CONFLICTS OF INTEREST AND ETHICS: NAVIGATING THE COURSE

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CONFLICTS OF INTEREST AND ETHICSNAVIGATING THE
COURSE
Presented by Tim Schutz and Pat Hrbacek
Tim Schutz and Pat Hrbacek are members of the law
firm of Hanes Schutz, LLC. Located in Colorado
Springs, Hanes Schutz, LLC has a substantial
special district practice representing a wide
range of districts in all aspects of their
business.
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I. Introduction A. Framing the IssuePublic
Trust
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I. Introduction A. Framing the IssuePublic
Trust The holding of public office or
employment is a public trust
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I. Introduction A. Framing the IssuePublic
Trust The holding of public office or
employment is a public trust A local
government official, or employee shall carry
out his duties for the benefit of the people
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B. Opportunity and Burden1. You Are the
Government
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B. Opportunity and Burden1. You Are the
Government2. Your Honor Promotes Integrity and
Trust
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B. Opportunity and Burden 1. You Are the
Government 2. Your Honor Promotes Integrity
and Trust 3. Your Failures Damage Public
Confidence and Create Personal Liability
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C. Hypothetical Situations 1. Oceans 11
Water District
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C. Hypothetical Situations 1. Oceans 11
Water District 2. County Line Sanitation
District
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C. Hypothetical Situations 1. Oceans 11
Water District 2. County Line Sanitation
District 3. Small Town Fire District
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C. Hypothetical Situations 1. Oceans 11
Water District 2. County Line Sanitation
District 3. Small Town Fire District 4. Star
Metropolitan District
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C. Hypothetical Situations 1. Oceans 11
Water District 2. County Line Sanitation
District 3. Small Town Fire District 4. Star
Metropolitan District 5. Anywhere
Metropolitan District
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II. The Law A. General Ethical
Considerations Colorado Code of Ethics C.R.S.
24-18-201
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II. The Law A. General Ethical
Considerations Colorado Code of Ethics C.R.S.
24-18-201 1. C.R.S. 24-18-103 Public
Trust
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II. The Law A. General Ethical
Considerations Colorado Code of Ethics C.R.S.
24-18-201 1. C.R.S. 24-18-103 Public
Trust a. Position of public trust work for
the benefit of constituents
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II. The Law A. General Ethical
Considerations Colorado Code of Ethics C.R.S.
24-18-201 1. C.R.S. 24-18-103 Public
Trust a. Position of public trust work for
the benefit of constituents b. A breach
of ones fiduciary duties may result in
civil and criminal liability
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2. C.R.S. 24-18-104 and 24-18-109
Rules of Conduct PROHIBITIONS DO
NOT a. Disclose or use confidential
information to further personal financial
interests (C.R.S. 24-18-104(1)(a))
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2. C.R.S. 24-18-104 and 24-18-109
Rules of Conduct PROHIBITIONS DO
NOT a. Disclose or use confidential
information to further personal financial
interests (C.R.S. 24-18-104(1)(a)) b.
Accept a gift of substantial value
to i. influence action (bribe) or
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2. C.R.S. 24-18-104 and 24-18-109
Rules of Conduct PROHIBITIONS DO
NOT a. Disclose or use confidential
information to further personal financial
interests (C.R.S. 24-18-104(1)(a)) b.
Accept a gift of substantial value
to i. Influence action (bribe)
or ii. Reward official action (payback)
(C.R.S. 24-18-104(2)(a)).
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PROHIBITIONS DO NOT (continued) iii.
Gift includes 1. Loan at below market
rate or
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PROHIBITIONS DO NOT (continued) iii.
Gift includes 1. Loan at below market
rate or 2. Private services compensation
at above market rates (C.R.S.
24-18-104(1)).
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PROHIBITIONS DO NOT (continued) c. Parti
cipate in private substantial financial
transaction with person that the official
inspects or supervises (C.R.S.
