Union Letter of Complaint Against Commissioner Yates

In today’s Ledger you’ll find an article concerning two state ethics complaints against Mayor Buddy Fletcher and Commissioner Edie Yates. Rick Rousos covers the story well, and I urge you to read it. However, there are additional links and text I think you’ll find pertinent.

The gist: In December 2008, a lawyer/researcher for Utility Workers Union of America filed two separate complaints to the The Florida Commission on Ethics. The December 4th, 2008 made the complaint against Mayor Buddy Fletcher. A December 19th, 2008 letter filed the complaint against Commissioner Edie Yates.

Brooks is based in Nashville, Tennessee and the UWUA, housed in Washington, DC, represents workers with Lakeland Electric. On February 2nd, 2009, the UWUA registered a web site, Lakeland Waste Watch. PDF copies of both complaints are published there – Fletcher, Yates

I’ve republished both letters in plain text. An earlier post covered the complaint letter concerning Mayor Fletcher. Below is the complaint against Commissioner Yates:

December 19,2008
Philip Claypool
Executive Director and General Counsel
The Florida Commission on Ethics
3600 Maclay Boulevard South, Suite 201
Tallahassee, FL 32312

Re: Complaint against Edith L. Yates, Commissioner, City of Lakeland

Dear Mr. Claypool:

I am enclosing for your attention a complaint against Edith Yates, a Commissioner of the City ofLakeland, involving the Commissioner conducting business with the City in violation of §§112.313(3) and 112.313(7) of the Florida Code of Ethics. Our organization represents numerous City employees, who live throughout Lakeland and Polk County.

Background

Ms. Yates became a City Commissioner on January 3, 2006. For many years, CommissionerYates has also owned a material interest in Baylis & Company, P.A., an accounting firm based inLakeland. Ms. Yates is a certified professional accountant and a senior partner in the firm.

Lakeland Downtown Development Authority (“LDDA”) is one of Commissioner Yates’longstanding clients. By state statute, LDDA is a component unit and agency of the City of Lakeland Laws of Florida 2004-415, § 5.

Notwithstanding her election to the City Commission in 2005, however, Ms. Yates has continuedto provide professional accounting services to LDDA. Specifically, Yates and her firm routinelyperform LDDA’s annual audit, prepare periodic financial statements and related reports each quarter, and provide miscellaneous additional services upon the agency’s request.

According to data provided by the City, LDDA paid Baylis & Company $2,160, $17,288, and$8,748 during calendar years 2006, 2007, and 2008, respectively. (See enclosed.) Ms. Yates’ firm is currently engaged in LDDA’s annual audit for Fiscal Year 2008.

Nature of Baylis contracts with LDDA

LDDA awarded a contract to Baylis & Company for annual audit services by competitive bid inJuly 2002. According to the

Request for Proposals (“RFP”), the bid was for audit services for Fiscal Years ending September 30, 2002, 2003, and 2004, with an option to renew on a year-by-year basis for five additional years.

The contract itself, however, contains no automatic “self renewal” clause. Instead, LDDA andBaylis have negotiated a new contract each year, with the terms memorialized in a series of “engagement letters” signed by the parties. Those contracts have been negotiated each year between the LDDA Executive Director and Baylis, and then ratified by the LDDA Board. As noted, these contracts include no self-renewal clause, and moreover contain no other restrictionson the material terms for potential future contracts.

In addition, the original RFP requested bids for annual audit services only. The resulting engagement letters from Baylis have also been limited to the annual audit. In addition to the annual audit, however, the firm has continued to perform other services for LDDA since Ms.Yates’ election, including preparation of quarterly financial statements and payroll records, and other miscellaneous services.

According to records provided by the City, these additional services are performed pursuant to separate contracts negotiated periodically between LDDA and Baylis, and possibly also on an adhoc basis as needed. In addition, as summarized below, the firm has increased the price it charges for some services in the years since Ms. Yates’ election.(1)

Violations of Florida Ethics Code

As you know, § 112.313(3) broadly provides that no “public officer or employee, acting in aprivate capacity [may] rent, lease, or sell any realty, goods, or services … to any political subdivision or any agency thereof, if he or she is serving as an officer or employee of thatpolitical subdivision.” Section 112.313(7) provides that “no public officer … shall have or holdany employment or contractual relationship with any business entity . . . which … is doing business with an agency of which he or she is an officer or employee. . ..”

Commission advisory opinions have long made clear that the statute generally prohibits any public officer from owning a business entity which conducts business with the officer’s public agency. In an opinion dealing with the City of Lakeland, for example, the Commission observedthat a City Commissioner who was a principal stockholder, officer, and director in a sheet metal company could not provide services to Lakeland General Hospital. CEO 76-65 (4/16/1976).

