Why San Jose councilmembers’ Amazon stocks were not disclosed before a meeting — and why it matters

Two San Jose lawmakers’ investments in Amazon and their abrupt departure from a City Council meeting — after they discussed and nearly voted on a policy to pay grocery workers higher wages — is raising questions about why the conflict wasn’t flagged sooner.

Councilmembers chalk it up to a lack of forethought.

As elected leaders Tuesday debated a $3 pay boost for grocery store workers at risk of contracting COVID-19, Vice Mayor Chappie Jones and Councilmember Pam Foley left the meeting because they own stock in Amazon, which owns Whole Foods, a grocer subject to the new rules.

But the revelation about their conflicts of interest came up mid-meeting — after the lawmakers debated the issue and even made a motion.

Councilmember Sylvia Arenas called it the most “awkward” moment in her four years on the San Jose City Council. Arenas said the conflict should have been detected long before the pair began discussing the policy — not in the middle of a live City Council meeting.

“The process was so damaged that I think we should have called it quits at that time,” Arenas said during the meeting.

What happened 

The 11th hour revelation about potential conflicts came up after Foley pondered whether she owned stock in any grocery companies.

Foley does not personally hold Amazon stock, but Foley and her husband own a mortgage company and a “small percentage” of Amazon stock plays a role in the business’ employee benefits plan.

As the council began discussing which grocery stores would be impacted, Foley texted her husband to ask if they owned grocery stock. At first he said no, but then he texted back to say they had a financial interest in Amazon, which owns Whole Foods.

“If he had even said ‘Amazon,’ it wouldn’t have triggered anything to me,” Foley said. “Once he said Whole Foods, I thought, ‘Oh, yeah. There may be a conflict here.’”

Foley immediately called City Attorney Nora Frimann on the phone — mid-meeting — to ask if her Amazon stock would be problematic. Frimann said yes and explained to the council the legal reasons for why a conflict existed.

Foley’s announcement set up flares for Jones, who disclosed during the meeting that he too owns one share of Amazon stock — which he would rather give up than lose the opportunity to vote.

“I’m conferring with the city attorney right now in terms of selling that stock to be able to vote at the next meeting,” Jones said. “But I need to get a clarification on that.”

Frimann explained that under state law, public officials may not use their official position to influence government decisions involving a financial interest. A lawmaker has a financial interest if the decision will have “material financial effect” on a business entity.

Shortly after, Foley and Jones dropped off the Zoom meeting for the remainder of the hazard pay discussion.

The impact

The next day, Foley told San José Spotlight that if she considered the conflict sooner, she would have excused herself from the conversation before weighing in. She was leaning toward supporting the measure.

Jones also said he didn’t consider Amazon stock as a potential problem before the discussion. While Frimann flagged the issue at the meeting, it is not the city attorney’s job to track where councilmembers invest. It is up to the councilmembers to report conflicts.

For example, Councilmember Sergio Jimenez’s wife works at Kaiser so he recuses himself in decisions about Kaiser. Councilmember Raul Peralez recuses himself from voting on issues involving The Health Trust because his wife works there.

“I know if the vice mayor and I had thought about it, we both would have said, ‘I’m sorry, we can’t participate in this discussion,’” Foley said. “It’s unfortunate, because the hazard pay is really important and I wanted to vote for it. I was disappointed I could not say yes.”

The impact from the conflicts also affects how quickly the hazard pay policy might go into effect.

If Jones and Foley had not recused themselves from voting, it’s possible they would have supported the measure — with analysis on potential unintended consequences to grocers — tallying 8 votes for the measure. That supermajority support would mean the urgency ordinance could go into effect right away.

Now, with just six votes in favor of hazard pay — Mayor Sam Liccardo, Councilmembers Matt Mahan and Dev Davis opposing — it advances as a regular ordinance, which requires another vote and 30 days before it goes into effect.

An ‘unusual’ situation

Frimann called the situation “unusual” and said private conversations would normally take place if a councilmember suspected a conflict. But no one thought to ask whether owning Amazon stock would be a problem, Frimann added, so she had no idea any conflicts existed.

She said having councilmembers draft memos and nearly vote on an item in which they had a financial interest is “not ideal.”

“We’ll have to think about ways to make sure we’re triggering people’s thoughts about stock ownership if we have something coming forward involving a corporation,” Frimann said. “Normally, our staff is very well prepared and very good about identifying who might be impacted by something the council is thinking about doing.”

Jimenez said he had numerous conversations with Foley and Jones before the meeting. Amazon was never mentioned.

“It’s incumbent upon the councilmember to identify a potential conflict and bring that up,”  he said.

San Jose native Paul Soto listened to the debacle as he waited to speak on rent freeze. He told San José Spotlight that having Foley and Jones take part in the conversation “tainted” the hazard pay proposal and robbed the public of an ethical debate.

“People need to recuse themselves so that none of their energy infects the debate — that’s the purpose of recusal,” Soto said. “I was denied the benefit of having the absence of Foley and Chappie. Now that entire issue cannot be considered legitimate.”

Contact Carly Wipf at [email protected] or follow @CarlyChristineW on Twitter.