24-18-109(2)(a)).
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PROHIBITIONS DO NOT (continued) c. Parti
cipate in private substantial financial trans
action with person that the official
inspects or supervises (C.R.S.
24-18-109(2)(a)). d. Official act that
provides an economic benefit to
business/undertaking where official has
substantial financial interest or serves
as counsel, consultant, representative, or
agent (C.R.S. 24-18-109(2)(b)).
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3. C.R.S. 24-18-104(3) Exceptions to
gift prohibition a. Campaign
contributions (C.R.S. 1-45-108)
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3. C.R.S. 24-18-104(3) Exceptions to gift
prohibition a. Campaign contributions
(C.R.S. 1-45-108) b. Insignificant
nonpecuniary gift (occasional)
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3. C.R.S. 24-18-104(3) Exceptions to gift
prohibition a. Campaign contributions
(C.R.S. 1-45-108) b. Insignificant
nonpecuniary gift (occasional) c. Publicly
presented nonpecuniary award for public service
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3. C.R.S. 24-18-104(3) Exceptions to gift
prohibition a. Campaign contributions
(C.R.S. 1-45-108) b. Insignificant
nonpecuniary gift (occasional) c. Publicly
presented nonpecuniary award for public
service d. Expense reimbursement
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3. C.R.S. 24-18-104(3) Exceptions to gift
prohibition a. Campaign contributions
(C.R.S. 1-45-108) b. Insignificant
nonpecuniary gift (occasional) c. Publicly
presented nonpecuniary award for public
service d. Expense reimbursement e. Reimbu
rsement/acceptance of participation in social
function/meeting (not extraordinary)
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3. C.R.S. 24-18-104(3) Exceptions to gift
prohibition a. Campaign contributions
(C.R.S. 1-45-108) b. Insignificant
nonpecuniary gift (occasional) c. Publicly
presented nonpecuniary award for public
service d. Expense reimbursement e. Reimbu
rsement/acceptance of participation in social
function/meeting (not extraordinary) f. P
erishable/nonpermanent value (e.g. meals,
lodging, travel expenses, or tickets to
sporting, recreational, educational or
cultural events)
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3. C.R.S. 24-18-104(3) Exceptions to gift
prohibition a. Campaign contributions
(C.R.S. 1-45-108) b. Insignificant
nonpecuniary gift (occasional) c. Publicly
presented nonpecuniary award for public
service d. Expense reimbursement e. Reimbu
rsement/acceptance of participation in social
function/meeting (not extraordinary) f. P
erishable/nonpermanent value (e.g. meals,
lodging, travel expenses, or tickets to
sporting, recreational, educational or
cultural events) g. Compensation for
speeches, appearances or publications
(reported pursuant to 24-6-203)
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3. C.R.S. 24-18-104(3) Exceptions to gift
prohibition a. Campaign contributions
(C.R.S. 1-45-108) b. Insignificant
nonpecuniary gift (occasional) c. Publicly
presented nonpecuniary award for public
service d. Expense reimbursement e. Reimbu
rsement/acceptance of participation in social
function/meeting (not extraordinary) f. P
erishable/nonpermanent value (e.g. meals,
lodging, travel expenses, or tickets to
sporting, recreational, educational or
cultural events) g. Compensation for
speeches, appearances or publications
(reported pursuant to 24-6-203) h. Empl
oyment salary
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3. C.R.S. 24-18-104(3) Exceptions to gift
prohibition a. Campaign contributions
(C.R.S. 1-45-108) b. Insignificant
nonpecuniary gift (occasional) c. Publicly
presented nonpecuniary award for public
service d. Expense reimbursement e. Reimbu
rsement/acceptance of participation in social
function/meeting (not extraordinary) f. P
erishable/nonpermanent value (e.g. meals,
lodging, travel expenses, or tickets to
sporting, recreational, educational or
cultural events) g. Compensation for
speeches, appearances or publications
(reported pursuant to 24-6-203) h. Empl
oyment salary Note Even though gift may not
have significant value, reporting
requirements of C.R.S. 1-45-108 and
24-6-203 may still apply. In Case of Doubt,
Disclose
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4. Ethical Principles C.R.S.
