Transcript Navigating Pay-to-Play Laws - Construction Industry Round Table

Navigating Pay-to-Play Laws: Could They
Destroy Your Firm’s Good Name?
Construction Industry Round
Table, Spring Conference
May 2, 2012
Larry Norton & Jim Kahl
Womble Carlyle’s Political Law
Practice Group
AGENDA
• Overview of Regulation and
Risks
• Pay-to-Play Laws
• Beyond Pay-to-Play:
Procurement and Goodwill
Lobbying
• Gifts to Public Officials
• Risk Management
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INTERACTING WITH PUBLIC OFFICIALS,
CANDIDATES
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Complex scheme of federal, state and local laws
Vary considerably
Impact on business and personal activity
Government contractors subject to special
restrictions on contributions and gifts, as well as
disclosure obligations
• Lobbying laws reach non-traditional activities –
e.g., goodwill & procurement lobbying
• Gifts to public officials
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WHY DO THESE LAWS
MATTER?
• Public sector clients are huge market
• Scrutiny by regulators, media,
competitors, watchdog groups
• Charged political climate
• Civil and criminal penalties
• Loss of business/opportunities
• Harm to business reputation
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POLITICAL CONTRIBUTIONS
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GENERAL RULES FOR
CORPORATIONS
Prohibited under federal law
• No corporate contributions to federal officeholders
and candidates, national parties, and federal PACs
• Exception – contributions by a corporate PAC
State laws vary
• A few states allow unlimited corporate contributions
• Prohibited in about 20 states
• Remaining states impose limits
• No limit on corporate spending in support of or
opposition to ballot measures
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GOVERNMENT CONTRACTORS
• Federal contractors prohibited from making
contributions in federal elections, except
through federal PAC
• Prohibition in force from beginning of
negotiations through performance
• Draft Obama Executive Order
• State laws vary: some prohibit (Connecticut,
Illinois, South Carolina); others limit (Kentucky,
N.J., Ohio); many require disclosure
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NO END RUNS ALLOWED
• Firm cannot
reimburse
contribution through
salary increases,
bonuses, or other
means
• One firm official or
employee cannot
reimburse another
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CORPORATE FACILITATION
• Corporate facilities or resources
cannot be used for fundraising
activities in support of federal
officeholders or candidates
(unless paid by permissible
source)
• Result: illegal in-kind
contribution
• Common corporate violation
• Civil & criminal sanctions
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RED FLAGS
• Enlist subordinates to handle invitations,
RSVPs for fundraising event
• Use customer lists for political fundraising
• Collect and forward checks to campaign
• Use company envelopes and postage
• Pay for cabs to fundraisers
• Refer to personal fundraising efforts in selfevaluations or strategic planning
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WHAT IS A CORPORATE PAC?
• Non-partisan, tax-exempt entity that makes
political contributions to officeholders,
candidates, other PACs
• Bears corporate name; may receive solicitation &
administrative financial support from corporation
• May also host fundraising events for
officeholders and candidates
• Funded with voluntary contributions from
qualified personnel, shareholders, members of
the Board of Directors
• Special structure if parent is foreign company
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WHY HAVE A CORPORATE PAC?
• Enhance company’s profile on
important issues and public policy
matters
• Support officeholders and
candidates who understand your
business and share your concerns
• Well-established way to make
political contributions identified with
your company
• Channel political activity away from
areas of legal risk
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FEDERAL CANDIDATE VISITS
• Company may allow federal candidate to appear
at meeting or other corporate function
• May pay for meal associated with event
• Meeting with senior management only – may
coordinate with candidate regarding message;
may ask attendees to contribute
• Meeting with all employees – may not
coordinate message; only the candidate may
solicit contributions; must allow candidate for
same office to appear, if request to do so
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PAY-TO-PLAY LAWS
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PAY-TO-PLAY: THE BASICS
• Prohibit or restrict political contributions by state and
local contractors and bidders
• May also restrict fundraising
• Laws may apply to PACs, officers, directors, senior
managers & even spouses and children
• Restrictions may begin before bid and end months
after contract is terminated (“look-back” provision)
• Disclosure/registration/reporting
WHAT’S AT STAKE?
• Public sector clients are
huge market
• Bids disqualified and
contracts voided
• Fines and criminal penalties
• Employment issues
• Harm to business reputation
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BEWARE OF IN-KIND CONTRIBUTIONS
• Home fundraising events
• Allowing campaign to
use company’s
facilities/equipment
• Sale of item or service at
less than usual charge
• Purchase of fundraising
tickets and items
• Loans
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WHERE ARE PAY-TO-PLAY LAWS?
