Ain't got that...

In an earlier post, I discussed how City Manager Marc Maxwell and City Attorney Nate Smith were managers in Greater Sulphur Springs Regional Center LLC, a private EB-5 company whose purpose is to raise capital from foreign investors. I talked about how this creates the appearance of conflicts-of-interest considering they can receive compensation from this entity (in addition to what the City pays them).

I sent a TPIA request to the City to obtain organizational docs related to GSSRC as well as any conflict-of-interest disclosures provided by Maxwell or Smith. The City's response only provided a copy of the April 4, 2023 Council meeting minutes, which are already publicly available. (This is the meeting where they approved Maxwell's dual role between the City and GSSRC)

It may be somewhat understandable (although debatable) because economic development entities are not private, non-governmental bodies. So, the City isn't likely required to maintain those documents.

When I followed up specifically about the conflict-of-interest disclosures, they replied: “There are no other statutorily required documents on file regarding the Greater Sulphur Springs Regional Center.”

There are a couple of ways to look at this, I think.

Texas Local Government Code Chapter 171 requires local public officials (including city managers and city attorneys) to file an affidavit of substantial interest and abstain from participating in any decision that has a special economic effect on a business entity in which they have a substantial interest. There are legal thresholds around specific ownership %'s and the like which define what substantial interest means.

Do Maxwell and Smith have substantial interests in GSSR currently? We don't know, and the City's response to the TPIA means they're not able to produce records that show this. This could be because they're not required to have them, disclosure wasn't required, or it was and they just didn't do it. There's not a way to know to know which is true right now, or not at least one I want to entertain.

It is possible, however, that Maxwell was required to give 171 notice and abstain during the Council's April 2023 vote on authorizing Maxwell to serve in the EB-5 entity (public records don't reflect any disclosure). This issue ties back to Maxwell creating the entity a few months prior to the Council authorizing his dual role. At the time the LLC was created, Maxwell was the sole member, meaning he had 100% ownership.

IF his share was still 10% or more at the time the Council took the April 2023 action, it could be argued that he was required to give disclosure under 171 because the authorization constituted a "special economic effect on the business entity that is distinguishable from the effect on the public." How? It legitimized the LLC's operations and authorized it to pursue economic benefits related to City interests. Had he not created the LLC beforehand, this wouldn't be a valid concern I don't think. It would come down to whether there was a substantial interest the next time the City took relevant action.

THE REALLY DUMB PART IS: THIS IS AN OPEN QUESTION BECAUSE THE COUNCIL DID NOT RESTRICT MAXWELL'S INCOME FROM THE LLC (Yes, that's me yelling in all caps). They could have removed the possibility of a conflict-of-interest. Yet, here we are.

By the way: I still haven't found where the Council approve Smith's dual role.

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