Thursday, February 5, 2009, 4:05 PM

Political GPS: FEC’S LOBBYIST CONTRIBUTION RULES -- THEY’RE A BUNDLE!

The FEC on Tuesday released a 70-page explanation for its new bundling rules, which implement a key provision of the 2007 lobbying law. The FEC document attempts to simplify compliance with the reporting requirements of the law and in some areas limit the reach of the law. It’s not easy, however, to square the deregulatory sentiment with the inherent complexity in 82 pages of combined rules and explanation.

The rules will be published shortly in the Federal Register and take effect thirty days thereafter. Here are some of the key points:

  • Campaigns, party committees, and leadership PACs must report “bundled” contributions received from lobbyists or PACs that they control, if the contributions exceed $16,000 over a six-month period.
  • Contributions are considered “bundled” when they are physically or electronically forwarded by a lobbyist. If, however, contributions are sent directly to a committee from individual contributors and no “credit” is given to the lobbyist – in the form of “written” evidence, a perk offered in exchange for the lobbyist’s efforts, or other means – then no reporting is required. In other words, a campaign will not be obligated to file a report merely because campaign officials know that contributions have poured in through the efforts of a lobbyist.
  • For lobbyists and registrants who want the public record to reflect their efforts, it is important to confirm in writing with the committee that “credit” has been given to the right source.
  • Bundled contributions are disclosed on the same reporting schedule that the committee uses for its other FEC filings, but for all filers, an additional semiannual report is also required.
  • For companies that employ federal lobbyists and have a “connected” federal PAC, and for other “nonconnected” PACs that are “controlled” by federal lobbyists, there is now a requirement to file a new FEC Form 1 and designate the PAC as a “lobbyist/registrant PAC.” In certain instances, determining whether a lobbyist “controls” a PAC will require filers to seek guidance from the Secretary of the Senate and Clerk of the House.

The FEC rejected calls from watchdog groups to require each fundraiser in a co-hosted event to report the full amount raised. This topic generated debate when the law was under consideration in Congress and again during the FEC’s deliberations. The FEC concluded that reporting should correspond with the way the committee actually credits each lobbyist. Depending on the circumstances, each lobbyist might be credited with a part of the total contributions raised, all of the contributions raised, or none at all.

While reporting committees and lobbyists can take comfort that some activity is exempt from regulation, the bundling rules are complicated, and future guidance in this area will come from three different sources – the FEC, the House, and the Senate – whose perspectives do not always coincide. In the meantime, watchdog groups are criticizing the “credit” requirement and rules for co-hosted events as further examples of an agency captive to the Members it regulates. But in a year in which half the Commission can be replaced within just a few months, the most important judge may be the new occupant of the White House. President Obama was a strong Congressional supporter of the lobbying reform law and a proponent of a strict construction of its bundling provisions.

More interpretive guidance is sure to follow. For now, the bundling rules, long delayed by an impasse over Commissioner appointments, and then by an impasse among the agency’s newly-assembled members, have been finalized. Beginning in early March, committees will have to track lobbyist contributions, with the first reports due in May. Ten days after the rules take effect – around mid-March - a new FEC Form 1 must be filed by each “lobbyist/registrant PAC.”

ILLINOIS PAY-TO-PLAY LAW: LAST-MINUTE GUIDANCE, BUT GOOD LUCK FINDING IT

Just days before the February 1 deadline for Illinois contractors to register under the State’s new “pay-to-play” law, the state procurement office issued rules to help explain some of the confusing aspects of the law. Among other things, the rules clarified which of a contractor’s employees must be listed on the registration form along with the names of their spouses and children. This was welcome news: a false registration form can lead to prosecution for perjury, and late filers are subject to fines.

And how did the State announce that these time-sensitive rules were in effect? Surprise answer: it didn’t.

The Illinois “pay-to-play” law, like similar laws in states and cities around the country, attempts to break the link between campaign contributions and the award of government contracts. Contractors and bidders must file registration statements that list affiliates and key employees, along with their spouses and children, all of whom are barred from contributing to certain officeholders and candidates. Any violation of the contribution ban can lead the state to void agreements with a contractor and disqualify bidders. (An executive order issued by the former Illinois Governor – yes, that Governor - expands the contribution ban for contracts entered into, and bids submitted, after January 1.)

Several days before the filing deadline, we talked to state officials, who signaled that the State was considering issuing rules to clarify some uncertain areas of the law. In fact, the State did just that on Wednesday, January 28, but we were only able to obtain the new rules through informal channels. There was no contemporaneous announcement on the agency website or posting of the rules – indeed, there was no posting the entire week. On top of that, the Illinois procurement office significantly revised and re-posted a pay-to-play Q&A guide on its website, though the website gave no indication that the prior version had ever been updated.

The rules are now available on the Illinois procurement office’s website. We hope the new Governor will find more effective ways to inform the public about these significant new obligations and restrictions. He should also reassess Mr. Blogojevich’s “pay-to-play” executive order, which is breathtaking in scope and out-of-sync with the Illinois statute on the same subject.

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