Page 22 - Lozano Smith Board Member Toolkit 2026

Penalties
Penalties for violating section 1090 are harsh. Contracts made in violation of section
1090 are void. A party to the contract can sue to declare the contract void and require
the official to return all funds and benefits received. A willful violation is punishable as
a misdemeanor or a felony, and an official convicted of violating section 1090 is
forever disqualified from holding public office.

Common Law Conflicts of Interest
There is also a judicially-recognized “common law” prohibition against conflicts. The
purpose of this common law prohibition is to avoid even the “appearance of
impropriety.” Courts and the California Attorney General’s Office have applied this
doctrine to situations involving non-financial personal interests.
The common law conflicts doctrine prohibits public officials from placing themselves
in a position where their private, personal interests may conflict with their official
duties. Public officials are entrusted with the public confidence and therefore must
exercise the powers conferred on them with “disinterested skill, zeal and diligence
primarily for the benefit of the public.” As such, if a common law conflict of interest
arises, another party, or their personal involvement in the underlying matter at issue, it
is generally recommended that the public official recuse him or herself from any
related action of the public agency. In the context of personnel matters, student
matters, or other matters in which the public officials will consider evidence or make
findings, the failure of a public official to recuse him or herself, may result in judicial
invalidation of the action taken by the public agency.

For the foregoing reasons, under the common law doctrine, if there is any doubt as to
whether a public official should recuse themselves, the safest avenue is to do so, and
thereby avoid any undue controversy or potential legal challenge.

Financial Interest Disclosure
Officials must file Form 700, also known as a Statement of Economic Interests,
conflict-of-interest statements when they are either:
> Elected officials listed in the Political Reform Act. These persons disclose all
economic interests located in or doing business in the jurisdiction.
> Public officials who management public investments.
> “Designated” officials listed in the agency’s conflict of interest code. Each state
and local agency is required to adopt a conflicts of interest code which designates
positions which involve making or participating in decisions which may have a
material effect on the employee’s financial interests. Persons with broader
decision-making authority generally are required to disclose more.

Investments, income, loans, real property interests, business positions, gifts ($50 or
more from any one source), and travel payments are reportable on the Form 700.

Officials must disclose economic interests which may give rise to a disqualifying
conflict of interest on the Form 700 when assuming office, annually while in office, and
upon leaving office.

Guide to Effective Governance 19