After deliberating for nearly a year and a half, a unanimous three-member panel of the Oregon Court of Appeals — including the Chief Judge, who wrote the opinion — gave Oregonians something to be thankful for just in time for Thanksgiving by reversing a trial court’s decision that, if it had been allowed to stand, would have let a giant drug company conduct a covert “stealth recall” of defectively made drugs instead of using a public recall to ensure that Oregonians did not purchase any of it and all the suspect product was returned to the maker.
The Court of Appeals opinion, reprinted in full below, is a stinging defeat to global consumer products conglomerate Johnson & Johnson and a ringing affirmation that, in Oregon, sellers have a duty to disclose all the material facts – facts that would be important to a consumer – about the products they sell to consumers. The Court concluded by noting that letting Johnson & Johnson’s tactic go unpunished would give an official stamp of approval to “calculated nondisclosure and manipulative suppression of information materially bearing on the purchasing choices of Oregon consumers.”
The opinion may be noticed in Germany, home of Volkswagen/Audi, which was recently revealed to have sold diesel-engine cars all across America that were intentionally loaded with special software intended to defeat government pollution emissions tests. The pollution performance of the so-called “clean diesel” technology cars sold with the undisclosed “defeat” software was a very material fact to Oregonians, where environmental consciousness is relatively high. VW touted the “clean diesel” cars as worthy “green” competitors to hybrids such as Toyota’s Prius series of high-mileage gas-electric hybrids. The Court of Appeals decision in the Motrin case may cause VW even more regret for having marketed directly to and attracted to its cars the very Oregonians most likely to be furious to learn that they were actually driving a much dirtier car than they had been led to believe.
The opinion will be published in Volume 275 of the Oregon Court of Appeals reports of opinions, starting on page 23 (275 Or App 23 (2015)).
The state appeals a judgment dismissing this action pursuant to the Oregon Unlawful Trade Practices Act (UTPA), ORS 646.607 and ORS 646.608, against defendants, who manufacture and distribute the over-the-counter painkiller Motrin. The state argues that the trial court, in dismissing the action under ORCP 21 A(8), erroneously concluded that the failure to disclose a known material risk that goods sold in Oregon may be defective is not actionable under the UTPA. We agree that the trial court so erred. See, e.g., Caldwell v. Pop’s Homes, Inc., 54 Or App 104, 634 P2d 471 (1981). Accordingly, we reverse and remand.
Whether a pleading fails to state ultimate facts sufficient to constitute a claim, as required under ORCP 21 A(8), is a question of law. Hansen v. Anderson, 113 Or App 216, 218, 831 P2d 717 (1992). When reviewing an order granting dismissal on that ground, we accept as true the facts alleged in the complaint and all reasonable inferences that may be logically deduced from the pleaded facts. Bernards v. Summit Real Estate Management, Inc., 229 Or App 357, 367-68, 213 P3d 1 (2009). We state the material facts in accordance with that standard by reference to the state’s operative amended complaint.
The defendants in this action are Johnson & Johnson, McNeil-PPC, Inc., and McNeil Healthcare, LLC. McNeil-PPC and McNeil Healthcare are Johnson & Johnson subsidiaries, and the three entities are in the business of manufacturing, advertising, distributing, and selling over-the-counter drugs throughout the United States, including in Oregon. In November 2008, defendants discovered that a batch of Motrin pills that had been manufactured at a Puerto Rico plant was defective—the 200-milligram pills failed to dissolve at the rate required by specifications for good manufacturing practices. The defective batch had been packaged and sold in 8-count vials. Six days after that discovery, defendants reported the dissolution failure to the FDA, but did not conduct a recall or notify wholesalers, retailers, or consumers that its 8-count vials contained potentially defective medicine.
Defendants eventually admitted that consumers who used the defective Motrin “might be receiving less than the expected dose of ibuprofen” and that its use “may lead to a worsening of pain, fever, or inflammation, all of which are very likely to be recognized by the consumer or diagnosed by a healthcare professional.”
A month later, in December 2008, defendants discovered the same dissolution defect in another batch of Motrin from the same Puerto Rico plant. That second batch of defective Motrin had been sold in 8-count vials and in 24-count bottles. In notifying the FDA of its second known batch of defective Motrin, defendants disclosed that it had been sold in 8-count vials, but did not disclose that the defective pills were also sold in 24-count bottles. Defendants, again, did not recall the defective product or notify wholesalers, retailers, or consumers.
Defendants eventually determined that 88,104 units of the defective Motrin 8-counts had been distributed nationally, and identified 29 Oregon retailers who received shipments of 8-counts during the distribution window for the defective pills. Defendants did not notify those 29 Oregon retailers (or anyone else outside the state) who were selling potentially defective Motrin; nor did they disclose the defect to consumers in Oregon or elsewhere, despite their knowledge that there was a material risk that defective Motrin was on the market in Oregon.
Defendants decided not to publicly recall the product. Instead, they hired a company, Inmar CLS, to send its employees—”secret shoppers”—out to purchase the remaining Motrin 8-counts from retailers. According to McNeil Healthcare’s “Director of Quality Assurance,” this covert buy-back approach was “a newly created prescribed path * * * which is a bit different than our typical procedures.” Similarly, according to McNeil Healthcare’s “Site Quality Leader” in Puerto Rico, the buy-back approach was “very different,” made possible by his “good relationship” with the local FDA director, with whom he had been having “very confidential” “off the record” discussions about how to avoid a recall. However, defendants were concerned that their highly unusual buy-back project would come to the attention of other FDA personnel, who would require a public recall. Defendants were particularly concerned about “the press that will be seen” in the event of a recall.
The first phase of the buy-back project took place in March and April 2009, months after the discovery of the defective Motrin. Inmar’s “secret shoppers” were explicitly ordered not to alert store personnel to the defect:
“DO NOT communicate to store personnel any information about this product. Just purchase all available product. If you are questioned by store personnel, simply advise that you have been asked to perform an audit[.]”
(Capitalization in original.)
The project’s first phase was limited in scale, designed to survey the amount of defective product on store shelves. Defendants sent secret shoppers to two stores in Oregon, and 250 stores nationwide. The goal was to obtain data that would allow defendants to prove to the FDA that all of the defective product had already been sold, so as to avoid the need for a nationwide recall. Defendants understood that, “if the data is not favorable,” the FDA—once notified—would expect a nationwide recall.
Defendants commenced the second phase of the buy-back project in June 2009, this time contracting with another company, WIS International. The second phase was much larger in scale, designed as a mass “silent recall” of the potentially defective Motrin from about 5,000 stores nationwide. Again, the drafted instructions to field employees emphasized that the “recall” was to be conducted in absolute secrecy:
“You should simply ‘act’ like a regular customer while making these purchases. THERE MUST BE NO MENTION OF THIS BEING A RECALL OF THE PRODUCT! If asked, simply state that your employer is checking the distribution chain of this product and needs to have some of it purchased for the project.” (Capitalization and boldface in original.)
During the second phase of the buy-back, WIS sent secret shoppers to 27 Oregon stores that defendants identified as having potentially received defective product through their supply chain. Specifically, defendants knew that 828 8-count vials that could contain pills from the defective batches had been distributed and sold in Oregon. However, the secret shoppers were able to find and purchase only 41 units, leaving the other 787 8-count units unaccounted for. In other words, by the time defendants actually executed their secret buy-back project, 95 percent of the units distributed in Oregon that could have contained defective Motrin had already been sold to consumers. Yet defendants did not, at any point before or during this course of events, notify Oregon consumers or retailers that the Motrin they had purchased or sold was potentially defective. FN1.
(FN1. The amended complaint does not allege that any of the defective Motrin was ever actually distributed to Oregon retailers or sold to Oregon consumers.)
In July 2009, a WIS employee, who was engaged in covert purchases in Oregon and was concerned about defendants’ surreptitious activities, informed the Oregon Board of Pharmacy, which, in turn, notified the FDA. By July 16, 2009, defendants were aware that the FDA expected them to conduct a publicized nationwide recall, having been so informed in writing.
Seven months later, on February 17, 2010, defendants publicly notified retailers and wholesalers of the potentially defective Motrin 24-count bottles.
Eventually, a series of FDA inspections established that McNeil-PPC’s production facilities—including the Puerto Rico facility that had manufactured the defective Motrin—had failed to comply with good manufacturing practices and that drugs from those facilities were adulterated. Defendants conducted three major recalls, including the largest recall of children’s medicines in the history of the FDA. A Consent Decree of Permanent Injunction entered into with the United States required destruction of Motrin 24-count bottles and third-party supervision of its manufacturing facilities for at least 60 months.
In the light of those events, the state filed this action against defendants under the UTPA, seeking civil penalties, various forms of injunctive relief, and attorney fees and costs. See ORS 646.632; ORS 646.642. In addition to alleging the facts recounted above, the amended complaint asserted four claims for relief based on various UTPA violations. The gravamen of each of those closely related claims was that defendants’ misrepresentation of the risk that the product was defective constituted actionable conduct under the UTPA.
The state’s first claim, brought under ORS 646.608(1)(e)—which prohibits misrepresenting the “sponsorship, approval, characteristics, ingredients, uses, benefits, quantities or qualities” of goods—alleged violations stemming from defendants’ continued advertising, promotion, and offering for sale potentially defective Motrin to consumers and retailers in Oregon. In so doing, the complaint alleged, defendants represented that those products “were effective for their intended use” and “conformed with current good manufacturing practices,” knowing that there was a “material risk” that the medicine “was not effective” and had been manufactured in substandard fashion.
The second claim alleged a violation of ORS 646.608(1)(b), which bars “[c]aus[ing] likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of * * * goods.” Specifically, the state alleged that defendants violated that prohibition by failing to disclose the material risk that the Motrin caplets sold in Oregon stores “were not manufactured consistent with current good manufacturing practices.”
