Protectionism 101: HB 279 and the regulation of Fantasy Sports

[TL;DR warning – this is a long one.]

I usually stick to writing about local issues at this site since I feel I can have the most impact in and around Huntervsille, but occasionally the General Assembly will motivate me to write about something outside of the confines of Mecklenburg County. Last week, Mecklenburg County Commissioner Matthew Ridenhour alerted me to just such an occasion when he commented about HB 279, or the “Fantasy Sports Contest Act,” on his facebook page. I, for one, am glad the majority party in Raleigh is finally taking action to protect all North Carolina residents from the scourge of unregulated fantasy sports. Because if there was a single overarching reason voters returned Republicans to the majority in Raleigh last November, it was definitely to grow the size of state government by enacting more paternalistic regulations.

Becki Gray wrote a column at Carolina Journal last week asking a very reasonable question, “As hundreds of bills are filed in the General Assembly, I ask: What problem are lawmakers trying to solve?” I asked myself the same question about HB 279 – what problems are the sponsors of this bill trying to solve? The answer wasn’t readily apparent so I decided to email the fourteen sponsors of the bill and ask them what problems they were trying to solve and why NC needed to regulate fantasy sports? I haven’t participated in fantasy sports in a few years, and I have never participated in the growing phenomenon known as daily fantasy sports, so maybe I just wasn’t aware of the problems that needed solving by state government.

Rep. Jason Saine (R), a primary sponsor of HB 279, promptly responded to my email (and cc’ed the bills other primary sponsors) with an outline of their justification for the legislation. He wrote in part, “It is important to note that without a legal definition and parameters, other states have seen confusion regarding fantasy sports.” As evidence of this confusion he linked to an April 2016 news story about an opinion by the office of the Attorney General in Tennessee that fantasy sports contests constituted illegal gambling under TN law. TN became the third state to regulate fantasy sports when the governor signed a bill into law later that same month.

The current version of HB 279 is five pages long. If the primary concern of the bill sponsors is that an NC court could rule fantasy sports to be gambling, it seems like the concise language contained within the proposed section 78E-9 of the bill would be sufficient by itself to address this concern. Section 78E-9 states fantasy contests are not to be considered gambling under NC law. Problem solved, right?

I haven’t seen much written yet in the mainstream press about this bill since it was filed other than a short piece in the N&O last week, but I have read two opinion pieces. Both writers, Nic Haag in the Lincoln Herald and Keith Larson in the Charlotte Observer, raised excellent objections to HB 279, many echoing my own objections to this bill. HB 279, as currently written, is nothing more than another manifestation of protectionism that unnecessarily imposes arbitrary restrictions on competition.

Another concern I have (a concern also expressed by Commissioner Ridenhour in his facebook post) that neither of the other opinion pieces referenced is the overreach potential of this bill.  If the intent of the bill sponsors is only to offer consumer protections to fantasy players and not to regulate small fantasy leagues amongst friends/family/co-workers involving small sums of money (or even no money), why not clear up that ambiguity in the bill? The bill states no fantasy contest shall be offered in this State unless the operator has been registered with the [Secretary of State]. A “fantasy contest” is an online fantasy or simulated game or contest… and an “operator” is a person or entity that offers fantasy contests to members of the public.

There does not appear to be any language in the bill clearly setting forth the intent for it to only apply to fantasy sports companies operating a web based platform as opposed to fantasy leagues amongst friends who happen to use an existing web based platform like Fantasy Draft, Yahoo, etc. Without clear language setting forth the intent of this bill to exempt small leagues involving friends/family/co-workers, I could easily see the Secretary of State’s office or another state agency attempting to require registration and the registration fee for a group of friends/family/coworkers based on the ambiguous definitions of fantasy contest and operator – and I could easily see a court upholding such an attempt unless changes are made to the existing bill language.

Consider this hypothetical. You and your friends have run a fantasy league every football season for years, you charge a $25 buy-in, and use Yahoo’s online fantasy platform. This season two of your friends can’t participate and you want to replace them to keep the same number of participants in your league so you send out a quick social media post on your social media profile open to the public for anyone interested in joining your league to contact you. Are you now an “operator” offering a “fantasy contest” to members of the public requiring you to register with the Secretary of State?

