Opinions No. 95-21, 95-23, and 95-37
BEFORE THE NEVADA COMMISSION ON ETHICS
In the Matter of the Request for Opinion concerning the conduct of
LARRY SCHEFFLER, former City Councilman, Henderson, Nevada
This Opinion is in response to both first and third party requests for opinions filed with the Nevada Commission on Ethics (Commission) concerning the conduct of former Henderson City Councilman, Larry Scheffler. On April 3, 1995, Mr. Scheffler requested the Commission to issue an opinion regarding various matters that arose during his tenure as a Henderson City Councilman. (Opinion Request No. 95-21). On April 12, 1995, Mr. Ron Coury filed a third-party request relating to specific votes or transactions that Mr. Scheffler had participated in as a Henderson City Councilman (Opinion Request No.95-23). On June 5, 1995, Mr. Richard MacDonald filed a third-party request relating to certain votes and matters upon which Mr. Scheffler had acted as a Henderson City Councilman (Opinion Request No.95-37). The specific allegations or concerns of each request will be treated in detail later in this Opinion.
On August 4, 1995, a hearing on the merits of Mr. Scheffler's request was held in Las Vegas, Nevada at which time Mr. Scheffler appeared and testified on the matter and was represented by legal counsel, Mr. Richard Wright. Also on August 4, 1995, the Commission held preliminary administrative hearings to determine whether just and sufficient cause existed for the Commission to conduct full hearings on the merits of the opinion requests of Mr. Coury and Mr. MacDonald and issue opinions pursuant to the provisions of NRS 281.511(2)(c). Mr. Coury was present without counsel at the preliminary hearing of Opinion Request No.95-23; Mr. MacDonald was present at the preliminary hearing of Opinion Request No.95-37 and was represented by his attorney, Mr. Randall Jones. The Commission determined that just and sufficient cause did exist to proceed with Opinion Request Nos. 95-23 and 95-37.
On September 20, 1995, the Commission proceeded to a full hearing on the merits of Opinion Request No.95-23. Mr. Scheffler was present and represented by Mr. Wright and Mr. Bruce Judd. Also present was the opinion requester, Mr. Coury, who was accompanied by his counsel, Mr. Alan Buttell. Witnesses who were present and testified in the matter concerning Opinion Request 95-23 were Ms. Shauna Hughes, Henderson City Attorney; Mr. Kimberly Sakowski, a graphic artist employed by Suburban Graphics as its research and development manager; Mr. James Arrendale, president of the Green Valley Community Association; Mr. David Wood, Henderson City Councilman and employee of a casino development company; and Mr. Steven Forsythe, President of Forsythe-Francis Advertising.
Also on September 20, 1995, the Commission began a hearing on the merits of Opinion Request No.95-37 .The hearing was continued to and completed on February 16, 1996. Mr. MacDonald was present at the both hearings and was represented by Mr. Jones. At the hearings on Opinion Request No.95-37, only Mr. Scheffler and Mr. MacDonald testified.
Because Mr. Scheffler did not waive statutory confidentiality in the matter, all hearings on the aforementioned opinion requests were confidential pursuant to the provisions of NRS 281.511(4) and therefore, not open to the public. All three Opinion Requests were heard separately and confidentially within themselves. Subsequent to its deliberation on all three of the requests, the Commission merged the requests into one opinion based upon the common facts and overlapping issues raised in the matters. Because the Opinion Requests have raised and resolved important issues of public policy, the Commission determined to make its Opinion public pursuant to NRS 281.511(4)(t) which was in effect at the time that the first Opinion Request was received.
THE NEVADA ETHICS IN GOVERNMENT LAW
A public officer has a public duty to act in a manner which is in the public interest and consistent with the public interest served by the governmental entity or office of which one is a member. NRS ch. 281 addresses ethical prohibitions and considerations for state and local elected or appointed officials. Based upon the findings of fact arising from each of the particular issues addressed below, t11e Commission concludes that Mr. Scheffler was a public officer during his tenure as Henderson City Councilman pursuant to NRS 218.4365 and while serving in that capacity, a member of the legislative branch as defined by NRS 281.4355. As a public officer, Mr. Scheffler was held to the high ethical standards embodied in NRS 281.481 and when performing a legislative function[1], was bound by the additional guidelines set forth in NRS 281.501(2) and (3).
The provisions of the Code of Ethical Standards relevant to the issues discussed in this Opinion are NRS 281.481(1), (2), and (9) and 281.501(2) and (3). Specifically, the pertinent subsections of NRS 281.481 state as follows:
A code of ethical standards is hereby established to govern the conduct of public officers and employees:
1. A public officer or employee shall not seek or accept any gift, service, favor, employment, engagement, emolument or economic opportunity which would tend improperly to influence a reasonable person in his position to depart from the faithful and impartial discharge of his public duties.
2. A public officer or employee shall not use his position in government to secure or grant unwarranted privileges, preferences, exemptions or advantages for himself, any member of his household, or any business entity in which he has a significant pecuniary interest or any other person.
. . . .
9. A public officer or employee shall not attempt to benefit his personal or financial interest through the influence of a subordinate.
NRS 281.501(2) and (3), which set forth the requirements that public officers must conform when determining to discuss, advocate, or vote upon a matter, read in pertinent part as follows:
2. In addition to the requirements of the code of ethical standards, a member of the legislative branch shall not vote upon or advocate the passage or failure of, but may otherwise participate in the consideration of a matter with respect to which the independence of judgment of a reasonable person in his situation would be materially affected by:
(a) His acceptance of a gift or loan;
(b) His pecuniary interest; or
(c) His commitment in a private capacity to the interests of others.
It must be presumed that the independence of judgment of a reasonable person would not be materially affected by his pecuniary interest where the resulting benefit or detriment accruing to him is not greater than that accruing to any other member of the general business, profession, occupation or group.
3. A public officer or employee shall not approve, disapprove, vote, abstain from voting, or otherwise act upon any matter:
(a) Regarding which he has accepted a gift or loan;
(b) Which would reasonably be affected by his commitment in a private capacity to the interest of others; or
(c) In which he has a pecuniary interest,
without disclosing the full nature and extent of the gift, loan, commitment or interest. Such a disclosure must be made at the time the matter is considered. If the officer or employee is a member of a body which makes decisions, he shall make the disclosure in public to the chairman and other members of the body. (Emphasis added.)
In Opinion Regarding Ron Lurie (Opinion No.90-01), the Commission explained the policy which forms the basis of the disclosure requirement:
Without disclosure at the time of discussion and action, neither the public nor other members of the particular legislative body can weigh the relevance of the circumstances of the public officer's private interest. While abstention from voting serves the public interest by preventing the public officer from voting his or her personal or private interest, the public should be fully informed of the full nature and extent of that public officer's private interest. Only with disclosure can the public judge whether private interests either have been or should be removed from a public decision made by a city council.
In Opinion No.90-01, the Commission held that Las Vegas Mayor Ron Lurie' s 10% partnership interest in real property purchased from the U.S. Bureau of Land Management (which Mayor Lurie acknowledged to be and was a "significant pecuniary interest") was sufficient to have materially affected the independence of judgment of a reasonable person in Mayor Lurie's situation when he considered and voted on matters in Las Vegas City Council meetings which related to the construction of both a proposed overpass and an interchange approximately one-half mile from the location of the property. Because such construction would have a positive impact on the value of the property owned by him and his co-investors by improving access to that property that would accelerate its development and increase its value, Mayor Lurie was required to disclose both the full nature and extent of his interest and abstain from voting on the matter.
The Commission further determined that Mayor Lurie was required to disclose the full nature and extent of his partnership interest and abstain from discussion and voting on an application to change the zoning of land which abutted the property in which he retained an interest. The Commission concluded that the nature and quality of a project developed on property adjacent to that owned by Mayor Lurie and his partners reasonably may have an effect upon the uses and value of the property owned by Lurie and other investors. That effect upon value might have been adverse or helpful depending upon the nature and quality of the abutting development approved.
Whether a disqualifying interest exists is always a factual question governed by the circumstances of each case. In view of Lurie, mere ownership of land in the vicinity of property which would be benefited by a proposed rezoning may be sufficient to disqualify a public officer from voting for it.
Such was the advice provided to Mr. Scheffler by the city attorney's office. Mr. Scheffler testified that when he first took office, he conferred with city attorneys representing the public works department and requested a number of legal opinions concerning both his landholdings and business interests. The advice provided by the city attorney's office, given both verbally and in writing, was that in the case where it was likely that his pecuniary interest would be significantly affected by approval or disapproval of the matter under consideration, he must disclose, and that where the facts of the matter reflected that a reasonable person in his situation could not vote with independence of judgment, abstention would be required as well. Accordingly, the criteria upon which Mr. Scheffler was advised to rely in making voting determinations was principally based upon whether the matter concerned a change in zoning or involved the development of infrastructure.
