When the contracted administrator of an urban renewal agency (URA) is awarded a separate contract to operate a business venture owned, in part, by the same URA, is it a conflict of interest? That’s precisely the question in the city of Meridian, where the administrator for the Meridian Development Corporation (MDC) also manages the Ground Floor business incubator.
Shaun Wardle is the owner of V&G Ventures, which was contracted by the MDC to serve as the administrator for the URA. According to records obtained by the Idaho Freedom Foundation, V&G is paid roughly $125,000 annually. “We do really everything, in terms of processing paperwork, records management, financial planning, strategic planning, project execution, acting as the team that administrates the overall operation of the development corporation,” said Wardle.
In addition to being the administrator of the MDC, Wardle is also the president and CEO of the Idaho Athletic Club in Meridian, and a Republican candidate for the state House of Representatives in District 20.
V&G was contracted to manage the Ground Floor business incubator, after the previous management company dropped out of its agreement with the city last February. “It was a quick transition we were in,” said Larry Lipschultz, chairman of the MDC board of directors. “There was a period, over a couple of days, where the owners of Venga Works (the previous management company) fired the president of the company and decided they didn’t want to be in that business anymore.” Crunched for time, the MDC offered V&G $3,000 per month to manage the Ground Floor until Sept. 30, the end of the fiscal year.
In the meantime, Lipschultz said the MDC will decide how to handle soliciting bids to run the Ground Floor in the next fiscal year. V&G employs an agent at the Ground Floor to manage and market the incubator, as well as do paperwork, and collect rent.
Legally speaking, one Boise attorney doesn’t’ think the MDC is doing anything wrong by contracting Wardle’s company to run the Ground Floor. “I don’t know that you can necessarily assume there’s a conflict of interest by having one company administer two contracts,” said former Idaho Attorney General David Leroy. “Merely having a single entity administer two public-related contracts doesn’t constitute anything.” Leroy added that while Wardle’s company might have a competitive advantage when the time came for the URA to award the contract for FY2011, any incumbent company would enjoy that advantage.
But ethically speaking, was it right for the MDC to give the contract to V&G without giving other companies the opportunity to compete for the business? According to Les Merritt, executive director with the Foundation for Ethics in Public Service, such situations have at least an appearance of impropriety. “On the surface, it doesn’t sound like a good idea. We’ve seen a pattern, when it comes to economic development commissions, of almost ‘insider trading’ so to speak.”
Wardle doesn't think there's a conflict of interest at all, that the arrangement struck between the MDC and his company was a quick reaction to a problematic situation that arose suddenly. "The negotiation there was to get a short-term solution in place, then the board could re-evaluate what would happen."
But Merritt said when time is of the essence, that's precisely when public agencies should slow down and not make snap decisions. "If it seems like you've got to do something today, or someone is putting pressure on you to do something, that's when you'd better back away and take a harder look. Maybe bring in some more people, and get some transparency on the issue."
MDC board member and Meridian City Councilman Keith Bird said hiring V&G Ventures as a contractor rather than taking Wardle on as an employee was a cost-savings measure. “We just give them (V&G) a set amount, which I like. With an employee, you gotta pay benefits and everything that goes with it, this way we just have a set amount.”
But that could also open the door to impropriety, or at least the appearance of it, said Merritt. “Every case would be different, but it’s possible that someone could structure it (a contract arrangement) so they would have an opportunity to get other contracts also. That’s what you kind of have to worry about.”