February 10, 2012 GENERAL MEMORANDUM

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1 2120 L Street, NW, Suite 700 T HOBBSSTRAUS.COM Washington, DC F February 10, 2012 GENERAL MEMORANDUM American Bar Association Report on Recommended Changes to Federal Lobbying Laws On January 3, 2011, the American Bar Association (ABA) Section of Administrative Law and Regulatory Practice, Task Force on Federal Lobbying Laws (Task Force), published its final report on the condition of U.S. lobbying laws and made recommendations for improvements. 1 The ABA Governmental Affairs Office is currently working on Capitol Hill to spark an interest in introducing legislation based on the proposals contained in the report. Though legislative activity this year seems unlikely, the ABA report included proposals that, if enacted into law, would introduce significant new restrictions and requirements for both lobbyists and their clients. We have summarized the report in the attached document. Among its recommendations, the report proposes an expansion in registration and disclosure requirements applicable to lobbying firms, while suggesting that not every employee listed by a firm as engaging in lobbying activities be legally characterized as a "registered lobbyist" - a characterization that carries both formal and informal consequences. Current law requires that a firm or organization register only when it employs an individual who makes more than one lobbying contact and whose lobbying activities constitute twenty percent or more of the time that employee spends on services for a client. The Task Force proposals would broaden this requirement by counting lobbying contacts by all firm employees in the aggregate and by removing the twenty percent rule, relying instead on a threshold income amount. Firms would also be required to disclose all lobbying support activities (as opposed to just the actual lobbying contacts) by their own employees as well as the activities of all other persons or entities retained by them. In addition, the recommendations would require clients of registered firms to file reports disclosing additional lobbying support that they themselves procured or performed. Many other changes are recommended. The full report is available on the ABA s website, 2 and we have attached hereto our detailed summary. Please let us know if you would like further information on this topic, or have any questions. Inquiries may be directed to: Bobo Dean (bdean@hobbsstraus.com) Caroline Mayhew (cmayhew@hobbsstraus.com) # # # 1 American Bar Association Section of Administrative Law and Regulatory Practice Task Force on Federal Lobbying Laws, Lobbying Law in the Spotlight: Challenges and Proposed Improvements, 63 ADMIN. L. REV. 428 (2011) (hereinafter Final Report). 2 c0000ce_report_ authcheckdam.pdf HOBBS STRAUS DEAN & WALKER, LLP WASHINGTON, DC PORTLAND, OR OKLAHOMA CITY, OK SACRAMENTO, CA

2 ABA Section of Administrative Law and Regulatory Practice, Task Force on Federal Lobbying Laws, Final Report SUMMARY OF FINAL REPORT In January 2011, the American Bar Association Section of Administrative Law and Regulatory Practice, Task Force on Federal Lobbying Laws, published its Final Report on the condition of the nation s lobbying laws and its suggestions for improvements. 1 This report summarizes the most significant recommendations and proposals advanced by the Task Force, which should be of interest to all lobbyists, lobbying firms, and their clients. The Task Force recommends a number of changes to the Lobbying Disclosure Act of 1995 (LDA). Generally speaking, the Task Force proposes to broaden registration and disclosure requirements and to significantly improve enforcement procedures. The Final Report cites a need for reform that "stems in part from limitations in the law itself and in part from circumstances in the political environment that make compliance with the law less effective than it should be." 2 The Task Force reports that current registration requirements are not sufficiently inclusive, and that the universe of lobbying firms and organizations required to register should be broadened. The Task Force also cites the "low level of enforcement" and the "absence of meaningful consequences" as significant barriers to the effectiveness of the LDA as currently implemented. The Task Force further notes a general reluctance to being characterized as a "registered lobbyist" and other "incentives to avoid LDA registration," such as limits on appointment of former lobbyists to executive branch positions, as significant issues which the Task Force considered in its proposal. The following summarizes the proposals and recommendations of the Task Force on various topics of lobbying law, as identified by the Task Force in the Final Report. Who Should Be Registered? The Task Force recommends that a lobbying firm or organization should be required to register if, during a quarterly period, employees in the aggregate make two or more lobbying contacts (either on behalf of a particular client in the case of a firm, or on its own behalf in the case of an organization), and also receives (in the case of a firm) or expends (in the case of an organization) a threshold amount of money for matters related to lobbying activities. 3 Current law requires registration only when the firm or organization employs an individual who makes more than one lobbying contact and whose lobbying activities constitute twenty percent or more of the time that employee spends on services for that client. The recommendation thus broadens the current registration requirements by counting lobbying contacts by employees in the aggregate and by removing the twenty percent of time requirement. The Task Force notes that "Although this change in the law would constitute an expansion of the scope of the registration requirement, its incidence would fall primarily on firms and organizations that engage in significant lobbying work." 4 1 American Bar Association Section of Administrative Law and Regulatory Practice Task Force on Federal Lobbying Laws, Lobbying Law in the Spotlight: Challenges and Proposed Improvements, 63 ADMIN. L. REV. 428 (2011) (hereinafter Final Report). 2 Final Report at Specifically, the amount provided in 2 U.S.C. 1601(a)(3)(A) and (B), which is adjusted according to the Consumer Price Index every four years. 4 Final Report at

