D.C. mayor Kelly's ethical dilemma: MBIA honorarium a legal 'gray area.'

WASHINGTON -- Mayor Sharon Pratt Kelly of the District of Columbia received $2,878 in speaking and hotel fees in November from the Municipal Bond Investors Assurance Corp., which received a total of $6.8 million for insuring two recent city bond deals.

The mayor reported the $2,000 she received as an honorarium from MBIA on outside income disclosure statements on file with the district's Office of Campaign Finance and Ethics. But she did not disclose that MBIA had picked up her $878 hotel tab.

The payments were reported in The Washington Post on Friday.

Mayor Kelly's acceptance of the money appears to fall into an ethical gray area of city campaign disclosure laws. But district and MBIA officials said there was nothing wrong with the mayor's actions and said the payments were not linked to the city's decision to use MBIA for bond insurance.

"The mayor is not prohibited from getting honoraria," said Vada Manager, Mayor Kelly's spokesman.

"Often, the selection of bond insurers is a matter of capacity to insure," he added. "This is a question where MBIA may have been the only firm that had the capacity. We sent out a packet to six or seven potential insurers, and they, MBIA, were the only ones to respond."

The insurer provided coverage for a $260 million deal late last month, and a $195.6 million issue in May 1991. It received fees of $3.8 million and $3 million, respectively, for the two issues.

Michael Ballinger, a spokesman for MBIA, said it is a "common practice and courtesy" to provide honoraria to conference speakers. He said MBIA has been sponsoring seminars and conferences for 10 years.

The insurer's 1991 conference dealt with the problems and key issues facing cities and states. Mayor Kelly's speech was on the "new fiscal realities" facing city governments.

Mr. Ballinger said: "MBIA invited speakers who because of their leadership positions in government are particularly well-qualified to speak about the conference theme of dealing with the fiscal problems facing our nation's cities. There is never any connection between the selection of a speaker for an MBIA conference and the possibility of us doing business with a governmental unit."

He added that MBIA has done deals for the district for the past 10 years. Moreover, he said the terms and conditions of insurance were the same for both the May 1991 deal, which was done before Mayor Kelly received the money, and last month's bonds.

Mr. Ballinger said the insurance on last month's deal -- which boosted the credit rating on the bonds to triple-A -- helped save the city $12 million in interest costs over the life of the bonds.

An official with the district's Office of Campaign Finance and Ethics said elected officials are not barred from accepting honoraria. He said that elected officials may accept and keep up to $10,000 in honoraria, so long as it is disclosed. They may accept more if the amount in excess of $10,000 is donated to charity.

The mayor reported receiving a total of $9,000 in honoraria last year. She received $5,000 for two speechs at Howard University, and $2,000 for a speech at Stanford University, in addition to the $2,000 from MBIA.

The official, speaking on a background basis, said government employees may not accept additional compensation for performing their duties. "It is a crime to accept extra money for doing your job," he said.

In the case of the mayor, the official said, it is difficult to draw lines when the appears before business-related groups. "It's pretty easy to see she isn't performing government work when she's speaking at a commencement," the official said. "It's a lot less clear where the mayor is speaking before a group of business people."

Another potentially applicable ethics rule limits government employees from receiving gifts from those who do or hope to do business with the city. Gifts are considered "anything of value" for which adequate compensation is not given. Under the rule, government employees may accept only nominal, and infrequent, gifts from those doing business with the city.

An official with the federal Office of Government Ethics said that office generally does not intervene in the district. "They have their own ethics office," she said. However, sometimes district ethics officials will consult with the federal office.

Federal rules generally prohibit officials from receiving gifts from "prohibited sources." Prohibited sources are those regulated by, doing business with, or hoping to do business with the government.

Joe Mysak, editor of The Bond Buyer, spoke on the press and public finance at the same conference as Mayor Kelly. Mr. Mysak, who speaks before a number of issuer and industry groups every year, does not accept an honorarium as a matter of policy. But MBIA paid for the cost of his hotel room. He is speaking at the National Association of State Treasurers Northeastern Treasurers Conference in Maine Tuesday. The Bond Buyer is paying his room and board.

Mr. Mysak was abiding by The Bond Buyer policy, which allows for the reimbursements of accommodations when the editor is a participant of a panel or conference. This policy does not extend to other editors or reporters on the staff.

Mr. Ballinger noted that it is standard practice to pay for the accommodations of speakers and panelists attending the MBIA seminar.

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