Interactions with Government Officials: What You Need to Know About Political Law Compliance

Transcription

1 October 13, 2016 Interactions with Government Officials: What You Need to Know About Political Law Compliance Patricia Zweibel, Counsel Melissa Miles, Counsel Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates The Americas Boston Chicago Houston Los Angeles New York Palo Alto São Paulo Toronto Washington, D.C. Wilmington Europe Brussels Frankfurt London Moscow Munich Paris Asia Pacific Beijing Hong Kong Seoul Shanghai Singapore Sydney Tokyo 1 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Webinar Overview Overview of campaign finance, pay-to-play, lobby and gift laws Application to inaugural events and transition issues Compliance strategies 2 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 1

2 Political Law Compliance Any time you communicate or interact with a public official, or spend money and a public official participates in the event or occasion, it is likely you are engaging in regulated activity. If related to election or campaign, campaign finance and pay-to-play considerations. If in connection with influencing an official decision, lobbying considerations. If providing a personal benefit, gift considerations. 3 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates FECA Ban on Corporate Contributions Federal law prohibits corporations from making monetary contributions, as well as in-kind contributions such as the use of corporate facilities or personnel, for campaign purposes This includes contributions to federal candidate committees, federal PACs and the national party committees Corporations may make: Contributions to Super PACs (independent expenditure committees) (per Citizens United) Ban on federal contractors, national banks Foreign national contribution ban Foreign parent with a domestic subsidiary Federal ban applies to federal, state and local contributions 4 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 2

3 FECA Rules on Corporate Contributions What is a contribution? Direct monetary payment In-kind contribution (e.g., property or services) Loans when is it a contribution?» Extension of credit; guarantee Coordinated communications 5 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Federal Hard Money Rules Contribution Limits for Individuals and Non-Multicandidate PACs Limits To Candidates $2,700* per election To State Party Committees $10,000 per yr. To PACs $5,000 per yr. To National Party Committees $33,400* per yr. plus: -An additional $100,200* per yr. for buildings -An additional $100,200* per yr. for recounts and legal fees -An additional $100,200* per yr. for conventions (only for national party committees, not senatorial or congressional national party committees) -Aggregate contribution limit for all of the national party committees of a given party (Democratic or Republican): $801,600* per year *These limits are indexed for inflation 6 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 3

4 Federal Hard Money Rules Contribution Limits for Multicandidate PACs To Candidates $5,000 per election To State Party Committees $5,000 per yr. To PACs $5,000 per yr. To National Party Committees $15,000 per yr. plus: -An additional $45,000 per yr. for buildings -An additional $45,000 per yr. for recounts and legal fees -An additional $45,000 per yr. for conventions (only for national party committees, not senatorial or congressional national party committees) -Aggregate contribution limit for all of the national party committees of a given party (Democratic or Republican): $360,000 per year 7 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Attribution and Designation Rules Knowing to whom one is making a contribution and necessity of making designations on the contribution check DGA and RGA representations» Operating accounts Joint fundraising committees: Hillary Victory Fund, Trump Victory, Hillary Action Fund, Trump Make America Great Again Committee Spousal attribution. Contribution attributable to signer of check. Knowing the date of a contribution is important: For applying contribution limits; and For reporting purposes. Contributions are deemed to be made when one relinquishes control over the contribution check (e.g., mailbox rule). One may not give to a particular candidate's election after the date of that election, unless: The campaign has net outstanding debt; and The check is designated in writing for that election's "debt retirement." 8 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 4

5 Fundraising at the Office under FECA Internal communications exemption permits fundraising/solicitation of only Restricted Class (i.e., shareholders and executive or administrative personnel). See AO (NAM) External communication and fundraising persons outside solicitable class (e.g., all employees and/or vendors) Advance payment from permissible source. An individual employee volunteers his or her own time without using corporate facilities or personnel. Directed employee time. Note that certain LLCs and partnerships cannot take advantage of these exemptions. 9 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Solicitation Guidelines for Avoiding Even the Appearance of Coercion Follow-up communications (e.g., follow-up call or ) Should not be done to ask if employee has given, and if not, to ask why. May be done to offer assistance or to answer questions that employee may have. Any oral follow-up communication should be scripted. May tell employee that it is important to contribute to candidate. Do not characterize contributions as helping to gain access to candidates. May characterize suggestion as helping to elect candidates whose views are good for the company's business interests. 10 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 5