3 When the employer firm or organization registers, the LDA also requires it to list "the name of each employee of the registrant who has acted or whom the registrant expects to act as a lobbyist on behalf of the client." 5 However, the Task Force suggests that this requirement be amended so that employees need only list as registered lobbyists individuals who spend at least twelve hours engaged in lobbying activities for a client in a given reporting period, in order to avoid unnecessarily characterizing individuals as such when it would not significantly advance the goals of the LDA. Finally, the LDA currently gives businesses, trade associations, and public charities the option to use the Internal Revenue Service s definition of "lobbying," rather than the LDA definition, for certain purposes. The original intent of this allowance was to "simplify the reporting obligations of these entities by enabling them to make a single calculation for IR Code and LDA purposes." 6 However, 1998 Technical Amendments to the LDA imposed requirements on these organizations to use the LDA definition in quarterly reports for lobbying activities involving Congress regardless, thus undermining the original purpose of the allowance. The Task Force recommends that the option be repealed entirely as it allows for misleading reports and can no longer be justified after the 1998 amendments. What Should Lobbying Firms and Organizations Disclose? In general, the Task Force recommends broadening the disclosure requirements, without significantly expanding the number of individuals characterized as "registered lobbyists." The Task Force makes several specific proposals, along with a recommendation for a searchable, user-friendly database, attaching a single identifying number to individuals, so that disclosures can be easily searched and examined by the public. While the Task Force recommends a somewhat broader definition of "lobbying support" activities than the definition currently in place, it claims that this recommends "does not entail a conceptual shift in the nature of the Act s coverage." 7 However, the Task Force does recommend a much more significant expansion of reporting requirements so that firms and organizations must disclose not only their own lobbying support activities, but those of "all other persons and entities retained by the registrant firm or organization." 8 The Task Force explains, "This expectation responds to the modern reality that much of the effort in a lobbying campaign may be dispersed among multiple entities. Required disclosure of this wider picture would directly serve the purposes of the LDA." 9 Again, this is broader than the requirements of current law, which would not require registration or disclosure of these additional entities if they themselves do not engage in "lobbying contacts," even though they may provide significant lobbying support. In addition to listing employees as "registered lobbyists" as discussed above, the Task Force proposes that registrants also be required to list any other individuals employed by the firm or organization who engaged in lobbying activities or support. However, these individuals would not be deemed "registered lobbyists" by virtue of being listed. The Task Force cites both formal and informal consequences of individual status as a registered lobbyist and concludes that 5 2 U.S.C. 1603(b)(6). 6 Final Report at Final Report at Final Report at Final Report at

4 "The prospects for enhanced compliance with the amended LDA will be increased if the broader disclosure requirements we propose are decoupled from that set of consequences." 10 For similar reasons, in order to keep the public record current and accurate as well as to protect individuals from erroneously being labeled as "registered lobbyists," the Task Force suggests that a simple form be available for individuals to file on their own to deregister themselves as lobbyists when needed. Finally, whereas current law requires only "a statement of the Houses of Congress and the Federal agencies contacted," 11 the Task Force recommends extending disclosure requirements to mandate identification of all the congressional offices, congressional committees, and federal agencies and offices contacted. "More extensive disclosure as proposed would directly serve the social interest in tracing the impact of lobbying on public decisionmaking." 12 However, this recommendation would allow for generic descriptions of the contacts made when they are made on a mass basis, such as to "all members of Congress" or "all members of the Senate Finance Committee." 13 Client Disclosure of Lobbying Support As previously discussed, the Task Force recommends expanding reporting requirements by requiring firms and organizations to disclose outside entities or individuals engaged in lobbying support activities in order to account for the fact that modern lobbying campaigns often involve multiple entities. To ensure complete disclosure of all entities involved, the Task Force also proposes that the client of a firm that is required to register under the LDA also be required to file quarterly reports "disclosing lobbying support that it has procured or performed itself. The disclosure should identify the firms that were hired, the individuals principally involved, the sums expended, and other information similar to that required of registrants on their LD-2s with regard to the same types of services." 14 Client filings are not currently required by law. Again, individuals identified by a client as engaged in lobbying support would not necessarily be characterized as lobbyists for that reason alone under the Task Force s proposal. The Task Force also recommends that, in addition to individuals "principally involved," a client should be required to report any involvement by any former LDA-covered official (such as members of Congress and congressional staff members). Particulars of Lobbying Support The Task Force proposes a definition of "lobbying support" that it describes as "broadly drawn to embrace a multitude of support activities, reflecting the realities of modern lobbying campaigns. The list is basically self-explanatory." 15 The Task Force notes that "actions taken to shape public opinion at the grassroots level in favor of or in opposition to government action would not, on their own terms, trigger any registration requirement. However, if a client otherwise meets the registration triggers, expenditures for phone banks, websites, advertising, and the like should be disclosed as 'lobbying support' " under the proposal. 16 The Task Force includes coalition building as a part of its proposed definition, but notes that the coalition itself 10 Final Report at U.S.C. 1604(b)(2)(B). 12 Final Report at Final Report at Final Report at Final Report at Final Report at

