BILL ANALYSIS �
AB 1090
Page 1
Date of Hearing: April 23, 2013
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Paul Fong, Chair
AB 1090 (Fong) - As Amended: April 10, 2013
SUBJECT : Public officers: conflicts of interest: contracts.
SUMMARY : Authorizes the Fair Political Practices Commission
(FPPC) to bring civil and administrative enforcement actions for
violations of Government Code Section 1090 (Section 1090),
dealing with conflicts of interest in contracts, and requires
the FPPC to provide opinions and advice with respect to Section
1090. Specifically, this bill :
1)Makes violations of Section 1090 subject to civil and
administrative enforcement proceedings, in addition to
criminal prosecutions. Permits the FPPC to bring a civil or
administrative action against any member of the Legislature,
state, county, district, judicial district, or city officer or
employee who is financially interested in any contract made by
that person in his or her official capacity, or by any body or
board of which that person is a member.
2)Prohibits the FPPC from commencing an administrative or civil
action against a person for a violation of Section 1090 except
upon written authorization from the district attorney of the
county in which the violation occurred.
3)Prohibits the FPPC from bringing a civil action against a
person for a violation of Section 1090 if the Attorney General
(AG) or a district attorney is pursuing a criminal action
against that person for the same alleged violation.
4)Provides that if two or more persons are responsible for a
violation of Section 1090, they are jointly and severally
liable.
5)Permits a person who is subject to Section 1090, or his or her
authorized representative, to request an opinion or advice
from the FPPC with respect to his or her duties under Section
1090. Provides that the FPPC's authority to issue opinions or
advice pursuant to these provisions is concurrent with the
authority of the AG to issue opinions and advice.
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6)Permits the FPPC to adopt regulations for the purposes of this
bill.
7)Requires the FPPC to investigate possible violations of
Section 1090 upon receipt of a sworn complaint from a person.
Permits the FPPC to investigate possible violations of Section
1090 on its own initiative. Requires such investigations to
be conducted pursuant to procedures that govern FPPC
investigations for potential violations of the Political
Reform Act of 1974 (PRA).
8)Provides that the FPPC must obtain written authorization from
the AG and the district attorney of the county in which an
alleged violation occurred before it can provide immunity from
prosecution for testimony compelled by the FPPC over a
person's objection.
9)Prohibits the FPPC from commencing an administrative action
against a person for a violation of Section 1090 if the FPPC
has commenced a civil action against that person for the same
violation. Prohibits the FPPC from commencing a civil action
against a person for a violation of Section 1090 if the FPPC
has commenced an administrative action against that person for
the same violation.
10)Provides that a civil violation of Section 1090 shall be
punishable by a fine payable to the FPPC for deposit in the
General Fund (GF) in an amount not to exceed three times the
value of the financial benefit received by the person.
11)Provides that if the FPPC determines that a violation of
Section 1090 has occurred through an administrative
enforcement process, the FPPC shall issue an order requiring
the violator to cease and desist violation of Section 1090,
pay a monetary penalty of up to $5,000 to the FPPC for deposit
in the GF, or both.
12)Requires the FPPC to follow the procedures that apply to
administrative actions brought for violations of the PRA when
bringing an administrative action for a violation of Section
1090 pursuant to the provisions of this bill.
13)Permits the FPPC to obtain a judgment in superior court for
the purpose of collecting any unpaid monetary penalties, fees,
or civil penalties imposed pursuant to this bill. Provides
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that the procedures for obtaining such a judgment for
collecting unpaid penalties or fees for a violation of the PRA
shall apply to any action by the FPPC to obtain a judgment for
unpaid penalties or fees for a violation of Section 1090.
14)Permits the FPPC to apply to the clerk of the superior court
for a judgment to collect penalties imposed by an FPPC
enforcement order for a violation of Section 1090, in lieu of
filing a small claims or civil case with the court to collect
those penalties, pursuant to the following:
a) Provides that if the time for judicial review of a final
FPPC order or decision for a violation of Section 1090 has
lapsed, or if all means of judicial review of the order of
decision have been exhausted, the FPPC may apply to the
clerk of the court for a judgment to collect the penalties
imposed by the order or decision, or the order as modified
in accordance with a decision on judicial review.
b) Requires the application to the clerk of the court to
include a certified copy of the order or decision, or the
order as modified in accordance with a decision on judicial
review, and proof of service of the order or decision.
