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Business Observer Friday, Mar. 29, 2013 6 years ago

SB 1666, power, special interests and your right to know

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Sen. Jack Latvala walked fast. The look on his bearded face was determined. He was preoccupied, on a mission.
by: Matt Walsh Editor

TALLAHASSEE — Sen. Jack Latvala walked fast. The look on his bearded face was determined. He was preoccupied, on a mission.

Nonetheless, it looked like this may be the only time to get to him. It's difficult to get five minutes with any senator or representative during the annual legislative session, unless you have special connections or have written a lot of campaign checks. I went for it anyway.

I told Sen. Latvala who I was — sheepishly, mind you — as we walked. I said: “Senator, I was wondering if we could speak a few minutes about Senate Bill 1666.”

The lion roared. “I'm not talking to any of you guys,” he said gruffly. “You guys” — media people. He headed briskly for the elevators. I tried to keep up.

“I'm not going to feather any industry's nest just to keep it in business,” he said, irritated, as he looked for an open elevator door. He moved to the next call button and pushed it and really let loose: “Look, can't you see I'm in a hurry!”

Got it. I backed off and walked away. The thought crossed my mind: Who's working for whom here?

But then that notion, as ridiculous as it may be, passed, and it occurred: This is how democracy works. On their turf, you're a groveler, a beggar, a special interest, another annoyance.

And on that day, that's what I was — one of those slimey special interests looking for a break, a favor, a vote to protect a special group: the taxpayers and their right to know. The bad part was I was also doing it to protect my industry — newspapers. Some of us get paid for publishing public notices, and as chairman of the Florida Press Association this year, I expected to act on behalf of the industry's interests.

In this case, that means working lawmakers to keep public notices in print and in newspapers — by the force of the law.

Yuck. That goes completely against my grain, the idea of using the law to protect a source of revenues and limit competition. Call it what it is: protectionism.

But there's an explanation if you'll bear with me. And, there is a better way. But getting to the better way is a titanic struggle. Spending weeks in the Capitol the past two years, watching how politics is practiced and played, I now see why government gets so screwed up.
The story of SB 1666 is the story of democracy, power, crony capitalism and your right to know. It's how the right public policies often lose out to human frailties.

How 1666 arose
Senate Bill 1666 and its companion in the House, HB 87, are on the Legislature's agenda for the second consecutive year. Their overarching intent is to speed up the mortgage foreclosure process. It takes about 800 days to complete a foreclosure in Florida, and many legislators believe this agonizingly slow process is inhibiting Florida's economic recovery. The backlog of pending foreclosures in Florida totals more than 375,000.

Rep. Kathleen Passidomo, R-Naples, is the lead sponsor of HB 87 for the second year. In the Senate, Latvala, R-Clearwater, took on the assignment to be the lead sled dog.

If you need a bull dog on legislation, Latvala is the man. Few lawmakers have the nerve to stand up to him. And to make challenging him even more daring, the talk in the Capitol is Latvala is among consideration for a turn as a future Senate president.

That brings us to Rule No. 1: If you plan to be a senator for a while and want to be effective or rise to a leadership position, never peeve the leadership, present or future designees. You'll be sent to the gulag (the worst offices) and marginalized. Forget committee chairmanships.

Now along comes Sandra Mortham, former Florida secretary of state (1994-94), former Republican House member (1986-1994); former Largo city commissioner (1992-94); and longtime legislative colleague and friend of Latvala. Mortham now runs Mortham Governmental Consultants LLC. She's a lobbyist.

And then there's Mortham's client, Albertelli Law, the Jacksonville-based law firm founded in 1997 by lawyer James Albertelli. One of Albertelli Law's specialties is handling mortgage foreclosures for banks.

(Full disclosure: Albertelli Law is a longtime customer of the Business Observer.)

In each of the past three years, Albertelli has been behind proposed legislation to shift the publishing of foreclosure-sale, public-notice advertising to the Internet. He formed U.S. Legal Pubs LLC to change the public-notice laws and become one of the leading publishers of Internet-based, foreclosure-sale notices. He doesn't believe newspapers should be the sole publishers of foreclosure notices; he believes it's time to go digital. He has a point.

To entice support, in a slide presentation for Florida's clerks of court in 2011, U.S. Legal Pubs proposed a plan that would split 50-50 the revenue from these Internet notices with the state's court clerks. In one slide, Albertelli estimated the clerks could stand to gain $37 million in new revenue in one year. (BTW: His revenue estimates were close to twice as high as reality.)

What's more, Albertelli's wasn't the only Internet-notice effort. Several municipal governments also have lobbied in recent years to discontinue public-notice advertising in newspapers. They want to publish notices on their own websites — primarily to save money.

Why newspapers?
To be expected, the newspaper industry didn't cotton to Albertelli or the city governments' ideas. Let's face it, no business likes to lose a protected source of revenue. But there were other fundamental public-policy issues that caused the Florida Press Association, the newspaper industry and consumer groups to oppose the online-only ideas.

It's a conundrum: There are legitimate reasons to keep notices in newspapers. There also is a better way (see below). Nonetheless, the arguments:
• Yes, the world is shifting to a digital age. But as recent as two years ago, as much as 50% of Florida's population did not have access to the Internet. This was especially so among minorities and senior citizens. Less than half of Florida's senior citizens have access today. If you shift public notices to websites, large swaths of Florida's population would not have access to public information. How is that constructive public notice?
• If public notice is supposed to be public notice, how is it public if the notices are published on some obscure government website? We all know how easy it is for Web searches to end up as Wonderland rabbit holes. In contrast, in most U.S. locales, the local newspapers and their websites are still the most viewed media, in spite of declining print circulation.
• Add to that newspapers have historical tradition with public notices. The public has known to expect and known where to go for public notices ever since the early 1700s, before the nation's birth.
• The public can trust the veracity and accuracy of public notices in print. The Internet has yet to perfect reliability and trustworthiness. How do you know whether the Chinese haven't hacked a website?

