The state of California in the US has codified a common law prohibition against "self dealing" in contracts. This prohibition is commonly known as "the Section 1090 prohibition" and basically provides that city officers or employees cannot be financially interested in any contract made by them in their official capacity or by the body of which they are members. The main clause of prohibition reads as follows:

Members of the Legislature, state, county, district, judicial district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members. Nor shall state, county, district, judicial district, and city officers or employees be purchasers at any sale or vendors at any purchase made by them in their official capacity.

Virtually all board members, officers, employees and consultants are public officials within the meaning of Section 1090 - the provision on Conflict of Interest in Contracts. If a violation of Section 1090 would result, the body or board is precluded from entering into the contract, even if the interested member abstains. A contract made in violation of Section 1090 subjects the officer or employee to a fine or imprisonment and to a perpetual disqualification from holding office in California. Moreover, a contract made in violation of Section 1090 is unenforceable and void.

Source: http://www.fresno.gov/city/staff/conflict/exhibit1.pdf