina Business Women Association Los Angeles. Other organizations included nonprofit health care provider Kaiser Permanente, the Los Angeles Metropolitan Water District, and the state Department of General Services.

Other Events With Horton and CES

Horton and CES have also sponsored:

• a “pre-conference” in June 2010 for Connecting Women to Power, focused on “strategies for competing in the global economy and international market,” according to a flier for the event posted on the board's website;

• a Career Pathways Symposium for college students in November 2010, billed as a career day and college fair introducing students to careers in math, science, and technology hosted by Horton, CES, Cal State Dominguez Hills, and several other contributors including AT&T, Darden Industries, Visa Inc., Hewlett-Packard, and the California Teachers Association, according to a news release posted on the board's website; and

• free breast cancer screening events in Los Angeles in April and May provided by Cancer Schmancer Movement, a nonprofit cancer education organization founded by actress Fran Drescher.

Horton told BNA in an interview and in a written statement that the SBOE Legal Department confirmed each of the CES events had a governmental purpose and conformed to existing law, policies, and procedures. In light of the financially challenging times, the board is leveraging its resources to participate in such gatherings along with other organizations, and through the events is improving compliance at a reduced cost to the state, he said.

“In that the behested payments defraying the cost of each co-sponsored seminar were properly used for governmental purposes and there was no personal gain to me or my wife, it was my honor to raise over $80,000 for these worthy causes,” Horton told BNA in a written statement.

Transparency, Perception, and Reality

Through the events he spearheaded, Horton said the board was able to educate more than 2,000 taxpayers and businesses on complying with the law, enhance personnel recruitment, further the training of SBOE staff, provide free access to legislative and administrative decisionmakers, provide 232 women with free mammograms, provide 450 seniors and the poor with free tax return preparation, and provide employment opportunities and career guidance to more than 1,000 high school and college students.

“If the participation conforms to the law and there is full transparency of the contributions, the governmental purpose, and the association, then perception has a better chance of being consistent with reality,” Horton said.

In a written statement, Steel told BNA that absent any further information she believed the CES event that she co-sponsored, Connecting Women to Power, was appropriate.

Yee told BNA that she participated in some planning for Connecting Women to Power, but withdrew her support after learning about the broad range of topics at the event outside SBOE's purview. She said she did not support the use of SBOE resources and the large number of staff deployed for the event.

Runner and Steel both told BNA it is appropriate to use events with a broad purpose to reach out to businesses and individuals and educate them about SBOE. If SBOE can reach more taxpayers, it can increase compliance and stimulate economic growth, they said.

“These partnerships don't create conflict, they provide assistance to taxpayers,” Steel told BNA in an e-mail.

Working Together Works

Another event involving behested payments was a reception called Working Together Works, held in Sacramento in March 2010. Horton hosted the event in partnership with the Coalition to Protect California Jobs and the Economy, with SBOE members and the executive directors of SBOE, FTB, and EDD as guests, according to an event invitation obtained by BNA.


Working Together Works was billed as “A jazzy evening of networking and entertainment with the goal of building upon the collaborative working relationship between the decision makers at the California State Board of Equalization, Franchise Tax Board and the Employment Development Department and businesses.”

Horton and CTPCJE invited tax practitioners and representatives that have business before the board to the Working Together Works event. The invitation billed the event as “A jazzy evening of networking and entertainment with the goal of building upon the collaborative working relationship between the decision makers at the California State Board of Equalization, Franchise Tax Board and the Employment Development Department and businesses.” A similar event scheduled for April 26, 2011, in Sacramento was canceled, according to information obtained by BNA.

CTPCJE received $10,000 from Wells Fargo and $5,000 from Pacific Gas & Electric Co. in payments behested by Horton in 2010 to sponsor the Working Together Works event. CTPCJE later made a $20,000 behested payment to CES in July 2010 to sponsor the Connecting Women to Power conference, according to filings with FPPC.

CTPCJE was originally formed in late 2008 to overturn a then-recently enacted law that imposed a 20 percent penalty on California corporations that underpay their income tax liabilities by more than $1 million (20 DTR H-2, 2/3/09). Former SBOE member Johan Klehs (D), who now works as a contract lobbyist for several clients, led the group.

