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Minutes - Regular Meeting - 6/2/1997 June 2, 1997 The Ethics Review Commission of the City of Round Rock, Texas met on Monday,June 2,1997 at 7:00 p.m. in the City Council Chamber,221 East Main Street. ROLL CALL: Those members present were Commissioners Dennis Graffious, Frederick Ort, Dr. J. R. Rogers, Gene Glaeser, Donald Sanders, and Larry Terrell. Also present were Assistant City Manager/City Secretary Joanne Land and Special Counsel for the Ethics Review Commission Barney Knight. APPROVAL OF MINUTES: May 6, 1997 The following correction was made to the minutes: Page 8, the statement after Chairman Glaeser; third statement,the word should read"gist" instead of"jest." MOTION: Commissioner Sanders moved to approve the minutes as corrected. Commissioner Graffious seconded the motion. VOTE: Ayes: Commissioner Graffious Commissioner Ort Commissioner Rogers Commissioner Sanders Commissioner Terrell Commissioner Glaeser Noes: None ACTION: The motion carried unanimously. CONSIDER. FINAL HEARING TO DETERMINE WHETHER OR NOT REASONABLE GROUNDS EXIST ON THE COMPLAINT FILED BY CLIFFORD L. 1 HODGINS AGAINST ROD MORGAN. Chairman Glaeser noted that the Commission received documents from Barney Knight pertaining to the complaint. The documents included a document from Mr. Knight requesting records; a document dated May 23rd requesting additional documents; a memo dated May 291h to the Ethics Commission from Mr. Knight; and documentation of events titled Selected Documents From Business File of Rod Morgan. Chairman Glaeser asked Mr. Knight to review the documents with the Commission. Mr. Knight: "First I will explain to you the same statement that I made to Mr. Walsh, Attorney for Mr. Morgan, 'there is no established or set procedure for this Commission, there are no rules of procedure,we are not a court and we are not covered i by the Administrative Procedures Act. The bottom line is it's important that we adopt a procedure or process that we can use to proceed in a manner to assure that it is reasonable and fair to both the public and Mr. Morgan. You were given a lot of documents to review at your place but this was the only way to do this. Given what I understood the Commission mission to me was, at the end of the last meeting, to gather information and bring it back. I will go through the information and Mr. Walsh is welcomed to interject at anytime. Mr. Morgan invited the Commission to look at the tape of the Planning Commission meeting and that will be done. I sent to Mr. Morgan, and he was extremely cooperative in responding, a semi-formal letter on May 14f asking him to produce all the records and documents that he had with respect to this issue and he did so. He produced his entire business file down to his notes, telephone 2 1 � messages and everything else in it. I had the City Secretary's office copy it and returned the original to Mr. Morgan. I have that copy here tonight to use. I had someone in my office number all the pages, which turned out to be 300 pages. The Commission is welcomed to review the copies of the whole file but I will only go over specific documents. Mr. Walsh is also welcomed to look at those documents. Mr. Morgan also arranged for me to get copies of the Alamo Title Company file. I want to add that anything that I say is not evidence. I'm not a witness. The records and files will be sufficient themselves for you to get whatever meaning they may have. Mr. Walsh is welcomed to go through the .documents and discuss those documents or have Mr. Morgan or other witnesses testify." The Commission viewed the tape of the March 19, 1997 Planning and Zoning Commission at which Councilman Morgan spoke. Mr. Knight said that as a matter of law the City Planner was absolutely correct that all the issues that were discussed met all the requirements under the State law. The law provides that if a subdivision is filed that meets all of the requirements and it is not approved within 30 days, it's automatically approved so the Planning Commission was obligated to approve that subdivision without any speakers for or against. Mr. Knight proceeded to highlight the specific documents from Councilman Morgans file. (See attachment "A") The Commission discussed and asked questions about certain documents. The Commission discussed how a 1031 Exchange works. 3 F EXHIBIT "A" Selected Documents From Business File of Rod Morgan June: 6. 1995 Notice of Appraised Value to B. Forsythe from Bell County Re: lot in Bell County. Page 190. tlndated Printouts providing information on multiple properties available in Georgetown, etc.. Pages 302-313. Undated Letter from Rod to Mike transmitting original contract and copy, saying "we would like to at least have a faxed copy with your approval by Dec. 27." Page 287. Undated Earnest Money Contract between M. Watson (Seller) and B. Forsythe (Buyer) for Double Creek property [fully executed with "mediation" attachment]. Pages 269-276. Ten (10) pages counting back pages not numbered. December 21, 1996 Earnest Money Contract between M.'Watson (Seller) and B. Forsythe (Buyer) for Double Creek property [fully executed with "mediation" attachment] and with "Information About Brokerage Services" form signed by Barbara B. Forsythe, 12/21/96 attached.- Pages 288-293. December 23, 1997 Map of lot/plat areas with note: "Attn: Rod Morgan". Page 297. December 26, 1996 Fax of specifications and drawings for duplex from Sean Little [Century 21 Cook and Associates Fax Cover] to Rod Morgan. Pages 277-286. January 2, 1997 Fax Rod Morgan to Rill Waltz asking for cost to subdivide and make into legal lots. Page 254. January 3, 1997 Commitment for Title Insurance to Forsythe on the Double Creek tract. Pages 148-155. Undated Plot plan for subdivision of the Double Creek tract. Page 162. January 9, 1997 Letter Agreement for Engineering Services from S. D. Kallman, Inc. to B. Forsythe for subdivision of land, executed by S. D. Kallman, Inc. and B. Forsythe. Pages 43-45. January 9, 1997 Letter Agreement for Engineering Services from S. D. Kallman, Inc. to Rod Morgan for subdivision of land, executed by S. D. Kallman, Inc. Not executed by Rod Morgan. Pages 228-230. January 20, 1997 Good Faith Estimate of loan expenses from Premier Mortgage to B. Forsythe. Page 181. t Undated Hand written notes estimating various component costs for a building. Pages 119-121. January 31. 1997 Submittal and schedule dates for P&Z review and public hearings. Page 144. January 31, 1997 $793.00 Invoice to B. Forsythe from SBS Designs Etc. for plans, etc. for a proposed duplex. Page 175. February 4. 1996 Transmittal/Delivery Form [for Plot Plan and copies for Forsythe Subdivision] from D.S. Kallman, Inc. to Rod. Morgan. Page 180. IIWated Fax from Wendy at Title Agency of Austin regarding attached sewer easement, dated February 5, 1997, executed by Mike Watson, with query as to whther OK to fund this. Pages 168-172. 