SB 1011, as introduced, Mendoza. Public officers: contracts: financial interest.
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.
This bill would, on and after January 1, 2018, include within the definition of remote interest that of a public officer in the financial interest of that public officer’s child, parent, sibling, or the spouse of the child, parent, or sibling, in a contract made by that public officer, except a public officer’s financial interests do not include any financial interest of those other persons unless the interest is actually known to the public officer, and that public officer knowingly or willfully fails to disclose those interests.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 1091 of the Government Code is amended
2to read:
(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
31contracting party has been converted from one form of business
32organization to a different form of business organization within
33three years of the initial taking of office by the officer. Time of
34employment in that case shall be counted only if, after the transfer
35or change in organization, the real or ultimate ownership of the
36contracting party is the same or substantially similar to that which
37existed before the transfer or change in organization. For purposes
38of this paragraph, stockholders, bondholders, partners, or other
P3 1persons holding an interest in the contracting party are regarded
2as having the “real or ultimate ownership” of the contracting party.
3(3) That of an employee or agent of the contracting party, if all
4of the following conditions are met:
5(A) The
agency of which the person is an officer is a local public
6agency located in a county with a population of less than 4,000,000.
7(B) The contract is competitively bid and is not for personal
8services.
9(C) The employee or agent is not in a primary management
10capacity with the contracting party, is not an officer or director of
11the contracting party, and holds no ownership interest in the
12contracting party.
13(D) The contracting party has 10 or more other employees.
14(E) The employee or agent did not directly participate in
15formulating the bid of the contracting party.
16(F) The contracting party is the lowest responsible bidder.
17(4) That of a parent in the earnings of his or her minor child for
18personal services.
19(5) That of a landlord or tenant of the contracting party.
20(6) That of an attorney of the contracting party or that of an
21owner, officer, employee, or agent of a firm that renders, or has
22rendered, service to the contracting party in the capacity of
23stockbroker, insurance agent, insurance broker, real estate agent,
24or real estate broker, if these individuals have not received and
25will not receive remuneration, consideration, or a commission as
26a result of the contract and if these individuals have an ownership
27interest of 10 percent or more in the law practice or firm, stock
28brokerage firm, insurance firm, or real estate firm.
29(7) That of a member of a nonprofit corporation formed under
30the Food and Agricultural Code or
a nonprofit corporation formed
31under the Corporations Code for the sole purpose of engaging in
32the merchandising of agricultural products or the supplying of
33water.
34(8) That of a supplier of goods or services when those goods or
35services have been supplied to the contracting party by the officer
36for at least five years prior to his or her election or appointment
37to office.
38(9) That of a person subject to the provisions of Section 1090
39in any contract or agreement entered into pursuant to the provisions
40of the California Land Conservation Act of 1965.
P4 1(10) Except as provided in subdivision (b) of Section 1091.5,
2that of a director of, or a person having an ownership interest of,
310 percent or more in a bank, bank holding company, or savings
4and loan association with which a party to the contract has a
5relationship of
borrower or depositor, debtor or creditor.
6(11) That of an engineer, geologist, architect, or planner
7employed by a consulting engineering, architectural, or planning
8firm. This paragraph applies only to an employee of a consulting
9firm who does not serve in a primary management capacity, and
10does not apply to an officer or director of a consulting firm.
11(12) That of an elected officer otherwise subject to Section 1090,
12in any housing assistance payment contract entered into pursuant
13to Section 8 of the United States Housing Act of 1937 (42 U.S.C.
14Sec. 1437f) as amended, provided that the housing assistance
15payment contract was in existence before Section 1090 became
16applicable to the officer and will be renewed or extended only as
17to the existing tenant, or, in a jurisdiction in which the rental
18vacancy rate is less than 5 percent, as to new tenants in a unit
19previously under a
Section 8 contract. This section applies to any
20person who became a public official on or after November 1, 1986.
21(13) That of a person receiving salary, per diem, or
22reimbursement for expenses from a government entity.
23(14) That of a person owning less than 3 percent of the shares
24of a contracting party that is a for-profit corporation, provided that
25the ownership of the shares derived from the person’s employment
26with that corporation.
27(15) That of a party to litigation involving the body or board of
28which the officer is a member in connection with an agreement in
29which all of the following apply:
30(A) The agreement is entered into as part of a settlement of
31litigation in which the body or board is represented by legal
32counsel.
33(B) After a review of the merits of the agreement and other
34relevant facts and circumstances, a court of competent jurisdiction
35finds that the agreement serves the public interest.
36(C) The interested member has recused himself or herself from
37all participation, direct or indirect, in the making of the agreement
38on behalf of the body or board.
