‘Stop that research! You’re under arrest!’
Bill to stop conflicts of interest has unintended consequences at Chico State
Agriculture Professor Lal Singh never imagined that his project developing an effective harvester for the olive industry could be considered a conflict of interest, just because the federal grant money for the research came to the university by way of the state.
But a state bill that took effect July 1 has made something that’s very common at Chico State University very illegal. Under Senate Bill 1467, also known as the State Contract Act, any CSU employee—including faculty, staff and students—who contracts with a state agency is in violation of state conflict-of-interest laws and may be criminally liable.
“This is one of the unintended consequences,” Singh said. “We were working on finding a solution for growers to harvest olives in a very economical way so they can compete internationally [and now] we’re told if we work on it we are felons.”
The bill’s backers were hoping to end scandals like that involving Oracle, in which a firm that was paid to advise the state on the software contract stood to gain $28.5 million if the state went with Oracle. It also brings to mind the Common Management System (CMS) software contract that was approved by the CSU after one of the system’s top administrators was paid to consult with the chosen vendor, PeopleSoft.
“This was never intended to have the effect it’s having on faculty at the university and the foundation,” said Richard Jackson, an administrator at the University Foundation, the vehicle through which grants are funneled. “Now, you can’t work for the state and also contract with the state. That means foundations can’t contract with the state and hire employees we’ve always hired. … It traps a lot of people that at first sight do not have conflicts of interest.”
All told, across campus, at least 120 employees have been directly affected by the bill, tallied Jeff Wright, who works with graduate, international and sponsored programs. For example, if you have a job at PASSAGES Adult Resource Center, you can’t also teach a class at Chico State. If you’re a faculty member at Chico State you can’t go guest-lecture at Sonoma State and get paid for it. Even if you’ve retired from the university or quit, two years would have to pass before you could snag that applied research project with the Department of Fish and Game or Cal-Trans traffic study.
“This is an unfortunate byproduct of the process,” Crabb said. “Imagine if the state agencies could not come to the universities for this kind of applied research? They’d have to go out of the state to get it.”
“The impacts are subtle,” added Crabb, who ran into to the problem personally when he was invited to participate in a program review at Cal Poly Pomona, a common favor that usually comes with an honorarium of $500. “I can’t accept the honorarium because I’d be in conflict with the law,” he said. “So I just had them cover my travel expenses.”
At first, Chico State and foundation officials thought the new law would not apply to workers here. In April, Wright saw an e-mail message stating that SB 1467 was not intended to affect faculty. “I said, ‘Great; don’t worry about it.'”
Then, in late June, the Chancellor’s Office lawyers starting sending out legal opinions saying it not only applied to university employees but anyone who is on the foundation’s payroll. Wright said he realized, “This is real and it does have the effect people say it does.”
Chico State’s human resources office was left to spread the word and the University Foundation, which keeps track of the grants and contracts, was left to sort out the details and make it all legal.
The News & Review contacted about a dozen employees the foundation lists as directors on state-funded projects. Some had barely heard of the senate bill, while others were confident the legal eagles would sort it all out in the end.
“It hasn’t affected us yet,” said Mike Kotar, chair of the Education Department, who was scheduled to attend one of several meetings held around campus on the issue. “I don’t think it’s going to.”
Chuck Nelson is a staff member who directs the Geographical Information Center that’s funded primarily through a government contract. “I was told that I was probably not going to have very many problems,” he said. “I let the attorneys over there [at the foundation] tell me whether I can do something or not.”
When Jim Fletcher, a professor and researcher, heard about the senate bill, “We were concerned. We needed it sorted out. My colleagues and I do a lot of work for state agencies.” One of his projects involves a public opinion survey conducted for the California Integrated Waste Management Board. In that case, he said, “We actually put things on hold for about two weeks.”
Kathy Fernandez, director of academic technology for the university, is in charge of several state contracts and is still learning which ones could be problematic. It’s been a headache, and Fernandez is frustrated that the bill isn’t cleaner.
“It just doesn’t have enough clarity on it,” she said. “People feel like it was rushed. They’re trying to fix the Oracle debacle [and they’ve done] a sloppy job.”
The passage of the Senate Bill last September followed a legislative audit of CMS that revealed at least two potential conflicts of interest: the CSU’s manager of information technology, David Ernst, who had been paid consulting fees by PeopleSoft, the ultimate contractor for the software project, and another employee whose spouse had invested in a computer company shortly before a deal with the firm was announced.
In a press release Sen. Debra Bowen, D–Redondo Beach, who authored SB 1467, referenced not CMS but the Oracle scandal. “The state shouldn’t be hiring consultants to recommend information technology projects and products, then turning around and buying products from those same consultants,” Bowen stated.