The third claim alleged violations of ORS 646.608(1)(g), which proscribes misrepresenting that goods are of a particular standard, quality, or grade. Defendants were alleged to have violated that provision by advertising, promoting, offering for sale, and selling Motrin 8-count vials and 24-count bottles in Oregon and failing to disclose “the material risk that the Motrin caplets contained therein were not manufactured consistent with current good manufacturing practices.”
In its fourth claim, the state alleged a violation of ORS 646.607(1), barring unconscionable tactics in connection with the sale of goods. That claim, like the others, stemmed from the alleged failure to disclose the material risk of defect, information that “would have enabled Oregon consumers to make informed decisions when purchasing a medicine that was at material risk of being ineffective and seek restitution or replacement if appropriate.” FN2
(FN2. Our descriptions of the state’s four claims are composite of the multiple counts within each claim, which separately allege violations relating to the sale of 8-count vials and 24-count bottles, and nondisclosure to consumers versus nondisclosure to retailers, among other things. Those distinctions are immaterial for purposes of our analysis.
To the extent that we refer to a “known” risk in the course of this opinion, we do so because that is what the state pleaded and argued. We express no opinion as to the potential liability under the UTPA of a defendant who fails to disclose a material risk of which the defendant did not have actual knowledge.)
Defendants moved to dismiss the amended complaint, contending that the state’s allegation of defendants’ failure to disclose a “material risk” of product defect was insufficient to state a claim under the UTPA. Defendants’ basic position—which was predicated upon their view of the “plain meaning” of the UTPA but also alluded to concepts of personal jurisdiction —was that a failure to disclose a material risk of product defect to Oregonians was not enough to establish an actionable “nexus” in Oregon unless it could be established that defective product was actually distributed in Oregon. That is, defendants posited, “the bad Motrin * * * had to have made its way into Oregon” before the UTPA could be “triggered.” Beyond that single, overarching premise that was asserted as being common to each of the state’s four claims, defendants advanced no particularized challenges to the sufficiency of the state’s individual claims with respect to the specific language of the various statutory clauses referenced by the complaint.
The state remonstrated that the complaint stated valid claims for relief, because the material risk that a product may be defective, regardless of whether it ultimately is proved to be defective, informs a rational consumer’s assessment of products in a competitive market. Given the UTPA’s remedial, consumer protection purposes, the state asserted, a manufacturer’s failure to disclose a material risk that a drug it is selling in Oregon is defective is exactly the kind of deceptive business practice that the UTPA prohibits. During oral argument before the trial court, the state further noted that—to the extent that defendants’ position was premised on the absence of pleading that defective Motrin had actually been distributed and sold in Oregon—that circumstance was directly attributable to defendants’ own highly irregular activities via the “secret shopper” campaign and failure to give prompt notice of the defective product.
The trial court, adopting defendants’ framing of the UTPA, dismissed the state’s action with prejudice, apparently in agreement with defendants’ rationale. Although it did not explain its reasoning explicitly, based on the court’s questions and commentary during the hearing, it evidently agreed with the defense that the state’s claims were categorically precluded because the UTPA did not explicitly authorize claims involving misrepresentation of “material risk” of defect, and that, in order to properly state a claim, the state would have had to allege that the defective Motrin actually reached Oregon.
On appeal, the parties substantially reiterate their arguments. The state asserts that, as a textual matter, a known material risk that a specific product is defective is a “characteristic” or “quality” of the product that negatively affects its monetary value and commercial attractiveness, and, consequently, that misrepresenting such a risk is actionable. In that regard, the state emphasizes that, in Caldwell, we held that a seller’s failure to disclose a material risk bearing on the value of a good (a mobile home) gave rise to an actionable UTPA claim. For their part, defendants counter that the text and legislative history of the UTPA, as well as decisions construing the UTPA, establish that the UTPA “prohibits only the misrepresentation of an actual fact * * * that relates in some way to Oregon,” and that a mere material risk that products sold in Oregon are defective does not qualify as such. In defendants’ view, the UTPA encompasses only misrepresentations regarding “actual facts” that are completely certain and does not prohibit representations that are “merely at ‘risk’ of being untrue.”
The trial court’s conclusion and defendants’ arguments in support of dismissal rest on the premise that a material risk of defect is, as a categorical matter, not a “fact” subject to the UTPA, and, thus, there was no actionable misrepresentation under the UTPA, as alleged in each of the state’s four claims.
Thus framed, the central question presented to us—whether claims involving misrepresentation of a known material risk are actionable under the UTPA—is one of statutory interpretation. In construing the operative provisions, we adhere to our usual statutory construction methodology, as amplified in State v. Gaines, 346 Or 160, 206 P3d 1042 (2009), and our goal is to discern the legislature’s intent.
Before addressing the operative provisions, we briefly highlight the UTPA’s underlying policies and basic structure. The UTPA is a remedial statutory scheme, “enacted as a comprehensive statute for the protection of consumers from unlawful trade practices.” Pearson v. Philip Morris, Inc., 358 Or 88, 115, ___ P3d ___ (2015); Raudebaugh v. Action Pest Control, Inc., 59 Or App 166, 171, 650 P2d 1006 (1982). As such, it is to be construed liberally to effectuate the legislature’s intent, to the extent that a proposed construction is supported by the operative text. See Denson v. Ron Tonkin Gran Turismo, Inc., 279 Or 85, 90 n 4, 566 P2d 1177 (1977) (suggesting that the UTPA “is to be interpreted liberally as a protection to consumers” and businesses alike); Wolverton v. Stanwood, 278 Or 341, 345, 563 P2d 1203 (1977) (finding a “middle ground” between a “broad reading” of the UTPA’s general policy and the inherent limits of the operative text; construing the requirement that actionable conduct occur “in the course of business” so as to apply “only to those unlawful practices which arise out of transactions which are at least indirectly connected with the ordinary and usual course of [a] defendant’s business”). Thus, our inquiry is pervasively informed by the appreciation that the UTPA is a remedial statutory scheme that should, to the extent consonant with the Gaines construct, be construed so as to effectuate its consumer protection purposes.
Consistently with those purposes, the UTPA authorizes both public and private enforcement of its provisions. The state may investigate and bring actions to enjoin and penalize violations. Unlike a private litigant, who “may bring a UTPA claim only if it has suffered an ‘ascertainable loss of money or property’ as a result of a ‘willful’ violation of the statute, [those] requirements do not apply when the state brings a UTPA claim.” Rathgeber v. James Hemenway, Inc., 335 Or 404, 413 n 5, 69 P3d 710 (2003); see ORS 646.618 (authorizing investigations); ORS 646.632 (describing state UTPA enforcement processes); ORS 646.638(1) (setting out “ascertainable loss” requirement for private actions); ORS 646.642 (authorizing enforcement of injunctions and compliance agreements and civil penalties).
The UTPA authorizes action against a panoply of deceptive and unsafe business practices, including, among other things, misrepresentations made in connection with the sale of goods. See Pearson, 358 Or at 115 (“The trade practices declared unlawful under the UTPA are extensive, too much so for description.”). Actionable representations under the UTPA “may be any manifestation of any assertion by words or conduct, including, but not limited to, a failure to disclose a fact.” ORS 646.608(2); see Pearson, 358 Or at 115 (observing that misrepresentations can occur either by misstating a fact or by failing to disclose a fact).
The UTPA’s “misrepresentation” provisions encompass a wide array of factual misrepresentations about the nature of a product, including, but not limited to, facts relating to its “source, sponsorship, approval, or certification,” ORS 646.608(1)(b); “sponsorship, approval, characteristics, ingredients, uses, benefits, quantities or qualities,” ORS 646.608(1)(e); and “standard, quality, or grade” or “style or model,” ORS 646.608(1)(g). FN3
(FN3. Related provisions, not implicated here, prohibit misrepresentations about specific or narrower categories of facts such as facts as to identity and ownership, ORS 646.608(1)(a); “geographic origin,” ORS 646.608(1)(d); and newness and originality, ORS 646.608(1)(f). More generically, a catch-all provision, ORS 646.608(1)(u), authorizes claims against persons who engage in “any other unfair or deceptive conduct in trade or commerce.”)
Those terms encompass a multitude of facts about a product’s inherent qualities, including facts that, though not specifically listed, nonetheless fall within one or several of the enumerated categories.
The sweep and scope of those provisions—both with respect to the form and content of misrepresentations—manifests the legislature’s intent to broadly prohibit misrepresentations materially bearing on consumer purchasing choices. A material risk that a product has a latent defect is exactly the kind of inherent feature of a product implicated under ORS 646.608(1) and (2). If a product is advertised and sold as effective for its intended use, notwithstanding a known risk that the product may not be fully effective, that risk itself is a “fact” for purposes of the UTPA, and its nondisclosure is actionable under the UTPA. FN4.
(FN4. A hypothetical exemplifies this understanding. A multinational auto manufacturer, which distributes its vehicles for sale in Oregon, knows that a certain percentage of its vehicles have defective gas tanks whose weaknesses can produce lethal fires, but is uncertain whether any of those actually defective vehicles have been distributed in Oregon. The manufacturer does not disclose that risk (viz., “One out of every 10,000 X-cars will blow up”) in marketing its product in Oregon. Regardless of whether it could ever be established that any of the lethal cars had actually been sold in Oregon, would that risk, if disclosed, materially affect the purchasing choices of Oregon consumers, either by way of purchasing an alternative competing product or by paying less (perhaps much less) for an “X-car”? The answer is patent.
We acknowledge that the assessment and determination of materiality can, and will, vary in different circumstances, depending on the nature of the product and the likelihood and severity of the risk. However, here, we are not called upon to explore the contours of that matter, because defendants’ position—and the trial court’s ostensible concomitant rationale for dismissal —was categorical: viz., nondisclosure of risk qua risk is not an actionable misrepresentation under the UTPA.)
