Privatized campaign finance database could make it tougher to track illegal political spending
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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. "That's like saying that because Joe Smith cheated on his income tax, we need to sue TurboTax."
Noting that amendment-tracking capabilities are on NetFile's long-term wish list, Montgomery said, "We want to make sure everyone is happy with the transition, but some people don't like change."
Joe Lynn, who was campaign finance project for the Ethics Commission when San Francisco went online, believes NetFile represents a degradation of Ethics audit capacity. "The biggest fine issued by the SF Ethics Commission, and the biggest in California, involved this principle, the auditing of an amendment," he said, referring to the $100,000 fine that a Pacific Gas and Electric Co.funded committee incurred from the city (plus $140,000 from the state) when its amended filings showed it failed to disclose $800,000 in last-minute donations from the utility to help defeat a 2002 public power measure. Ethics auditors caught one of PG&E's violations, while the media, using Ethics' amendment review tools, caught the other.
"But thanks to the way NetFile's system is set up, it doesn't have the capacity to display amendments the way we do," Lynn said. "This demonstrates the dangers of privatization."
Lynn said NetFile's less sophisticated ability to track amendments stems from the fact that it was set up in 1998 to help committees fill out campaign finance reports, "and not from what makes sense for public disclosure.
"It's unfortunate, but not necessarily negligent, that this fell through the cracks," added Lynn, who suggests the Ethics Commission should work to resuscitate its amendment-tracking ability by requiring that committees filing amendments fill out a form stating just how filings have been amended.
"We need to have ordinance," Lynn said. He doesn't buy the argument that NetFile's system is adequate just because it's used by San Jose, Santa Clara, and San Bernardino.
"San Francisco should have a first-class system," Lynn said. "This is another mechanism by which a committee can skirt the law."
Robert Stern at the LA Center for Governmental Studies worries that by signing on with NetFile, San Francisco will lose "the ability to find electronically information on what was changed and to see whether voters had this amended information before an election and what they were learning through amendments afterwards."
Luby also worries that because Ethics' old database won't have technical support, it could irreparably break down in the future and that even if it remains functional, "auditors will have to look in two places to see every local contribution Chevron made."
Luby e-mailed his concerns to management Dec. 7, 2007, then provided them with his detailed analysis Jan. 2 submissions that raised St. Croix's ire.
"I cannot attest to the accuracy of the information in this report," St. Croix wrote in a Jan. 11 memo to the commission. "I believe that many of its conclusions are inaccurate and many are spurious. Further, the information appears to be based on false assumptions and the language implies dishonest motives that are quite simply non-existent."
But St. Croix's reply earned a swift rebuke from Luby's union, Service Employees International Union Local 1021. "We believe the report was written in accord with Mr. Luby's previously recognized duties," SEIU work-site organizer Cristal Java wrote Jan. 15.
Claiming St. Croix implied that Luby's report was a "misuse of City resources," Java added, "While Mr. Luby's act of forwarding his report may not satisfy the technical requirements of filing a complaint, we believe that Mr. Luby's bringing of a report about work-related problems to your attention was whistleblowing."
Luby said St. Croix "is attempting to discredit his amendment review report because its results reflect that Ethics staff dropped the ball when the new database's minimum system requirements were provided to NetFile. Mr. St. Croix doesn't want to own up to the mistake."