24-18-105 a. SHOULD NOT (but not legally
prohibited) i. Acquire or hold an interest
in a business or undertaking that may
receive economic benefit through
anticipated official action
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4. Ethical Principles C.R.S.
24-18-105 a. SHOULD NOT (but not legally
prohibited) i. Acquire or hold an interest
in a business or undertaking that may
receive economic benefit through
anticipated official action
ii. Obtain employment within 6 months of
leaving office where ex-official will
take advantage of matters in which
ex-official had direct involvement
(e.g., rules, contested cases)
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4. Ethical Principles C.R.S.
24-18-105 a. SHOULD NOT (but not legally
prohibited) i. Acquire or hold an interest
in a business or undertaking that may
receive economic benefit through
anticipated official action
ii. Obtain employment within 6 months of
leaving office where ex-official will
take advantage of matters in which
ex-official had direct involvement
(e.g., rules, contested cases)
iii. Perform an act to the economic
detriment of a business or undertaking when
the official has a substantial financial
interest in a competing business.
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b. I CAN, BUT SHOULD I --Discussion
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B. Disclosure Requirements 1. Applicable to
All Special Districts
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B. Disclosure Requirements 1. Applicable to
all Special Districts 2. Particular
Importance to Developer Controlled Districts
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B. Disclosure Requirements 1. Applicable to
all Special Districts 2. Particular
Importance to Developer Controlled Districts
3. Mandatory Disclosures C.R.S.
24-18-109(3)
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B. Disclosure Requirements 1. Applicable to
all Special Districts 2. Particular
Importance to Developer Controlled Districts
3. Mandatory Disclosures C.R.S.
24-18-109(3) If official has a
personal/private interest a. Must disclose
the interest and
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B. Disclosure Requirements 1. Applicable to
all Special Districts 2. Particular
Importance to Developer Controlled Districts
3. Mandatory Disclosures C.R.S.
24-18-109(3) If official has a
personal/private interest a. Must disclose
the interest and i. Must not vote and
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B. Disclosure Requirements 1. Applicable to
all Special Districts 2. Particular
Importance to Developer Controlled Districts
3. Mandatory Disclosures C.R.S.
24-18-109(3) If official has a
personal/private interest a. Must disclose
the interest and i. Must not vote and
ii. Must not influence.
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b. Butmay vote if i. Necessary for
quorum or to allow board to act and
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b. Butmay vote if i. Necessary for
quorum or to allow board to act and
ii. Board member complies with
disclosure process of 24-18-110.
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4. Voluntary Disclosure C.R.S.
24-18-110 a. Written disclosure to Secretary
of State listing i. Amount of financial
interest
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4. Voluntary Disclosure C.R.S.
24-18-110 a. Written disclosure to Secretary
of State listing i. Amount of financial
interest ii. Purpose and duration of
services
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4. Voluntary Disclosure C.R.S.
24-18-110 a. Written disclosure to Secretary
of State listing i. Amount of financial
interest ii. Purpose and duration of
services iii. Compensation received
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4. Voluntary Disclosure C.R.S.
24-18-110 a. Written disclosure to Secretary
of State listing i. Amount of financial
interest ii. Purpose and duration of
services iii. Compensation received
iv. Other necessary information.