Though “old-fashioned,” newspapers authenticate public notices with legal affidavits. Authenticating original documents on the Internet hasn't been perfected. How do you easily verify an Internet posting is an original and hasn't been altered?

And finally, is it a good idea to have governments control public notices on their websites? Do you trust government to watchdog itself and control the flow of information?

In 2010, 2011 and 2012, the press association and newspaper publishers took these arguments to lawmakers — all the while recognizing that public-notice advertising only on the Internet is coming. The tipping point — when the vast majority of local news is consumed online — hasn't occurred yet.

As a step toward this day, Florida's newspapers worked with Rep. Ritch Workman of Melbourne last year to revise Florida's public-notice statutes. Now, all public notices must be published in print and online — in qualified newspapers and for free on the newspapers' websites and on FloridaPublicNotices.com, a searchable, public-notice portal owned by the Florida Press Association.

The newspapers are required to make their legal-notice tabs and links prominent on their home pages. And they're required to offer free email notification to consumers if they want notice on specific properties.

When the governor signed this legislation into law, believe it or not, Florida became one of the most progressive states in the country for publishing public notices online. Other states are adopting the Florida model.

That didn't slow Albertelli. Here's where he, Mortham and Latvala converge. Mortham asked Latvala to push legislation that would open up foreclosure-sale advertising to “publicly accessible websites.” They chose to insert the public-notice provisions in a bill the legislative leadership wants approved — the mortgage foreclosure bill, SB 1666.

If anyone could get this through the Legislature, the Senate's biggest, relentless, bull dog could.

But if you read SB 1666, you can conclude the public-notice provisions are hardly germane to the intent of speeding up the foreclosure process. In fact, from a practical standpoint, they would add time and cost to the process if a bank's lawyer chose the new option. They would not improve on what lawmakers adopted last year, and arguably, they would result in less notice than what is required now.

Once again, the newspaper industry hopes to have the online provisions stricken. Last week, however, Latvala held firm, and none of the 12 senators on the Banking and Insurance Committee challenged Latvala with an amendment to remove them.

Before the hearing, Sen. Nancy Detert, R-Sarasota, remarked a common refrain, wondering how much longer the “Newspaper Preservation Act” will continue.

But there also are Senate newspaper believers. Sen. Bill Montford, who represents 11 small counties in the Panhandle, fears that if public notice advertising disappears from his region's small weeklies, many of them will shut down. While the big-city senators would love to see some of their metro dailies shut down, Montford shutters at the thought of his communities without that vital source of local news.

Deeper discussion required
So now the hard-core politics intensify. SB 1666 next goes to the Senate Judiciary Committee. Mortham and newspaper lobbyists are making their cases before all committee members.

In the greater picture, the Albertelli public-notice provisions in SB 1666 appear miniscule compared to such issues as the state's $72 billion budget; reforming the state pension system; and whether to expand Medicaid. But if they are adopted, lawmakers will have nicked at an issue that should have a far-reaching, deeper discussion. Public notice is serious and important. It should be more than a dual of power between competing special interests.

“Whenever the people are well-informed, they can be trusted with their own government,” Thomas Jefferson said. He also said: “If once (the people) become inattentive to the public affairs, you and I, and Congress and assemblies, judges and governors, shall all become wolves.”

The dissemination of public information matters ... But there's a better way.

A free-market approach to public notice
Let's assume everyone agrees it's acceptble public policy that our government (federal, state, local and all of their attendant parts) must be required to notify the public of its actions, much as it is required now.

And let's assume it's also good public-policy to require banks and other creditors to notify the public before they sell or dispose of debtors' property.

These are good public policies.

So now the question is: What is the most efficient and effective way to notify the public constructively (a key word) with the least amount of government intervention and regulation, with the least amount of the state deciding winners and losers?

Let the market decide.

Here's how:
Start with state statutes. All they need to say are two things: Constructive public notice is required, and if it's not, aggrieved parties can seek recompense and violators will be appropriately (severely) punished.

From there, the decision on what constitutes constructive public notice should be left up to each government body or creditor to decide what constitutes constructive notice. Let those who are required to give notice decide where, when and how often they will give public notice.

This would create a self-regulating, incentivized market.

Consider the bank that is foreclosing on a past-due borrower, and say the foreclosure process has reached the point of a foreclosure sale.

The lawyer representing the bank now knows he must provide “constructive” public notice. It will be in his financial and business interest to select a medium or media and a frequency of notice great enough that the debtor's lawyer will not feel compelled to file suit challenging the bank lawyer's public notices.

The bank lawyer has the additional economic incentives of not wanting to end up in court or lose his client. He now has economic incentive to find the most effective public notice at the most efficient price.

In this scenario, it would not matter whether public notices appeared in newspapers, on websites, in magazines or on fence posts. The bank lawyer must feel satisfied that he has taken enough steps that he can defend himself in a court that he provided “constructive” notice.

What is “constructive” notice? Let the courts decide. This could result in a patchwork of different thresholds, depending on judicial circuits. But even that could be avoided by another market-based incentive system: a judicial system of loser pays. If a debtor challenges the bank lawyer's public notices and loses in court, he must pay all legal fees.

While such a system won't ever stop the “special interests” from rent seeking every year in the state Capitol, legislators who succumb to these overtures would be inundated, as they are now, by all of the market participants who will argue “laissez faire” — leave the system alone! Let the market decide.

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