That conclusion comports with our analysis and holding in Caldwell. There, the buyer of a mobile home brought a UTPA claim against the seller, Pop’s Homes, alleging that it had misrepresented the status of the mobile home’s location in a trailer park when the defendant seller had known of, but not disclosed, a risk that the mobile home could not remain there. 54 Or App at 106. The buyer had contacted the defendant, which was in the business of selling used mobile homes on consignment, with the express purpose of buying a mobile home already set up for occupancy in a trailer park near downtown Portland. The defendant, which had separate sales offices for “in-park” mobile homes (located in and set up for occupancy in parks) and “lot sales” (for mobile homes on the premises and without a space in a park), had directed the buyer to its in-park sales office. Id. at 107. After being shown two mobile homes in the same park, the buyer, interested in one of them, asked the defendant’s sales representative why its owner was selling. The representative responded that the owner wanted a larger space. The defendant, although it had information that the owner was selling because the trailer park “was being sold,” did not disclose that information to the buyer. FN5. Id. at 108.
(FN5. It is unclear whether, at the time that representation was made to the plaintiff, the defendant was aware that the park was up for sale—and therefore at risk of being sold—or whether a sale was already pending. See id. at 108-10.)
A month after moving in, the buyer learned that the property had been sold and would cease to operate as a trailer park, and that he had to vacate in 120 days. Id.
The buyer sued the defendant under ORS 646.608(1)(e) and prevailed before a jury, but the trial court entered a judgment notwithstanding the verdict in favor of the defendant. Id. at 106. On appeal, we reversed, holding that the defendant’s failure to disclose the change in ownership of the trailer park to the buyer constituted a false representation under the UTPA. We explained:
“In this case, defendant is charged with failing to tell plaintiff that the park was being sold. The testimony established that a mobile home’s value would be substantially decreased if it had to be moved. The permanency of the location of the mobile home in the park was therefore both a ‘characteristic’ and a ‘quality’ of the home under ORS 646.608(1)(e). A change in ownership of the park obviously jeopardized an owner’s ability to keep the mobile home * * * in situ. Failure to communicate this fact constituted a false representation concerning a characteristic or quality of the mobile home. The trial court’s ruling to the contrary was error.” Id. at 110.
Thus, in Caldwell, we held that a seller’s failure to disclose a known risk of some significant event or circumstance bearing materially on a buyer’s purchasing decision is an actionable misrepresentation of a “characteristic” and “quality” under the UTPA. So too here. Just as in Caldwell, where the undisclosed risk that the mobile home might have to be relocated in the near future was a “characteristic” and “quality” whose nondisclosure was actionable, here, the undisclosed risk of product inefficacy—bearing materially on Oregon consumers’ purchasing decisions (assuming, again, the truth of the allegations of the amended complaint)— constituted an actionable misrepresentation of “fact” for purposes of the UTPA.
Defendants’ effort to distinguish Caldwell is unavailing. Specifically, defendants assert that the actionable misrepresentation in that case was limited to the omission of the certain fact of the trailer park’s impending sale, and did not encompass the corresponding risk concerning the mobile home’s location. That argument ignores our fundamental characterization of the misrepresentation in Caldwell: “The permanency of the location of the mobile home in the park”—a feature that an impending change in ownership “obviously jeopardized.” Id. In other words, the essential nondisclosure in Caldwell related to the then-existing risk, created by the park’s pending sale, that the mobile home would have to be moved from the park—a risk bearing materially on the buyer’s purchasing decision.
Defendants further contend that—regardless of Caldwell—Paul v. Providence Health System-Oregon, 351 Or 587, 273 P3d 106 (2012), establishes that claims predicated on a misrepresentation of a material risk of defect are not actionable under the UTPA. In Paul, the plaintiffs brought a private UTPA action after “computer disks and tapes containing records of 365,000 patients” were stolen from the defendant’s employee’s car. Id. at 589. The plaintiffs claimed that they were threatened with a loss of money due to the theft of their personal data and sought damages for funds expended to forestall those threatened losses. The Supreme Court concluded that the complaint failed to state a claim, holding that a private UTPA litigant’s burden to allege “ascertainable loss of money or property” could not be satisfied by “such speculative losses as the risk of identity theft.” Id. at 603 (emphasis in original). That holding, predicated exclusively and explicitly on a private UTPA litigant’s burden to allege and prove “ascertainable loss,” see ORS 646.638(1), is inapposite in the context of a UTPA enforcement action by the state. As noted, the “ascertainable loss” requirement does not apply to such actions. Rathgeber, 335 Or at 413 n 5.
Finally, we reject defendants’ suggestion that, without an allegation (and consequent proof) that defective product was actually distributed in Oregon, no actionable conduct occurred in Oregon for purposes of triggering the UTPA. The actionable conduct was the failure to inform Oregonians of a known material risk that the Motrin they were purchasing might be defective. That conduct was legally sufficient to establish the requisite nexus under the UTPA. FN6.
(FN6. We reject without amplification defendants’ remaining arguments, including their invocation of contextually inapposite statutes.)
We end, as we began, with reference to the overarching consumer protective purposes of the UTPA and our obligation to construe its provisions, to the fullest extent consonant with Gaines, to effectuate those remedial purposes. The construction we adhere to today comports with Caldwell and effectuates the UTPA’s remedial purposes. Conversely, defendants’ construction would sanction calculated nondisclosure and manipulative suppression of information materially bearing on the purchasing choices of Oregon consumers.
The trial court erred in granting the motion to dismiss. That error, in turn, requires reversal of the court’s award of attorney fees to defendants.
Reversed and remanded.
One thing most people don’t realize is that auto repair is totally unlicensed and almost-totally unregulated in Oregon — anyone call call themselves a mechanic and open an auto repair shop, no questions asked by anybody, no proof of qualifications or required certifications needed.
The one repair shop law requires anyone who takes money for doing car repairs to give you a written estimate beforehand, and to update the written estimate as more problems are discovered. This law was passed because sleazy repair shops would give consumers a real low-ball estimate to get the car into the shop, disassemble it, and then lower the boom on the consumer once the car couldn’t be driven away.
However, even this law is essentially toothless, because there is no law that requires repair shops to buy an insurance bond to protect consumers. That means that, if you don’t get an estimate, or if your repair guy winds up leaving your car worse off than when you brought it in, you will have to sue for the damages, and there’s nothing saying that he will have any assets you can recover from if you win.
So the key with repair, as with purchases, is to prepare for battle at home, before you step onto the dealer’s lot or go to the repair shop. And if you live in an DEQ emissions-testing area, never buy a car on a weekend or after testing hours on weekdays — your test drive of the car (you do a test drive, right?) should be directly from the dealership to the DEQ test facility, where they will give you a free emissions check. Not a formal test, but a good indication if the car you are thinking about will fail or not.
One thing to always know about purchases at an Oregon car dealer’s lot: There is no 3-day right of rescission for a car purchase or lease, even if you do not yet have final approval of financing
Before You Go To The Dealer
Know the fair purchase price of the car you want. Edmunds and Kelley Blue Book are good resources to compare different cars and make an informed decision about which car (or cars) best suite you and how much you should expect to pay for them. The salesman will likely negotiate based on the sticker price, which may be higher than the fair purchase price.
Do the math. Before going to a dealer, calculate the total maximum price you can afford or want to spend for a vehicle, and then figure out what monthly payments fit that budget. People who go to dealers without such knowledge and negotiate based solely on what they can pay per month usually end up paying more over the life of the loan.
Research your financing options. Often the best rate on a new car is offered by the dealership when the manufacturer is offering special rates. If you are not looking to purchase a new car during a sales event or are looking to purchase a used car, check with your bank or credit union to determine the best rate available to you. Compare those rates to those offered when you visit the dealer. You may be able to pre-qualify with a bank or credit union to lock in a rate before you go to the dealer.
Know your score. Check your credit score before you go to a dealer to make sure you are aware of any shortcomings you may have. You can request your credit report for free once a year by visiting www.annualcreditreport.com, however you have to pay to see your credit score. Knowing your credit score will help you determine if you may be able to qualify for better financing. Learn more about building your credit score.
Choose a dealer that you can trust. Be Informed is an online tool for consumer to search DOJ’s database of consumer complaints to see if other people have contacted our consumer hotline with concerns about a business before they do business with them. Many customers also share their experiences with local businesses, both good and bad, by posting consumer reviews online.
Negotiating The Deal
Remember: Everything is negotiable. Never buy a car in a hurry. Be prepared to take as long as several weeks to find and negotiate the deal you want. Keep in mind that everything is on the table – no matter what the salesperson says. This includes:
· The price of the vehicle you are buying
· The trade-in value of your current vehicle
· Your financing options
· Insurance and service contracts
Do not negotiate on monthly payments alone. Make buying your new car, selling your old car, and financing your new car three separate transactions. This helps you understand exactly what you are paying for each step.
Get the best interest rate. Always ask the dealer if the interest rate being offered is the lowest rate he or she can offer and whether it includes a profit for the dealer. You may be able to pre-qualify with a bank or credit union to lock in a better rate before you go to the dealer.
Don’t lower your monthly payments by opting for a longer loan term. Lowering your monthly payments by adjusting the length of the loan may seem like a good idea at first, but it may cause you to pay thousands of dollars more in interest over the term of the loan. What’s more, vehicles begin to depreciate the moment they leave the lot and continue to do so every year after. The longer the term of the loan, the more likely it is for the value of the car to fall below the amount left on the loan. This creates “negative equity.” If you later decide to sell or trade-in a vehicle for which you owe more than it is worth, you will still be responsible for paying off the negative equity.
Beware the “numbers game.” Do not assume salespeople are your friends – no matter how friendly they may be. Their job is to sell you a car. Most are paid on a commission basis, so the more you spend the more money they make. This includes the person who goes through your financing options and final paperwork with you. They also get commission for selling additional products such as service contracts, add-ons and other services like credit life insurance. Many of these products have a very high profits margin.
Avoid the numbers game by making sure you understand the total cost of the vehicle and services being offered. If you just negotiate based on monthly payments, it is even easier to get tricked into paying more than you need to.
The Attorney General offers the following adivce to avoid losing at the numbers game:
· Take notes. Once you have agreed on a price with a dealer, make written notes of what the agreement is and stay alert. Make sure to include the cost of each item.
