March 23 (Bloomberg) -- Did you hear the latest joke about New Jersey? A group of investigative journalists this week released a report calling it the least corruptible state in the country. How did that happen?
Easy. We bribed them.
All kidding aside, this is a state where in 2009 three mayors, two assemblymen and five rabbis were among 44 charged in a single money-laundering and bribery sting by the Federal Bureau of Investigation. One of those mayors, Peter Cammarano, was from Hoboken, where I live. He was sentenced to 24 months in prison. Five years before his arrest, another former Hoboken mayor, Anthony Russo, pleaded guilty to corruption charges. His son now sits on the city council.
In New Jersey, we expect corruption. It’s built into the system. We have 566 municipalities, the most per capita of any state. Local governments tax the citizenry dry, while preserving the opportunities for graft that flow from operating redundant public services. The state legislature likes it this way and always has. Whadayagonnado?
So it was quite a story this week when the Center for Public Integrity, a Washington-based nonprofit, ranked New Jersey as the state with the lowest corruption risk in the U.S. (Local corruption didn’t count, it said. Only “corruption risk” in state government did.) There’s a simple explanation for how the group reached its conclusion, too: Its methodology was awful.
Here’s how the center got the New Jersey data for its nationwide “State Integrity Investigation.” Last year, it hired Colleen O’Dea, a freelance journalist who worked for about 26 years at the Daily Record in Morris County, to answer a list of 330 questions about New Jersey state government. Each called for a numerical score. O’Dea, 49, said she interviewed 26 people for the assignment, five in person. The center paid her $5,000.
The center also hired a former local newspaper editor to review her work. From there, the center provided O’Dea’s responses to another Washington-based nonprofit called Global Integrity. That group fed the answers into an algorithm, said Randy Barrett, a Center for Public Integrity spokesman. The results from the algorithm were used to generate letter grades in 14 categories and an overall score for New Jersey of 87 percent, or a B+.
The center hired reporters for every other state, too, along with “peer reviewers” to read their responses. Each reporter got the same list of queries. The center called this investigative reporting. Really, though, it was just a bunch of people answering questionnaires.
For example, O’Dea gave New Jersey a top score of 100 percent when asked to evaluate this statement: “In practice, the state-run pension funds disclose information about their investment and financial activity in a transparent manner.”
How did she decide that? The questionnaire said to give a high score if such information was available online at little or no cost. Her notes, posted on the center’s website, say she asked someone at the New Jersey State League of Municipalities about this. “Very transparent,” her notes said. The center gave the state an “A” in the category of “state pension-fund management,” based partly on O’Dea’s answer to that question.
Now consider that, in August 2010, New Jersey became the only state ever sued for fraud by the Securities and Exchange Commission. The SEC said the state for years lied to municipal-bond investors about the underfunded condition of its two largest pension plans. New Jersey settled without admitting or denying the agency’s claims.
Making a Difference
When I asked O’Dea in a telephone interview if she knew about the SEC lawsuit, she said she didn’t. Later, she e-mailed me to say that she had, in fact, been aware of it, and that “the state has since owned up to the issue.”
Either way, it’s hard to believe New Jersey deserves an A for how it manages its pension funds. Yet for all we know, this grade could have made the difference between finishing No. 1 in the rankings or not. The center ranked Connecticut No. 2 with an overall grade of B, or 86 percent, one point behind New Jersey.
Another example from the survey: “In practice, the state-run pension funds have sufficient staff and resources with which to fulfill their mandate.” O’Dea gave another top score. This time she listed a second source, in addition to the fellow from the league of municipalities: a spokesman at the New Jersey Department of the Treasury. He told her the answer was yes.
And so forth. The center gave New Jersey’s insurance department a B+. One of the inputs was the 100 percent score O’Dea awarded in response to this statement: “In practice, the state insurance commission has a professional, full-time staff.”
Her notes listed two sources: Someone from the Independent Insurance Agents and Brokers of New Jersey, and a spokesman for the New Jersey Department of Banking and Insurance. Both said the statement was true. (Imagine that.) O’Dea said the sources she chose “seemed to logically have knowledge of the question.”
O’Dea said she was surprised by the overall grade that the algorithm produced. “Certainly when I went into this I didn’t think we would come up with a B+," she said. “I was thinking maybe a C.” So give her points for candor.
Barrett, the Center for Public Integrity spokesman, said the group stands by its data and that “if there’s a situation where we made a mistake and need to make a correction, we’ll make it.”
But there’s nothing here worth correcting. They ought to dump the whole thing in the Hudson River.
(Jonathan Weil is a Bloomberg View columnist. The opinions expressed are his own.)
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