1,rbruary 10, 1997 Fax memo from RM to Stacy re directions regarding changes in the plans for the Forsythe duplex. Page 145. l-ehruary 13, 1997 Letter from Jeff Arnold at National Exchange to B. Forsythe enclosing copies of "Authorization to Disburse Funds". Page 138. February 13. 1997 Fax from Wayne Harter to Rod Morgan with message beginning: "Rod. We will need you to provide the following for the preliminary & Final Plat Submittal on Wed Feb 19: .... check(s) for fee's to be made payable to the City of Round Rock. Any questions or comments please call." Page 143. February 20. 1997 S. D. Kallman, Inc. bill to Forsythe for completion of subdivision plat, with cc to Rod Morgan. Page 130. 1'ehruary 7-7, 1997 Notice of Public Hearing [subdivision] for March 19, 1997 P&Z Meeting. Page 133. March 5, 1997 Residential Construction Contract between Larry Morgan Custom Builder/Broker Inc. and B. Forsythe; showing Rod Morgan as agent. Pages 47-53. March 5, 1997 Authorization to Disburse Funds[$1,100.00]to National Exchange, signed by Larry Morgan but not by Forsythe. Page 111. March 6. 1997 Fax from RM to "Dayna" with notation the "We want to be able to start construction on March 20." Page 107. 2 � f Manch 11. 1997 Appraisal of proposed duples on Lot 2, Double Creek Drive prepared for Premier Mortgage Company, by J. Brett Frame] and Kelly Cassell. Pages 425. Attachments: Maps, Site Plan, Floor Plan, Elevation, Specifications and Allowances [executed by Larry Morgan and B. Forsythe] March 14, 1997 Agenda for March 19, 1997 P&Z meeting. Page 132. March 17. 1997 Fax from Larry Morgan Custom Builder/Broker Inc. to Rod Morgan requesting Rod Morgan to have Forsythe sign the contract and for RM to fax it to Jeff Arnold today. Page 99. March 17. 1997 Authorization to Disburse Funds [$4,477.50] signed by Larry Morgan and Forsythe to National Exchange. Page 101. March 18. 1997 Notes regarding all and fax from Premier Mortgage to Mr. Morgan requesting callback and showing how Premier came up with the loan amount for Ms. Forsythe. Pages 91-93. March 18, 1997 Fax from Morgan to Jeff Arnold [National Exchange agent for Premier Mortgage] forwarding Forsythe purchase contract and specs. Page 94. March 18, 1997 Fax from Morgan to Jeff Arnold re: disbursement of operating expenses L _ for Forsythe. Page 97. March 19, 1997 Planning & Zoning Commission Hearing April 9, 1997 Sewer Line Easement executed by Michael F. Watson only [not notarized]. Pages 33-35. May h, 1997 Sewer Line Easement executed by Watson and Barbara B. Forsythe [notarized MW 05-06-97; BF 05-19-97]. Pages 36-38. April 23. 1997 Authorization to Disburse Funds in the amount of $22,338.00, executed by Larry Morgan and Barbara B. Forsythe. Page 100. 3 Mr. Walsh indicated that he was making notes and proposed "that we just wait until the end and try to respond instead of piece meal here and there if that is acceptable." Mr. Knight entered 3 more items into the record and completed outlining the selected documents from Mr. Morgans file. Mr. Knight concluded, "I didn't see anything in this file at all that indicated any nefarious intent, but it appeared to me from the tape and the file that there was an economic relationship between Mr. Morgan and Ms. Forsythe." Chairman Glaeser called a five minute recess and reminded the Commissioners that there was to be no discussion during this time. After the recess he called on Mr. Ed Walsh, Councilman Morgans attorney. Mr. Walsh: "My name is Ed Walsh and I am an attorney here in Round Rock. I am here representing Councilman Morgan and, as Mr. Knight told you, he has tried in every way to cooperate with the Commission and with Mr. Knight in the investigation." He said that he would call Mr. Morgan and two other witnesses, Ms. Forsythe and Larry Morgan, to testify. He added that all of the documents that Mr. Knight went over did come out of Mr. Morgans file and they had no quarrel with any of those documents. Mr. Walsh said that he looked at Mr. Knight's memo to the Commission and disagreed with one part of the memo and that was what the Commission needed to find in order to find that Councilman Morgan violated the Ethics Ordinance. He asked the Commission to look at the complaint that was filed by the complainant, Mr. Hodgins. 4 "He cites that Councilman Morgan violated Subsection 2. paragraph d. by committing the following act or admissions to wit; and then Mr. Hodgins says'see attached' and the second page is the substance of Mr. Hodgins complaint. Now the ordinance certainly says that the Commission can instruct that the complaint be filed and proceed. This Commission did not do that. We are here tonight, you are here tonight, on this complaint filed by this particular individual and I think that the Commission needs to zero in on paragraph 2. of the complaint. Paragraph 1. ori the second page simply cites the provision that he is saying that Councilman Morgan violated. Paragraph 2. sets out the acts and admissions that Councilman Rod Morgan clearly violated the above provision on March 19, 1997 when he testified at a public hearing of the City of Round Rock Planning and Zoning Commission on behalf of a client, Barbara Forsythe, who he is representing and acting as a paid agent in the purchase, subdivision, instruction, and management of rental housing in the City of Round Rock. I submit to you that that is what the Commission needs to determine is true before you can find Councilman Morgan guilty of any Ethics violation. He is here tonight to try to clear his name. To show that, no, he wasri t representing anybody for pay or profit. I believe that the Commission is bound by the complaint that this citizen filed and that that is the test in order to find the violation. Something that I know wasn't intentional on Mr. Knight's part, but this ordinance in talking about the hearing and it says that the Commission must find by clear and convincing evidence from the record that a violation has been committed. I dori t know if anybody really knows and can define,what clear and convincing evidence 5 i means but it's certainly a greater burden than just in ordinary civil litigation. I know we are not a court or bound by rules of evidence but you are bound by that standard. I would like, after the witnesses testify, time to make some final comments and maybe some argument to address some of the arguments that Mr. Knight made." Mr. Walsh called Barbara Forsythe for his first witness. Joanne Land: "Ms. Forsythe, do you solemnly swear or affirm to tell the truth, the whole truth, and nothing but the truth, so help you God." Ms. Forsythe: "Yes." Mr. Walsh: "Ms. Forsythe would you state your name for the Commission." Ms. Forsythe: "It's Barbara Forsythe." Mr. Walsh: "And where do you live?" Ms. Forsythe: "On Laura Court in Round Rock." Mr. Walsh: "You are the now the owner of the property in question here tonight?" Ms. Forsythe nodded yes. Mr. Walsh: "When did you first meet Rod Morgan?" Ms. Forsythe: "About two years ago." Mr. Walsh: "And how did you meet him?" Ms. Forsythe explained how she first met Councilman Morgan. Mr. Walsh: "Ultimately did you and Mr. Morgan find a property that you were interested in purchasing?" 