At the most recent Ludington City Council meeting, a question of ethics arose dealing with a contract/agreement wherein City Manager John Shay played a dual role.  I called "foul", the city attorney called "fair", please read the following and suggest what you as an umpire would call it.

At 10:30 into the most recent meeting on July 13 (video supplied below), I made a statement as part of my comment:  "You should also realize that John Shay acting as the city's signatory agent in the agreement with the Rotary Club for the City Park Improvements is not a sound idea.  John is a member of the Ludington Rotary Club so he would be expected to have sometimes conflicting loyalties to both the city and the club.  It would be more seemly for the city's signator to be someone without rotary club affiliation so alleged improprieties can be minimalized." 

The contract agreement between the two parties is a five page instrument starting on page 73 of the council packet for that meeting with spaces for John Shay and the city clerk signing on behalf of the City of Ludington.  It's fifteen clauses include provisions concerning: 

a) the assignment of the Rotary Club project manager as the city's representative in subcontracting (2nd clause).

b) the city agrees to enter into reasonable contracts suggested by the Rotary Club for completion (3rd clause)

c) the rotary club gets the park and band shell renamed with the Rotary label, along with additional signage for donors, etc. which the Rotary Club shall erect (6th clause).

d) termination of agreement by either party (12th clause)

Two city officials commented on the inherent conflict of interest later in the meeting by effectively dismissing its significance and then saying that it was required by charter:

July 13, 2015 Ludington City Council from Mason County District Library on Vimeo.

Councilor Winczewski:  (50:45 in) "... in the committee meetings, John Shay did come forth with the fact that he was a member of the Rotary Club; we all knew that when we were making these decisions, and the bathrooms that are there right now have a real issue with vandalism and so they are locked a lot of times, and they're hopefully going to put the new bathrooms at a little different angle/location, so that we can have them open more often.  So thanks, Rotary Club.  That's great.

City Attorney Wilson:  "It should be noted that Mr. Shay has no financial interest in this contract whatsoever; the fact that he's a member of the Rotary Club is interesting, but irrelevant for purposes of this agreement, and the fact that he has to sign the contract is a function of our charter, which requires the city manager and city clerk to sign all contracts that we have for the city.  If Mr. Shay didn't sign the contract we would violate the charter."

First off, Councilor Kathy admits to making decisions in her committee meeting, which is an interesting choice of words, since these committees (supposedly) only have advisory capacity, which is why they do not have to follow the Open Meetings Act.  They should make no decisions at these non-quorum committee meetings, and so their knowledge of Shay's dual role as rotary member and city manager is 'interesting but irrelevant' to borrow a phrase. 

The main point here is that this agreement came to the city council effectively brokered out of the public eye and open meetings without the general public knowing how-- and without them knowing John Shay was a member of both parties making concessions in, and eventually writing up, the agreement.  The COLDNews article on the weekend before the meeting does not reveal that fact.

After it was agreed to they did divulge that connection in an article and with a photo, whose original caption is included:

Rotary members John Shay, Linda O’Brien, Carlos Alvarado, Debra Kinnaird, Tom Calabretta, and Jim Jensen spend a moment at what will now be known as Rotary Park. In back is the band shell that will have a name change from the Kiwanis Band Shell to the Rotary Band Shell. The shell area was busy Monday evening for the 7 p.m. Monday Zumba class, which is free and open to the public. The fountain renovation is being taken on separately related to the Love Ludington program.

One should also not be surprised that Carlos Alvarado, the City of Ludington's FOIA Coordinator who is contracted by a Shay-brokered deal at the end of last year at $125 per hour for handling FOIA requests, is a member of this club.  As Councilor Holman reminded us in a past meeting with her Finance Committee Chairman math skills, this contract costs the city $120,000 a year which goes over to Carlos' pockets [her math was a bit off, however, as usual].  If you recall, Carlos Alvarado's experience and specialties in law were far removed from FOIA Coordinator duties.

Attorney Richard Wilson's analysis, however, is somewhat relevant.  He is correct in saying that when the City gets in contracts and agreements that the city manager and city clerk are supposed to sign for the city, (as found in the city charter Section 13.2 paragraph 4) saying:  "All contracts, agreements or leases (agreed to by council) shall be signed by the City Manager and the City Clerk."