Provides that the application constitutes a sufficient
showing to warrant issuance of the judgment to collect the
penalties. Requires the clerk of the court to issue the
judgment immediately.
c) Provides that an application to the clerk of the court
for a judgment to collect penalties imposed by an FPPC
enforcement order shall be made to the clerk of the
superior court in the county where the monetary penalties,
fees, or civil penalties were imposed by the FPPC.
d) Provides that a judgment entered pursuant to these
provisions has the same force and effect as a judgment in
civil action.
e) Provides that the remedy provided in this bill is in
addition to those available under existing law.
EXISTING LAW :
1)Creates the FPPC, and makes it responsible for the impartial,
effective administration and implementation of the PRA.
AB 1090
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2)Prohibits members of the Legislature and state, county,
district, judicial district, and city officers or employees,
pursuant to Section 1090, from being financially interested in
any contract made by them in their official capacity, or by
any body or board of which they are members. Prohibits state,
county, district, judicial district, and city officers or
employees from being purchasers at any sale made by them in
their official capacity, or from being vendors at any purchase
made by them in their official capacity.
3)Provides that a person who willfully violates Section 1090 is
punishable by a fine of not more than $1,000 or by
imprisonment in the state prison, and is forever disqualified
from holding any office in the state.
4)Provides that a contract made in violation of Section 1090 may
be voided by any party to the contract, except for the officer
who had an interest in the contract in violation of Section
1090.
5)Prohibits a public official, pursuant to the PRA, from making,
participating in making, or in any way attempting to use his
or her official position to influence a governmental decision
in which the official knows or has reason to know that he or
she has a financial interest. Provides that designated
employees and specified public officials that realize an
economic benefit as a result of a violation of this provision
are liable in a civil action brought by the civil prosecutor
for an amount of up to three times the value of the benefit.
6)Provides that violations of the PRA are subject to criminal,
civil, and administrative penalties.
7)Makes the AG responsible for enforcing the criminal provisions
of the PRA with respect to state agencies, lobbyists, and
state elections. Provides that the district attorney of any
county in which a violation occurs has concurrent powers and
responsibilities with the AG.
8)Provides that the FPPC is the civil prosecutor for violations
of the PRA with respect to the state or any state agency,
except itself.
9)Permits the FPPC to bring an administrative action alleging a
AB 1090
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violation of the PRA, subject to certain conditions and
procedural requirements. Provides that when the FPPC
determines in the course of an administrative proceeding that
a violation has occurred, the FPPC shall issue an order that
may require the violator to do any of the following:
a) Cease and desist violation of the PRA;
b) File any reports, statements, or other documents or
information required by the PRA; and,
c) Pay a monetary penalty of up to $5,000 per violation to
the GF of the state.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of the Bill : According to the author:
In 1974, California voters passed Proposition 9, a
measure that enacted comprehensive conflict of
interest laws designed to ensure that public officials
would perform their duties in an impartial manner,
among other provisions. That measure, commonly known
as the Political Reform Act, also created the FPPC,
and made it primarily responsible for enforcing those
conflict of interest laws. Under the PRA, a public
official generally is prohibited from making or
participating in the making of any governmental
decision in which the official knows or has reason to
know that he or she has a financial interest.
The conflict of interest laws in the PRA apply broadly
to all types of governmental decisions. There is a
separate conflict of interest law, however, that
applies only to contracting decisions. Government
Code Section 1090 generally prohibits a public
official or employee from making a contract in his or
her official capacity in which he or she has a
financial interest. In addition, a public body or
board is prohibited from making a contract in which
any member of the body or board has a financial
interest, even if that member does not participate in
the making of the contract. Unlike the conflict of
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interest rules contained in the PRA, however, the FPPC
does not have a role in enforcing Government Code
Section 1090. Instead, enforcement actions may be
brought only by the Attorney General or by the
district attorney in the county in which the violation
occurred. Furthermore, unlike the PRA, which can be
enforced through criminal, civil, or administrative
actions, Government Code Section 1090 can be enforced
only through criminal prosecutions.
