COMMENTS
THOMAS W. KELTY, Chief Counsel,
Illinois Municipal League
"CARE IS THE KEY"
In two recent decisions, the courts have rendered
opinions in situations in which care, in the consideration
of official action by municipalities, has proven to be a
key ingredient in the operation of municipal government.
On November 30, 1990, the Illinois Supreme Court
rendered an opinion in the case of People of the State of
Illinois v. Scharlau et al., a case arising out of action
taken by a number of elected commissioners of the City
of Danville and by their corporation counsel, additional
Defendant, Wendell Wright. All Defendants were convicted in the Circuit Court of Vermilion County of official misconduct (Ill.Rev.Stat., 1989. ch. 38, par. 33-
3 (c)) and of violating the prohibition against municipal
officials having pecuniary interests in contracts involving the governmental unit they serve (Ill.Rev.Stat., 1989, ch. 24, par. 3-14-4 (a); ch. 102, par. 3 (a)). While the
appellate court reversed the trial court ruling, the Illinois Supreme Court reversed the appellate court and affirmed the trial court.
The defendants were prosecuted after they had
settled a Federal class action lawsuit brought pursuant
to the Voting Rights Act of 1965 (42 U.S.C. §1973b
(1982 & Supp. V 1987)). This lawsuit involved allegations that the City of Danville's election practices diluted minority voting strength. The settlement changed
Danville's municipal government from a mayor-commissioner system, where commissioners were elected city-wide, to a mayor-aldermanic system with the City
divided into separate aldermanic districts. However,
the settlement also guaranteed that defendants would
be placed, by appointment, in newly created administrative positions, called "department heads," for three years at a fixed salary which defendants were given the power to determine.
In January 1987, the defendants were nearing the
end of their four-year terms as commissioners of the
City of Danville and were anticipating running for reelection in February. At that time, a group of African American residents of Danville filed a lawsuit against the city and its commissioners alleging that the nonpartisan, at-large, city-wide process for electing commission members excluded African American representation and diluted their voting strength.
One month later, the parties to this lawsuit filed a
stipulation for a consent decree. This stipulation provided for Danville's form of government to change from a mayor-commissioner system to a mayor-aldermanic system. For the defendants, the stipulation provided that: (1) for three years after the first general election under the new government, the commissioners would continue in office as the administrators of various departments which corresponded to their commission duties; (2) the occupants of these administrative, or "department head," positions would not be members of
the city council and would have no legislative duties; (3) the administrators could be removed only by a majority vote of the city council for "misfeasance or malfeasance"; and (4) the current commissioners would determine the salaries for the new department heads, and
these salaries could not change for four years.
The hearings before the trial court revealed the Defendants knew that they could not hope to prevail in the underlying litigation but they argued during negotiations that they needed to remain in office "for a period of time after the new aldermen were elected in order to
guarantee a smooth transition." The defendants indicated that the specific provisions regarding salary, length of term, and removal were compromises upon
which the voting rights plaintiffs agreed in the interest
of protecting defendants from any reprisals by the new
aldermen. Both sides agreed that, even though defendants could not hope to prevail in the suit, the settlement was a reasonable means of avoiding prolonged
and expensive litigation.
The State's Attorney argued throughout these proceedings that the settlement agreement violated State
conflict-of-interest laws. The trial judge repeatedly
warned the State's Attorney that the court would not
allow him to argue the merits of such claims, and indi-
March 1991 / Illinois Municipal Review / Page 19
cated several times that the State's Attorney would have
the opportunity to pursue the prosecution of defendants after a settlement was entered. At the conclusion
of the hearings, the trial judge entered an order which
found that the voting rights plaintiffs had a reasonable
likelihood of success on the merits. He stated, however,
that both parties to the suit had negotiated a reasonable
settlement considering the potential length and cost of
litigation and defendants' concern for an orderly transition. Particularly, he found that the provision for the
three-year transition term provided stability and continuity of government. In an apparent contradiction of
his earlier statements to the State's Attorney, the federal
judge found the settlement did not violate Illinois law
and that the commissioners had not violated their fiduciary duty to the city.
Soon after the consent decree was entered, defendants were tried in the circuit court of Vermilion
County on charges of violating State conflict-of-interest
statutes. During those proceedings, each defendant testified regarding the settlement process. Defendants
admitted that they had no right to require that they
retain their jobs as a condition of settling the voting
rights lawsuit and that they were not legally entitled to
retention. All defendants had testified at grand jury
proceedings that they would receive personal benefits
under the consent decree and that they would never
have considered agreeing to the settlement without the
retention provisions.
Defendant Wright testified that defendants as a
group felt that they were being asked to sacrifice their
personal positions and that "if they were going to give
up something, they were entitled to something in return." Although they did not use the issue in the negotiation process, Wright indicated that defendants had discussed among themselves which of their pensions
would vest within the next three years. Defendants
argued that their major concern was for an adequate
transition, not for pension security. Wright also admitted that he had been aware that the Federal court
had the ability to fashion the terms of the settlement
without the direct involvement of defendants in the
negotiation process.
