There are times when it is sad to report on unethical practices – especially when it comes to municipal governments. As a business ethics expert and someone who speaks on a regular basis to municipalities around the country, it is painful when a city – like the city of Miami – find themselves embroiled in a dispute regarding ethical behavior.
It seems like we can now add the city of Miami to the city of Harrisburg, Pennsylvania and the state of Illinois insofar as the growing list municipalities misrepresenting themselves to the public in 2013 alone. In Miami’s case, it appears as though they are about to become two-time losers. We wonder who will be next.
In an online article for CNN Money by writer James O’Toole, we learn that:
“The Securities and Exchange Commission charged the city of Miami and its former budget director with securities fraud on Friday, alleging that the city misrepresented its finances to bond investors.”
The former budget director, Michael Boudreaux has apparently been accused of misrepresenting financial reports for 2007 and 2008, and for good measure managed to both misrepresent 2009 bond offerings and transfer money from a capital improvement fund to cover up deficits in other funds. Transferring money in that fashion is not legal. It didn’t seem to phase Mr. Boudreaux and one could wonder, “What is Miami thinking?”
I ask this question, because it was only in 2003 that the SEC placed sanctions against Miami for similar behavior! Apparently four year’s represents a generation; perhaps two, in Miami.
According to George Canellos (quoted from the article), who is the SEC’s co-director of enforcement:
“The fact that a city official would enable these false and misleading disclosures to investors merely a few years after Miami had been reprimanded by the SEC for similar misconduct makes this repeat behavior all the more appalling and unacceptable.”
Lawyers for Miami and the former budget director have circled the wagons or speedboats as their debt was downgraded.
Who Makes up Cities?
Cities, towns, villages and the like are not like the statues and monuments that are often erected in town squares or in front of museums. Cities are living and breathing things composed of real people.
“Well that’s pretty obvious, Chuck,” you might say.
I’m afraid that within the confines of many city halls, politicians, bureaucrats and even a few budget directors fail to understand that they serve the needs of the people and they serve at the will of the people. Even if they are not elected, but rather hired or appointed, those who have chosen a life of serving a constituency have a responsibility as well as a duty.
If cities are composed of people, people also invest in cities. We can look at pension funds who buy city of Miami bonds as mega-billion dollar entities where managers sit in front of computer screens in sleek offices, or we can look at those whose money is placed in those funds: teachers, trades people, police officers and many other professions. When the fund invests in bonds such as offered by the city of Miami or the state of Illinois, and the bonds are downgraded, guess who loses?
The budget director and undoubtedly several people above and below him understood what they were doing. The people investing might have understood it as well, but they may have described it in different terms starting with the word “fraud.”
Can a city commit fraud? No, not really, but some people within the city are well able to do so. In a sense, those doing wrong placed their needs ahead of the very people who pay them.
Oh, I get it alright
There will undoubtedly be those who will rush to the defense of the city and the budget director. They will point out the catastrophe of default had nothing been done and that the risks were well worth taking. They will say that anything they did, they did for the good of all.
When one or two or a few decide on their own what is best for a large number of people without the approval of those people, we no longer live in a democracy.
An ethical approach might have been the city of Miami presenting, in highly sobering terms and in a very public forums, the troubles the city was about to face. The public arguments might have been ugly, contentious and depressing, but they would have been honest.
Within the bureaucracy of Miami a decision was made for the second time in less than a decade because they had the opportunity to do so. Frankly, they did so because they did not care.
Mandatory, annual ethics training should be a requirement throughout city government. If ethical violations occur they should be immediate grounds for dismissal. If the rules of ethics are strictly enforced and if it happens frequently enough, government may get back to serving the people instead of themselves.
Will the City of Miami seek ethics training services? They should! From me? Well…that might be a stretch as some might not like the fact that I talk about the good, bad and ugly of ethical behavior. But this I know…it would be my honor to speak to the City of Miami employees about ethical behavior – the Human Side of Ethics – so to speak. Perhaps we can make a difference!
YOUR COMMENTS ARE WELCOME!