Political GPS: LOBBYIST TRANSPARENCY OR GAG ORDER: OUR THOUGHTS

Late last week, President Obama took another step that attempts to marginalize the role of lobbyists in government decision-making. In a memorandum to agency heads, the President banned lobbyists from participating in meetings and telephone calls with executive branch officials about projects funded under the American Recovery and Reinvestment Act (Recovery Act). Any comments by lobbyists on such matters must be submitted to agency officials in writing.

The most striking aspect of the directive is that it prohibits an entire segment of the policy-making community from speaking with government officials about the disbursement of federal funds, while allowing numerous others who are unregistered –including most lawyers and company officials – to participate freely in those discussions.

The only instance where a lobbyist can talk to an executive branch official about Recovery Act spending is when the conversation is limited to “policy issues” that do not “touch upon” particular projects. But as soon as the discussion turns to specific funding applications, oral communications are supposed to come to an end.

And that’s not the only way that lobbyists are singled out. Meetings with lobbyists about “policy issues” must be summarized by the officials and posted on the agency’s “Recovery website.” Lobbyists’ written comments must also be posted. But communications between executive officials and anyone who is not a lobbyist are not required to be part of the public record. That’s an odd result for a directive that’s intended to promote transparency.

Meanwhile, the directive raises other, more practical issues.

One question is whether non-lobbyist employees of organizations registered under the Lobbying Disclosure Act (LDA) may participate in meetings with government officials about Recovery Act projects. The President has directed agency officials to inquire, upon scheduling and again at the outset of any oral communication, whether “any of the individuals or parties appearing or communicating” about particular recovery projects are “registered under the Lobbying Disclosure Act of 1995.” If so, the lobbyist may not attend or participate.

What, then, is the rule for non-lobbyist employees of companies or associations that are LDA registrants? These employees would be meeting with officials on behalf of a “party” registered under the LDA. Because the directive says that such parties may not communicate orally with agency officials about particular Recovery Act projects, does this mean that such non-lobbyist employees should be treated the same way as their lobbyist colleagues? It’s doubtful that this result is intended. But the language of the President’s directive can certainly be read that way.

If our assumption is right that non-lobbyist employees of LDA registrants may meet with executive branch officials, then what exactly is gained? An in-house lobbyist could analyze the issues and discuss them with her employer. The company can then handpick a non-lobbyist to participate in a meeting with executive branch officials. And the non-lobbyist may even hand-deliver the lobbyist’s written comments during the meeting. The lobbyist’s participation will be obvious and her influence felt - whether she is in the room or not.

At the same time, there is little doubt that the law will empower those who operate outside the LDA scheme at the expense of those who register and report. This would seem to reward those who decline to register because they decide that the burdens of entering the LDA reporting scheme outweigh the risk of getting caught. The rule will also benefit those who spend less than 20% of their time in a three-month period engaged in lobbying-related work, and therefore do not trigger one of the registration thresholds.

Finally, it must be noted that the President’s directive stands in contrast to other efforts to address perceived lobbying abuses. HLOGA’s restrictions on gifts from lobbyists to public officials were tied to documented abuses - even if they involved only a relative few. This new directive, however, limits speech with government officials – speech that is at the core of the First Amendment right to petition the government for the redress of grievances.

The Director of OMB is required to issue guidance on the memorandum to agency heads and within 60 days make recommendations to the President for modifications and revisions. We expect that some of these issues will be raised with OMB and addressed through this procedure.

ROUNDUP OF STATE DEVELOPMENTS

Florida High Court Upholds Gift Ban, Disclosure Rules for Lobbyists

The Florida Supreme Court last week upheld a 2005 law that bans lobbyists from giving gifts to legislators and requires that lobbyists file quarterly reports disclosing their compensation. The court rejected arguments that the legislature gave itself powers reserved to the other branches of government, such as issuing advisory opinions, investigating violations, and recommending punishment. The court also brushed aside arguments that lobbying is part of the general practice of law and therefore discipline can only be handed out by the Florida Supreme Court.

Like many other states, Florida has tightened its gift rules and expanded disclosure for lobbyists. The state’s gift law, referred to as a “no cup of coffee rule,” bars registered lobbyists from buying legislators meals or tickets, paying for their travel, or providing a host of other amenities.

Then There Were Five: New Mexico May Quit the “No Contribution Limits” Club

A bill has passed the New Mexico legislature that for the first time sets limits on campaign contributions to state elected officials and lawmakers. Governor Richardson is expected to sign the bill, with the new limits taking effect for the 2010 election cycle. The new law does not prohibit donations from corporations, as many states do.

The measure would limit individual contributions to $5,000 per election for statewide candidates, and $2300 for candidates running for non-statewide offices. Political committees would be subject to a $5,000 limit per election for all candidates.

