Tuesday, January 20, 2009
Agency May Make Loan to Company Headed by Member’s Son—A.G.
By KENNETH OFGANG, Staff Writer
A community redevelopment agency may make a loan to a company owned by the non-dependent adult son of a member of the agency’s governing board, although the member may not participate in the decision, Attorney General Jerry Brown has opined.
In a published opinion made public Friday, Brown said the loan would not violate Government Code Sec. 1090 or the Political Reform Act of 1974, also known as Proposition 9, because the board member would have no financial interest in the proceeds of the loan. The result would be no different if the board member and son share a rented residence, the attorney general said.
Sec. 1090 generally bars a public official from entering into a contract in which the official is “financially interested,” and bars a public “body or board” from entering into a contact in which a member has a financial interest. Proposition 9 bars a government official from participating in a decision that will have a material financial effect upon a member of the official’s “immediate family,” which the act defines as including the official’s “spouse and dependent children.”
Brown cited a 2005 opinion by his predecessor interpreting a similar provision of the redevelopment statute, prohibiting an agency official or board member from acquiring any interest, including an “indirect financial interest,” in property within the project area. The attorney general said on that occasion that a board member did not have an indirect interest in property acquired by an adult child.
Brown also cited a 1956 opinion that there was no conflict in having an automobile dealer whose brother was a county supervisor sell automobiles to the county, since neither brother had any interest “in the financial attainments of the other.”
The attorney general elaborated:
“We are informed that the board member’s son’s corporation will receive the proceeds of the agency’s loan. There is no indication that the member will personally profit from this transaction. While the Legislature could have characterized the inherent ‘interest’ that a self-supporting parent may be said to have in the financial attainments of an adult child as one that, by itself, amounts to a prohibited financial interest, it has not done so. Nor have we located any judicial determination that the parent-adult child relationship, in itself, creates a financial conflict of interest in situations of the sort considered here. Thus, we conclude that the familial relationship between the board member and her adult son does not invalidate the proposed loan agreement under section 1090.”
Similarly, Brown wrote, since an adult child who is not a dependent is not a member of the parent’s “immediate family” as defined in Proposition 9, there is no conflict under that enactment.
The attorney general did state concerns, however, about the possibility of a common law conflict of interest, which need not be limited to situations involving a personal financial interest.
“Here, even if the agency board member cannot be said to have a statutory financial interest in her son’s contract with the agency within the meaning of section 1090 or the Political Reform Act, it is difficult to imagine that the agency member has no private or personal interest in whether her son’s business transactions are successful or not,” Brown wrote. “At the least, an appearance of impropriety or conflict would arise by the member’s participation in the negotiations and voting upon an agreement that, if executed, would presumably redound to her son’s financial benefit.”
The problem can be avoided, however, if the board member will “abstain from any official action with regard to the proposed loan agreement and make no attempt to influence the discussions, negotiations, or vote concerning that agreement.”
The opinion, No 07-807, was requested by Assemblywoman Norma J. Torres, D-Pomona, and prepared by Deputy Attorney General Marc J. Nolan. A phone call to Torres’ official was not returned Friday.
Copyright 2009, Metropolitan News Company