Arizona Open Hand Act

Mar 24

Arizona Open Hand Act

One-Page Summary – Final Version

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Purpose

Restores public trust by prohibiting lawmakers, rulemakers, and their spouses, domestic partners, dependent children, and controlled organizations from personally profiting from official duties. Closes all known loopholes for self-dealing, including family conduits, shell companies, lawsuit settlements, delayed compensation, and equity-based compensation.

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Key Provisions by Category

1. Profiting from Official Duties (Sections 4, 4A)

- Prohibits receiving material profit influenced by official actions or nonpublic information.

- Explicitly covers betting/gaming winnings, investment returns, compensation for services enabled by official duties, and equity-based compensation (stock options, carried interest).

- Creates rebuttable presumption of violation for profits within 90 days of official action.

2. Campaign Finance Standards (Section 5)

- Campaign staff must have appropriate credentials, be paid ≤150% of location-specific average wage, and provide documented deliverables.

- Prohibits using campaign funds for family members or no-show jobs.

3. No-Bid Contracts (Section 6)

- Prohibits awarding contracts to self, family, or controlled organizations. Sole source exception requires full disclosure and absolute recusal.

4. Revolving Door (Section 7)

- Two-year ban on lobbying former colleagues.

- Four-year ban on serving as agent, advisor, or consultant for any entity regulated by or doing business before the former official's agency.

5. Extending Official Powers (Section 8)

- Prohibits using official authority to benefit self, family, close friends, or business associates. Explicitly bans self-appointment to paid boards.

6. Misuse of State Resources (Section 9)

- Prohibits using state personnel, equipment, or funds for private business, campaigns, or personal purposes.

7. Exploitative Lawsuit Settlements (Section 9A)

- Prohibits officials or family from filing civil actions against regulated entities to obtain inflated settlements. Creates presumptions based on timing and amount.

8. Conduit Arrangements (Section 9B)

- Treats payments to shell companies, nominees, charities, or trusts controlled by the official as payments directly to the official. Closes pass-through loopholes.

9. Delayed Compensation (Section 9C)

- Prohibits negotiating post-service employment with regulated entities while in office. Requires disclosure of any such arrangements. Creates presumptions for excessive delayed compensation.

10. Serving Regulated Entities (Section 10)

- Prohibits lawmakers from serving as agents, advisors, or consultants (including realtors and attorneys) for regulated entities while in office. Existing employment may continue only with disclosure and recusal.

11. Family Employment & Interests (Sections 11, 11A)

- Requires disclosure and recusal if family member works for, sues, or holds any financial interest (any percentage) in a regulated entity.

- Creates presumptions of violation for short-term (<6 months), above-market (>150%), or no-show family employment.

12. Disclosure (Section 12)

- Mandates disclosure of all organizations, profits, campaign employment, contracts, recusals, significant assets (art, digital currency, etc.), post-service arrangements, and conduit transfers.

13. Enforcement (Section 13)

- Dual enforcement: existing ethics entities and Attorney General have concurrent jurisdiction.

- Any Arizona resident may file a sworn complaint.

- Penalties: forfeiture, civil penalties up to 3× profit, criminal penalties (misdemeanor/felony).

14. Whistleblower Protection (Section 14)

- Prohibits retaliation against reporters. Provides civil remedies including reinstatement, back pay, damages, and attorney fees.

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Effective Date

January 1 following enactment.

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I will now draft and integrate provisions to cover all identified remaining gaps. This will create a truly comprehensive ethics bill.

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Additional Provisions to Close Remaining Gaps

Section 9B. Anti-Conduit Provision (Shell Companies, Nominees, and Charitable Pass-Throughs)

Section 9B. Prohibition on Conduit Arrangements

1. For purposes of this Act, any payment, transfer, or disposition of value to any person or entity that is:

(a) Controlled, directly or indirectly, by a Covered Person;

(b) Established, funded, or directed by a Covered Person for the purpose of receiving or redirecting value; or

(c) A charitable organization in which a Covered Person serves as an officer, director, trustee, or has the ability to direct distributions;

shall be treated as a payment directly to the Covered Person.