Only five other states presently have no limits on campaign contributions: Illinois, Missouri, Oregon, Utah, and Virginia.

New York City Touts Results From Pay-to-Play Reform

The New York City Campaign Finance Board boasted recently that its pay-to-play law has given City voters “greater confidence that their candidates are free from the influence of ‘big money’ interests.” City officials examined campaign reports covering a six-month period and found that out of 14,782 contributions, only 60 violated the reduced contribution limits that apply to City vendors. The reduced limits also apply to a vendor’s owners, principal officers, and senior managers.

Wisconsin Court Rejects Broad Regulation of Ballot Measure Groups

A Wisconsin federal judge held that a state law unconstitutionally burdened the First Amendment rights of a citizen who planned to spend $500 on postcards and yard signs to influence a state ballot initiative. The Wisconsin law requires every group or individual that spends $26 or more on influencing a referendum to register with the state, open a dedicated bank account, keep records for three years, and file reports that disclose donors.

The court rejected a request to strike down the law altogether or increase the threshold for triggering disclosure from $25 to $1,000. U.S. District Judge J.P. Stadtmueller wrote: “Because of the relatively unsettled and evolving nature of First Amendment jurisprudence in the area of campaign finance laws, and because it appears that the Wisconsin Supreme Court has not addressed the scope of these statutory provisions, the court declines to reach the issue of whether [the law is] unconstitutional on [its] face.” The Wisconsin legislature has yet to indicate whether it will try to amend the law to raise the thresholds for disclosure.

FEC BUNDLING REPORT FORM: IT’S TWO, TWO, TWO REPORTS IN ONE!

Candidate committees, leadership PACs, and party committees that receive bundled contributions exceeding $16,000 in a semiannual period must now report those contributions to the FEC. The Commission’s recently-adopted rules require these committees to disclose reportable bundled contributions according to their normal reporting schedules – i.e., monthly, quarterly or semiannually. But, the new rules say that monthly and quarterly filers must also file a semiannual report of bundled contributions.

This rule has caused some confusion as to whether a committee reporting bundled contributions might have to file two separate reports containing potentially identical information in July and again in January. Fortunately, the FEC’s just-released Form 3L, allows monthly or quarterly filers to consolidate those reports and the semiannual report on one form. The form also requires the filers to report separate totals of bundled contributions when, for example, bundled contributions in a quarter differ from the total amount of bundled contributions for the semiannual period.

And yes, . . . we are old enough to remember the Doublemint twins.

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).

Political GPS: INITIAL FILING DATE APPROACHES UNDER NEW FEC BUNDLING RULES

Any federal PAC that is established or controlled by a company or other organization registered under the Lobbying Disclosure Act (LDA), or by an individual lobbyist, must identify itself as such in an amended registration, filed with the FEC by March 29. The filing is intended to ease the job for candidate and other reporting committees that under new FEC bundling rules must report contributions attributable to these so-called "lobbyist/registrant" PACs.

How do you tell if a PAC is a “lobbyist/registrant PAC” that must file an amended registration? Here are a few pointers, along with some questions that remain unanswered:

• The new FEC report calls for the same information required by the LD-203, just in another form. PACs will disclose to the FEC if they are controlled by LDA registrants or lobbyists; LDA registrants and individual lobbyists will disclose on the LD-203 whether they established or control a federal PAC. You should ensure that the filing with the FEC is consistent with whatever is being reported (or will be reported) to the Hill.


• What if you haven’t filed an LD-203 yet, or are uncertain whether a PAC is lobbyist-controlled? The first place to look is to the Clerk of the House and Secretary of the Senate. In jointly-issued guidance, these two congressional offices say that if a PAC treasurer or board member is a lobbyist, then the PAC is “controlled” by a lobbyist. Another clear case is the connected PAC, where the connected organization is an LDA registrant.


• Unfortunately, there is a lot of gray area. What qualifies as “establishing” a federal PAC? Setting up a bank account? Participating in planning discussions? Something else? And what qualifies as “control?” Do you control a PAC if you’re not on a PAC Board, but are involved in governing or administering the PAC in other, perhaps less formal ways?


• If the published guidance from the Hill isn’t clear, the FEC says you should seek “definitive guidance” by communicating with the Secretary of the Senate and Clerk of the House. But how do you obtain “definitive guidance” from these offices when they have no procedure for requesting or obtaining it? Can you rely on an opinion offered over the phone from a line-level staffer? Must you listen carefully for a hint of equivocation in their response? What if a member of the Senate office is certain of the answer, but the House office is less sure?


• Finally, if you can’t obtain “definitive guidance” from the Hill, the FEC offers a fallback rule. The FEC says that a PAC is established or controlled by an LDA registrant or lobbyist if the PAC is a separate segregated fund of a registrant or if the lobbyist/registrant had a “primary role” in establishing the PAC (excluding legal or compliance advice) or “directs [PAC] governance or operations.”