I also received a response from Rep. John Bradford (R) to my question about what problems the sponsors of the bill are attempting to resolve. Rep. Bradford wrote in part, “The key concern for states, like NC, have been whether daily fantasy sports operators are collecting money from the general public, because that is the conduct where there is risk of harm… These operators create jobs and revenue in NC.” I have yet to be provided with evidence from any of the bill sponsors of any actual harm suffered by a fantasy sports participant in NC.

Regarding the “jobs and revenue” justification for this bill, maybe someone can point me to the bills filed by Rep. Bradford (or any other bill sponsor) seeking to legalize drugs and prostitution on the same basis.

Why not allow the fantasy sports companies to police themselves and let the market sort out what consumer protections may or may not be needed? This unregulated market seems to have worked out pretty well so far in NC. Fantasy sports have been around in some form or another in NC for at least 15 years – and that’s being conservative. The bill sponsors may argue daily fantasy sports are different, but HB 279 as written makes no distinction between season long and daily fantasy contests. The fact that the bill sponsors can’t come up with a single instance of a fantasy sports operator defrauding or otherwise causing financial harm to an NC resident over the past 15 years should tell you all you need to know about this bill.

To further bolster their support for this bill, both Reps. Saine and Bradford have pointed out that the industry supports oversight and regulations like HB 279. As I pointed out to Rep. Saine, I don’t think that helps their argument. It only reinforces the perception that this proposed legislation is nothing but protectionism being pushed by current market participants to erect barriers to entry for future competitors.

Rep. Saine attached the two letters below in his email as evidence of industry support (he also posted them on his twitter feed) and Rep. Bradford wrote the following in a facebook comment on March 9, “NC companies operating in this space specifically asked for legislation to clearly separate fantasy sports from gambling activities.”

FantasyDraft Support
FSTA NC Support

 

So, which “NC companies” are Rep. Bradford referring to? He doesn’t specify so I am going to assume at least one of them is the company that wrote a letter in support to Rep. Saine, Fantasy Draft, LLC. Who is Fantasy Draft, LLC? In the timeless words of local radio personality Tremaine “QCB” Sloan, I had never heard of them.

Fantasy Draft, LLC (“Fantasy Draft”) lists a Cornelius, NC address on their letterhead. They have a corporate logo on the top of the building at that address as well as roadside signage and they are listed on the company directory on the first floor of the building. They’ve been featured in stories at the Charlotte Observer and Cornelius Today. A quick perusal of the “Press Box” page of their website shows Charlotte, NC on all of their bylines. A story from November 13, 2014 on their site announcing their launch states that Fantasy Draft is based outside of Charlotte, NC. The story goes on to state, “The investment group behind FantasyDraft is led by Charlotte-based entrepreneur and business owner Robert Stevanovski and includes senior individuals at The Jordan Company, a private investment firm, with more than $8 billion in committed capital among others. Stevanovski owns several businesses that have generated over $3 billion dollars in revenue over the last five years.” Mr. Stevanovski is one of the co-founders of ACN, LLC based in Concord.

Interestingly, when you run a property search of the Cornelius address listed by Fantasy Draft it shows the owner as West Catawba Ave, LLC. The managing member of this company according to filings at the Secretary of State is Pasicor, LLC. The manager of Pasicor, LLC is Robert Stevanovski according to filings at the Secretary of State. One of the other tenants in the building with Fantasy Draft is Xoom Solar. Xoom Solar is a subsidiary of ACN, LLC.

Based on the above, it would seem obvious Fantasy Draft is an NC company. But, over at the Secretary of State’s website, I was unable to locate Fantasy Draft when I performed a corporate name search (you can perform the search here). Just searching the word “fantasy” in the corporate name search brings up approximately 140 results, 26 of which appeared to be related to fantasy sports in some manner, but no Fantasy Draft. I also attempted a search based on company officials and was still unable to locate Fantasy Draft. I then did a search online in the Mecklenburg County Register of Deeds assumed names database (you can perform the search here) just in case they were operating as a d/b/a or an assumed name and still found no results.

