BILL ANALYSIS Ó
SENATE COMMITTEE ON ELECTIONS
AND CONSTITUTIONAL AMENDMENTS
Senator Norma J. Torres, Chair
BILL NO: AB 1090 HEARING DATE: 7/2/13
AUTHOR: FONG ANALYSIS BY: Darren Chesin
AMENDED: 4/10/13
FISCAL: YES
SUBJECT
Conflicts of interest: contracts
DESCRIPTION
Existing law provides for all of the following:
1. Creates the Fair Political Practices Commission (FPPC),
and makes it responsible for the impartial, effective
administration and implementation of the Political Reform
Act (PRA).
2. Prohibits members of the Legislature and state, county,
district, judicial district, and city officers or employees,
pursuant to Section 1090 of the Government Code, 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 Attorney General (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 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:
Cease and desist violation of the PRA;
File any reports, statements, or other
documents or information required by the PRA; and,
Pay a monetary penalty of up to $5,000 per
violation to the General Fund (GF) of the state.
This bill authorizes the FPPC to bring civil and administrative
enforcement actions for violations of 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 :
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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 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.
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
PRA.
8. Provides that the FPPC must obtain written authorization
from the AG and the district attorney of the county in which
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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
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 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
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of filing a small claims or civil case with the court to
collect those penalties, pursuant to the following:
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.
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.
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.
Provides that a judgment entered pursuant to
these provisions has the same force and effect as a
judgment in civil action.
Provides that the remedy provided in this bill
is in addition to those available under existing law.
BACKGROUND
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
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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 in Section 1090 date 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.
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
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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.
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,
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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
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.
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
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it easier for public officials acting in good faith to comply
with the conflict of interest laws.
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 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.
COMMENTS
1. 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
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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 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. Previous Legislation . AB 1558 (Wolk) of 2005, and AB 3003
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(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.
PRIOR ACTION
Assembly Elections and Redistricting Committee: 4-2
Assembly Appropriations Committee: 12-5
Assembly Floor: 58-13
POSITIONS
Sponsor: Fair Political Practices Commission
Support: California Common Cause
Oppose: Association of California Water Agencies
Valley Ag Water Coalition
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