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Privatized campaign finance database could make it tougher to track illegal political spending

San Francisco's recent move to a new, privatized electronic campaign finance database will make it more difficult to track amendments to reports on political spending, a change that has caused a conflict between top-level staffers at the Ethics Commission.

In a Jan. 10 memo sent to all of the appointed members of the Ethics Commission, fines collection officer Oliver Luby wrote, "The transition to a NetFile-created database will result in large amounts of deletion of campaign data from the Commission's database, both in the future and retroactively.

"This data deletion will destroy the ability of the Commission and the public to systematically perform computerized reviews of finance changes made via amendment," Luby wrote, adding, "Coincidentally, the biggest beneficiary of this lack of disclosure will be the clients of NetFile."

Many large campaigns use NetFile to electronically file their finance statements, and last year the Ethics Commission decided to have the company take over the city database, which officials with the Department of Technology and Information Services say is failing.

To illustrate his concerns, Luby sent a report to commissioners and staff Jan. 2 identifying more than $2 million in transactions that political committees, including the 2003 campaigns Gavin Newsom for Mayor and Kamala Harris for District Attorney, reported between 1997 and 2007 by using post-filing-deadline amendments, sometimes in violation of the law.

"If there is any way for the Commission to convince NetFile to provide a database and filing system that will not delete data, I recommend pursuing it," Luby concluded. "Otherwise, this problem is an indicator that the cost savings obtained by using NetFile, instead of SF DTIS, were inflated."

But Ethics executive director John St. Croix didn't appreciate Luby's input and defended the choice of NetFile.

"DTIS determined that it would be very expensive and unrealistic for them to create a new system since they didn't have the man power or the time. And to buy it elsewhere, like from the city of Los Angeles, would have been expensive, so we looked at the private vendors," he told the Guardian.

St. Croix signed a three-year, $90,000 per year contract with NetFile on Oct. 31, 2007, and told us, "If we don't go with NetFile, we won't have anything,"

David Tristan, deputy director of Los Angeles' Ethics Commission confirmed that his city's in-house system, which costs $30,000 per year, is not a turnkey operation: "It was built as a filing, audit, enforcement, and compliance tool, and it's a good system, but we encourage that you have a systems person."

St. Croix claimed Ethics auditors are not losing any tracking capability. "The way the old system works, a global assessment is no longer available," St. Croix told the Guardian.

Acknowledging that his staff will have to take more steps to do a comprehensive "global search," St. Croix said Luby "is negating the fact that we will be able to display lobbyist reports, statements of economic interests, and all our scanned filings."

If a modification to the NetFile contract is required, St. Croix said, "We'll try to get the city to pay for it." But, he claimed, "there is no basis for the idea that there is a sinister relationship between the filers and NetFile."

NetFile founder David Montgomery confirmed that NetFile, which accounts for 50 percent of the state's electronic filings, provides services to filers, such as political committees supporting candidates and measures, and governmental agencies.

"But the data filed belongs to NetFile's customers. We're just providing a management service," Montgomery told the Guardian, dismissing conflict-of-interest concerns.