In sum, it’s a very unusual regulatory scheme. Charged with adopting bundling rules to implement the 2007 lobbying law, the FEC has deferred on a question uniquely within its own expertise: what does it mean to establish or control a federal PAC? The FEC provides a back-up rule, but you can only rely on it if you can’t get a “definitive answer” from the Hill – whatever that might mean. Which raises a further question as to how the FEC will enforce new rules requiring PACs to identify themselves as “lobbyist/registrant PACs,” given that a PAC may determine its legal obligation based on informal conversations with House and Senate staff. Stay tuned: it may be awhile before these new rules shake out.

HAVEN’T WE ALWAYS HAD LEADERSHIP PACS?

Beginning March 19, the FEC will officially recognize a new type of political committee called a “Leadership PAC.” Of course, leadership PACs have been around for years. But the FEC hasn't defined what a leadership PAC is - even in rules adopted in 2002 that address the relationship between leadership PACs and principal campaign committees.

That all changes with the FEC’s new lobbyist bundling rules. A “Leadership PAC” is defined as a political committee that is established, financed, maintained or controlled by a candidate for Federal office or a current officeholder, but which is not an authorized committee of the candidate or officeholder, and not affiliated with an authorized committee. Each Leadership PAC must file an amended FEC Form 1 identifying itself as such, and it must disclose its receipt of bundled contributions from LDA registrants and individual lobbyists.

Leadership PACs can still engage in their traditional activities, such as making contributions to other officeholders and candidates, and subsidizing the officeholder’s travel when campaigning on their behalf. But caution is advised. It’s fairly easy to make an excessive in-kind contribution to the candidate’s authorized committee, and as with all political committees, some types of disbursements are prohibited altogether. And now leadership PACs have a new obligation: reporting bundled contributions.

NO RECESSION FOR THE GOVERNMENT RELATIONS INDUSTRY

In the midst of a downturn for almost every sector of the economy, one industry is in growth mode – the government relations business. Total spending on lobbying Congress and federal agencies increased more than 14% in 2008 from $2.84 billion at the end of 2007 to $3.24 billion at the end of 2008.

These statistics confirm what we have been hearing anecdotally from our professional lobbyist colleagues: that after a slower 2007, business picked up in 2008 and remains at a high level. Given the number of significant issues that the new Administration is addressing – from restructuring the financial industry to taking on health care and energy independence – it’s not surprising that many industries are opening their wallets to make their case in Washington.

Further evidence of the growth in government relations activity is reflected in PAC statistics released last week by the FEC. The number of PACs increased by 9% during 2008. So-called “non-connected” PACs increased by 23%. A non-connected PAC can solicit funds from a wide range of potential contributors because it is not sponsored by a corporation or labor union. These PACs are frequently used to complement the lobbying efforts of issue-oriented groups.

It might seem surprising then that there were 1.6% fewer federal lobbyists at the end of 2008. Two factors likely influenced this change. One is that many lobbyists vying for positions in the Obama Administration saw it as advantageous to shed their lobbyist label in 2008. Second, more rigorous disclosure requirements and stiffer sanctions in the 2007 lobbying law prompted some organizations to remove employees from their lobbying reports if they didn’t clearly meet the definition of a lobbyist.

In the midst of this busy time, lobbyists should keep in mind that they are subject to more extensive regulation than ever before. With increased disclosure, there’s a lot more information available to regulators, watchdog groups, and competitors. Public reports are also subject to random audits, and lobbyists are now liable for violating congressional ethics rules. All indications from the Obama Administration are that this regulatory trend will continue.

SPENDING BY 501(C) GROUPS TRIPLED IN 2008 ELECTION, POISED TO GROW IN 2010

The 2008 election marked a major shift in the role of non-profit groups, with 527 groups spending half of what they did in 2004, while 501(c) organizations tripled their political spending. According to a report issued by the nonpartisan Campaign Finance Institute, 501(c)(4) social welfare groups, (c)(5) labor unions, and (c)(6) business leagues spent in excess of $200 million in the 2008 campaign. These groups can raise funds from donors in unlimited amounts, and no public reporting is required.

A number of factors, both regulatory and political, contributed to the shift. The upshot is that the IRS and FEC currently allow for considerable soft money spending by 501(c) groups. For instance, 501(c) groups can air television, radio, and satellite ads that name candidates 60 days before a general election and 30 days before a primary, so long as the ads are not “the functional equivalent of express advocacy.” TV, radio ads, and satellite ads aired outside of these windows, as well as ads distributed at any time through other media, are subject to even less stringent regulation. 501(c) groups may also fund polling, market research, and other forms of campaign support. The IRS requires that such activity not be a 501(c)(4)’s primary purpose, but a combination of vague rules and weak enforcement provides non-profit groups with plenty of space to operate.