Because contracting decisions fall within the broader
conflict of interest rules contained in the PRA,
however, the FPPC nonetheless can and does bring
enforcement actions under the PRA for conflicts of
interest that arise in the context of contracting
decisions.
The existence of multiple conflict of interest laws
that are enforced by multiple entities create
unnecessary confusion for public officials and hamper
efforts to effectively enforce the state's strict
conflict of interest rules.
AB 1090 improves enforcement of the state's conflict
of interest laws by allowing the FPPC to bring civil
or administrative enforcement actions in response to
violations of the Government Code Section 1090
contracting laws, and gives public officials an
additional tool in helping to avoid conflicts of
interest by allowing the FPPC to issue advice
regarding a public official's obligations under
Government Code 1090.
2)Overview of Section 1090 : Section 1090 generally prohibits a
public official or employee from making a contract in his or
her official capacity in which he or she has a financial
interest. In addition, a public body or board is prohibited
from making a contract in which any member of the body or
board has a financial interest, even if that member does not
participate in the making of the contract. Violation of this
provision is punishable by a fine of up to $1,000 or
imprisonment in the state prison, and any violator is forever
disqualified from holding any office in the state. The
prohibitions against public officers being financially
interested in contracts that are contained Section 1090 date
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back to the second session of the California Legislature
(Chapter 136, Statutes of 1851).
Various provisions of state law provide exceptions to, or
limitations on, Section 1090. Among other provisions, state
law provides that an officer shall not be deemed to be
financially interested in a contract if the officer has only a
"remote interest" in the contract and if certain other
conditions are met. Similarly, another section of state law
provides that an officer or employee is not deemed to be
interested in a contract if his or her financial interest
meets one of a number of different enumerated conditions.
Given the complexity of Section 1090, and the various exceptions
to and limitations on that section, it can be extremely
difficult for a public board or body to determine whether or
not a member of that board or body has an impermissible
financial interest in a contract made by the board or body.
The AG and county district attorneys have enforcement
authority over Section 1090, but neither the AG nor the county
district attorneys typically give legal opinions on the
application of that section. Public officials may be able to
receive an opinion from the legal counsel to the board or body
of which they are a member, but such an opinion does not
provide the same legal protection to the public official.
3)Conflict of Interest Rules in the Political Reform Act : In
addition to the conflict of interest laws found within Section
1090 that apply to contracting decisions made by governmental
entities, the PRA also has separate conflict of interest laws
that apply more broadly to all governmental actions.
Generally, these provisions prohibit a public official from
making, participating in making, or in any way attempting to
use his or her official position to influence a governmental
decision in which the official knows or has reason to know
that he or she has a financial interest, as defined. Any
public official who knowingly or willfully violates these
conflict of interest rules can be charged criminally. Civil
and administrative enforcement actions may also be brought
against an individual for a violation of these conflict of
interest rules. The FPPC has sole authority to bring an
administrative enforcement action under the PRA, and the FPPC
also has the authority to bring civil enforcement actions
under certain circumstances.
AB 1090
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This bill sets up similar processes for the FPPC to bring civil
and administrative enforcement actions for violations of
Section 1090. Generally, an administrative enforcement action
brought by the FPPC pursuant to this bill would be subject to
the same procedural and due process requirements that apply to
administrative enforcement actions that the FPPC brings under
the PRA. Additionally, the penalties available for violations
would be the same as those that are available for violations
of the PRA, the statute of limitations for bringing an
enforcement action would be the same as for violations of the
PRA, and the procedure for collecting unpaid penalties would
be the same as under the PRA. However, enforcement actions
brought under this bill would be subject to a few restrictions
that are not applicable to actions under the PRA.
