UNIVERSITY OF CALIFORNIA

Political Reform Act
Disqualification Requirements

January 2007

Prepared by the University
Conflict of Interest Coordinator
Office of the General Counsel

The State of California’s Political Reform Act of 1974, (Gov. Code, § 81000, et seq.), (the "Act"), prohibits public officials from participating in governmental decisions when personal financial interests may be affected by those decisions. The Act requires that all government employees and officials disqualify themselves from participating in a governmental decision when a financial conflict of interest is present. The pertinent sections of the law provide:

No public official at any level of state or local government shall make, participate in making or in any way attempt to use his official position to influence a governmental decision in which he knows or has reason to know he has a financial interest. (Gov. Code, § 87100.)

...no state administrative official shall make, participate in making, or use his or her official position to influence any governmental decision directly relating to any contract where the...official knows or has reason to know that any party to the contract is a person [or entity] with whom the...official, or any member of his or her immediate family, has engaged in any business transaction or transactions on terms not available to...the public. (Gov. Code,
§ 87450.)

All University of California employees and officials, either directly or by application of the University’s Conflict of Interest Code, are subject to those provisions of the Act which prohibit the making of or the participation in University decisions in which financial conflicts of interest exist. An individual who finds himself or herself in a conflict of interest is required to refrain from making, participating in the making of, or attempting to influence any University decision which may materially affect the individual’s financial interests. As a member of the University, you, therefore, must be aware of what is meant by making or participating in making a University decision, what constitutes a conflict of interest, how to disqualify yourself, what could happen if you do not disqualify, and the academic decision exemption.

This document is intended to explain the disqualification requirements pertaining to financial conflict of interest. Definitions used in the subsequent explanation follow closely the legal definitions in the Act and regulations.

Nothing contained in this document shall abridge your rights as a citizen to appear before a governmental agency as a member of the general public to represent yourself on matters related solely to your personal interests.

What is Meant by Making or Participating in the Making of a Decision?

The meaning of "decision-making" within the scope of the Political Reform Act is basic since you must disqualify yourself if you have a financial conflict of interest in a University decision.

You make a decision when, acting within the authority of your office, you:

1. vote on a matter;
2. appoint a person;
3. obligate or commit the University to any course of action;
4. enter into any contractual agreement on behalf of the University;
5. determine not to act, within the meaning of the above subparagraphs, unless such determination is made because of your financial interest. (Cal. Code of Regs., tit. 2, § 18702.1.)

You participate in the making of a decision when, acting within the authority of your University position, you:

1. negotiate, without significant substantive review, with a governmental entity or private person regarding the decision; or

2. advise or make recommendation to the decision-maker, either directly or without significant intervening substantive review, by:

   conducting research or making an investigation which requires the exercise of judgment on your part and the purpose of which is to influence the decision; or preparing or presenting any report, analysis or opinion, orally or in writing, which requires the exercise of judgment on your part and the purpose of which is to influence the decision. (Cal. Code of Regs., tit. 2, § 18702.2.)

Disqualification Requirement -- A Financial Conflict of Interest

A public official (University employee) has a financial interest in a decision if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on the official, a member of his or her immediate family,1 or on any of the following:

1. any business entity in which the public official has a direct or indirect investment worth $2,000 or more;
2. any real property in which the public official has a direct or indirect interest worth $2,000 or more;
3. any source of income, except gifts or loans by a commercial lending institution made in the regular course of business on terms available to the public without regard to official status, aggregating $500 or more in value provided to, received by or promised to the public official within 12 months prior to the time when the decision is made;
4. any business entity in which the public official is a director, officer, partner, trustee, employee, or holds any position of management;
5. any donor of, or any intermediary or agent for a donor of, a gift or gifts aggregating $390 or more in value provided to, received by or promised to the public official within 12 months prior to when the decision is made. (Gov. Code, § 87103.)

In relation to the above, you have an indirect investment or interest if the investment or interest is owned by your spouse or dependent child, by an agent on your behalf, or by a business entity or trust in which you, your agents, spouse, including a registered domestic partner, and dependent children own a 10 percent or greater interest.

Whether or not a decision will have a material financial effect on one of the above financial interests is determined by financial increases or decreases as provided in a series of regulations found at California Code of Regulations, title 2, section 18705.

FOOTNOTE:

1. Immediate family means the spouse, including a registered domestic partner, and dependent children. (Gov. Code § 82029.)

Disqualification Requirement--
Interest in a Contract

You have an interest in a contract when you know or have reason to know that any party to the contract is an individual or entity with whom you, or any immediate member of your family, have engaged in any business transactions on terms not available to members of the public, within 12 months prior to the time when the official action is to be taken, regarding:

1. any investment or interest in real property, or
2. the rendering of goods or services totaling $1,000 or more. (Gov. Code, § 87450.)

