Opinion: Carolina Beat

Outside influence in government

The following editorial was published in the August 2016 print edition of Carolina Journal:

Several members of the Investment Advisory Committee, a state commission that advises the treasurer about financial strategies for the state’s substantial investment portfolio, were surprised to learn at a recent meeting that, unlike many elected and appointed officials in the federal government, nothing prevents the treasurer, or most state employees (along with elected officials and government board members) from accepting outside employment that offers significant compensation and could pose conflicts of interest.

You may not know that there’s no limit to the amount of money North Carolina public employees and officials can receive in addition to their government salaries. State ethics laws require many of these officials to disclose those outside sources of compensation — including business interests, investments, rental income, and scholarships — to the state Ethics Commission in a document known as a Statement of Economic Interest.

But merely disclosing personal holdings seems inadequate.

There are criminal penalties for filing SEI forms with false or incomplete information, but they hasn’t prevented Lt. Gov. Dan Forest from being part-owner of two real estate firms, Insurance Commissioner Wayne Goodwin from being part of a firm that collects lease revenues from a building in Rockingham, Attorney General Roy Cooper from getting rent from commercial and residential real estate, or Gov. Pat McCrory from owning stock in Duke Energy, as WRAL News reported earlier this year.

The IAC’s concerns are related to a recently enacted state law that requires stricter ethics guidelines for the treasurer, who serves as the ultimate decision maker for investing nearly $90 billion in pension funds for state and local employees and teachers. Retiring Treasurer Janet Cowell raised eyebrows several months ago when she joined the corporate boards of James River Group Holdings and ChannelAdvisor without notifying the IAC or the pensions’ board of trustees. Cowell reportedly received roughly $300,000 in compensation, between cash and stock, for joining the corporate boards.

Cowell would have to recuse herself from any decision the retirement fund might make if it considered investing in those entities. The candidates seeking to win the treasurer’s office this fall — Democrat Dan Blue III and Republican Dale Folwell — say they would not serve on corporate boards.

Blue told Carolina Journal he thinks that a prohibition on outside income should be considered for a number of offices across state government. Folwell said the treasurer, in particular, should be focused fully on protecting state investments and not have the potential distractions corporate board membership or other outside employment would entail.

We agree, particularly for full-time officials such as judges, the Council of State, and most senior-level staff members and department heads. High-level public servants should give their undivided attention to the people of North Carolina and not be in a position where they may be distracted or compromised by outside interests.

Many senior elected or appointed officials in the federal government must surrender any outside business interests or place their assets in blind trusts. Similar requirements might be appropriate for those serving at the top echelons of state government.