39(16) That of a person who is an officer or employee of an
40investor-owned utility that is regulated by the Public Utilities
P5 1Commission with respect to a contract between the investor-owned
2utility and a state, county, district, judicial district, or city body or
3board of which the person is a member, if the contract requires the
4investor-owned utility to provide energy efficiency rebates or other
5type of program to encourage energy efficiency that benefits the
6public when all of the
following apply:
7(A) The contract is funded by utility consumers pursuant to
8regulations of the Public Utilities Commission.
9(B) The contract provides no individual benefit to the person
10that is not also provided to the public, and the investor-owned
11utility receives no direct financial profit from the contract.
12(C) The person has recused himself or herself from all
13participation in making the contract on behalf of the state, county,
14district, judicial district, or city body or board of which he or she
15is a member.
16(D) The contract implements a program authorized by the Public
17Utilities Commission.
18(17) That of an owner or partner of a firm serving as an
19appointed member of an unelected
board or commission of the
20contracting agency if the owner or partner recuses himself or
21herself from providing any advice to the contracting agency
22regarding the contract between the firm and the contracting agency
23and from all participation in reviewing a project that results from
24that contract.
25(c) This section is not applicable to any officer interested in a
26contract who influences or attempts to influence another member
27of the body or board of which he or she is a member to enter into
28the contract.
29(d) The willful failure of an officer to disclose the fact of his or
30her interest in a contract pursuant to this section is punishable as
31provided in Section 1097. That violation does not void the contract
32unless the contracting party had knowledge of the fact of the remote
33interest of the officer at the time the contract was executed.
34(e) This section shall be repealed on January 1, 2018.
end insertSection 1091 is added to the Government Code, to
36read:
(a) An officer shall not be deemed to be interested in a
38contract entered into by a body or board of which the officer is a
39member within the meaning of this article if the officer has only
40a remote interest in the contract and if the fact of that interest is
P6 1disclosed to the body or board of which the officer is a member
2and noted in its official records, and thereafter the body or board
3authorizes, approves, or ratifies the contract in good faith by a vote
4of its membership sufficient for the purpose without counting the
5vote or votes of the officer or member with the remote interest.
6(b) As used in this article, “remote interest” means any of the
7following:
8(1) That of an officer
or employee of a nonprofit entity exempt
9from taxation pursuant to Section 501(c)(3) of the Internal Revenue
10Code (26 U.S.C. Sec. 501(c)(3)), pursuant to Section 501(c)(5) of
11the Internal Revenue Code (26 U.S.C. Sec. 501(c)(5)), or a
12nonprofit corporation, except as provided in paragraph (8) of
13subdivision (a) of Section 1091.5.
14(2) That of an employee or agent of the contracting party, if the
15contracting party has 10 or more other employees and if the officer
16was an employee or agent of that contracting party for at least three
17years prior to the officer initially accepting his or her office and
18the officer owns less than 3 percent of the shares of stock of the
19contracting party; and the employee or agent is not an officer or
20director of the contracting party and did not directly participate in
21formulating the bid of the contracting party.
22For purposes of this paragraph, time of employment with the
23
contracting party by the officer shall be counted in computing the
24three-year period specified in this paragraph even though the
25contracting party has been converted from one form of business
26organization to a different form of business organization within
27three years of the initial taking of office by the officer. Time of
28employment in that case shall be counted only if, after the transfer
29or change in organization, the real or ultimate ownership of the
30contracting party is the same or substantially similar to that which
31existed before the transfer or change in organization. For purposes
32of this paragraph, stockholders, bondholders, partners, or other
33persons holding an interest in the contracting party are regarded
34as having the “real or ultimate ownership” of the contracting party.
35(3) That of an employee or agent of the contracting party, if all
36of the following conditions are met:
37(A) The agency of which the person is an officer is a local public
38agency located in a county with a population of less than 4,000,000.
39(B) The contract is competitively bid and is not for personal
40services.
P7 1(C) The employee or agent is not in a primary management
2capacity with the contracting party, is not an officer or director of
3the contracting party, and holds no ownership interest in the
4contracting party.
5(D) The contracting party has 10 or more other employees.
6(E) The employee or agent did not directly participate in
7formulating the bid of the contracting party.
8(F) The contracting party is the lowest responsible bidder.
9(4) That of a parent in the earnings of his or her minor child for
10personal services.
11(5) That of a public officer in the financial interest of that public
12officer’s child, parent, sibling, or the spouse of the child, parent,
13or sibling, in a contract made by that public officer, except a public
14officer’s financial interests do not include any financial interest of
15those other persons unless the interest is actually known to the
16public officer, and that public officer knowingly or willfully fails
17to disclose those interests.
