Bill Text: CA AB906 | 2009-2010 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Conflict of interest: remote interest in a contract.

Spectrum: Bipartisan Bill

Status: (Passed) 2009-10-11 - Chaptered by Secretary of State - Chapter 488, Statutes of 2009. [AB906 Detail]

Download: California-2009-AB906-Amended.html

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BILL NUMBER: AB 906	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 1, 2009

INTRODUCED BY   Assembly Members Hill and Smyth

                        FEBRUARY 26, 2009

   An act to amend Section  1092   1091  of
the Government Code, relating to conflict of interest.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 906, as amended, Hill. Conflict of interest:  statute
of limitations.  remote interest in a contract. 
   Existing law prohibits Members of the Legislature, and state,
county, district, judicial district, and  county 
 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.  A
contract made in violation of any of these provisions may be avoided
at the instance of any party except the officer interested in the
contract. Existing law provides that the applicable statute of
limitations for commencing an action to avoid a contract under this
provision is 4 years after the plaintiff has discovered, or in the
exercise of reasonable care should have discovered, the violation.
 
   This bill would specify that the provision specifying the
applicable statute of limitations for commencing that act applies to
an action that was in violation of that prohibition and that was
discovered, or in the exercise of reasonable care should have been
discovered on or after January 1, 2003.  
    Existing law defines what is a remote interest in a contract that
does not present a prohibited conflict of interest under these
provisions.  
   This bill would revise the definition of "remote interest" to
include the interest of an officer or employee of a state, county,
district, judicial district, or city who is also an employee or agent
of an investor-owned utility, in a contract solely related to energy
efficiency encouragement programs, under specified conditions. 

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


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 1091 of the  
Government Code   is amended to read: 
   1091.  (a) An officer shall not be deemed to be interested in a
contract entered into by a body or board of which the officer is a
member within the meaning of this article if the officer has only a
remote interest in the contract and if the fact of that interest is
disclosed to the body or board of which the officer is a member and
noted in its official records, and thereafter the body or board
authorizes, approves, or ratifies the contract in good faith by a
vote of its membership sufficient for the purpose without counting
the vote or votes of the officer or member with the remote interest.
   (b) As used in this article, "remote interest" means any of the
following:
   (1) That of an officer or employee of a nonprofit entity exempt
from taxation pursuant to Section 501(c)(3) of the Internal Revenue
Code (26 U.S.C. Sec. 501(c)(3)) or a nonprofit corporation, except as
provided in paragraph (8) of subdivision (a) of Section 1091.5.
   (2) That of an employee or agent of the contracting party, if the
contracting party has 10 or more other employees and if the officer
was an employee or agent of that contracting party for at least three
years prior to the officer initially accepting his or her office and
the officer owns less than 3 percent of the shares of stock of the
contracting party; and the employee or agent is not an officer or
director of the contracting party and did not directly participate in
formulating the bid of the contracting party.
   For purposes of this paragraph, time of employment with the
contracting party by the officer shall be counted in computing the
three-year period specified in this paragraph even though the
contracting party has been converted from one form of business
organization to a different form of business organization within
three years of the initial taking of office by the officer. Time of
employment in that case shall be counted only if, after the transfer
or change in organization, the real or ultimate ownership of the
contracting party is the same or substantially similar to that which
existed before the transfer or change in organization. For purposes
of this paragraph, stockholders, bondholders, partners, or other
persons holding an interest in the contracting party are regarded as
having the "real or ultimate ownership" of the contracting party.
   (3) That of an employee or agent of the contracting party, if all
of the following conditions are met:
   (A) The agency of which the person is an officer is a local public
agency located in a county with a population of less than 4,000,000.

