Is a Contract With a Public Officer With Financial Interest ''Legal'' ?

In Thomson v. Call (1985) 38 Cal. 3d 633, 214 Cal. Rptr. 139, 699 P.2d 316, a taxpayer brought suit to challenge the validity of a transaction in which a corporate defendant purchased a parcel of land from a city councilman and then conveyed the land to the city. The California Supreme Court in Thomson affirmed the trial court's finding that the city councilman's interest in the transaction violated section 1090 and the contract in question was "void." ( Id. at p. 646.) In a footnote, the high court explained that, "California courts have generally held that a contract in which a public officer is interested is void, not merely voidable." (Id. at p. 646, fn. 15 (italics following comma added).) In People v. Honig (1996), the Supreme Court explained that "the duties of public office demand the absolute loyalty and undivided, uncompromised allegiance of the individual that holds the office. Yet it is recognized '"that an impairment of impartial judgment can occur in even the most well-meaning men when their personal economic interests are affected by the business they transact on behalf of the Government."' Consequently, our conflict-of-interest statutes are concerned with what might have happened rather than merely what actually happened. They are aimed at eliminating temptation, avoiding the appearance of impropriety, and assuring the government of the officer's undivided and uncompromised allegiance. Their objective 'is to remove or limit the possibility of any personal influence, either directly or indirectly which might bear on an official's decision . . . .' In view of the purposes of our conflict-of-interest statutes, it is well established that their scope is not limited to instances of actual fraud, dishonesty, unfairness or loss to the governmental entity, and criminal responsibility is assessed without regard to whether the contract in question is fair or oppressive. Thus, it has been repeatedly held that such matters are irrelevant under section 1090." (Honig, supra, at p. 314, italics omitted.) The high court in Honig also explained that the courts have broadly construed the term "financially interested" in section 1090 in order to give effect to its legislative purpose: "In enacting the conflict-of-interest provisions the Legislature was not concerned with the technical terms and rules applicable to the making of contracts, but instead sought to establish rules governing the conduct of governmental officials. Accordingly, those provisions cannot be given a narrow and technical interpretation that would limit their scope and defeat the legislative purpose. . . . . . . the term 'financially interested' in section 1090 cannot be interpreted in a restricted and technical manner.