After searching online it appears Fantasy Draft is incorporated in Delaware and has filed as a foreign limited liability company in Mississippi (where fantasy sports legislation has already been signed into law) with its principal office in Cornelius, NC. The question for the bill sponsors is whether a physical presence and employees in NC is alone enough to consider Fantasy Draft an NC company. There is nothing wrong with incorporating in Delaware and filing to do business in other states, however, it does not make Fantasy Draft an NC company in my opinion. Whether Fantasy Draft is a foreign corporation transacting business in this state without a certificate of authority pursuant to NCGS §55-15-01 is another question entirely.

To be clear, I reject the premise that the state should be involved with regulation of fantasy sports. But, because of the number of bill sponsors (14) and because it’s a bi-partisan bill, I recognize HB 279 has a good chance of passing the House and heading to the Senate. Let’s hope before it does some other members of the House or members of the Senate can scale this bill back and limit it to simply preventing fraud and abuse and maximizing competition.

Eric

Did Swain just imply Aneralla accepted a bribe over HFFA?

During the public comments portion of last night’s well attended Huntersville town board meeting, former mayor Jill Swain strongly implied bribery was a motivation for current mayor John Aneralla to place the HFFA management contract discussion on the agenda. It is a felony in NC [NCGS 14-217] for any person holding office to receive anything of value, including campaign contributions, for performing any official act.

You can listen to her comments for yourself here beginning at approx. the 25:35 mark. Mrs. Swain read from the minutes of the Oct. 19, 2015 town board meeting – which took place less than a month before the election that Swain lost to Aneralla – wherein Mr. Aneralla, commenting on the HFFA contract renewal discussion that night, stated in part, “I believe there’s a citizen here that would like to bid for that contract.”

Mrs. Swain then commented that what Mr. Aneralla did not say was that the citizen in question who followed him in public comments at that meeting was a donor to his own campaign, Mr. Brian Sheehan. [Sheehan contributed $1,000 to the Aneralla campaign in August 2015.] She went on to state that she was curious about the reason this board is potentially interested in breaking a five year contract that would unnecessarily cost our taxpayers. She concluded by encouraging citizens to watch and see if Mr. Sheehan is first in line to bid on that contract.

If Mrs. Swain’s comments were not intended to imply the current mayor accepted a bribe in order to have the board vote on whether to bid out the HFFA management contract I would think she would want to publicly clarify her comments.

Mrs. Swain’s concern for the well being of the taxpayers is welcome, but I have to ask where that same concern was when the board she presided over decided against putting this $183,564 annual contract out for bid in October 2015? [see the contract in question below] As I stated in my own public comments last night, only in government could it be seen as a good thing to NOT consider bidding out a contract in 15 years.

HSW 2015

I reached out to Mr. Sheehan for a comment and asked if he contributed to the Aneralla campaign in order to ensure Aneralla would allow the HFFA management contract be put out for bid? Mr. Sheehan replied, “Absolutely not. I’ve known him for 15 years, have given to his other campaigns for office over the years. I haven’t spoken with, emailed with or otherwise been in contact with John in about a year. I never asked him to put this issue on the agenda. Glad he did and think it is the right thing to do, but I haven’t spoken with him in a year.”

Mrs. Swain closed her campaign account earlier this year according to Meck Board of Election filings. But, you have to wonder whether we just witnessed the opening salvo of the 2017 mayoral campaign after her comments last night.

Why can’t I buy beer before noon on Sunday?

This column originally appeared in the September 17, 2015 edition of the Herald Weekly. I decided to re-post this piece after the FB dialogue this weekend with Sen. Jeff Tarte and others and after reading the recent opinion piece in the Observer by Yaël Ossowski. Mr. Ossowski touches on a number of alcohol related laws in need of revising, including Sunday alcohol sales. But he also references the popular “Craft Freedom” movement attempting to revise the current distribution scheme for brewers in the state. I’m glad state legislators (and even the Observer editorial staff) are finally coming around to changing this decades old rigged system, but you have to ask what took so long (or you can just be a cynic and assume campaign contributions from a certain special interest group kept the rigged system in place for so long…). Apparently brewers just needed a catchy social media campaign to get the attention of legislators since basic arguments against protectionism failed to be persuasive.

Hopefully my #SundayEquality campaign will eventually have the same success in the legislature as the Craft Freedom campaign seems to be having.

