People v. Honig

In People v. Honig (1996) 48 Cal.App.4th 289, the appellant argued that section 1090 did not apply because the transactions were grants, rather than contracts. (Honig, supra, 48 Cal.App.4th at p. 349.) This court found there was ample evidence that the transactions were in fact contracts, noting sections 1090 and 1097 are not to be applied in a narrow and technical manner that would limit their scope and defeat their legislative purpose. (Id. at pp. 350-352.) Honig did not hold section 1090 applies regardless of whether a contract actually is made by anyone or where contract law demonstrates that a contract was not formed. As the superior court indicated, evidence at the preliminary examination demonstrates that defendant may have violated another conflict of interest statute, such as section 87100, a part of the Political Reform Act of 1974, which provides: "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." However, evidence showing a violation of section 87100 is not necessarily sufficient to establish a violation of section 1090, which is more specific than the conflict-of-interest provisions of section 87100. Section 1090 applies to the making of governmental contracts, a more limited and specific form of official behavior, while section 87100 applies to the making, participation in making, or in any way attempting to use an official position to influence any governmental decision. (Honig, supra, 48 Cal.App.4th at p. 329.) The former is punishable as a felony, while the latter is only a misdemeanor. ( 1097, 91000.) Under regulations applicable to section 87100, public officials are permitted to make decisions in which they have a financial interest if their interest is affected in a manner that is indistinguishable from the decision's effect on the public generally. (See Cal. Code Regs., tit. 2, 18707, 18707.1.) But those regulations are not applicable to section 1090. (Honig, supra, 48 Cal.App.4th at p. 325-329, and fn. 15.) The court looked past the individual contracts in question and considered the relationships between all the parties connected with them, either directly or indirectly, to determine if a conflict of interest existed. Honig was the State Superintendent of Public Instruction. His wife was the founder and director of a nonprofit corporation known as the Quality Education Project (QEP). Over a period of several years, Honig, without following the procedures usually applicable in such situations, directed his staff to arrange for a series of contracts or "grants" to be made by the Department of Education (DOE) to certain school districts. The money was used to pay the salaries of persons who actually worked for neither the districts nor the DOE, but for QEP. On this basis, Honig was charged and found guilty of four counts of violating sections 1090 and 1097. (Id. at pp. 304-312.) The appellate court affirmed the conviction, finding that Honig, although he had made no contracts with his wife's corporation in the legal sense, had caused them to be made. The court explained: "In considering conflicts of interest we cannot focus upon an isolated 'contract' and ignore the transaction as a whole. It appears clear that the payment of DOE funds to the school districts, the districts' payment of those funds to QEP employees in the form of continued salaries and benefits, and the employees' work for QEP, were in performance of single multiparty agreements. In short, defendant simply used the school district contractors as conduits to funnel DOE funds to individuals as compensation for working for his wife's corporate employer. The use of a third party as a contractual conduit does not avoid the inherent conflict of interest in such a transaction. " (Honig, supra, 48 Cal. App. 4th at p. 320.) The trial court in Honig gave the following general instruction defining a criminal conflict of interest: " 'Any state Officer or employee who, acting in his official capacity, who willfully makes or causes to be made a contract in which he has a financial interest is guilty of a violation of Government Code section 1090 and 1097.In order to prove such a crime, each of the following elements must be proved:(1) that the person is a state officer or employee;(2) that the person acted in his official capacity;(3) that the person knowingly; and(4) willfully made or caused to be made a contract in which he had a financial interest.' " (Honig, supra, 48 Cal. App. 4th at p. 322.)