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b. Commencing January 1, 2009,
electronic disclosure required see
handout i. Secretary of States website
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b. Commencing January 1, 2009,
electronic disclosure required see
handout i. Secretary of States website
1. http\\www.state.co.us
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b. Commencing January 1, 2009,
electronic disclosure required see
handout i. Secretary of States website
1. http\\www.state.co.us
a. Elections link lower left
corner of webpage
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b. Commencing January 1, 2009,
electronic disclosure required see
handout i. Secretary of States website
1. http\\www.state.co.us
a. Elections link lower left
corner of webpage b. Conflict of
interest link under Division Programs
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b. Commencing January 1, 2009,
electronic disclosure required see
handout i. Secretary of States website
1. http\\www.state.co.us
a. Elections link lower left
corner of webpage b. Conflict of
interest link under Division
Programs c. E-file link under Online
Services
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c. In addition to disclosure to Secretary of
State, state for record at time of act the
fact/summary of disclosed interest
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c. In addition to disclosure to Secretary of
State, state for record at time of act the
fact/summary of disclosed interest
d. Disclosure affirmative defense.
C.R.S. 24-18-110
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5. Consequences of Failure to Disclose
Conflict a. Crime Failure to disclose
conflict of interests Class 2 misdemeanor
C.R.S. 18-8-308(1)
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5. Consequences of Failure to Disclose
Conflict a. Crime Failure to disclose
conflict of interests Class 2 misdemeanor
C.R.S. 18-8-308(1) b. Elements of
crime C.R.S. 18-8-308(1)
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5. Consequences of Failure to Disclose
Conflict a. Crime Failure to disclose
conflict of interests Class 2 misdemeanor
C.R.S. 18-8-308(1) b. Elements of
crime C.R.S. 18-8-308(1) i. Public
servant
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5. Consequences of Failure to Disclose
Conflict a. Crime Failure to disclose
conflict of interests Class 2 misdemeanor
C.R.S. 18-8-308(1) b. Elements of
crime C.R.S. 18-8-308(1) i. Public
servant ii. Exercises substantial
discretionary function
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5. Consequences of Failure to Disclose
Conflict a. Crime Failure to disclose
conflict of interests Class 2 misdemeanor
C.R.S. 18-8-308(1) b. Elements of
crime C.R.S. 18-8-308(1) i. Public
servant ii. Exercises substantial
discretionary function iii. In
connection with contract, purchase,
payment, or other pecuniary transaction
and
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5. Consequences of Failure to Disclose
Conflict a. Crime Failure to disclose
conflict of interests Class 2 misdemeanor
C.R.S. 18-8-308(1) b. Elements of
crime C.R.S. 18-8-308(1) i. Public
servant ii. Exercises substantial
discretionary function iii. In
connection with contract, purchase,
payment, or other pecuniary transaction
and iv. Without having given 72 hour
advance written notice to Secretary of
State and governing body of known potential
conflicting interest.
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5. Consequences of Failure to Disclose Conflict
(continued) c. Personal Liability Breach
of Fiduciary Duty
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5. Consequences of Failure to Disclose
Conflict (continued) c. Personal Liability
Breach of Fiduciary Duty d. Contract
Voidable by District. C.R.S. 24-18-203
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5. Consequences of Failure to Disclose
Conflict (continued) c. Personal Liability
Breach of Fiduciary Duty d. Contract
Voidable by District. C.R.S.