6 Ms. Forsythe: "Yes." Mr. Walsh: "And that's the tract in question that was purchased from Mr. Watson?" Ms. Forsythe: "Right." Mr. Walsh: "At any time prior to that purchase had you signed any agreement with Mr. Morgan or asked him to represent you in any sort of transaction?" Ms. Forsythe: "No." Mr. Walsh showed Ms. Forsythe five documents that had been presented by Mr. Knight earlier in the meeting. Ms. Forsythe indicated by her testimony that she had never paid Mr. Morgan but,in fact, Mr. Watson had paid Mr. Morgan. Mr. Walsh:: "During the whole transaction have you ever reached any l agreement with Mr. Morgan that he would market that property or manage it or try to lease it or anything of that nature." Ms. Forsythe: "No, I bought a duplex and owned it 30 years and I handled it all myself, in fact,I was an absentee landlady for three years." Mr. Walsh:: "Now let's talk about the Planning and Zoning meeting that was in question that everybody is talking about here. Did you request Mr. Morgan to come to that meeting?" Ms. Forsythe: "No, I just found out that he was coming and I came." Mr. Walsh:: "Okay, did you ask him to come to speak on your behalf?" Ms. Forsythe: "No." 7 Mr. Walsh:: "Did you agree to pay him any sort of fee for coming." Ms. Forsythe: "No." Mr. Walsh:: "On the tape Mr. Harter with Mr. Kallman s firm got up and answered some questions that the staff had. Is that correct?" Ms. Forsythe: "Yes." Mr. Walsh: "Or the P&Z members?" Ms. Forsythe: "Yes." Mr.Walsh: "And he was somebody you had paid to represent you?" Ms. Forsythe: "Yes." Mr. Walsh: "The 1031 Exchange, did that go okay?" Ms. Forsythe: "Yes, it did. It's completed" t Mr.Walsh: "Now from the size of Mr. Morgan's file that has been presented to the Commission tonight. He was involved in a lot of things concerning the sale of the property to you and your constructing the duplex. Is that correct?" Ms. Forsythe: "A huh." Mr. Walsh:: "Was he doing that for any sort of fee?" Ms. Forsythe: "No,not from me." Mr. Walsh:: "Was his office a convenient place to meet being that Mr. Larry Morgan was in Georgetown and you were here in Round Rock?" Ms. Forsythe: "Yes." Mr.Walsh:: "And all these faxes and so forth, do you have a fax machine?" s Ms. Forsythe: "No,I don't and I dorft have access to one." Ms. Forsythe concluded her testimony by stating that Councilman Morgan did not represent or act as a paid agent in the purchase, subdivision, construction and management of the rental housing that she is constructing. Mr. Knight then questioned Ms. Forsythe. Mr. Knight: "Did Mr. Morgan advise you, and there is no implication here of the question, did Mr. Morgan advise you that he was getting fees from Larry Morgan Builders?" Ms. Forsythe: "No." Mr. Knight: "That he would be paid a fee?" Ms. Forsythe: "No." Mr. Knight: "Did he advise you as to whether or not he would, he got any fee for referral of you to Premier Mortgage?" Ms. Forsythe: "No." Mr. Knight: "Did you just assume that he was just doing the subdivision work as a friend?" Ms. Forsythe: "I didri t know because I didn't know how to do all of this so--.-' Mr. Knight: "Okay,but you have never paid Mr. Morgan any money or agreed to pay him any money, or--" Ms. Forsythe: "No." Mr. Knight: "And do I understand it that you never agreed that he can make fees from other people in the transaction?" 9 Ms. Forsythe: "No, I didri t know any of that." Mr. Knight: "Did you deny at the Planning and Zoning Commission meeting that, or make it known that, he didn't represent you? Did you feel like at that time that he did not in fact represent you?" Ms. Forsythe: "Well, I had no feelings about it at all. All I was doing was shaking after all these people were talking against me causing the water problem." Mr. Knight: "All right, and on the contract that you signed with Larry Morgan Builders it shows Mr. Rod Morgan as the agent there. Do you know who he was the agent for?" Ms. Forsythe: "No." Mr. Knight: "No further questions." Commissioner Rogers: "I have one quick question. I was looking through previous documentation and you said that you did not call Councilman Morgan to come and speak on your behalf at the P&Z meeting at that point and time." Ms. Forsythe: "No." Commissioner Rogers: "There was no phone call from you or discussion between the two of you?" Ms. Forsythe: "No." Commissioner Rogers: "Thank you." Ms. Forsythe: "I didri t think it would be a problem." Ms. Forsythe was excused from further testimony. 10 Mr. Walsh called Larry Morgan as his next witness. Joanne Land: "Mr. Morgan, do you solemnly swear or affirm to tell the truth the whole truth, and nothing but the truth, so help you God." Larry Morgan: "Yes." Mr. Walsh: "Will you state your name." Larry Morgan: "My name is Larry Morgan." Mr. Walsh: "And where do you live?" Larry Morgan: ,"I live at 308 Rio Bravo in Georgetown,Texas." Mr. Walsh: "And I take it you are a home builder." Larry Morgan: "That is correct. Mr. Walsh: "How long have you been doing that?" Larry Morgan: "Approximately three years." Mr. Walsh: "You are also Rod Morgans brother?" Larry Morgan: "That is correct." Mr. Walsh: "When did you become involved in this transaction involving Ms. Forsythe?" Larry Morgan: "Rod called me one day on a referral that someone was interested in doing a custom duplex because that's my business custom homes. He asked if he could bring Ms. Forsythe up to Georgetown to see some of the homes I'm building." Mr. Walsh: "The contract between Ms. Forsythe and you,who drew that up?" 11 Larry Morgan: "I drew that up." Mr. Walsh: "Did the contract provide for any commission for Rod Morgan?" Larry Morgan: "No,not in the contract." Mr. Walsh: "Do you intend to pay him a commission?" Larry Morgan: "I intend to pay a commission." Mr. Walsh: "Do you know how much?" Larry Morgan: "You can't use standard percentage as a real estate agent, and I am also a broker but I'm also a builder, so there is a fine line and this is a Texas Capitol Contract and there is not an allocation for that. So it would be market conditions which would be less than 3%." Mr. Walsh: "As far as the P&Z meeting goes,were you present?" Larry Morgan: "Yes, I was." Mr. Walsh: "Did you ask Rod Morgan to speak on your behalf?" Larry Morgan: "No,I did not." Mr. Walsh: "Did you hire him in any manner to speak for you and represent you at that meeting?" Larry Morgan: "No." Mr. Walsh: "The $64,000 question may be if the P&Z would have not divided this lot into two would you still have built this duplex for Ms. Forsythe?" Larry Morgan: "Yes." Mr. Walsh; "Your construction of the building was not contingent on the P&Z approval of making two lots." 12 Larry Morgan: "It was not contingent on that." Mr. Walsh: "And it follows then does it not that Mr. Morgans commission was not contingent on that?" Larry