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1 This Webcast Will Begin Shortly If you have any technical problems with the Webcast or the streaming audio, please contact us via at: Thank You! 1

2 Surviving the Elections: Surviving the Elections: Key Political Law Compliance Steps for Corporations January 24, 2012 A Presentation for ACC by: Larry Norton & Jim Kahl Womble Carlyle s Political Law Practice Group 2

3 TOPICS FOR TODAY ü Corporate & Personal Political Contributions ü Corporate Advocacy ü Lobbying Regulation ü Gifts to Public Officials ü Approaching Compliance 3

4 OVERVIEW: REGULATORY COMPLIANCE Complex scheme of federal, state and local laws Vary considerably across jurisdictions 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 4

5 OVERVIEW: LAWS ARE RAPIDLY CHANGING New rules regarding corp. political spending & advocacy New lobbying & ethics restrictions New contribution laws Half of the states have changed political activity laws in past 5 years 5

6 CORPORATE & PERSONAL POLITICAL CONTRIBUTIONS 6

7 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 7

8 NO END RUNS ALLOWED Company cannot reimburse a personal contribution through salary increase, bonus, or other means Executives cannot reimburse their employees 8

9 The Washington Post Feb. 24, 2011 Last week, Larry Minor, whose Agri-Empire business is one of the nation s largest potato growers, was indicted in a California court on charges of funneling $66,000 in campaign contributions through his family and employees to two candidates for the state legislature, evading the state s contribution limit of $3,900. 9

10 CORPORATE FACILITATION Corporate facilities or resources cannot be used for fundraising activities in support of federal officeholders or candidates (unless receive advance payment from permissible source) Result: illegal in-kind contribution Common corporate violation Civil & criminal sanctions 10

11 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 11

12 VOLUNTEER ACTIVITY Permitted: Occasional, isolated or incidental use of company facilities or resources Safe Harbor: 1 hour per week or 4 hours per month Internet Safe Harbor: Federal law permits unlimited use of work computers & Internet access, subject to company policy 12

13 PERSONAL CONTRIBUTIONS Generally permitted Varying limits (candidate, cycle, annual) Separate limit for spouse Fundraisers in personal residence special rules & allowances Avoid interactions with employees that may be construed as coercive Do not discuss personal contributions in connection with employee evaluations, strategic planning 13

14 SPECIAL CONTRIBUTION RESTRICTIONS 14

15 STATE AND LOCAL PAY-TO-PLAY LAWS Prohibit or restrict political contributions by state and local contractors and bidders 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 15

16 WHAT S AT STAKE? Bids disqualified and contracts voided Barred from future contracts Fines and criminal penalties Damage to reputation 16

17 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 PAY-TO-PLAY LAWS South Carolina Vermont Virginia West Virginia LOCAL LAWS All California counties, Culver City, LA City, LA County MTA, LA Unified School District, Oakland, Pasadena, San Francisco Chicago & Cook County, IL Columbia, SC Dallas, Houston, & San Antonio, TX Denver Fort Lauderdale & Orange County, FL New Jersey in over 165 cities & towns New York City Philadelphia 17

18 CORPORATE ADVOCACY: CITIZENS UNITED V. FEC 18

19 COURT S RULING All incorporated entities can make independent candidaterelated expenditures Communications may advocate for/against candidates & political parties All types of media: Radio & TV, print, magazine, etc. May spend unlimited amounts Ruling applies to all elections: federal & state Federal corporate contributions still prohibited (still need corporate PAC) 19

20 ADVOCACY THROUGH NEW FUNDRAISING VEHICLES Super PACs 501(c)(6) s 501(c)(4) s 527 s Minimizing the risks 20

21 KEY DISCLOSURE ISSUES ü Cost of communications must be reported by sponsoring entity to fed/state regulator ü But Federal & state rules vary on disclosure of payments to intermediaries ü FEC deadlocked on post-citizens United rules ü Confusion regarding application of old rules 21

22 FEC: DISCLOSURE CONSIDERATIONS Disclosure likely required if: Solicitation expressly states or suggests that some portion of payment will be used to fund election advertising There is a special assessment for an ad Disclosure likely not required if: Ads are funded with general dues Nothing said to members about use of dues 22

23 OTHER POST-CITIZENS UNITED ISSUES Ban on contributions and expenditures by foreign nationals affirmed by S. Ct. Ø Bluman v. FEC January 2012 Ability of government contractors to make expenditures is uncertain Ban on corporate facilitation uncertain Ø FEC s draft Citizens United rules (Dec 2011) asks for comments on use of corporate facilities 23

