On Sept. 14 of that same year, two months before Carlton bestowed the ayes that bolstered Facebook's interests — and, she says, unbeknown to her — an independent financial adviser purchased between $10,001 and $100,000 in Facebook stock for Catherine Carlton's husband's investment portfolio.
She says she didn't know she owned the shares until the following spring, around the end of March, when she went to complete her Form 700, a document mandated by the state Fair Political Practices Commission (FPPC) that requires elected officials to disclose their assets and economic interests in order to flag possible conflicts of interest.
"Neither my husband nor I knew that his independent financial adviser purchased (Facebook) stock for his investment portfolio until I got the report for my form 700," she said in a written statement.
When she found out about it, she said, she informed the city attorney and sold the stock.
"It's not a big deal," she told The Almanac.
Carlton did not immediately respond to a request for more specificity about when the shares were sold, indicating only that they were sold "sometime in 2017." The form doesn't provide that information.
The FPPC form requires elected officials to check a box indicating the range of the investment value. Carlton checked the box indicating that the value of the Facebook shares her husband owned was between $10,001 and $100,000, the second-lowest of four categories of investment values officials must report.
Carlton also did not immediately provide specific information about how much money her husband's adviser had invested in Facebook.
"It wasn't that much," she said, estimating it was closer to the lower side of the reported range, but noting, "I have no idea."
In the roughly seven months between the time the stocks were purchased and the reported date Carlton's Form 700 was filed with the city, April 3, 2017, Facebook shares rose in value by 11.3 percent.
After initially reporting that her husband had lost money on the stock, she later corrected her statement: Her husband made $5,500 on his Facebook stock, she said.
Carlton told The Almanac she sent a letter to the FPPC about the conflict in addition to filing her Form 700 report.
At the time The Almanac interviewed her, Carlton was dealing with a family medical emergency and had limited availability to respond to questions.
City Attorney Bill McClure said in an interview that Carlton approached him when she said she became aware that she owned Facebook shares. At that time, he says, he told her that she would be disqualified from voting on any matters relating to Facebook.
"In theory, if Cat knew that she owned shares in Facebook at a time when there was a decision involving Facebook — or let's say the general plan, affecting Facebook — if she knew that, she would have to disqualify or recuse herself," he said.
A lot of people have independent advisers who purchase and sell shares in an investment account, he said. Unless they look at a monthly statement, it can be hard for people to track the shares they own.
"I'm not making any excuses," he said. "I don't know how the FPPC treats it if a person doesn't know they own — or that their husband owns — shares in Facebook."
More recently, he says, he advised Carlton to recuse herself from all Facebook decisions and deliberations on the council for a year, after she told him she learned that a company she worked for was doing consulting work with Facebook. She told The Almanac she quit the position in October, a couple of weeks after learning about the conflict, and has not voted on any Facebook-related matters since then. She announced the recusal publicly in November 2017.
McClure pointed to the Political Reform Act, part of the state government code and enforced by the FPPC, that dictates how elected officials should behave when it comes to financial conflicts.
California Government Code 87100 states:
"No public official at any level of state or local government shall make, participate in making or in any way attempt to use his official position to influence a governmental decision in which he knows or has reason to know he has a financial interest."
In other words, the question of whether Carlton's participation on the council to vote on Facebook matters constitutes a violation of the law, he said, comes down to whether or not she knew she owned the shares — or had a reason to know.
He added that the law further says that officials whose financial conflict is tied to their source of income are directed to be recused from related matters for a year, but officials whose conflict is tied to shares they might own are recused from the matter for only as long as they hold related shares. So Carlton was eligible to again participate in voting on Facebook-related matters immediately after she sold the shares.
McClure also noted that Carlton's votes and actions on the council would not be invalidated if she had committed an ethics violation. If found to be in violation, it's more likely she would be subject to administrative or civil penalties from the FPPC, he said.
Jay Wierenga, FPPC communications director, told The Almanac he couldn't definitively say whether Carlton's incident, as described, was a violation of the law.
"I can only point to the statute," he said.
"Public officials should always be cognizant of their responsibilities, including knowing about potential conflicts of interests," he said.
Generally, the FPPC launches investigations of an elected official after someone files a complaint against him or her, or based on referrals from local filing officers, he said. Fines, he noted, can reach $5,000 per violation.
According to FPPC reports, an incident similar to Carlton's occurred elsewhere in California a couple of years ago. Gregory Cox, a member of the San Diego County Board of Supervisors and the Coastal Commission, had reportedly been unaware that his wife had purchased 500 SeaWorld shares in January 2015. In October of that year, he voted as a member of the Coastal Commission to approve an amended SeaWorld permit application to replace and expand an existing orca facility.
The FPPC reports that Cox said he discovered the violation the following January, when preparing his annual statement of economic interests and immediately asked his wife to sell the SeaWorld stock. He then self-reported the incident to the commission's Enforcement Division. Ultimately, he was fined $3,000 for the violation.
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