May 25, 2006
City of Santa Ana
2003 N. Broadway
Santa Ana, CA 92706
RE: Your Request for Advice
Our File No. A-06-096
Dear Ms. Betancourt:
This letter is in response to your request for advice regarding the gift provisions of the Political Reform Act (the “Act”).1 This letter is based on the facts presented. The Fair Political Practices Commission (“Commission”) does not act as a finder of fact when it renders assistance. (In re Oglesby (1975) 1 FPPC Ops. 71; Govt. Code section 83114.)
Are airfare to and accommodations in Hawaii as part of a promotional offering provided to potential buyers of condominiums in a Honolulu development considered gifts to you under the Act?
Because the airfare to and accommodations in Hawaii were provided to promote a sale in the regular course of business to members of the public without regard to official status we would consider the airfare and accommodations to be a discount or rebate in connection with the sale of the property and, therefore, not a gift under the Act.
On the weekend of May 5, 2006, you traveled to Hawaii on a private airplane owned by Mr. Michael Harrah or his corporation, Caribou Industries (“Caribou”) and were provided with two nights lodging in Hawaii before returning to Orange County on Mr. Harrah’s airplane. In addition to Mr. Harrah and you, approximately ten other people were on the flight and were provided with the same free airfare and lodging. In a recent telephone conversation, you stated that the airfare and lodging were offered to you on April 25th and you accepted the trip a “few days later.”
The transportation and lodging was provided to you and these other individuals as potential investors in a high-rise, luxury condominium project Caribou is constructing in Hawaii. You had already executed what amounts to an option agreement with Caribou and paid the company $10,000 as a fully refundable deposit in furtherance of this agreement. The purpose of this trip was for Caribou to allow its investors to view and personally inspect the property they are considering purchasing before they decide to either withdraw or to make additional payments toward the purchase price. The weekend of May 5th was also the “groundbreaking” for the project. During your stay, you were subjected to numerous “pitches” by Caribou representatives regarding the project in seeking to secure your investment. You and the other potential investors were obliged to attend these presentations.
In our recent telephone conversation, you further stated that although you became aware of this offering by word of mouth, the company advertises the property on its website at www.pinnaclehonolulu.com. Additionally, according to information you obtained from the developer, the company offers the free airfare and accommodations to any potential buyer who is willing to put down a $10,000 deposit, as a way of promoting the sales of the property.
Under section 89503, designated employees of local government agencies are prohibited from accepting gifts totaling more than $360 from any single source in a calendar year if the member or employee would be required to report the receipt of income or gifts from that source on his or her statement of economic interests. (Section 89503(c); regulation 18940.2(a).) Elected officers and designated employees are also required to report on an annual statement of economic interests gifts aggregating $50 or more in value from a single source in a calendar year. (Section 87200 et seq.; 87207(a).) As a Planning Commissioner for the City of Santa Ana you are subject to these provisions.
Section 82028 (a) defines “gift” as “any payment that confers a personal benefit on the recipient, to the extent that consideration of equal or greater value is not received and includes a rebate or discount in the price of anything of value unless the rebate or discount is made in the regular course of business to members of the public without regard to official status.”
According to the facts you have presented,2 this trip was provided in the normal course of business to any potential investors who had submitted the required deposit and without regard to your official status. Although you were among the first group to be invited to visit the property, according to information you received from the builder he is planning future trips for potential investors, and anyone who expresses an interest in purchasing available properties (and presumably, submits a $10,000 deposit and commits to attend a sales presentation) will be provided the same opportunity you received -- a trip to Hawaii with accommodations in order to view the property.
As long as the travel and accommodations are provided in the normal course of business to members of the public without regard to official status as part of an offering to promote the sale of the property we would view such travel and accommodations as a discount or rebate in connection with the sale and not a gift subject to the provisions of the Act. This is consistent with our advice regarding other promotional offers such as free airline travel for frequent flyers. (Ackerman Advice Letter, No. A-97-044; Odom Advice Letter, No. I-91-280.)
However, we caution you that if the property was offered to you at a discount or below market price or before being offered for sale to members of the public, that discount would be considered a gift under the Act.
By: William J. Lenkeit
Senior Counsel, Legal Division