If you have an interest in a contract according to the criteria listed, you must disqualify yourself from making, participating in the making of or using your official position to influence a decision. If, in any specific instance, you are not sure you are required to disqualify yourself, you should contact the Conflict of Interest Coordinator at your campus or laboratory.

How to Disqualify Yourself from Decision-Making

If you determine that your financial interests require you to disqualify yourself from making or participating in the making of a University decision, you must refrain from participating in any way in the decision, and you must not use your official position to influence any other person with respect to the matter. The determination not to act may be accompanied by disclosure of the disqualifying interest, but disclosure is not required. (Cal. Code of Regs., tit. 2, § 18702.1(a)(5).)

Sanctions for Violations of the Disqualification Provisions of the Act

The Act provides that violators are subject to administrative, civil, and criminal penalties. In addition, persons violating an agency's conflict of interest code are subject to disciplinary action. (Gov. Code, § 91003.5.) Persons violating the Act:

1. may be subject to monetary penalties imposed by the Fair Political Practices Commission ("FPPC"). (Gov. Code, § 83116.);
2. may be enjoined or compelled to comply with the provisions of the Act in an injunctive action brought by any person living in California. (Gov. Code, § 91003.);
3. may be liable in a civil action. (Gov. Code, § 91005.5.); or
4. may be prosecuted for a misdemeanor and, if convicted, fined. (Gov. Code, § 91000.)

University Conflict of Interest Code

In addition to the disqualification requirements, the Act provides that every agency shall adopt and promulgate a Conflict of Interest Code. The University first adopted a Conflict of Interest Code with an effective date of April 1, 1980. The Code identifies specific positions held by more than 1,500 University employees and officials who are deemed to be "designated officials." A designated official by definition holds a position which the University or the FPPC has identified as having the potential for decision-making which could give rise to a financial conflict of interest. In addition to being subject to the Act's disqualification requirements, a designated official must file, as public documents, financial disclosure statements upon assuming or leaving a designated position and annually while holding the position. Coordinator Ross Smith is the University official responsible for receiving statements and placing them on file as public records. Coordinator Smith is located at the Office of the General Counsel, 1111 Franklin Street, 8th Floor, Oakland, California 94607-5200.

In order to keep the University's Conflict of Interest Code current with amendments to the Act and to Regulations as they occur, the Code is updated and republished each year.

Conflict of Interest Code Coordinators

Code Coordinators have been appointed to assist you with information regarding the Political Reform Act. If you have questions regarding the Act or the necessity of disqualifying yourself from making or participating in the making of a decision, you should contact the Coordinator for your location.

Academic Decision Regulation

Because of concern that the Act would operate to prohibit faculty and other members of the University with teaching and research responsibilities from making various decisions in the course of academic instruction and research, the FPPC adopted an academic decision regulation, (Cal. Code of Regs., tit. 2 § 18702.4(c)) which provides:

1. Except as provided in subsection (b), neither disclosure of financial interest nor disqualification is required...in connection with:
   1. Teaching decisions, including the selection by a teacher of books or other educational materials for use within his or her own school or institution, and other decisions incidental to teaching;
   2. Decisions made by a person who has teaching or research responsibilities at an institution of higher education to pursue personally a course of academic study or research, to apply for funds to finance such a project, to allocate financial and material resources for such academic study or research, and all decisions relating to the manner or methodology with which such study or research will be conducted. Provided, however, that the provisions of this subsection (2) shall not apply with respect to any decision made by the person in the exercise of institution- or campus-wide administrative responsibilities respecting the approval or review of any phase of academic research or study conducted at the institution or campus.
2. Disclosure shall be required...in connection with a decision made by a person or persons at an institution of higher education with principal responsibility for a research project to undertake such research, if it is to be funded or supported, in whole or in part, by a contract or grant (or other funds earmarked by the donor for a specific research project or for a specific researcher) from a nongovernmental entity, but disqualification may not be required...in connection with any such decision if the decision is substantively reviewed by an independent committee established within the institution.

Two University documents provide for University implementation of the academic decision regulation:

1. University Policy on Disclosure of Financial Interest in Private Sponsors of Research (APM-028-0)
2. Guidelines for Disclosure and Review of Principal Investigator's Financial Interest in Private Sponsors of Research (APM-028-10)

Questions about the Academic Decision Regulation or the conflict of interest filing obligations of principal investigators may be directed to the Office of the Vice Provost for Research.

Request for Advice

If you have any questions concerning your obligations under the Political Reform Act, you may seek advice from the FPPC. If the Commission advises an official in writing that disqualification is not necessary, and the official has truthfully provided all material facts, the official is provided with immunity against any administrative action brought by the Commission arising from the same conflict of interest charges. Reliance on the written advice also serves as evidence of good faith conduct in any civil or criminal proceedings bases on the same charges.

You may write or call the FPPC.

Fair Political Practices Commission
428 J Street, Suite 620
Sacramento, California 95814
1-(866) 275-3772