Court Opinion

ID: 4128497
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:39:16.699142+00
Date Added: 2024-06-11T14:37:35.858471
License: Public Domain

TO BE PUBLISHED IN THE OFFICIAL REPORTS

                     OFFICE OF THE ATTORNEY GENERAL
                               State of California

                                  BILL LOCKYER
                                  Attorney General

                                          :
                OPINION                   :                No. 99-303
                                          :
                    of                    :                June 4, 1999
                                          :
            BILL LOCKYER                  :
            Attorney General              :
                                          :
        ANTHONY S. Da VIGO                :
        Deputy Attorney General           :
                                          :

         THE HONORABLE RICHARD E. FLOYD, MEMBER OF THE
CALIFORNIA ASSEMBLY, has requested an opinion on the following questions:

             1. Does an incompatible activities statement adopted by the Board of
Administration of the Public Employees’ Retirement System pursuant to Government Code
section 19990 apply to the members of the Board of Administration?

             2. May a person who has declared bankruptcy serve on the Board of
Administration of the Public Employees’ Retirement System?

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                                         CONCLUSIONS

             1. An incompatible activities statement adopted by the Board of
Administration of the Public Employees’ Retirement System pursuant to Government Code
section 19990 does not apply to the members of the Board of Administration.

             2. A person who has declared bankruptcy may serve on the Board of
Administration of the Public Employees’ Retirement System.

                                            ANALYSIS

               1.      Incompatible Activities Statement

               The first inquiry is whether an incompatible activities statement adopted by
the Board of Administration (“Board”) of the Public Employees’ Retirement System
(“PERS”) pursuant to Government Code section 199901 applies to the members of the
Board itself. Section 19990 states in part:

              “A state officer or employee shall not engage in any employment,
      activity, or enterprise which is clearly inconsistent, incompatible, in conflict
      with, or inimical to his or her duties as a state officer or employee.

            “Each appointing power shall determine, subject to approval of the
      department, those activities which, for employees under its jurisdiction, are
      inconsistent, incompatible or in conflict with their duties as state officers or
      employees. . . .”

We conclude that the Board’s incompatible activities statement adopted under the terms of
section 19990 does not apply to the members of the Board itself.

              Preliminarily, we note that the Legislature has enacted a comprehensive
statutory scheme, the Public Employees’ Retirement Law (§§ 20000-21703), governing the
payment of retirement compensation to public employees. (See Pomona Officers’ Assn. v.
City of Pomona (1997) 58 Cal. App. 4th 578, 584-585; Board of Administration v. Wilson
(1997) 52 Cal. App. 4th 1109, 1119-1120; Oden v. Board of Administration (1994) 23
Cal. App. 4th 194, 198; Claypool v. Wilson (1992) 4 Cal. App. 4th 646, 653-655; City of

      1
          Unidentified section references hereinafter are to the Government Code.

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Sacramento v. Public Employees Retirement System (1991) 229 Cal. App. 3d 1470, 1478-
1479; Valdes v. Cory (1983) 139 Cal. App. 3d 773, 780-783.) While PERS is part of the
State and Consumer Services Agency (§ 20002), it provides retirement benefits not only for
state employees but also for the employees of local public agencies that have contracted for
coverage (Quintana v. Board of Administration (1976) 54 Cal. App. 3d 1018, 1021; 71
Ops.Cal.Atty.Gen. 129, 129-130 (1988); 70 Ops.Cal.Atty.Gen. 189, 190-191 (1982)).

             PERS is managed by the Board (§ 20120), which is comprised of 13 members
(§ 20090; 72 Ops.Cal.Atty.Gen. 58, 59 (1989)) serving four-year terms of office (§ 20095).
Section 20090 states:

             “The Board of Administration of the Public Employees’ Retirement
       System is continued in existence. It consists of:

               “(a) One member of the State Personnel Board, selected by and serving
       at the pleasure of the State Personnel Board.

              “(b) The Director of the Department of Personnel Administration.

              “(c) The Controller.

              “(d) The State Treasurer.

             “(e) An official of a life insurer and an elected official of a contracting
       agency, appointed by the Governor.

             “(f) One person representing the public, appointed jointly by the
       Speaker of the Assembly and the Senate Committee on Rules.

              “(g) Six members elected under the supervision of the board as follows:

            “(1) Two members elected by the members of this system from the
       membership thereof.

               “(2) A member elected by the active state members of this system from
       the state membership thereof.

             “(3) A member elected by and from the active local members of this
       system who are employees of a school district or a county superintendent of
       schools.

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              “(4) A member elected by and from the active local members of this
       system other than those who are employees of a school district or a county
       superintendent of schools.

             “(5) A member elected by and from the retired members of this
       system.”

               Returning to the language of section 19990, we find that the Board has
adopted an incompatible activities statement for “employees” under its “jurisdiction” as an
“appointing power.” The statute does not authorize the adoption of an incompatible
activities statement for the “appointing power,” in this case the Board. We reject the
suggestion that “employees” under the “jurisdiction” of the Board, as an “appointing
power,” would include the Board members themselves.

