Conflicts of Interest – Government Code sec 1090

For a few years there, most during the recession, investigations and prosecutions involving Government Code section 1090.  With the economy well on the road to recovery Conflict of Interest prosecutions are starting up again.  California Attorney General Kamala Harris issued two opinions late last year regarding Government Code section 1090.  Government Code section 1090 prohibits a “government official” from being “financially interested” in any contract made by him or her in an official capacity, or by any public body on which he or she sits.  The definition of both who is a “government official” and what a “financial interest” is extremely broad.

In one opinion (Op. 13-702) Harris was asked two questions: (1) whether a community college trustee who is married to a tenured professor could participate in the collective bargaining process between the district and the bargaining unit that represents his wife and, (2) whether the trustee, a retired district employee (president) receiving health benefits from the district equal to those of current employees, could participate in the process of renegotiating health benefits provided to current employees.

Harris stated the DOJ believed the board member could participate due to a narrow exception in the law.  Namely because Government Code section 1091.5(a)(6) defines as a “non-interest” a spouse of an officer in his spouse’s employment if the spouse’s employment has existed for at least a year prior to the official’s election or appointment to the agency board. Harris said the official could not participate in re-negotiating the health care benefits of current employees that would affect their health care benefits.  Such involvement would create a direct financial interest in the contract.  “Government salary” exceptions in the Government Code do not apply to health care benefits. Once the conflicted member was recused the community college board could renegotiate the health benefits under the “rule of necessity”.  The “rule of necessity” allows a public agency to perform essential business despite a member’s conflict.

In the other Attorney General’s opinion (Op. 13-303), Harris was asked whether a city council could buy products from a vendor when a council member has a 50 percent ownership interest. Harris rather obviously stated the council could not.  The council member had an obvious “financial interest” in any contract between the city and the business.  This part of Harris’ opinion was a given under existing case law.  The new information from this opinion was that the “rule of necessity” did not apply because other vendors could supply the products.   Harris also stated none of the statutory “remote” or “non-interests” applied in this circumstance. The other new and important detail in this opinion was Harris’ opinion that even if city staff made retail purchase decisions without direction or consultation with the council the council member would still be in violation of Government Code section 1090.  Harris reasoned this was because staff decisions are permissible only when the council delegates decision making authority.  Staff does not have independent authority to make such decisions. In this situation recusal of the conflicted council member does not cure the conflict because there is a presumption that the conflicted member is involved in the contract – even if done by staff.

The California Legislature also recently expanded the scope of Government Code section 1090 with the passage of SB 952.  It is now a felony for any person to aid and abet a government official in violating the conflict of interest laws.  This change allows prosecutors to charge anyone involved with a 1090 violation – not just those who fall into the already broadly defined “government official” category.

This amendment to Government Code section 1090 came just one year after a law allowing the California Fair Political Practices Commission to be able to provide advice to public officials and employees about situations involving potential 1090 violations.  The advice can only relate to future, not prior, conduct.  The FPPC is required to allow the Attorney General and the local DA’s office the opportunity to provide feed back before the FPPC provides a formal response.