Ethics, Conflicts of Interests,and California Law

California Special District Association (CSDA) Magazine, Volume 6,
Issue 7 , January 01, 2011
Due to recent events, public agencies are under increasing public
scrutiny. Issues relating to"conflicts of interest" or ethical
conflicts require all public sector employees and officials to be
awareof a number of laws that are designed to avoid ethical or
financial conflicts within our public institutions. In California ,
there are two principal laws that, along with recognized common law
principles, define and regulate the conduct of public officials and
employees.
Government Code § 1090: If One Of Us Has A Conflict, We All Have A Conflict
Government Code section 1090, et seq ., generally prohibits a public
official or employee (elected or appointed) from making or
participating in the making of a contract in which he or she has a
financial interest. Section 1090 applies to nearly all public sector
employees and officials, including Special Districts. The goal of
section 1090 is to ensure that the public official, in carrying out
his or her official duties, is not distracted or motivated by
personalfinancial gain, or even by the possibility of personal
financial interest. The statute removes or limits any possibility that
an official will be influenced by any direct or indirect personal
interest when making a contract.
Under section 1090, a Special District cannot avoid a conflict of
interest by merely requiring the official with the conflict to
abstainfrom the decision-making process relating to the contract.
Rather, asingle public official's actual or potential financial
interest in a contract prevents the entire legislative body from
entering into the contract. A contract that violates Section 1090 is
void . Since a void contract from a legal standpoint does not exist,
it is not enforceable. A governmental agency has no authority to
comply with a void contract, and may even be compelled by legal action
not to comply.
Upon finding that a contract is voidand therefore unenforceable, the
court can impose various remedies including the requirement that the
party with the illegal interest forfeit and repay monies obtained
through the contract. Disgorgement of profits is particularly likely,
since public officials and other fiduciaries cannot profit by a breach
of their duty.
A public official who violates the statute, even in reliance on legal
counsel's advice, faces both civil and criminal liability.
The analysis as to whether a public official has a financial interest
in acontract is a complicated one that necessarily requires careful
analysis. For example, there are instances where a public official
may have a financial interest in a conflict, but there is not a
conflict under section 1090 that requires the entire Board to be
recused. A public official may have only a"remote" interest in the
contract, or may have a "non-interest" in a contract. These terms are
specifically defined in the California Government Code and need to be
examined in any case where a potential conflict is present.
Further complicating the issue is the fact that certain "designated"
employees, as well as elected or appointed officials, must ensure they
have no financial conflicts of interest with regards to contracts the
District is considering or entering into. "Designated" employees are
usually defined in a District's conflict of interest code and include
high-ranking employees, or employees who have access to a District's
revenues, funds or investments. A District must be aware of which
employees are "designated" and make sure that these employees are
aware of the requirements of Section 1090 as well as the Political
Reform Act
http://ptusss.blogspot.com/2012/02/california-penal-code-section-3004-and.html

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