Conflicts of Interest Rules
Under the Act, a public official has a disqualifying conflict of interest in a governmental decision if it is foreseeable that the decision will have a financial impact on his or her personal finances or other financial interests. In such cases, there is a risk of biased decision-making that could sacrifice the public’s interest in favor of the official’s private financial interests. To avoid actual bias or the appearance of possible improprieties, the public official is prohibited from participating in the decision.
There are five types of interests that may result in disqualification:
- Business Entity. A business entity in which the official has an investment of $2,000 or more; or in which the official is a director, officer, partner, trustee, employee, or manager.
- Real Property. Real property in which the official has an interest of $2,000 or more including leaseholds. (However, month-to-month leases are not considered real property interests.)
- Income. An individual or an entity from whom the official has received income or promised income aggregating to $500 or more in the previous 12 months, including the official's community property interest in the income of his or her spouse or registered domestic partner.
- Gifts. An individual or an entity from whom the official has received gifts aggregating to $630 or more in the previous 12 months.
- Personal Finances. The official's personal finances including his or her expenses, income, assets, or liabilities, as well as those of his or her immediate family.
If a decision may have a financial impact or effect on any of the foregoing interests, an official is disqualified from governmental decision if the following two conditions are met:
- The financial impact or effect is foreseeable, and
- The financial impact or effect is significant enough to be considered material.
Generally, a financial impact or effect is presumed to be both foreseeable and material if the financial interest is "explicitly" or directly involved in the decision. A financial interest is explicitly involved in the decision whenever the interest is a named party in, or the subject of, a governmental decision before the official or the official's agency.
If the interest is "not explicitly involved" in the decision, a financial impact or effect is reasonably foreseeable if the effect can be recognized as a realistic possibility and more than hypothetical or theoretical. A financial effect need not be likely to occur to be considered reasonably foreseeable.
However, for interests "not explicitly involved" in the decision, different standards apply to determine whether a foreseeable effect on an interest will be material depending on the nature of the interest. The FPPC has adopted rules for deciding what kinds of financial effects are important enough to trigger a conflict of interest. These rules are called "materiality standards," that is, they are the standards that should be used for judging what kind of financial impacts resulting from governmental decisions are considered material or important.
There are too many materiality standards to adequately review all of them here. To determine the applicable materiality standard, or to obtain more detailed information on conflicts, an official may seek assistance from agency counsel or the FPPC anytime the official has reason to believe a decision may have a financial impact or effect on his or her personal finances or other financial interests.