24-18-203 e. Intangible Losses --Public
Trust --Personal Financial and Emotional
Costs
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C. Board Member Contracts --Recall
Hypothetical Situations
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C. Board Member Contracts --Recall
Hypothetical Situations 1. Prohibition Unless
Publicly Bid C.R.S. 31-1-1001 No
contract for work or material, including
a contract for services, regardless of the
amount, shall be entered into between the
special district and a member of the board or
between the special district and the owner of
twenty- five percent or more of the territory
within the special district unless a notice
has been published for bids and such member or
owner submits the lowest responsible and
responsive bid
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C. Board Member Contract (continued) a. No
Contract Construction or Services
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C. Board Member Contract (continued) a. No
Contract Construction or Services b. Between
District and Board Member or District and
Owner of 25 of District Land
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C. Board Member Contract (continued) a. No
Contract Construction or Services b. Between
District and Board Member or District and
Owner of 25 of District Land c. Unless
Notice Published
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C. Board Member Contract (continued) a. No
Contract Construction or Services b. Between
District and Board Member or District and
Owner of 25 of District Land c. Unless
Notice Published d. Lowest Responsible and
Responsive Bidder
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2. Exception Due to Geographic Isolation
C.R.S. 24-18-201 Contract with Board
member not prohibited if because of
geographic restrictions, a local government
could not otherwise reasonably afford itself
of the subject of the contract. It shall be
presumed that a local government could not
otherwise reasonably afford itself of the
subject matter of a contract if the additional
costs to the local government is greater than
ten percent of a contract with an interested
party or if the contract is for services that
must be performed within a limited time frame
and no other contractor can provide those
services within that time period.
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3. District Must Also Publish Notice of
Intent to Enter Into the Contract with the
Board Member C.R.S. 32-1-903(3)
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3. District Must Also Publish Notice of
Intent to Enter Into the Contract with the
Board Member C.R.S. 32-1-903(3) 4. Inter
ested Board Member Should Recuse Himself from
the Boards Consideration of Potential
Contract
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3. District Must Also Publish Notice of
Intent to Enter Into the Contract with the
Board Member C.R.S. 32-1-903(3) 4. Inter
ested Board Member Should Recuse Himself from
the Boards Consideration of Potential
Contract 5. Interested Board May Participate
in Board Decision Only if His Presence is
Necessary for Board to Act, and He Makes the
Required Disclosures
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3. District Must Also Publish Notice of
Intent to Enter Into the Contract with the
Board Member C.R.S. 32-1-903(3) 4. Inter
ested Board Member Should Recuse Himself from
the Boards Consideration of Potential
Contract 5. Interested Board May Participate
in Board Decision Only if His Presence is
Necessary for Board to Act, and He Makes the
Required Disclosures See Discussion of
C.R.S. 24-18-109, 24-18-110 and 18-8-103,
above
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D. Summary 1. Know the Rules or Know When
You Dont Know
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D. Summary 1. Know the Rules or Know When
You Dont Know 2. When in Doubt, Ask
Questions
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D. Summary 1. Know the Rules or Know When
You Dont Know 2. When in Doubt, Ask
Questions 3. Resources
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D. Summary 1. Know the Rules or Know When
You Dont Know 2. When in Doubt, Ask
Questions 3. Resources 4. When In Doubt,
Take the Selfless Action
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D. Summary 1. Know the Rules or Know When You
Dont Know 2. When in Doubt, Ask
Questions 3. Resources 4. When In Doubt,
Take the Selfless Action The holding of
public office or employment is a public
trust. Alocal government official, or
employee shall carry out his duties for the
benefit of the people...
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E. Questions/Answers/Observations
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F. Attachments 1. Colorado Code of Ethics
24-18-101 through 24-18-113
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F. Attachments 1. Colorado Code of Ethics
24-18-101 through 24-18-113 2. Special
District Bidding Contracts 32-1-1001,
32-1-903
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F. Attachments 1. Colorado Code of Ethics
24-18-101 through 24-18-113 2. Special
District Bidding Contracts 32-1-1001,
32-1-903 3. Failure to Disclose Criminal
Statute 18-18-308
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F. Attachments 1. Colorado Code of Ethics
24-18-101 through 24-18-113 2. Special
District Bidding Contracts 32-1-1001,
32-1-903 3. Failure to Disclose Criminal
Statute 18-18-308 4. Secretary of State
Disclosure Form
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F. Attachments 1. Colorado Code of Ethics
24-18-101 through 24-18-113 2. Special
District Bidding Contracts 32-1-1001,
32-1-903 3. Failure to Disclose Criminal
Statute 18-8-308 4. Secretary of State
Disclosure Form 5. SDA