6 Political Site Visits: House, Senate and President With eligible class only (as defined under Federal Election Campaign Act) Candidate and corporate executives may advocate election and solicit contributions Opponent does not need to be invited or request to appear granted Food may be served With all employees Candidate may advocate his or her election and solicit donations but the candidate may not accept donations before, during or after the presentation. The candidate may just leave campaign literature. Corporate executives may introduce but not advocate election and no solicitation of contributions Opponent upon request must be given same opportunity Light refreshments may be served Press is permitted 11 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates How to Avoid Pay-to-Play Violations Avoid linkage: when making contributions or donations (political or charitable) or providing gifts Make sure that your consultants are properly vetted Be aware of strict liability pay-to-play laws (federal, state and local) 12 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 6

7 Avoid Linkage Know who or what you are giving to. There should be no relationship between a gift, entertainment, charitable donation or political contribution and official decision on business. Do not discuss fundraising in congressional offices or while lobbying. Transmittal letters do not use them. Be careful of timing. Example: CEO of 21CT (a tech company) contributed $10,000 to Texas Speaker Joe Straus» Made days before approval of $90 million contract to detect Medicaid fraud» Lost $90 million contract and criminal investigation 13 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Strict Liability Pay-to-Play Laws Strict liability pay-to-play laws ban a company from obtaining government contracts if the company or its covered donors make or solicit political contributions or gifts in that jurisdiction to officeholders, candidates, political parties or other political committees (e.g., PACs) Covered donors usually are the company s PAC, owners, employees, directors, outside consultants and, in a handful of jurisdictions, family members Strict liability means the contribution or gift triggers a ban on business regardless of intent Nearly all deal with political contributions, but a few jurisdictions cover gifts 14 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 7

8 Strict Liability Pay-To-Play Laws Pay-to-play laws in the following jurisdictions: California, Connecticut, Florida, Hawaii, Illinois, Kentucky, Michigan, Missouri, New Hampshire, New Jersey, New Mexico, Ohio, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont, Virginia, and West Virginia Albuquerque, Allentown (PA), Chicago, Chicago Ridge (IL), Cook County (IL), Dallas, Detroit, Houston, Jefferson Parish (Louisiana), Lehigh County (PA), Miami Beach, Miami Gardens, New Orleans, New York City, Orange County (FL), Orange County (NY), Philadelphia, Providence, Salt Lake City (UT), Salt Lake County (UT), San Antonio, Seattle In California: All California Counties, Culver City, Los Angeles City, L.A. County MTA, Oakland, Pasadena, San Francisco, Santa Ana, and CalSTRS In New Jersey: numerous localities We are aware of pay-to-play reporting-only requirements in Connecticut, Illinois, Maryland, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, Rhode Island, Denver, Detroit, DuPage County (IL), Kane County (IL), Los Angeles City, Nassau County (NY), Providence, San Antonio, and for CalPERS and CalSTRS 15 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Federal Strict Liability Pay-to-Play Rules for Regulated Financial Institutions and Covered Employees There are currently 3 federal pay-to-play rules: MSRB Rule G-37 (for broker-dealers that underwrite municipal securities, and for municipal advisors under Dodd-Frank new application to muni advisors effective August 17, 2016) SEC Rule 206(4)-5 (for registered investment advisers providing investment advisory services to state or local government entities) CFTC (for swap dealers that engage in a commodities-based swap with a state or local governmental counterparty) These apply to political contributions and solicitations, not gifts MSRB Rule G-37 has reporting and records requirement SEC rule just has recordkeeping requirement 16 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 8

