Opinion No. 98-07CP

This Opinion is in response to a request for opinion filed pursuant to NRS 294A.345 and 281.477 with the Nevada Commission on Ethics (Commission) by Pete Sferazza against Mike Mouliot. A hearing on the opinion request was held on October 29, 1998, in Reno, Nevada. Mr. Mouliot was represented by William Baker, and Mr. Sferazza represented himself. The Commission heard testimony from Mr. Sferazza and Mr. Mouliot, received some evidence by offer of proof, and received several exhibits. At the conclusion of the hearing, the Commission deliberated the matter and reached a decision. The Commission now issues the Findings of Fact and Opinion which follows.

1. Mr. Mouliot is the incumbent and the Republican candidate for Washoe County Commission District 3, and Mr. Sferazza is the Democratic candidate for the same Washoe County Commission seat.

2. In a televised 15-second campaign advertisement, Mr. Mouliot made the following statements regarding Mr. Sferazza:

Pete Sferazza proved he was as poor of a lawyer as he was a mayor. He drew up a contract between the Reno Sparks Convention Authority and the City of Reno to repay the city over six million dollars for the property to build the bowling stadium. One problem. The contract was unenforceable, and the six million dollars was lost that should have been used to repay the City of Reno. That six million dollars could have been used for more police, better roads, more parks. Don't let Pete do to Washoe County what he did to the City of Reno. Re-elect Washoe County Commissioner Mike Mouliot.

3. In 1992, the Reno Redevelopment Agency[1] approved the purchase of land in downtown Reno for approximately $5,000,000. On March 23, 1993, an agreement was on the agenda of the Redevelopment Agency to sell the land to the Reno Sparks Convention and Visitors Authority (RSCVA) for the construction of a bowling stadium. Mr. Sferazza sought to have a provision included in the agreement that the land would revert to the Redevelopment Agency if the RSCVA defaulted on the payment of the purchase price of approximately $6,700,000.

4. Between March 23, 1993 and April 6, 1993, Mr. Sferazza was notified by bond counsel representing the RSCVA that bonds could not be marketed for the construction of the bowling stadium unless the RSCVA held the land without conditions, Therefore, on April 6, 1993, the Redevelopment Agency approved a Memorandum of Agreement between the Redevelopment Agency and the RSCVA that did not have in it the condition Mr. Sferazza had earlier sought.

5. Mr. Sferazza did not draft the Memorandum of Agreement (MOA). The MOA was drafted by Michael Halley, a deputy city attorney, and Bart Schouweiler, counsel for the RSCVA. Mr. Sferazza signed the MOA as the chairman of the Redevelopment Agency.

6. The MOA provided that the Redevelopment Agency would convey the land to Washoe County, that the RSCVA would pay the Redevelopment Agency a purchase price of $6,690,102, and that "the terms and conditions of the repayment shall be negotiated by the parties at a later date, and shall be subject to approval of [the Redevelopment Agency’s] bond counsel."

7. The RSCVA built the National Bowling Stadium on the land. The RSCVA has not paid any money to the Redevelopment Agency for the purchase of the land.

8. At hearing, Mr. Baker stated that he had been told by Reno officials that the MOA was intended to be a "wink-and-a-nod" agreement, meaning that the agreement was never intended to be enforced. Mr. Mouliot testified that before he ran the television advertisement, he checked about the enforceability of the MOA with Reno City Manager Charles McNeely, and Mr. McNeely informed Mr. Mouliot that Mr. McNeely had received an opinion from the City Attorney's Office that the MOA was an unenforceable contract because it was illusory. The City Attorney's advice was not in writing.