The Commission notes, however, that while the opinions provided to Mr. Scheffler with regard to the voting standard applicable to matters of infrastructure were rather straightforward, the development of water and utility lines near Mr. Scheffler's holdings not only benefited the land upon which they were to be constructed, but also property situated in the immediate vicinity. Unfortunately, the advice obtained from the city attorney's office did not specifically define those instances in which consideration by the Henderson City Council might require disclosure of a councilman' s own real estate interests and abstention of his vote on such matters. Clearly, a zoning change related to density affects property value. Increasing density increases the commercial value of the affected property as well as that land situated adjacent thereto because demand begets demand: residential real estate developments creates a market benefit. Further, with a rate of development that is fairly dynamic, such as that occurring in Henderson during recent years, it is reasonably foreseeable that the construction of new communities and the growth and residential demand for services generated as a result will increase the monetary value of any real estate located within that radius. The more desirable pieces of land south of Lake Mead Drive are those parcels that stand to benefit from such development. The beneficial effect upon a property owner's pecuniary interest in such circumstances is simply unavoidable, whether the consequences of such developments occur today or tomorrow. The unprecedented concentration of master-planned communities in southern Green Valley will undoubtedly increase the value of nearby smaller properties.
Consequently, when Mr. Scheffler contemplated making decisions that would have affected, accommodated, or facilitated the development of real estate located within the vicinity of parcels of property in which he had ownership or investment interests, disclosure was mandated. Abstention would also be required whenever the independence of judgment of a reasonable person in Mr. Scheffler's situation would be materially affected. Though advice from counsel to the contrary may result in a finding that the official's conduct in reliance thereof was not willful (See, NRS 281.551(5)), where he acts in contravention of NRS ch. 281, an actionable violation nevertheless will have occurred.
Where abstention is required, disclosure is mandated as well. The criteria for abstention is not solely whether there is a pecuniary interest or there is a commitment in one's private capacity to the interests of another; such are the criteria for disclosure only. Members of the legislative branch are required to abstain from voting on matters in which they have such interests or commitments only if these would materially affect the independence of judgment of a reasonable person in those same circumstances. It is against these criteria and standards that the facts as determined in the following findings must be reviewed.
FINDINGS OF FACT
Generally Applicable Findings
The following findings of fact are an amalgam of general facts taken from the three hearings of the Opinion Requests and are intended to apply to the discussion of each.
1. Mr. Scheffler is a former member of the Henderson City Council (Council), which body consists of five members. He was appointed on May 16, 1990, to replace Councilman Carleton Lawrence. He served until June 30, 1995, at which time he lost his bid for reelection. While in public office, Mr. Scheffler voted on numerous property matters and zoning related issues.
2. Both prior to and during his membership on the Council, Mr. Scheffler acquired numerous real estate interests in the southern Green Valley area of Henderson. This region, located south of Lake Mead Drive between Eastern Avenue and Horizon Drive, is one of Henderson's prime development areas and one of the most active real estate markets in southern Nevada.
3. In 1978, Mr. Scheffler and two partners formed Las Vegas Color Graphics, a Nevada corporation, which was the first graphics and printing business in the Las Vegas area to engage in pre-press assembly. The company assembles and produces film and color proof images for various publications and advertising agencies throughout the world. Its clients include Las Vegas hotels such as the Las Vegas Hilton, Flamingo Hilton, Imperial Palace, and the Riviera. One of its largest clients is the Las Vegas Convention and Business Authority from which R&R Advertising has purchased advertising space. The payroll company which serves the employees of Las Vegas Color Graphics is known as Viking Color Graphics.
4. Mr. Scheffler testified that there was a master plan on every development north of Lake Mead Drive and for the Green Valley Ranch area. The Council had been working on the master plan for everything south of the Lake Mead Drive, other than Green Valley Ranch.
5. During the period of time that Mr. Scheffler served as councilman, it was the policy of the city of Henderson to encourage development in the area to increase its tax base.
6. Richard MacDonald is a Henderson property developer and member of the Foothills Partners. Ltd., a Nevada limited partnership. The partnership has interests in real estate situated in the southern Green Valley area in the vicinity of property owned by Mr. Scheffler and his investment partners.
7. According to the zoning designation system specified in the Henderson Municipal Code, land may not be considered for gaming use unless it is within a gaming enterprise overlay district, a district which has been approved by the city as suitable for limited gaming and nonrestricted gaming establishments. A license or permit to engage in gaming in a particular facility or to increase the extent of gaming in a facility within that district may be procured from the business license division of the city of Henderson, subject to subsequent approval by the Council. It is unlawful to engage in gaming in the absence of the appropriate license or permit. Limited gaming in commercial zones requires a special use permit. Upon approval of an application by the Council, the Henderson Municipal Code provides for a limited use gaming permit authorizing operation of up to 199 slot machines and up to nine live table games.[2]
8. Since 1984, Ron Coury and his business partner have owned a Las Vegas-based graphics corporation identified as Suburban Graphics, a screen printing company and production facility. During the past year, Suburban Graphics has evolved to perform some but not all of the same type of work done by Las Vegas Color Graphics. Though both Mr. Scheffler's and Mr. Coury's business use Macintosh computers and other personal computer systems, Mr. Scheffler's business additionally has another and significantly more sophisticated system (Cy tech System).
9. Since 1989, Mr. Coury and his business partner have owned and operated a Henderson casino and restaurant known as Thirstbusters Casino (Thirstbusters) that was purchased in 1988. Thirstbusters is located in the ward formerly represented by Mr. Scheffler in the Green Valley district. It is situated in a C-2 (commercial) zone, in the same gaming enterprise overlay district in which three undeveloped properties owned by Las Vegas Color Graphics are also located. The closest parcel is situated approximately five miles away from Thirstbusters.
10. In June 1992, Mr. Scheffler's attorney, Mr. John Marchiano, created and for a time served as an officer of LCS Investments, a corporation formed as a holding company for the real estate investments of Mr. Scheffler and his investment partners. Mr. Marchiano subsequently appeared before the Council on behalf of Mr. Scheffler and his partners concerning matters relevant to the zoning or development of their real estate interests.
11. Shortly after Mr. Scheffler assumed public office, he requested an opinion from the Henderson City Attorney, Shauna Hughes, to advise him concerning the requirements of disclosure and abstention from voting with reference to (1) real estate he owned in the Henderson area. Ms. Hughes generally responded in a series of written opinions[3] that when the Council considered any infrastructure[4] passing in front of or zoning of real property located adjacent to Mr. Scheffler's land that would result in a material benefit to Mr. Scheffler, he would be required under the Code of Ethical Standards to disclose his property interest and abstain from voting on the matter. Because Henderson has been rapidly developing in recent years, considerable infrastructure is being constructed.
12. Regarding Mr. Scheffler's color graphics business, and specifically regarding a Council agenda item relating to a gaming corporation that had contracted with an advertising agency for production of brochures and other marketing materials which had in turn subcontracted with other businesses, including Las Vegas Color Graphics, the Henderson City Attorney's Office informed Mr. Scheffler that because he had no privity of contract with the corporation itself, but shared only a contractual relationship with the advertising agency, he was not required to disclose his private interest in Las Vegas Color Graphics and abstain from voting on the specific matter that affected that agency's client. Ms. Hughes testified that her opinion neither addressed the size of the contract or account nor the contract's relative size to Mr. Scheffler's business. Further, the opinion was not expressly limited in application to instances in which Las Vegas Color Graphics was but one of many subcontractors to an advertising contract.
13. From time to time, when Mr.: Scheffler had questions concerning a specific parcel of property or a particular action to be taken by the Council during the course of its meetings, he would ask Ms. Hughes verbally about disclosure and voting and receive a verbal response.
Findings and Conclusions Specifically Related to Opinion No. 95-23
(Third-Party Request by Mr. Coury)
Because this Opinion consolidates three Opinion Requests, and each of those Opinion Requests raised several issues, we will render findings of fact and discuss each issue within the context of the Opinion Request in which it arose. Findings of fact for each issue will be made in consecutively numbered paragraphs, followed by discussion, analysis, and conclusions of law that will be made in unnumbered paragraphs.
1. Use of Vintage-Model Chevrolet
One of the contentions made by Mr. Coury in his request for an opinion is that Mr. Scheffler violated the provisions of NRS 281.481(1) and (2) by using his public position to operate a 1955 Chevrolet owned by Falconi's Honda for a period of several months and for which such use was obtained in exchange for a favorable vote on an automobile mall project which Mr. Coury alleged had come before the Council for approval prior to the dealership' s grant of personal use of the vehicle to Mr. Scheffler. The Commission finds as follows:
14. In 1991, Mr. Scheffler voted to approve the application of Mr. Frank Ellis, one of the owners of Falconi Honda in Las Vegas, and approximately 20 other automobile dealerships for the construction of an automobile sales mall in Henderson.
15. In 1994, Mr. Scheffler left his Lexus and its keys with Mr. Ellis as collateral for his own use of a 1955 classic Chevrolet two-door hardtop from Falconi's used car inventory on West Tropicana in Las Vegas, all the while continuing to make $900.00 per month payments on his Lexus. Mr. Scheffler desired to test out the Chevrolet before making a decision to either purchase it outright (at a price of $6,000.00 to $18,000.00) or trade in his Lexus as part of a negotiation. Re continued to drive the Chevrolet, which bore license plates issued to the Falconi Honda dealership, for approximately eight months while maintaining his license and insurance on the Lexus. Mr. Ellis was out of the country for a portion of this period, and Mr. Scheffler was busy working on his political campaign for reelection. Mr. Scheffler ultimately elected not to purchase the Chevrolet and returned it to Mr. Ellis.
