open, ethical leadership: ethics, disclosure & conflicts of interest michael g. colantuono p....

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 RoadPenn Valley, CA 95946(530) 432-7359MColantuono@CLLAW.US

P. Scott BrowneLaw Offices of P. Scott Browne131 So. Auburn StreetGrass Valley, CA 95945(530) 272-4250Scott@ScottBrowne.com

Agenda

Political Reform Act Conflicts

Other Conflict laws

Other Political Reform Issues

Constitutional Issues

Conflicts of Interest

6 Primary Conflict of Interest Issues

1. Gov’t Code § 1090  2. Political Reform Act 3. Common Law Bias / Due Process Requirements 4. Nepotism 5. Incompatible offices6. 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

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 InterestsIncome

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 Analysis1. Identify People / Property

2. Identify Rule

3. Apply Rule

4. Analyze Extent of Impact

Public Generally Exception (Cont’d)

Significant Segment Rules 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 anti-nepotism 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)

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, non-profit 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 USpayments 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

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.

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