Eric


Huntersville residents and all North Carolinians of legal drinking age should be allowed the choice to purchase alcohol anywhere it is sold before noon on Sunday. (For the purpose of this column, I’m referring to beer and wine only.)

The current reason this choice is not allowed is due to N.C. General Statute 18B-1004(c) which states, “It shall be unlawful to sell or consume alcoholic beverages on any licensed premises from the time at which sale or consumption must cease on Sunday morning until 12:00 Noon on that day.”

This is an antiquated law that needs to be repealed.

 Why did the legislature select the arbitrary hour of noon on Sunday to allow for the sale and purchase of alcohol to resume? Why not 11 a.m.? Or why not leave it at 1 p.m. like it was until 1993, when the legislature changed the time to noon [SL 1993-243]?

Why restrict alcohol purchases before noon on Sundays only instead of enacting the same time restriction every day of the week?

Why only ban the sale or consumption of alcohol before noon, but not the wholesale delivery of alcohol before noon as outlined in the exception granted to wholesalers in 18B-1004(e)?

These would be questions a reasonable person would ask if they had never heard of “blue laws” or our state’s limit on Sunday alcohol sales. I emailed every legislator in the General Assembly and the Governor and requested any rational reason for continuing to enforce N.C.G.S. 18B-1004(c); I received very few responses.

Sen. Jeff Tarte’s response was representative of the few responses I did receive – why change the status quo?

“I have no problem with the current situation because the vast majority of citizens have expressed no issue with the current law,” he wrote. “Nothing more and nothing less.”

Understood, but I would argue the lack of citizens explicitly requesting the law be changed is not evidence of their continued support of the status quo.

It’s not my intent to delve into the implied religious basis of this and other so-called “blue laws” here, but maybe a reader can point to the place in the Bible where it prohibits the sale of alcohol before noon Eastern Standard Time on Sunday? And what about Friday and Saturday? These days are considered to be Sabbath or significant by two of the largest religious groups in the world.

If the General Assembly won’t extend the statewide ban on the sale of alcohol before noon on Sunday for the entire week, surely they should respect the traditions of two of the largest religious groups in the world and also ban the sale of alcohol before noon on Friday and Saturday, right?

I recently spoke with representatives of the growing craft-beer scene in Huntersville and Cornelius for their opinions on this issue. Ray Steimel, co-owner of Primal Brewery, said the law doesn’t affect his business much because most of his customers don’t arrive until around 2 p.m. on Sundays.

But he did express frustration with the law as a consumer, as did Matt Glidden, owner of Ass Clown Brewery in Cornelius, citing Sundays on Lake Norman as an example. Glidden said he would love to at least have the option to open and sell alcohol before noon on Sundays for special events, but since this option isn’t available, he stated the law is, “out of sight, out of mind.”

Primal is currently open on Sundays, while Ass Clown is not. Glidden doesn’t think craft beer businesses would be greatly affected by a change in the law, but he does feel the coming craft distillery boom is going to be greatly hampered by both the noon prohibition and also the current monopoly on spirituous liquor sales in N.C. enforced by the ABC Commission.

The Sunday alcohol sales time was last changed more than 20 years ago. It’s past time for another change. I welcome readers to provide their own rational reasons for maintaining the status quo if they disagree.

Huntersville Board agenda – Feb. 20, 2017

There is a town board meeting tonight at 6:30pm – the pre-meeting starts at 5pm. You can view the agenda or download the full agenda packet here. You can watch a live stream of tonight’s meeting at the town’s Ustream page here. I can’t cover every agenda item so I always encourage residents to review these agendas and discuss any items of interest with the mayor or a board member because even a single motivated resident can make a difference on how the votes turn out on some of these items.

