Esty faulted by Malloy on communications, not ethics

On the question of whether his old consulting business poses a conflict with his new public role as a state commissioner, Daniel C. Esty has the governor and the state ethics code on his side. But will it be enough?

To function as the state’s first commissioner of energy and environmental protection, Esty acknowledged Wednesday he should meet another standard not found in Connecticut law: Avoiding the appearance of a conflict.

Esty, a celebrated Yale professor, author and policy expert, spent three days this week trying to respond to questions about his lucrative consulting and speaking income before joining the administration.

On Wednesday, Esty released a list of global speaking engagements that paid him $1.2 million since 2006, including a $15,000 fee for an appearance Monday as part of a public speaking series in Ohio, the Town Hall of Cleveland.

“I know that impressions matter, and we want to be very clear about addressing any past work I’ve done,” Esty said.

With previously released information about his consulting working, including $205,000 he was paid over eight years consulting for Northeast Utilities, the public now can see the full extent of his past consulting and speaking clients, Esty said.

So, has clarity been achieved?

“I guess it depends on who you ask,” said House Minority Leader Lawrence F. Cafero Jr., R-Norwalk. “Commissioner Esty has fostered this uncomfortable feeling everyone has.”

Connecticut ethics laws bar public officials from acting on matters in which they have a direct financial interest, and they forbid them from taking a position with a business they regulate for at least a year after leaving state service.

But the laws are silent on when business dealings prior to becoming a state official pose a conflict or the appearance of a conflict. In states that define an apparent conflict, the statutes talk about whether “a reasonable person” or “an impartial observer” would see an official’s relationships as causing bias.

In Esty’s case, should his consulting for NU, the parent of the state’s largest utility, Connecticut Light & Power, disqualify him? How about a $7,500 speaking fee from the other major power company, United Illuminating?

“The code of ethics always has a tension between attracting good people to work for government and protecting the interests of government,” said Carol Carson, the executive director of the Office of State Ethics.

Gov. Dannel P. Malloy, who says Esty has no conflict of interest, said anyone with expertise in an industry will have a history in that industry.

“What you have to understand is that if you want tremendously accomplished people to give some portion of their life to public service after they have proven that extraordinary talent, situations like this present themselves,” Malloy said. “But we work through it.”

Cafero agrees – to a degree.

“You want experts who worked in the industry,” Cafero said. “If you said you can’t take anyone with experience, you’d be hard-pressed to find qualified people.”

But Cafero said Esty articulated a voluntary standard for conflicts, then appeared to fall short: He recused himself as commissioner from dealings with more than two dozen former consulting clients, but he left CL&P and UI off the list.

“You brought it on, pal,” Cafero said. “You set the bar. You don’t think you are going to get questioned?”

If Esty had publicized his dealings with the two utilities and explained why he believed he had no conflict, he might have avoided the controversy, Cafero said. Instead, the dealings were disclosed by The Hartford Courant.

And for that, Malloy faults his commissioner.

“Could he have handled it better? Yeah, I think he probably could have,” Malloy told reporters.

Malloy later said he was referring to Esty’s failure to initially disclose everything.

“He should have done it out of the box,” Malloy said.

Hours later, Esty said the same thing in an interview: “In retrospect, it would have been good to put this all out there on day one.”

Before he released the list, there was no way to determine who paid him for speaking engagements, even in the financial disclosure form all state officials are required to file annually. It is supposed to list all sources of income for the year in excess of $1,000.

On April 29, Esty filed his first annual financial disclosure statement with the Office of State Ethics. But the only source of honoraria identified by Esty was an entity that collected the fees and then paid him, Esty Associates LLC.

His wife, Elizabeth Esty, disclosed her husband’s speaking fee from UI in 2009 in the disclosure form she filed as a state legislator in 2010.

Esty said he initially focused only on consulting clients, because that work often represented a closer relationship with a company than giving a single speech, as he did for United Illuminating in 2009.

“It’s not the same level of engagement,” he said.

He said he did not recuse himself from dealing with CL&P, because the consulting he did for the utility’s corporate parent, Northeast Utilities, ended in 2006, outside a five-year lookback period he set.

The new Department of Energy and Environmental Protection has two functions pertaining to energy: energy policy, and energy regulation. The latter function is the responsibility of an autonomous unit, the Public Utilities Regulatory Authority.

Esty has no direct control over electric rates, nor can he hire or fire members of the regulatory authority. But the energy policy being developed by the department under his supervision is meant to influence the regulators.

“Our responsibility will be to present a policy framework,” Esty said. “Once in place, we let the rate review go, and we don’t inject the policy perspective at that point.”

Esty conceded he may have contributed to confusion about his relationship to the regulators by his intervention in an issue involving a CL&P application to install “smart meters” that better track energy use.

Instead of asking that the regulators delay acting on the application until the energy policy is finished, he wrote a letter directing a delay, language he says was inappropriate.

Roy Occhiogrosso, the governor’s senior adviser, said the governor remains grateful that Esty has given up his outside income to work for the state. His integrity is not questioned within the administration, he said.

Asked if the administration saw Esty’s problems as a matter of better communication, Occhiogrosso said, “At some level, everything is a communication issue.”