A Summary of Conflict-of-Interest Rules

 

 

 

 

 

 

http://www.fppc.ca.gov/library/CanIVote7-05.pdf

 

“Public officials, whether elected or appointed, should perform their duties in an impartial manner, free from bias caused by their own financial interests or the financial interests of persons who have supported them.”  California Political Reform Act of 1974

 

Conflict of interest laws apply only to financial conflicts of interest; i. e., those arising from economic interests.  Whether a disqualifying conflict of interest exists in any given situation depends heavily on the facts of each governmental decision.

 

Stripped of legal jargon, a conflict of interest exists if it is likely that the outcome of a decision will have an important impact on a public official’s economic interests, and not on the economic interests of a significant portion of the official’s jurisdiction.  The voters who enacted the Political Reform Act by ballot measure in 1974 judged such circumstances to be enough to influence, or to appear to others to influence, a public official’s judgment with regard to that decision.

 

Under rules adopted by the FPPC, deciding whether a financial conflict of interest exists under the Political Reform Act involves eight criteria.  In simplified language, they are:

 

1. Public Official

The Act’s conflict-of-interest rules apply to “public officials” as defined in the law. An elected official or an employee of a state or local government agency designated in an agency’s conflict-of-interest code or files a Statement of Economic Interests (Form 700) is a “public official.” [BWD directors are listed in the BWD’s conflict-of-interest code and required to file a Form 700 annually.]

 

2. Making, participating in making, or influencing a governmental decision

If the official is exercising discretion or judgment with regard to the decision, then their conduct with regard to the decision is very probably covered.  [BWD directors are expected to exercise discretion and judgment, however…]

 

3. Sources of a financial conflict of interest

The Act’s conflict-of-interest provisions apply only to conflicts of interest arising from economic interests. There are six kinds of economic interests from which conflicts of interest can arise:

 

• Business Investment.
• Business Employment or Management.
• Real Property in which the public official has $2,000 or more invested
• Sources of Income Any individual or organization that has provided or promised $500 or more in income to a public official or his/her spouse or partner within the past 12 months.
•  Gifts from an individual or organization that total $390 or more within the last 12 months.
• Personal Financial Effect  If a public official’s expenses, income, assets or liabilities or those of his/her immediate family are likely to go up or down by $250 or more in a 12-month period as a result of a decision, then the decision has a “personal financial effect”.

 

4. Economic interests directly involved in a governmental decision

In general, an economic interest is directly involved if it is the subject of the governmental decision.

 

5. Likelihood that a governmental decision will have a material (“important.”) financial effect on a public official’s economic interests

A public official will has a conflict of interest only if it is “reasonably foreseeable” that a decision will have a “material financial effect” on his/her economic interests.  To understand the FPPC’s “materiality standards” at a “big picture” level, remember these facts:

 

• An economic interest that is directly involved in a governmental decision presents a bigger conflict-of-interest risk than one not directly involved.
• There are different standards for different types of economic interests.
• The rules vary by the size and situation of the economic interest.

 

6. Likelihood that the materiality standards will be met

Generally speaking, the likelihood of one or more economic interests being met need not be a certainty, but it must be more than merely possible.

 

7. “Public Generally” exception

A public official is not disqualified from a decision if a significant segment of his/her jurisdiction feels a financial impact which is substantially similar to the impact on the economic interest of the official.

 

8. Participation legally required

The “legally required participation” rule applies only if an agency would be unable to act without it.

 

The full text of “Can I Vote?” at http://www.fppc.ca.gov/library/CanIVote7-05.pdf and other information about conflict of interest is available from the FPPC.  Contact them by:

 

 

03/08/07

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