2. A rebuttable presumption shall arise that any payment, transfer, or disposition of value to any of the following is a violation of this Act if the payment occurs within one (1) year before or after official action affecting the source of the payment:

(a) Any entity in which a Covered Person has a Sufficient Financial Interest;

(b) Any charitable organization identified in subsection (1)(c); or

3. Any Covered Person who knowingly establishes, utilizes, or directs a conduit arrangement to circumvent the prohibitions of this Act shall be subject to:

(a) Forfeiture of the entire amount of value transferred through the conduit;

(b) A civil penalty equal to three (3) times the amount transferred; and

4. This section does not apply to:

(a) Transfers that are fully disclosed in writing to the ethics enforcement entity prior to the transfer and approved as not intended to circumvent this Act;

(b) Transfers that are demonstrably bona fide gifts or transactions with no connection to official duties.

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Section 9C. Delayed Compensation and Post-Service Employment Negotiation

Section 9C. Prohibition on Delayed Compensation and Post-Service Employment Negotiation

1. No lawmaker or rulemaker shall, during their term of office, negotiate, enter into, or agree to any employment, consulting, or other compensated arrangement with:

(a) Any entity that is subject to regulation by the State of Arizona or any political subdivision thereof; or

(b) Any entity that is doing business with, or seeking to do business with, any state agency or legislative body before which the official serves;

where the compensation or duties are to commence after the official leaves office.

2. Any such arrangement entered into within one (1) year prior to leaving office, or at any time while in office, shall be disclosed in writing to the ethics enforcement entity within thirty (30) days of the arrangement.

3. A rebuttable presumption shall arise that any compensation received by a former lawmaker or rulemaker from an entity described in subsection (1) within two (2) years after leaving office is a violation of this Act if:

(a) The compensation exceeds the former official's lawful state compensation during their final year in office; or

(b) The arrangement was not disclosed as required by subsection (2).

4. Violations of this section shall be subject to:

(a) Forfeiture of all compensation received;

(b) A civil penalty equal to three (3) times the compensation received; and

5. This section does not prohibit:

(a) Employment or consulting arrangements that are disclosed and approved in advance by the ethics enforcement entity as not creating a conflict of interest;

(b) Employment with an entity that is not subject to regulation by or doing business with the former official's agency or legislative body.

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Section 11A. Presumptions for Family Employment and Compensation

Section 11A. Presumptions for Family Employment and Compensation

1. For purposes of Section 11, a rebuttable presumption shall arise that employment or compensation of a Covered Person by an entity that is regulated by or doing business with the agency or legislative body in which the official serves is a violation of this Act if any of the following circumstances exist:

(a) The employment duration is less than six (6) months and the total compensation exceeds the location specific average wage for comparable duties by more than twenty-five percent (25%);

(b) The compensation exceeds the location specific average wage for comparable duties by more than one hundred fifty percent (150%);

(c) The Covered Person is unable to provide documented deliverables commensurate with the level of employment and compensation, including timesheets, work product, or other verifiable evidence of services rendered;

(d) The employment commenced within one (1) year before or after the official's participation in a matter directly affecting the employer.

2. The official bears the burden of demonstrating by clear and convincing evidence that the employment or compensation is bona fide, at fair market value, and not influenced by the official's duties.

3. This section does not apply to employment or compensation that is disclosed in writing to the ethics enforcement entity and approved in advance as not creating a conflict of interest.

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Section 4A. Clarification on Equity-Based Compensation

Section 4A. Treatment of Equity-Based Compensation

1. For purposes of Section 4, the following shall be treated as material profit when the event occurs, unless otherwise exempt:

(a) Stock options, restricted stock, restricted stock units, and other equity-based compensation shall be treated as material profit when granted, vested, or exercised, whichever occurs first;

(b) Carried interest, performance fees, and similar compensation from investment funds shall be treated as material profit when allocated, distributed, or realized;

(c) Any increase in the value of such equity or carried interest that is attributable to official action by the lawmaker or rulemaker shall be treated as material profit at the time of such increase.

