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

Following our coverage here and here about Trenton Mayor Tony Mack’s unsuccessful efforts to countermand a pay-to-play bar imposed by his City Law Director, anonymous sources are leaking that Mayor Mack himself is now under Justice Department investigation for pay-to-play and election law disclosure violations.

The Trentonian is reporting that its sources have confirmed that Trenton Mayor Tony Mack is being identified as a “person of interest” in an FBI probe “focused on alleged pay-to-play violations, fraudulent Election Law Enforcement Commission reports, and even a June 2010 event held by Atlantic City political insider Joseph Jacobs at his Linwood shore home.”

At present, the main players in this drama are not speaking. Bloomberg News is similarly following this story and to date has been unable to get anyone at the Mayor’s office or at the FBI to comment on the leak.

CHEAP SHOT ALERT. The following embed is a gratuitous cheap shot that I lack the self-discipline or willpower to omit.

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Much has been written and said about the SEC’s new pay-to-play rules, which will go into effect on March 14.

Recent commentary has generally focused on the lack of certainty to the business community on how these rules will be applied, as well as the administrative difficulties that will likely arise as the rule first goes into effect. RealClearPolitics has an interesting new take on the regulations, which focuses on how this could impact the 2012 Republican Presidential Primary.

More on that later. As a reminder, the SEC’s new rule has three key elements:

1) It prohibits investment advisors from providing advisory services for compensation—either directly or through a pooled investment vehicle—for two years, if the advisor or certain of its executives or employees have made prohibited political contributions to an elected official in a position to influence the selection of the advisor;

2) It prohibits advisory firms and certain executives and employees from soliciting or coordinating campaign contributions from others (a practice referred to as “bundling”) for any elected official in a position to influence the selection of the adviser. It also prohibits solicitation and coordination of payments to political parties in the state or locality where the adviser is seeking business; and

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We brought Trenton to your attention here just a few days ago to highlight the potential pitfalls of “ban first, inquire later” pay-to-play enforcement. At the time, we observed that Trenton Mayor Tony Mack’s effort to rescind a pay-to-play ban was “procedurally murky”. The Trentonian apparently agreed and reported on the issue complete with a YouTube embed of Elvis singing “Suspicious Minds” as a musical accompaniment to its call that “[t]here is no reason for the City of Trenton to continue with another embarrassing decision made by a city council that lacks backbone.”

This call precipitated two immediate effects. First, it instilled great personal shame in myself for having failed to this point to accompany my entries with Elvis embeds. I resolve to remedy that.

Second, public pressure such as that brought to bear by The Trentonian has caused the law firm in question, Cooper Levenson, to terminate its contract with the city over the issue. A copy of the termination letter can be found here. Whether this result was warranted or appropriate, one should bear this little tune in mind before contributing in Trenton.

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The only consistent element one can discern from state and local pay-to-play enforcement is that municipal approaches to enforcement vary widely. Local legislation and enforcement is driven far more by politics and past scandal than a desire to afford the regulated community with consistent national application. Recently, this blog engaged in something of a back and forth with the public interest group CityEthics.org over realistic approaches to pay-to-play enforcement. Trenton, New Jersey’s City Hall and Pennsylvania’s House of Representatives now offer the most recent embodiment of these tensions.

Pennsylvania’s scandals of choice in recent years have involved allegations that the State contracting employees -- from the Governor on down -- have been all too cozy with political allies and former employees in the awarding of no-bid contracts; political allegations that date back several years. It should not be surprising, therefore, that the Pennsylvania House State Government Committee recently passed proposed legislation by a unanimous vote that focuses on the conduct and relationships of state procurement evaluators rather than on the conduct of those seeking state contracts.

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On March 14, the SEC's pay-to-play rule will come into effect and there is growing concern that the rule's exemption for accidental violations will result in an administrative hailstorm. The rule allows an advisor to apply to the SEC for an order exempting it from application of the two-year ban. Under such provision, the SEC can exempt advisers from the time out requirement where the adviser discovers triggering contributions after they have been made, and when imposition of the prohibition is unnecessary to achieve the rule's intended purpose. An exemption would be based on the facts and circumstances of each applicant, including the SEC's consideration of factors such as whether the adviser had a compliance program in place.

The SEC estimated that seven advisers would apply for the exemption each year, a number that several attorneys have speculated as too low given the number of investment advisers affected. On the other hand, the SEC utilized FINRA's data on exemption applications to calculate the estimate, and investment advisers have had several months to digest and prepare for the rule. Either way, whether March will come in like a lamb or a lion for the SEC is anyone's guess.

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