The Commission concludes that while it may not be the common practice of an automobile dealer to permit a person an eight -month test drive of a vehicle with dealer license plates, there is no evidence that Mr. Scheffler utilized his position on the Council to receive preferential treatment from Falconi Honda. The facts demonstrate that the favorable vote on the automobile mall project was made three years before Mr. Scheffler even had access to the car. The Commission therefore determines that Mr. Scheffler did not violate NRS 281.481(1) or (2).
2. Las Vegas Convention Authority Contracts
Mr. Coury asserted that Mr. Scheffler violated the provisions of NRS 281.481(1) and (2) by using his position on the Council to influence the award of Las Vegas Convention and Visitors' Authority (LVCVA) contracts to his private company, Las Vegas Color Graphics. The Commission finds as follows:
16. In 1994, R&R Advertising of Las Vegas (R&R) contracted with the LVCVA for the production of two magazines. R&R thereafter awarded a subcontract on the project to Daycor Publishing, one of several Las Vegas publishers who had submitted a bid to R&R for the work, who in turn contracted with Suburban Graphics to perform the artwork for the magazine covers.
17. In the fall of 1994, Mr. Sakowski, a graphics designer employed by Suburban Graphics, asked Mr. Bruce DeBold, the owner and operator of Daycor Publishing, whether Suburban Graphics would be permitted to bid on any other related LVCVA projects, specifically the separation work and the pre-press negative work for the content of the magazines. Mr. DeBold responded that he could not state who was causing him to be so "politically" influenced, but that all the negative work and inside work was required to go to Las Vegas Color Graphics. Thus no other LVCVA work on that project was available for bid by Suburban Graphics. Mr. Sakowski testified that Mr. DeBold informed him that he worked under the guidance of R&R and that "his hands were tied, he had no choice...it was politics, the politics involved wouldn't permit him to bring the bulk of the work to Suburban Graphics."
18. Mr. Scheffler testified that he had never served on the LVCVA Board and that his relationship to R&R Advertising was a dependent one. According to Mr. Scheffler, once R&R, as a client of the LVCVA, determined to subcontract out some of its work, it accepted any bid it desired as long as the amount did not exceed its own bid awarded to complete the entire project. It was up to R&R to select the work, price, and quality and allocation of the subcontracts it put out to bid. Mr. Scheffler had dealt directly with R&R, who had been a customer of Las Vegas Color Graphics for approximately 17 years, but he had no ability to direct R&R to select his own graphics company to perform work on any particular contract, LVCVA or otherwise.
The issue is whether Mr. Scheffler used his position as a Henderson City Councilman to obtain work for Las Vegas Color Graphics under such contracts, distinct from the work that Suburban Graphics had under those contracts, and whether he used his position to deny Suburban Graphics other or additional work under the contracts.
The testimony at the hearing established that after Daycor Publishing won an R&R contract for the right to produce magazines for the LVCVA, Mr. DeBold determined whether any of the work required him to engage subcontractors, and if so, at what price. Daycor Publishing decided to contract with Suburban Graphics to perform the artwork for the magazine covers and Las Vegas Color Graphics to achieve the graphics work on the project. Mr. Scheffler testified that he had no knowledge that anybody from R&R had directed Mr. DeBold to award a subcontract to Las Vegas Color Graphics. Based upon Mr. DeBold's expressing to Mr. Scheffler that the project was the first of its size that he had been awarded by the LVCVA and that Mr. DeBold desired to achieve the "best quality in town, " Mr. Scheffler believed that Mr. DeBold made his own decision to hire Mr. Scheffler's business to perform the majority of the graphics work on the contract. It was Mr. Scheffler's opinion that it was only for reasons of courtesy that Mr. DeBold refrained from so informing Mr. Sakowski.
Though Mr. Sakowski testified generally to the scope of the alleged competition which existed between Las Vegas Graphics and Suburban Graphics, he had no specific knowledge regarding how the decision to allocate work on the LVCVA magazines was made. Though the reasons for Mr. DeBold' s award of the bulk of the graphics work on the LVCVA contract to Las Vegas Color Graphics may have been political, Mr. Sakowski did not define what the "political influence " in the case was, and could not testify as to the manner in which Mr. Scheffler's company had come to receive work on the project. Though Mr. Sakowski reasoned that Mr. DeBold worked under the guidance of R&R Advertising, Mr. Sakowski could not explain the relationship of R&R to the control and decision to grant LVCVA work to Las Vegas Color Graphics. Moreover, Mr. Sakowski had no information that in December 1991, when Thirstbusters' application for a limited gaming license was considered by Mr. Scheffler, that Las Vegas Color Graphics had anything to do with the LVCVA magazines.
Based upon the lack of evidence establishing a violation of NRS 281.481(1) and (2), the Commission concludes that Mr. Scheffler did not misuse his position as a member of the Council to obtain LVCVA contracts and to preclude Suburban Graphics the opportunity to bid on any phase of the project.
3. Forsythe Francis Advertising Contracts
Another issue raised by Mr. Coury's Opinion Request was whether Mr. Scheffler violated the provisions of NRS 281.481(1) and (2) by the alleged use of his membership on the Regional Transportation Commission (RTC) to direct contracts to the Forsythe Francis Advertising Agency (Forsythe Francis), which would in turn send work to Las Vegas Color Graphics, and by dissuading the president of Forsythe Francis from handling the campaign of a political opponent. The Commission finds as follows:
19. Mr. Scheffler sat on the RTC by virtue of his membership on the Council.
20. In 1992, Forsythe Francis entered into a $1 million, two-year contract with the RTC to service the CAT system (the Las Vegas transportation system).
21. Las Vegas Color Graphics had not done any subcontracting work for Forsythe Francis on projects involving the RTC. In the previous five or six years, Las Vegas Color Graphics had performed only six other jobs for Forsythe Francis. Because Forsythe Francis had an established relationship with Laser Graphics, it seldom had occasion for business relationships with any other graphics company.
22. When the RTC contract came up for renewal in the summer of 1994, Mr. Scheffler suggested to the RTC that Forsythe Francis should be required to rebid its contract so that more printers and local vendors would be provided the opportunity to compete for work on the project. Although staff recommended the contract simply be renewed based on the RTC's former satisfaction with the CAT account, Mr. Scheffler expressed concern that Forsythe Francis conducted too much work outside of the city without even taking quotes from local businessmen. Mr. Scheffler's stated goal was to save money for the RTC and to support the local economy.
23. Prior to the RTC's vote on the matter, Mr. Steven Forsythe, president of Forsythe Francis, testified that he had spoken with RTC staff to express his company's concern that because Mr. Scheffler had his own graphics company and that part of his livelihood was derived from work obtained from advertising agencies, it would probably not be proper that Mr. Scheffler vote on the matter. Mr. Forsythe had no knowledge whether the issue was, in fact, discussed with Mr. Scheffler. Though he was present, Mr. Scheffler abstained from voting at the meeting in which remaining members of the RTC voted to put the contract out to bid.
24. After a three-month sealed bidding process, the RTC awarded the major portion of the CA T account to Forsythe Francis and granted some brochure work on the contract to Carell Printing (Carell), a local vendor who was a customer of Las Vegas Color Graphics.
25. After its award, Carell approached Mr. Scheffler to handle the film for the project at Las Vegas Color Graphics. Mr. Scheffler declined to accept the work, citing a "conflict-of-interest," but recommended that Carell contact his competitor, Laser Graphics. When Laser Graphics could not complete the project due to broken or malfunctioning machinery, Carell repeated its request to Mr. Scheffler, who at this time responded that he would accept the work, but would donate the film to the RTC. Mr. Scheffler then telephoned Mr. Zev Kaplan, the attorney for the RTC, to inform him of the arrangement.
26. Forsythe Francis also performed campaign related work for state and local races. In February 1995, Mr. David Wood, a current member of the Council who was elected to Mr. Scheffler's seat on the Council, interviewed Mr. Forsythe to determine whether he should hire the agency to run his political campaign. At that time, Mr. Wood had not yet decided in which ward to campaign for a position. Mr. Forsythe testified that he informed Mr. Wood that if he ran against Mr. Scheffler in Ward Four, Forsythe Francis would not want to handle his race because it was not its policy to work for any political candidate who was campaigning against any sitting member of a public agency with whom Forsythe Francis had an advertising contract. Mr. Forsythe explained that political campaigns are very emotional, and he was not interested in getting adversarial with anyone. Because his company was doing work for the CAT system pursuant to a contract with the RTC, he did not want to represent any political candidate who may be directly opposed to any of the eight commissioners who currently sat on the RTC. Mr. Forsythe stated that his company had declined opportunities in the past to run other political races for the same reason. It was a policy which had been consistently followed and had nothing to do with any particular personality involved. He testified that he had not stated to Mr. Wood that if he handled Mr. Wood's campaign, Forsythe Francis would lose the RTC contract. He stated that he had never had a conversation with either Mr. Scheffler or anyone on Mr. Scheffler's behalf concerning the issue, and thus, Mr. Scheffler had not attempted to influence his decision not to handle Mr. Wood ' s campaign.
27. Mr. Wood eventually decided to challenge Mr. Scheffler in Ward Four and contracted with another advertising agency to handle his political campaign.
