Santa Monica Conflict Law : ‘Revolving Door’ May Be Closing

The Santa Monica City Council has asked the city attorney to draft a “revolving door” ordinance that would keep high city employees, elected officials and appointees from conducting business with the city for two years after leaving office.

There is no city law, other than general conflict of interest provisions, prohibiting departing employees and officials from representing people and companies before the city on issues in which they were substantially involved while in office. “This is a city that operates in a goldfish bowl,” said Mayor Christine E. Reed. “I think we have to be cleaner than clean.”

Interested in Airport Land

The proposed law, which could affect department heads, council members and upper city management officials, appears to have been sparked by concerns about the business projects of former City Manager John H. Alschuler since he left his post last September. The law would not be retroactive, however.

When Alschuler left his post, he became a partner with the consulting firm of Hamilton, Rabinovitz & Szanton, which had done much of the economic analysis on the city’s land-use plan. About a month before stepping down as city manager, Alschuler also became a trustee with the Stahl family trust, which owns several acres of property in Santa Monica.

Last week, Alschuler contacted city officials on behalf of David Stein, an Orange County real estate developer who is interested in submitting proposals for a development on residual land at the Santa Monica Airport. The city is trying to decide how to use 43 acres that will become available for development as a result of reorganization of the airport.

Stein, a partner with Barry Brief of the Stein-Brief Group, is developing 550 acres of beachfront property between Laguna Beach and Dana Point in what is known as the Monarch Beach project. Stein’s company purchased the land for $80 million in September, 1983, in one of the largest real estate deals in Orange County history.

“I work with him,” Alschuler said of Stein. “At this point . . . we’re discussing the possibilities (at the airport) as a lot of other developers are.”

At Tuesday’s City Council meeting, Reed placed the “revolving door” issue on the agenda at the last minute.

“I feel that it puts me in a difficult position to make an informed and impartial decision, and I think that other people are put in a difficult position to deal even-handedly with all developers when one developer is being represented by the immediate past city manager of the City of Santa Monica,” Reed said.

‘An Honest Guy’

“I don’t think John is guilty of anything,” Councilman David G. Epstein said. “But people sometimes raise their eyebrows on things. It’s like the procurement guy from the Pentagon going to work for Lockheed.”

Epstein said Alschuler’s involvement on the airport issue may not look good for the city. “(Alschuler) had taken a responsibility for the (airport) plan,” Epstein said. “It could seem to someone that he was selling not his expertise but some kind of inside information he had from working in the city. I think John is an honest guy, but it may be better to have some rules about it.”

Councilman Dennis Zane disagreed. “In my mind there were no misgivings about John’s activities that prompted this move,” Zane said. “I think it is possible in the future for people to use their position in an improper way. I don’t think that has occurred in the case of John Alschuler.”

Councilman Ken Edwards said that Alschuler’s actions may have motivated Reed to offer the proposal but that the city has been thinking of enacting a “revolving door” law for a long time.

Denies Competitive Advantage

“(The airport) is one area where (Alschuler) certainly has an advantage over other competitors because of his having participated in the final negotiations with the Federal Aviation Administration (over the airport),” Edwards said. “I don’t think anyone has expressed any animosity toward John, but we wanted to bring to light similar incidents in the future.”

Alschuler denied that he has a competitive advantage. “I don’t think so,” he said. “You have to understand this is not pertinent to the deal I negotiated with the Federal Aviation Administration. Yes, I understand the context, but the question of what to do with the residual land was not dealt with in the negotiations. This is a whole new issue, a whole new ballgame.”

In an interview last fall, Alschuler said that he had “no present plans to do business in Santa Monica.” Alschuler also said that while he was city manager representatives from the Stahl family trust would “periodically call and ask for advice. I assume they found the advice useful, as did many other people.”

The City of Los Angeles, the State of California and the federal government have laws governing activities of former employees. In Los Angeles, a past employee is permanently restricted from representing a party before the city on an issue in which he was substantially involved as a city employee.

State Restrictions

Former California employees are permanently restricted from making a formal or informal appearance or oral or written communication before state agencies on issues in which the employee was substantially involved.

High federal officials are restricted for one year from coming back to a federal agency on any matter. There are also two-year and permanent bans for federal officials in some situations.

City Manager John Jalili said that a policy is necessary for Santa Monica. “In the public sector, even the appearance of a possible conflict is damaging in most cases,” he said.

And with several large development projects coming up in the next year, council members are becoming concerned about even the hint of impropriety. “I think you want to avoid the appearance of any impropriety,” Epstein said. “There is so much suspicion of government that it’s probably a good idea to avoid things that heighten that suspicion.”

Myers Concerned

City Atty. Robert M. Myers said he is concerned that former city officials may use their expertise for personal gain. “The problem is that individuals (can) use information they obtained while working for the city for financial advantage in situations that can be adverse to the interests of the city,” Myers said.

Myers would not comment on whether Alschuler’s activities sparked the proposal but said, “I’ve been concerned about the subject matter when the former city attorney (Richard Knickerbocker) went from representing the city on airport issues to suing the city over airport issues.”

But city officials privately said they were concerned about Alschuler’s involvement with groups that had had dealings with the city.

While nearly all council members said they favored the law, two city officials who left the city last year cautioned against drafting a proposal that could work to the city’s disadvantage.

“I think they have to be careful in drafting it,” said former Community and Economic Development Director Mark Tigan. “There are a number of scenarios that could act to the disadvantage of the city. Suppose a former city official becomes a federal official. Does that mean the city can’t receive grants? Suppose a former city official becomes a bank . . . director. Does that mean the city can’t deal with the bank?”

Safeguards Cited

Tigan, who left the city in December to become director of the Community Development Trading Group, said that many safeguards exist in the city’s procurement system. “The council gets to review any contract of significance,” Tigan said. “I don’t see any need for (the law) unless they are regulating themselves. It seems to be symbolic. If the purpose is symbolic, I see nothing wrong with symbolic legislation.”

Former Planning Director James Lunsford, who has represented organizations on planning issues, said he doesn’t think there is a need for the law.

“I think the inference of such a law would reflect more on existing city employees than previous ones,” Lunsford said. “It would imply they would show favoritism toward former employees, which I certainly have never found to be true.”

Reed said the disadvantages are outweighed by the advantages of the law. “I suppose to the degree that the service of someone with a lot of knowledge is lost for two years it might be considered a disadvantage,” she said. “... But I think we have an obligation to be very, very careful.”