Evan Goldberg, Bowen’s chief of staff, said the conflict-of-interest laws used to apply to CSU (trustees had successfully lobbied for its removal) and SB 1467 re-instituted the ban on what are called “follow-on contracts.” An example would be someone who is hired as a consultant by a private company that ultimately wants to get a contract with the state. “You don’t want a state employee serving two masters,” he said.
Goldberg said that CMS actually didn’t play a role in the development of SB 1467, but, “It may have prevented certain aspects of CMS. Had that law been in place, PeopleSoft probably wouldn’t have tried to engage Mr. Ernst.”
Frustrated university and foundation officials are pinning their hopes on a “fixer bill” called SB 41 and also carried by Bowen. If it passes (it’s in an Assembly appropriations committee up for a vote by Sept. 12), employees involved directly in education or research through their primary jobs would be exempted and much of the problems at Chico State would be solved. “It would take effect immediately because it’s an emergency bill,” Goldberg said.
"[SB 1467] was certainly not to prevent professors and employees from dealing in research issues,” Goldberg said. “The intent is to prevent people from allowing themselves to have conflicts of interest.”
In the meantime, Jackson believes the foundation has found a way around the law. One restriction reads, “A CSU employee may not contract or be employed by an agency that receives its funding from a state contract, unless required by his/her employment.” So, with the blessing of CSU lawyers, Chico State is taking advantage of that “unless” and writing contracted work into professors’ “terms and conditions” of employment.
“It’s a normal part of a faculty member’s job to do research, and that includes getting contracts and grants,” Jackson said. “They are going back and documenting a condition that was already there. That’s our patch.” A handful have balked at the inclusion, in which case they probably won’t be allowed any more contracts.
The foundation still isn’t certain how it will help protect non-faculty workers from liability. “Typically, state projects involve the faculty members but they also involve students,” Wright said. If a student working on a contract also happens to work for Chico State, say as a teacher’s assistant or in a work study job at the library, “this law makes them a criminal.”
Adding to the confusion is that fact that it isn’t even the university or the foundation that would be punished if the law were violated: “The individual employees become liable,” Wright said. “And this is criminal liability.”
“We worked very hard to try to reduce the risk for the individual faculty,” Crabb said. It was easy enough, though a little time-consuming, to make projects part of the scope of responsibility for people’s jobs. “We can do the same for students,” he added.
The most difficult case Crabb has faced is that of a former faculty member who had retired but was working on a state-funded project. Since that person no longer had a contract with the university, nothing could be written into it. The solution will probably be to have the faculty member get back into the faculty early retirement program (FERP) that allows continued teaching.
“If we don’t make these adjustments, faculty can’t work on these projects,” Crabb said.
As the foundation goes through all the faculty members and other employees who’ve been tabbed as being in violation of the new law, Wright has kept an eye out to see if in any of the cases there is truly a conflict of interest. “I don’t know of any,” he said.
A partial list of Chico State employees’ contracts
Project Director Funding agency Project Title
Brad Dodson CalPoly University Foundation Ag literacy
Jeanette Sturzen CA Dept. of Education Chico Ag field office
Lal Singh UC Cooperative Extension Varietal research
Lau Ackerman University Farm fertility management study
Richard Rosecrance UC Cooperative Extension Almond Union Mild Etch
Chuck Nelson CA Dept. of Fish and Game Lake Earl EIR
Chuck Nelson CA Dept. of Water Resources Sac. River access Web site
Frank Bayham CA Dept. of Parks & Re Northeast Archeology info.
Greg White CA Dept. of Water Resources Sites reservoir survey
Vicki Paxton CA Dept. of Aging Area Agency on Aging
Katie Milo CSU, Sacramento CalWorks 2002-03
Robert Main CA Dept. of Corrections McGee correctional institute
William Wattenburg CA Highway Patrol Truck stopping device
Allen Lunde CSU foundation Chico State calling center
Dan Ripke USDA Economic benefit analysis
Tom Fox UC regents/office of the pres. Nor Cal writing project
Kathy Fernandes CA Dept. of Toxic Substances Translation, interpretation
William Jones CA State Library Nor Cal Native American Project
Cindy Wolff CA Dept. of Health Services Sierra Cascade nutrition
Jennifer Rotnem UC Davis Arcade creek bioassessment
Marti Wolfe CA Dept. of Toxic Substances Peer review
Dan Dewayne CA Arts Council CAC Bimbetta performance
Dave Fergunson CA Dept. of Education Upward Bound summer food program