Based upon the facts as presented, there is no evidence that Mr. Scheffler used his position as a member of the RTC to direct graphics work for the CA T system, or any other RTC project, to Las Vegas Color Graphics. To Mr. Scheffler's knowledge, Las Vegas Color Graphics had not done any work directly for the RTC, nor had it done much business with Forsythe Francis. Further, it is clear that there was no initiative or effort undertaken by Mr. Scheffler or anyone on his behalf to dissuade Forsythe Francis from handling Mr. Wood's political campaign against Mr. Scheffler. The evidence demonstrates that Forsythe Francis declined to handle Mr. Wood's campaign not for fear that Mr. Scheffler would intervene 'and cause the RTC to cancel its CAT contract, but to comply with the company's standing policy. Consequently, the Commission finds no violation of NRS 281.481(1) or (2).
4. The Del Webb Vote
Mr. Coury’s Opinion Request asked the Commission to determine whether Mr. Scheffler violated the provisions of NRS 281.501(2) and (3) by voting on November 15, 1994 to approve the Del Webb Corporation's (Del Webb) plans for development of a master planned community in Henderson known as "Village I," where Del Webb was allegedly a customer or former customer of Las Vegas Color Graphics. The Commission finds as follows:
28. When Mr. Scheffler became a member of the Council in 1990, he asked for an opinion from the Henderson City Attorney's Office regarding how to proceed generally in his public capacity if a property developer had contracted with an agency, and that agency secured a graphics contract for which Mr. Scheffler's private business was selected as a subcontractor.
29. Specifically with regard to a gaming-related matter which came before the Council in which Mr. Scheffler's graphics business was but one of many subcontractors hired by an advertising agency who had contracted with certain gaming executives to prepare brochures and other marketing material, the Henderson City Attorney's Office advised Mr. Scheffler in a written opinion that no conflict of interest existed which required him to disclose his private business interest when voting on an agenda item concerning the gaming corporation because Mr. Scheffler's contractual relationship was not with the ultimate client, but with the advertising agency. Mr. Scheffler was informed that any work Las Vegas Color Graphics obtained through an advertising agency need not be disclosed in the event that agency's client appeared before the Council unless Las Vegas Color Graphics had a direct relationship or privity of contract with that client. Consequently, Ms. Hughes opined that because Mr. Scheffler's contractual relationship was with the advertising agency and not with the client and that he was only one of many subcontractors who contributed services to the overall marketing package of the gaming property for which the work was performed, Mr. Scheffler was not required to disclose his private interest in Las Vegas Color Graphics. Ms. Hughes testified that the facts upon which her opinion was based, however, neither addressed the size of the contract or account nor the contract's relative size to Mr. Scheffler's business.
30. Del Webb retained R&R Advertising to produce publications, brochures, and advertisements related to its proposed property development project.
31. On November 15, 1994, Mr. Scheffler voted as a member of the Council to approve Del Webb's application for the development of a retirement community and amended land use designation on approximately 564 acres located northeast of Green Valley Parkway and Horizon Ridge Parkway in the MacDonald Ranch planning area. At the time of the vote, Del Webb was not, nor had it ever been, a customer of Las Vegas Color Graphics. Mr. Scheffler testified that prior to the vote on Del Webb ' s application, he did not know that R&R had an account with Del Webb nor did he have knowledge of any agency whose client was Del Webb that would be approaching Las Vegas Color Graphics for possible work.
32. After the Council's vote on November 15, 1994, Las Vegas Color Graphics engaged in work for R&R Advertising, which had been hired by Del Webb to prepare its marketing materials.
Mr. Coury asserted that because Las Vegas Color Graphics' client list included Del Webb and several other property developers who regularly appear before the Council, an inherent conflict of interest existed between Mr. Scheffler's public duty as city councilman and private business interests because he was motivated to advocate Council approval of any project for which he anticipated that his company would be selected for production of graphics materials. Mr. Coury contended that pursuant to NRS 281.501(2) and (3), Mr. Scheffler should have disclosed and abstained from voting on Del Webb's property development because Del Webb, through R&R Advertising, was doing business with Las Vegas Color Graphics.
Mr. Coury's contention, however, requires some basis in evidence that at the time Mr. Scheffler voted in favor of the Del Webb project he had both the foreknowledge that R&R would be chosen by Del Webb to promote its development and that Las Vegas Color Graphics would be selected by R&R to complete the graphics portion of a subcontract. Mr. Scheffler testified that until a project was voted on and approved by the Council, the developer did not have an account for which to engage an advertising agency. According to Mr. Scheffler, when one worked through an agency, one would not always even know who the ultimate client was until he received the subcontract. Mr. Scheffler testified that prior to November 1994, he had not done any graphics business for Del Webb, and, in reliance upon Ms. Hughes' opinion, he had not voted on any matter where he had a direct relationship with a person or entity who used the services provided by Las Vegas Color Graphics.
NRS 281.501(2) and (3) require specific circumstances that require disclosure and which would require abstention if such would materially affect the independence of judgment of a reasonable person. The question of whether disclosure and abstention are required depend in these general circumstances upon whether the matter: (i) was one in which Mr. Scheffler had a pecuniary interest or which would reasonably be affected by his commitment in a private capacity to the interests of his business partners (disclosure), or (ii) was one in which the independence of judgment of a reasonable person in Mr. Scheffler's situation would be materially affected by such pecuniary interest or commitments (abstention from voting). There is no evidence in the record of Opinion Request No.95-23 with respect to any such interest or commitment to the interests of others on the part of Mr. Scheffler in the matter or which would affect his ability to vote with independence of judgment. The facts as presented do not indicate that Mr. Scheffler had knowledge of or had reasonably anticipated that he would be hired by R&R to perform graphics work for Del Webb's marketing materials at the time he voted to approve Del Webb's application for its property development. Because there is no evidence of conflict as defined in the foregoing circumstances, and those circumstances by themselves do not suggest such a conflict, Mr. Scheffler did not engage in any prohibited conduct under NRS 281.501(2) or (3) at the time of his vote on the matter.
The Commission disagrees with Ms. Hughes' advice to Mr. Scheffler that Mr. Scheffler's status as a mere subcontractor would insulate him from ethical liability .A person should not be permitted to do indirectly what he is prohibited from doing directly. Ms. Hughes testified that the facts upon which her opinion was based neither addressed the size of the contract or account nor the contract's relative size to Mr. Scheffler's business and was not expressly limited to the situation where Scheffler was one of many vendors. Conceivably these could be factors which could make a difference, but under the facts as addressed by the city attorney's office, such were not taken into consideration. The Commission nevertheless concludes that independent of the advice provided by the city attorney's office, there was no evidence to demonstrate a violation of NRS 281.501(2) or (3).
5. Issues Relating to Mr. Scheffler's Financial Disclosure Statement
The next two issues considered in this Opinion are whether (1) Mr. Scheffler's failure to file a 1992 financial disclosure statement and (2) his failure to disclose his interests in LCS Investments and Viking Color Graphics from those financial disclosure statements he did file constituted violations of NRS 281.561 and NRS 281.571(1)(t). These questions were raised by both Mr. Coury and by Mr. Scheffler in their respective opinion requests. Mr. Coury additionally alleged that Mr. Scheffler violated NRS 281.571(1)(t) by omitting five other corporations from his financial disclosure statements. The Commission finds as follows:
33. Though Mr. Scheffler believed that his 1992 financial disclosure statement had been filed, no public record exists of such a filing. Mr. Scheffler remembered having prepared the statement himself but relied upon the city clerk to file it because the clerk had performed such functions on behalf of all Councilmembers since 1990.
34. While Mr. Scheffler identified Las Vegas Color Graphics and Autumn Graphics as businesses which provided private sources of income on his statements of financial disclosure rued while in public office, he did not include seven other entities in which he was alleged to have financial interests: LCS Investments, Viking Color Graphics, Inc., Sierra Color Graphics, Inc., Wedgewood Color Graphics, Inc., Plastic Graphics Industrial, Inc., Rhino, Inc., and Gaming Graphics, Inc.
35. At the hearing, Mr. Scheffler testified that his failure to identify both LCS Investments and Viking Color Graphics on his filed statements of financial disclosure was based upon his belief that since these companies generated no income, neither constituted a "business entity" which he was required to report pursuant to NRS 281.571(1)(t). Mr. Scheffler asserted that LCS was simply a holding company for Las Vegas Color Graphics and his real estate interests that did no business and made no money. He testified that he did not include Viking Color Graphics, the payroll company for Las Vegas Color Graphics, on any of his financial disclosure statements because it was created as a separate corporate entity owned by Mr. Scheffler and Ms. Linda Fernandez in order to insulate Las Vegas Color Graphics assets from a lawsuit. Because Viking Color Graphics was organized solely to administer the payroll for Las Vegas Color Graphics and did not produce any product, invoice, or revenue, Mr. Scheffler believed that it was not an organization or enterprise operated for economic gain within the meaning of NRS 281.571(3)(a).
