Transcript Slide 1

Open, Ethical Leadership:
Ethics, Disclosure & Conflicts of Interest
Michael G. Colantuono
P. Scott Browne
CALAFCO Annual Conference
Palm Springs, CA
October 7, 2010
Michael G. Colantuono, Esq.
Colantuono & Levin, P.C.
11406 Pleasant Valley Road
Penn Valley, CA 95946
(530) 432-7359
[email protected]
P. Scott Browne
Law Offices of P. Scott Browne
131 So. Auburn Street
Grass Valley, CA 95945
(530) 272-4250
[email protected]
Agenda
Political Reform Act Conflicts
Other Conflict laws
Other Political Reform Issues
Constitutional Issues
Conflicts of Interest
6 Primary Conflict of Interest
Issues
1.
2.
3.
4.
5.
6.
Gov’t Code § 1090
Political Reform Act
Common Law Bias / Due
Process Requirements
Nepotism
Incompatible offices
Gov. Code § 1126
Gov’t Code §1090
“Members of the Legislature, state,
county, district, judicial district, and
city officers or employees shall not
be financially interested in any
contract made by them in their
official capacity, or by any body or
board of which they are members.
Nor shall state, county, district,
judicial district, and city officers or
employees be purchasers at any
sale or vendors at any purchase
made by them in their official
capacity.”
Gov’t Code §1090 (Cont’d)
 Remote Interests

Non-Interests
Political Reform Act
When Does a Public
Official Have a
Conflict?
Political Reform Act
Who is a “Public
Official?”
5 Components of a Conflict of
Interest under PRA

Decision
 Economic Interest
 Reasonably Foreseeable
 Material Effect
 Distinguishable From Effect
on “Public Generally”
All components must exist
Is a Decision Involved?

Decision

Participating

Influencing
Economic Interests
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Business Interests
Real Property Interests
Income Interests
Gift Interests
Personal Finances
Reasonably Foreseeable
“Substantial Likelihood”
Material Effect
Directly vs. Indirectly Involved
Material Effect (Cont’d)
Directly Involved Real
Property
Material Effect (Cont’d)
Directly Involved
Business Interests
Income
Gifts
Material Effect (Cont’d)
Directly Involved
Personal Finances
Material Effect (Cont’d)
Directly Involved
Economic Interests
Material Effect (Cont’d)
“Regulatory Definitions of
Material”
Public Generally Exception

Two Part Test


Significant Segment
Indistinguishable Effects
Public Generally Exception
(Cont’d)
 Four Step Analysis
1. Identify People / Property
2. Identify Rule
3. Apply Rule
4. Analyze Extent of Impact
Public Generally Exception
(Cont’d)
 Significant Segment Rules
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Individuals
Real Property
Business Entities
Governmental Entities
Exceptional Circumstances
Public Generally Exception
(Cont’d)
Special Exception Rules
Legally Required Participation
Allows
Disqualified
Members to
Participate
Conflict of Interest
What to do
if you Have
a Conflict
Conflict of Interest
How to
Obtain
Advice
Remedies for PRA
Violations
Common Law Bias /
Due Process
 Public officials cannot use their official
position for private benefit.

Due process in an administrative hearing
demands an appearance of fairness and the
absence of even a probability of outside
influence.

Doesn’t preclude holding opinions; just
participation by someone with a closed mind.
Nepotism
 No state laws against nepotism.
 May be affected by “income” interest
or definition of “family” under Political
Reform Act.

Local agency may have antinepotism policy (personnel rules).
Federal funding requirements.
Incompatible Offices
 Based on the theory that “One
cannot serve two masters.”

Exists if any significant clash of
duties exists between the offices, if the
dual holdings would be improper
because of public policy, or if one
officer exercises supervisory, auditory
or removal power over the other.
Gov’t Code §1126

“[A] local agency officer or employee shall
not engage in any employment, activity, or
enterprise for compensation which is
inconsistent, incompatible, in conflict with, or
inimical to his or her duties as a local agency
officer or employee or with the duties,
functions, or responsibilities of his or her
appointing power or the agency by which he
or she is employed.”

