TODAY S TOPICS COMPLIANCE OVERVIEW. Corporate Political Activity: Compliance Tips for the 2014 Election Year

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1 Corporate Political Activity: Compliance Tips for the 2014 Election Year ACC Legal Quick Hit Presentation Jim Kahl Womble Carlyle Sandridge & Rice, LLP February 18, 2014 TODAY S TOPICS Corporate Contributions & Political Activity Personal Political Activity Lobbying Rules Gift Restrictions 2 COMPLIANCE OVERVIEW Complex, overlapping scheme of federal, state & local laws and rules Vary considerably across jurisdictions Laws impact companies and their officers, managers & employees Laws are changing rapidly at federal and state level legislation and court rulings Heightened media exposure; violations are newsworthy 3 1 1

2 CORPORATE POLITICAL CONTRIBUTIONS & ACTIVITY 4 GENERAL RULES FOR CORPORATIONS No federal corporate contributions Candidates, parties, or PACs But direct and indirect independent expenditures permitted Citizens United v. FEC Corporate contribution rules vary by state Unlimited corporate contributions allowed in VA, UT, OR, MO Prohibited in about 20 states Others impose limits Contributions by foreign corporations prohibited in all state and local elections 5 NO END RUNS ALLOWED Company cannot reimburse contributions through salary increases, bonuses, or other means Birdsall Services Group: 7 top executives of NJ engineering firm indicted; 2 pled guilty; trying to get around state pay-to-play law 6 2 2

3 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 But, special rules permit certain onsite candidate appearances 7 CORPORATE POLITICAL ACTION COMMITTEES (PACs) Non-partisan, tax-exempt entity that makes political contributions to officeholders, candidates, other PACs Funded with voluntary contributions from qualified personnel, shareholders, members of the Board of Directors, and family members (the restricted class ) Can pay for fundraising, solicitation and administrative support May host fundraising events State PAC may be needed for non-federal contributions 8 FEDERAL PAC CONTRIBUTION LIMITS Multicandidate PAC $5,000 per candidate per election $15,000 per national party comm. per year $5,000 per state/local party or PAC per year Not Multicandidate PAC: $2600 per candidate per election $32,400 per national party comm. per year $10,000 per state/local party per year $5000 per PAC per year

4 EMPLOYEE POLITICAL ACTIVITY 10 PERSONAL CONTRIBUTIONS Generally permitted for US citizens and green card holders (foreign citizens prohibited) Varying state limits (candidate, cycle, annual) Often can host fundraisers at home and engage in other volunteer activities for candidates Avoid interactions with subordinates and coworkers that may be construed as coercive Do not discuss personal contributions in connection with employee evaluations, strategic planning 11 INDIVIDUAL FEDERAL CONTRIBUTION LIMITS $2,600 per candidate, per election $5,000 per PAC, per year $10,000 per state/local party comm, per year $32,500 per national party comm, per year $123,200 biennial limit ($48,600/candidates & $74,600/PACs and parties) Supreme Court Challenge of Biennial Limit McCutcheon v. FEC

5 VOLUNTEER ON-SITE 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 13 PUBLIC CONTRACTOR CONTRIBUTION RESTRICTIONS 14 STATE & LOCAL PAY-TO-PLAY LAWS Prohibit or restrict political contributions by state and local contractors and bidders Laws may apply to contributions by the company, its PAC, officers, directors, senior managers & even spouses and children Registration &/or reporting may also apply

6 WHAT S AT STAKE? Bids disqualified and contracts voided Barred from future contracts Fines and criminal penalties Damage to reputation 16 PAY-TO-PLAY LAWS STATE LAWS California Connecticut Florida Georgia (licensees) Hawaii Indiana (lottery contracts) Illinois Kentucky Louisiana (hurricanecontracts) Maryland Missouri Nebraska New Jersey New Mexico Ohio Pennsylvania Rhode Island 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 & Orange County New Jersey in over 260 cities & towns New York City Philadelphia 17 LOBBYING

7 KEY LOBBYING ISSUES Expansion in definition of lobbying More disclosure about lobbying activities Registration/reporting triggers differ by jurisdiction federal, state & local More political contribution and gift restrictions imposed on lobbyists More collateral obligations, such as mandatory ethics training and wearing ID badges 19 FEDERAL LOBBYIST OBLIGATIONS Quarterly reports (LD-2) on lobbying activities & expenses Semiannual reports (LD-203): Certify compliance with Congressional gift rules Disclose political contributions, donations, and other expenditures tied to covered legislative and executive branch officials Lobbying reports subject to random GAO audits Fines up to $200,000 per violation & possible felony liability Gift giving to Members/staffers banned (some exceptions) Lobbyist may not plan or request travel for Member & staff; may not accompany Member on a trip 20 STATE LOBBYING REGULATIONS State lobbying laws can differ greatly from federal law Just one communication to influence legislation or executive action may trigger registration and reporting Broad definitions of lobbying e.g., goodwill & procurement lobbying

8 EXPANDED DEFINITIONS Goodwill lobbying: Meet with public officials to build relationships, even if there is no attempt to influence a particular matter relationship building Procurement lobbying: Attempts to influence purchasing or procurement decisions by government agencies. In 2005, 18 states had procurement lobbying laws. Today, 26 states and many municipalities 22 GIFT RESTRICTIONS 23 GIFTS TO GOVERNMENT OFFICIALS Highly regulated federal, state & local Rules cover legislative & executive branch officials, and career employees Many states impose special gift restrictions on lobbyists and government contractors Gift may be anything of value review gift/ethics laws carefully Gift exceptions highly specific, but often allow wide range of permissible giving

9 FEDERAL GIFT RULES House & Senate Gift Rules Two sets of rules and exceptions All Executive Branch Employees No gifts from prohibited source unless a specific exception applies Obama Executive Order Political appointees cannot accept gift from lobbyists or their employers limited exceptions Office of Government Ethics Draft Rules Extend E.O. restrictions to all federal employees 25 COMMON GIFT RULE EXCEPTIONS Personal friendship and hospitality Widely-attended industry gatherings, site visits, and receptions Invitations to charitable fundraising events Promotional items Caps, plaques, commemorative items Informational materials Items of nominal value 26 RISK MANAGEMENT Develop and disseminate clear policies & procedures Develop culture of Ask first who answers questions? Have tracking process for gifts, contributions & other reportable payments Remind employees that personal activities can impact the business Regular training key staff Conduct a compliance review to identify risk areas and prioritize compliance needs

10 CONTACT INFORMATION Jim Kahl (202) Womble Carlyle 1200 Nineteenth Street, N.W. Suite 500 Washington, DC