First, this bill prohibits the FPPC from bringing an
administrative or civil action against a person for violation
of Section 1090 except upon written authorization from the
district attorney of the county in which the violation
occurred. This requirement does not generally apply when the
FPPC brings enforcement actions under the PRA (although there
are certain circumstances in which the FPPC must get written
authorization from a district attorney to bring a civil action
for a violation of the PRA that occurred within the
jurisdiction of that district attorney). This requirement for
the FPPC to get written authorization is designed to ensure
that this bill does not hinder criminal enforcement actions
for violations of Section 1090.
Second, this bill requires the FPPC to get written authorization
from the AG and from a district attorney prior to granting
immunity to a witness as part of an investigation with respect
to possible violations of Section 1090, a requirement that
does not apply with respect to investigations for possible
violations of the PRA. Instead, the PRA simply requires the
FPPC to notify the AG at least 30 days in advance of granting
immunity. Again, the requirement for the FPPC to get written
authorization is designed to ensure that this bill does not
hinder criminal enforcement actions for violations of Section
1090.
Finally, this bill prohibits the FPPC from bringing a civil
action for an alleged violation of Section 1090 if it has
commenced an administrative action against a person for that
same alleged violation, and similarly prohibits the FPPC from
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commencing an administrative action for an alleged violation
of Section 1090 if it has already brought a civil action for
the same alleged violation. The PRA does prohibit a civil
action from being filed with regard to any person for any
violations after the FPPC has issued an administrative order
against that person for the same violation, but it does not
explicitly prohibit the FPPC from commencing an administrative
action against a person if a civil action has already been
brought against that person for the same conduct.
Nonetheless, according to information from the FPPC, as a
matter of practice, the FPPC does not pursue administrative
and civil enforcement actions for a single violation of the
PRA at the same time, though it is possible that the FPPC
could bring a civil enforcement action under the PRA, and
ultimately agree to resolve that action through an
administrative stipulation with a fine.
4)Section 1090 vs. Political Reform Act Conflict of Interest
Laws : Notwithstanding the fact that Section 1090 and the
PRA's conflict of interest laws are enforced and interpreted
by different entities, California courts nonetheless have
recognized that the two conflict of interest laws are very
similar, and have sought to harmonize the legal
interpretations of the two laws to the extent possible (see,
e.g., Lexin v. Superior Court (2010) 47 Cal.4th 1050, People
v. Honig (1996) 48 Cal.App.4th 289). In fact, the California
Supreme Court has relied upon regulations adopted by the FPPC
under the PRA to assist the court in interpreting the
provisions of Section 1090, notwithstanding the fact that the
FPPC does not enforce Section 1090 (see Lexin , supra).
Given the similarity between these two laws, authorizing the
FPPC to provide opinions and advice regarding Section 1090,
and to bring civil and administrative enforcement actions for
violations of Section 1090, may result in greater consistency
in the enforcement of these conflict of interest laws and may
make it easier for public officials acting in good faith to
comply with the conflict of interest laws.
5)Bipartisan Commission on the Political Reform Act of 1974 : The
Bipartisan Commission on the Political Reform Act (McPherson
Commission) was created in 1998, pursuant to SB 1737
(McPherson), Chapter 1080, Statutes of 1998, to reassess the
provisions of the PRA in order to determine what its effects
have been and whether changes would provide for a more
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efficient and effective implementation. The McPherson
Commission consisted of 14 members appointed by various
elected officials and the FPPC. The McPherson Commission
issued its final report in 2000, which included 35 specific
recommendations regarding amendments to the PRA as well as its
administration and enforcement. One of the recommendations of
the McPherson Commission was that all state conflict of
interest statutes, including Section 1090, should be
consolidated into a single code or body of law to be
interpreted and enforced consistently by a single state
agency. In making this recommendation, the commission found
that "the existence of multiple conflict of interest
provisions sprinkled throughout various Codes creates
unnecessary confusion in the minds of public officials who
strive to obey the law but who often have no idea what Code to
review or whom to ask for advice."
