Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, August 12, 1993 TAG: 9309120250
SECTION: EDITORIAL PAGE: A10 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
His and four other senior lawmakers' involvement with the new firm, Cranwell has said, is entirely legal. Besides, he says, members of the part-time General Assembly can't be expected to abstain from outside careers and business opportunities.
True on both points.
But at issue isn't whether the deal passes the legal test. The question is whether it passes the smell test.
A lot of Virginians - Democratic gubernatorial candidate Mary Sue Terry and Democratic Gov. Douglas Wilder among them - are holding their noses.
Indeed, the furor has led two of the original five legislative participants, state Sen. Hunter Andrews of Hampton and Del. Alan Diamonstein of Newport News, to pull out.
What makes the Guaranty Insurance setup remarkable isn't any single aspect so much as a combination of things.
First, it's in an industry that does not fall merely under a state regulation or two, but is heavily regulated. Before Guaranty can sell a single policy in Virginia, for example, it must get permission from state agencies that fall under the General Assembly's supervision.
Second, Guaranty does not propose to be merely one of many companies doing business in a heavily populated field. It is to be a private-mortgage insurer, one of only eight such companies in the nation. Though paid for by home buyers who cannot afford the conventional 20 percent down-payments, the insurance protects the lenders of these mortgages - such as banks, which also are state-regulated.
Third, the organizer of the company, George E. Murphy Jr., has been a General Assembly lobbyist for health-care insurers. As initially set up before Andrews and Diamonstein withdrew, Murphy and the five legislators, all Democrats, would have comprised fully half the Guaranty board. The common thread among them is not geographic proximity or vocational background. The common thread is political connectedness.
Fourth, these are not your run-of-the-mill legislators. Guaranty no longer will have Andrews, the Senate's majority leader and Finance Committee chairman, or Diamonstein, chairman of the House General Laws Committee. In Cranwell, however, it still has the House majority leader; in Del. Lewis Parker of Mecklenburg County, the chairman of the House Corporation, Insurance and Banking Committee; and in Del. Alson Smith of Winchester, who is retiring from the General Assembly this year, a long-time legislative insider and Democratic Party fund-raiser.
Fifth, the possible conflicts of interest - or appearance of such conflicts - extend not only to the company itself, but to its customers. Banks, subject to the regulatory prowess of influential lawmakers, might perceive an interest in steering business toward the well-connected firm.
Potential conflicts are a constant, of course, with part-time legislators. Lawyers sitting in the assembly tend to support laws that favor the earning potential of attorneys. Law firms assume that having a legislator or two as partners won't hurt their business any. The whole business is murky, a matter of degrees, and the best antidote generally is full disclosure.
Still, there ought to be restraint, and limits. Wilder says the Guaranty episode underscores the need for ethics-reform legislation. Terry has termed the situation inappropriate, and suggests legislation to prohibit the clustering of several lawmakers on the boards of companies in state-regulated industries.
In matters like this, however, new laws may not be the answer. Trying to cover all contingencies, deciding where to draw lines, can descend into a theater of the absurd. Should the legal limit be one legislator per board of a state-regulated business? Two? Three, so long as none is a committee chairman?
A deeper difficulty is that detailed laws governing such matters tend to turn what should be the minimum into the standard. Thus, Cranwell defends the Guaranty deal on the grounds that it is legal - as if staying this side of the law is about the best that Virginians should have a right to expect of their elected officials.
Surely, they have a right to expect more. Surely, Virginians can expect their representatives to have nose enough to recognize a questionable situation when they smell it, and judgment enough to stay away from it.
by CNB