2. A rebuttable presumption shall arise that any equity-based compensation or carried interest received by a Covered Person from an entity described in Section 4(1) is a violation of this Act if the compensation was granted, vested, allocated, or increased in value within one (1) year before or after official action affecting that entity.

3. This section does not apply to:

(a) Widely held diversified investments as provided in Section 4(4)(c);

(b) Equity-based compensation that is disclosed in writing to the ethics enforcement entity and approved in advance as not creating a conflict of interest.

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Arizona Open Hand Act

Section 1. Short Title

This Act may be cited as the "Arizona Open Hand Act"

Section 2. Findings and Purpose

The Legislature finds that public trust is eroded when lawmakers or rulemakers, or those closely associated with them, derive personal financial gain from the exercise of official authority beyond the compensation and expense reimbursement expressly provided by law. To preserve the integrity of the legislative and rulemaking processes, it is necessary to prohibit any material profit that flows from official actions, whether received directly by the official or indirectly through family members, domestic partners, dependent children, or organizations in which the official holds a controlling or informing financial interest. The Legislature further finds that self-dealing extends to campaign finance practices, employment arrangements, contract awards, lawsuit settlements, conduit arrangements, delayed compensation, misuse of state resources, and the improper extension of official privileges to oneself and associates, all of which undermine public confidence in government.

Section 3. Definitions

As used in this Act:

1. "Covered Person" means:

(a) A lawmaker or rulemaker;

(b) The lawmaker's or rulemaker's spouse or domestic partner;

(d) Any organization in which the lawmaker or rulemaker has a Sufficient Financial Interest.

2. "Sufficient Financial Interest" means:

(a) Ownership of ten percent (10%) or more of the equity or voting interest in an organization;

(b) A position as an officer, director, trustee, or partner of an organization;

(c) Any financial interest that enables the lawmaker or rulemaker, whether formally or informally, to direct the organization's activities or to communicate nonpublic information to the organization for purposes of securing a material profit. For purposes of this subsection, "enables" includes, but is not limited to, situations where the official can influence hiring, contracting, business strategy, or major financial decisions of the organization.

3. "Lawmaker" means any member of the Arizona Legislature.

4. "Material Profit" means any financial gain, benefit, or thing of value exceeding the nominal gift limits established under Arizona law, including but not limited to winnings from betting or gaming, income from investments, compensation from private entities, distributions from organizations, tangible assets such as art, collectibles, jewelry, and real property, as well as digital assets including cryptocurrency, non-fungible tokens (NFTs), and any other digital representation of value that can be traded, transferred, or exchanged for goods, services, or currency, where the gain is substantially attributable to the official's position or actions.

5. "Rulemaker" means any person appointed to serve on a state board, commission, or agency with authority to adopt rules having the force of law, excluding judges acting in their judicial capacity.

6. "Location Specific Average Wage" means the average hourly or annual wage for a specific occupation within the county or metropolitan statistical area where the employment is based, as determined by the most recent data published by the Arizona Office of Economic Opportunity or the United States Bureau of Labor Statistics.

7. "Doing Business With" means any transaction, contract, lease, permit, license, litigation, regulatory matter, or other interaction with the State of Arizona or any political subdivision thereof, including but not limited to:

(a) Seeking or holding any contract, grant, loan, or other financial benefit;

(b) Seeking or holding any permit, license, certification, or approval;

(d) Being subject to inspection, audit, investigation, or enforcement action.

Section 4. Prohibition on Profiting from Official Duties

1. No Covered Person shall knowingly receive, or agree to receive, any material profit that results from or is influenced by:

(a) The official's actions or duties as a lawmaker or rulemaker;

(b) Any legislative or regulatory matter in which the official participated or had discretionary authority; or

2. Covered Profits expressly include, but are not limited to:

(a) Winnings or payments from any online or in-person betting, gaming, or wagering platform related to a legislative or regulatory outcome;

(b) Any investment return, debt repayment, distribution, or other pecuniary benefit from an entity that is directly affected by a pending matter, including but not limited to securities, real estate, art, collectibles, digital currencies, and other investment assets, when received by or directed to a Covered Person;

(c) Compensation, fees, or other consideration from a private source for services rendered that are substantially the same as, or enabled by, the official's public duties. This prohibition applies both during service as a lawmaker or rulemaker and for a period of two (2) years following the termination of such service;

(d) Any material profit received by a Covered Person where the official knowingly facilitated the profit by:

(i) Informing the recipient of nonpublic information;

(ii) Taking or refraining from official action with the intent to confer the profit; or

(iii) Directing that the profit be paid to a Covered Person in lieu of the official.

