Amended in Assembly August 18, 2015

Amended in Assembly July 7, 2015

Amended in Senate June 1, 2015

Senate BillNo. 330


Introduced by Senator Mendoza

February 23, 2015


An act to amend, repeal, and add Section 1091 of the Government Code, relating to public officers.

LEGISLATIVE COUNSEL’S DIGEST

SB 330, as amended, Mendoza. Public officers: contracts: financial interest.

(1) Existing law prohibits Members of the Legislature, and state, county, district, judicial district, and city officers or employees from being financially interested in a contract, as specified, made by them in their official capacity or by any body or board of which they are members, subject to specified exceptions. Existing law identifies certain remote interests that are not subject to this prohibition and other situations in which an official is not deemed to be financially interested in a contract, including, among others, that of a parent in the earnings of his or her minor child for personal services. Existing law makes a willful violation of this prohibition a crime.

This bill would, on and after January 1, 2017, instead include within the definition of remote interests that of a public officer who is an elected member of any state or local body, board, or commission, if that public officer’s spouse, child, parent, sibling, or the spouse of the child, parent, or sibling, has a financial interest in any contract made by that public officer in his or her official capacity, or by any body, board, or commission of which that public officer is a member.

(2) Existing law imposes a criminal penalty for every officer or person who willfully violates the prohibitions against making or being financially interested in contracts, as specified.

begin insertThis bill would additionally provide that a member who knows and fails to disclose his or her remote interest in a contract, as defined, or knows and willfully fails to disclose the fact of his or her remote interest in a contract, as defined, is subject to criminal penalty. end insertBy expanding these prohibitions, this bill would create a new crime, and thus, would impose a state-mandated local program.

(3) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 1091 of the Government Code is amended
2to read:

3

1091.  

(a) An officer shall not be deemed to be interested in a
4contract entered into by a body or board of which the officer is a
5member within the meaning of this article if the officer has only
6a remote interest in the contract and if the fact of that interest is
7disclosed to the body or board of which the officer is a member
8and noted in its official records, and thereafter the body or board
9authorizes, approves, or ratifies the contract in good faith by a vote
10of its membership sufficient for the purpose without counting the
11vote or votes of the officer or member with the remote interest.

12(b) As used in this article, “remote interest” means any of the
13following:

14(1) That of an officer or employee of a nonprofit entity exempt
15from taxation pursuant to Section 501(c)(3) of the Internal Revenue
16Code (26 U.S.C. Sec. 501(c)(3)), pursuant to Section 501(c)(5) of
17the Internal Revenue Code (26 U.S.C. Sec. 501(c)(5)), or a
18nonprofit corporation, except as provided in paragraph (8) of
19subdivision (a) of Section 1091.5.

P3    1(2) That of an employee or agent of the contracting party, if the
2contracting party has 10 or more other employees and if the officer
3was an employee or agent of that contracting party for at least three
4years prior to the officer initially accepting his or her office and
5the officer owns less than 3 percent of the shares of stock of the
6contracting party; and the employee or agent is not an officer or
7director of the contracting party and did not directly participate in
8formulating the bid of the contracting party.

9For purposes of this paragraph, time of employment with the
10contracting party by the officer shall be counted in computing the
11three-year period specified in this paragraph even though the
12contracting party has been converted from one form of business
13organization to a different form of business organization within
14three years of the initial taking of office by the officer. Time of
15employment in that case shall be counted only if, after the transfer
16or change in organization, the real or ultimate ownership of the
17contracting party is the same or substantially similar to that which
18existed before the transfer or change in organization. For purposes
19of this paragraph, stockholders, bondholders, partners, or other
20persons holding an interest in the contracting party are regarded
21as having the “real or ultimate ownership” of the contracting party.

22(3) That of an employee or agent of the contracting party, if all
23of the following conditions are met:

24(A) The agency of which the person is an officer is a local public
25agency located in a county with a population of less than 4,000,000.

26(B) The contract is competitively bid and is not for personal
27services.

28(C) The employee or agent is not in a primary management
29capacity with the contracting party, is not an officer or director of
30the contracting party, and holds no ownership interest in the
31contracting party.

32(D) The contracting party has 10 or more other employees.