The Ethics Code broadly precludes all such arrangements, unless they are saved under one ofexemptions provided by § 112.313 (12), or “grandfathered” under either § 112.313(3) or §112.316. Indeed, several months after assuming office Commissioner Yates requested theopinion of the City Attorney whether she could continue providing accounting services to LDDA. The City Attorney advised that, unless one of the statutory exceptions applied,Commissioner Yates clearly could not provide these services: “Based on the foregoing, I . . . conclude that as a partner in a Professional Association where a material interest is owned by you and your husband, a prohibited contractual relationship would exist were Lakeland Downtown Development Authority to enter into a contract with your Professional Association to provide actuarial services.”

The Baylis payments are not exempt

In this case, neither the exemptions nor the “grandfather” provisions can excuse Commissioner Yates’ charges to LDDA. As shown by the enclosed City spreadsheet, for example, the payments to Baylis have clearly exceeded $500 per calendar year.

In addition, although the audit contract was awarded to Baylis by bid in 2002, the ensuing contracts negotiated by the firm and LDDA each year have not been submitted to any competitive bidding procedure. The Polk County Supervisor of Elections office has also confirmed that Commissioner Yates has filed no Form 3 A with the County.

In any event, the 2002 RFP by its terms applied only to annual audit services, but not to thequarterly and other miscellaneous services routinely provided by Baylis to LDDA. The 2002 bid therefore could in no way justify Commissioner Yates’ charges for these other services, even assuming that it could excuse the annual audits.

The Baylis payments are not properly “grandfathered”

The Baylis payments also cannot be shielded by the two “grandfather” provisions of the statute.

Most fundamentally, the Commission’s advisory opinions hold that the “grandfather” protections afforded to contracts entered into before a public officer assumes office are generally lost if the contracts are subsequently extended. Such an extension is considered a new agreement, exceptin narrow circumstances such as where the original contract includes a “self-renewal” clause that would extend the contract on the same terms and conditions.

In CEO 02-14 (7/30/2002), for example, the Commission observed: “Although we have found that public agency actions regarding business relationships with private entities (actions sometimes labeled ‘contract renewals’)can remove a situation from the ‘grandfathering’ effect of Section 112.316, . . .we also have found that where an original contract specifically provides for time-certain extensions, then ‘grandfathering’ will not be inapplicable due to exerciseof the renewals, provided the terms of the contract remain the same as those ofthe original.” (Emphasis supplied.)

Similarly, the Commission found in CEO 85-40 (5/23/1985) that extension of a banking agreement would continue to be “grandfathered,” but only because “the two-year banking services agreement contemplates a one-year extension by written consent of the City and the bank” on the same terms. The Commission noted, however, that any subsequent negotiation of a “similar” agreement upon the expiration of the existing agreement would be unlawful.

See also CEO 95-13 (6/1/1995) (“inasmuch as a renewal of the contract would constitute a new agreement between the City and the corporation that would not be ‘grandfathered,’ such renewal would create a prohibited conflict of interest”).

At the very least, to receive continued protection the original contract must remove any element of discretion from the parties during renewal negotiations, and the contract must in fact berenewed on identical or substantially identical terms.

See generally CEO 80-88 (12/4/1980);CEO 76-48 (3/16/1976); CEO 07-1 (1/31/2007); and CEO 76-118 (7/26/76).

• Baylis annual audit services

In the case of the Baylis payments, none of these requirements have been met. Although the original RFP issued by LDDA for annual audit services in 2002 contemplated an option for extension of the award for five additional years beyond Fiscal 2004, no “self-renewal” clause is included in the contracts themselves.

Instead, LDDA and Commissioner Yates’ firm have negotiated new contracts each year for the annual audit, and then submitted these new contracts to the LDDA Board for approval. See, for example, the enclosed Baylis/LDDA contracts for Fiscal Years 2006, 2007, and 2008.

Curiously, Ms. Yates personally signed the LDDA contracts on behalf of her firm prior to her election to office. After her election, however, the firm began to sign the contracts in the name of “Baylis & Company” – suggesting that Commissioner Yates might recognize at least the appearance of impropriety for a sitting City Commissioner to negotiate and sign contracts to sell services to a City agency.

For its part, LDDA apparently assumes these arrangements are lawful, “as long as the rate doesnot increase.” (LDDA minutes, 10/5/2006; copy enclosed).(2) This is not the law, however, since the original award and the related engagement letters in no way restrict the discretion of the parties to change the terms of the contract whenever the option to renew is exercised. The Ethics Code does not permit a private firm owned by a City Commissioner to negotiate a new service contract with the City every year, merely because “the rate does not increase.”