3. Presumption and Burden.

Where a Covered Person receives a material profit within ninety (90) days before or after the official's participation in a matter that directly affects the source of that profit, there shall be a rebuttable presumption that the profit was received in violation of this section. The official bears the burden of demonstrating by clear and convincing evidence that the profit was not influenced by official duties or nonpublic information.

4. Exceptions. This section does not prohibit:

(a) Lawful compensation and expense reimbursement paid by the State of Arizona;

(b) Gifts or benefits that are within the nominal limits set forth in state ethics laws and that are not conditioned upon or connected to official action;

(c) Returns on widely held diversified investments that are not materially influenced by the official's actions and that are not received by a Covered Person who has knowledge of the official's participation in related matters.

Section 4A. Treatment of Equity-Based Compensation

1. For purposes of Section 4, the following shall be treated as material profit when the event occurs, unless otherwise exempt:

(a) Stock options, restricted stock, restricted stock units, and other equity-based compensation shall be treated as material profit when granted, vested, or exercised, whichever occurs first;

(b) Carried interest, performance fees, and similar compensation from investment funds shall be treated as material profit when allocated, distributed, or realized;

(c) Any increase in the value of such equity or carried interest that is attributable to official action by the lawmaker or rulemaker shall be treated as material profit at the time of such increase.

3. This section does not apply to:

(a) Widely held diversified investments as provided in Section 4(4)(c);

(b) Equity-based compensation that is disclosed in writing to the ethics enforcement entity and approved in advance as not creating a conflict of interest.

Section 5. Campaign Finance Employment Standards

1. Any person employed or compensated with funds from a lawmaker's or rulemaker's campaign committee shall:

(a) Possess appropriate credentials, training, education, or demonstrated experience for the position held;

(b) Be compensated at a rate no greater than one hundred fifty percent (150%) of the location specific average wage for an employee with like credentials, years of experience, and duties;

(c) Provide documented deliverables commensurate with the level of employment and compensation, including but not limited to timesheets, work product, or other verifiable evidence of services rendered;

(d) Not be a Covered Person as defined in Section 3(1), unless the employment is disclosed in writing to the campaign committee's treasurer and the ethics enforcement entity with jurisdiction, and is otherwise permitted by law.

2. The ethics enforcement entity with jurisdiction may request and review documentation of credentials, compensation, and deliverables to ensure compliance with this section.

3. Violations of this section shall be reported to the appropriate campaign finance enforcement entity and shall be subject to penalties including forfeiture of improperly paid compensation and civil penalties as provided in Section 13.

Section 6. Prohibition on No-Bid Contracts

1. No lawmaker or rulemaker shall participate in or influence the award of any contract, grant, or other financial benefit from the State of Arizona or any political subdivision thereof to:

(a) The official themselves;

(b) Any Covered Person as defined in Section 3(1);

2. Any contract awarded in violation of this section is voidable at the discretion of the contracting agency.

3. Exception for Sole Source. If the contractor described in subsection (1) is the only available provider of the goods, services, or construction within the time frame required for execution of the contract, the official shall:

(a) Make full written disclosure of the relationship to the contracting agency and the ethics enforcement entity with jurisdiction;

(b) Absolutely recuse themselves from any and all participation in the contracting process, including but not limited to:

(i) Initiating, drafting, or reviewing the contract;

(ii) Communicating with the contractor regarding the contract;

(iii) Voting on or approving the contract; and

(iv) Supervising or overseeing performance of the contract.

4. Any attempt to circumvent the competitive bidding process to create a sole source exception under this section shall be grounds for enhanced penalties.