36. Mr. Scheffler further testified that he omitted other corporations from inclusion on his statements of financial disclosure because they had never done any business, possessed any assets, and had, for all practical purposes, "died. " As far as Mr. Scheffler was aware, however, these corporations may still exist in a technical sense because neither he nor any of his business partners had ever taken any steps to formally dissolve them. He did not know whether any of them had filed a federal tax return. Specifically in regard to each of these corporations, Mr. Scheffler testified that Sierra Color Graphics was formed as a shell corporation but had since died. It had never done any business or held any assets. Similarly, Wedgewood Color Graphics, Inc., which was formed in the 1980s to perform work originating in Phoenix where Mr. Scheffler had a partner, but it never did any work and dissolved without ever having had any assets. Likewise, Plastic Graphics Industrial, Inc., Rhino, Inc., and Gaming Graphics, Inc. never did business and have never held any assets.
NRS 281.561 requires public officers to file statements of financial disclosure with the Commission and with the office with whom their declarations of candidacy are filed. NRS 281.561(3) provides that every public officer, whether appointed or elected, shall file a statement of financial disclosure each year of his or her term. NRS 281.571(1)(t) mandates such disclosure to include a list of each business entity with which the public officer or a member of his household is involved as a trustee, beneficiary or trust, director, officer, owner in whole or in part, limited or general partner, or holder of any class of stock or security. "Business entity" is defined as " any organization or enterprise operated for economic gain, including a proprietorship, partnership, firm, business, trust, joint venture, syndicate, corporation or association. " NRS 281.571(3)(a). A willful failure to file a statement of financial disclosure as required by the provisions of NRS 281.561 and 281.571 or regulations adopted thereunder is a misdemeanor. NRS 281.581. The Co1lllnission finds that Mr. Scheffler's failure Lo file a 1992 statement of financial disclosure was an omission based upon neglect and was thus not a willful violation of NRS 281.561 for purposes of NRS 281.581.
The Commission concludes that with the exception of LCS Investments and Viking Color Graphics, Mr. Scheffler's failure to disclose companies which he incorporated was not violative of the financial disclosure laws because such companies expired without performing any function that benefited Mr. Scheffler's. His failure to specify LCS Investments and Viking Color Graphics, however, was based on his erroneous belief that NRS 281.571(1)(t) only required him to disclose businesses which made money, and because neither of these businesses made money in the traditional sense, they were not "business entities" required to be reported within the meaning of the statute. At the hearing on this matter on August 3, 1995, the Commission noted that Mr. Scheffler's reasoning that such companies were simply "holding" companies was not dispositive of the issue. Both LCS Investments and Viking Color Graphics were development businesses which were relevant to the income resulting from Mr. Scheffler's property and business interests. Though the payroll company may have been created for purely administrative or legal reasons, it was nevertheless an enterprise operated for economic gain because it was a service company that supported Mr. Scheffler's principal business, Las Vegas Color Graphics. LCS Investments and Viking Color Graphics were and are relevant to Mr. Scheffler's commercial activities, and we find that they should have been disclosed as "business entities" pursuant to NRS 281.571(1)(t). Mr. Scheffler's failure to include LCS Investments and Viking Color Graphics on his financial disclosure forms was based upon his mistaken belief described above.
6. Mischaracterization of Real Property
Mr. Coury contended that Mr. Scheffler violated NRS 281.481(2) and (9) by using his public office to force, influence, or mislead Council staff to mischaracterize the location and size of acreage owned by Las Vegas Color Graphics for which he was seeking approval of a limited gaming use permit application from the Council in May and June 1992. Mr. Coury alleged that fraud was perpetuated by Mr. Scheffler because he failed to clarify the true location of the property at subsequent public hearings on the matter.
37. On May 6, 1992, Mr. Scheffler's partner in Las Vegas Color Graphics, Mr. Charles Harris, filed three permit applications with the City of Henderson Planning Department for the operation of limited gaming at property at 749 and 799 Green Valley Parkway and 1440 Horizon Ridge Parkway, all vacant land. The existing zoning for all three properties, which were situated in a Gaming Enterprise Overlay District, were classified RS-2-G (Single Family Residential with Gaming Enterprise Overlay) district. Mr. Harris submitted the application forms because Mr. Scheffler was too busy at that time to do so. The named applicant for the use permits was identified as Las Vegas Color Graphics.
38. In a letter to the City of Henderson dated May 6, 1992, Mr. Scheffler's attorney, Mr. John Marchiano, vouched for the accuracy of Las Vegas Color Graphics' use permit application. Mr. Marchiano stated that the application conformed with all city of Henderson ordinances and regulations, that the subject property lay within the gaming overlay district, and that the application was consistent with the policies established by the Council.
39. Neither Mr. Harris nor Mr. Scheffler physically designated or identified the project addresses of the properties specified in the permit applications; these were subsequently assigned by a technician in the Henderson City Planning Department (Planning Department). Ms. Hughes testified to the general methodology followed by city staff in assigning an address for undeveloped property. When undeveloped property that is affected is not built on a street, requests for zoning changes, limited use permits, or other permits originate through an application with the Planning Department. Based upon the legal description or other information pertaining to the general location of the land with which they are provided, the Planning Department staff determines the address of the property through computers and by reference to undesignated streets or streets which have been officially adopted by the Council. Later, when addresses become available and a street is actually put in and numbers are assigned, that information will be entered into the file. Consequently, when public notices concerning action on undeveloped property are mailed out or appear in the local newspapers, the location of the parcel in the application will be described with an accompanying map that includes locational arrows. In the instant case, the only personal knowledge Ms. Hughes had concerning the parcel's location was obtained through a conversation with the city planning technician who had assigned the particular addresses to Las Vegas Color Graphics' applications. Ms. Hughes testified that when she questioned the technician as to whether she had ever had personal contact with any permit applicants, the technician responded "no" and that the application in issue was a standard application. The technician stated to Ms. Hughes that in regard to that application, she did what she had always done, which was to fill in the address based upon her projections.
40. The address assigned to the use permit application for property located at 749 Green Valley Parkway did not exist at the time the application was filed. The land for which the application was made actually fronted on a proposed street identified on the Clark County Assessor's map as Augie Street. The map indicated that Las Vegas Color Graphics' property was set back from Green Valley Parkway by approximately 336 feet, separated by an eight acre parcel owned by someone else, which other property actually abutted the street designated on the application.
41. On June 4, 1992, the Henderson Planning Commission (Planning Commission) considered Las Vegas Color Graphics' application for a limited gaming and limited gaming liquor facility which, as depicted on the Planning Commission's discussion sheet for the meeting, was located at 749 S. Green Valley Parkway. At no time during public hearing of the matter did it appear that city staff, whom Mr. Coury claimed must have certainly discovered the alleged fraud, made any disclosure to the Planning Commission concerning the true location of the parcel that was the subject of the application. The Planning Commission recommended denial of the project by a vote of 5 to 2.
42. On the Council's agenda for its meeting of June 16, 1992 were nine items relating to Las Vegas Color Graphics' applications for zoning changes, comprehensive plan amendments, and limited use gaming permits with respect to each of three separately described parcels of property. The agenda characterized the location of these parcels at 749 S. Green Valley Parkway, 799 S. Green Valley Parkway, and 1440 Horizon Ridge Parkway. Mr. Scheffler was present at the hearing, accompanied by Mr. Marchiano.
43. On June 16, 1992, the Council approved a use permit (U-26-92) to allow Las Vegas Color Graphics' operation of a limited gaming and liquor facility consisting of 6,400 square feet on 5.48 acres in a proposed CC-G (Community Commercial with Gaming Enterprise Overlay) district at 749 S. Green Valley Parkway. The approval was subject to several conditions which included approval of a comprehensive plan amendment to the community and neighborhood shopping land use classification for the subject parcel and approval of a zoning classification amendment to the CC-G (Community Commercial with Gaming Enterprise Overlay) district or other appropriate commercial classification for the subject parcel. Mr. Scheffler abstained from voting on the application.
44 .At no time during any public hearing of the matter did either Mr. Scheffler or staff disclose that the property's location had been misidentified.
According to Mr. Coury, it would have made a great deal of difference to surrounding property owners if they had received previous public notice that the property which was the subject of Las Vegas Color Graphics' application was on Augie Street, not Green Valley Parkway. Augie Street provides residential access, whereas Green Valley Parkway is a major thoroughfare serving commercial uses of which any additional use would likely be unopposed by area residents on the basis that II Green Valley Parkway was commercial anyway. II Mr. Coury contended that if the public had been made aware that Augie Street was the actual location upon which a new casino was proposed, local residents would have been put on notice that the permit application affected a small residential street and would have mounted greater public protest. Mr. Coury argued that Mr. Scheffler's application was fraudulent on its face and constituted a gross misdemeanor pursuant to NRS 197.130 (false reports by public officers) and NRS 197.140 (public officer making false certificate). He further contended that “the act of providing a fraudulent application is compounded by the apparent collusion and conspiracy of the staff employed by the City of Henderson to accommodate the desires of one of their Councilmen.”
At the hearing, Mr. Scheffler denied that either he or his business partner had done anything with respect to the manner in which city staff characterized the property on the maps which were to be the subject of the public notice. He further denied using his public office to conceal the proper location or influencing the staff' assignment of an address for the affected property. Finally, Mr. Scheffler reasoned that even had the location been correctly identified for purposes of public notice, little public protest would have occurred because whatever the address, the property was located in the middle of the desert, near no one.