Other Business:

– Item D: The board will consider whether to authorize up to $100,000 for yet another transportation study, this time focusing on northwest Huntersville and the proposed extensions of Birkdale Commons Pkwy, Hugh Torance Pkwy, and Ervin Cook Rd. The good news is that CRTPO has agreed to provide up to $50,000 in reimbursement at the conclusion of the study – of course, the reimbursement would still come from taxpayer dollars so I’m not sure how that makes it any better. My question, has this corridor never been studied before? If it has, why is another study needed? [Update: passed 5-1]

– Item F: The board will consider appointments to the recently formed Ordinance Advisory Board. Three members with expiring terms are seeking to be re-appointed, but there are 14 other applications listed so there’s clearly a high interest level among Huntersville residents to get involved with this advisory board. [Update: all three current members were re-appointed – Hines, Henson, and Walsh]

Consent Agenda:

– Item C: The board is being asked to appropriate $2,340.99 to the Huntersville police department’s insurance account. Why you may be asking? Likely because of a motor vehicle accident involving a police vehicle, but that would just be an educated guess since the town consistently declines to specify the basis for this frequent consent agenda item. And who is responsible for repairing police vehicles that have been damaged in an accident? [Update: after Commissioner Boone removed this item from Consent, Chief Spruill advised this was related to an MVA during a high-speed chase on I-77. He also advised there were only two facilities in the area capable of performing all necessary repairs to police vehicles and that the police vehicles are repaired at the least expensive of these two options – the Toyota Collision Center at Toyota of North Charlotte.]

– Item G: If approved, a public hearing will be called for March 20 to consider corporate welfare an economic development incentive grant to new Huntersville business Oerlikon Metro. According to the Charlotte Observer article on this job announcement, the expansion is possible because of a $1 million incentive grant from the One North Carolina Fund. According to the OneNC site, corporate welfare awards are allocated to local governments as part of a negotiated challenge grant. By statute, OneNC requires that a local government provide an incentive to match the OneNC funding. The required local match depends on the tier designation of the county – in a Tier 3 county the local government must provide no less than a dollar for dollar match of the OneNC grant, although the matching funds can take various forms including cash, in-kind services, or donations of land. Mecklenburg County is designated a Tier 3 county by the Commerce Department. Of note, the local government may establish ALL OR PART of its match by securing PRIVATE COMMITMENTS of assistance to the project. How much, if any, of the local match will Huntersville work to obtain from private commitments?

Since Huntersville is in a Tier 3 county, this would seem to me to indicate the town will be on the hook for at least a million dollars of matching funds to ensure the Oerlikon Metro expansion. Strangely enough, Commissioner Bales neglected to include this information during her comments about the Oerlikon announcement at the February 6 board meeting. My question on this topic remains the same, how were any jobs ever created before the existence of the OneNC Fund and our current corporate welfare incentive system?

Oh, and of course the board will be going into closed session at the pre-meeting tonight to discuss the Oerlikon incentive even though it’s already public knowledge how much the state is providing because residents can’t be trusted to know how our elected officials intend to negotiate with our money. Fortunately the town is well aware that closed session minutes are public record so I’ll be sure to post an account of the minutes once I receive them.

Eric

Is Huntersville denying access to public records?

That’s the question after the town recently attempted to deny me access to the minutes from the closed session town board held on January 9. I was finally provided a copy of the redacted minutes on February 7, but only because I’m familiar with open meeting and public records laws and because I don’t mind being persistent. Is it possible other less persistent Huntersville residents have been denied access to records or information in the past?

For the record, none of the criticism below is directed towards the town clerk who has always promptly facilitated my many requests for records and information.

The Huntersville town board held a special meeting on January 9 for the purpose of accepting the resignation of former town manager Greg Ferguson. This special meeting was not live streamed. During this special meeting the town board went into closed session to discuss a personnel matter – the resignation of the town manager. NCGS 143-318.11 sets forth the situations when a public body is permitted to go into closed session.

According to the Lake Norman Citizen, the only media outlet in attendance at the special meeting, the closed session lasted over two hours. Given the lengthy time period of the closed session, I was interested in determining whether anything was discussed among the board that was unrelated to the specific personnel issue for which the closed session was called. I sent a request to the town on January 18 for a copy of the closed session minutes once they had been approved. I was informed the same day the closed session minutes cover personnel related matters and cannot be released and that I could speak with the town attorney [Bob Blythe] for an explanation – no exceptions were cited, just an outright denial. Mr. Blythe is a part-time employee of the town and his current base salary is $110,577.36.

I responded to the town’s denial by citing NCGS 143-318.10(e) and that I would discuss the legality of withholding the closed session minutes with the town attorney once they had been approved by the town board. NCGS 143-318.10(e) states in part: Every public body shall keep full and accurate minutes of all official meetings, including any closed sessions… such minutes and accounts shall be public records… however, minutes or an account of a closed session… may be withheld from public inspection so long as public inspection would frustrate the purpose of a closed session.