   (B) The contract is competitively bid and is not for personal
services.
   (C) The employee or agent is not in a primary management capacity
with the contracting party, is not an officer or director of the
contracting party, and holds no ownership interest in the contracting
party.
   (D) The contracting party has 10 or more other employees.
   (E) The employee or agent did not directly participate in
formulating the bid of the contracting party.
   (F) The contracting party is the lowest responsible bidder.
   (4) That of a parent in the earnings of his or her minor child for
personal services.
   (5) That of a landlord or tenant of the contracting party.
   (6) That of an attorney of the contracting party or that of an
owner, officer, employee, or agent of a firm that renders, or has
rendered, service to the contracting party in the capacity of
stockbroker, insurance agent, insurance broker, real estate agent, or
real estate broker, if these individuals have not received and will
not receive remuneration, consideration, or a commission as a result
of the contract and if these individuals have an ownership interest
of 10 percent or more in the law practice or firm, stock brokerage
firm, insurance firm, or real estate firm.
   (7) That of a member of a nonprofit corporation formed under the
Food and Agricultural Code or a nonprofit corporation formed under
the Corporations Code for the sole purpose of engaging in the
merchandising of agricultural products or the supplying of water.
   (8) That of a supplier of goods or services when those goods or
services have been supplied to the contracting party by the officer
for at least five years prior to his or her election or appointment
to office.
   (9) That of a person subject to the provisions of Section 1090 in
any contract or agreement entered into pursuant to the provisions of
the California Land Conservation Act of 1965.
   (10) Except as provided in subdivision (b) of Section 1091.5, that
of a director of, or a person having an ownership interest of, 10
percent or more in a bank, bank holding company, or savings and loan
association with which a party to the contract has a relationship of
borrower or depositor, debtor or creditor.
   (11) That of an engineer, geologist, or architect employed by a
consulting engineering or architectural firm. This paragraph applies
only to an employee of a consulting firm who does not serve in a
primary management capacity, and does not apply to an officer or
director of a consulting firm.
   (12) That of an elected officer otherwise subject to Section 1090,
in any housing assistance payment contract entered into pursuant to
Section 8 of the United States Housing Act of 1937 (42 U.S.C. Sec.
1437f) as amended, provided that the housing assistance payment
contract was in existence before Section 1090 became applicable to
the officer and will be renewed or extended only as to the existing
tenant, or, in a jurisdiction in which the rental vacancy rate is
less than 5 percent, as to new tenants in a unit previously under a
Section 8 contract. This section applies to any person who became a
public official on or after November 1, 1986.
   (13) That of a person receiving salary, per diem, or reimbursement
for expenses from a government entity.
   (14) That of a person owning less than 3 percent of the shares of
a contracting party that is a for-profit corporation, provided that
the ownership of the shares derived from the person's employment with
that corporation.
   (15) That of a party to litigation involving the body or board of
which the officer is a member in connection with an agreement in
which all of the following apply:
   (A) The agreement is entered into as part of a settlement of
litigation in which the body or board is represented by legal
counsel.
   (B) After a review of the merits of the agreement and other
relevant facts and circumstances, a court of competent jurisdiction
finds that the agreement serves the public interest.
   (C) The interested member has recused himself or herself from all
participation, direct or indirect, in the making of the agreement on
behalf of the body or board. 
   (16) (A) That of an officer or employee of a public entity who is
also an employee or agent of the contracting party, if all of the
following conditions are met:  
   (i) The contracting party is an investor-owned utility regulated
by the Public Utilities Commission.  
   (ii) The contract solely provides the public entity with energy
efficiency rebates or any other type of program to encourage energy
efficiency by the public entity that is funded by utility ratepayers
under the authority of the Public Utilities Commission.  
   (iii) The officer or employee of the public entity has not
directly or indirectly participated in making the contract in any
manner.  
   (B) For purposes of this paragraph, "public entity" means the
state, county, district, judicial district, or city, as stated in
Section 1090. 
   (c) This section is not applicable to any officer interested in a
contract who influences or attempts to influence another member of
the body or board of which he or she is a member to enter into the
contract.
   (d) The willful failure of an officer to disclose the fact of his
or her interest in a contract pursuant to this section is punishable
as provided in Section 1097. That violation does not void the
contract unless the contracting party had knowledge of the fact of
the remote interest of the officer at the time the contract was
executed. 
  SECTION 1.    Section 1092 of the Government Code
is amended to read:
   1092.  (a) A contract made in violation of Section 1090 may be
avoided at the instance of any party except the officer interested
therein. The contract shall not be avoided because of the interest of
an officer therein unless the contract is made in the official
capacity of the officer, or by a board or body of which the officer
is a member.
   (b) An action under this section shall be commenced within four
years after the plaintiff has discovered, or in the exercise of
reasonable care should have discovered, a violation described in
subdivision (a).
   (c) The changes made to this section by Chapter 68 of the Statutes
of 2007 shall apply to an action that was in violation of Section
1090 and that was discovered, or in the exercise of reasonable care
should have been discovered, on or after January 1, 2003.