Although this bill would not consolidate Section 1090 into a
single code or body of law, it would make the FPPC responsible
for enforcement of Section 1090, in addition to the conflict
of interest rules in the PRA, and it would provide public
officials with a single state entity (the FPPC) that can
provide opinions and advice on most of the state conflict of
interest statutes.
6)Arguments in Support : The sponsor of this bill, the FPPC,
writes:
The [FPPC] has a unique expertise in advising upon,
investigating, and prosecuting civil ethics
violations, such as conflicts of interest, under the
[PRA]. In fact, the prohibitions set forth in Section
1090 are quite similar to the conflict-of-interest
prohibitions contained in the [PRA]?.Under the [PRA],
conflicts of interest are subject to criminal, civil
or administrative prosecution. This results in
accounting for the full range of conduct that can be a
violation of the [PRA], even if the conduct does not
meet the intent requirements for criminal prosecution.
Section 1090 does not currently have a similar range
of penalties, even though it is very similar to the
[PRA's] conflicts-of-interest provisions. This bill
would bring conformity to both prohibitions. Moreover,
the [FPPC] is well-suited to assist the Attorney
General and district attorneys by having civil and
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administrative enforcement authority over Section 1090
conflicts.
Additionally, often times, when [FPPC] staff is
advising or investigating public officials, a
potential 1090 issue is spotted in the fact pattern.
However, because Section 1090 falls outside the [PRA],
[FPPC] staff is forced to simply refer the individual
or the matter to either the Attorney General or
district attorney. Individuals are often unable to
obtain timely advice regarding Section 1090 issues.
Authorizing the [FPPC] to formally and informally
advise officials on Section 1090 matters would bring
much needed clarity to this area of the law and enable
public officials to more effectively carry out their
public duties. Further, authorizing the [FPPC] to
bring civil or administrative actions under Section
1090 would result in more enforcement and, ultimately,
more compliance with Section 1090, thus ensuring
public officials conduct the public's business free
from improper personal financial interests.
7)Arguments in Opposition : In opposition to this bill, the
Association of California Water Agencies writes:
We believe that Government Code section 1090 currently
provides for strong safeguards against financial abuse
by government officials and public employees when
entering into contracts on behalf of a public agency.
Adding the threat of administrative and civil fines to
the current threat of jail time seems unnecessary. If
a local government official or employee is going to
willfully violate the law, the prospect of going to
jail is likely much more of a deterrent than an
[administrative] fine. If the law is violated in
error, without the intent to gain a financial benefit,
currently the District Attorney (DA) can make a
determination on whether the case should be pursued.
Often the DA will not pursue a case because it is
clear that the person did not intend to violate the
law. We believe that AB 1090 would merely add
opportunities for government officials and public
employees to be fined which is much easier to
accomplish than pursuing a criminal case.
AB 1090
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8)Previous Legislation : AB 1558 (Wolk) of 2005, and AB 3003
(Hayashi) of 2008, both would have authorized a pilot project
under which the FPPC would have been able to provide written
opinions on Section 1090. AB 1558 was held on the Senate
Appropriations Committee's suspense file, while AB 3003 was
held on the Assembly Appropriations Committee's suspense file.
9)Related Legislation : AB 552 (Fong), which is also being heard
in this committee today, would establish an expedited process
for the FPPC to apply to the clerk of the court for a judgment
to collect penalties imposed by an FPPC enforcement order.
This bill contains similar provisions with respect to FPPC
enforcement orders issued pursuant to this bill for a
violation of Section 1090.
10)Political Reform Act of 1974 : California voters passed an
initiative, Proposition 9, in 1974 that created the FPPC and
codified significant restrictions and prohibitions on
candidates, officeholders and lobbyists. That initiative is
commonly known as the PRA. Amendments to the PRA that are not
submitted to the voters, such as those contained in this bill,
must further the purposes of the initiative and require a
two-thirds vote of both houses of the Legislature.
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REGISTERED SUPPORT / OPPOSITION :
Support
Fair Political Practices Commission (sponsor)
California Common Cause
Opposition
Association of California Water Agencies
Analysis Prepared by : Ethan Jones / E. & R. / (916) 319-2094