Morgan: "That's correct." Mr. Knight then questioned Larry Morgan. Mr. Knight: "Where it shows that Rod Morgan was the agent on the signature page of your contract with Ms. Forsythe,who was he the agent for?" Larry Morgan: "That is where you have to show me that because I dont recall that on mine." Larry Morgan looked at the contract to which Mr. Knight was referring to. Larry Morgan: "The purpose on that was this was put on for the Title Company. When it was sent over they had no cross reference for the money that was in escrow because of the 1031 Exchange. So I would imagine the Title Company had that as a cross reference as to who to talk to or whatever." Commissioner Sanders: "Was that added on there or part of the contract?" Larry Morgan: "It was added on the side there----wrote that on there just for clarification. I used the fax machine there because it was closer and I may have had him sent that over or fax it over." Mr. Knight: "He was not an agent for anyone?" Larry Morgan: "Not in the context of the contract." Commissioner Ort: "When was construction started?" 13 r C Larry Morgan: "I dont know. I would have to look at my notes." Commissioner Ort: "Prior to P&Z?" Larry Morgan: "No." Commissioner Graffious: "Do you have any plans to build another duplex?" Larry Morgan: "No plans." Commissioner Sanders: "Receipt notation at the bottom by the Title Company acknowledging$2,500 on 3/6/97. There was already$2,500 as a deposit. It was written to the title agency. They kept those funds pending this contract." Larry Morgan: "Yes, if you notice in that contract, Tex Cap is not the best contract in the world but it's great for home building. There is not a place in there for earnest money." Commissioner Sanders: "She is acknowledging receipt of earnest money but she already had it." Larry Morgan: "She already had it so they had'to have it as a formality." Larry Morgan was excused from further testimony. Mr. Walsh: "I call Rod Morgan." Joanne Land: "Mr. Morgan, do you solemnly swear or affirm to tell the truth the whole truth, and nothing but the truth, so help you God." Councilman Morgan: "I do." Mr. Walsh: "For the record would you state your name." Councilman Morgan: "My name is Rod Morgan." 14 Mr. Walsh: "And where do you live Mr. Morgan." Councilman Morgan: "I live at 1307 Woodrock in Round Rock." Mr. Walsh: "And how long have you lived here in Round Rock?" Councilman Morgan: "I have lived here for almost 20 years." Mr. Walsh: "And how long have you been in the Real Estate business." Councilman Morgan: "About 21 years." Mr. Walsh: "And your company is Landmark Properties?" Councilman Morgan: "Yes sir." Mr. Walsh: "And you are also on the City Council?" Councilman Morgan: "That is correct." Mr. Walsh: "And how long have you been on the City Council?" Councilman Morgan: "I'm serving my 511,year." Mr. Walsh: "Let's sort of start from the beginning and try to hit the high points. Did you meet Ms. Forsythe at that Board of Realtors meeting?" Councilman Morgan: "Yes, sir, that is correct. That is completely accurate." Mr. Walsh: "And did you then proceed to try to help her find some property to build a duplex?" Councilman Morgan: "Yes, about a year to a year and a half later. She called me and I recalled who she was from that meeting and we went from there." Mr. Walsh: "And how did you or she come upon this property in question that Mr. Watson owned?" 15 Councilman Morgan: "We spent a lot of time looking for properties that would suit her needs. We looked throughout the entire area of Georgetown and Round Rock. We looked at new ones, we looked at previously owned ones, and we didn t find exactly what she was interested in. I knew of someone who might sell their duplex. It was an absentee owner who lives between two places between San Francisco and Phoenix, Mike Watson. As it turns out, he wasn't really interested in selling that duplex. We manage that duplex for him." Mr. Walsh: "You already had a relationship with Mr. Watson?" Councilman Morgan: "Yes, sir, I was his managing agent for an existing duplex." Mr. Walsh: "Okay, and how long have you been doing that for him?" i Councilman Morgan: "For several years. He bought the property in the early 90's." Mr. Walsh: "He wasn't interested in selling the duplex he owned. What happened after that?" Councilman Morgan: "He had mentioned in previous times that he might sell the property. He didn't see that he would be moving back. He originally bought it to live in but that never took place. So in the back of my mind I said well maybe he is interest in selling it. He was not interested in selling that property but at the same time or shortly after he bought that duplex. He bought a vacant lot next door and Ms. Forsythe liked that floor plan very much and she said you know what if I can build a duplex like this on this lot. She said do you think he would be interested in selling the 16 lot. I said well I don't know we've never really discussed it but I will give him a call. I called him up and he said well let me think about it a few days and I will call you back. So that is what happened. He called me back and said you know what do you think it's worth. I told him what I thought it was worth and he said I will sell it at that price. Send me a contract and I said well okay that is fine. I visited with Ms. Forsythe. I said this is what he wants to sell it for. Is this acceptable to you? She said yes that is fine. All my numbers work to do this and so we sent him a contract. There was absolutely no reason to have a listing agreement. That would have been just an exercise so that would be covered in a purchase agreement anyway so I sent him a purchase agreement. He faxed me back a copy. The reason that there are some dates and stuff missing is the original didri t come back. He didri t know that he needed to send back the original. He thought the fax would be adequate. So Ms. Forsythe already had earnest money being held by a title agency. I called Alamo Title and so they later did a receipt for escrow which is not on that contract. That is why it's not on there where it is usually explained." Mr. Walsh: "Mr. Knight raised a probably valid point. Was there ever a listing agreement with Mr. Watson?" Councilman Morgan: "No there was never a listing agreement because he never said that he was interested in selling the property. I approached him." Mr. Walsh: "Okay, so you had not been trying to market the property for him?" 17 Councilman Morgan: "No,whatsoever." > Mr. Walsh: "What discussions did you have with Ms. Forsythe regarding your role in this transaction? The sale of the property to her?" Councilman Morgan: "Well, I told -Ms. Forsythe that the property was available for purchase but I do represent the seller of the property and could not be her agent in this transaction. I am required by State law to fully disclose that. I did that in writing and verbally. I didn't have a choice. This occurs commonly as Mr. Sanders knows that you