5 would not have to register unless it was a "client" that would otherwise be required to register under the proposal. Additional Filings The Task Force s recommendations generally require firms, organizations, and clients to register rather than those employees or affiliated organizations that actually provide the lobbying support. However, the Task Force recommends that a certain "limited class of lobbying supporters" also be required to file, for example those who have made recent federal political contributions of $10,000 or more or those who have previously served as a member of Congress or as a Senate-confirmed presidential appointee (among others). 17 The Task Force explains that "The public interest in disclosure of information about these persons is relatively high because of the prominence or sensitivity of their roles in the lobbying enterprise." 18 However, such individuals would again not be deemed "registered lobbyists" by virtue of the recommended filing requirement. Again, this proposal extends filing requirements to a class of individuals not covered by current law. Lobbying Participation in Political Fundraising In general, the Task Force s Final Report recommends separation of lobbying and political fundraising activities. The Task Force recommends no restrictions (beyond those generally applicable to all ordinary citizens) on lobbyists personal contributions to individual campaigns or party committees, except that the Task Force recommends that a lobbyist s biennial aggregate contributions be limited to half the amounts allowed to other citizens by law to prevent disproportionate political influence based on cumulative contributions to multiple campaigns or party committees. However, the Task Force does propose that individual lobbyists should be prohibited from "conducting certain fundraising activity to support the campaign of any member of Congress, or candidate for Congress, with whom that lobbyist has made a 'lobbying contact' within the past two years," and that conversely "an individual lobbyist should be prohibited from making a 'lobbying contact' with a member of congress (including the member s staff), or a candidate for Congress, if that lobbyist has conducted any covered fundraising activity for that person within the past two years." 19 The Task Force notes that it considers this proposal to be "reasonably framed in relation to the problem it aims to alleviate, and for that reason stands a good chance of surviving First Amendment scrutiny," despite the lack of clarity provided by the case law in the area. 20 The Task Force also considers whether and when individual fundraising actions should be imputed to the firm and to other employees for the purposes of effective enforcement of the law. The Task Force proposed that, where a registered lobbyist makes a lobbying contact with a member and is thereby disqualified from fundraising for that member, the disqualification should extend both to other registered lobbyists in the same firm as well as to the firm itself, but not to non-lobbyist colleagues personally. Conversely, where a registered lobbyist has engaged in fundraising, the Task Force recommends that neither the lobbyist nor the firm be permitted to lobby the member during the next two years. The Task Force includes fundraising efforts and events for any political committee controlled by the member of Congress or person seeking office, but not for independent organizations unless the member or member s campaign staff are 17 Final Report at Final Report at Final Report at Final Report at

6 consulted about the fundraising. The Task Force also recommends that these restrictions apply only to fundraising for election campaigns for Congress, and not for the presidency or vice presidency. Earmarks Where lobbyists are retained to lobby for earmarks, the Task Force suggests that those individuals and their employers be required to certify "that they have not contributed to, nor sought individual or PAC contributions for, those members whom they have lobbied for earmarks during the current session of Congress." 21 Alternatively, if the first recommendation is found to be constitutionally problematic, the Task Force recommended that Congress allow the contributions up to a modest amount, such as $250. The Task Force explains, "This measure would permit the lobbyist to make a symbolic statement of support for the campaign which is sometimes deemed important to the constitutionality of limitations on campaign contributions but it would also take a strong stand against the conflicts of interest inherent in the interplay between lobbying for earmarks and supporting political campaigns." 22 Contingent Fees The Task Force notes that in the context of lobbying services, contingent fee arrangements may incentivize lobbyists to engage in any behavior necessary to achieve success and therefore payment. However, such arrangements may also enable some people to obtain representation that they could not otherwise afford. Accordingly, the Task Force proposed a ban on contingent fees only "where the object of the lobbying is to obtain an earmark, tax relief, or similar authorization of a targeted loan, grant, contract, or guarantee." 23 The Task Force justifies this recommendation by noting, "Where the lobbyist is seeking a narrow financial benefit for the client, the temptations for unethical behavior are probably at their greatest." 24 Additionally, the Task Force recommends that lobbyists should be required to attach a copy of any contingent-fee contract to the required disclosure forms, subjecting the arrangements to public scrutiny. Enforcement The Task Force notes the lack of effective enforcement efforts as a serious problem with the current state of lobbying laws. There is no follow-up on noncompliance letters, and no sustained effort to identify lobbyists who should register but have not. Thus, the Task Force proposes the use of an enforcement agency that "would be able to resort to proceedings such as rulemaking and administrative penalty actions." The Task Force recommends that enforcement responsibility rest with an executive agency, which would be held more politically accountable, and suggests the Civil Division of the Department of Justice. The Task Force s proposal separates civil and criminal responsibilities, and thus the enforcement unit would be able to consult with prosecutors when necessary, but would not be able to threaten regulated parties with prosecution on its own. Finally, the Task Force expresses hope that an improved and more rational set of rules will themselves lead to better enforcement in turn. 21 Final Report at Final Report at Final Report at Final Report at