Would the blind trust proposed by Rick Caruso go far enough if he is elected mayor of Los Angeles?

Shortly after Rick Caruso announced his candidacy for mayor in February, he promised to give up day-to-day running of his business and place his assets in a blind trust to avoid potential conflicts of interest, if he was elected.

The mayoral race is still ongoing, but Caruso moved forward on Thursday with the first part of that pledge, stepping down as chief executive of the real estate development company known simply as Caruso and elevating the company’s leader. Corinne Verdery as CEO.

But Caruso’s promise to put his holdings, which include the Grove Mall, in a blind trust drew fire Thursday from his mayoral rival, Rep. Karen Bass, and two government ethics experts who called him out. characterized as an inappropriate measure which would lead to conflicts of interest.

“Real estate developers have long sought to influence decisions at the town hall. We won’t let that happen in Los Angeles,” Bass said in a Thursday morning tweet.

Caruso’s campaign spokesman, Peter Ragone, countered that Caruso “is the only candidate who has committed to appointing an ethics czar who will oversee all aspects of his ethics commitments and ensure transparency and accountability. sunlight in all his operations as mayor”.

The back-and-forth over blind trust Caruso predicts is the latest flare-up between two starkly different candidates – one a billionaire developer and the other a career civil servant – in the race to lead the nation’s second-largest city. .

The Bass campaign held a press conference Thursday morning in which Norm Eisen and Richard Painter — who served as chief ethics counsel to Presidents Obama and George W. Bush, respectively — lambasted the planned course of action. by Caruso. The pair published an editorial in Slate Wednesday afternoon, sharply criticizing the conflicts Caruso could face if elected mayor.

In a city troubled by a series of corruption scandals that have tested relations between developers and Los Angeles City Hall, Eisen and Painter seem to wonder if existing laws and standards go far enough to avoid even the appearance of irregularities. Bass, who is on vacation this week, did not attend the Zoom press conference. Her campaign declined to say where she was.

The Caruso campaign said Thursday that if elected, a separate administrator would be appointed to oversee this global blind trust, which would also include its large stock portfolio. Whether the development company retains Caruso’s name if Caruso is elected will depend on Verdery, Ragone said.

Ethics experts generally have says that Caruso’s business holdings do not prevent him from performing his duties, as long as he properly discloses his financial interests and carefully follows protocol regarding potential conflicts as they arise.

Eisen and Painter took a much stricter view. They suggest that to truly avoid ethical issues if elected, Caruso should have an independent trustee sell his real estate in and around town and put the proceeds into something conflict-free, like a mutual fund. diversified.

“It is extremely important to insist that the mayor be free from conflicts of interest and that this real estate empire be sold if Mr. Caruso were to be the next mayor of Los Angeles,” Painter said Thursday.

Bob Stern, co-author of the 1974 State Political Reform Act and former general counsel for the California Fair Political Practices Commission, seemed mystified by the suggestion, saying he didn’t know of any laws in the country that would require such a measure. .

The state’s blind trust provisions are clear, Stern said.

Unless an individual disposes of the assets of the blind trust, they are not considered truly “blind” and conflict of interest rules still apply. But that doesn’t mean individuals should liquidate their assets to avoid conflicts of interest: They should simply recuse themselves from acting on matters directly affecting their assets, Stern said.

In Caruso’s case, that would likely mean avoiding court orders or contracts that specifically involve any of his properties.

Broader decisions about city development that aren’t directly related to Caruso properties would not be considered a conflict under the law, Stern said.

“In a sense, his biases are there whether he owns the property or not. He’s very business-oriented,” Stern said. That perspective, however, would hardly surprise voters in Los Angeles — Caruso said. made his commercial success a central part of his campaign.

When asked how Caruso would approach hypothetical city decisions that could indirectly benefit him as a developer, Ragone said: “The law allows Rick many established options to avoid conflicts of interest, when they actually exist, including the recusal.”

Others, like Carmen Balber, executive director of advocacy group Consumer Watchdog, took issue with how Caruso could generally benefit from a pro-development approach in the city.

“He can’t forget he’s a developer and he does better when the rules favor developers,” Balber said. “No matter how strict the creation of a trust is for Caruso, the details of his actions in power – and whether or not he is still engaged in decision-making that could benefit him personally – will require a meticulous examination.”

The Mayor of Los Angeles has considerable influence over land use decisions in the city. He or she has the authority to hire and fire the top executive of the Planning Department. He or she would also have the power to replace the nine members of the city’s planning commission, a volunteer panel that reviews large-scale development projects.

Caruso’s business has been entangled in a fight over plans to upgrade and expand CBS Television City studios in Los Angeles, located across from the Grove, raising questions about how he could handle such projects as a mayor.

But an elected official with substantial personal wealth — and assets in the region he governs — would hardly be unprecedented in Los Angeles or California.

“Many local officials and statewide officials who have assets often create a blind trust,” said retired attorney Colleen McAndrews, noting that the practice became more common after the passage of the State Political Reform Act.

McAndrews, a former member of the state’s Fair Political Practices Commission, advised Arnold Schwarzenegger on establishing a blind trust when he became governor. Governor Gavin Newsom also put his hospitality business, the PlumpJack Group, in a blind trust when he took office and did not liquidate individual companies.

The closest parallel to Caruso’s situation would likely be Richard Riordan, a wealthy businessman who served two terms as mayor of Los Angeles beginning in 1993.

Riordan paid a fine of $3,000 for violating the state’s Conflict of Interest Act in 1996 over an issue his office inadvertently called an error, but Stern and others said the conflicts weren’t a major issue during its administration.

McAndrews, who also served as Riordan’s attorney when he was mayor, said she would conduct trainings with city staff so they know what the then-mayor’s assets were and can spot the potential conflicts as they arise.

But Eisen, the former Obama lawyer who co-wrote the Slate op-ed, argued that simply complying with existing conflict-of-interest law would not go far enough to meet the best ethical practices.

Eisen said he and Painter offered to provide Bass with informal, pro bono advice about potential ethical issues at stake. When asked why they hadn’t approached Caruso in the same way before outlining their concerns in a public op-ed, Eisen said he knew Bass from his congressional service.

Los Angeles Times

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