can�be out showing property and low and behold the property that someone wants to buy is the one you have listed. You really act as a dual agent so that is why that is that way. I think I followed the correct procedure and disclosure." Mr. Walsh: "And as Mr. Sanders said that form that is filled out is that required in all of these transactions?" Councilman Morgan: "That is absolutely required before or at signing a contract and I stated on there that I was representing the seller. You are required by State law to treat all parties fairly in a transaction and have full-disclosure. I did complete all of that." Mr. Walsh: "There is language in that standard form about an intermediary and that would require written acknowledgments and so forth?" Councilman Morgan: "Yes it's a separate--" Mr. Walsh: "But you all werei t at that point in this transaction, where you needed it?" 18 Councilman Morgan: "No,I was already the agent for Mr. Watson." Mr. Walsh: "Let's talk about the P&Z meeting. Why was it that you were here that night for the P&Z meeting on this property?" Councilman Morgan: "It wasn't necessary for me to be at that meeting but I had heard that there was a lot of opposition to this. I didri t quite understand why there would be that opposition since what Ms. Forsythe wanted to do fully complied with all City rules and regulations but I attended and with no intent to speak. That wasn't my purpose, but after I heard all of the comments that wereri t correct and accurate, I felt compelled to state the facts as I know them." Mr. Walsh: "Was this a decision you made sitting in here sort of spur of the moment?" Councilman Morgan: "It was totally spur of the moment. I had no plans. If I was going to speak, I certainly would have been a little bit or far more prepared and probably more methodical in my approach. I just tried to address or rebut the items that weren't accurate." Mr. Walsh: "In hindsight,with 20/20 vision,would you do it again?" Councilman Morgan: "There is no way I would do it again because knowing what I know now, there was absolutely no need for me to speak. I spoke on my own initiative and Ms. Forsythe certainly didri t ask me to speak or represent her and she certainly didri t pay me any money to do that." Mr. Walsh: "Did anyone else in this transaction, ask you to speak here?" 19 Councilman Morgan: "No,no one else asked me to speak" Mr. Walsh: "Or represent them in any way?" Councilman Morgan: "No one else did." Mr. Walsh: "Did anybody a you an money or promise to a you an Y YP YY Y Y P pay Y money?" Councilman Morgan: "No, I haven't been paid anything by anyone else." Mr. Walsh: "Going to some of the concerns that Mr. Knight expressed a while ago. He talked about toward the last of the tape you several times used the words 'we are going to'. Would you explain why you used that word?" Councilman Morgan: "Well, that's my normal way of speaking. I dont use the word I. I dont try to take credit for things or put it on myself. That's my normal way of speaking. I certainly have been involved in this transaction from start to finish. I think everything that Mr. Knight has gone through here shows the complexity of even a simple transaction and how much a real estate agent actually does that they are not required to do. I have not been paid anything by a mortgage company, or any kind of referral fee, or the engineering company, or surveying company, or appraiser, or anything of that nature. That is part of what a real estate, what a good real estate agent does to assist in a transaction." Mr. Walsh: "Were you, in some instances for all of these documents, a sort of conduit or given copies of these things because you were an agent involved?" Councilman Morgan: "Absolutely, who else are people going to contact. I mean that's typically what happens. The agent is the conduit for the information. The 20 title company says could you please call the buyer or seller and get this information. The engineer says would you please do this or do you have a copy of a plat or do you have that. The appraiser calls you do you have any comparables to assist me in doing my appraisal. This is normal and usual and customary in real estate." Mr. Walsh: "Why was that Bell County Appraisal in your file?" Councilman Morgan: "That is a copy of an appraisal that Ms. Forsythe had received on a lot that she had bought many years ago and she was merely asking me to explain some things on the county appraisal. It had nothing to do with anything in this transaction. I wasn't going to sell the property. She just asked me--she knows that I guess real estate agents deal with this and she askedme to explain some things on it and that's what I did." Mr. Walsh: "Regarding the 1031 Exchange. Mr. Sanders gave some explanation of that and I have to confess ignorance myself on that sort of transaction, but did everything go okay to complete the 1031 exchange?" Councilman Morgan: "Yes, it did. I'll say that Mr. Sanders probably explained that as good as anyone could of explained it. It's a very technical transaction and very few real estate agents know the details on that. He had all the details totally correct on that. The only thing that I made a comment on was that Ms. Forsythe was not near the end of the 180 days. We had plenty enough time to -- and there I go, I said again 'we', she had plenty of time to get her money invested into the property. That's an IRS ruling and the builder--we were plagued by bad weather as we all know and the builder was very efficient in getting the structure up and her money reinvested by the deadline." 21 Mr. Walsh: "As Mr. Knight told the Commission, you cooperated and brought your entire file up to Ms. Land and also arranged for Ms. Forsythe and Mr. Watson to authorize the release of the Title Company file." Councilman Morgan: "That is correct. I am sorry that there was a lot of boring information in that file but I try to keep all details and all pieces of paper in there that I might need to refer to or questions would come up on but that is true I handed over which I have in my hand here. I didn't realize there was 300 pages in that transaction for such a small transaction as you might say for this--most of it had to do with the sale of the lot,a great deal of it did." Mr. Walsh: "At the time of the P&Z meeting the land sale from Mr. Watson to Ms. Forsythe had closed. Is that correct?" Councilman Morgan: "That is absolutely correct. It had closed not quite two months earlier. , That transaction was done there was language in the contract that the seller must provide an easement to get access to wastewater. That's the facts from the Title Company. They just wanted to make sure that everything in the contract was complied with before they funded it and sent the money to the seller." Mr. Walsh: "And you had been paid your commission from that sale by Mr. Watson." Councilman Morgan: "That is correct that was the agreement in the contract and I received my compensation from