· Bring a calculator. Some dealers will try to change the deal later without you noticing. Compare the agreed-upon prices with the prices listed in the purchase agreement and make sure they add up to the same price before you sign anything. For example, you may think that you are getting a great deal on your trade-in, but in exchange the dealer may have increased your interest rate.
· Take someone with you. They can take notes while you ask questions. Two people are less likely to miss something.
· Do not believe a salesperson that tells you that additional products or services are free or included in the cost of the car. Pay close attention to the purchase agreement to verify there are no hidden charges or fees before you sign it.
· Be cautious about purchasing aftermarket add-ons or treatments offered by the dealer. Examine the cost and need for such extras and whether you can afford it. Some add-ons are unnecessary, or are significantly overpriced, and may greatly increase the price or cost of your overall financing.
· Ask to take a copy of the purchase agreement home with you. It is well within your rights to keep a copy of every document you sign – in its entirety.
Closing The Deal
At any point in the negotiations, be prepared to walk away. You have no obligation to sign a contract … especially if it is not on the same terms you thought you agreed on. After you have agreed on a deal with the sales department, you will be taken by the salesperson to the finance and insurance representative. If you are told that he or she will fill out the paperwork, watch out – in some dealerships the finance and insurance representative will try to change your agreement without you catching on.
Be very careful what you sign. Make sure that all promises made by the salesperson or dealership are in writing. If a contract has terms substantially different from what the salesperson initially promised, do not sign the contract unless you are willing to accept the new terms.
Take your time. Do not let anyone rush you to sign paperwork without reviewing the terms of the agreement. Read all documents and understand all terms before you commit to them.
Do not lie. Do not allow false information on any forms and beware a salesperson who suggests putting false information, such as a higher income or a larger down payment, on your finance application. While financing may be approved, the payments may be difficult for you to make. If something goes wrong, you will be held accountable for the false information.
Do not sign a blank contract or application. Do not sign anything that contains blank spaces – especially on any contracts or credit applications. Draw a line through all blanks on documents you sign.
Stick to the plan. Unless you have done comparison shopping with an insurance agent, try to resist buying life or disability insurance from a dealer. You cannot be required to buy other products, in order to finance or purchase a vehicle. Beware of a salesperson that tells you that you cannot be financed unless you purchase these products.
Get an expert opinion. If you are purchasing a used vehicle, have a trusted mechanic inspect the vehicle before you buy. This may cost around $100 or more, but could save you thousands in the long run.
Free DEQ Emissions Test. A used vehicle in good condition will still fail an emissions test if the exhaust sensors have been tampered with or disabled. If you visit a DEQ Clean Air Station during a test drive and ask for a “voluntary” test, you can receive a free emissions test before you close the deal.
Processing the paperwork. Dealers may charge up to $75.00 for processing your paperwork with DMV. Dealers may charge up to $100.00 for electronically processing your paperwork with DMV and providing you with a license plate at the time of sale. These are not government mandated fees, and are also negotiable prices. However, a dealer can refuse to sell you a vehicle if you do not want to pay either $75.00 or $100.00, the same as if you and the dealer do not agree on the price of any other term, such as the price of the vehicle.
You do not have to pay sales tax on any vehicle purchased in Oregon. If you are buying a car in another state, make sure the dealer fills out paperwork for Oregon residents so that you do not have to pay sales tax.
In Oregon, you can take a new or used car home before financing is approved. This practice is called “spot delivery” and is designed to lock you in to a purchase. If you are tempted to do this, take a moment to read up on the Yo Yo Scam before you drive off the lot in a car without approved financing. There is no 3-day right of rescission for a car purchase or lease, even if you do not yet have final approval of financing. However, if you cannot get financed at the exact same terms for which you signed an agreement, or if the financing is not completed within 14 days, you must bring the car back to the dealer and the dealer must give you back your trade-in vehicle and down payment.
Choosing an Auto Mechanic
Oregon consumers can follow a few basic guidelines when looking for an affordable, reliable auto mechanic.
Do your research. Ask friends and family for references, and look for a garage that services your specific make and model. Edmunds.com provides free, third party automotive information, tools and services for consumers.
You can also search Be Informed, DOJ’s online tool, to find out whether other consumers expressed concern about a particular mechanic. Many customers also share their experiences with local businesses, both good and bad, by posting consumer reviews online.
Check credentials. Look for indications of being certified by nationally recognized organizations such as the Automotive Service Excellence (ASE), or AAA approval. Although these endorsements do not always guarantee a mechanic is honest or does good work, it is an indication that the mechanic meets basic standards of knowledge and competence in motor vehicle repair.
Know your warranties. Ask if the repair shop offers a repair warranty on parts and labor, or if the parts come with a warranty.
Know your rights. Under Oregon law, vehicle repair shops must provide consumers with a written estimate for vehicle repair costs, and receive the owner’s approval based upon the written estimate, prior to repairing or tearing down their motor vehicle.
If you believe a mechanic has performed work on your vehicle without your authorization, or if you have any other grievance against an Oregon mechanic, file a complaint with the Attorney General’s Consumer Hotline or call 1-877-877-9392.
Credit Scores & Credit Reports
When it comes to your finances, your credit score (also known as FICO score) is very important. The higher your credit score, the more likely you are to have banks competing to offer you lower and lower interest rates when you apply for a loan. A bad credit score can make it very difficult to even qualify for a loan, let alone a low interest rate. Potential landlords, insurance companies, and utility providers such as cell phone carriers may also take your credit score into consideration before renting to, or doing business with you.
Several types of data are factored into your credit score. In general this data is grouped into five categories – each accounting for a certain percentage of what is factored into your credit score:
- Payment history – paying your bills regularly and on time will have a huge impact on your score.
- Amounts owed – the amount of debt you owe vs. the amount you have been approved to borrow from (your debt to credit ratio).
- Length of credit history – the length of time you have held your accounts. The longer you have held a line of credit the better.
- New credit – the number of recently opened accounts or credit inquiries. Opening new accounts can cause your score to drop slightly. Maintaining your accounts in good standing for a longer period of time will increase your score.
- Types of credit used – your score will be higher if you are able to responsibly juggle a variety of different types of accounts including credit cards, installment loans (like a car loan), mortgages and retail accounts.
Even for people with poor credit, improving your FICO score is possible, but you must be vigilant. Always pay your bills on time, pay down your debts and keep tabs on your credit report.
Credit reports. Check your credit report to make sure you are aware of what your shortcomings may be or to spot any inaccuracies that may be on it. You can request your credit report for free from each of three reporting bureaus every year by visiting www.annualcreditreport.com, however you will have to pay to see your credit score. There are other companies that offer credit reports, but will require you to buy a product or service before you can access your report.
Correcting errors on your report. Consumers have the right to challenge incorrect information contained in their reports. If you suspect an error your credit report, contact the credit reporting agency in writing and tell them what information you think is inaccurate. Submit paper copies (not originals) of any documents that support your position. If you do so, the credit reporting agency must investigate its accuracy. You may also dispute the information in question with your creditor. Notify your creditor in writing that you wish to dispute an item and be sure to include copies (again, not originals) of any supporting documentation. In either case, if the error is confirmed it must be removed from your credit report.
Identity theft. If you notice something strange on your credit report and suspect that you may have been a victim of identity theft, please contact the Department of Consumer and Business Services. More information is available on this site on how to protect your sensitive information and prevent identity theft from happening in the first place.
Instead of making citizens request information, it’s time to make openness the default setting for all Oregon governments instead of just empty rhetoric:
1) All public work would be stored on fully open servers and indexed continually as created.
2) Instead of citizen public records requests, officials would have to ask for and get the OK to create or store any records outside the fully open systems.
3) Records would be “Born Free” instead of born hidden and then only released on request.
The Public Records Act was intended to ban that kind of response, and create a default position of openness based on the idea that citizens in a democracy have a right to know what was being done in their name, and that we all have a right to know how the decisions are made, who influences them, and what was considered. But the many interests who prefer to operate outside the public view have been tireless in throwing up shade barriers, and so the “sunshine” is now less and less bright.
The whole public records act process in Oregon, as elsewhere, has become a bureaucratic swamp of agency evasion, vindictive fees and delay, because they are all baked into the very basis of a public records act where the citizen approaches the government on bended knee with a request for a record, and the government gets to decide whether or not it understands the request, how long it will take to understand the request, how much it will charge the citizen to come to that understanding, and how hard it will fight to oppose the request.
Thus, it is now time to give up on the idea that openness is optional, and that government is to be trusted to consider citizen requests and restrict refusals to produce records to a short list of obvious exceptions.
Instead, Oregon must move to a system where all public records are stored on openly accessible servers that anyone can access day or night and browse, anonymously and freely, without charge, and the records must be indexed so that the records are intelligible.
In this world, the only time citizens will need a public records act request is when a public official has completed the lengthy and somewhat difficult process of getting approval to create and store certain records outside the publicly accessible servers, a process that will create a trail to follow so that the citizen-requester can know that the record exists, who has it, and the reason it’s not already available, so that the citizen can challenge the rationale.
We don’t need more training for officials on how to handle public records requests — what we need are systems that make public record requests unnecessary 99.99% of the time, because all the records are either automatically accessible or indisputably not appropriate for public disclosure — with the burden on the creator of the record to obtain that status before storing the record out of public view.
Below are selected excerpts from the Secretary of State report.
One way agencies can improve transparency is to use technology to be proactive, rather than reactive – that is, simply make public information available upfront, rather than waiting for the public to ask for it. This is the motivation behind Oregon’s Open Data Portal, located at data.oregon.gov.
Several agencies have taken similar action. For example, the Oregon State Board of Nursing posts several types of public information online, including disciplinary actions against licensees. The Oregon Liquor Control Commission posts information about licensed businesses and new license applications it receives.
This kind of proactive accountability is beneficial both for agencies and for requesters. Requesters are able to quickly and easily locate information, eliminating the need for certain public records requests. Agencies, in turn, receive fewer requests and are able to devote more time and resources to unique requests or their other duties.