9 Federal Strict Liability Pay-to-Play Rules for Financial Institutions Upcoming federal pay-to-play rules: SEC s security-based swap dealer pay-to-play rule (effective June 27, 2016, but compliance date is not set) FINRA's pay-to-play rule for third-party and affiliated placement agents approved by SEC on August 26, 2016 FINRA to issue a release setting effective date of new rules Effective date likely to be between February and October Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Lobby Laws Three categories of activities may trigger lobby registration and reporting requirements at federal, state, and local levels. Attempt to influence legislation. Attempt to influence legislation or formal rulemaking by executive branch agency. Attempt to influence legislation or any decision of executive branch agency, including financial arrangements and contracts (e.g., seeking business from agency). Thresholds: Even if activity is considered lobbying activity, must meet thresholds (e.g., under LDA, 20% of one s time and more than one lobbying contact). 18 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 9

10 What is Lobbying Activity Under the LDA and HLOGA: LD-2 Report Lobbying activity Lobbying contacts; and Research and preparation for such contacts (i.e., work done with the intent that the results will be used for lobbying contact).» Includes strategizing, planning, possibly other background work Covered officials Lobbying contact includes making the following communications in an attempt to influence legislation, federal contracts, or any other position of the federal government:» Under Methods A and C, communications with Congressional members and staff; and» Under Method A (LDA), communications with Covered Executive Branch Officials (i.e., White House Staff, Military Personnel at or over pay grade O-7, and Presidential and Schedule C Appointees but not career SES employees).» Under Method C (IRC), lobbying contact includes communications with Covered Executive Branch Officials (i.e., White House Staff, top two officials in any office of the EOP, and Cabinet-level officials and deputies). > Includes communications with any executive branch official regarding federal legislation 19 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Backup Information and Reporting Issues Contemporaneous tracking of time The identity of public officials is not disclosed The issues worked on are disclosed only if a lobbyist works on the issues, not a non-lobbyist employee Washington Office method Documentation supporting contacts with covered officials Documents reflecting issues lobbied supporting representations on LD-2 Should include bill and brief description of legislation. 20 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 10

11 LD-203 Reports Semi-Annual Reports are due 30 days after the end of a semi-annual period. Upcoming due dates: January 30, 2017 July 31, 2017 Semi-Annual Disclosure Report ("LD-203") Lobbyists, lobbying firms, and lobbyist employers are required to file a semi-annual report detailing political contributions, charitable contributions, and other expenditures related to covered legislative and executive branch officials. Even if an employee had no activity or activity that fell below the threshold for becoming a lobbyist, if he or she was listed on an LD-2 report, that employee must file an LD-203 for that semi-annual period. 21 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates LD-203 Report: Expenditure Categories The current LD-203 form provides five categories for filers to use when disclosing reportable contributions and expenditures: "FECA" "Honorary Expenses" "Meeting Expenses" "Presidential Library Expenses" "Presidential Inaugural Committee" 22 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 11

12 What Is a Gift Law? Prohibition, limit, or restriction on providing personal benefit to public officials. Covered gifts include anything of personal value, such as meals, entertainment, transportation, and lodging; not in-kind political contributions. Factors to consider» Timing» Contacts with campaign staff or office staff?» Content of presentation Covered gifts do not include benefits to a governmental entity but a letter of acceptance should be obtained. Federal government, each state, and certain cities and counties have their own separate gift laws. FCPA and jurisdiction-specific foreign gift issues Special issues Presidential conventions Split events (fundraiser/personal) Charitable donations 23 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Federal Legislative Branch Gift Rules Federal legislative gift rule exemptions for various inaugural-related events Reception exemption Nominal food in certain settings Widely attended gathering Outside activities Friendship (cannot be expensed and subject to increased scrutiny) Site visits: food and local travel outside D.C. (House rules vs. Senate rules) Attendance at events sponsored by charity (House rules vs. Senate rules) Home district products Nominal items (baseball caps, t-shirts, and greeting cards) Training Informational materials 24 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 12

13 Federal Legislative Branch Gift Rules Items paid for at market value or promptly returned Commemorative items (allows certain gifts during site visit) Personal hospitality exemption is not permitted for lobbyists Political contributions Form LD Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Federal Executive Branch Gift Rules Gifts to executive branch officials and employees are generally limited to $20 per occasion and $50 per calendar year. Commonly used exceptions include: There is no reception exception Widely attended gathering (but requires pre-clearance from agency) Meals and entertainment from non-prohibited source Personal relationship (factors: personal payment and relationship history) Modest items of food and refreshments, such as soft drinks, coffee and donuts, offered other than as part of a meal Greeting cards and items with little intrinsic value, such as plaques, certificates, and trophies, which are intended solely for presentation Gifts the receipt of which is specifically authorized by statute (e.g., Foreign Gifts and Decorations Act) Gifts to the President and Vice President 26 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 13