According to a solicitation letter sent by the group to prospective members in January 2009 and obtained by BNA, the penalty repeal effort was led by consulting firm PricewaterhouseCoopers and lobbying firm Aprea & Micheli. Doug Anderson, listed on the solicitation letter as a staff member at PwC, later went to work in Horton's office at SBOE in September 2009 for one year.

The solicitation letter, seeking a minimum contribution of $30,000, also said the coalition would be working on tax policy education, including an annual California tax law and policy seminar and a continuing education program.

Most of Group's Income Paid for Lobbyist

CTPCJE filed a tax return for 2009 showing the group was designated as an Internal Revenue Code Section 501(c)4 nonprofit organization that took in $209,400 and paid out $207,652 in professional fees and other payments to independent contractors. According to lobbyist filings with the Secretary of State, the coalition paid the lobbying firm Aprea & Micheli $145,149 in 2009.

CTPCJE's IRS Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, listed the organization's officers as President Myung-Soo Seok, board members Carolyn McIntyre and Gene Hale, and Secretary-Treasurer Ashlee Titus. Seok is a consultant with Sage Strategies, a government relations consulting firm in Los Angeles. McIntyre is the president of the California Cable and Telecommunications Association, Hale is president of G&C Equipment Corp. in Los Angeles and chair of the Los Angeles Black Chamber of Commerce, and Titus is an attorney in the Sacramento office of campaign law firm Bell, McAndrews & Hiltachk.

According to its 2010 tax return, the organization took in $41,000 and spent $29,464 during the year, with $20,000 of its expenditures being its behested payment to CES.

The group's purpose, according to the tax returns, is “to advance the general welfare of the citizens of the state of California by promoting tax policies that encourage economic prosperity and job creation.”

Charles H. Bell, an attorney with the law firm that handles the legal filings for the group, told BNA it is no longer active and has filed paperwork with the Attorney General's office to disband. Although it started out as an organization to fight the corporate tax underpayment penalty, it shifted away from that focus and worked more on tax policy education, he said.

CTPCJE board members and Marc Aprea, the lobbyist who was paid by the group to work on its behalf, did not respond to requests for comment from BNA.

The Grace Initiative

One other board member, Chiang, also has reported payments at his behest to a nonprofit organization. The Grace Initiative, an organization founded in late 2010, received a total of $35,000 from seven sources to sponsor a breakfast reception held Jan. 3, 2011, in Sacramento. The breakfast honored Chiang as he was sworn in to serve his second term as state controller, and was billed as an alternative to more elaborate inaugural events.

Some of Chiang's behested payments also came from entities that have business before the board, and a few of them also made contributions to his campaign coffers. Time Warner Cable, Fidelity National Title, and the California Fire Foundation run by the California Firefighters Association each made $5,000 behested payments for the breakfast, and made a total of $22,000 in contributions to Chiang's campaign in 2009 and 2010. Other contributors to the breakfast through behested payments included PricewaterhouseCoopers, Peace Officers Research Association of California, the California State Council of Laborers, and a political action committee for state employees called PACE CSEA.

Bill Wong, a political consultant and fund-raiser, told BNA he set up the Grace Initiative and organized the breakfast for Chiang. The idea behind the effort was twofold—to avoid triggering gift reporting rules for other elected officials who attended the event, and to make the event a low-key affair with a larger purpose of raising money to assist with financial literacy and income tax preparation.


The idea behind the Grace Initiative was twofold—to avoid triggering gift reporting rules for other elected officials who attended the event, and to make the event a low-key affair with a larger purpose of raising money to assist with financial literacy and income tax preparation.

“We didn't want to just raise money and throw a party,” Wong said.

If the value of the event was greater than $50 a person, other elected officials who attended would have been required to report the event as a gift, according to FPPC rules.

Chiang was disengaged from the process of setting up the nonprofit or planning the event, Wong said. Chiang did not ask for the contributions directly and they may not have been considered behested payments, but because his name was on the invitation for the event, he reported them as if they were, Wong said.

Wong said the nonprofit spent about $12,000 on the breakfast, and has since spent about $13,000 on two financial literacy events, and another $3,000 on administration fees.

At the financial literacy events, held in early April in Sacramento and Los Angeles, volunteers from Chiang's office helped attendees file tax returns and claim the earned income tax credit if they were eligible. Chiang appeared briefly at the Los Angeles event, Wong said.