24 LOBBYING 24

25 IMPLICATIONS OF LOBBYING Registration (Company &/or Employee) Periodic disclosure reports Contribution restrictions Gift restrictions Contingency fee bans Blackout periods Ethics training/id badge 25

26 FEDERAL LOBBYING RULES Ban on gifts from lobbyists and lobbyist employers to Members of Congress and staff (exceptions apply) Lobbyist may not plan or request travel, or accompany Member on a trip Quarterly reports (LD-2) on lobbying activities & expenses Semi-Annual Reports (LD-203): ü Certification: We understand the Congressional rules on gifts and travel, and we have complied with them. ü Disclose political contributions, donations, and other expenditures Random GAO audits, up to $200,000 fines, & felony 26

27 WHO IS A LOBBYIST? Registration required within 45 days of meeting all 3 of these requirements: 1. Employed or retained to make or actually make more than one lobbying contact 2. 20% or more of a person s time for a client is spent on lobbying activity within any three month period 3. Salary, overhead, and other expenses for lobbying activity expected to exceed $11,500 in a calendar quarter 27

28 SURVIVING A GAO AUDIT Three key steps to survival: Ø Policies and procedure for tracking expenses and reportable contributions Ø Demonstrate that those procedures are followed Ø Have documentation to support the numbers reported in LD-2/LD

29 STATES TAKE BROAD APPROACH TO LOBBYING REGULATION Influencing government processes Licenses, permits Shaping industry policy Generating goodwill Procurement lobbying 29

30 WHAT IS PROCUREMENT LOBBYING? Attempt to influence purchasing or procurement decisions by government agencies, pension systems Generally covered: ü Convince agency personnel of a need for products/ services ( talking up the service) ü Seek an appropriation ü Attempt to influence contents of an RFP ü Door-opening ( goodwill lobbying ) In 2005, 18 states had procurement lobbying laws. Today, 26 states and many municipalities. 30

31 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 31

32 GIFT RESTRICTIONS 32

33 GIFTS TO GOVERNMENT OFFICIALS Highly regulated federal, state & local Rules cover leg. & ex. officials, and staff Reporting requirements may apply Majority of states impose additional restrictions on lobbyists and their employers, and government contractors Exceptions yes, but highly specific 33

34 WHAT IS A GIFT? Potentially anything of value Site visits (meals, beverages, travel) Invitations to company-sponsored and charitable events Tickets to sporting and entertainment events Valuable commemorative items expensive pens, designer desk accessories, wine/spirits, clothing Transportation 34

35 BAN ON GIFTS TO MEMBERS OF CONGRESS AND STAFF Old Rule: $50 per gift, $100 per Member or staff person per year Rule since 2007 If a company employs or retains federal lobbyists, gifts are prohibited unless they qualify under a specific exception. Caution: House and Senate rules differ and similar rules may be interpreted differently 35

36 EXECUTIVE BRANCH GIFT RULES Obama Executive Order (Jan. 2009) No gifts from lobbyists or their employers to political appointees in executive branch Limited exceptions All other Executive Branch Officials No gifts from prohibited source unless meet a specific exception (e.g., $20 de minimis rule) 36

37 PROPOSED OGE RULES Ø Proposed September 13, 2011 Ø Extends Executive Order restrictions to all executive branch employees Ø Would eliminate certain currently permissible gifts from lobbyists/lobbying organizations: ü $20 de minimis gifts ü Widely attended gatherings ü Social invitations (e.g., cocktail parties) 37

38 COMMON EXCEPTIONS 38

39 EXCEPTIONS FOR FOOD & ATTENDANCE Widely attended industry events (may allow for local transportation, etc.) Charitable events Receptions/parties (food and entertainment of nominal value) Many technicalities 39

40 CONGRESSIONAL SITE VISITS Food and refreshments on premises with employees, plus local transportation House and Senate rules differ Restrictions on planning and participation by registered lobbyists Remember: FEC concerns, especially in election years 40

41 CHARITABLE FUNDRAISING EVENTS Members and staff may only accept invitation from event sponsor Sponsor = significant and active role in organizing the event If not sponsor, may request that charity invite House members to sit with them; but not Senators or Senate staff Exec Branch OK if agency approves; except Obama appointees may not be invited by a lobbyist or lobbyistemployer 41

42 SPECIAL RULE FOR TICKETS Tickets may be provided to Member or Congressional staff in exchange for face value, or if no face value on the ticket, then the face value of the highestpriced ticket for the event 42

43 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 43

44 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 44

45 Jim Kahl (202) CONTACT INFORMATION Larry Norton (202) 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. 45

46 Questions? 46

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