Friday, May 15, 2009, 11:38 AM

First Lobbyist Bundling Reports Due
May 20

The rubber is about to hit the road for the new FEC lobbyist bundling rules. Leadership PACs, presidential campaigns, and political party committees, which report monthly, have until May 20 to file the new Form 3L. (Congressional committees will not have to report bundled contributions until quarterly reports are due in July.) The May 20 submissions will be the first bundling reports to be filed since the new rules were finalized earlier this year.

Under the rules, the recipient committees must consult the Congressional lobbying disclosure websites and the FEC's database to determine whether contributions were bundled by lobbyists, registrants, or the PACs they control. Reporting committees are well-advised to print out computer screenshots from these databases and maintain them in their records. Committees may rely on the disclosure databases, unless they have knowledge that a fundraiser should be registered as a lobbyist or that a PAC is controlled or established by a lobbyist.

It is also wise for lobbyists who may have bundled contributions during the period to confirm the reporting obligation with the recipient committees. A written confirmation will help ensure that the committee gives fundraising credit to the appropriate person and that the amount attributed is correct. As we have previously written in Political GPS, it is far better for bundled contributions to be attributed to an individual lobbyist or PAC, rather than a corporation. In the event the recipient committee fails to disclose reportable contributions, a confirmatory letter also helps establish that the bundler did not participate or acquiesce in the committee’s failure to file a form 3L.

These new reports are sure to generate attention, so lobbyists should do all they can to ensure that their efforts are portrayed accurately in the FEC filings.


In keeping with the recent series of 3-3 splits in FEC enforcement matters (see May 8 Political GPS), this week we have another pair of dueling statements from FEC Commissioners concerning yet another tie vote. Apart from the notable fact of a Commission deadlock, the dismissal serves as a reminder that taking prompt remedial steps after discovering apparent violations can mitigate enforcement action or, as in this case, get the entire case dismissed.

This matter centered on allegations that in the run-up to the 2008 election, Wal-Mart and some of its management employees advocated the election of certain federal candidates. At issue were oral presentations and written materials provided to hourly-wage supervisors about the potential impact on Wal-Mart of the Employee Free Choice Act, and the increased likelihood of the bill's passage if Democrats won the White House and obtained a large majority in the Senate. A series of Wall Street Journal articles, which formed the basis for the complaints to the FEC, quoted employees who said that at the meetings with supervisors they were told how to vote.

The three Republican Commissioners voted to adopt the staff’s recommendation and close the case. The staff noted that the written materials provided to employees did not expressly advocate the election or defeat of a candidate, and therefore could be shared outside of the company’s restricted class. The staff recommendation was also influenced by the company’s efforts to clarify any misimpression about alleged meetings with employees. In the initial Wall Street Journal story, a company spokesperson said that any direction to employees as to how to vote was unauthorized, and the company immediately followed with an e-mail to managers reminding them that such statements are contrary to company policy. The three Democrats, however, thought the allegations concerning the oral statements merited investigation. Following the tie vote, the Commission voted to close the matter.

This case marks the second time in just the past few months that the Democratic Commissioners have been on the losing end of a vote to investigate allegations of coercion. More importantly, the case underscores the value of prompt corrective measures in mitigating FEC action.


The SEC is expected to propose new rules that would bar investment advisors from managing state pension funds if the advisors or certain of their employees make campaign contributions to officials or candidates for public office. The new pay-to-play rule, which was previously considered but not adopted in 1999, could be proposed as soon as July.

The SEC rules, if adopted, would extend to investment advisors the principles of MSRB Rule G-37, which restricts campaign contributions by broker-dealers engaged in the municipal securities business. Key features of the 1999 proposal were:

  • Two-Year Time Out - This core provision prohibits investment advisors from providing or seeking work for two years if the advisor makes a campaign contribution to officials responsible for, or having influence over, the selection of an investment advisor, or to candidates for such offices. It would also be a violation to solicit such contributions from a third-party.
  • Two-Year "Look-Back" – An investor can be disqualified based on contributions made in a two-year period before a contract is awarded. The SEC suggested that this anti-circumvention measure would prompt advisors to inquire about prior contributions by potential partners and executive officers.
  • Covered Employees - The contribution prohibition would apply to the advisor's partners, executive officers, solicitors, or a PAC controlled by any of the above.
  • Registered and Unregistered Advisors – The proposed rule would apply both to SEC-registered advisors and those exempt from registration. Accordingly, the proposal would cover hedge funds, venture capital funds, and other private investment companies.
  • Recordkeeping, but no reporting – The lack of reporting obligations would distinguish the proposal from G-37. However, the required records could be reviewed by the SEC staff in the course of an investigation or examination.
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