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Item 7 Action Item 7 Action Recusal Review – Edward Renwick Executive Summary: This item presents a recusal review under Charter § 707 regarding Edward Renwick, vice president of the Board of Harbor Commissioners. Recommended Action: Adopt the resolution in Attachment D to find that vice president Renwick does not have a significant and continuing conflict of interests at this time. Authors: Heather Holt, Executive Director Tyler Joseph, Director of Policy Presenter: Tyler Joseph, Director of Policy Ethics Commission August 18, 2020 Recusal Review – Edward Renwick A. Introduction Members of City boards and commissions are required to complete and submit a recusal notification form (Form 51) each time they recuse themselves due to an actual or apparent conflict of interests. Los Angeles Municipal Code (LAMC) § 49.5.6(D). When a board or commission member submits a threshold number of recusal forms in a 365-day period, the Ethics Commission is required to review the recusals and determine whether the member has a significant and continuing conflict of interests. Los Angeles City Charter (Charter) § 707. This item discusses the recusals of Edward Renwick, the vice president of the Board of Harbor Commissioners (Harbor Commission). Vice President Renwick has been cooperative with staff throughout the process. He received a copy of this report and declined to submit written comment. B. Recusal Requirement Under Charter § 707, the Ethics Commission is required to “examine the nature and extent” of a board or commission member’s conflicts of interests whenever the member is disqualified during a 365-day period from acting on either of the following: 1. Three or more agenda items, because of the same investment in a business entity, the same interest in real property, or the same source of income; or 2. One percent or more of all items pending before the commission, because of any investments in business entities, interests in real property, or sources of income. In conducting its examination, the Ethics Commission must determine whether the commissioner has a “significant and continuing” financial conflict of interests. If the Ethics Commission determines that the conflict is significant and continuing, it must order divestment of the interest that causes the conflict. Charter § 707. Assessing whether a conflict is “continuing” is often a straightforward task. Considering the items for which recusals were submitted, as well as the reasons for the recusals, can be helpful in determining whether the conflict is ongoing. However, Charter § 707 does not define or otherwise provide guidance regarding the specific meaning of “significant”—a more subjective term. It is our practice to analyze the significance of recusals by addressing the following questions: 1. Is the number of recusals significant? 2. Is the subject matter of the recusals significant? 3. Is the impact of the recusals on the City or affected persons significant? Item 7 Ethics Commission 1 of 5 August 18, 2020 Board and commission members who are deemed to be public officials within the meaning of the California Political Reform Act of 1974 are required to disclose certain financial holdings by filing statements of economic interests (SEIs). These SEIs include the state’s Form 700 and the City’s Form 60. Form 700 requires a public official to disclose the financial interests specified for the official’s position in the conflict of the interests code of the official’s agency. It helps filers and the public identify personal interests that could be affected by governmental decisions and is, therefore, a useful tool for identifying when recusal may be necessary. Form 60 requires high ranking City officials to disclose personal interests associated with sources that are actively engaged in business with the City. Here, Vice President Renwick is required to disclose the financial interests identified in Attachment A by filing periodic SEIs with the Ethics Commission. Copies of Vice President Renwick’s SEIs for the relevant period are provided in Attachment B. When a board or commission member is disqualified from acting on a matter because of an actual or apparent conflict of interests, the member is required to complete a Form 51 and submit copies to the Mayor’s office, the City Attorney’s office, the Ethics Commission, and the executive secretary for the commission on which the member serves. Each of the Form 51s submitted by Vice President Renwick during the review period are provided in Attachment C. C. Facts The Harbor Commission oversees activity at the Port of Los Angeles (the Port), the nation’s largest port by container volume. It is charged with making and enforcing all necessary rules and regulations governing port operation and use, harbor traffic, and facilities. Charter §§ 652(a)–(d). Vice President Renwick has served on the Harbor Commission since November 2013. He was reappointed in May 2017, and his current term will expire on June 30, 2022. Vice President Renwick recused himself from 21 matters between November 6, 2019, and July 15, 2020 (the review period). All 21 of the