Amended in Assembly July 8, 2015

Amended in Senate April 30, 2015

Amended in Senate April 22, 2015

Amended in Senate April 6, 2015

Senate BillNo. 704


Introduced by Senator Gaines

February 27, 2015


An act to amend Section 1091 of the Government Code, relating to publicbegin delete officers.end deletebegin insert officers and employees.end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 704, as amended, Gaines. Public officers and employees: conflict ofbegin delete interest.end deletebegin insert interest: contracts.end insert

Existing law prohibits Members of the Legislature, state, county, district, judicial district, and city officers or employees 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. Existing law identifies certain remote interestsbegin insert in contractsend insert that are not subject to this prohibition and other situations in which an official is not deemed to be financially interested in a contract. Existing law makes a willful violation of this prohibition a crime.

This bill would include in the definition of “remote interest” the interest of a person who is an owner or partner of a firm servingbegin delete onend deletebegin insert asend insert anbegin delete advisoryend deletebegin insert appointed member of an unelectedend insert board or commissionbegin delete toend deletebegin insert ofend insert the contracting agency,begin delete if the duties of the advisory board or commission do not include providing advice with respect to seeking or awarding contracts, andend delete if the owner or partner recuses himself or herself frombegin insert providing any advice to the contracting agency regarding the contract between the firm and the contracting agency, and fromend insert all participation in reviewing a project that results frombegin delete a contract between the firm and the contracting agency.end deletebegin insert that contract. The bill would also include in the definition of “remote interest” the interest of a planner employed by a consulting engineering, architectural, or planning firm.end insert

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

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.

20(2) That of an employee or agent of the contracting party, if the
21contracting party has 10 or more other employees and if the officer
22was an employee or agent of that contracting party for at least three
23years prior to the officer initially accepting his or her office and
24the officer owns less than 3 percent of the shares of stock of the
25contracting party; and the employee or agent is not an officer or
26director of the contracting party and did not directly participate in
27formulating the bid of the contracting party.

28For purposes of this paragraph, time of employment with the
29contracting party by the officer shall be counted in computing the
30three-year period specified in this paragraph even though the
P3    1contracting party has been converted from one form of business
2organization to a different form of business organization within
3three years of the initial taking of office by the officer. Time of
4employment in that case shall be counted only if, after the transfer
5or change in organization, the real or ultimate ownership of the
6contracting party is the same or substantially similar to that which
7existed before the transfer or change in organization. For purposes
8of this paragraph, stockholders, bondholders, partners, or other
9persons holding an interest in the contracting party are regarded
10as having the “real or ultimate ownership” of the contracting party.

11(3) That of an employee or agent of the contracting party, if all
12of the following conditions are met:

13(A) The agency of which the person is an officer is a local public
14agency located in a county with a population of less than 4,000,000.

15(B) The contract is competitively bid and is not for personal
16services.

17(C) The employee or agent is not in a primary management
18capacity with the contracting party, is not an officer or director of
19the contracting party, and holds no ownership interest in the
20contracting party.

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

22(E) The employee or agent did not directly participate in
23formulating the bid of the contracting party.

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

25(4) That of a parent in the earnings of his or her minor child for
26personal services.

27(5) That of a landlord or tenant of the contracting party.

28(6) That of an attorney of the contracting party or that of an
29owner, officer, employee, or agent of a firm that renders, or has
30rendered, service to the contracting party in the capacity of
31stockbroker, insurance agent, insurance broker, real estate agent,
32or real estate broker, if these individuals have not received and
33will not receive remuneration, consideration, or a commission as
34a result of the contract and if these individuals have an ownership
35interest of 10 percent or more in the law practice or firm, stock
36brokerage firm, insurance firm, or real estate firm.

37(7) That of a member of a nonprofit corporation formed under
38the Food and Agricultural Code or a nonprofit corporation formed
39under the Corporations Code for the sole purpose of engaging in
P4    1the merchandising of agricultural products or the supplying of
2water.