him." 22 Mr. Walsh: "I don't want to be repetitive or redundant but so the record will - be clear did Mr. Watson request that you appear at this meeting for any reason to represent him?" Councilman Morgan: "No, he did not. He was through with the transaction. He had no further interest in what went on. Other than he certainly would like to have a nice neighbor and he knew what was going to happen." Mr. Walsh: "And did your brother, Mr. Morgan, request you to be here or pay you any fee or promise you any profit for being here and speaking before the Commission." Councilman Morgan: "He did not." Mr. Walsh: "In the preliminary hearing there was a lot of discussion about the comment you made when you got up saying you represented Ms. Forsythe. Do you have a better description of what you were doing here instead of'representing her'." Councilman Morgan: "Well, I think that was, in hindsight, a poor choice of words. I was speaking on her behalf. I wanted to make it clear what I was speaking about and what side I was speaking on and the word represent was a poor choice of words in hindsight." Mr. Walsh: "You were going to get a commission when the sale of the duplex construction completes and Ms. Forsythe pays your brother?" Councilman Morgan: "Yes sir, that is correct." Mr. Walsh: "Was that commission ever contingent upon this lot being divided in half?" 23 Councilman Morgan: "It was not. The contract was entered into quite a bit earlier before the P&Z meeting and Larry Morgan was going to build the duplex for Ms. Forsythe whether it was on a half acre lot or whether is was on a quarter acre lot. It had no bearing on the subdivision." Mr. Walsh: "And he will be paying you?" Councilman Morgan: "Yes, he will be paying me. I wasn't involved in the drawing up of that contract. That was done strictly between Ms. Forsythe and Larry. I wasn't there to even address questions or discuss anything about a brokerage fee. He is paying me a brokerage fee for that. As Larry said there's some things that have room for improvement on the Builders Association contract there. It doesn't have a place to receive earnest money. It doesri t have a brokerage fee item or paragraph in there and t that's true of a lot of builders. They use their own contracts because they know their procedure and that's why that is." Mr. Walsh: "If we were in a courtroom--Mr. Knight knows I would get called down for this --but I want to ask you. This is your case. Is there anything that I haven't asked you that you think is important that you want to tell the Commission tonight in their consideration of this." Councilman Morgan; "I don't know that I can add much else to what's already been said unless there are some specific questions that I can address." Mr.Walsh: "I pass the witness." Commissioner Rogers: "I want to clarify a point. In our previous meeting you made a comment, 'so I, we learned that there was going to be opposition and Ms. 24 Forsythe asked if I was going to go and I said I'd be happy to attend.' Now that tells me that she talked to you and she asked you and you said that you'd go." Councilman Morgan: "Well, she didri t ask me to go. She did not ask me to go. She just asked me if I was going." Councilman Rogers: "Okay." Chairman Glaeser: "But you do stand by that statement that she asked you if you were attending?" Councilman Morgan: "Yes, she did. Which is a fair question. I don't think it had any bearing on the representation or anything." Commissioner Graffious: "Was she the primary person that you became aware of the problems associated at that meeting or the public support or lack of support at that meeting? Was she the one that brought that to your attention or was someone else that had done it first?" Councilman Morgan: "No, I had learned of that really through Planning and Zoning. Not anything that I was trying to farret out by any means. You know how you hear things and I just heard that there was opposition to it. I didn't quite understand that but, of course,I later understood why." Chairman Glaeser: "We have your testimony during the meeting, the preliminary hearing; excuse me, 'so we learned there was going to be opposition and Ms. Forsythe asked if I was going to go and I said,Well I will be happy to attend that'." Councilman Morgan: "But she didn't ask me to go. She didn't ask me to go speak on her behalf." 25 1 Commissioner Graffious: "As one not in the Real Estate business, I noticed that a lot of the documentation presented here was surrounding the building on the property. As an agent was your responsibility to the landowner to sell the property then did you turn around and assist Ms. Forsythe with further development of the property. Is that standard?" Councilman Morgan: "That is very common. If you wanted to buy a new home I would show you what's available. You might say I like x, y, z builder. I want to buy that home so I will take you there. You are not paying me a commission. You haven't written me a check for a brokerage fee. That's being paid for by the builder. But I am going to assist you. I may or may not go with you for financing that depends on whether there is a need to. I may assist you in selections that go into the home. I may assist you in selecting the lot. I may assist you in other modifications to the home because I am the person you talk to and I may help get you what you want but you are not paying me. And that is a normal and customary procedure in real estate." Chairman Glaeser: "Thank you very much Mr. Morgan. Mr. Walsh do you have some final summary comments." Mr. Walsh: "Yes, Mr. Chairman. I saw Councilman Stluka in the audience and it jogged my memory that he and I were both on this committee that came up with this Ethics Ordinance many years ago and my long term memory is not very good any more so I cant give you any insight or inside information as to what this provision means. But what I believe it is directed at, if you read it carefully, is the lawyer on the City Council who says well for a fee I'll go and appear for you before some City 26 P Commission. More or less influence peddling sort of situation and not this situation here. In reading this, the strange thing that occurs to me is that to show why that is the intent of it. Assume just for the sake of assuming, the scenario that the contract with Mr. Watson selling to Ms. Forsythe was contingent on coming up and getting this resubdivison and it wouldn't close and Rod Morgan wouldn't get his commission unless that body took that action. I see nothing in this ordinance to prevent him, Rod Morgan, at P&Z from stepping up here and saying my name is Rod Morgan, I'm here representing myself, I'm a Real Estate Broker and I've got a commission that's coming to me that is contingent on this being approved. And I don't think that would be a violation because this says that the person can represent himself or a family member. And I think that really does go to the fact that this particular provision was targeted to