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TN No Longer an Openness Leader on Financial Disclosures

Advocates for open government in Tennessee are expressing concern about whether Gov. Bill Haslam’s executive order relaxing income disclosure rules portends similar steps away from transparency, but there seems to be little out-and-out outrage over the governor’s move.

“The only thing that bothers me about the executive order is the tone that it sets and the signal that it might send,” said Frank Gibson, executive director of the Tennessee Coalition for Open Government. “He’s not rolling back a law.”

Dick Williams, state chairman of Common Cause in Tennessee, had a similar reaction.

“I hope it’s not an indication of how we’re going to go from here, and I’d like to think it’s not,” Williams said. “But it’s just sad that his very first executive order, just a day or so after being sworn in, he takes a significant step backward.”

One fascinating aspect of the reaction, advocates for openness in government have said, is that the more demanding executive order that Phil Bredesen, Haslam’s predecessor, set as governor went largely unnoticed — until Haslam’s order loosened the requirements.

After being sworn in as the state’s 49th governor Jan. 15, Haslam’s first executive order was to declare that members of the executive branch must follow state law on disclosure, which brings the administration in line with the Legislature. The order means key administration officials including Cabinet members will have to divulge the sources of outside income but not the specific amounts they make. The step rolls back a Bredesen order, which called for disclosure of the amounts.

“Bredesen, to his credit, set a tone of openness by issuing that executive order in the first place,” Gibson said. “So I can’t slam him (Haslam) for doing it, because he’s basically doing what the law is for the Legislature.

“The thing that Bredesen did was far more disclosure than what Congress is required to do. Congress has to report the value of their investments in categories, from $50,000 to half a million dollars, and half a million dollars to a million, and a million to 5 million. So even members of Congress don’t have to report what their actual income is.”

Williams noted that the Haslam step presents a glaring change.

“It sticks out like a sore thumb at being a difference from what had been the precedent,” Williams said. “He (Haslam) is correct that the law doesn’t require it, but it’s kind of one of those things, once you’ve set the precedent, it’s definitely a step backward to not continue it.”

Haslam’s order caught the attention of the nonpartisan Sunlight Foundation, based in Washington, and its policy director, John Wonderlich, called the decision a “stunning disrespect for the role disclosure plays in democracy.”

“Governor Haslam’s executive order flouts the public trust embodied in that disclosure system, and places his personal and political concerns over the public interest and integrity of the very system he was elected to lead,” Wonderlich wrote.

A recurring refrain, however, is a call for a middle-of-the-road approach that would require ranges of income be reported, rather than none.

Robert Stern, president of the Center for Governmental Studies, a Los Angeles-based nonprofit research group, falls into that category.

“I guess my solution is a compromise, which is what we have in California and which I believe is recommended, which is ranges,” said Stern. “Over a thousand dollars. Over $10,000, over $100,000, over $1 million, and at that point who cares? You should have an idea.”

“We want to know what the conflict is and approximately if it’s a big conflict or a little conflict, but we don’t need to know the exact amount of the conflict,” added Stern, whose organization describes itself as promoting “innovative political and media solutions to help individuals participate more effectively in their communities and governments.”

Issue of Income Prominent in Gov’s Race

Common Cause’s Williams said the potential for conflict should be closely watched for department heads such as those in Economic and Community Development and Revenue, not because he has concerns specific to Haslam’s choices for those jobs but because of the nature of the positions.

Haslam named Bill Hagerty, founder and managing director of Hagerty Peterson & Co., a merchant bank and private equity firm, to the post of Economic and Community Development commissioner. Haslam picked Richard Roberts, director of Miller Industries, which makes towing and recovery vehicles, to head the Department of Revenue.

The issue of Haslam’s personal income rose prominently in the 2010 governor’s race, with opponents among Democrats and Republicans insisting that Haslam’s income from his family’s Pilot Corp. presented a conflict of interest. Ironically, one of Haslam’s harshest critics was his current commissioner of Safety, Bill Gibbons.

Gibbons ran against Haslam for the Republican nomination. He dropped out early but not before he proposed a plan for openness in government.

Gibbons, previously the Shelby County district attorney general, hit Haslam hard on the issue during the campaign and said every time the state widens a highway with a lot of commercial traffic Pilot has an interest with its truck stops. He said voters couldn’t know if it was a big conflict or a small conflict because Haslam would not reveal his income from Pilot. Haslam did divulge his income from investments outside Pilot Corp.

Haslam has also announced a blind trust for his holdings, but the trust will not include Pilot holdings or a real estate investment he has outside the state.

Among candidate Gibbons’ detailed plans for openness was a strengthening of disclosure laws by moving beyond the requirement of candidates and officeholders to disclose only the sources of income and require reporting of the amount of income from each source.

