Chicago Mayor Rahm Emanuel Tries To Exempt Financial Firms From Ethics Laws

On its face, Chicago’s municipal pension system is an integral part of the Chicago city government. The system is included in the city’s budget, it is directly funded by the city and its board of trustees includes city officials and mayoral appointees. Yet when it comes to enforcing the city’s anti-corruption laws, Mayor Rahm Emanuel’s administration is now arguing that the pension funds are not part of the city government at all.

The counterintuitive declaration came this week from the mayor-appointed ethics commission, responding to Chicago aldermen’s request for an investigation of campaign contributions to Emanuel from the financial industry. The request followed disclosures that executives at firms managing Chicago pension money have made more than $600,000 worth of donations to Emanuel. The contributions flowed to the mayor despite a city ordinance -- and an executive order by Emanuel himself -- restricting mayoral campaign contributions from city contractors.

Brushing off the lawmakers’ complaint about Emanuel’s donations from the financial industry, the mayor’s ethics commission issued a nonbinding legal opinion this week arguing that Chicago's pension systems are “not agencies or departments of the city, and thus firms that contract with them are not doing or seeking to do business with the city.” The commission said its interpretation means financial firms’ business with Chicago pension funds should be considered exempt from city ethics laws.

With the aldermen’s complaint about campaign contributions generating headlines and potentially complicating Emanuel’s already tough race for re-election in two months, the Emanuel-appointed commission was unusually frank about its motives: It said the release of its opinion was designed “to attempt to ensure that no ethical clouds are hanging over any candidate’s head.”

In response, one of the aldermen who filed the complaint said the legal opinion was a "weak attempt at splitting hairs."

"Ethically and intuitively, the city's own pension funds warrant oversight by the city, and all the financial advisers who do business with the city should be held accountable by our board of ethics,” Alderman Scott Waguespack told International Business Times. “There should be oversight, and the pay-to-play rules apply to these firms."

With the mayor attempting to exempt the pension system from the city's ethics rules, Waguespack says the lawmakers are counting on the federal government to enforce a 2011 Securities and Exchange Commission rule restricting contributions to public officials from executives at financial firms that manage public pension money.

Aldermen Waguespack, John Arena and Robert Fioretti (a candidate for mayor) have filed formal complaints with the SEC, which sent them a letter this week saying the agency will review their complaint “in connection with our statutory and regulatory responsibilities.”

The Chicago mayoral election is Feb. 24, 2015, with a runoff, if needed, on April 7.