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Open, Ethical Leadership:Ethics, Disclosure & Conflicts of Interest
Michael G. Colantuono
P. Scott Browne
CALAFCO Annual Conference
Palm Springs, CA
October 7, 2010
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Michael G. Colantuono, Esq.Colantuono & Levin, P.C.11406 Pleasant Valley RoadPenn Valley, CA 95946(530) [email protected]
P. Scott BrowneLaw Offices of P. Scott Browne131 So. Auburn StreetGrass Valley, CA 95945(530) [email protected]
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Agenda
Political Reform Act Conflicts
Other Conflict laws
Other Political Reform Issues
Constitutional Issues
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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
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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.”
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Gov’t Code §1090 (Cont’d)
Remote Interests
Non-Interests
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Political Reform Act
When Does a Public Official Have a
Conflict?
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Political Reform Act
Who is a “Public Official?”
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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
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Is a Decision Involved? Decision
Participating
Influencing
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Economic Interests
Business Interests
Real Property Interests
Income Interests
Gift Interests
Personal Finances
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Reasonably Foreseeable
“Substantial Likelihood”
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Material Effect
Directly vs. Indirectly Involved
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Material Effect (Cont’d)
Directly Involved Real Property
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Material Effect (Cont’d)
Directly Involved
Business InterestsIncome
Gifts
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Material Effect (Cont’d)
Directly Involved
Personal Finances
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Material Effect (Cont’d)
Directly Involved
Economic Interests
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Material Effect (Cont’d)
“Regulatory Definitions of Material”
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Public Generally Exception
Two Part Test Significant Segment Indistinguishable Effects
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Public Generally Exception (Cont’d)
Four Step Analysis1. Identify People / Property
2. Identify Rule
3. Apply Rule
4. Analyze Extent of Impact
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Public Generally Exception (Cont’d)
Significant Segment Rules Individuals Real Property Business Entities Governmental Entities Exceptional Circumstances
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Public Generally Exception (Cont’d)
Special Exception Rules
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Legally Required Participation
Allows Disqualified Members to Participate
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Conflict of Interest
What to do if you Have a Conflict
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Conflict of Interest
How to Obtain Advice
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Remedies for PRA Violations
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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.
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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.
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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.
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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.
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Political Reform Act Issues
Statements of Economic Interest
(Form 700s)
Gifts
Travel Payments
Honoraria
Mass Mailing
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Statement of Economic Interest
Government Code § 87200 requires members of city councils, planning commissioners, and other local government officials to disclose their economic interests.
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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.
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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
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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.
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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.
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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
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Honorariums
No local elected office holder, candidate for local elected office, or designated employee may accept any honorarium.
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Honorariums
“Honorarium” means a payment for a speech, article, or attendance at any public or private conference, meeting or similar gathering.
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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.
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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.
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Honoraria Exceptions (Cont’d)
An honorarium made directly to a bona fide charitable, educational, civic, religious, or similar tax-exempt, non-profit organization.
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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.
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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.
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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.
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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.
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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.
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Other Resources
Confer with your Agency Counsel
Attorney General publications
FPPC Website - Fact sheets
FPPC Hotline 1-866-ASK-FPPC
FPPC Advice letters
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Transportation by Transportation Companies
California has a long history of attempting to prohibit public officials from being influenced by gifts of transportation.
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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.
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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.
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Elements of the Ban (Cont’d)
The ban applies to both elected and non-elected public officers, but not to employees.
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Elements of the Ban (Cont’d)
The ban applies to foreign and domestic carriers and to transportation received outside of California.
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Elements of the Ban (Cont’d)
Applies whether the pass or discount was provided in connection with personal or public business.
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Elements of the Ban(Cont’d)
Violation of the ban is punishable by forfeiture of office.
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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.
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Gifts of Public Funds
All expenditures of public funds must be for a public purpose. Cal. Const. Art. XVI, §6
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Tests for Gifts of Public Funds
Does the expenditure serve the public interest?
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Extra Compensation
Extra compensation paid to employees after services have already been rendered is generally prohibited. Cal. Const. Art. XI, §10(a)
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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
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Questions & Answers