prevent the influence peddling. The appearing before City Boards and Commissions for a fee letting your client think he is going to get some special consideration because you've hired the City official. As I said I think the evidence is clear that Councilman Morgan did not come up here and intentionally or knowingly violate this ordinance. I think that you need to believe him when he came up and all these folks were standing up and saying things that he thought were not correct to more or less set the record straight. I don't think he would ever do it again. This has certainly, regardless of what this Commission does, smirched his good name and that goes with the territory when you are a public official. The evidence is clear that he was not here representing anybody for pay or profit. You've heard all the witnesses and the ordinance itself as I pointed out earlier on what 27 ` D you need to determine is Section 8 b the issue at a final hearing shall be whether a violation of this section has occurred. The Commission shall make it's determination based on clear and convincing evidence in the record. Evidence in the record, not what somebody speculates. I submit to you this complaint that-Mr. Hodgins filed here is just pure speculation. That he appeared here as a paid agent of Barbara Forsythe and acting as a paid agent in the purchase of subdivision construction and management. The evidence just doesn t support that and I respectfully request that the Commission determine that Councilman Morgan did not violate this ordinance." Mr. Knight: "I think that clearly the complaint, although parts of it, may have been speculative when it was made. A citizen made a complaint based upon the statements made at the public meeting regardless of the issues or facts and some of it i was necessarily speculative. I think, as Mr. Walsh pointed out, and anything I say is argument not advise, I agree 100% that if you-make a finding you have to do it based on what's clear and convincing evidence in your own mind and that somewhere more than 50% of the evidence in what is clear and convincing to you. If there is any real doubt then he should not be found guilty of violating this ordinance. I think it's very possible the violation was inadvertent. Inadvertent being different from intentional or unintentional the way they are defined in the ordinance. If you show up and you have your mental facilities with you and of what your are doing and you step forward and purposely do something you are doing something intentionally and knowingly. I think he did that knowingly and intentionally stepped forward and spoke on this issue. I think if he violated the ordinance in doing so I think that was inadvertent and if he had 28 thought about,known about, remembered he certainly would not have done so. I don't think there is any question about that. The issue in making your decision you need to look at the section of the ordinance that is the subject of this complaint and read it carefully. I would tell you that the real argument that I would have on guilt or innocence is limited to considering the last remarks Mr. Morgan made about a prospective person coming and saying show me some properties and they are shown the properties and get paid a fee by a home builder or somebody. They never sign a contract with that person that comes and asked them to provide all these and a lot of time because they dori t get any fee unless the deal is consummated. If you look at this ordinance except for Barbara Forsythe there would not have been a series of events. There would have been no representation of any body in this instance. The ordinance doesn't say you have to be paid for that specific point in time and it doesn't say that Ms. Forsythe has to pay you or the profits have to be from her. It says you represent someone directly or indirectly and you have to decide what directly and indirectly means and for pay or profit is in this process. It appears to me that there is basis for finding that Mr. Morgan directly or indirectly represented Ms. Forsythe for pay or profit and he was doing so at the time he made the presentation at the Planning and Zoning Commission. That was just a step in a great number of steps he obviously took given this lady a lot of good service. The file speaks for itself she got her money's worth." Chairman Glaeser suggested some recommended steps to reach a decision in this matter. There were three questions the Commission felt should be answered in making 29 the final determination so the Commission addressed each question individually. Question number one "Did Councilman Morgan intentionally or knowingly represent or appear on behalf of Barbara Forsythe or any other person, group, or interest either directly or indirectly before the Planning and Zoning Commission?" Commissioner Graffious stated, "The clause itself says anybody other than himself basically or his family. So if I understood right then we are looking at this just as it is directed towards possibly him being an agent to Barbara Forsythe but if we tend to lead toward somebody else then the recommendation would then be to go ahead and reestablish the proceedings over again?" Mr. Knight replied, "We haven't had many complaints so we are attempting to build our own process and procedures and I wouldn't advise us to get to the point of having these conducted like a criminal proceeding. But since the notice Mr. Morgan has gotten is alleging a complaint that he represented Ms. Forsythe; I think it's reasonable that the decision be limited to that and if the Board finds and feels motivated that if the evidence shows that he was representing somebody else a more general complaint can be filed if somebody wants to." The Commission agreed that they should confine the complaint as written limited to Ms. Forsythe. Chairman Glaeser stated, "To answer Commissioner Graffious' question, there is. three different ways that a complaint can be filed. One of those ways is that a Board can ask for further discovery and findings and.move forward in it's own investigation. I believe that Councilman Morgan intentionally or knowingly represented in an indirect way Barbara Forsythe before the Planning and Zoning Commission." 