The Commission concludes, however, that even assuming tile assigned address of Las Vegas Color Graphics' permit application was erroneous, and further that the public was in fact misled as a result, the issue is whether Mr. Scheffler used his public office as city councilman to engage in deceptive behavior and to force or influence city staff to engage in activity directly or indirectly which was misleading. Based upon the testimony provided by Ms. Hughes, there is no evidence that Mr. Scheffler or anyone on his behalf engaged in any activity to mislead or deceive anyone as to the location of the property. The line upon the application form designated "Project Address II was left blank pending assignment of a street and number by a Henderson Planning Department technician employed in that department whose standard practice it was to do so.
There is no evidence in the record to substantiate Mr. Coury's belief that Mr. Scheffler mislead or caused city staff to mischaracterize or "screen" the true location of the affected property and prevent adequate notice of what the Planning Commission and Council would be voting on in order to gain some form of advantage. There is also no evidence to support Mr. Coury's contention that staff's failure to advise both the Planning Commission and Council of the misleading information was influence by Mr. Scheffler. Because there is no such evidence in the record, and the circumstances by themselves do not permit such an inference to be drawn, we find no violation of NRS 281.481(2) or (9).
7. Vote Against Thirstbusters' Limited Gaming License
Another issue raised by Mr. Coury is whether Mr. Scheffler violated NRS 281.481(2) and NRS 281.501(2) and (3) by opposing and voting on Thirstbusters' request for a special use permit and limited gaming license at the Council's hearing of the matter on December 19, 1991. Mr. Coury was and is the owner of Thirstbusters, a restaurant and tavern. Mr. Coury contended that Mr. Scheffler was required to disclose the following circumstances as conflicts of interest and to recuse from voting on the matters, namely (1) Mr. Coury's graphics business, Suburban Graphics, was in direct competition with Mr. Scheffler's private business interest in Las Vegas Color Graphics, and (2) six months following Mr. Scheffler's participation in the unanimous Council vote to deny Thirstbusters' requested for increased gaming, Mr. Scheffler appeared before the Council to request use permits to conduct gaming on property at three limited gaming licenses in three different locations in Henderson, which would result in direct competition with Thirstbusters. The Commission finds as follows:
45. In 1988, Thirstbusters was licensed as a restaurant and tavern facility. It serves low-priced meals in a family restaurant atmosphere, offering a gourmet-style menu as well as a 24-hour coffee shop menu. The establishment is located on North Valle Verde Drive in the Valley Verde Shopping Center on Sunset Road and North Valle Verde Drive in the Green Valley District. It fronts on Sunset Road, a major thoroughfare and the most highly used road in the Henderson area with the exception of Boulder Highway. Thirstbusters is surrounded on three sides by other commercially zoned property, including a 7 -11 directly across the street, and on one side by industrially zoned property. The nearest residential development is known as Green Valley Highland Condominiums, located approximately 400 feet to the south.
46. Subsequent to its licensure as a restaurant and tavern facility, Thirstbusters applied for a limited gaming license and authorization to operate a casino. At a hearing on the matter before the Henderson Planning Commission, approximately 300 to 500 citizens attended to protest the proliferation of gaming in the neighborhood. Mr. Scheffler, a member of the neighborhood and not at that time a member of the Council, paid for signs which stated: "Stop the Casino." Following a 7-0 vote by the Planning Commission to deny Thirstbusters' application, the Council unanimously voted to deny operation of a casino, but subsequently granted Thirstbusters a restricted gaming license to operate 15 slot machines.
47. On December 17, 1991, Mr. Coury appeared before the Council in a new attempt to obtain a special use permit for a limited gaming license to expand its operation to include up to 199 slot machines and up to nine live table games. At the time of the hearing, Mr. Scheffler and his partners owned three undeveloped properties at Green Valley and Horizon Ridge Parkways which were within the same commercial zone and gaming overlay zone that Thirstbusters was situated (See Issue 5 above). The properties were among a whole group of lots Mr. Scheffler and his partners had purchased on speculation and for "flipping" purposes. The parcel in the closest proximity to Thirstbusters was located approximately five miles away.
48. Mr. Coury testified at the Council hearing that there would be no increase in the size of Thirstbusters' facility, no change in the basic use, and no increase in the restaurant or bar seats. He presented testimony to the Council from various witnesses -including a real estate appraiser, traffic and parking expert, policeman, marketing research representative, University of Nevada Las Vegas (UNLV) business and economic researcher, and two priests -to establish that the surrounding community was not opposed to the application and that its approval would not result in any adverse effects.
49. Mr. Coury also commissioned a survey of registered voters in Green Valle who resided within one mile of Thirstbusters. According to the survey of 312 randomly selected registered voters in Green Valley who resided in an area within one mile of Thirstbusters, 75% of the respondents in that radius did not oppose expanded gaming in an existing casino or "establishment" (the respondents were not informed that the survey pertained specifically to Thirstbusters). These findings were allegedly comparable to previous surveys of all Clark County residents by the LVCVA and UNLV taken by researchers at the Center for Business and Economic Research.
50. Several Green Valley area residents who lived adjacent to Thirstbusters testified during public comment at the Council hearing that they were opposed to the possible expansion of slot machines at Thirstbusters because they were against the proliferation of gaming in the area. They chose to live in the bedroom community of Green Valley to get away from large- scale commercial development, attempting to find respite from the gaming environment. They feared that increased gaming "in their backyards" would serve only to exacerbate traffic problems and noise as well as to depreciate their property values. The residents believed that a casino was not compatible with the neighborhood community. Mr. Scheffler explained that an overwhelming number of voters in his district had contacted him to express their disapproval of limited gaming in the area. Mr. Scheffler claimed that no one had called him in support of Thirstbusters. The other councilmen had received some calls and letters in favor, but the majority of residents were against it.
51. Toward the end of the Council meeting, Mr. Coury's attorney, Mr. Alan Buttell, stated that because a competition existed between Mr. Scheffler's and Mr. Coury, s graphic design businesses in the processing of computer files for the printing industry, Mr. Scheffler had a conflict of interest which prohibited him from voting on Thirstbusters' gaming application. Mr. Scheffler responded that he had never bid against Mr. Coury in his entire life and had been in business for 14 years. He stated to Mr. Buttell as follows: " And if you can show me one instance where I have ever bid against you, I would like you to do that for me. " Mr. Buttell stated he could not show that instance but wanted to raise the issue "just in case. " Mr. Scheffler then requested advice as to how to proceed from City Attorney Hughes.
52. After immediately conferring with and being advised by Ms. Hughes that he was not required to abstain from voting on the matter because the alleged business competition was not relevant to the issue of gaming licensure, Mr. Scheffler voted with a unanimous Council to deny Mr. Coury, s request. The motion to support the Planning Commission' s recommendation and deny the permit application was made by Councilman Williams and seconded by Councilman Harris. All five Councilmembers addressed the merits of the issue and stated their reasons for voting against Thirstbusters' request. Although each expressed their appreciation for the professional manner of Mr. Coury's presentation, they commented on the overwhelming calls and letters received opposing the issue and the general community opposition to the expansion of gaming at Thirstbusters.
53. In April 1995, Mr. Ron Zayas, a California customer of Suburban Graphics and an independent computer graphics consultant (who ran a firm that specialized in high resolution graphics and whose jobs were routinely bid through both Mr. Coury's and Mr. Scheffler's companies), wrote Mr. Coury to inform him of the following four clients that had been presented with quotes from both Las Vegas Color Graphics and Suburban Graphics: Affordable America Vacations (Affordable), Bally's Casino (Bally's), Datel Computers (Datel), and Unicorn Software (Unicorn). Mr. Zayas wrote that he based his quotes for customers on the amount of risk they wished to incur versus costs: " A customer who wanted to be on the forefront of technology was trained to produce artwork composed on a PC or Mac and designed to be output at Suburban; a less risky customer could use the bridge technology available at Las Vegas Color and pay somewhat more for the convenience. " He stated that while Affordable chose to go exclusively with Suburban Graphics, Datel and Unicorn mixed their opinions depending on the job. Bally's started out with Las Vegas Color Graphics and eventually used Mr. Zayas' consulting to switch over to Suburban Graphics. With regard to a final customer, Nevada Sports Schedule, Mr. Zayas reported that Mr. Scheffler was explicitly aware that such business was an active Suburban Graphics customer that had a potentially high-volume account.
54. Independent of the information provided him by Mr. Zayas, Mr. Sakowski, who was in charge of research and development at Suburban Graphics, testified that he had no knowledge concerning any specific job that Suburban Color Graphics and Las Vegas Color Graphics had in common or how often, or the extent to which, both companies competed on a "head to head" basis because bids were generally sealed and lists of private customers were not published. Mr. Coury testified that it was not until he had a conversation with Mr. Zayas that he was he made aware that Suburban Graphics was the only other company bidding on a given job with Las Vegas Color Graphics. Until that point in time, Mr. Coury had no knowledge that his own screen printing company was so heavily involved in the photographic and color separation industry. Mr. Scheffler testified that although he believed that Mr. Zayas had asked Las Vegas Color Graphics to do a couple of jobs, he did not remember ever working with him before November 1991.
