Monday, September 15, 2008, 7:04 PM

Political GPS: A Little Help From Your Executive Assistant Can Expose You and Your Company to Liability

At the highest levels of business, there is no job too big, and none too small, for the executive assistant. So it’s not surprising when CEOs and other top execs ask their assistants to help them plan and organize a campaign fundraising event.

The problem is that this kind of help can land the company in trouble with the Federal Election Commission, leading to six and seven figure fines, intrusive government investigations, and unwelcome headlines. Under federal law, corporate officials are barred from ordering or directing support staff to plan, organize or carry out a fundraising event as part of their work responsibilities, unless the corporation receives advance payment for the costs of the employees’ salary, benefits and overhead.

The latest evidence that the FEC likes to flex its muscle in this area came last week in a settlement with CarePlus Medical Centers, Inc. and CarePlus Health Plans, Inc. The two companies and their Chief Operating Officer paid over $130,000 in fines and admitted violations of federal law. In recent years, the FEC has pursued a string of similar cases against corporations and their executives, with fines ranging as high as $3.8 million.

According to publicly-released documents, CarePlus CEO Miguel Fernandes hosted a fundraiser for a U.S. Senate candidate in Florida. At his request, his assistant helped prepare invitations; maintain spreadsheets to keep track of contributions pledged and received; and type letters and address labels. None of the assistant’s work was reimbursed by the campaign or other permissible source, such as the company’s PAC. Making matters worse, executives received an e-mail from the Vice President and Chief Operating Officer, advising that they were “expected to donate” to the Senate campaign.

As this campaign season reaches full throttle, it’s essential that politically active executives and other employees receive appropriate guidance about the rules in this area, and that company policies specifically address volunteer political activity.

FEC Clarifies Election Cycle Contribution Limits

Last Thursday the FEC issued an Advisory Opinion that clarified how contributions earmarked to future campaigns count toward biennial and calendar-year contribution limits.

The six-member Commission concluded unanimously that a credit card contribution charged in June 2008 is considered “made” in 2008, even though the contributor earmarked it for the 2010 Democratic candidate for the U.S. Senate in Arizona. The contributor, who charged his contribution through an organization that solicits contributions for Democratic candidates and party committees, requested that if there is no Democratic candidate in 2010, the funds should be forwarded to the Democratic Senatorial Campaign Committee.

Because the contributor incurred an obligation to pay when he presented his credit card number to the intermediary organization, that’s when the contribution was made. His contribution is therefore subject to the inflation-adjusted biennial limit for 2007-2008 of $108,200. Within that limit, he may make contributions to candidates and their authorized committees totaling no more than an inflation-adjusted limit of $42,700. Also, his contributions to national party committees are subject to an inflation-adjusted annual limit, which for 2008 is $28,500.

Bundling: FEC Puts the Pedal to the Metal

A key part of last year’s ethics and lobbying reform – the Honest Leadership and Open Government Act of 2007 (HLOGA) – was a provision requiring the disclosure of contributions bundled by lobbyists if they exceed $15,000 in a six-month period. Enforcement of this provision was left to the Federal Election Commission, which issued a notice of proposed rulemaking and received comments on the new requirement last November. However, the Senate standoff over FEC Commissioner appointments (see July 11 Political GPS), left the rulemaking proceeding dormant for months. With new FEC Commissioners taking office just a couple of months ago, new FEC Chairman Donald McGahan acknowledged that it was simply too late to finalize bundling rules for the 2008 election – especially because under the new law FEC rules will not even take effect until three months after the FEC votes on them.

Well that made some sense, but then came a surprise. On September 8, the FEC announced that it would hold a hearing on the draft rules nine days later – September 17 – and only those persons who submitted comments ten months ago could testify at the hearing.

Since the bundling rules won’t impact this election, we’re left wondering what the rush is all about and why comments on the proposed rules have to be frozen as of last November. HLOGA is a complicated law, as underscored by the difficulty that Congressional ethics staff had in trying to develop rules for filing reports and abiding by gift restrictions. Moreover, whatever the FEC decides to do, it only makes sense to account for the intervening guidance from House and Senate staff. After a ten-month break, the rulemaking process would benefit from some fresh perspectives. We’ll follow FEC’s actions and keep you up-to-date.

And you thought politics in Washington was nasty. . . Illinois pay-to-play revisited

We reported in the July 2 Political GPS that pay-to-play legislation passed the Illinois legislature and was sent to Governor Rod Blagojevich for signature. Claiming the legislation did not go far enough, the Governor used his “amendatory veto” authority to strip the bill of the pay-to-play provisions, implemented them by executive order instead, and inserted provisions that impact legislators’ pay and curbed the ability of legislators to hold non-elected government jobs. Last week, by a vote of 110-3, the Illinois House overrode the Governor’s veto and rejected his ethics rewrite, leaving the Senate with 15 calendar days to decide whether to take similar action.

Meanwhile, the new pay-to-play executive order is set to take effect on January 1, 2009. The order prohibits businesses holding or seeking contracts exceeding $50,000 from making contributions to elected state officials from the time a bid is issued until two years after contract performance has ended. The contribution ban also applies to parent and subsidiary corporations, commonly-owned entities, the company’s PAC, persons owning 7.5% or more of the company, company executives, and the spouse and minor children of covered persons. A violation of the contribution restriction can result in a termination of the contract, and three violations will result in all contracts being voided and debarment from state contracting for three years.

If past is prologue, the pay-to-play saga in Illinois has several more chapters to be written. Political GPS will follow these developments and keep you up-to-date.

Jim Kahl to Speak at ASAE’s 2008 Annual Association Law Symposium

Jim Kahl will be a panelist addressing “Lobbying, Ethics & Campaign Finance Reform: Challenges & Opportunities in an Election Year,” as a part of the Annual Association Law Symposium sponsored by ASAE & The Center for Association Leadership. The event will be held on Friday, September 19, 2008, at the Ronald Reagan Building & International Trade Center in Washington, D.C. from 8 AM to 5:30 PM. You can see Jim’s panel at 10:45 AM. For more information, click here.

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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