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).

Illinois Elections Chair Admits Problems In Rolling Out Pay-to-Play Law

In public testimony last week, the Chairman of the Illinois State Board of Elections acknowledged that his agency was ill-equipped to implement the state’s new "pay-to-play" law. "We had problems," Chairman Albert Porter admitted, saying the agency had "insufficient time" before the initial February 2 registration deadline to address extensive legal, practical and technical challenges. Porter also noted that the election board had requested $465,000 to implement the law, but the bill was passed without providing any funding.

Porter was testifying before an independent commission, established by the new Illinois Governor to recommend reforms in the wake of the Blagojevich and other scandals.

The Illinois "pay-to-play" law requires state contractors and bidders to file a registration statement that lists affiliates and key employees, along with their spouses and children - all of whom are barred from contributing to certain officeholders and candidates. Failure to comply with registration obligations can lead to fines and even perjury charges. A single violation of the contribution ban allows procurement officers to void contracts and disqualify bids.

The state board was unable to get electronic registration up-and-running for the initial filings, and they have yet to establish a website where registration information can be searched. Both are mandated by the new law. The Illinois legislature recently amended the pay-to-play law to give the elections board until August 1, 2009, to fulfill these obligations. The bill awaits the Governor’s signature.

CONNECTICUT ETHICS BOARD ADOPTS BROAD INTERPRETATION OF LOBBYING

The Connecticut Citizen's Ethics Advisory Board issued an opinion last week that broadly interprets the state’s lobbying law. In Connecticut, lobbying is defined as "communicating directly or soliciting others to communicate" with a public official or staff employee in the executive branch for the purpose of influencing administrative action. The Ethics Board concluded that drug companies are "lobbying" when they recommend to a state advisory panel which drugs should be placed on the state’s approved Medicaid drug formulary - even though the advisory panel members are not "public officials."

Why? Because the panel passes along recommendations to the State Social Services Department, which is comprised of public officials. The Ethics Board concluded that the drug companies’ communications are "soliciting others" (the advisory panel members) to influence the decision of the Social Services Department.

The state's lobbying law clearly encompasses grassroots lobbying efforts, such as urging citizens to contact their representatives on policy issues. It is far less certain that the lobbying law was intended to cover contacts with quasi-governmental officials such as the advisory panel members. But the Connecticut ruling reflects a national trend to regulate interactions well beyond traditional notions of lobbying.

PENNSYLVANIA INCHES ITS WAY TOWARD LOBBYIST REPORTING

Last week, Pennsylvania's Independent Regulatory Review Commission approved rules implementing the state’s 2007 law that requires lobbyists and their principals to disclose how much they spend to influence state policymakers. Debate over the proposed rules focused on the issue of when lobbyist registration and reporting is required - at the time the lobbyist is engaged to lobby or when a contact with an official is made. The compromise approved by the panel requires registration and reporting whenever a person is contractually engaged – in writing or verbally - to provide lobbying services.

The new rules will take effect within 14 days of adoption by the Commission, unless the Pennsylvania House or Senate disapproves them. In an interesting footnote, prior to the 2007 law’s passage, Pennsylvania was the only state without a law requiring lobbyists to disclose how much they spend on lobbying activities.

NORTON & KAHL TO LEAD AMERICAN LEAGUE OF LOBBYISTS BREAKFAST FORUM ON NEW FEC BUNDLING RULES

The Federal Election Commission recently adopted complicated rules which, for the first time, require the disclosure of political contributions "bundled" by lobbyists. Professional lobbyists need a firm understanding of what these new FEC rules mean for them.

• What's a "bundled" contribution?
• How are bundled contributions reported to the FEC?
• How do these new rules affect PACs that lobbyists help administer?
• How should lobbyists ensure that credit for bundled contributions is attributed to the right source?
• How will the FEC treat events co-hosted by lobbyists?
• What kinds of contribution records do lobbyists need to keep?

The American League of Lobbyists has invited Political GPS authors Larry Norton and Jim Kahl to explain these new FEC bundling rules at a breakfast forum where they will give a nuts-and-bolts understanding of what these new rules mean for you and your business.

Date: Thursday, March 12, 2009
Time: 8:15 a.m. - Registration & Breakfast,
8:30 a.m. - 10:00 a.m. - Speakers
Place: National Press Club (Lisagor Room), 529 14th Street, NW
Washington, DC 20045
Cost: $45/ALL Member; $70/Nonmember
Deadline for Registration: 5:00 p.m., Tuesday, March 10
Click here to register.

Special Note: Mention that you became aware of this event from Womble Carlyle's Political GPS and receive the ALL Members rate. For questions or comments, please contact Patti Jo Baber by phone at 703-960-3011.