In addition, it is not at all clear that the material terms of the audit contract have not changed since Commissioner Yates’ election. The annual engagement letters have provided for the same estimated range of charges for the audit and annual report, but the actual charge depends on the time expended and the corresponding hourly rate for the firm’s professional and para-professional staff, plus expenses.

The documents produced so far by the City do not reveal whether the Baylis firm’s hourly rateshave increased for annual audit services.(3) The September 2006 contract for miscellaneous services, however, suggests that the firm’s hourly rates may have increased significantly. That document states that the hourly rate for the firm’s professionals can be up to $175 per hour. The firm’s response to the 2002 RFP, by contrast, stated a maximum rate of $125 per hour.

Since Commissioner Yates’ charges for annual audit services cannot be considered “grandfathered” based on the 2002 competitive bid award, the charges for 2007 and 2008 clearly violated the state Ethics Code. (4)

• Baylis quarterly and miscellaneous services

Finally, the 2002 RFP provided only for annual audit services. Even assuming for the sake of argument that the recent charges for annual audits could be “grandfathered” as a renewal of the 2002 award, this in no way justifies Commissioner Yates’ charges for quarterly and other miscellaneous services.

According to the Baylis contracts disclosed by the City, those charges are made pursuant toseparate contracts, apparently exemplified by the September 22, 2006, “Small Business Services Engagement Letter.”(5) This contract was negotiated and signed by LDDA and Baylis nearly nine months after Ms. Yates assumed office. Thus, there could be no basis to consider this contract “grandfathered” from some previous contract.(6)

The spreadsheet provided by the City reveals that Baylis charged LDDA $960 for non-auditservices during calendar year 2006, $1,788 during 2007, and $1,248 during 2008. Thus, even assuming the charges incurred during 2006 were based on some contract that pre-dated Commissioner Yates’ election, her charges for 2007 and 2008 clearly violated the statute.

Conclusion

Based upon the foregoing, it seems clear that these Baylis & Company transactions have been inviolation of §§ 112.313(3) and 112.313(7) of the Florida Ethics Code, and that these charges cannot be considered “grandfathered” under the statute. I therefore request that the Commission investigate this complaint under its usual procedures.

Please let me know if you require additional information in this matter.

Sincerely,

Mark Brooks
SENIOR NATIONAL RESEARCHER
521 GALLATIN ROAD, SUITE 6
NASHVILLE, TN 37206
615-227-4350 (OFFICE PHONE)
615-523-2350 (FAX)
markbrooks@uwua.net (E-MAIL)

(1) I am enclosing for the Commission’s investigation the following contracts between Baylis and LDDA: contract for audit services for FY 2005 (8/26/2005); contract for FY 2006 audit (9/20/06); contract for miscellaneous “small business services” (9/22/06); contract for FY 2007 audit (9/14/07); and contract for FY 2008 audit (9/26/2008). I will be pleased to provide all other documents disclosed by the City upon the Commission’s request

(2) The relevant entry from the LDDA minutes provides: “FY 2006 AUDIT: Since Edie Yates was elected as a City Commissioner and is a principle (sic) at Baylis & Company, LDDA’s auditing firm, the question was raised whether Baylis & Company could continue as the auditorfor LDDA. A letter was received from the City Attorney stating that LDDA may continue the terms of its audit contract with Baylis & Company as long as the rate does not increase.” As can be noted from the enclosed letter, this description grossly oversimplifies the City Attorney’s opinion.

(3) A public records request for the Baylis firm’s actual billing statements has not yet been answered by the City.

(4) This complaint assumes that the Baylis charges for audit services submitted during 2006 were based on the annual engagement letter dated August 26, 2005 – prior to Ms. Yates’ election – and that the 2006 charges could be “grandfathered” on that basis. There is no justification, however, for the 2007 or 2008 charges.

(5) In response to a request for all contracts between LDDA and Baylis, the City has disclosed only one engagement letter for miscellaneous services, dated September 22, 2006. That contract provides that fees are to be “reevaluated” every year, and also increases the firm’s basic quarterly charge for the coming year.

(6) Even if that had been the case, moreover, the 2006 contract would not have been continued on the same material terms, since the engagement letter also increased the firm’s basic rate for quarterly services.

2 thoughts on “Union Letter of Complaint Against Commissioner Yates

  1. Pingback: Lakeland Local News and Info from Lakeland Florida » Blog Archive » Union Letter of Complaint Against Mayor Fletcher

  2. Since this comes up when you google my name, I would like everyone to know that the Board of Ethics voted unanimously that I was NOT guilty of any ethics violation.

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