Six days later on January 24 I was informed that upon advice from the town’s employment attorney the town was precluded from releasing the requested minutes because NCGS 160A-168 takes precedence over NCGS 143-318.10(e). My immediate thoughts after receiving that email: 1) who is the town’s employment attorney and why did the town have to consult outside counsel to address such a basic open meetings issue; and 2) NCGS 160A-168 only deals with privacy of employee personnel records and does not provide for any outright ban on disclosure of closed session minutes dealing with a personnel matter.

I was later advised the town uses an attorney in the Raleigh office of Jackson Lewis P.C. at an hourly billable rate of $275 for shareholders, $225 for associate attorneys and $120 for paralegals. Are there no employment attorneys the town could contract with in Mecklenburg County, possibly at a lower hourly billing rate? The good news – the town only pays Jackson Lewis on an as needed basis and does not pay them an annual retainer unlike Smith Rodgers, PLLC, the law firm used by Huntersville Police Department at a minimum annual cost to taxpayers of $18,070.

I responded the same day on January 24 by requesting the town forward my email and the 2015 NC Court of Appeals case Times News Publishing Co. v. Alamance-Burlington Bd. of Ed. to the town’s employment attorney and that I would be available to discuss with either Mr. Blythe or the town’s employment attorney at their convenience. I never received a call from either attorney. The Times News case dealt with a very similar situation and is still good law in NC. I’d encourage anyone interested in open meeting and public records law in NC to read for yourself – it’s only twelve pages and can easily be understood by a non-lawyer.

I re-sent my request on February 7 for a general account of the January 9 closed session and received a redacted copy of the minutes later the same day. [See below.] But this apparently warranted further review by the town’s employment attorney to assist with the redaction. Again, why was outside counsel needed to comply with this request pursuant to straightforward NC statutory and case law and how much did this request end up costing the taxpayers of Huntersville? If I was immediately provided with the redacted minutes upon request on February 7, why did the town promptly deny my identical request sent on January 18? How do we know other citizens haven’t been wrongly denied records or information by the town in the past based on similar grounds?

Maybe instead of using taxpayer dollars to employ outside counsel to help with responding to basic records requests from residents, those taxpayer dollars would be better spent on requiring select town employees to attend an open meetings/public records training or CLE.

Eric

2017-01-09 Hville closed mins

 

Some final thoughts on CMS’s decision to hire Charles Jeter

My piece raising questions about CMS’s hiring of Charles Jeter was posted on the morning of January 17. The thorough piece written by Ann Doss Helms in the Charlotte Observer in response to my piece was posted at the Observer’s website at 3:45pm on January 19 (it came out in print in the Sunday edition on January 22). I finally received a response from CMS to the final two questions about the number of applicants and number of applicants interviewed at 5:54pm on January 19 – two hours after Ann’s piece was posted online at the Observer. CMS’s response echoed the numbers cited in Ann’s piece: four total applicants and three total applicants interviewed before the position was filled.

So why did it take the involvement of a Charlotte Observer reporter for CMS to provide me this information? How many other requests for records or information from residents/voters/parents go unanswered because the person making the request isn’t a reporter for the Observer?

The Observer piece only raised additional questions in my mind. First, CMS General Counsel George Battle III, who is paid at least $190,000 according to the most recent salary figures online, stated in the Observer, “Jeter’s predecessor didn’t register.” This seems contrary to filings at the NC Secretary of State’s Office showing Jonathan Sink registered as the local government liaison for CMS in January 2013.

If Mr. Jeter’s predecessor didn’t register, then why is his registration form at the Secretary of State’s Office? [See registration form below.]

Sink registration

Of note, page 2 of Mr. Sink’s registration form only lists one out of a possible thirty-one categories on which he intends to lobby – #9 Education. In comparison, Mr. Jeter’s registration form, signed on January 17, lists a staggering SIXTEEN categories on which he intends to lobby as the local government liaison for CMS – including #9 Education, but also including such categories as #22 Law Enforcement/Courts/Judges/Crimes/Prison, #26 Natural Resources/Forest Products/Fisheries/Mining Products, and #29 Transportation/Highways/Streets/Roads.

