Pay to Play Law Blog : Pay to Play Lawyer & Attorney : Bribery, Campaign Contributions

Critics of "pay-to-play" restrictions have long come from throughout the political spectrum, raising concerns ranging from free speech to ballot access. But the recent "pay-to-play" proposals in Newark, NJ have been criticized by some public officials for a rather novel reason: they can't pick up the phone and call Oprah for a contribution like their popular Mayor, Corey Booker, can.

While the proposed legislation in Newark is in its infancy and is likely to change, it appears to be aimed at limiting contributions from local redevelopment companies. Specifically, the Star Ledger reports that the legislation's current language, "would bar contributions to city candidates from redevelopers, their subcontractors and their consultants starting the moment there is interest in an area for redevelopment."

This concept is not a novel one, particularly in New Jersey, which has arguably the toughest "pay-to-play" laws in the country. In fact, numerous localities in New Jersey have similar laws on the books. And as we detailed previously, Governor Chris Christie has proposed a wave of robust reforms that would further regulate the political law environment in the Garden State.

What is unique here, however, are claims such as the ones contained in the Star Ledger article:

As "pay-to-play" legislation limiting campaign donations from local redevelopers wends its way through City Hall, some city leaders are saying the proposed fundraising restrictions would create an unfair playing field for candidates who don’t have Oprah Winfrey on speed dial.

"I am not a rock star councilwoman," said at large council member Mildred Crump this week. "We have a rock star mayor."

Indeed, candidates without nationwide networks would be more directly impacted by the current Newark "pay-to-play" proposals than a national figure like Mayor Booker. Yet another reason for some to dislike this sort of piecemeal "pay-to-play" regulation. Nonetheless, reports on the ground indicate that passage of some form of this legislation is likely.

In any case, New Jersey continues to be a focal point for developments in the "pay-to-play" arena. We will monitor such developments closely as the end of 2010 nears.

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One of the most prominent public displays of the once secretive world of pay-to-play in recent history surrounded the California Public Employees' Retirement System (affectionately referred to as “CalPERS”). As many will recall, CalPERS’ board of directors was subjected to significant scrutiny as a result of investigations in New York that demonstrated an all-too comfortable secret relationship between placement agents, investment firms, and public retirement systems. In California, CalPERS came to learn that several placement firms led by a former board member had received millions of dollars in service fees for helping certain investment firms land contracts to manage their funds.

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Pay-to-play law blog author Stefan Passantino, has recently co-authored the "Handbook on Corporate Political Activity: Emerging Corporate Governance Issues," published by The Conference Board. As a co-author, Mr. Passantino draws on some of the experiences commented upon in this blog and offers an overview of the legal rules and standard practices related to political activity, as well as a discussion of internal oversight of political spending. Like the blog, the Handbook focuses on the challenges confronting corporations and other groups looking to comply with the myriad of inconsistent and ever-changing regulations affecting the Political Law space and offers some compliance best-practices from some of the largest corporations in the country. Also, like this blog, IT'S FREE!

Click here for a preview of the Handbook.

The "Handbook on Corporate Political Activity" addresses:

• The legal framework for understanding political giving, including an overview of federal/state pay-to-play laws
• How corporations can monitor the political engagement and policy positions of the trade associations to which they belong 
• Standards of director conduct that can potentially be applied to political activity 
• The rewards of a robust political engagement program, and the risks if such programs aren't managed well 
• Examples of companies that have successfully managed political engagement programs 
• The importance of embedding political-spending decisions into a corporation's ethical framework

To download a complimentary copy of the "Handbook on Corporate Political Activity" by The Corporate Board, go to http://bit.ly/aJW1U6.

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The Los Angeles City Council is expected to approve a recommendation to place a measure on the March 2011, Los Angeles municipal ballot banning bidders on LA contracts from making contributions or fundraising for City officials or candidates. The recommendation was made by a unanimous vote of the Los Angeles City Ethics Commission earlier this month.

Interestingly, the LA City Ethics Commission chose to enhance the bite of the proposed ban on bidder contributions by adding further recommended restrictions. The Commission recommended that the proposed ban:

• Apply the ban to bidders and their agents, their subcontractors, and their subcontractors’ agents and require bidders to disclose these agents and subcontractors in the bid documents. A common drafting, enforcement (and ultimately compliance) challenge with pay-to-play legislation surrounds the casting of the “agent” net. Here, when one examines the staff recommendations - which were ultimately adopted - the net is cast to ban contributions by to the following agents of bidders: the bidder’s Board chair; its president; its chief executive officer; its chief financial officer; its chief operating officer; any individual who holds an ownership interest of 20 percent or more; and any individual authorized in the bid to represent the bidder before the City. That 20 percent ownership piece becomes a pretty widely-cast net and one that has seen successful constitutional challenges in other jurisdictions.

• Apply the ban from the date a bidder submits a bid until one of the two following dates: a) For bidders who are not awarded the contract, the date the successful bidder signs the contract; and b) For bidders who are awarded the contract, the date 12 months after they sign the contract.

• Apply the ban to any contract (including a lease, franchise, permit, license, grant, amendment, change order, renewal or extension) that is required by law to be approved by an elected City official.

• Apply the ban to both personal contributions and fundraising activity and apply the same restrictions to lobbying entities that are applied to bidders. Again, without much fanfare, the proposed ban extends not just to “bidders” but also to any lobbyist. In our experience, lobbyists dance in the aisles when legislation such as this is passed and incumbents come to learn that their campaign coffers pay a steep price for a “throw-in” expansion such as this.

• Apply the ban to a City official who would solicit or receive contributions or fundraising proceeds from a person that the official knows or has reason to know is a person subject to the ban. Well, THAT should serve as a particular little compliance nightmare for officials and the unfortunate lawyers who work to keep them on the straight and narrow path. The opportunity for inadvertent violation and second-guessing is rampant with language such as this.

• Apply the ban to contributions to and fundraising for any City committee controlled by an elected City official or candidate for elected City office.

• Require invitations for bids to include notice of the ban. This provision will require bidders to certify that they will comply with and inform their agents and subcontractors of the ban.

• Prohibit persons who violate the ban from contracting with the City for four years following the violation. Ouch. That is a steep price to pay for an inadvertent violation. Does that mean I can buy a 20% ownership interest in a competitor and effectively put them out of business with a $10 contribution?

Interestingly, several news reports have noted that while “law firms, taxicab companies, airport concessionaires and construction firms doing business with the city get a special rule against padding the pockets of city officials”, one group is conspicuously absent from the “Rolls of the Regulated”: developers. The reason for the omission has nothing to do with the power or wealth of developers, said Yusef Robb, spokesman for City Council President Eric Garcetti, but rather because to include such a group would be “extremely complex”. 

I buy that. Do you? Let’s just chalk it up to bad timing that the same day that Robb’s quote hit the LA Times, this article ran as well.

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