It does, however, come with its own risks. The Employment Department, for example, told us it has considered putting some information online – but certain information, due to confidentiality, simply cannot be posted. Agencies must be careful about the records they post online to avoid accidentally sharing sensitive or confidential information.
We have built a needlessly costly and complicated system on a premise that records are born hidden, and can be brought to light through a request and response system that allows for bureaucratic discretion in responding to the requests.
That system needs to be ended and completely reinvented in a simpler way. We do not need more expensive tweaking of an already groaning system that is riddled with politically motivated exceptions that flourish in any such discretion-based system.
As Copernicus showed in demolishing the Ptolemaic celestial model, the best solution to this kind of problem is often to rethink the fundamental premise of the problem, the one that is creating the cascade of smaller problems, not to keep adding refinements to correct the problems caused by the last refinements.
To bring more consistency to agency responses to public records requests, the Department of Administrative Services should provide statewide guidance and training on:
§ procedures for handling non-routine and complex public records requests, including communicating with requesters regarding fees and timelines;
§ procedures for the use and retention of electronic communication, including text and instant messaging as they relate to public records law; and
§ procedures for the use of personal devices and personal email accounts, as they relate to public records law.
To address the variation in fees charged by state agencies, the Department of Administrative Services should also consider:
§ creating rates to charge for the cost of copies of public records; and
§ identifying rates to charge for labor for state employees working on public records requests.
To improve responses to public records requests, state agencies should create policies and procedures based on the guidance to be provided by the Department of Administrative Services, and:
§ implement a record management program or process that fits the needs of each agency (e.g. HPRM or another system);
§ create goals for turnaround time that fit agencies’ processes based on past experiences with responding to requests;
§ create and keep a tracking mechanism, such as a log, to measure adherence to turnaround time goals and to track documentation related to each request; and
§ identify frequently requested information and consider proactively making the information available (e.g., posting more information on agency website or the Oregon Transparency Website).
To address concerns regarding high fees and long turnaround times for public records requests, the Oregon Legislature should:
§ consider creating a third party, such as an ombudsman, to review disputes over non-routine requests; and
§ take into consideration the results of the Attorney General’s task force for any recommended changes to the public records law.
Most public records requests should never have been necessary because they require no thought to fill and there was no reason that the information should not already have been available to the requester. But whenever a request seeks anything that doesn’t fall into the “shouldn’t have needed a request to get this,” category, the system breaks down, because it inherently tasks bureaucrats with the terrifying responsibility of approving release of information that they may not themselves understand, so the bureaucrat’s natural response is to seek additional internal reviews and approvals to find and assess whether anyone will get in trouble for releasing the information. This review wastes vast amounts of resources because people have to stop doing productive work simply to review requests for records of past work. The system is erratic in trying to recover those costs and agencies are adept at using cost-recovery to discourage public insight into their doings.
State Agencies Respond Well to Routine Public Records Requests, but Struggle with Complex Requests and Emerging Technologies
Oregon state agencies respond well to most public records requests for routine information, but the infrequent complex requests produce challenges. As a result, some requesters believe that agencies deliberately discourage, delay, or block the release of public information.
The Department of Administrative Services should provide guidance and training to help agencies develop procedures, and agencies should create timeliness goals for responding to requests. Better monitoring, consistent fees, use of technology, and third-party mediation could also help with the retention and disclosure of public records and improve trust in Oregon’s government.
Oregon’s public records law was enacted in 1973. Known primarily as a law of disclosure, the law grants all citizens within the state of Oregon the right to inspect all records – with some exceptions.
When the law first passed, it included 16 classes of records that could be exempt from disclosure for a total of 55 exemptions. Changes and revisions since that time have raised the total number of exemptions in Oregon law
to more than 400. The intent, however, remains the same: that Oregon’s government is accessible and transparent to its people.
For our audit, we examined nine agencies of varying sizes and missions to capture a fuller picture of public records in Oregon state agencies. The nine agencies were:
§ The Department of Human Services
§ The Oregon Employment Department
§ The Department of Environmental Quality
§ The Public Employees Retirement System
§ The Oregon Liquor Control Commission
§ The Oregon Department of Education
§ The Oregon Real Estate Agency
§ The Oregon State Board of Nursing
§ The Board of Parole and Post-Prison Supervision
Agencies handle routine requests well, struggle with complex ones
We found that public records requests generally fall into one of two categories. The first is routine requests, or common requests for information that agencies have easy and ready access to. These requests, which generally make up 90 percent or more of an agency’s total requests, can be fulfilled at little to no cost and within a couple of weeks.
The other category is non-routine or complex requests. These are voluminous in scope, ask for “any and all” information, or are otherwise complicated for an agency to complete. These are the requests that can take weeks or months to fulfill and often at a high cost.
In the selected files we reviewed, we found no evidence to suggest that agencies were regularly taking an unreasonably long time, or charging unreasonably high fees, to respond to records requests. But when agencies struggle to respond to complex, non-routine requests, it can foster suspicion and distrust, which in turn can undermine the credibility and transparency of both the agency and Oregon government.
To address this distrust, some states and provinces have established a neutral, third-party entity that helps mediate disagreements between requesters and agencies. An ombudsman or commission can help determine when a request is too broad or when an agency is taking an unreasonably long time to respond. Oregon has no such mechanism. The Attorney General’s role is limited to denials based on exemptions and fee waivers.
Agencies retain public records longer than required
It is important that agencies properly retain and manage their public records so they can be efficiently located and disclosed in response to a records request. To do this, agencies must follow their retention schedules – guidelines, created and authorized by the Archives Division, that determine how long certain records must be kept before they are destroyed or transferred to the State Archives for permanent retention.
But we found that agencies are keeping too many records for too long, resulting in a large volume of information. Some employees are too cautious about accidentally deleting or losing track of a public record, and so have a tendency to “keep everything.”
We found that better management tools and specific training on the issue of record retention may help state employees better manage records. This can reduce the volume of public information statewide and assist agencies to more efficiently respond to public records requests.
Exemptions remain an issue and may require a closer look
Exemptions – those instances in which a record may be exempt from disclosure – make up a major portion of Oregon’s public records law.
Agencies generally understand which exemptions most commonly apply to the records in their care. But due to the sheer number of exemptions in the law, including how they are worded and where in statute they are located, staff sometimes must consult with experts or the Department of Justice.
There is a perception among some requesters that agencies inappropriately use exemptions to block the release of public information. Most of Oregon’s exemptions are applied at the agency’s discretion. After weighing the public interest, these records may be disclosed even if an exemption applies. The exception is confidential information, which is legally prohibited from release.
These issues regarding exemptions are not new. After a national report gave Oregon a failing grade in government transparency eight years ago, state officials closely examined the law and accepted feedback from requesters and public officials. Their findings, published in 2010 as the Attorney General’s Government Transparency Report, found that “Any meaningful overhaul of Oregon’s public records law must reorganize and make coherent sense of the numerous exemptions.”
A bill was subsequently introduced in the 2011 legislative session to address some of these recommendations, but it failed to pass. A task force was recently convened by the Attorney General to examine in greater detail the issues of exemptions in Oregon law.
Variations in responses frustrate some requesters
Requesters expect their government will be transparent and open, that fees charged for requests will be reasonable and records will be made available as quickly as possible. They expect agencies that fail to do so will be held accountable.
But variation among agencies’ responses to records requests – in both fees and timeliness – can lead to confusion and frustration among requesters when they are not sure what kind of response to expect.
Agencies charge differing fees to provide public information. This variation extends to both the fees for copying costs and the charge for staff time to respond to a request. Agencies charge anywhere from $0.05 to $0.25 per page in copying costs, and from $15 to $40 per hour for staff time.
We also found a time variation among agencies in responding to requests, due largely to the differences between routine and non-routine requests. First, agencies have varying internal guidelines for what it means to be timely, if they have any internal guidelines at all. Second, timeliness depends largely on the type of request an agency receives. We found that routine requests were fulfilled within 14 days, while non-routine requests could take upwards of 265 days to fulfill.
We saw no evidence to suggest that adding a specific deadline in law would positively affect agencies’ abilities to respond to requests in a timely fashion. But agencies that set internal guidelines or goals to respond to requests hold themselves accountable to requesters while maintaining the flexibility provided in Oregon law.
Agencies are not keeping up with changing technologies
Oregon’s public records law was updated in 2011 to extend the definition of a public record to electronic or digital messages. Agencies have taken a longer time to update their own policies to include emerging technologies such as email, text, and instant messages.
More than half of the agencies we examined had policies to address email as it relates to public records. But only one agency had specific language to address the use of a personal or private email account in conducting the public’s business. Only one agency had a policy to address the use of instant messages, and no agencies had policies regarding text messages, as public records.
A few agencies have adopted policies to address social media, which appear to draw language from the Social Networking Media guide provided by the Department of Administrative Services.
Technologies like those mentioned above have changed how government and its agencies communicate with the public. Technology can also help agencies improve transparency by being proactive and making information available online. Several agencies have done so with commonly requested information, which can help reduce the overall number of public records requests.
Our recommendations are addressed to three groups: the Department of Administrative Services (DAS), all state agencies, and the Oregon Legislature.
We recommend the Department of Administrative Services create statewide, standard rates for copying and rates for employee labor, to resolve some of the inconsistency in public records requests fees statewide. We also recommend they provide guidance to agencies regarding communication technologies as they relate to public records, including personal email, text and instant messages, and social media.
For agencies, we recommend they create policies and procedures to clearly address communication technologies under the guidance of DAS. We also recommend they adopt tools to help manage both record retention and public records requests.
For the Legislature, we recommend they consider creating a neutral third- party, such as an ombudsman, to mediate disputes between requesters and agencies. We also encourage them to consider the forthcoming results from the Attorney General’s task force for any recommended changes regarding the public records law.
Of particular concern is the number of findings that continue to be uncorrected year after year.