This sounds absolute, but there are exceptions to this charter rule that occur when conflicts of interest would arise.  Each year for the past dozen years, the city has approved a City Manager Agreement with John Shay, and even though the most recent years show him signing for both the City and for himself (see p. 46 here), this is rare to see people sign contracts with themselves.

Now, in general, a lawyer cannot represent both parties in a lawsuit or in setting up a contract (see rule 1.7 and the supplemental Loyalty to a Client which follows it), and writing a contract with yourself may be inspirational for achieving a goal, but it is not really enforceable (try suing yourself for breach of contract and figure out why!).  If both parties here were private businesses with a member in common, it would be common sense to not use that member as a contract signatory for either party or for both.

Likewise, if an official was the chief deal maker for a city and entered into a contract with an agency he was a member of, where the agency gains the powers and benefits granted in the clauses of the agreement as already noted (a-d), then it is proper and ethical to stay out of negotiations as much as possible and not to be a signing member of one of the two parties. 

In the agreement between the city and the Ludington Rotary Club both entities make gains, and John Shay could be easily said to be the biggest recipient.  As a city official, he gains prestige for brokering a deal wherein a city park gets a $300,000 facelift without any public funds reportedly being spent.  As a Rotary Club member, he gains power by brokering a deal where a public park and a public band shell get the Rotary name-- not bad for marketing the brand. 

Undoubtedly, some Ludington citizens do not want to rename City Park or make the changes envisioned, and likewise some Rotary Club members would feel that other more worthwhile projects than building public bathrooms where they already exist could be done by Rotarians for $300,000. 

The guiding legal principle beyond the city charter is found in state law in the Contracts of Public Servants with Public Entities (MCL 15.321, et. seq.).  It is here we discover that MCL 15.322(1) says:  "... a public servant shall not be a party, directly or indirectly, to any contract between himself or herself [which includes (by subsection 2b) any "unincorporated association of which he or she is a member."] and the public entity of which he or she is an officer or employee."  

Further subsection 3 states:  "a public servant shall not do either of the following:  (a) Take any part in the negotiations for such a contract[as described above] or the renegotiation or amendment of the contract, or in the approval of the contract.  (b) Represent either party in the transaction.

From the accounts related at the meeting, John Shay took an active part in the negotiations of the agreement, and when he signed the contract, he signed on to be the representation for the city.  This would also disqualify him for signing for the city on his own city manager contract.

 

It mentions exceptions found in two other sections of the law, MCL 15.323 exempts someone who is a part-time employee or a college official-- as long as certain disclosure rules are followed, and MCL 15.323a which offers exemptions primarily for small town firefighters and medical professionals.  A city manager has no exemption.

As for the city charter, which Attorney Wilson seems to want to take literally in this case but not others, the obvious way to make this agreement binding and proper is to not have John Shay sign it, and run into a violation of this statute and create a conflict of interest, but to have the assistant city manager, who already steps in for the city manager when he is otherwise incapacitated to sign other documents.  And, of course, to have left John Shay out of the whole process dealing with this agreement both before and after this deal has been made. 

For as stated, "he would be expected to have sometimes conflicting loyalties to both the city and the club."  Which should be obvious to all who understand what ethics entails.

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I agree with your argument that Shay has no business signing the contract as it has proceeded through the process of being drafted and approved. It seems that Ludington's elite, again, are going against State law. Wilson's misinterpretation and lack of knowledge about the law is most disturbing. This, again, is another example of the Council goose stepping to the mandates of Wilson and Shay and are again showing just how inept and ignorant some elected official can be. I would like the Council members to actually read the laws and ordinances they are supposed to uphold and work with at least some time in their terms as Councilors. Foolish people are running Ludington's Government. Good article X.

Thanks, Willy.  It also coincides with the Michigan Power contract the city agreed to after introducing it on the weekend before the March 9th meeting after keeping longstanding non-transparent negotiations under wraps for a long time.  As shinblind has pointed out, such a deal probably wasn't in the citizens of Ludington's best interests-- but it creates more money for our local government to spend.

I'm hoping to research it more to figure out what actually went on behind the scenes-- since our leaders won't tell us.

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