Attendees also were given free information from state and federal agencies, banks, and other sources about financial literacy, scholarships, and other assistance, Wong said. Volunteers each received a $50 gasoline gift card to thank them for their help.

Wong said the nonprofit may shut down, and is holding $5,000 to pay legal costs for that process.

Smaller Events Show
Differences Among Members

While the large events done in conjunction with outside organizations may be creating tension between board members, they also appear to have different approaches to conducting the low-profile, board-sponsored seminars around the state that are intended to educate taxpayers and are coordinated by the board's Outreach Services Division.

According to the 2011 Outreach Plan, the number of events varies widely between board members' districts. More than 8 million people live in each of the four districts, and population is roughly equal.

In 2010, no board-sponsored events were held in Yee's district, nine were held in former acting member Barbara Alby's (R) district, 17 were held in Steel's district, and 11 in Horton's district. Chiang, who holds a statewide office, participated in 10 small business and financial literacy seminars with SBOE assistance. Similarly, in 2011, SBOE will sponsor four events in Yee's district, eight in Runner's district, 25 in Steel's, and 34 in Horton's.

Yee told BNA she has eliminated most in-person seminars and classes in her district to cut costs, and encourages taxpayers to use the board's online resources and classes instead. For example, no seminars for small business owners will be held in her district in 2011. Four such seminars will be held in Runner's district, 12 in Steel's, and 30 in Horton's, according to the outreach plan.

Runner, who was elected to the board in November 2010 after serving as a state senator and assemblyman, told BNA he is still figuring out what he will do with respect to outreach events in his district but he believes they serve a valuable purpose. Reaching out to specific groups and segments of the business community will improve compliance and help business owners be successful, he said.

“It's cheaper to get people to voluntarily comply than it is to spend money on audits,” Runner said.

Although the number of events has been increasing, the average cost for each board-sponsored event is decreasing, according to the plan. The average cost per event in 2011 is $3,735 not including salaries, which is 51 percent less than it was in 2009. Board staff has cut costs by eliminating venue and equipment rentals, reducing postage and travel costs, and reducing the number and frequency of staff traveling to the events, the plan said.

Overall, costs for the events including salaries for staff in the Outreach Services Division were $391,598 in 2010 and are expected to be $467,130 in 2011.

Travel expense claims for these events, including non-outreach services staff such as SBOE executive team members, are included in BNA's request under the state Public Records Act for information related to outreach events.

Behested Payments Viewed by Some
As Unethical Skirting of Contribution Limits

Porter of FPPC and California Common Cause Regional Director Derek Cressman both told BNA the events using behested payments and nonprofit organizations appear to be legal based on current rules.

“This is a practice that has been pioneered by the Legislature,” Cressman said. “It is clearly legal and I think it is clearly an evasion of the contribution limits.”

State law sets limits on contributions that candidates can take from a single source per election. The limit for SBOE and statewide candidates including the controller has been $6,500 per election since 2009.

Board members should be concerned about appearance issues that the events raise, and should adopt more stringent rules, Cressman said.

“Disclosure is not enough. It is an unethical practice in which they should not be engaging,” he said.

Robert M. Stern, president of the Center for Governmental Studies and authority on state campaign finance laws, agreed with Cressman.

“It doesn't surprise me that members are soliciting funds from people appearing before them,” Stern said in an e-mail to BNA. “[SBOE] members are politicians (usually ex-legislators) so that is what they are programmed to do.”

Stern suggested the behested payment disclosure limit for all state elected officials should be reduced from $5,000 to $500. For SBOE, members should adopt rules that go beyond statewide rules and require disqualification if people are making payments to events sponsored by members, he said.

A few board members acknowledged that the issue of behested payments is driving the board's discussion.

When asked about specific events and behested payments, Yee said they do create an appearance of conflict.

“While I recognize that behested payments are legal they do smack of impropriety by those who do business before the board while supporting these networking events,” Yee said. “I question whether these events are the best use of resources.”

Horton said he believed, based on the debate April 26, that board members are interested in greater transparency than provided under current rules. The answer to the “age old question” about whether behested payments to charities with which a member is associated gives the appearance of providing greater access to donors will always be subjective, he said.

By Laura Mahoney


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