Legal Alerts Nov 20, 2014

It Is Now a Crime to Help a Public Official Make a Contract that Holds Personal Financial Interest

California Legislature Expands Government Code Section 1090 Liability to Those Who Aid and Abet

It Is Now a Crime to Help a Public Official Make a Contract that Holds Personal Financial Interest

An amendment to Government Code section 1090 now makes it a felony for any person to aid and abet a government official in violating the conflict of interest provisions of the Code. This amendment, made possible with the passage of SB 952, advances the ability of prosecutors to charge all persons, government officials and others who are knowingly involved in aiding and abetting, or directly participating in the making of a contract in which a government official is financially interested.

During the past session, the Legislature passed SB 952, which Gov. Jerry Brown signed into law, amending the powerful and far reaching statute that prohibits a government official from being financially interested in a contract made in the official’s capacity, or by the agency of which he or she is a member. Section 1090 provides felony criminal penalties, including state prison sentences, fines and a lifetime ban from holding office. Any contract made in violation of this law is void and the government retains all the benefits of the contract while recovering any payments or consideration provided pursuant to the contract.

An earlier appellate decision, D’Amato v. Superior Court, had cast some doubt on whether section 1090 criminal liability could be applied to someone other than a government official under an aiding and abetting theory. In D’Amato, the Court of Appeal held that the Legislature intended that section 1090’s liability extend only to an official having an interest in a contract approved by the body or board upon which he or she sits. This amendment to the statute now supersedes that conclusion.

Now with aider and abettor liability explicitly provided for in section 1090, any person who knowingly engages in activity that aids and abets a public official in participating in the making a contract in which the official is financially interested will have shared criminal liability. This will sweep within the statute those who offer inducements or bribes for legislative action, as the inducement or bribe creates a financial interest in the contract for the public official.

How might this new law apply in the real world? Imagine this scenario based on an actual case: Hub City Solid Waste Services, Inc. v. City of Compton. In this case, the principal of a company seeking to do business with the city provided campaign contributions and hired members of council members’ families with the understanding that the council members will vote in favor of a contract with the company. The council members then voted to approve a contract with the company. Under this scenario, not only the council members, but also the company principal, would be criminally liable under Government Code section 1090.

The new law takes effect Jan. 1.

For more information on this amendment or how it may affect your agency, please contact the attorney author of this legal alert listed at right in the firm’s Public Policy & Ethics Compliance practice group or your BB&K attorney.

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