Why would the local government liaison for CMS ever need to lobby the general assembly about mining and mining products?? [See registration form below.]

Jeter registration

Second, Mr. Battle was quoted in the Observer denying responsibility for the refusal to release the applicant and interviewee numbers to me. If Mr. Battle was not responsible for making the determination on whether or not to provide the requested information to me, then who in the CMS Legal department did make this decision? Based on the email responses from my contact at CMS it seemed obvious CMS Legal was being consulted throughout this process. My initial request was sent on December 13 and the initial response from CMS was received on January 3 stating, “… awaiting a response from CMS Legal on whether [applicant and interviewee figures] can be released.” On January 6, CMS responded again stating, “… CMS Legal has determined that no records exist of this information.” The final email came from CMS Chief Communications Officer Kathryn Block but only referenced “CMS” in general, not CMS Legal, stating, “CMS has considered items four and five…”

If Mr. Battle didn’t make the decision to deny me the requested information, does that mean the CMS Communications Department is making determinations on what records/information is or is not disclosable under the law without consulting with CMS Legal?

Finally, I still want someone to explain to me how a local government liaison produces $91,000 worth of value to the taxpayers. Don’t worry, I’m not holding my breath…

On CMS’s decision to hire Charles Jeter

[Jan. 19, 2017 update – Thanks to Ann Doss Helms at the Charlotte Observer for writing a follow-up story today on this issue. You can read it here.]

Why did the Charlotte Observer need almost 650 words in their article on December 5, 2016 just to announce former elected official Charles Jeter (R) as the new government liaison for Charlotte-Mecklenburg Schools? It’s almost as if someone involved with CMS felt they really needed to justify to the taxpayers why this hire was worth at least $91,000 of their tax dollars a year. But, even after reading all those words in the online edition of the Observer I was still left with unanswered questions about CMS’s hiring of Mr. Jeter.

  • Why would a former politician who resigned unexpectedly at the end of July citing the need to devote time to his young family then apply for a job less than three months later that will likely require him to travel back and forth to Raleigh on a regular basis? And in case you didn’t follow the District 92 House race too closely – the seat flipped from (R) to (D) in November after Mr. Jeter’s unexpected resignation.
  • Why would CMS hire a former elected official when he would be prohibited from even doing his job until 6 months after he left office pursuant to the “cooling off” period for lobbyists in North Carolina? [See NCGS 120C-304(b).] This one was easily answered by the NC Ethics Commission after I started reviewing this issue. The 6 month “cooling off” period is not applicable to Mr. Jeter because he was actually hired as a local government liaison, not a lobbyist, and local government liaisons are only subject to Article 5 of the lobbying law according to this 2011 formal advisory opinion from the Ethics Commission. What’s the actual difference between a lobbyist and a local government liaison? Good question.
  • Even though he’s only a local government liaison, not a lobbyist, he still has to register as a liaison with the Secretary of State’s Office just like his predecessor. [See NCGS 120C-502(a).] Why then has Mr. Jeter still not registered as a liaison with the Secretary of State’s Office as of the morning of January 17, 2017? You can search for yourself here.
  • If he “got out of his trucking company” as the article stated, why is Mr. Jeter still listed as the President of this trucking company according to the Secretary of State’s website?
  • There are nine board members on the CMS Board of Education – why was only one, Rhonda Lennon from District 1 (which covers Huntersville, Cornelius and Davidson), cited in the article as mentioning the job opportunity to a friend? When did Ms. Lennon mention this job opportunity to Mr. Jeter and how many other friends did she mention the job opportunity to? Surely other board members mentioned this great job opportunity to their friends as well, right?
  • Since Mr. Jeter said he went through a “lengthy selection process” in the Observer article, and since surely other board members mentioned this great opportunity to qualified friends, how many other qualified applicants did Mr. Jeter beat out for this $91,000 a year taxpayer funded job?

I decided to send a records request to CMS on Dec. 13, 2016 to help answer some of these questions. My requests are below along with CMS’s responses in italics.

1) The date the job was first publicly posted and all forms in which the public job posting occurred, e.g., online, newspaper, etc.; [Received January 3 – The position was posted on the CMS job board 10/7/16 – 10/14/16.]