30 Commissioner Ort then said he would take exception to knowingly. As defined, knowingly means that he could be assured that his testimony would be reasonably certain to cause the result. "He had no knowledge that he would knowingly alter the result. I would go along with that he acted intentionally .in that he engaged in the conduct that presented the testimony to the Commission when his conscience objective was to cause the result, that is the granting of the subdivision, if he acted intentionally but not knowingly. I dont think there is any evidence to indicate that he received direct pay or profit by attendance at this meeting." Commissioner Sanders then said, "I would have probably been there myself to help continue the whole process. So yes he was there I think intentionally and I think he was representing her and obviously a construction contract but to what degree that I dont know." Mr. Knight went over question number one with modification. The question posed was, 'Did Councilmember Morgan intentionally represent or appear on behalf of Barbara Forsythe either directly or indirectly before the Planning and Zoning Commission? MOTION: Commissioner Terrell moved that the Commission take a vote on question No. 1, "Did Councilmember Morgan intentionally represent or appear on . behalf of Barbara Forsythe either directly or indirectly before the Planning and Zoning Commission?" Commissioner Rogers seconded the motion. VOTE: Ayes: Commissioner Graffious 31 Commissioner Ort Commissioner Rogers Commissioner Sanders Commissioner Terrell Commissioner Glaeser Noes: None ACTION: The motion carried unanimously. Chairman Glaeser noted that the answers should be either yes or no to question No. 1. Commissioner Graffious - yes Commissioner Ort. - yes �\ Commissioner Rogers - yes Commissioner Sanders - yes Commissioner Terrell - yes Commissioner Glaeser - yes Question No. 2 was 'Did Councilmember Morgan have a business relationship with Barbara Forsythe or any other person, group or interest that would benefit differently in the public at large from approval of the subdivision plat at issue'? Commissioner Graffious: wanted to discuss the idea of public-at-large. He stated, "In my mind, as I was looking at the video, the discussion,for at least the public, that presented itself here in that general subdivision. Do I have that ability to put 32 public-at-large based on what I saw in the video knowing that generally it was the people in the subdivision as being at large not necessarily at City level." Mr. Knight responded, "The Commission needs to decide if he was representing somebody that had an interest different from the public at large for the City as a whole. He is a Councilmember and was he representing an interest there other than the interest of the City generally in getting a good subdivision approved." Chairman Glaeser suggested rewording question No. 2 to, 'Did Councilmember Morgan have a business relationship with Barbara Forsythe'? MOTION: Commissioner Rogers moved that the Commission take a vote on question No. 2, "Did Councilmember Morgan have a business relationship with Barbara Forsythe?" Commissioner Terrell seconded the motion. VOTE: Ayes: Commissioner Graffious Commissioner Ort Commissioner Rogers Commissioner Sanders Commissioner Terrell Commissioner Glaeser Noes: None ACTION: The motion carried unanimously. Chairman Glaeser noted that the answers should be either yes or no to question No. 2. 33 Commissioner Graffious - yes Commissioner Ort - yes Commissioner Rogers - yes Commissioner Sanders - yes Commissioner Terrell - yes Commissioner Glaeser - yes Question No. 3, 'Did Councilmember Morgan appear before the Planning and Zoning Commission on behalf of Ms. Forsythe for pay or profit'? MOTION: Commissioner Rogers moved that the Commission take a vote on question No. 3, "Did Councilmember Morgan appear before the Planning and Zoning Commission on behalf of Ms. Forsythe for pay or profit'?" Commissioner Graffious t seconded the motion. VOTE: Ayes: Commissioner Graffious Commissioner Ort Commissioner Rogers Commissioner Sanders Commissioner Terrell Commissioner Glaeser Noes: None ACTION: The motion carried unanimously. Chairman Glaeser noted that the answers should be either yes or no to question No. 3. 34 Commissioner Graffious - no Commissioner Ort - no Commissioner Rogers - no Commissioner Sanders - no Commissioner Terrell - no Commissioner Glaeser - yes Chairman Glaeser stated, "You will notice in paragraph 6, of Mr. Knight's memo, an answer of "no" to anyone of the above questions will require a decision in favor of Councilmember Morgan and declared that no violation occurred and or such vote and decision in the record and minutes of the meeting. At this point the Commission needs to make sure that's the conclusion that they want to make." Commissioner Graffious stated, "When we discuss on whether not a violation ever occurred, I have concerns that I would like to address, after this vote concerning what was presented to us on whether we as a Commission should institute further proceedings. I would like to make sure that our final decision says that the violation as pertained from the initial allegation is what we close out." Mr. Knight responded, "I think what you can do, if you wish, is consider a finding of not guilty on this specific complaint, if that is where you are so inclined. It is incumbent upon, in fairness to Mr. Morgan, to get this specific complaint over with." Commissioner Graffious said, "I am aware of the reference in the ordinance that allows us as a Commission to have information surrounding circumstances of possible ethical standard violations to bring us together to make a ruling on what we find. With 35 what I have right now, I'm prepared to close this out regarding the allegation of acting as an agent for Barbara Forsythe but my concern is we haven t dealt deep enough in regards to him acting as another agent for someone else, namely possibly his brother Larry Morgan." Mr. Knight replied, "I understand efficiency but I think the Commission needs to take action on this specific complaint first. Then if you desire the Commission can come back in another meeting to consider and discuss that issue and take a position publicly if you are going to pursue the other issue." MOTION: Commissioner Graffious moved that Councilmember Morgan represented Barbara Forsythe for pay or profit at the March 19, 1997 Planning and Zoning Commission meeting. Commissioner Terrell seconded the motion. Mr. Knight noted that a "no" vote means that he did not violate the ordinance, ie not guilty on the complaint as charged. VOTE: Ayes: None Noes: Commissioner Graffious Commissioner Ort Commissioner Rogers Commissioner Sanders Commissioner Terrell Commissioner Glaeser ACTION: The motion carried unanimously. 36 CONSIDER REVIEW AND POSSIBLE RECOMMENDATIONS CONCERNING THE CITY OF ROUND ROCK ETHICS ORDINANCE. MOTION: Commissioner Rogers moved that this item be tabled. Commissioner Terrell seconded the motion. VOTE: Ayes: Commissioner Graffious Commissioner Ort Commissioner Rogers Commissioner Sanders Commissioner Terrell Commissioner Glaeser Noes: None ACTION: The motion carried unanimously. Chairman Glaeser asked if it was necessary for the Ethics Commission to meet before they can initiate a sworn complaint. Mr. Knight responded that a meeting was not necessary if the Chair and one other member of the Commission wishes to file a complaint. If the Chair is not cooperative and a great majority of the Commission wanted to file a complaint then a meeting would need to be held. There being no further business,the meeting adjourned at 10:34 p.m. Respectfully submitted, Christine Martinez Assistant City Secretary 37