The State also introduced into evidence an indemnification ordinance which defendants enacted less than
two weeks after the Federal court" approved the consent decree. The ordinance, suggested by defendant
Wright, provided indemnification by the city to its appointees (who included Wright along with the former
commissioners) and further extended indemnification
to include "any criminal action or proceeding if the
indemnified person had no reasonable cause to believe
his conduct was unlawful and any act or omission
within the scope of the office or employment." The
State contended that the appellate court relied on the
proper rules of statutory construction in interpreting
the conflict-of-interest statutes, but failed to apply
them correctly. The State argued that there are no inherent ambiguities in any of these statutes. It contended
that, given that these statutes are not ambiguous, there
is no need to be lenient when interpreting these criminal
statutes, because both the legislative intent and the evil
that the General Assembly sought to address by enacting these statutes is obvious, (See Aljeos, 97 111. 2d at
511-12.) They also disagreed with the appellate court's
articulation of an exception for "mixed-interest" cases,
arguing that the statutory language clearly indicates
that public officers may gain no personal interest in a
municipal transaction and opining that, even if the legislature intended for public officials such as defendants
to be able to receive some minute personal benefit if the
product of the transaction or incident is totally beneficial to the city, there is nothing "incidental" about the
benefits defendants gleaned from the settlement
agreement. The State further argued that there were no
alternative methods of settlement negotiation which
would have allowed defendants to reach an agreement
without including themselves in the settlement process,
and contended that the conflict of interest in the case is
entirely volitional.
The defendants responded by claiming that they
had simply exercised their proper governmental authority in negotiating a settlement to the voting rights
case that was in the best interests of the city. Defendants
supported this position by looking to the statements of
the Federal trial judge, who said that defendants had
not violated their fiduciary duty, that the agreement
was sensible and entered into in good faith, and that by
settling the lawsuit defendants served the city well by
saving Danville's taxpayers from the crushing burden
of protracted and expensive litigation while providing
the city with a smooth transition to the new government. They also claimed that the State did not follow
proper procedural channels and should have appealed
the substance of the consent decree rather than prosecuting defendants; they suggested that the State is pun-
Page 20 / Illinois Municipal Review / March 1991
ishing them for doing their job. They also argued that
they should have been allowed to rely on the Federal
district court's statement that the settlement did not
violate State law as an affirmative defense in their subsequent prosecution, and that legislative immunity
should have precluded their prosecution.
In its analysis of the appellate court opinion, the
Illinois Supreme Court stated,
|
"We agree with the State that defendants were
properly convicted under the conflict-of-interest
statutes and therefore reverse the judgment of the
appellate court. We recognize that the dispositive
issue in the case at bar is the proper construction of
the statutes in question. We agree with the State
that the appellate court recited the proper principles of statutory construction but then failed to
cogently apply that law to the facts of this case."
|
The court found that the defendants "had a duty to
act in the best interest of the city" and that it had a "duty
to refrain from using their positions as city commissioners for personal benefit." The court recited the words of
President Kennedy who said, "no responsibility of government is more fundamental than the responsibility of
maintaining the highest standards of ethical behavior. . . ."There can be no dissent from the principle that
all officials must act with unwavering integrity, absolute impartiality, and complete devotion to the public
interest.
Lastly, the court was particularly disturbed by the
city adoption of an indemnification ordinance shortly
after the settlement agreement was approved. In its
opinion, the court states, "We also parenthetically note
that the evidence of the municipal ordinance that defendants passed soon after the consent decree was entered only serves to support the contention that defendants acted outside the limits of their authority. We find
it odd that defendants found it necessary to enact an
ordinance which indemnified Danville city officials
who violated a criminal statute while acting on the city's
behalf in good faith would have been acting outside of
their official capacity. While not dispositive, this evidence serves to further impugn defendants' actions in
negotiating the terms of the consent decree."
The court likewise rejected defendants reliance
upon the doctrine of legislative immunity to protect
them from prosecution. The court states "While the
defendants may have been immune from civil liability
under the doctrine of legislative privilege, we cannot
allow them to conceal their criminal violations and escape punishment merely because they committed their
crimes while performing legislative duties." United
States v. Gillock (1980) 445 U.S. 360.372-73, 63 L.Ed. 2d
454, 464-65, 100 S. Ct. 1185. 1193-94.
In a recent decision of the Ninth Circuit Court of
Appeals, the courts give us another example of the care
that needs to be taken in the destruction of documents
that apply to the operation of local government, in this
case those rules that apply to the pay for fire department battalion chiefs. The case of Abshire et al. v.
County of Kern 908 Fed. 2d 483, arose as a class action
brought against the county by fire department employees seeking back overtime pay and interest allegedly due under overtime provisions of the Fair Labor Standards Act (FLSA). While the lower court ruled
that these employees were "bonafide executives" the
court of appeals reversed. The key consideration in this
case was whether employees met the "duties test" and
the "salary test" established by the FLSA for determining whether an employee is a "bonafide executive". The
problem in this case arose because of the manner in
which the salaries of these people were computed. In
the facts which were stipulated in the trial court the pay
of the battalion chiefs is subject to a potential deduction
for absences from work of less than a day's duration if
the absence cannot be covered or paid as vacation,
sick-leave, or accrued compensatory time-off. The
"key" to maintaining these employees as bonafide executives was to avoid creating the situation in which
they were construed to be paid on an hourly basis rather
than a salary basis. In order to satisfy the salary test, the
court said "an employee's pay cannot be subject to
deductions for absences of less than a day", and in this
situation they were in fact subject to such deductions.
The rule applies whether the deductions are actually
made or not, as long as they are subject to the possibility
of such deduction being made.
Municipalities would be wise to review their local
ordinance, rules, and regulations which govern the
compensation of salaried personnel in order to assure
they are not subject to a violation of the salary test. •
March 1991 / Illinois Municipal Review / Page 21