2) The job description or any description of job duties listed; [Received January 4 – see below.]

3) The anticipated or expected salary range listed; [Received January 3 – As advertised in the job posting, the salary range is $71,572.00-$91,187.00.]

4) The number of total applicants applying for this position before it was filled; [Received January 3 – #4 and #5 are requests for information rather than records (I’m awaiting a response from CMS Legal on whether these items can be released)]

5) The total number of applicants interviewed for this position before it was filled; and

6) The date and manner in which an offer of employment was extended to Charles Jeter. [Received January 3 – Date and manner in which an offer of employment was extended is personnel information that isn’t open to public record.]

CMS_Job Description

After the initial responses from CMS we learned the job was only posted for one week and only at CMS’s job board. We also learned Mr. Jeter was hired at or very near the maximum salary since, according to the Observer article, his new job will pay him $91,000 a year. What we didn’t learn was how many other people applied and/or were interviewed for this job during the “lengthy selection process” described by Mr. Jeter or how long after the job posting was he actually offered the job.

On January 6 CMS finally responded to requests 4 & 5 by stating – CMS Legal has determined that no records exist of this information. I asked for clarification – Does this mean the answer to numbers 4 & 5 is zero (0) applicants? Or, does this response mean that no records exist of any applicants applying or interviewing, but that the number is not zero (0)? On January 9 CMS responded to my request for clarification – The response to points 4 and 5 is: there is no record(s) that exist pertaining to the applicant number or number of candidates interviewed.

Still not being satisfied since I originally requested records or information, I revised my request and asked another way – 4) How many total applicants applied for this position before it was filled; and 5) How many total applicants were interviewed for this position before it was filled. CMS responded the same day on January 9 – Thank you for your follow-up inquiry. The items requested in 4 & 5 do not fall in the category of personnel information that is defined in the personnel privacy statutes as public information. Additionally, we have a concern that disclosing such information runs the risk of someone being able to identify the applicants and that would be a disclosure in violation of the personnel privacy laws.

Now we were getting somewhere. So someone at CMS had determined requests 4 & 5 didn’t have to be answered because of personnel privacy laws. But what specific laws were they relying on? Again on January 9 I asked for additional information – Please have CMS Legal specify any and all statutes in support of their refusal to provide the requested information. The next day, January 10, CMS responded – NCGS 132-6.2(e) states that a public agency is not required to respond to records requests by “creating or compiling a record that does not exist.”

I still wasn’t satisfied with CMS’s response to what I thought was a simple question so on January 10 I requested a time to discuss over the phone. After not receiving a response I left a voicemail with my point of contact at CMS requesting the same. On January 11 the Chief Communications Officer at CMS, Kathryn Block, emailed the following response in part – CMS has considered items four and five and determined that disclosing such information runs the risk of someone being able to identify the applicants. This would represent a violation of personnel privacy laws. CMS takes the privacy of its employees and applicants very seriously. Therefore, we are unable to fulfill this portion of your request.

To recap: CMS initially declined responding to 4 & 5 because no records existed. No wait, they said, it’s because responding would violate personnel privacy laws. On second thought, they said, it’s definitely because no records exist and we don’t have to create records that don’t exist.  Seriously though, we can’t disclose the requested information because it would violate personnel privacy laws.

Which is it CMS, no records exist or disclosing the number of applicants and/or interviewees would violate personnel privacy laws?

I decided to consult with Jonathan Jones, Director of the NC Open Government Coalition, who helpfully explained the limitations of a records request. He stated, “[CMS] is only legally obligated to provide records and not information. That’s why it ends up being a potentially valid response to your requests. It’s not a valid response if a record does exist that would answer your request for information and they would rather withhold it for personnel reasons. You can’t argue both because  either the record exists or it doesn’t.”

Essentially, CMS responded to my questions about the number of applicants and interviewees with a “No Comment.” Fair enough. But, based on the job only being posted for one week at the CMS job board and based on CMS’s conflicting responses and absurd conclusion that revealing the number of applicants would somehow result in someone being able to determine the identity of an applicant, it’s also fair for me to infer there was only one applicant and one interviewee – Charles Jeter.

Another example of your tax dollars hard at work in Mecklenburg County.

Eric