recusals related to his interests and investments in the banking industry. Vice President Renwick is the co-founder and CEO of Raineth Holdings, a property investment, management, and leasing company. He and his spouse also receive partnership income from their interests in the real estate development companies Wah TG, LLC and Insight Development, LLC. Prior to founding Raineth Holdings, Vice President Renwick was a partner with the Los Angeles-based investment firm The Yucaipa Companies and a consultant for The Boston Consulting Group. Vice President Renwick reported partnership income from Wah TG, LLC, Insight Development, LLC, and various subsidiaries of The Yucaipa Companies on his most recent Form 700. Item 7 Ethics Commission 2 of 5 August 18, 2020 Of Vice President Renwick’s 21 recusals during the review period, 15 resulted from his personal friendship with the CEO of Harbor Performance Enhancement Center, LLP (HPEC), which is participating in a single lawsuit involving the Port. That lawsuit, HPEC v. City of Los Angeles Harbor Department, et al. (the HPEC litigation), is currently pending in U. S. District Court. Twelve of those 15 recusals were for closed-session discussions of the HPEC litigation. Vice President Renwick also recused himself from an amendment to the legal services agreement with Nossaman LLP, the firm providing the Port with legal advice and support for the HPEC litigation, and from a conflict of interests waiver and legal services agreement allowing Crowell & Moring, LLP to represent the Port in the HPEC litigation. Of the remaining six recusals during the review period, each was for a closed-session discussion concerning other active or potential litigation involving the Port and resulted from Vice President Renwick’s business affiliations with the banking community. Vice President Renwick was the subject of two previous recusal reviews, both resulting from his relationships in the banking industry. The first of those reviews, in April 2016, concluded that none of his recusals were required under City or state law and was presented for informational purposes only. The second, in December 2019, found that Vice President Renwick’s recusals were continuing but not significant, and no divestment was required. A copy of those reviews are provided in Attachment F and are also available online. D. Analysis 1. Continuing Nature of the Recusals All 21 of Vice President Renwick’s recusals during the review period came as a result of his business relationships in the banking industry. He and his spouse continue to own and operate Raineth Holdings and receive income from The Yucaipa Companies, Wah TG, LLC, and Insight Development, LLC. In addition, the HPEC litigation is ongoing. For these reasons, we believe that conflicts are likely to continue and that Vice President Renwick may be required to recuse himself again in the future. 2. Significance of the Recusals a. Number of Recusals During the review period, the Harbor Commission met 17 times in regular and special sessions and considered approximately 242 items. Vice President Renwick recused himself from participating in 21 items, or approximately nine percent of all items considered by the Harbor Commission during that time. Of those 21 recusals, 15 related to a single law suit. Because Vice President Renwick participated in over 91 percent of all matters before the Harbor Commission during the review period, and because nearly three-quarters of his recusals concerned a single recurring item, we do not believe the number of recusals is significant. Item 7 Ethics Commission 3 of 5 August 18, 2020 b. Subject Matter of the Recusals In 2015, the Port solicited proposals to develop a vacant 110-acre property for the purpose of operating a support facility to ease shipping and storage congestion in the Port. The Port selected the proposal offered by HPEC, and the two parties entered into an exclusive negotiating agreement that was later extended by amendment. During the following years, both parties invested significant resources in the project, and HPEC secured $130 million in financing from global investment firm Macquarie Group Limited. The plaintiffs in the HPEC litigation name the Port, the City, and multiple organized labor groups as defendants. The complaint alleges, among other things, restraint of trade, breach of contract, unfair labor practice, and violation of the Sherman Antitrust Act. The allegations are serious in nature and allege millions of dollars in lost investment and revenue, as well as conspiratorial conduct. In addition to the financial considerations, the project at the center of the HPEC litigation was initially viewed by both parties as a critical infrastructure upgrade to the Port’s core operations. For these reasons, we believe the subject matter of the recusals is significant. c. Impact of the Recusals According to the meeting minutes provided by Harbor Commission staff, the closed session items relating to discussion of potential or ongoing litigation from which Vice President Renwick recused himself were informal in nature, and no action was taken.
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