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STATE LAWS
California
Connecticut
Florida
Georgia (licensees)
Hawaii
Indiana (lottery contracts)
Illinois
Kentucky
Louisiana (hurricane contracts)
Maryland
Missouri
Nebraska
New Jersey
New Mexico
Ohio
Pennsylvania
Rhode Island
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South Carolina
Vermont
Virginia
West Virginia
LOCAL LAWS
Oakland, City and County of L.A., Culver
City, San Francisco, County of San
Diego, plus Cal State Teachers
Retirement System, and Cal Public
Employees Retirement System
Chicago & Cook County
Dallas, Houston, & San Antonio, plus
Teacher Retirement System of TX
Denver
Fort Lauderdale
New Jersey – in over 165 cities & towns
New York City
Philadelphia
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PAY-TO-PLAY COMPLIANCE
PROGRAM
 Develop a risk map
 Notice to covered
employees (some
state-specific)
 Contribution surveys to
support reports and
certifications
 Pre-approval of some
contributions
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NEW FUNDRAISING VEHICLES
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Super PACs –
527’s
501(c)(4)’s
Minimizing the
risks
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CONSIDERATIONS WHEN GIVING
TO ADVOCACY GROUPS
Due diligence
Avoid earmarking contributions and other
conduit situations
Know the company you keep
Understand how disclosure works
Expenditures may not be coordinated with
candidate or party
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LOBBYING
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LOBBYING LAWS MAY ALSO APPLY TO
GOVERNMENT CONTRACTORS
• Generating “goodwill”
• Procurement lobbying
• May require
registration by
contractor/employee
• Disclosure reports
• May trigger
contribution, gift
restrictions
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WHAT IS PROCUREMENT LOBBYING?
• Attempt to influence purchasing or procurement
decisions by government agencies, pension systems
• Generally cover:
 Convince agency personnel of a need for
products/services (“talking up” the service)
 Seek an appropriation
 Attempt to influence contents of an RFP
 Door-opening (“goodwill lobbying”)
• In 2005, 18 states had procurement lobbying laws.
Today, 26 states and many municipalities.
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COMMON EXCEPTIONS
• Responding to a formal request for bids or
proposals
• Participating in a bid conference
• Small procurements
• Providing technical advice in response to a
request by an agency official
• Some states require registration only if
meeting with an official who has discretion
to award or administer a contract
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STATES THAT REGULATE
PROCUREMENT LOBBYING
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Arkansas
Connecticut
Delaware
Florida
Georgia
Idaho
Illinois
Indiana
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
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Michigan
Mississippi
Missouri
New Hampshire
New Jersey
New York
North Carolina
Ohio
Pennsylvania
Rhode Island
Tennessee
Texas
Vermont
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GOODWILL
LOBBYING
• Some sales activity may be subject to goodwill lobbying laws
• Meet with public officials to build relationships and generate
goodwill, even if no effort a particular matter
• Examples:
 NC – lobbying includes “building of relationships . . . with
intention of influencing current or future legislative or
executive action or both”
 IL – Lobbying includes efforts to promote goodwill with
high-level executive officials, their chiefs of staff and
members of legislature
 HI – register as lobbyist if purpose of meeting is “getting to
know” or “establish rapport” with legislators
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GIFT RESTRICTIONS
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GIFTS TO PUBLIC OFFICIALS
AND EMPLOYEES
• Many states and localities impose
special restrictions on gifts to public
officials by government contractors and
lobbyists
• Some states and localities require
disclosure of gifts on periodic reports
• “Gifts” include meals, tickets to sporting
or entertainment events, invitations to
charitable fundraisers, etc.
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FEDERAL LAWS
• Gifts to Members of Congress and
Congressional staff: $50/Gift and
$100/Year ($0 if hire federal lobbyist)
• Exceptions are available (Note that
House and Senate rules differ)
• Executive branch officials and
employees: no gifts from “prohibited
source” unless qualify for exception
• Obama appointees: no gifts from federal
lobbyists or their employers
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STATE LAWS
• All states have
laws in this area
• Most stringent
restrict gifts and
require reporting
• Most lenient allow gifts of all
sorts, but may
require reporting
over $ threshold
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COMMON GIFT RULE EXCEPTIONS
• Personal friendship and hospitality
• Widely-attended gatherings and
receptions
• Invitations to charitable fundraising events
• Promotional items
• Plaques
• Informational materials
• Benefits available to the general public
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APPROACH TO COMPLIANCE
• Policies: Develop and disseminate simple and
clear policies and procedures for political
contributions, gifts, procurement activity, and
use of corporate resources for fundraising
• Training: Provide regular training to key groups
(assist them to spot issues and ask questions)
• “Ask First” Culture: Encourage questions &
make sure everyone knows who is responsible
for answering political law questions
MORE COMPLIANCE TIPS
• Tracking systems: For gifts, political
contributions & reportable payments
• Know the players: Identify who must file reports
& who can trigger violations. Don’t forget
consultants!
• Separate responsibility: Keep government
relations and compliance separate, if possible
• Legal Compliance Review: Identify risk areas,
prioritize compliance needs
CONTACT INFORMATION
www.wcsr.com/politicallaw
Jim Kahl
[email protected]
(202) 857-4417
Larry Norton
[email protected]
(202) 857-4429
This presentation is intended to provide general information and should not be construed as
providing legal advice or legal opinions. You should consult an attorney for specific legal
questions.