33(E) The employee or agent did not directly participate in
34formulating the bid of the contracting party.

35(F) The contracting party is the lowest responsible bidder.

36(4) That of a parent in the earnings of his or her minor child for
37personal services.

38(5) That of a landlord or tenant of the contracting party.

39(6) That of an attorney of the contracting party or that of an
40owner, officer, employee, or agent of a firm that renders, or has
P4    1rendered, service to the contracting party in the capacity of
2stockbroker, insurance agent, insurance broker, real estate agent,
3or real estate broker, if these individuals have not received and
4will not receive remuneration, consideration, or a commission as
5a result of the contract and if these individuals have an ownership
6interest of 10 percent or more in the law practice or firm, stock
7brokerage firm, insurance firm, or real estate firm.

8(7) That of a member of a nonprofit corporation formed under
9the Food and Agricultural Code or a nonprofit corporation formed
10under the Corporations Code for the sole purpose of engaging in
11the merchandising of agricultural products or the supplying of
12water.

13(8) That of a supplier of goods or services when those goods or
14services have been supplied to the contracting party by the officer
15for at least five years prior to his or her election or appointment
16to office.

17(9) That of a person subject to the provisions of Section 1090
18in any contract or agreement entered into pursuant to the provisions
19of the California Land Conservation Act of 1965.

20(10) Except as provided in subdivision (b) of Section 1091.5,
21that of a director of, or a person having an ownership interest of,
2210 percent or more in a bank, bank holding company, or savings
23and loan association with which a party to the contract has a
24relationship of borrower or depositor, debtor or creditor.

25(11) That of an engineer, geologist, or architect employed by a
26consulting engineering or architectural firm. This paragraph applies
27only to an employee of a consulting firm who does not serve in a
28primary management capacity, and does not apply to an officer or
29director of a consulting firm.

30(12) That of an elected officer otherwise subject to Section 1090,
31in any housing assistance payment contract entered into pursuant
32to Section 8 of the United States Housing Act of 1937 (42 U.S.C.
33Sec. 1437f) as amended, provided that the housing assistance
34payment contract was in existence before Section 1090 became
35applicable to the officer and will be renewed or extended only as
36to the existing tenant, or, in a jurisdiction in which the rental
37vacancy rate is less than 5 percent, as to new tenants in a unit
38previously under a Section 8 contract. This section applies to any
39person who became a public official on or after November 1, 1986.

P5    1(13) That of a person receiving salary, per diem, or
2reimbursement for expenses from a government entity.

3(14) That of a person owning less than 3 percent of the shares
4of a contracting party that is a for-profit corporation, provided that
5the ownership of the shares derived from the person’s employment
6with that corporation.

7(15) That of a party to litigation involving the body or board of
8which the officer is a member in connection with an agreement in
9which all of the following apply:

10(A) The agreement is entered into as part of a settlement of
11litigation in which the body or board is represented by legal
12counsel.

13(B) After a review of the merits of the agreement and other
14relevant facts and circumstances, a court of competent jurisdiction
15 finds that the agreement serves the public interest.

16(C) The interested member has recused himself or herself from
17all participation, direct or indirect, in the making of the agreement
18on behalf of the body or board.

19(16) That of a person who is an officer or employee of an
20investor-owned utility that is regulated by the Public Utilities
21Commission with respect to a contract between the investor-owned
22utility and a state, county, district, judicial district, or city body or
23board of which the person is a member, if the contract requires the
24investor-owned utility to provide energy efficiency rebates or other
25type of program to encourage energy efficiency that benefits the
26public when all of the following apply:

27(A) The contract is funded by utility consumers pursuant to
28regulations of the Public Utilities Commission.

29(B) The contract provides no individual benefit to the person
30that is not also provided to the public, and the investor-owned
31utility receives no direct financial profit from the contract.

32(C) The person has recused himself or herself from all
33participation in making the contract on behalf of the state, county,
34district, judicial district, or city body or board of which he or she
35is a member.

36(D) The contract implements a program authorized by the Public
37Utilities Commission.

38(c) This section is not applicable to any officer interested in a
39contract who influences or attempts to influence another member
P6    1of the body or board of which he or she is a member to enter into
2the contract.