Figure 5 illustrates compliance requirements that have had control weaknesses or noncompliance for several years. The Department of Human Services is responsible for most of the weaknesses that remain uncorrected. This may not be surprising as the department is responsible for administering many large federal programs. The programs with uncorrected weaknesses at the Department of Human Services represent $2.8 of the $10.6 billion received by the state and affect the following large programs: Foster Care, Adoption Assistance, Temporary Assistance for Needy Families, Supplemental Nutrition Assistance, and some portions of Medicaid. The size of these programs underscores why it is important to correct these weaknesses so they don’t continue from one year to the next. Figure 5 shows the types of federal requirements that tend to have findings that carry forward from one year to the next.
Corrective action taken on federal findings
Audit findings include recommendations that address noncompliance and internal control weaknesses. In response to audit findings and recommendations, state agencies must design a corrective action plan to submit to the federal granting agency. Federal agencies issue a decision on the findings including the questioned costs the state will be required to repay. During future audit periods, we are required to determine whether agencies have taken corrective, partial, or no action. In fiscal year 2014, we reported on the status of 33 findings from prior years because they remained uncorrected at the end of the fiscal year. The number of uncorrected prior year findings increased by 50% from fiscal year 2013.
Historically, many findings remain uncorrected from one year to the next because the agencies don’t correct the underlying issues leading to noncompliance or control weaknesses. When a finding is not corrected, we must re-issue the finding the next year. Figure 6 presents the action taken over the last five years on prior year findings that remained uncorrected at the end of each the fiscal years shown.
“Last year we reported that some agencies appear to rely on auditors to identify mistakes that should be detected by the agency’s control processes.“
Background and Statistics
Specific procedures, prescribed by the Federal Office of Management and Budget (OMB), are used to determine the federal programs selected for audit each year. High risk programs are required to be audited, which includes programs with prior year findings, and large expenditure programs that have not been audited in the most recent two years. At least 50% of total federal expenditures are required to be audited each year. However, due to internal control and compliance weaknesses, auditors had to increase that coverage for fiscal year 2014 to 74% of the state’s total
federal expenditures in order to meet audit requirements set by the OMB. Figure 7 below shows the five-year history of audited programs.
Programs audited in consecutive years were due to weaknesses identified in a prior year.
When agencies do not correct program weaknesses, we are required to re-audit the program, resulting in diverting audit efforts from other areas that warrant attention.
Keeping the State of Oregon Accountable, Fiscal Year 2014
As the state’s independent auditors, every year we audit the State of Oregon’s financial statements. Among the billions of dollars of transactions, each year we find errors amounting to millions of dollars due to incorrect coding of financial transactions or misinterpretation of Generally Accepted Accounting Principles (GAAP). We propose adjustments to correct errors and we report findings with recommendations to strengthen controls.
The Departments of Education, Administrative Services, and Human Services/ Oregon Health Authority reduced the dollar amount of errors requiring audit adjustments this year, while some other agencies showed increases in the amount of errors. Overall, this year’s audit results showed improvement over last year. While the improvements shown may reflect increased efforts by some agency management to implement better controls over accuracy, we have found that diligence is required to ensure accuracy of accounting records continues to improve.
Our annual financial audit provides the state with our professional opinion about the completeness, accuracy and validity of the state’s accounting information. Accurate and reliable accounting data is crucial to ensuring state dollars are properly spent and provides a starting point for the next budget cycle. State agencies use financial data to create budget requests for the Oregon Legislature to allocate the state’s resources. Without an accurate accounting of the revenues, expenditures, assets and liabilities of the state, the Legislature doesn’t have correct information to budget for the future.
Our services also include audits of the state’s administration of major federal programs that provide billions of dollars in federal revenue to the State of Oregon. Every year, our audit results show state agencies are out of compliance with federal requirements because the agencies’ controls are not adequate to administer federal programs in accordance with federal requirements. The common errors we find in federal program compliance often continue from year to year and are slow to be resolved.
For more information about audit results, see the reports listed on our website:
Oregon’s Financial Statements:
Single Audit (including Federal Compliance) Results:
Summary of the Financial Statement Audit
We reported 11 weaknesses related to internal controls over financial reporting for the fiscal year ended June 30, 2014 and 7 weaknesses from prior years that remained uncorrected. We proposed 26 audit adjustments at nine state agencies to correct about $200 million in financial reporting errors. The proposed adjustments affected 55 different financial statement accounts, with five accounts requiring adjustments of at least $30 million. This year shows improvement over last year when we reported twice as many weaknesses in internal control and several more adjustments that accounted for $1 billion in misstatements.
Last year we reported that some agencies appear to rely on auditors to identify mistakes that should be detected by the agency’s control processes. Improvements were noted at a few agencies; for example, management at the Department of Human Services and Oregon Health Authority initiated training this year for financial services staff to better understand the proper application of GAAP. In particular, they implemented procedures to report expenditures in the appropriate year, which resulted in fewer audit adjustments for their agencies. Although there is noticeable improvement, over half of the adjustments proposed for the state’s financial statements were to correct errors in the Department of Human Services and Oregon Health Authority financial information.
We issued an unmodified opinion on the state’s financial statements. An unmodified opinion means the state’s financial statements, as corrected, are fairly presented in conformance with GAAP. Figure 1 presents a summary of the state’s financial statements for fiscal year 2014.
Summary of the Single Audit
Significant control weaknesses identified in multiple federal programs
We audited 20 federal programs representing $8.5 billion in federal funds
to determine if the state was compliant with federal program requirements.
We found the Department of Human Services and Oregon Health Authority did not establish adequate internal controls and were not materially compliant with federal requirements for three programs: Foster Care, Adoption Assistance, and Medicaid. We issued qualified opinions on these three programs in fiscal year 2014.
A program receives a qualified opinion if we find a department’s internal controls will not reasonably prevent or detect significant noncompliance in a timely manner. For these programs, we identified control weaknesses and noncompliance in the areas of allowable activities/costs, eligibility, period
of availability, reporting, and special tests and provisions.
Figure 2 presents federal programs with qualified opinions over the last five years.
Authority, Purpose, and Scope
The State of Oregon’s management is responsible for preparing annual financial statements, preparing a schedule of expenditures of federal awards, maintaining effective internal controls, and being accountable to the citizens of Oregon for its use of public monies.
The financial statements provide a comprehensive view of the state’s financial activities during the fiscal year (Statement of Activities) and an overall picture of the state’s financial position at the end of the fiscal year (Statement of Net Position). The management of each state agency is responsible for maintaining effective internal controls over financial reporting and ensuring financial information is complete and accurate. Statewide Accounting and Reporting Services (SARS), part of the Department of Administrative Services, is responsible for preparing the state’s financial statements in accordance with Generally Accepted Accounting Principles, which are numerous and complex. SARS prepares the financial statements by providing guidance and training to agency staff throughout the year, compiling financial information from more than 100 state agencies, and making numerous accounting adjustments to ensure amounts are properly reported.
The Secretary of State Audits Division is responsible for expressing opinions on the state’s financial statements. We conduct our work following Government Auditing Standards applicable to financial audits, which require that we plan and perform the work to obtain reasonable assurance about whether the financial statements are materially correct. The work includes examining evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by state management, as well as evaluating whether the financial statements are presented properly. The Audits Division audits the state’s financial statements, schedule of federal awards, and major federal programs on an annual basis. We conduct the annual statewide Single Audit, which is required by the federal government for Oregon to continue to receive federal financial assistance. The purpose of the fiscal year 2014 audit was to:
§ Determine if the amounts reported in the State of Oregon’s financial statements were materially correct and adequately supported;
§ Review internal accounting and compliance control procedures;
§ Determine whether the Schedule of Expenditures of Federal Awards (SEFA) is presented fairly in relation to the state’s financial statements; and
§ Evaluate the state’s major federal programs for compliance with applicable laws, rules, and regulations.
Rapier, who got his start in the “oil bidness” has made a name for himself by writing – prolifically — accessible books, articles, presentations, blog posts, primers, and probably graffiti about energy. His writing is always straightforward plain English, and it is imbued with a belief in the power of honest reporting and a touching faith in the willingness of Americans to accept the fundamental law of the universe and engineering: “There ain’t no such thing as a free lunch.”
A tireless Sisyphus, Rapier daily rolls the boulder of his knowledge up the side of the mountain of ignorance that America has about energy, which extends from where energy comes from to the costs and consequences of how we use it.
A parent, Rapier seems to get his energy for his task from a desire to help us all think carefully and critically about complex issues that will define the world his children will face. Left on our present course, that is a world where our our behavior, most notably around the capture and use of energy, is taking us very much in the direction opposite our hopes and dreams for the future.
OregonPEN asked Robert if we could republish this latest piece on the Keystone XL decision. He wrote: “Absolutely. You may republish. My goal here is to get people to focus on the much more serious battles that need to be fought and recognize KXL for what it was. The war isn’t won; that wasn’t really much of a skirmish. People shouldn’t get complacent, they should be gearing up for a much bigger fight.”
Earlier this month, after a debate that spanned nearly the entire duration of his presidency, President Obama finally rejected the proposed Keystone XL pipeline project. He had been heavily criticized on this issue from many angles, including by me, for his long-running failure to make a decision on this issue. For the record, my position on the pipeline wasn’t that it should be built. Nor that it shouldn’t. But rather that it was a distraction that garnered far more attention than it deserved, while more important issues desperately warranted attention.
Today, in the last Keystone XL article that I plan to write, I want to review the controversy, explain why I feel it took on a symbolic meaning far beyond what it deserved, and describe some of the other things that were taking place while an environmental movement mobilized to stop the pipeline. In a nutshell, I am going to strip the symbolism and wishful thinking and address things we actually know to be true.
Keystone XL Review
First, a quick review for that rare person who has no idea what this Keystone XL controversy is all about. The Keystone Pipeline is owned by TransCanada (TSX, NYSE: TRP). Phase 1 of the pipeline began operating in 2010, and had the capacity to move 590,000 barrels per day (bpd) of crude oil from the Athabasca oil sands in Alberta to hubs and refineries in the US. In 2011, Phase 2 of Keystone connected Steele City, Nebraska to the major oil hub in Cushing, Oklahoma. Phase 3 connected the Cushing hub to Gulf Coast refineries with a capacity of 700,000 bpd and began operating in January 2014.