9. At hearing, Mr. Mouliot explained that he had prevented the television advertisement from running once he was notified of Mr. Sferazza's filing of the opinion request in this matter. Mr. Mouliot also testified that he should not have claimed that Mr. Sferazza drafted the MOA because he knew that Mr. Sferazza had not acted as an attorney in the creation of the MOA. Mr. Mouliot conceded that the MOA was between the RSCVA and the Redevelopment Agency, not the City of Reno. Mr. Mouliot also conceded that he had no proof or knowledge that the money owed by the RSCVA to the Redevelopment Agency was "lost." In fact, Mr. Mouliot sits on the RSCVA in his capacity as a county commissioner, and Mr. Mouliot explained that the RSCVA had never voted to pay or not to pay the Redevelopment Agency. Mr. Mouliot testified that the RSCVA does not have the money to pay the Redevelopment Agency and that the bowling stadium has been costing the RSCVA millions of dollars per year to keep it open and operating.

The Commission has jurisdiction over this matter and these parties pursuant to NRS 294A.345 and 281.477 because they are both candidates as defined in NRS 294A.005.

1. A person shall not, with actual malice and the intent to impeded the success of the campaign of a candidate, cause to be published a false statement of fact concerning the candidate, including, without limitation, statements concerning:

According to NRS 281.477(7), the person who makes the request (in this case Mr. Sferazza) bears the burden of proving the elements of the offense under NRS 294A.345 by clear and convincing evidence.

In this matter, Mr. Sferazza complained that seven portions of Mr. Mouliot's advertisement were false. We will examine each portion of the advertisement in the order raised by Mr. Sferazza.

First, Mr. Sferazza complains that he was not "as poor of a lawyer' as he was a mayor because he was not acting in the capacity as a lawyer in the drafting of the MOA. Mr. Sferazza is right. He was not acting as an attorney in the creation of the MOA because his role was that of mayor and chairman of the Redevelopment Agency. The lawyers involved in the drafting of the MOA were a deputy city attorney and the counsel for the RSCVA. Mr. Mouliot's statement that Mr. Sferazza was the lawyer involved in the drafting of the MOA is false.

Second, Mr. Sferazza complains that he did not "draw up" the MOA. Mr. Sferazza is right. The MOA was drawn up by a deputy city attorney and the counsel for the RSCVA. At hearing, Mr. Mouliot admitted that he should not have said that Mr. Sferazza was the attorney who drew up the MOA. We agree. Mr. Mouliot's statement that Mr. Sferazza "drew up" the MOA is false.

Third, Mr. Sferazza explained that the contract was between the RSCVA and the Redevelopment Agency, not the City of Reno. The face of the contract proves this to be true. Mr. Mouliot's statement that the contract was between the RSCVA and the City of Reno is false.

Fourth, Mr. Sferazza complains that the MOA has never been determined to be unenforceable. Mr. Mouliot produced no evidence to the contrary. Instead, Mr. Mouliot stated that he relied upon the statement of Charles McNeely that Mr. Mr. McNeely had been told by an unidentified member of the city attorney's staff that the MOA might not be enforceable because it might be illusory. We are not the proper tribunal to determine whether the MOA is enforceable. We can and do find, though, that Mr. Mouliot's bald statement that the MOA was unenforceable is not supported by the evidence and is, therefore, false.

Fifth, Mr. Sferazza claims that the money due from the RSCVA to the Redevelopment Agency was not "lost” as Mr. Mouliot claimed. We agree. The record shows that Mr. Mouliot and the RSCVA have never determined not to pay the debt owed the Redevelopment Agency under the MOA. It may be that the RSCVA may not have the money presently I but that it a long way from saying that the RSCVA will never have the money or that the Redevelopment Agency will never seek the money. It can be hoped that the RSCVA will honor its obligation to the citizens of Reno and pay the entire purchase price as the RSCVA agreed to do in the MOA. Until the RSCVA defaults or otherwise repudiates its obligation under the MOA, it cannot be fairly and truthfully said the purchase money is "lost." Mr. Mouliot's statement that the money is "lost," therefore, is false.

Sixth, Mr. Sferazza explained that the purchase money could not be used for "more police, better roads, more parks" as claimed by Mr. Mouliot in his advertisement. Mr. Sferazza testified that the Redevelopment Agency's money could only be spent on projects within the redevelopment area and could not be spent on hiring more police officers. Mr. Sferazza did concede that some of the Redevelopment Agency money was spent on the police station located in the bowling stadium. Though we find Mr. Mouliot's statement to be irresponsibly overstated, it is not false because legally the Redevelopment Agency's money could be spent on police facilities, roads, and parks within the redevelopment area.