3(d) The willful failure of an officer to disclose the fact of his or
4her interest in a contract pursuant to this section is punishable as
5provided in Section 1097. That violation does not void the contract
6unless the contracting party had knowledge of the fact of the remote
7interest of the officer at the time the contract was executed.

8(e) This section shall be repealed on January 1, 2017.

9

SEC. 2.  

Section 1091 is added to the Government Code, to
10read:

11

1091.  

(a) An officer shall not be deemed to be interested in a
12contract entered into by a body or board of which the officer is a
13member within the meaning of this article if the officer has only
14a remote interest in the contract and if the fact of that interest is
15disclosed to the body or board of which the officer is a member
16and noted in its official records, and thereafter the body or board
17authorizes, approves, or ratifies the contract in good faith by a vote
18of its membership sufficient for the purpose without counting the
19vote or votes of the officer or member with the remote interest.

20(b) As used in this article, “remote interest” means any of the
21following:

22(1) That of an officer or employee of a nonprofit entity exempt
23from taxation pursuant to Section 501(c)(3) of the Internal Revenue
24Code (26 U.S.C. Sec. 501(c)(3)), pursuant to Section 501(c)(5) of
25the Internal Revenue Code (26 U.S.C. Sec. 501(c)(5)), or a
26nonprofit corporation, except as provided in paragraph (8) of
27subdivision (a) of Section 1091.5.

28(2) That of an employee or agent of the contracting party, if the
29contracting party has 10 or more other employees and if the officer
30was an employee or agent of that contracting party for at least three
31years prior to the officer initially accepting his or her office and
32the officer owns less than 3 percent of the shares of stock of the
33contracting party; and the employee or agent is not an officer or
34director of the contracting party and did not directly participate in
35formulating the bid of the contracting party.

36For purposes of this paragraph, time of employment with the
37contracting party by the officer shall be counted in computing the
38three-year period specified in this paragraph even though the
39contracting party has been converted from one form of business
40organization to a different form of business organization within
P7    1three years of the initial taking of office by the officer. Time of
2employment in that case shall be counted only if, after the transfer
3or change in organization, the real or ultimate ownership of the
4contracting party is the same or substantially similar to that which
5existed before the transfer or change in organization. For purposes
6of this paragraph, stockholders, bondholders, partners, or other
7persons holding an interest in the contracting party are regarded
8as having the “real or ultimate ownership” of the contracting party.

9(3) That of an employee or agent of the contracting party, if all
10of the following conditions are met:

11(A) The agency of which the person is an officer is a local public
12agency located in a county with a population of less than 4,000,000.

13(B) The contract is competitively bid and is not for personal
14services.

15(C) The employee or agent is not in a primary management
16capacity with the contracting party, is not an officer or director of
17the contracting party, and holds no ownership interest in the
18contracting party.

19(D) The contracting party has 10 or more other employees.

20(E) The employee or agent did not directly participate in
21 formulating the bid of the contracting party.

22(F) The contracting party is the lowest responsible bidder.

23(4) That of a public officer who is an elected member of any
24state or local body, board, or commission, if that public officer’s
25spouse, child, parent, sibling, or the spouse of the child, parent, or
26sibling, has a financial interest in any contract made by that public
27officer in his or her official capacity, or by any body, board, or
28commission of which that public officer is a member.begin insert The member
29knows and fails to disclose, his or her interest in a contract
30pursuant to this paragraph is punishable as provided in Section
311097. If the member knows and willfully fails to disclose the fact
32of his or her interest in a contract pursuant to this paragraph is
33punishable as provided in Section 1097. That violation does not
34void the contract unless the contracting party had knowledge of
35the fact of the remote interest of the officer at the time the contract
36was executed.end insert

37(5) That of a landlord or tenant of the contracting party.

38(6) That of an attorney of the contracting party or that of an
39owner, officer, employee, or agent of a firm that renders, or has
40rendered, service to the contracting party in the capacity of
P8    1stockbroker, insurance agent, insurance broker, real estate agent,
2or real estate broker, if these individuals have not received and
3will not receive remuneration, consideration, or a commission as
4a result of the contract and if these individuals have an ownership
5interest of 10 percent or more in the law practice or firm, stock
6brokerage firm, insurance firm, or real estate firm.