An effort to reach Gibbons this week for comment on Haslam’s executive order was unsuccessful.

Haslam consistently refused during the campaign to divulge the amount of his income from Pilot, as first requested by a consortium of the state’s largest newspapers. He reasoned that Tennesseans knew that his family owned Pilot and therefore knew all they needed to know. He has now extended that same principle to other members of his administration, and Haslam used the same consistent line of explanation when he addressed the executive order in a recent press conference as governor.

Deputy Gov. Claude Ramsey reiterated the explanation Haslam has given going back to the campaign.

“To the best of my knowledge the executive order was a follow-up to what he said all over this state to the people of Tennessee,” Ramsey said. “I don’t think the executive order was one period, one comma, different from what he had said for months.”

Haslam Order In Line With Other States’ Rules

Ramsey said to his knowledge there was no survey of what is done in other states to influence the decision.

There is little to suggest Haslam’s order is out of line with other states, although that doesn’t translate into a sparkling record on public disclosure.

The Center for Public Integrity, a journalistic research organization in Washington that promotes improving government openness and accountability, issued a report in 2009 in which Tennessee was among 20 states given a grade of “F” for its disclosure laws. Tennessee was given 57.5 points out of a possible 100, ranking 34th among the 50 states. Only Louisiana, Washington and Hawaii received a grade of “A.”

The report was an update to a report by the Center for Public Integrity issued in 2007. Tennessee received an “F” in that report as well.

Like all the surveys reviewed by TNReport, though, the center’s study focused on laws, not executive orders by governors.

Charts compiled by the Center for Ethics in Government for the National Conference of State Legislatures show a broad range of requirements on disclosure, with several states requiring reporting based on ranges of income.

The Center for Ethics in Government does not summarize its findings like the Center for Public Integrity, but Peggy Kerns, director of the ethics center, said, “I would think that most states do not require disclosure of the actual amount of income, just the source.”

Stern, the Los Angeles researcher, said he believes the work done by the Center for Public Integrity is a good measuring stick and that there has been “not much change at all” since the report was released.

The written report in 2007 did address more closely how state requirements affect governors than the more recent report.

“Requiring them to disclose their private financial ties could reveal possible conflicts of interest,” the 2007 report said. Only Washington received a grade of “A” in that report.

The 2007 study made specific mention that Bredesen, who was wealthy before his election, did not take a paycheck as governor, which put him in the company of then-Gov. Arnold Schwarzenegger of California. Then-Gov. Jon Corzine of New Jersey drew a salary of $1 a year, the report noted. Haslam, like Bredesen, is not accepting a paycheck from the state.

The 2009 report noted that two southern states — Louisiana and Mississippi — made the biggest improvements since the earlier study, and it pointed to Louisiana Gov. Bobby Jindal pushing through an ethics reform package that bolstered requirements for all lawmakers to report their financial interests. That action, the report said, led Louisiana to the top spot in its rankings, with 94.5 points out of 100 in the center’s 43-question survey.

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Press Releases

Roberts to Lead TN Revenue Dept. in New Administration

Press Release from Gov.-Elect Bill Haslam, Jan. 7, 2010:

NASHVILLE – Tennessee Governor-elect Bill Haslam today announced East Tennessee executive and attorney Richard Roberts as Commissioner of the Tennessee Department of Revenue.

Roberts will oversee the Department of Revenue, which is responsible for the administration of state tax laws and motor vehicle title and registration laws.

“I’m excited that Richard has agreed to join the team as we prepare to begin a new administration,” Haslam said. “Our state is facing difficult economic times, and to have Richard – a results-oriented manager – at the helm of our Revenue Department will help as we look ahead to difficult decisions.”

Roberts currently serves as a director of Miller Industries, Inc., the world’s largest manufacturer of towing and recovery vehicles. Previously he was General Counsel and Senior Vice President with Forward Air Corporation, and he also held the same positions with Landair Corporation. Both are Greeneville, Tenn.-based transportation companies. Before working at Forward Air, he was a corporate securities attorney with the regional law firm Baker, Worthington.

He serves on the East Tennessee Foundation Board of Directors and previously served on the Board of Directors for the Niswonger Foundation from 2000-2006.

“I appreciate the confidence the governor-elect has shown in asking me to serve as Commissioner of Revenue,” Roberts said. “I look forward to the opportunity to be of service to our great state.”

Roberts has a bachelor’s degree from the University of Tennessee Knoxville and a JD/MBA from UT College of Law.

Roberts, 56, is married to Imogene King.