             While Board members are not subject to an incompatible activities statement
which they adopt for their employees under the terms of section 19990, we note that Board
members are not without statutory limitations placed upon their official and private conduct.
For example, subdivision (a) of section 8920 states generally with respect to state officers,
including Board members:

              “No Member of the Legislature, state elective or appointive officer, or
       judge or justice shall, while serving as such, have any interest, financial or
       otherwise, direct or indirect, or engage in any business or transaction or
       professional activity, or incur any obligation of any nature, which is in
       substantial conflict with the proper discharge of his duties in the public
       interest and of his responsibilities as prescribed in the laws of this state.”

More specifically, section 20150 states with respect to members of the Board:

              “A board member or employee of the board shall not, directly or
       indirectly:

              “(a) Have any interest in the making of any investment, or in the gains
       or profits accruing therefrom.

              “(b) For himself or herself or as an agent or partner of others, borrow
       any funds or deposits of this system, nor use those funds or deposits in any
       manner except to make current and necessary payments authorized by the
       board.

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            “(c) Become an indorser, surety or obligor on investments by the
      board.”

Section 20151 prescribes additional fiduciary standards for Board members:

             “The board and its officers and employees shall discharge their duties
      with respect to this system solely in the interest of the participants and
      beneficiaries:

              “(a) For the exclusive purpose of both of the following:

            “(1) Providing benefits to members, retired members, and their
      survivors and beneficiaries.

              “(2) Defraying reasonable expenses of administering this system.

              “(b) Minimizing the employers’ costs of providing benefits under this
      part.

              “(c) By investing with the care, skill, prudence, and diligence under the
      circumstances then prevailing that a prudent person acting in a like capacity
      and familiar with those matters would use in the conduct of an enterprise of
      a like character and with like aims.”

Further, section 20153 provides in part:

              “(a) During the process leading to an award of any contract by the
      system, no member of the board or its staff shall knowingly communicate
      concerning any matter relating to the contract or selection process with any
      party financially interested in the contract or an officer or employee of that
      party, unless the communication is (1) part of the process expressly described
      in the request for proposal or other solicitation invitation, or (2) part of a
      noticed board meeting, or (3) as provided in subdivision (c). Any applicant
      or bidder who knowingly participates in a communication that is prohibited
      by this subdivision shall be disqualified from the contract award.

            “(b) During the evaluation of any prospective investment transaction,
      no party who is financially interested in the transaction, or an officer or
      employee of that party, may knowingly communicate with any board member

                                             5                                            99-303
        concerning any matter relating to the transaction or its evaluation, unless the
        financially interested party discloses the content of the communication in a
        writing addressed and submitted to the executive officer and the board prior
        to the board’s action on the prospective transaction. . . .

                “. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

               “(3) Consistent with its fiduciary duties, the board shall determine the
        appropriate remedy for any knowing failure of a financially interested party
        to comply with this subdivision including, but not limited to, outright rejection
        of the prospective investment transaction, reduction in fee received, or any
        other sanction.

                “. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .”

Other statutes applicable to Board members include section 1090, governing financial
interests in contracts made by public officers in their official capacities, and section 87100,
regulating financial interests in decisions made by public officers in their official capacities.
(See 78 Ops.Cal.Atty.Gen. 362, 368-374 (1995).) The Ethics in Government Act
(§§ 89500-89522) regulates the acceptance of honoraria and gifts by Board members.
(§ 20094.)

              It is concluded that an incompatible activities statement adopted by the Board
under the terms of section 19990 does not apply to the members of the Board itself.2

                2.         Declaration of Bankruptcy

              The second inquiry is whether a declaration of bankruptcy is a basis for
disqualifying a person from serving on the Board. We conclude that it is not.

               The statutes providing for disqualification for and vacancy of public office do
not include a declaration of bankruptcy as a cause for such events. (§§ 1020-1028, 1770.)
The other statutes discussed above, governing the conduct of Board members, neither
prohibit a determination of personal bankruptcy nor prescribe disqualification or forfeiture
of office as a consequence thereof. (See §§ 8920, 20150-20153, 89500.)

        2
         We reached the same conclusion with respect to the Board’s members under former section 19251,
the predecessor statute to section 19990. (Cal. Atty. Gen., Indexed Letter, No. IL 68-122 (May 15, 1968);
see 65 Ops.Cal.Atty.Gen. 316, 317, fn.1 (1982); 53 Ops.Cal.Atty.Gen. 163, 170-171 (1970).)

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              The qualifications of Board members are set by the Legislature. (§ 20100.)
We find no statutory or other authority upon which a disqualification based on a declaration
of bankruptcy may be predicated.

                It is concluded that a person who has declared bankruptcy may serve on the
        3
Board.

                                                 *****

         3
          In view of the conclusion reached, it is unnecessary to consider whether a state statute providing
for disqualification from public office due to a declaration of bankruptcy, a matter governed by the United
States Constitution and federal laws, would withstand federal constitutional scrutiny. (Cf. Grimes v.
Hoschler (1974) 12 Cal. 3d 305.)

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