BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1090
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          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.







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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  







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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.








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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.








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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