The Phase 4 expansion of the Keystone Pipeline is the one we came to know as the Keystone XL (“XL” stands for export limited.) Like Phase 1, this expansion would add pipeline from Alberta and cross the US-Canadian border. The 875 miles of pipeline would have a capacity of up to 830,000 bpd, and terminate in Steele City, Nebraska. Because the proposed route crossed the international border, the U.S. State Department was required to determine that the project was in the national interest in order to grant a permit (as the agency did with Phase 1).
The Keystone XL was first proposed in 2008. In 2010, the State Department issued its Draft Environmental Impact Statement. The State Department determined that the project was unlikely to have a significant impact on oil sands development or global greenhouse gas emissions, and they estimated that six people per year would be killed on average if the oil was instead transported by rail. In a 2010 interview, then-Secretary of State Hillary Clinton responded to a question about the project with “We’ve not yet signed off on it, but we are inclined to do so and we are for several reasons.” (She was recently forced to pivot away from supporting the project in response to the surging presidential campaign of Sen. Bernie Sanders.)
An Environmental Movement Forms
Opposition to the Keystone XL turned into an environmental movement. The pipeline project became the most controversial one in the U.S. since the Trans-Alaska pipeline of the mid-1970s. Opponents of the Keystone XL believed that stopping the pipeline would slow the rate of oil sands development, and thus limit greenhouse gas emissions into the atmosphere. Proponents argued that it would strengthen our relationship with Canada at the expense of more hostile oil suppliers like Venezuela, improving U.S. energy security and creating jobs in the process.
Books could be written on the nuances of each side, but I don’t intend to rehash those debates here. If you are interested, I have linked to some of my previous articles at the end. The truth is that it really didn’t have much significance either way. For environmentalists, this issue became larger than life. Fund-raising campaigns were launched to stop the pipeline. Protests were organized in front of the White House. Celebrities got themselves arrested.
In the aftermath of the president’s rejection of the pipeline, environmentalists will rightly claim victory. But let’s look at the big picture here.
Carbon Dioxide Emissions Continue to Rise
The Obama Administration could have ruled on the pipeline in 2010. It would have meant overruling the State Department’s recommendation at that time, so it would have required political courage. But, the President faced reelection. So instead of making a politically courageous decision, he kept coming up with excuses for why he couldn’t yet decide the issue. So let’s review what has happened since 2010, when the President could have first ruled on the 875-mile, 830,000 bpd pipeline:
- 12,000 miles of oil transmission pipelines were built in the U.S. (Source).
- The liquid petroleum pipeline network in the U.S. grew to beyond 190,000 miles. (Source).
- Crude oil imports from Canada increased by 1.5 million bpd. (Source).
- Canadian oil sands production rose by 700,000 bpd to reach 2.3 million bpd. (Source).
- Crude oil transported by rail in the U.S. increased by a factor of 30 to reach 1 million bpd. (Source).
- A train carrying crude oil derailed and caught fire in Lac-Mégantic, Quebec, killing 47 people. (Source).
- While campaigning for reelection in 2012, President Obama announced his strong support for the 700,000 bpd southern leg of the Keystone pipeline (Source).
- Global demand for oil increased by 4.2 million bpd. (Source).
- Global coal consumption increased annually by 270 million tons of oil equivalent (the equivalent of 5 million bpd of oil), with demand in Asia Pacific up by 15%. (Source).
- Annual emissions of carbon dioxide rose by more than 2 billion metric tons to an all-time record of 35.5 billion metric tons per year. (Source).
In Defense of the Protesters
If you were an opponent of the pipeline, you may be wondering what my point is other than to argue about the futility of your efforts at actually having the end result you envisioned. But that’s not it. David Roberts at Vox recently wrote a very good and thoughtful column that sought to explain and justify the activism — while acknowledging the arguments of the skeptics. When you distill his argument down, it is that social change is hard to predict, and that these protests don’t really seem futile or pointless. This movement could lead to something bigger. He invoked, as others have done, the early protests of the civil rights movement and the tremendous positive changes that resulted.
But there is an implicit assumption built into these sorts of argument. We have the benefit of decades of hindsight here, and by linking the Keystone XL protests to the civil rights movements the implication is “Great things could happen from these protests without really much downside risk.” That gets right to the heart of my issue over the Keystone XL protests, and is an issue that Keystone XL protesters fail to acknowledge. Is it possible that these efforts are actually counterproductive? The answer to that in my opinion is “Absolutely.”
The Counterproductive Possibility
There are many different ways these protests could prove to be counterproductive. Perhaps there were situations within the civil rights movement that were counterproductive, and those could turn out to be the real historical analogies to Keystone XL. There are examples today where good intentions in the name of civil rights turn out to have negative unintended consequences. (See the backlash caused by a University of North Texas journalism dean trying to create a racial incident over a routine police contact. This is the sort of issue that can pull attention away from real issues of racial injustice).
What if cutting off pipeline access doesn’t really work the way the protesters think it does, and oil ends up getting to market by rail because the demand is still there? That would be an example where efforts could actually make matters worse. Carbon emissions could actually end up being higher because rail transport is more energy intensive, and more people could be killed in rail accidents.
What if people were so singularly focused on this issue that they developed a totally unrealistic view of the importance of this project relative to much greater threats? I once likened this to protecting a drowning man from sunburn. Or focusing triage efforts on a hangnail in a patient with a serious head wound. Those are the sorts of distractions that could prove to be ultimately extremely counterproductive. I can spin all kinds of stories about the importance of mobilizing and motivating people to justify protecting a drowning man from sunburn, but I do a disservice if I fail to acknowledge the danger of misallocating resources when time is of the essence.
That argument inevitably leads to “Well, what is your solution?” I do in fact spend a lot of time writing about, advocating for, and working on various solutions. Most of my effort would be focused on reducing the demand side. The war on drugs shows what happens when we try to cut off supplies from a product that is still in demand. That tactic doesn’t work very well, but that’s a topic for another article. My real bottom line concern is that when movements are built around inconsequential issues (a loaded phrase to be sure), resources are diverted and distracted away from more critical issues. Time is a precious resource that we can’t afford to fritter away in the hope that over a period of years the protests on the inconsequential issue lead to action on a consequential issue.
Democrat presidential hopeful Bernie Sanders recently tweeted “I have always opposed Keystone XL. It isn’t a distraction — it’s a fundamental litmus test of your commitment to battle climate change.” I disagree. The litmus test needs to be whether you really understand the reasons that global carbon dioxide emissions continue to climb. If you don’t understand the problem, or don’t understand the cause, you may focus your efforts on futile solutions. The fact that we are building pipelines is inconsequential relative to global coal emissions, for example. But by focusing so much attention on Keystone XL there is a risk of losing sight of this. The Keystone XL battle may have been won, but by positioning this the way they have, protesters may have a much harder time motivating people for much more important battles ahead. When you hype the significance of Keystone XL to the moon, it becomes hard then to follow up with “But this next issue is REALLY important.”
Unless pipeline opponents can leverage this victory into getting China to rapidly slash coal consumption — and Beijing just admitted China has been consuming even more than previously thought — the victory, like the controversy around the pipeline itself, will be purely symbolic.
Robert Rapier’s Previous Keystone XL Articles
Washington Post: President Obama is Lying About the Keystone Pipeline
Keystone XL’s Emissions Versus Coal-Fired Power
Protecting a Drowning Man from Sunburn
The Increasing Irrelevance of the Keystone XL Debate
Protesting Keystone XL While Rome Burns
Why Environmentalists are Wrong on Keystone XL
How I Would Decide the Keystone XL Pipeline Issue
Take a Stand, Mr. President
Link to Original Article: While You Were Distracted by Keystone XL
The Center for Public Integrity, winner of the 2014 Pulitzer Prize for Investigative Reporting, has given Oregon government an F for accountability and transparency. The fact that 11 states earned an F and no state got a grade higher than a C, should not reassure anyone.
Among the Center’s findings, conducted in partnership with Global Integrity, the study revealed “state lawmakers and agency officials who operate with glaring conflicts of interest and engage in cozy relationships with lobbyists; ethics and open records laws fraught with loopholes, and watchdog agencies crippled by a lack of funds and staff.”
With kind permission of the Center for Public Integrity, OregonPEN reprints the article below that outlines Oregon’s problems, followed by a fuller description of the national CPI study (see “Laboratories of Democracy?” below).
In the Oregon case, Governor Kitzhaber’s troubles top the list, but there are many aspects to the concerns about public integrity in government. Indeed, OregonPEN has reported just in the last several months of incidents where the Oregon Attorney General’s Office withheld information about a legal settlement of a suit against the state (No. 38, 7 November 2015). This suit was and remains a matter of public record, and there is a state agency (Teacher Standards and Practices Commission) that appears to have willfully violated the Public Meeting Laws, with either the tacit approval or acquiescence of Department of Justice lawyers.
The Center’s method was as follows: For each state, it tracked 245 questions to come up with 12,250 data points across 13 categories. The 13 categories are:
- public access to information
- political financing
- electoral oversight
- executive, legislative and judicial accountability
- state budget processes
- civil service management
- internal auditing
- lobbying disclosure
- state pension fund management
- ethics enforcement.
The mission of the Center is “to serve democracy by revealing abuses of power, corruption and betrayal of public trust by powerful public and private institutions, using the tools of investigative journalism.”
