Wednesday, June 25, 2008, 3:13 PM

Political GPS: New Lobbying Law Deadline Approaches: Is Your Organization Ready?

If your company, trade association, or other organization employs one or more federal lobbyists, or if you work for a lobbying firm, someone must be prepared by July 30th to certify that your organization is familiar with House and Senate gift rules and that no one has made a gift in violation of these rules. As in Sarbanes-Oxley, the certification must be made under penalty of perjury. There’s no time to waste in ensuring that your certification is supported by appropriate training and due diligence.

Along with this sworn certification, you’ll also need to report contributions to federal candidates, leadership PACs, and Presidential libraries, as well as donations to charities and other groups that honor covered officials or have ties to them.

Every individual who has been registered as a federal lobbyist for your organization and has not terminated before January 1, 2008, must also file his or her own disclosure report and sworn certification.

Here’s the catch -- the form for the report and certification has yet to be released. Latest word is that it’ll be available on June 30th. We expect that the form and any accompanying instructions will shed light on these impending obligations.

FEC Back to Full Strength?
Due to a stand-off over nominations, the Federal Election Commission has been without a quorum for the entire year. The impasse ended this week.

What will this mean? Most importantly, it means that the Commission can issue Advisory Opinions. Any person or organization can get an answer to a question about specific activity within 60 days - or even less if you can demonstrate exigency. Best of all, you’re entitled to rely on the opinion without fear of adverse legal action.

The FEC will also be able to open investigations and adopt new rules. We expect that a top priority will be adopting rules to implement the “bundling” provisions of the new federal lobbying law. Once the FEC’s rules take effect (three months after they are adopted), candidates will have to disclose when they receive contributions that can be traced to the efforts of a registered lobbyist. Last year, when the FEC announced that it was initiating this rulemaking, the agency asked for comment on whether disclosure should be required when contributions are bundled by individuals who work for organizations that employ federal lobbyists, even though they themselves are not registered as lobbyists. That question and many others will be answered in the coming months.

The Firewall Rule Survives, but the FEC’s Coordination Rules Burn
In the FEC’s latest battle with the D.C. courts over rules implementing 2002’s McCain-Feingold law, the D.C. Circuit Court of Appeals struck down Commission regulations that address coordination between outside groups and official campaigns (or political parties). Federal law has long prevented donors from asking outside groups to finance campaign activity – for example, buying airtime or funding voter turnout efforts. If such “coordination” were not prohibited, it would be easy to evade limits and other restrictions on campaign contributions. In a ruling issued on June 13, 2008, the Court found that the FEC’s latest effort to adopt implementing rules opens an “enormous loophole.” The upshot is that the law in this area will likely remain in flux until the elections are over.

One thing is certain, however. The Court upheld a new “firewall safe harbor” intended to protect a wide range of consultants, such as media buyers, polling firms, fundraisers, list developers, and others. An appropriately structured firewall that meets FEC’s standards will allow some employees of a consultant to work on a candidate or party’s campaign effort, while others – separated by the firewall - are working for outside groups.

Donations to Convention Host Committees – No Limits and a Tax Subsidy, Too!
Federal contribution limits and source do not apply to donations to so-called “host committees,” which raise money for the Presidential nominating conventions. In other words, corporations (without being limited to their PACs) and individuals may donate without any limit. On top of that, these donations are tax-deductible and need not be disclosed by the host committees until 60 days after the conventions are over. Last week, the Campaign Finance Institute issued a report indicating that the same donors to the host committees have spent over $800 million on federal campaign contributions (via PACs and through executives) and lobbying since 2005.

Back in the States. . . Public Contractors Beware
Illinois may soon join the growing list of jurisdictions that ban political contributions by existing and prospective state contractors. In May, the Illinois General Assembly passed a bill that would prohibit businesses that hold or seek state contracts of $50,000 or more from contributing to the campaigns of public officials who oversee those contracts. This legislation culminates a years-long effort to enact public contract reform in a state with a rich history of contract scandals. But Governor Rod Blagojevich has indicated that he may use his veto power to change the proposed new law. Even if this bill is not enacted, caution is still warranted in Illinois since the City of Chicago and Cook County already have contribution bans in place for city and county contractors.

Meanwhile, Ohio has far less difficulty passing pay-to-play legislation; it just can’t seem do it in a procedurally correct way. The state has twice (in 2007 and in 2008), enacted the same sweeping pay-to-play provisions that restrict political contributions from state and local contractors. Both laws, however, have been found invalid on technical grounds under the state constitution; the most recent decision was handed down last week. The state is considering whether to appeal this decision or to take a another try at writing the legislation. The third time might be the charm – so be careful.

If your business has or seeks public contracts with states and municipalities, you need to keep these pay-to-play laws on your radar screen. An impermissible campaign contribution by a corporate executive, director, or owner, and in some cases their spouses and family members, could result in the cancellation of your contracts, debarment from future bidding, monetary fines, and even criminal penalties.

If you have any questions or would like more information, please feel free to contact Larry (LNorton@wcsr.com, (202) 857-4429) or Jim (JKahl@wcsr.com, (202) 857-4417).
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