UPDATE: Moorestown, NJ Reverses Recent Pay-to-Play Reforms
As we predicted here...“Moorestown council will undo recent campaign finance reforms, but one council member doesn't think the discussion should end there.”
Rethinking Pay-to-Play Legislation
We have previously used our little corner of "The Cloud" to blog about the unintended consequences that often present themselves when local governments respond to (already illegal) bribery scandals with increased pay-to-play legislation. What can appear at first blush to be a thoughtful means of preventing undue influence and increasing transparency frequently becomes stymied in legal loopholes and legislation impossible both for the regulated community to comply with and for regulators to enforce.
The Potential Consequences of Paying to Play: Birdsall Services Group
By David Fine and Mason Smith
New Jersey engineering firm Birdsall Services Group realized the full consequences of violating state pay-to-play laws on August 30th after a state court judge ordered that the contractor pay $1M in criminal penalties, the maximum allowable by law.
Under the state’s pay-to-play law, which many agree requires an overhaul, business entities are prohibited from making reportable contributions (in excess of $300) to elected officials prior to the award of certain government contracts and during their pendency. See N.J.S.A. 19:44A-20.3 through 20.25. In a scheme designed to work around these restrictions, Birdsall bundled several non-reportable $300 contributions written by individual employees, sent them to elected officials as one contribution, and reimbursed the employees with bonuses. The scheme stretched over six years, during which Birdsall contributed over $1M to various campaigns and netted millions of dollars in revenue on public contracts subject to the restrictions – contracts for which Birdsall was technically ineligible under state law.
Continue Reading...No More "Golden Goose" for School Bond Campaign Donors in the Golden State?
As frequent readers of this blog know well, California has always been considered a fairly restrictive jurisdiction when it comes to the regulation of pay-to-play politics. One large exception to that general rule, however, has been in the school bond campaign context, where financial institutions, attorneys and underwriters have traditionally been permitted to give sizable campaign contributions in support of potential bond initiatives that could benefit their bottom line.
San Diego Pay-to-Play in the Spotlight
Like a slow-moving train wreck, we simply cannot look away from the debacle stirred up by the sexual harassment allegations lodged against San Diego Mayor Bob Filner recently. Admittedly, those allegations rank pretty high on the "Public Official Being Gross" Scale; sufficiently high, in fact, to break John Oliver's "Eww-O-Meter". That's impressive in the modern political era when one considers the, uh, stiff competition Filner faces in the category. Here at the Pay-to-Play Law Blog, however, we are far too cerebral to focus on such prurient matters and are instead drooling salaciously at the brewing scandal currently hidden behind the icky one playing out before us everywhere.
Continue Reading...Still Wondering If The SEC Is Serious About Pay-to-Play Enforcement?
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To the tune of a $100,000 fine and five year debarment against an individual broker, the Securities and Exchange Commission let it be known – again – that it is very serious about putting teeth behind its new pay-to-play rules.
Yesterday, the SEC announced entry of a consent order by which former Goldman Sachs investment banker Neil Morrison accepted the largest individual penalty ever handed down for a federal pay-to-play violation of MSRB Rule G-37. What makes the settlement especially noteworthy are the fact that most of the "contributions" Mr. Morrison were alleged to have made were in the form of personal "in-kind" services to Massachusetts gubernatorial candidate Tim Cahill rather than just cash donations, the fact that Goldman Sachs had repeatedly warned its bankers about G-37 prior to Mr. Morrison's conduct, and the fact that Goldman self-reported the violation.
Continue Reading...Do SEC and MSRB Pay-to-Play Rules Scare Off Donations to Federal Candidates?
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As readers of this blog know well, the avowed goal of the SEC's pay-to-play framework is to protect the integrity of the public procurement process by preventing registered investment advisors from improperly influencing the award of state and local contracts for the management of public investment funds. On its surface, Rule 206(4)-5, which bars investment advisors from managing public investment funds in jurisdictions where their political contributions or the contributions of their “covered associates” exceed $150 per election to elected officials who directly or indirectly oversee such funds, seems well suited to this task. The problem is that many covered by these provisions – and their helpful in-house compliance officers – erroneously believe that SEC restrictions apply to contributions to ALL candidates. This is incorrect.
Continue Reading...Video Interview: Discussing Recent STOCK Act Developments with LXBN TV
Recent developments have brought once and future changes to the STOCK Act. Not surprisingly, these changes afford less transparency for public sector conduct and potentially far greater disclosure obligations for the private sector.
Moreover, the political intelligence community’s “close up”, which we warned about last week while wearing our best Little Orphan Annie dress, is upon us as the Securities and Exchange Commission just today announced issuance of the subpoenas we knew were “only a day away”.
I talk about it all with LexBlog here:
Is the "Political Intelligence" Community Ready for its Close Up? (It Better Be)
Some time ago, we alerted you to the STOCK Act and warned purveyors of "political intelligence" to prepare for some "enhanced scrutiny". Think of it as akin to "enhanced interrogation" without the need for towels. (And for those for whom a talking head is worth a thousand words, I discuss all this here courtesy of my good friend Colin O'Keefe at LexBlog).
For those new to the issue, the Stock Act was a reaction to news reports appearing to demonstrate that some members of Congress and their staff were benefitting from stock trades based on nonpublic information. Specifically, as we wrote previously, the bill affirmed that Members of Congress are not exempt from insider trading laws and mandated comprehensive online disclosure of trading activities by Congress. Parallel language in the bill designed to mandate enhanced disclosure by "political intelligence" firms died in the House of Representatives.
In an election year, a bill like the STOCK Act made a good deal of sense. This year, it would appear, not so much. In case you missed it, the Senate recently slipped language through in the dark of night gutting the Act's application to staffers and eliminating the requirement that mandated disclosures actually be searchable online. In a nice touch, the White House quietly announced that the President had signed the bill limiting the STOCK Act on the day your taxes were due. Commentators from the Sunlight Foundation to OpenSecrets to Jon Stewart voiced outrage.
Just Call It The "Pay-to-Play" Corridor
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When one hears about state pay-to-play reform efforts underway along the “Northeastern Corridor”, it’s only natural to look first to the news wires in New Jersey, Connecticut and New York. After all, those jurisdictions have proven themselves to be the leaders of the pack when it comes to pay-to-play advancements, or at least reformist, pay-to-play rhetoric. In recent weeks, however, we have begun to see momentum building behind new pay-to-play legislation in the neighboring jurisdictions of Pennsylvania and Rhode Island. Depending on the outcome of these new efforts, perhaps it’s time that we drop the directional nomenclature and simply start calling the entire region the “Pay-to-Play Corridor”.