55. In June 1992, six months following his vote to deny Thirstbusters' application for expanded gaming on its premises, Mr. Scheffler appeared before the Council to request that the zoning of three undeveloped properties owned by Las Vegas Color Graphics at Green Valley and Horizon Ridge Parkways be changed from single family residential to community commercial and to apply for a comprehensive plan amendment and operation of limited gaming and limited gaming liquor facilities at these properties. (See, Issue 6 above).
Mr. Coury's first argument was that Mr. Scheffler was aware that if Thirstbusters' were to generate more income resulting from an increased number of slot machines, Mr. Coury could or would invest those profits into his own graphics business and be able to challenge Mr. Scheffler's company on a more direct and greater level. The Commission must determine whether the alleged competition between the graphics businesses provided a sufficient nexus to require disclosure in considering the gaming application in the first place, and secondly, whether the independence of judgment of a reasonable person in Mr. Scheffler's situation would be so materially affected by those circumstances such that he was required to abstain from voting on the matter.
Based upon the contents of the April 1995 letter written to Mr. Coury by Mr. Zayas, Mr. Coury asserts that Mr. Scheffler had knowledge during the period leading up to November 1991 that his own company was competing for business with Mr. Coury's operation, and thus, that Mr. Scheffler had lied at the December 1991 Council meeting when he stated that Las Vegas Color Graphics had never bid on the same project bid by Suburban Graphics. Mr. Coury further contended that even assuming the two companies do not know what specific jobs are in issue at the time they are approached for bids, nor the identity of another company bidding on a project, Las Vegas Color Graphics and Suburban Graphics were in a constant competitive situation because they were in the same type of business providing common services to a common customer base. In response, Mr. Scheffler testified that although both companies could probably perform the same work in 1991, he did not foresee at that time competing with Suburban Graphics directly for the same work. He stated he did not have any idea that the technology would change over the next four years. As he looked at things in 1991, he did not envision any area in business where Las Vegas Color Graphics and Suburban Graphics would become direct competitors. Further, although during the past year Suburban Graphics has evolved to perform some of the same type of work accomplished by Las Vegas Color Graphics, testimony at the Commission hearing established that Las Color Graphics and Suburban Graphics did not perform exactly the same kind of work. According to Mr. Coury, 95% of what Las Vegas Color Graphics does, Suburban Graphics does also, while only 20% of what Suburban Graphics does, Las Vegas Color Graphics does also. Suburban Graphics was allegedly more diversified, having a sign division as well as a silk-screening division. According to Mr. Scheffler, there are only two other graphics businesses in town with whom he competes on both a price and quality basis: Southwest Color Graphics (a competitor for approximately 10 years) and Image Works (a competitor for about two years). He testified that Las Vegas Color Graphics could not compete with Suburban Graphics on anything other than quality, because Mr. Scheffler could not even match Mr. Coury's prices, which were 10-30% below what Las Vegas Color Graphics charged.
Mr. Coury nevertheless argued that the competition he asserted to exist between Las Vegas Color Graphics and Suburban Graphics constituted a conflict of interest that should have prohibited Mr. Scheffler from voting on Thirstbusters' gaming application, because if Mr. Scheffler could succeed in preventing Mr. Coury's restaurant and bar from increasing its revenues, which would result from expanded gaming at Thirstbusters, Mr. Scheffler could limit Mr. Coury’s capability to make the financial investment in Suburban Graphics necessary to compete with Las Vegas Color Graphics. The graphics business has certain capital requirements to enable it to compete technologically. The type of equipment used is very expensive. Mr. Scheffler testified to having better equipment than Suburban Graphics which enabled him to produce better quality service. Thus, had the number of slot machines at Thirstbusters been increased, Mr. Coury would have had more capital to improve Suburban Graphics.
There was no evidence, however, that Mr. Scheffler had knowledge that Mr. Coury would invest Thirstbusters' increased profits in Suburban Graphics and that as a result, Suburban Graphics would compete technologically with Las Vegas Color Graphics. The Commission agrees with Ms. Hughes' determination that a relationship between the two graphics business (as it related to Mr. Scheffler's ability to vote with independence of judgment on Thirstbusters' gaming request) was too attenuated to have either required his disclosure or abstention. Though Mr. Coury argued that other Councilmembers had only been following Mr. Scheffler's lead when they voted to deny Thirstbusters' application, the minutes reflect that the motion to support the Planning Commission' s recommendation and deny Thirstbusters' request was made by Councilman Williams and seconded by Councilman Harris, and the vote was not taken until after each of the five Councilmembers had addressed the merits of the issue, stated his individual reasons for voting against the request, and commented upon the professional manner of Mr. Coury's presentation.
Because the foregoing circumstances do not establish or create an inference of any conflict of interest which would have affected Mr. Scheffler's ability to vote on the matter, no violation of NRS 281.501(2) or (3) resulted from his failure to disclose and abstain from voting on Thirstbusters' application. We cannot assume that Mr. Scheffler's actions on the Council were motivated or prompted by his awareness of a growth in the graphics industry that would lead to Mr. Coury's diversification into those areas and require large sums of money to purchase certain equipment in order to better compete with Las Vegas Color Graphics. It would not be reasonable to conclude within the meaning of NRS 281.481(2) that Mr. Scheffler used his public position to secure or grant any unwarranted privilege, preference, exemption or advantage for himself, Las Vegas Color Graphics, or his business partners.
Mr. Coury also contended that Mr. Scheffler's ownership of real property in Henderson for which Mr. Scheffler eventually sought zoning for limited gaming should have required disclosure and abstention by Mr. Scheffler from voting on Thirstbusters' application for expanded gaming privileges. We conclude that Mr. Scheffler's ownership of real property in the vicinity of Thirstbusters for which he anticipated procuring his own limited gaming license constituted an interest of a pecuniary nature that required disclosure of his interest in a potentially competitive property. It was only six months after Mr. Coury's appearance before the Council for Thirstbusters' application that Mr. Scheffler appeared before that same body to apply for the same use as a gaming property for which Thirstbusters had been denied.
The Commission concludes that at the time Mr. Scheffler voted to deny Thirstbusters, request to increase its number of slot machines, he intended or at least contemplated the development of his own properties in a manner which might prove competitive with Thirstbusters. It is unlikely that a reasonable person in Mr. Scheffler's situation would have considered and voted upon Thirstbusters' application without anticipating the impact Thirstbusters might have upon Mr. Scheffler's own properties. Though Mr. Coury's telephone surveys of registered voters concerning expanded gaming at his restaurant were restricted to a one-mile radius of Thirstbusters, it is not unreasonable to conclude that the approximate five-mile distance existing between one of Mr. Scheffler's parcels and Thirstbusters is within the same zone of competition for a gaming business. Those circumstances, in addition to requiring disclosure, also required Mr. Scheffler's abstention from voting as they would have materially affected the independence of judgment of a reasonable person in Mr. Scheffler's position. That the properties owned by Las Vegas Color Graphics were subsequently sold without having been developed does not alter our analysis.
Under these circumstances, NRS 281.501(2) and (3) required that Mr. Scheffler ought to have both disclosed his private property interests and commitments to the interests of his business partners relative to the matter and abstained from voting on the matter. Therefore, Mr. Scheffler violated NRS 281.501(2) and (3) by failing to disclose and abstain from participating in the Thirstbusters matter.
8. Vote Against Settlement Agreement
The next matter to be decided is whether Mr. Scheffler violated the provisions of NRS 281.501(2) and (3) by failing to disclose or abstain on the Council's vote concerning approval of a settlement agreement between Thirstbusters and the City of Henderson which granted Thirstbusters a limited gaming license for the operation of 40 slot machines. Based upon the same arguments as described in Issue 7 above, Mr. Coury requested the Commission to draw the conclusion that Mr. Scheffler improperly considered and voted against the agreement because he was motivated by desires to prevent Thirstbusters' from expanding in a financial fashion and to limit the competition for gaming which he anticipated would result between Thirstbusters and property owned by Las Vegas Color Graphics, for which latter business the Council had approved an application for a use permit to allow the operation of gaming, just one week prior to the vote on the Thirstbusters settlement agreement. The Commission finds as follows:
56. Following the Council's denial of Mr. Coury's application to obtain a limited gaming use permit for the operation of up to 199 slot machines at Thirstbusters (See Finding of Fact #52 above), Mr. Coury filed a lawsuit against the City of Henderson petitioning for judicial review in the Clark County District Court. Settlement discussions ensued during May of 1992.
57. Mr. Coury negotiated a settlement agreement with the City of Henderson in which Mr. Coury agreed to accept a limited gaming use permit authorizing Thirstbusters operation of 25 additional machines (thereby increasing the number of machines on its premises to 40) and agreed not to request any table games. The agreement provided that neither Mr. Coury nor his business partner would ever come before the Council to require any increase as long as they owned Thirstbusters. According to the terms of the settlement, if the business were to be sold, the new owner would be required to come before the Council for approval of the transfer of the gaming license itself pursuant to section 4.32.170 of the Henderson Municipal Code. Further, should the new owner attempt to obtain additional machines, it would require a new application. The settlement agreement was prepared by Mr. Coury's attorney, Mr. But tell, and the Henderson City Attorney's Office.
58. On June 16, 1992, the Council had approved the aforementioned application of Las Vegas Color Graphics for a use permit to allow its operation of gaming and liquor facility at 749 S. Green Valley Parkway in Henderson.