Section 7. Revolving Door / Cooling-Off Period

1. No former lawmaker or rulemaker shall, for a period of two (2) years after leaving office:

(a) Act as a lobbyist before the legislative body, board, commission, or agency in which they served;

(b) Receive compensation for representing any person or entity before the legislative body, board, commission, or agency in which they served on any matter in which they participated personally and substantially during their service.

2. No former lawmaker or rulemaker shall, for a period of four (4) years after leaving office, serve as an agent, advisor, consultant, or independent contractor for any entity that was subject to regulation by or doing business before the agency or legislative body in which the former official served, if the former official participated personally and substantially in matters affecting that entity during their final two years in office.

3. This section does not prohibit:

(a) Employment with an entity that is not subject to regulation by or doing business before the former official's agency or legislative body;

(b) Employment that is primarily ministerial in nature and does not involve advocacy, strategy, or advice regarding matters before the former official's agency or legislative body.

4. This section shall be construed consistently with and in addition to any existing cooling-off periods provided by Arizona law.

Section 8. Prohibition on Extending Official Powers to Self, Family, and Associates

1. No lawmaker or rulemaker shall knowingly exercise the powers and rights of their official duties to confer a benefit, privilege, or advantage upon:

(a) Themselves;

(b) Any Covered Person as defined in Section 3(1);

(c) Any person with whom the official has a personal, business, or financial relationship that would cause a reasonable person to question the official's impartiality. For purposes of this subsection, "personal, business, or financial relationship" includes, but is not limited to, close friends, former business partners, individuals with whom the official has a significant financial entanglement, and individuals who have provided or received substantial gifts or favors from the official.

2. Prohibited actions include, but are not limited to:

(a) Appointment to any paid board, commission, or authority;

(b) Appointment of oneself to any paid board, commission, or authority;

(d) Allocation of state resources, personnel, or funds;

(e) Intervention with administrative or regulatory processes;

(f) Any other exercise of discretionary authority that confers a non-public benefit.

3. Nothing in this section prohibits the official from exercising powers and rights that are generally available to all members of the public under the same terms and conditions.

Section 9. Prohibition on Misuse of State Resources

1. No lawmaker or rulemaker shall knowingly use state personnel, equipment, materials, facilities, or funds for any private business, campaign, or personal purpose not authorized by law.

2. This section does not prohibit:

(a) Incidental and de minimis personal use that does not interfere with official duties and does not result in cost to the state;

(b) Use authorized by law or by written policy of the relevant agency.

3. Violations of this section shall be subject to restitution of the value of resources used and civil penalties as provided in Section 13.

Section 9A. Prohibition on Exploitative Lawsuit Settlements

1. No lawmaker or rulemaker shall, directly or indirectly, initiate, cause to be initiated, or participate in any civil action against any person or entity that is:

(a) Subject to regulation by the State of Arizona or any political subdivision thereof; or

(b) Doing business with, or seeking to do business with, any state agency or legislative body before which the official serves;

where the official receives, or any Covered Person receives, any settlement, judgment, or other payment from such action, unless the settlement, judgment, or payment is approved in advance by the ethics enforcement entity with jurisdiction as demonstrably reasonable and not influenced by the official's duties.

2. A rebuttable presumption shall arise that any settlement, judgment, or payment received by a Covered Person from a person or entity described in subsection (1) is a violation of this Act if:

(a) The action was filed within one (1) year before or after a legislative or regulatory matter affecting the defendant was pending before the official;

(b) The settlement amount exceeds the actual damages alleged in the complaint by more than twenty-five percent (25%); or

(c) The defendant paid the settlement within ninety (90) days of the official's participation in a matter directly affecting the defendant.

3. Any settlement, judgment, or payment described in this section shall be reported in writing to the ethics enforcement entity with jurisdiction within thirty (30) days of receipt, including:

(a) The parties to the action;

(b) The claims alleged and the actual damages claimed;

(d) Any relationship between the official and the plaintiff or the plaintiff's counsel.

4. Violations of this section shall be subject to:

(a) Forfeiture of the entire settlement amount;

(b) A civil penalty equal to three (3) times the settlement amount; and

5. This section does not apply to:

(a) Actions arising from personal injury or property damage that are not related to the official's duties;

(b) Actions in which the official is named as a defendant in their official capacity;