14 Obama Executive Order Federal Executive Branch Gift Rules Obama Executive Order prohibits most gifts to executive branch officials and employees from lobbyists, lobbying firms, and lobbyist employers Non-Obama employees may be covered as well May not utilize $20/$50, widely attended, or reception exceptions, among others Limited exceptions remain, including: Personal relationship (factors: personal payment and relationship history) Modest items of food and refreshments, such as soft drinks, coffee and donuts, offered other than as part of a meal, but not including receptions with alcohol like in the legislative branch Greeting cards and items with little intrinsic value, such as plaques, certificates, and trophies, which are intended solely for presentation 27 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Obama Executive Order Federal Executive Branch Gift Rules Gifts the receipt of which is specifically authorized by statute (e.g., Foreign Gifts and Decorations Act) Gifts to the President and Vice President Press and charity exceptions 28 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 14

15 Types of State and Local Gift Laws Absolute ban regardless of value (e.g., Florida lobbyist law). Dollar limits Some are per occasion (e.g., Florida nonlobbyist law $100 per occasion) and some are per period (e.g., California $460 per 12-month period). Prohibition on gifts that may reasonably tend to influence an official (Contrast: New Jersey and Nevada) Likely application: State and local official (e.g., Governor, Mayor) inauguration events Also potential application to federal inauguration events» E.g., state society Presidential inauguration events with state and local officials attending 29 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Compliance Strategies System will involve some form of preclearance (whether it be for political contributions, lobbying, or gifts/entertainment) Preclearing contributions Making clear that in-kind contributions (use of company resources) are covered Defining group of employees whose personal contributions/fundraising will be covered under pay-to-play Preclearing gifts/entertainment and lobbying Ways to reduce the challenge of the volume of requests this will generate» Hub and Spoke Model: Push down function to regional or business compliance officers» Reduce number of requests using blanket/advance pre-approval 30 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 15

16 Inaugural Events Various Inauguration-related Events Examples» Inaugural balls (usually reception with headliner music)» Other inaugural celebrations, such as breakfasts and lunches relating to viewing the inauguration and the inaugural parade, and non-presidential Inaugural Committee balls» Tickets to attend the inaugural swearing-in 31 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Inaugural Committees Contributions to inaugural committees Contributions from corporations and individuals are unlimited» No later than 90 days after the Inauguration, PIC must disclose identity of donors and amount of contributions to FEC Federal law prohibits contributions by foreign nationals Reportable on LD-203 if filer makes contributions aggregating $200 or more Contributions to federal PIC do not invoke federal, state and local pay-to-play laws 32 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 16

17 Non-PIC Inaugural Events Federal lobby disclosure implications LD-203» Events held to honor or recognize a covered legislative or executive branch official (including President and Vice President) LD-2» Is inauguration activity lobbying? 33 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Inaugural Committees Contributions to state and local inaugural committees are subject to state and local ethics and election laws, as well as federal, state and local pay-to-play laws 34 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 17

18 Inaugural Event Compliance Strategy When making sponsorship payments, request representations from entity holding the event No prohibited gifts Whether reportable on LD-203 When hosting event, ensure compliant with above Any lobbying at event? May be reportable 35 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Transition Issues Federal Presidential transition teams: Presidential Transition Act Contribution limitations In-kind contributions Pay-to-play implications Voluntary restrictions imposed by the transition committee (e.g., no corporate contributions) LD-2 lobby reporting issues 36 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 18

19 Transition Issues State and Local Contributions to state and local transition committees may be subject to state and local ethics and election laws. They are subject to federal pay-to-play laws. May be subject to state and local pay-to-play laws. On rare occasions, serving on state or local transition team may raise conflict of interest issues. This information is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. 37 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 19