3(8) That of a supplier of goods or services when those goods or
4services have been supplied to the contracting party by the officer
5for at least five years prior to his or her election or appointment
6to office.

7(9) That of a person subject to the provisions of Section 1090
8in any contract or agreement entered into pursuant to the provisions
9of the California Land Conservation Act of 1965.

10(10) Except as provided in subdivision (b) of Section 1091.5,
11that of a director of, or a person having an ownership interest of,
1210 percent or more in a bank, bank holding company, or savings
13and loan association with which a party to the contract has a
14relationship of borrower or depositor, debtor or creditor.

15(11) That of an engineer, geologist,begin delete orend delete architectbegin insert, or plannerend insert
16 employed by a consultingbegin delete engineering orend deletebegin insert engineering,end insert architecturalbegin insert,
17or planningend insert
firm. This paragraph applies only to an employee of
18a consulting firm who does not serve in a primary management
19capacity, and does not apply to an officer or director of a consulting
20firm.

21(12) That of an elected officer otherwise subject to Section 1090,
22in any housing assistance payment contract entered into pursuant
23to Section 8 of the United States Housing Act of 1937 (42 U.S.C.
24Sec. 1437f) as amended, provided that the housing assistance
25payment contract was in existence before Section 1090 became
26applicable to the officer and will be renewed or extended only as
27to the existing tenant, or, in a jurisdiction in which the rental
28vacancy rate is less than 5 percent, as to new tenants in a unit
29previously under a Section 8 contract. This section applies to any
30person who became a public official on or after November 1, 1986.

31(13) That of a person receiving salary, per diem, or
32reimbursement for expenses from a government entity.

33(14) That of a person owning less than 3 percent of the shares
34of a contracting party that is a for-profit corporation, provided that
35the ownership of the shares derived from the person’s employment
36with that corporation.

37(15) That of a party to litigation involving the body or board of
38which the officer is a member in connection with an agreement in
39which all of the following apply:

P5    1(A) The agreement is entered into as part of a settlement of
2litigation in which the body or board is represented by legal
3counsel.

4(B) After a review of the merits of the agreement and other
5relevant facts and circumstances, a court of competent jurisdiction
6finds that the agreement serves the public interest.

7(C) The interested member has recused himself or herself from
8all participation, direct or indirect, in the making of the agreement
9on behalf of the body or board.

10(16) That of a person who is an officer or employee of an
11investor-owned utility that is regulated by the Public Utilities
12Commission with respect to a contract between the investor-owned
13utility and a state, county, district, judicial district, or city body or
14board of which the person is a member, if the contract requires the
15investor-owned utility to provide energy efficiency rebates or other
16type of program to encourage energy efficiency that benefits the
17public when all of the following apply:

18(A) The contract is funded by utility consumers pursuant to
19regulations of the Public Utilities Commission.

20(B) The contract provides no individual benefit to the person
21that is not also provided to the public, and the investor-owned
22utility receives no direct financial profit from the contract.

23(C) The person has recused himself or herself from all
24participation in making the contract on behalf of the state, county,
25district, judicial district, or city body or board of which he or she
26is a member.

27(D) The contract implements a program authorized by the Public
28Utilities Commission.

29(17) That of an owner or partner of a firm servingbegin delete onend deletebegin insert asend insert an
30begin delete advisoryend deletebegin insert appointed member of an unelectedend insert board or commission
31begin delete toend deletebegin insert ofend insert the contracting agency begin delete if the duties of the advisory board or
32 commission do not include providing advice with respect to seeking
33or awarding contracts andend delete
if the owner or partner recuses himself
34or herself frombegin insert providing any advice to the contracting agency
35regarding the contract between the firm and the contracting agency
36and fromend insert
all participation in reviewing a project that results from
37begin delete a contract between the firm and the contracting agency.end deletebegin insert that
38contract.end insert

39(c) This section is not applicable to any officer interested in a
40contract 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.



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