Agency must adopt policy.
Political Reform Act Issues
 Statements of Economic Interest
(Form 700s)
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Gifts
Travel Payments
Honoraria
Mass Mailing
Statement of Economic
Interest
 Government Code § 87200 requires
members of city councils, planning
commissioners, and other local
government officials to disclose their
economic interests.
Statement of Economic
Interest

In addition, all local agencies must
adopt conflict of interest codes. Certain
categories of officials and employees of
local government agencies fall under
regulation by the Act if the agency’s
conflict of interest code requires filing of a
Form 700.
Form 700s (Cont’d)
 Must be filed upon taking office, leaving
office, and annually in between
 Require disclosure of personal financial
interests
 Alert public officials to personal
interests that might be affected.
 Help inform the public about potential
conflicts of interest
Gift Restrictions
 No local elected office holder,
candidate for local elected office, or
designated employee of a local agency
may accept any gift or gifts from a
single source aggregating in excess of
$490
 Gifts aggregating $50 or more must
be disclosed on a Form 700.
Gift Restrictions (Cont’d)
 A gift is any payment that confers
personal benefit on a recipient without
consideration
 A gift is accepted when the official
takes actual possession of the gift or
exercises direction or control over it.
Exceptions to Gift
Restrictions
Exceptions include:
 Gifts returned or donated to charity
(without claiming tax deduction)
 Gifts from family members
 Informational material (books, papers)
 Birthday presents of equal value
 A bequest or inheritance
 Home hospitality
Honorariums

No local elected office holder,
candidate for local elected office, or
designated employee may accept any
honorarium.
Honorariums

“Honorarium” means a payment for
a speech, article, or attendance at any
public or private conference, meeting or
similar gathering.
Honoraria Exceptions
Some payments are not prohibited nor
required to be disclosed on a Form 700,
for example:
 An honorarium the official returns
within 30 days.
Honoraria Exceptions
(Cont’d)
 An honorarium the official donates
to his or her government agency's
general fund within 30 days, and for
which the official does not claim an
income tax deduction.
Honoraria Exceptions
(Cont’d)
 An honorarium made directly to a
bona fide charitable, educational, civic,
religious, or similar tax-exempt, nonprofit organization.
Gifts of Travel
Certain travel payments may be subject to
gift limit restrictions and/or may be
reportable. Travel payments include
payments, advances, or reimbursements for
travel, including actual transportation as well
as related lodging and subsistence.
Travel Exceptions
 Travel payments in connection with
an event at which 87200 filer (elected
officials) official gives a speech or
participates on a panel is reportable but
not subject to gift limit if w/in US
payments to local filers (staff) not
reportable nor subject to limit if w/in
course & scope of employment, proper
public expenditure and w/in U.S.
Travel Exceptions
(Cont’d)
Not subject to gift limit, but which
may be reportable:
 Travel in connection w/ bona fide
business, trade, or profession, and
which satisfies criteria for federal
income tax deductions for business
expenses.
Travel Exceptions
Not subject to any limit but
reportable by agency rather than
official:
 Travel payments provided by the
official’s government agency or by any
state, local, or federal government
agency.
Mass Mailing Restrictions
Items prepared or mailed at public
expense may not:
 Feature an elected officer of the agency
which produces or sends the mailing; or

Include the name, office, photograph, or
other reference to an elected officer if the
item is prepared in coordination with the
elected officer.
Other Resources
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Confer with your Agency Counsel
Attorney General publications
FPPC Website - Fact sheets
FPPC Hotline 1-866-ASK-FPPC
FPPC Advice letters
Transportation by
Transportation Companies
 California has a long history of
attempting to prohibit public
officials from being influenced by
gifts of transportation.
Article XII, §7
 A transportation company may not grant
free passes or discounts to anyone holding
an office in this State; and the acceptance of
a pass or discount by a public officer, other
than a Public Utilities Commissioner, shall
work a forfeiture of that office. A Public
Utilities Commissioner may not hold an
official relation to nor have a financial interest
in a person or corporation subject to
regulation by the commission.
Elements of the Ban
 This ban is violated when a
transportation company makes a gift of
transportation or discounts the price of
transportation to a public officer.
Elements of the Ban (Cont’d)

The ban applies to both elected and
non-elected public officers, but not to
employees.
Elements of the Ban (Cont’d)
 The ban applies to foreign and
domestic carriers and to transportation
received outside of California.
Elements of the Ban (Cont’d)
Applies whether the pass or discount
was provided in connection with
personal or public business.
Elements of the Ban(Cont’d)
 Violation of the ban is punishable by
forfeiture of office.
Points to Remember
The prohibition on free transportation:

Applies to passes or discounts from
transportation companies.
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Applies only to officers; not employees.
Covers both personal and business use.
Covers inter-state, intra-state and foreign
transportation companies.
Gifts of Public Funds
All expenditures of public funds
must be for a public purpose.
Cal. Const. Art. XVI, §6
Tests for Gifts of Public
Funds
Does the expenditure serve the
public interest?
Extra Compensation
Extra compensation paid to employees
after services have already been
rendered is generally prohibited.
Cal. Const. Art. XI, §10(a)
Exception to Prohibition
on Extra Compensation

When retroactive compensation is paid to
employees pursuant to terms of newly
negotiated MOU covering the period for
which retroactive compensation is paid
Questions & Answers