18(6) That of a landlord or tenant of the contracting party.
19(7) That of an attorney of the contracting party or that of an
20owner, officer, employee, or agent of a firm that renders, or has
21rendered, service to the contracting party in the
capacity of
22stockbroker, insurance agent, insurance broker, real estate agent,
23or real estate broker, if these individuals have not received and
24will not receive remuneration, consideration, or a commission as
25a result of the contract and if these individuals have an ownership
26interest of 10 percent or more in the law practice or firm, stock
27brokerage firm, insurance firm, or real estate firm.
28(8) That of a member of a nonprofit corporation formed under
29the Food and Agricultural Code or a nonprofit corporation formed
30under the Corporations Code for the sole purpose of engaging in
31the merchandising of agricultural products or the supplying of
32water.
33(9) That of a supplier of goods or services when those goods or
34services have been supplied to the contracting party by the officer
35for at least five years prior to his or her election or appointment
36to office.
37(10) That of a person subject to the provisions of Section 1090
38in any contract or agreement entered into pursuant to the provisions
39of the California Land Conservation Act of 1965.
P8 1(11) Except as provided in subdivision (b) of Section 1091.5,
2that of a director of, or a person having an ownership interest of,
310 percent or more in a bank, bank holding company, or savings
4and loan association with which a party to the contract has a
5relationship of borrower or depositor, debtor or creditor.
6(12) That of an engineer, geologist, architect, or planner
7employed by a consulting engineering, architectural, or planning
8firm. This paragraph applies only to an employee of a consulting
9firm who does not serve in a primary management capacity, and
10does not apply to an officer or director of a consulting firm.
11(13) That of an elected officer otherwise subject to Section 1090,
12in any housing assistance payment contract entered into pursuant
13to Section 8 of the United States Housing Act of 1937 (42 U.S.C.
14Sec. 1437f) as amended, provided that the housing assistance
15payment contract was in existence before Section 1090 became
16applicable to the officer and will be renewed or extended only as
17to the existing tenant, or, in a jurisdiction in which the rental
18vacancy rate is less than 5 percent, as to new tenants in a unit
19previously under a Section 8 contract. This section applies to any
20person who became a public official on or after November 1, 1986.
21(14) That of a person receiving salary, per diem, or
22reimbursement for expenses from a government entity.
23(15) That of a person owning less than 3 percent of the shares
24of a
contracting party that is a for-profit corporation, provided that
25the ownership of the shares derived from the person’s employment
26with that corporation.
27(16) That of a party to litigation involving the body or board of
28which the officer is a member in connection with an agreement in
29which all of the following apply:
30(A) The agreement is entered into as part of a settlement of
31litigation in which the body or board is represented by legal
32counsel.
33(B) After a review of the merits of the agreement and other
34relevant facts and circumstances, a court of competent jurisdiction
35finds that the agreement serves the public interest.
36(C) The interested member has recused himself or herself from
37all participation, direct or indirect, in the making of the agreement
38
on behalf of the body or board.
39(17) That of a person who is an officer or employee of an
40investor-owned utility that is regulated by the Public Utilities
P9 1Commission with respect to a contract between the investor-owned
2utility and a state, county, district, judicial district, or city body or
3board of which the person is a member, if the contract requires the
4investor-owned utility to provide energy efficiency rebates or other
5type of program to encourage energy efficiency that benefits the
6public when all of the following apply:
7(A) The contract is funded by utility consumers pursuant to
8regulations of the Public Utilities Commission.
9(B) The contract provides no individual benefit to the person
10that is not also provided to the public, and the investor-owned
11utility receives no direct financial profit from the
contract.
12(C) The person has recused himself or herself from all
13participation in making the contract on behalf of the state, county,
14district, judicial district, or city body or board of which he or she
15is a member.
16(D) The contract implements a program authorized by the Public
17Utilities Commission.
18(18) That of an owner or partner of a firm serving as an
19appointed member of an unelected board or commission of the
20contracting agency if the owner or partner recuses himself or
21herself from providing any advice to the contracting agency
22regarding the contract between the firm and the contracting agency
23and from all participation in reviewing a project that results from
24that contract.
25(c) This section is not applicable to any officer interested in a
26
contract who influences or attempts to influence another member
27of the body or board of which he or she is a member to enter into
28the contract.
29(d) The willful failure of an officer to disclose the fact of his or
30her interest in a contract pursuant to this section is punishable as
31provided in Section 1097. That violation does not void the contract
32unless the contracting party had knowledge of the fact of the remote
33interest of the officer at the time the contract was executed.
34(e) This section shall become operative on January 1, 2018.
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