59. On June 25, 1992, the Council cast a 4-1 vote to approve Mr. Coury's settlement with the City. Mr. Scheffler did not disclose his potentially competitive property interest at the time the settlement agreement was considered and cast the only vote opposing it. He did not consult with Ms. Hughes immediately prior to making such vote because he did not consider it a problem based upon their previous discussions.
As we have already concluded, the competition between Suburban Graphics and Las Vegas Color Graphics provided too attenuated a basis to require Mr. Scheffler to abstain from voting on Thirstbusters issues, including the matter of Thirstbusters' settlement agreement. (See Issue 7 above). Similarly, as we have already concluded, the potential competition between Thirstbusters' gaming and the potential for gaming on Las Vegas Color Graphics' properties did require Mr. Scheffler's disclosure and abstention and should have required the same for his consideration of Thirstbusters' settlement agreement for the same reasons. (See Issue 7 above). With respect to the relationship of his own parcels with the business of Thirstbusters, the Commission finds that Mr. Scheffler was required to disclose his interests and to abstain from voting on the Council' s consideration of Thirstbusters' settlement agreement with the City of Henderson. Mr. Scheffler voted on the settlement agreement with the full knowledge that only one week earlier he had applied for and been approved a use permit to allow limited gaming and limited gaming liquor operation in the same gaming overlay district in which Thirstbusters, was located.
Notwithstanding Mr. Scheffler's stated belief that the city would win Mr. Coury’s lawsuit and his motivation to vote for the desires of his constituents in the neighborhood adjacent to Thirstbusters to restrict the number of slot machines at Thirstbusters to only 15, the facts reflect that a conflict of interest existed between Mr. Scheffler's private property interests (as well as those of his business partners to whom he was committed) and his public duties as city councilman which required him to disclose these interests pursuant to NRS 281.501(3) and prohibited him from voting on the agreement under NRS 281.501(2).
9. Mr. Scheffler's Relationship with John Marchiano and Shauna Hughes
The final matter brought to the Commission' s attention by Mr. Coury, as well as by Mr. Scheffler in his own request for an opinion, was whether Mr. Scheffler's relationship with Henderson City Attorney Shauna Hughes or attorney John Marchiano violated any of the provisions of NRS 281.481 or required disclosure or abstention on any related matters pursuant to NRS 281.501(2) or (3). The Commission finds as follows:
60. Mr. John Marchiano was a former City Attorney of Henderson who then moved into the private practice of law. Mr. Marchiano has appeared before the Council representing the interests of various Henderson property developers on real estate related matters.
61. Sometime between 1988 and October 1991, owners of Renata's, represented by Mr. Marchiano, applied to the Council to build a supper club in which they anticipated placement of 199 slot machines. The site was on Sunset Road, approximately 1,000 feet from Thirstbusters' location. Though the community did not consider the proliferation of gaming at Renata's any more appealing than that which had been proposed by Thirstbusters, opposition in the neighborhood was not as large. Unlike Thirstbusters, which was situated at the "mouth" of the residential community, Renata’s was situated on a main corridor around the corner from Thirstbusters, occupying a space that was somewhat set back. Following an arbitration in which Renata's was authorized to commence business and operate 40 slot machines, approval of a subsequent application by the Council permitted it 75 more machines.
62. Mr. Arrendale testified that after several meetings and" negotiations" between Renata’s and the Green Valley Community Association, during which time Renata’s proposed to include a bowling alley within its anticipated facility, the citizens in the area acquiesced. Recognizing the benefit that a bowling alley would contribute to the community, the neighborhood was willing to engage in a trade-off as long as it had some say in the manner in which the facility would be configured. Representatives from Renata's allowed members of the community to sit in on planning meetings in which it was agreed that the gaming would be put in one area and the bowling alley in another portion of the building. Mr. Arrendale related his conversations with Renata's representatives as:
...just to build the place that has gaming, gaming, drinks and food, is not enough. You can get a restaurant, you can get a bar and you can go gamble. But, you know, if that's all you're going to offer, then we're going to fight it and that's the whole slot arcade idea and we were against that. We've said that all along. We had fought some places harder than others. There's no question about that. However, in the end, we were always given something back and it, it's made the community a little bit better place and we have not had to come back time and time again.
63. In 1989, Mr. Coury retained Mr. Marchiano to act as counsel for Thirstbusters.
64. On January 8, 1991, the Council considered the use permit request (U-32-90) of Sunset Mountain Plaza Partners (Sunset Mountain) to allow limited gaming and limited gaming liquor operation in a CC-G (Community Commercial with Gaming Enterprise Overlay) district at 4660 E. Sunset Road, generally located northwest of Sunset Road and Mountain Vista Road in Henderson.
65. The proposed tenant of the property was Mr. Russ Jacoby, Chief Executive Officer of Inn Zone Operations, who owned other Inn Zone operations throughout the Las Vegas Valley. Mr. Jacoby requested a minimum of 75 slots for placement at the Sunset Road location in which he proposed the operation of a business to be called "The Major League Bar & Grill " (Major League). Mr. Jacoby informed the Council that the proposed facility would have a full service menu equal to the Inn Zone with a 75-seat dining room as well as other seating areas where food may be served. He stated it would "not be a beer joint by any stretch of the imagination" and that because the main entrance to the building would be through the restaurant, not through the slot machine area, patrons would not be exposed to gaming unless they so desired. Mr. Jacoby stated that his business was anticipating costs in excess of $1 million.
66. According to the Council minutes of this meeting, Mr. Scheffler was concerned about the parking situation in the area and stated that "things didn't slow down much" at 6:00 p.m. when he shopped at the shopping center where the Major League would be operated. He said he thought it would be unfair to Renata's if Major League's application was approved.
67. City Attorney Hughes said there was some confusion about why an establishment like Renata's would be treated one way and the Major League another. She explained that the definition of "supper club" required a minimum capital investment in the property of $250,000 exclusive of land, building, parking, kitchen, bar, and alcohol dispensing and gaming devices. It also required that 60% of gross revenues, exclusive of gaming, be derived from service of meals during an average six-month period. Ms. Hughes informed the Council that a supper club could be issued a limited gaming license, but a limited gaming license might be issued to businesses other than a supper club.
68. Mr. Scheffler moved to deny Major League's application and directed staff to follow up on the possible revision of the gaming ordinance in relation to the number of slots permitted for a limited gaming and limited gaming liquor operations. The Council unanimously passed Mr. Scheffler's motion.
69. In October 1991, Renata's applied for a limited gaming license to expand its number of slot machines from 75 to 199 machines. Mr. Marchiano informed the Council that the appearance was based on a soon to be implemented state law which prohibited gaming expansion beyond 15 machines unless the facility had 200 hotel rooms. Unless applications were made prior to its effective date or attempts made to become " grandfathered " in under the law, a gaming establishment having less than 200 hotel rooms would be limited to 15 slot machines. Mr. Scheffler supported Renata’s application.
70. On December 17, 1991, Mr. Coury appeared before the Council in an effort to similarly expand the number of machines on Thirstbusters' premises. Immediately prior to the Council hearing on the matter, Mr. Marchiano withdrew as counsel for Mr. Coury. Mr. Scheffler joined in a unanimous decision by the Council to deny Thirstbusters' application.
71. Sometime in June 1992, Mr. Scheffler retained Mr. Marchiano as his attorney. On or about June 16, 1992, Mr. Scheffler appeared before the Council represented by Mr. Marchiano on the applications of Las Vegas Color Graphics for zoning changes, comprehensive plan amendments, and limited use gaming permits with respect to each of three separately described parcels of property. As previously discussed, one of these parcels was situated approximately five miles from Thirstbusters. (See Finding of Fact #47). Subject to various aforementioned conditions, the Council approved Las Vegas Color Graphics' application for a limited use gaming permit for property described at 749 S. Green Valley Parkway. Mr. Scheffler did not vote upon this matter.
72. In June 1992, Mr. Marchiano created, and for a time served as an officer of, LCS Investments, a corporation formed as a holding company for the real estate investments of Mr. Scheffler and his business partners. Mr. Marchiano was listed as the resident agent on the incorporation documents. He subsequently appeared before the Council on behalf of Mr. Scheffler and his investment partners concerning matters relevant to the zoning or development.
73. On June 25, 1992, Mr. Scheffler cast the sole opposing vote in the Council's approval of a settlement agreement between Thirstbusters and the City of Henderson (See, discussion of Question 8 above).
74. Shauna Hughes is married to attorney Edward B. Hughes. For approximately seven years, Mr. Hughes rented office space from Mr. Marchiano to conduct his own private law practice in the same building. At the present time Mr. Hughes is renting other space in a different building in a different location. Mr. Hughes and Mr. Marchiano were never partners or otherwise affiliated.
75. Prior to her appointment as Henderson City Attorney by Mr. Marchiano, Shauna Hughes served as a deputy city attorney. Prior to and since her public employment, Ms. Hughes had no professional relationship with Mr. Marchiano other than in her capacity as deputy city attorney and city attorney. Although she interacted with him quite frequently in her public capacity when he appeared before the city council representing the interests of various developers in Henderson, she had never shared any personal or business interests with Mr. Marchiano.