Wednesday, January 14, 2009, 1:57 PM

Political GPS: Federal Prosecutors Look to Expand Role Over Election Activity

The FEC recently requested comments from the public on its enforcement procedures and policies – an exercise of interest to campaign finance lawyers, but otherwise little noticed by the public. One comment was received from an unexpected source – the U.S. Department of Justice – and serves as a timely reminder of the potentially serious consequences that can stem from federal campaign finance law violations.

The three-page letter from the Justice Department takes the FEC to task for failing to refer more election cases to criminal prosecutors. The Department wants the first crack at all cases where there is any hint of evidence that the potential violation was “knowing and willful.” More than that, the Justice Department wants the FEC to stand down in all such cases until a prosecutor authorizes them to proceed, and then submit proposed settlements of civil charges for a prosecutor’s approval. Under the McCain-Feingold law, “knowing and willful” violations of campaign finance laws can be prosecuted as felonies, which the Department argues reflects the desire of Congress to see more criminal prosecutions in this area.

We have strong disagreements with the Department’s submission, both as to their reading of Congressional intent and approach to shared jurisdiction. But Political GPS readers would be wise to take note of the Department’s message. With fresh political scandals in the headlines and a new Administration touting reform, the Department appears to see an opening to assert the enhanced enforcement capabilities it was given in McCain-Feingold.

The potential implications are significant. “Knowing and willful” violations of federal campaign finance laws are punishable by imprisonment up to five years, with a minimum sentence of 15 months. And, of course, the mere fact of a criminal investigation can be tremendously damaging and disruptive.

The Justice Department’s comments also serve as a valuable reminder of the importance of a compliance program that effectively manages civil, criminal and reputational risks.

MSRB Calls for More Pay-to-Play Rules in the Municipal Financial Markets

The Municipal Securities Rulemaking Board (MSRB) late last week called for the incoming Administration to limit political contributions by unregulated participants in the municipal securities markets – just as MSRB rules now restrict contributions by banking and underwriting professionals.

The MSRB’s announcement comes amid a federal probe that derailed New Mexico Governor Bill Richardson’s appointment to Secretary of Commerce. Federal investigators are looking at "pay-to-play" practices in the state and municipal bond markets and, in particular, allegations that CDR Financial Products received financial services contracts worth millions of dollars after making contributions to political organizations affiliated with Gov. Richardson.

The MSRB was established in 1975 by Congress to develop rules regulating securities firms and banks involved in underwriting, trading, and selling municipal securities. The Board’s Rule G-37, instituted in the 1990’s, severely limits the ability of professionals in these areas to make state and local political contributions.

Readers of Political GPS know that we have written a lot about state and local pay-to-play laws. As we begin the year, we expect that these laws will continue to proliferate. Businesses will have to be careful that political contributions, including those by covered employees, do not jeopardize government contracts or expose the business to other liability.

Major Changes in Louisiana Lobbying Reports

On January 1, 2009, Louisiana lobbyists and their employers face major changes in their reporting obligations. Lobbying reports must now be filed monthly, in electronic form, with the first report due on February 15. Filers must disclose business relationships with public officials and their spouses, and well as disbursements made for the benefit of officials’ spouses and minor children.

These changes are part of a sweeping overhaul of Louisiana’s lobbying and ethics laws, which was led by Governor Bobby Jindal shortly after taking office in 2008. Other parts of the law which have already taken effect bar lobbyists and their employers from giving free tickets to elected officials, and impose a $50 per event limit on food and beverages provided to public officials by lobbyists, and those seeking state contracts.

If you have any questions, comments or would like to schedule a consultation, please feel free to contact Larry (, (202) 857-4429) or Jim (, (202) 857-4417).
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