JobsOhio Program Violates Ethics Standards

Conflicts of Interest Raise Questions about Governor Kasich’s JobsOhio Program

The JobsOhio program is under investigation once again. I have previously blogged about independence questions raised with respect to the audit of the program by KPMG.

As the state’s lead economic-development agency, Jobs-Ohio is charged with recommending financial incentives for companies seeking to locate in the state.

Last fall, charges were leveled at KPMG for its lack of independence in the JobsOhio audit. As KPMG was auditing JobsOhio’s books last fall, the global auditing and consulting firm also was seeking $1 million in taxpayer money from JobsOhio for an unnamed client.

JobsOhio, the state’s privatized development agency, says that the grant request was handled separately from and without the knowledge of the firm’s auditing division. But the timing raises ethical questions.

The situation also exposes weaknesses in the laws creating Governor John Kasich’s JobsOhio, because recipients of state aid are kept secret until the project is approved.

Laura Jones, a spokeswoman for JobsOhio, said KPMG LLP’s Columbus office conducted the audit, but the grant was sought by an out-of-state office.

“The fact that KPMG serves JobsOhio and countless other businesses ... from the same office here in Columbus is not a conflict in our minds,” she said, adding that the state also monitors and ultimately approves taxpayer-funded incentives to companies.

KPMG was chosen by JobsOhio to conduct an audit required by law. On November 5, 2012, about the time the audit was being conducted, KPMG also was listed on a sheet of eight pending grant commitments from the state for fiscal year 2013, according to a document obtained by the Columbus Dispatch through a public-records request.

JobsOhio officials said the record is confidential and the state released it by mistake.

Officials from the Kasich administration, JobsOhio, and KPMG indicated that the grant was not for KPMG itself, but for an anonymous KPMG business client. A KPMG spokesman said only that “we’re confident we acted properly at all times. It would be inappropriate for us to comment further due to client confidentiality.”

All the excuses and explanations do not mask the fact that KPMG lacked independence in appearance if not in fact raising ethical questions about the JobsOhio program. KPMG’s behavior in this matter fails to meet the independence and objectivity ‘smell test.’

Now, another matter has arisen bringing into question whether the JobsOhio program should be shut down. On August 5th of this year, two Cincinnati lawmakers called for an ethics investigation into possible conflicts of interest among board members of JobsOhio.

The lawmakers said Governor Kasich’s job-creation organization may be cutting secret deals that benefit big business and donors who support him and other Republicans.

Their complaints are based on a Dayton Daily News report last month that found six of nine members of the JobsOhio board of directors have financial ties to companies that got tax credits through the agency and the state.

“This looks terrible,” said state Representative Connie Pillich, D-Montgomery, who joined state Representative. Denise Driehaus, D-Clifton Heights, in calling for an investigation into JobsOhio by the state ethics commission.

“It’s a symptom of a larger problem,” Pillich said. “It reeks of secrecy, self-dealing and everything bad government can be.”

Kasich said Thursday the call for an ethics investigation is “a bunch of political carping.” JobsOhio doesn’t need to be more open about its work, the governor said. “There’s tremendous transparency,” Kasich said. “This is all politics.”

A spokeswoman for Kasich, Connie Wehrkamp, said board members do not have conflicts of interest and that most of the deals cited by Democrats were in place before JobsOhio began work. She also said board members do not vote on or personally approve tax breaks to companies.

This is a weak explanation for the ethics of the program. If deals were in place before JobsOhio began its operations, then those relationships should have been considered in creating the JobsOhio program and the lawmakers should have recused themselves from decision-making in any matter related to JobsOhio, not just tax breaks to the entity. Ethics should evolve to meet the demands of new situations and challenges that raise conflict of interest concerns. The JobsOhio program created ethical challenges that were ignored by Ohio lawmakers including Governor Kasich.

I agree with the criticism of the JobsOhio program and Governor Kasich’s weak explanation for not adhering to conflict of interests standards. Certainly he has chosen not to take the ethical high road in this matter. Government programs must not only be free of conflicts and be independent programs, they must appear to be that way in the public’s mind. The JobsOhio program has come under ethics scrutiny twice in less than a year and Governor Kasich should shut it down to avoid further embarrassment and charges that bring into question the ethics of his administration.

Blog posted by Steven Mintz, aka Ethics Sage, on August 15, 2013