Seventh, Mr. Sferazza raised the same concern about Mr. Mouliot's final statement in the advertisement that Mr. Sferazza raised regarding the parties to the MOA, namely that Mr. Sferazza's involvement with the MOA was in the capacity of the chairman of the Redevelopment Agency, not as the mayor of Reno, and therefore, that Mr. Mouliot's appeal to voters not to allow Mr. Sferazza to do to Washoe County what he did to Reno is incorrect. We have already stated that the MOA was between the RSCVA and the Redevelopment Agency, not the City of Reno, so to the extent that Mr. Sferazza can be accused of doing anything to any agency of government, Mr. Mouliot's statement should have more accurately referred to the Redevelopment Agency, not the City of Reno.

Having found that most of Mr. Mouliot's statements are false, we must now determine whether the false statements were made with "actual malice and the intent to impede the success" of Mr. Sferazza's campaign under NRS 294A.345(1). We find that several of Mr. Mouliot's statements were made with actual malice and with the intent to impede Mr. Sferazza's campaign. The intent to impede Mr. Sferazza's campaign is self-evident in the tone, tenor, and timing of the advertisement.

The actual malice was proven, in large part, by Mr. Mouliot's own testimony. Mr. Mouliot testified that he knew that Mr. Sferazza was not acting as an attorney in the creation of the MOA and that Mr. Sferazza did not draft the MOA. Mr. Mouliot admitted that he should not have made these statements regarding Mr. Sferazza. The MOA, on its face, shows that Mr. Sferazza's role regarding the MOA was as the chairman of the Redevelopment Agency, not as the attorney who drafted the MOA. Mr. Mouliot admitted that he had the MOA in his possession and that the MOA was the reason he ran the advertisement. Mr. Mouliot also produced minutes of the meetings in which the MOA was before the Redevelopment Agency, and those minutes, yet again, show that Mr. Sferazza was acting as chairman of the Redevelopment Agency, not as an attorney, regarding the MOA. Mr. Mouliot could provide no evidence that the MOA was unenforceable or that the purchase money was lost to the Redevelopment Agency. This last claim is particularly troubling because Mr. Mouliot, as an RSCVA member, is one of the people who could assure that the purchase money was not "lost” to the Redevelopment Agency by assuring that the RSCVA honors its promises made in the MOA.

Taken in total, the evidence clearly showed that Mr. Mouliot had the means to know and did know at the time that he ran the advertisement that several of his claims against Mr. Sferazza were false, yet he ran the advertisement anyway and prominently featured the falsehoods in a clear intent to harm and impede Mr. Sferazza's candidacy. Thus, under NRS 294A.345(1) and (5)(a), Mr. Mouliot made statements with "knowledge of the falsity" of the statements and with a "reckless disregard for whether [the statements were] true or false."

For this violation, we impose a civil penalty of $1,000 upon Mr. Mouliot pursuant to NRS 281.551(4). Mr. Mouliot shall pay the penalty by cash or by cashier's check or money order made payable to "State of Nevada, Office of the Treasurer,” to be received by the Commission office no later than 5:00 p.m. P.S.T. on December 3, 1998. Failure to pay the penalty shall result in such legal action as is necessary to collect the penalty.

Based upon the record, the Commission concludes that Mr. Mouliot violated NRS 294A.345(1)(b) with statements made in his televised political advertisements regarding Mr. Sferazza. Because the statements were made with actual malice as defined in NRS 294A.345(5)(a), we impose upon Mr. Mouliot a civil penalty in the amount of $1,000.

It is specifically noted that the foregoing Opinion applies only to these specific facts and circumstances. The provisions of the Nevada Revised Statutes quoted and discussed above must be applied on a case-by-case basis, with results which may vary depending on the specific facts and circumstances involved.

[1] The Reno Redevelopment Agency is comprised of all of the members of the Reno City Council and is served by the staff of the City of Reno. The mayor of Reno is the chairman of the Redevelopment Agency.