7(7) That of a member of a nonprofit corporation formed under
8the Food and Agricultural Code or a nonprofit corporation formed
9under the Corporations Code for the sole purpose of engaging in
10the merchandising of agricultural products or the supplying of
11water.

12(8) That of a supplier of goods or services when those goods or
13services have been supplied to the contracting party by the officer
14for at least five years prior to his or her election or appointment
15to office.

16(9) That of a person subject to the provisions of Section 1090
17in any contract or agreement entered into pursuant to the provisions
18of the California Land Conservation Act of 1965.

19(10) Except as provided in subdivision (b) of Section 1091.5,
20that of a director of, or a person having an ownership interest of,
2110 percent or more in a bank, bank holding company, or savings
22and loan association with which a party to the contract has a
23relationship of borrower or depositor, debtor or creditor.

24(11) That of an engineer, geologist, or architect employed by a
25consulting engineering or architectural firm. This paragraph applies
26only to an employee of a consulting firm who does not serve in a
27primary management capacity, and does not apply to an officer or
28director of a consulting firm.

29(12) That of an elected officer otherwise subject to Section 1090,
30in any housing assistance payment contract entered into pursuant
31to Section 8 of the United States Housing Act of 1937 (42 U.S.C.
32Sec. 1437f) as amended, provided that the housing assistance
33payment contract was in existence before Section 1090 became
34applicable to the officer and will be renewed or extended only as
35to the existing tenant, or, in a jurisdiction in which the rental
36vacancy rate is less than 5 percent, as to new tenants in a unit
37previously under a Section 8 contract. This section applies to any
38person who became a public official on or after November 1, 1986.

39(13) That of a person receiving salary, per diem, or
40reimbursement for expenses from a government entity.

P9    1(14) That of a person owning less than 3 percent of the shares
2of a contracting party that is a for-profit corporation, provided that
3 the ownership of the shares derived from the person’s employment
4with that corporation.

5(15) That of a party to litigation involving the body or board of
6which the officer is a member in connection with an agreement in
7which all of the following apply:

8(A) The agreement is entered into as part of a settlement of
9litigation in which the body or board is represented by legal
10counsel.

11(B) After a review of the merits of the agreement and other
12relevant facts and circumstances, a court of competent jurisdiction
13finds that the agreement serves the public interest.

14(C) The interested member has recused himself or herself from
15all participation, direct or indirect, in the making of the agreement
16on behalf of the body or board.

17(16) That of a person who is an officer or employee of an
18investor-owned utility that is regulated by the Public Utilities
19Commission with respect to a contract between the investor-owned
20utility and a state, county, district, judicial district, or city body or
21board of which the person is a member, if the contract requires the
22investor-owned utility to provide energy efficiency rebates or other
23type of program to encourage energy efficiency that benefits the
24public when all of the following apply:

25(A) The contract is funded by utility consumers pursuant to
26regulations of the Public Utilities Commission.

27(B) The contract provides no individual benefit to the person
28that is not also provided to the public, and the investor-owned
29utility receives no direct financial profit from the contract.

30(C) The person has recused himself or herself from all
31participation in making the contract on behalf of the state, county,
32district, judicial district, or city body or board of which he or she
33is a member.

34(D) The contract implements a program authorized by the Public
35Utilities Commission.

36(c) This section is not applicable to any officer interested in a
37contract who influences or attempts to influence another member
38of the body or board of which he or she is a member to enter into
39the contract.

P10   1(d) The willful failure of an officer to disclose the fact of his or
2her interest in a contract pursuant to this section is punishable as
3provided in Section 1097. That violation does not void the contract
4unless the contracting party had knowledge of the fact of the remote
5interest of the officer at the time the contract was executed.

6(e) This section shall become operative on January 1, 2017.

7

SEC. 3.  

No reimbursement is required by this act pursuant to
8Section 6 of Article XIII B of the California Constitution because
9the only costs that may be incurred by a local agency or school
10district will be incurred because this act creates a new crime or
11infraction, eliminates a crime or infraction, or changes the penalty
12for a crime or infraction, within the meaning of Section 17556 of
13the Government Code, or changes the definition of a crime within
14the meaning of Section 6 of Article XIII B of the California
15Constitution.



O

    96