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Press Releases

TN Department of Revenue Restructured

State of Tennessee Press Release, Oct. 25, 2010:

Department Veterans Elevated to New Positions

NASHVILLE Commissioner Charles Trost has restructured the Tennessee Department of Revenue to ensure that tax enforcement policies are uniformly and consistently implemented. As part of the reorganization, department veterans Arnold Clapp and David Gerregano have been named Assistant Commissioners, responsible for maintaining compliance and uniform tax policies, and upholding the standards and credibility of the department.

“It is imperative that the department provide a reliable structure for compliance,” said Commissioner Trost. “We will continue to provide consistent enforcement to sustain the high degree of integrity in this office. I am pleased to make these appointments to such distinguished attorneys who combine more than 56 years of working in the Department of Revenue, and who will bring the benefit of their experience and judgment to these important new positions.

In his new role as Assistant Commissioner for Compliance and Integrity, Clapp will directly advise the commissioner and the department, and handle legal matters involving tax enforcement. Clapp, a Nashville School of Law graduate, has filled many roles since joining the department in 1967, including Audit Supervisor, Senior Tax Counsel and Special Counsel to the Commissioner.

David Gerregano, a Vanderbilt Law graduate, has been with the department for over 13 years. As Assistant Commissioner for Legal Affairs, Gerregano will provide guidance to the department in its tax policy efforts while continuing to serve in the role of General Counsel.

“The Department of Revenue will now have senior officers responsible for compliance in a manner now standard within major corporations and public agencies,” Added Commissioner Trost. “These positions will have complete authority to oversee all matters within the department and advocate for the taxpayers of the State of Tennessee so that it can provide, to the fullest extent, the myriad of necessary services on which our citizens depend.”

The Department of Revenue is responsible for the administration of state tax laws and motor vehicle title and registration laws established by the legislature and the collection of taxes and fees associated with those laws. The Department of Revenue collects approximately 92 percent of total state tax revenue. During the 2009-2010 fiscal year, the department collected $10.1 billion in state taxes and fees. In addition to collecting state taxes, $1.9 billion of local sales tax was collected by the department for local governments during the 2009-2010 fiscal year. Besides collecting taxes, the department enforces the revenue laws fairly and impartially in an effort to encourage voluntary taxpayer compliance. The department also apportions revenue collections for distribution to the various state funds and local units of government. To learn more about the department, log on to www.TN.gov/revenue.

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Press Releases

Trost Named New Revenue Dept. Head

Press Release from the Office of Tennessee Gov. Phil Bredesen, Sept. 20, 2010:

NASHVILLE – Governor Phil Bredesen today named Charles A. Trost commissioner of the Department of Revenue. Trost replaces former commissioner Reagan Farr who left the administration September 1 to return to the private sector.

“Charlie Trost is widely recognized for his work and expertise in the areas of state and federal tax law and tax litigation and he also brings to this role extensive experience working with industries and companies moving to or relocating in Tennessee,” said Bredesen. “I appreciate his willingness to step in at this time to provide continued leadership to the Department of Revenue and ensure our efforts to create new jobs and attract capital investment to Tennessee are uninterrupted.”

“I am certainly honored to have the opportunity to serve Governor Bredesen and the state of Tennessee in this important role,” said Trost. “Beyond its responsibilities of collecting taxes and enforcing revenue laws fairly and impartially, the Department of Revenue is a critical partner in attracting jobs and investment to Tennessee, and I look forward to working with the employees of the Department of Revenue to fulfill these responsibilities.”

Tennessee has been applauded for the collaboration between its Departments of Revenue and Economic and Community Development to recruit jobs to the state. Since January 2003, Tennessee has attracted more than 190,000 new jobs and attracted $33 billion in new capital, consistently placing among the top five states in the U.S. for business climate.

Trost was previously of counsel with Waller Lansden Dortch & Davis, LLP in Nashville. He has been recognized for more than 10 years for his work in the area of state tax law in The Best Lawyers in America, as well as Business Tennessee’s list of the “Top 101 Lawyers in Tennessee.”

He received his Juris Doctor from the University of Alabama, his Master of Law in Taxation from New York University and holds a Bachelor of Arts from Vanderbilt University. He is a member of the Uniform Law Commission and a Fellow of the American College of Tax Counsel.

Trost is a Trustee of the Community Foundation of Middle Tennessee and a member of the Board of Directors of The Land Trust for Tennessee.

The Tennessee Department of Revenue is responsible for administration of state tax laws and motor vehicle title and registration laws established by the General Assembly and for collection of taxes and fees associated with those laws. The department collects approximately 92 percent of total state tax revenue. It is also responsible for apportioning revenue collections for distribution to various state funds and local units of government. The magnitude of collections by the department makes possible a lower cost of collection per tax dollar than local communities could achieve.