Oregon gets F grade in 2015 State Integrity Investigation – Land of ethics, manners hurt by rare scandal
OREGON: GRADE:F(58); RANK:44TH
Assessing the systems in place to deter corruption in state government
Public Access to Information: GRADE:F(38); RANK: 34th
Political Financing: GRADE:F(37); RANK: 49th
Electoral Oversight: GRADE:C(74); RANK: 11th
Executive Accountability: GRADE:F(55); RANK: 38th
Legislative Accountability: GRADE:D-(61); RANK: 30th
Judicial Accountability: GRADE:F(55); RANK: 32nd
State Budget Processes: GRADE:C(74); RANK: 27th
State Civil Service Management: GRADE:D(66); RANK: 12th
Procurement: GRADE:F(55); RANK: 45th
Internal Auditing: GRADE:C+(77); RANK: 36th
Lobbying Disclosure: GRADE:F(58); RANK: 30th
State Pension Fund Management: GRADE:F(49); RANK: 43rd
Ethics Enforcement Agencies: GRADE:F(56); RANK: 28th
By Lee van der Voo
12:01 am, November 9, 2015 Updated: 12:05 pm, November 12, 2015
The State Integrity Investigation is a comprehensive assessment of state government accountability and transparency done in partnership with Global Integrity.
November 10, 2015: This story has been corrected.
One day before Oregon’s usual Valentine’s Day statehood celebration this year, the Capitol was awash with reporters chasing a rare story on the abuse of access to power rather than the frosted sheet cake being handed out by the Oregon Wheat Growers League to mark the state’s 156th birthday.
In a state where ethical behavior is assumed rather than regulated, former Gov. John Kitzhaber offered his resignation in a pre-recorded speech heard in his reception room, while de facto-governor Kate Brown prepared for duty in the secretary of state’s office a floor below.
Kitzhaber was being investigated following media reports that his fiancé, a consultant, was selling access to the governor’s office and using state resources for personal gain, and that he blurred the line between his job as governor and his re-election campaign.
For many in the state, Kitzhaber’s resignation is a thing of the past. But the scandal that ensnared the former governor highlighted a wobbly legal framework in Oregon’s government, where good behavior is taken for granted rather than enforced.
That framework explains why Oregon fared poorly in this year’s State Integrity Investigation, earning an overall score of 58 – an F grade – and tied for 44th among the 50 states in the data-driven assessment of state government accountability and transparency by the Center for Public Integrity and Global Integrity.
“It’s not like Chicago or something,” said Dan Lucas, a researcher, policy advocate and chief editor of the blog Oregon Catalyst. Noting four of the last seven Illinois governors went to jail, he said, “We don’t have that level of corruption.”
But Oregon’s relative lack of scandal may be a function more of good manners rather than of law. As Lucas and others note, and this year’s failing grade suggests, lines are easily blurred in Oregon government, and ethical lapses and partisan abuses of power – while often not criminal – have been smoothed over by both political maneuvering and etiquette.
Kitzhaber’s resignation caused Oregon to receive an F in the category of executive accountability. The debacle also ensnared the Oregon Government Ethics Commission, and highlighted why Oregon is one of the worst performing states with regard to access to information (F).
Oregon’s overall failing grade represented a substantial dip from the C- the state received from the last State Integrity Investigation scorecard in 2012, but the grades and scores are not directly comparable due to changes made to improve and update the questions and methodology—like eliminating the category for redistricting, a process that generally occurs only once every 10 years.
Oregon’s ethics commission didn’t move quickly to investigate complaints regarding Kitzhaber, and more importantly, his fiancé Cylvia Hayes. At the time, officials said they struggled with whether she was covered by state ethics law.
But the law is clear – Hayes, as a member of Kitzhaber’s household, was subject to the rules. Yet – until ethics reform passed the legislature afterwards – the ethics commission was unprotected from political interference by the governor’s office. The governor either appointed its directors, or gave names to the Democratic-controlled legislature for nomination by party leaders, one possible explanation why the commission didn’t act. Even after reforms, Oregon’s ethics commission still lacks budget protections and the staffing and technical support to see its mission through.
The commission’s lack of rigor hurt most every other category of this assessment.
As the keeper of records designed to collect robust information about the state’s elected officials and civil servants, the commission never audits the asset-disclosure forms it collects, the State Integrity Investigation revealed. Enforcement has been so lax that political leaders have been able to fudge on specifics in their disclosure forms or simply fail to provide significant information. The forms aren’t available online so that members of the public can check. And the State Integrity probe discovered that people who examine the forms universally report that the quality of information is substandard.
Holes in public records law
Such issues underscore why Oregon remains one of the worst performing states regarding access to information (an F grade), ranking tied for 34th even in a category where only six states earned a passing grade. The state has no open data laws or independent agency charged with overseeing citizen access to government. Oregon’s Public Records Law is also full of exemptions – at least 480 – and lacks firm deadlines for delivery of public records. The Kitzhaber debacle underscored the consequences when public information doesn’t flow freely or in a timely way; substantive deadlines might have allowed voters a closer look at Kitzhaber’s issues before he was re-elected, only to resign a month after his swearing-in.
Oregon’s lawmakers (D- in legislative accountability), like the ethics commission, operate without legal safeguards against unethical conduct. The state legislature still does not have laws prohibiting nepotism and cronyism in hiring, for example – a situation intended to allow rural legislators to support a family in the state capital of Salem but that leaves the government vulnerable to abuse. And low pay combines with a lack of campaign finance law to eliminate a buffer between Oregon legislators and special interests in the private sector.
As a result, legislators can grow accustomed to practices that cut corners. They may fudge the lines between their part-time legislative duties and their other jobs, angle for work in places where they shouldn’t or find themselves enormously dependent on campaign contributors as state races get more expensive.
“The problem in our legislature regarding integrity is not about the ethics stuff. Or going to jail. These are intellectual integrity issues…” said Phil Keisling, Director of the Center for Public Service of the Hatfield School of Government at Portland State University.
Few requirements for judges, courts
The judicial branch is also plagued by potential for conflict and a lack of legal safeguards; the category grade for judicial accountability is F. While, again, Oregon judges don’t seem to have overt corruption issues – judges weren’t sanctioned for bad behavior at any point during the study period – staffing shortages prevented many state-level judges from offering full opinions on their rulings. And Oregon lacks laws to force its judges to explain their decisions to the public. The state also lacks judicial performance evaluations, and is behind other states in making court data publicly available. Unless a complaint is filed, the Oregon Commission on Judicial Fitness lacks the power to investigate problems, and even then, those records are sealed unless they lead to discipline.
There were some bright spots: the state’s budgeting process earned a C and the secretary of state’s audits division a C+. Both were sufficiently staffed, transparent, and had the authority to act with independence, suffering only from the same lack of legal safeguards that brought state scores down overall.
And while Oregon’s civil service system scored only a 66 – a D grade – that ranked the state 12th, the highest of all its category rankings. Government workers aren’t always protected from political interference in Oregon, but the civil service system in the Beaver State does seem to be better than most.
Correction, November 10, 2015, 4:15 p.m.: An earlier version of this story incorrectly reported that the ethics commission lacks the authority to independently investigate bad behavior.
Posted on November 10, 2015
Attorney General Rosenblum:
We, the undersigned, have been notified that the Oregon Department of Justice has conducted digital surveillance on Oregonians because of their use of the Black Lives Matter hashtag on social media.
As recounted by our colleague, Urban League of Portland President Nkenge Harmon Johnson, and other sources, two weeks ago, her husband, the Director of Civil Rights for Oregon Department of Justice, Erious Johnson, was called to your office. At that meeting, it was revealed that the Oregon Department of Justice Criminal Justice Division has been using software to conduct “threat assessments.” The division searched the Twitter feeds of Oregonians who have used the hashtag “Black Lives Matter.” We do not know how many Oregonians were investigated by the Department of Justice. We do know, however, that Director Johnson was one of them. Because he had posted tweets using that hashtag, he was identified under the Oregon Department of Justice’s threat assessment process.
It is improper, and potentially unlawful, for the Oregon Department of Justice to conduct surveillance and investigations on an Oregonian merely for expressing a viewpoint, or for being a part of a social movement. We are concerned that such unwarranted investigations are racially motivated, and create a chilling effect on social justice advocates, political activists and others who wish to engage in discourse about the issues of our time. Furthermore, during a time when you, as attorney general, are chairing the Law Enforcement Profiling Task Force mandated by House Bill 2002, we are particularly concerned that the Oregon Department of Justice is conducting investigations such as this.
Certainly, we do not know all of the facts and look forward to hearing from you. More information is needed about the scope, breadth and purpose of the Department of Justice’s activities related to Black Lives Matter, and other social justice movements. As a result, we call for:
- An immediate halt to digital and other surveillance of Black Lives Matter, related topics, and those individuals using that hashtag.
- An independent audit, conducted by an entity accepted by the undersigned, to determine who at the Oregon Department of Justice created and authorized this threat assessment practice; when it began; whether the investigations included email, browser history, phone, and other online and off-line activity; what were the department’s intentions; and what has been done with this information.
- Said independent audit to review whether the Criminal Justice Division was properly supervised or trained to avoid racial bias.
- An apology and disclosure to all Oregonians ensnared in this surveillance.
Direct contact from your office to each person who was surveilled, including providing those individuals with a copy of all of the information about them that was reviewed by the Department of Justice.
- A public meeting held by you, Attorney General Rosenblum, during this month to explain the information that is currently known about the use of this software to investigate Oregonians, and your response to the situation.
- Your commitment to address digital surveillance as part of the Law Enforcement Profiling Task Force recommendations.
- Audit results to be shared with the public by December 31, 2015.
It is startling that Oregon taxpayers’ dollars were spent in this way. We are copying this correspondence to members of the executive and legislative branches in hopes that they will commit to ensuring an effective and transparent process going forward. We seek answers and accountability about the existence of a digital surveillance program in our Department of Justice that appears to target civil, racial and human rights activities in Oregon. We request your immediate response and remediation.
Nkenge Harmon Johnson, Urban League of Portland
Tom Chamberlain, AFL-CIO
Joseph Santos-Lyons, Asian Pacific American Network of Oregon
Kayse Jama, Center for Intercultural Organizing
Eric Richardson, NAACP Eugene/Springfield Branch
David Rogers, ACLU of Oregon
Jo Ann Hardesty, NAACP Portland Branch
Ken Allen, Oregon AFSCME Council 75
CC: Governor Kate Brown
Secretary of State Jeanne Atkins
Bureau of Labor and Industries Commissioner Brad Avakian
House Speaker Tina Kotek
Senate President Peter Courtney