Raleigh, N.C. — Even before they agreed to combine, Duke Energy and Progress Energy were two of the state's largest publicly traded companies, so it's no surprise that eight of 170 lawmakers reported owning stock in the two companies when they ran for office last year.
Lawmakers, judges, statewide elected officials and a host of political appointees are required to report when they own more than $10,000 worth of a publicly traded company on a "statement of economic interest," a form filed annually with the North Carolina Ethics Commission.
The statements are supposed to help constituents, lawmakers, the press and others identify conflicts – or apparent conflicts – public officials have because of where they work, what stocks they own, what nonprofits they serve and other similar metrics. The forms provide a window into the financial pressures and interests that weigh upon those making the laws and policies.
For example, Rep. Jerry Dockham, R-Davidson, owns stock in the two power companies and also serves on the House Public Utilities and Energy Committee, which is a likely stopping point for any legislation that might directly affect the two companies.
"I can't remember anything coming before us that I believed would be a conflict," said Dockham, who is serving his 12th full term in the General Assembly.
But, Dockham said, if the legislature did take up a bill that would directly affect the energy giant, "I would feel I'd have to recuse myself out of an abundance of caution. I've always tried to tread carefully on things like that."
Ethics experts say that merely owning stock in a company that is regulated by state law is not enough to create a conflict of interest. Factors like what percentage of a company's stock a lawmaker owns and whether a law's potential impact is disproportionately important to one company over all others also factor into potential conflicts.
In the case of lawmakers like Dockham, their own judgment comes into play, according to Perry Newson, director of the North Carolina Ethics Commission.
"For legislators, at the end of the day, it's their call. It's whether they believe that particular situation and that financial benefit would have an impact on their decision making," Newson said.
Disclosure born out of scandal
North Carolina's current disclosure requirements date to 2005 and 2006, when an ethics scandal led to the conviction of former House Speaker Jim Black. Plagued by stories that suggested legislative action was influenced by campaign donations and other boons, lawmakers passed ethics reform packages meant to make state government more transparent.
Some 5,000 judges, lawmakers and executive branch officials are required to submit an annual statement of economic interest form. Another 1,500 members of regional transportation organizations were recently brought under the law and are in the process of filing their disclosure forms.
Unlike campaign finance disclosures, which are available online from the State Board of Elections, those who want to view an ethics disclosure must request the form from the Ethics Commission. The process can be quick – less than a day or so for a handful of forms, longer for a bulk request.
However, the forms are not always legible or easily analyzed. Bad handwriting can foil interpretation, as can officials who don't fill in the form correctly.
Statements of economic interest are treated differently depending on which branch of government they come from. Ethics Commission staffers review forms for members of executive branch agencies and most boards and commissions to ensure that information is filled out correctly.
But for forms filed by lawmakers and judges, state law only requires that there be an answer in each box. Newson says ethics commission staffers are allowed only to check for completeness, not accuracy.
The Ethics Commission has four people reviewing thousands of forms. That means, even if they were able to, ethics staffers don't have the manpower to cross-check the statements against any other documents.
"In the best of all possible worlds, they should be filled out electronically and immediately online," said Jane Pinsky, director of the North Carolina Coalition for Lobbying and Government Reform.
That's how it works in South Carolina, where elected officials are required to file electronically, and information from their reports is published online almost instantly.
"I should be able to type in a company name and find out which lawmakers own shares of that company," Pinsky said. South Carolina doesn't meet that standard.
She said a robust disclosure database would allow users to see, for example, which lawmakers owned tobacco stocks as the legislature voted on taxes or regulations related to the industry. For that to happen, information from disclosure forms would need to be stored in a database.
In North Carolina, forms are stored as individual PDF files for each lawmaker, some of them no more than electronic copies of handwritten files.
Officials with the Ethics Commission say they expect to begin a project in March to give North Carolina voters 24/7 online access to ethics disclosures, but they don't have a deadline for completing the work.
Forms don't disclose everything
WRAL News examined the statements of economic interest for all lawmakers elected in 2012, along with members of the Council of State, the 10 statewide officeholders, such as the governor and State Treasurer.
By creating a database from the forms, WRAL News found that, of the 180 officeholders examined, 42 held banking stocks, 26 held stocks in energy companies and 38 were invested in computer, software or other technology companies. No one stock seemed to be universally held among those who met the $10,000 reporting threshold, although North Carolina-based companies like BB&T and Duke Energy were the most popular.
More remarkable were the difficulties involved in interpreting the information.
Despite the availability of an electronic filing option, many lawmakers choose to submit handwritten forms, which are often difficult, if not impossible, to read. Electronic filing not only makes the forms more legible, but they are easier to process. The system through which forms can be filed electronically, Ethics Commission officials say, does not allow a filer to leave off required information.
Pinsky says that, even when disclosure reports are filled out perfectly, they are full of imperfect information. For example, the stock reporting requirement doesn't differentiate between someone who owns $10,000 worth of stock and $100,000. It also does not give the public insight into stocks owned through third-party funds or trusts. For example, House Speaker Thom Tillis reports his only stock ownership is through the Wachovia Wealth Investment Management Trust. Now owned by Wells Fargo, it's unclear what stocks might be in that fund.
Similarly, employment information doesn't distinguish between someone who might earn part-time income from a particular company or someone who earns six figures in their professional life. That would be important in order to determine how big of a conflict a lawmaker's employer might pose, Pinksy said.
The most common errors WRAL News found while entering the forms into a database had to do with debt owed to credit-card companies and the like – at least 10 lawmakers confused terms like debtor and creditor.
Occasionally, a lawmaker submits an addendum or note that doesn't clearly fit with the information requested by the form. For example, Sen. Bob Rucho, R-Mecklenburg, wrote "Stock companies not controlled by me or my family" in response to a question about which publicly traded companies he owned. Rucho explained that he invested in mutual funds through a stockbroker but didn't own individual stocks, in which case he wouldn't be required to disclose anything at all.
Disclosure a reality of public service
"I would be surprised if any of my constituents looked this up," Rep. Hugh Blackwell, R-Burke, said. "It's probably something mainly used by my political opponents."
Blackwell reports owning more than $10,000 worth of stock in Abbott Laboratories, AT&T, Exxon Mobile and Duke Energy, all businesses regulated in one way or the other by North Carolina law. He is also vice chairman of the newly created House Regulatory Reform Committee, which is charged with crafting legislation to make government rules less onerous on businesses.
Blackwell notes that his own stock ownership "is a drop in the bucket" compared to the value of shares traded. Owning those stocks, he said, would rarely if ever present a conflict of interest.
"If I were trying to line my pockets by doing something that helped one of those companies, it would only mean $2 or $3 to me," he said.
Indeed, Newson and Dockham both said that they have talked to people who have chafed under the disclosure requirements.
"For some people, that is really sensitive information," said Dockham, who serves on a local community college board. "We lost some two or three good members a few years ago because they wouldn't fill it out."
Newson said he is encountering similar push-back from transportation planning board members who have recently come under the purview of the disclosure regulations.
By and large, Newson and others said, most view the forms as a price paid for being involved in public service.
Pinksy said that state lawmakers face low approval ratings in public opinion surveys. One way to improve their image, she said, would be to lay bare their potential conflicts.
"It would be in their best interest to fund a good disclosure program," she said.
However, improving or reworking the state's ethics disclosure regimen has not appeared on the agendas for legislative leaders in either chamber this year.