Ex-Official Penalized in Land Deal

Declaring that a government official cannot “serve two masters,” the state Supreme Court on Thursday ruled that an Albany, Calif., councilman who violated conflict-of-interest laws by selling his land to a developer must pay $470,000 to the city, plus forfeit the property.

In an unanimous ruling on a civil suit brought by eight Albany taxpayers, the court toughened conflict-of-interest laws both by setting up a method of imposing fines and by further limiting acts by government officials.

“This remedy provides public officials with a strong incentive to avoid conflict-of-interest situations scrupulously,” the court concluded.

The developer in the Albany case, Cebert Properties Inc., bought then-Councilman Hubert F. Call’s hilltop land and deeded it to the city for use as a park after the council required that Cebert donate parkland in exchange for approval to build a 2,500-unit condominium project lower on the same hill.

The fine represented the $258,000 paid to Call by the developer for the 1.1 acres, plus 7% interest dating back to the year of the sale, 1973.

The court ordered the payment even though Call disclosed his ownership, acted on the city attorney’s advice, abstained from most votes on the matter and did not initiate the deal or conspire to push it through.

“Mere membership on the board or council establishes the presumption that the officer participated in the forbidden transaction or influenced other members of the council,” Justice Otto Kaus wrote for the court.

“Similarly, the full disclosure of an interest by an officer is also immaterial, as disclosure does not guarantee an absence of influence. To the contrary, it has been suggested that knowledge of a fellow officer’s interest may lead other officers to favor an award which would benefit him.”

The major issue Thursday was not that Call, a councilman from 1967 until 1976 when he retired, violated conflict-of-interest law, the court said. The larger question was the deterrent effect of the way in which the penalty was assessed.

The court reasoned that if the developer had not spent the $258,000 on Call’s land, the company would have spent it on parkland elsewhere in Albany.

Price Negotiations

Additionally, Call negotiated the price to $258,000, up from Cebert’s original offer of $63,800. He was negotiating while on the council, and thus also was responsible for the city’s treasury.

The court said the penalty of imposing a fine, plus allowing the city to keep the land had a “deterrent effect . . . effectively implementing the conflict-of-interest statutes’ strict public policy goals.”

While the facts in Thursday’s case were “but one of endless permutations” that crop up because of conflict-of-interest laws, the way in which the fine was determined “is a bright-line remedy which may be appropriate in many different factual situations,” Kaus wrote.

The high court affirmed the penalty fashioned by the Superior Court. A state Court of Appeal had struck down the fine.

Loss to Treasury

“Mr. Call had to know that every dollar he got was a dollar the city did not get,” said Neil L. Shapiro, attorney in the suit brought by eight Albany residents.

“It is a strong ruling. The court is saying that when the Legislature tells you (that you) can’t do this, they mean it and we mean it.”

“It hurts,” Call’s lawyer, Jerome Berg, said of the ruling. “It is going to be forever hard to be a city official and have business interests. If there is any overlap in business interests, there seems to be no way to escape the demands of the city.

“There can be no contract with a city official, direct or indirect. That seems to be what the decision says. The ruling is very hard.”

The high court acknowledged that the ruling was harsh, but said officials must pay dearly for even appearing to violate the public trust. In reaching its decision, the court reiterated a principle established in this state in 1872 “that no man can faithfully serve two masters whose interests are or may be in conflict.”

Justice Stanley Mosk joined the majority ruling on Call. But in a separate opinion joined by Chief Justice Rose Elizabeth Bird, Mosk concluded that the company also should have been held liable. (Thomson v. Call, S.F. 24693)