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New DC Pay to Play Provision Clears Initial Hurdles Before City Council – December 2018

It may be the holiday season, but government officials never have any issue with delivering pay-to-play coal in the stockings of the regulated community.

This year’s Grinch – the DC City Council, which has for years been looking for a way to tackle the purported “pay-to-play” culture that plagues city government in the District of Columbia. While past attempts may have fallen short, increased attention because of recent polls and studies that call into question the conflict of interest policies of the city and its elected officials have lit a fire under the Council to finally take action, even if many in the business community view the action as unnecessary and incapable of reigning in the identified problems.

On Tuesday, November 20, public hearings were held to debate proposed bills related to campaign finance and pay-to-play rules. One of the bills under council review, the Campaign Finance Reform Act of 2017, written by Councilmember Charles Allen (D – Ward 6), moves to prohibit businesses which hold over $250,000 in city government contracts from being able to contribute to political campaigns. The bill would also increase authority of the Office of Campaign Finance by making it independent of the Board of Elections and requiring increased disclosure by independent expenditure committees within the City. The bill also incorporates matters of concern from previous councilmembers’ proposals and is backed by D.C. Attorney General Karl Racine.

In addition to the above restrictions, the proposed legislation also prohibits donations from prospective municipal contractors during the formal bidding process. This restriction applies both to corporate donations and to senior executives of such corporations.

After careful consideration, the legislation passed an initial voting hurdle, with 11 of 13 City Councilmembers voting in favor. Mayor Muriel Bowser has declined to reveal her position on the legislation, although her administration has been under continued scrutiny for receiving large contributions from city vendors. Earlier in 2016, the head of D.C. Department of General Services resigned on the pretext that he was pressured by City Administrator Rashad Young to direct a contract to Fort Myer Construction, a huge campaign donor to the Mayor and other elected officials.

Later this month, the Council will revisit the legislation to take a second vote. If it passes, the bill will find itself on Mayor Bowser’s desk, with the possibility of a veto in play. We shall see. In the meantime, the Pay-to-Play Law Blog will continue to keep tabs on the progress of the bill and provide the regulated community with useful updates as they occur.

New DC Pay to Play Provision Clears Initial Hurdles Before City Council – December 2018

Montana Governor Signs Executive Order Seeking To Unmask Contractor Contributions to 501(c)(4) Nonprofits

Readers of this blog know that we don’t often find ourselves discussing pay-to-play happenings emanating from the Mountain Time Zone. In 2018, however, nothing surprises the Pay-to-Play Law Blog team – not even the recent news that Montana is putting into a place an onerous, and constitutionally questionable, disclosure obligation for contractors seeking to do business with the state. The new provision – put into place via Governor Steve Bullock’s new executive order mandates that prospective state vendors in Montana publicly disclose certain organizational contributions they make to 501(c)(4) non-profit organizations. The unprecedented move was announced on June 8th by Bullock, who appears to be carving himself out a strong transparency niche among what is anticipated to be a crowded field for the 2020 Democratic presidential nomination. We’re not sure how big a niche that actually is in the electoral sense, but can’t blame a Governor for trying.

Under the new order, which goes into effect October 1, 2018 and does not apply to existing contractors, recipients of goods contracts over $50,000 and services contracts over $25,000 will be required to disclose contributions exceeding $2,500 that they have made to 501(c)(4) social welfare organizations in the two-year period prior to bid submission. These organizations, colloquially referred to as “dark money” groups by those in the transparency community, are allowed to shield their donors from public scrutiny under federal law due to their nonprofit tax status. Such organizations (like all corporations) are prohibited from making direct political contributions to federal, state and local candidates in Montana.

Since the 2010 Citizens United decision, however, such groups have been free to expend funds on independent expenditure and other election-related communications in the state, so long as such expenditures are not coordinated with Montana candidates or political committees. The connection between such independent political activities by non-profits and the appearance of improper influence over state contracting decisions seems fairly tenuous (particularly when the contributions being disclosed are not “behested” payments encouraged by public officials), but groups like the Center for American Progress are nevertheless hailing the move as a win for Montana’s citizens.

The announcement by Governor Bullock opens up what will likely be a new front in the pay-to-play disclosure battle between the regulated community and public officials. Nonprofits in jurisdictions such as California and New York are used to battling it out with state attorney generals over the limited disclosure of 501(c)(4) donor information to charitable regulators in the state, but businesses seeking and holding state contracts are generally not used to sharing such otherwise private information – particularly with the public at large. Contractors are familiar with candidate and PAC contribution disclosure in certain jurisdictions, but social welfare group donation reporting represents a whole new frontier of mandated disclosure

In just the first few weeks since the executive order’s release, it has seen supporters and detractors alike. Bullock’s backers maintain that the reporting requirement is just a good-government reform designed to ensure fair and transparent elections and contracting. Opponents, however, have highlighted the speech chilling impact of such a disclosure obligation and criticized how it undermines the reasonable expectation of privacy for donors to social welfare organizations.

As we continue through the summer and move closer to implementation of the order on October 1st, we here at Pay-to-Play Law Blog will be sure to keep the regulated community apprised of any updates or tweaks in the Treasure State. Likewise, we’ll be sure to keep everyone apprised of any jurisdictions looking to make an even bigger splash in this new pay-to-play pool after watching Montana gently dip its toe in the water.

 

Thanks to Claire McDowell for her assistance with this post.

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Montana Governor Signs Executive Order Seeking To Unmask Contractor Contributions to 501(c)(4) Nonprofits

San Francisco’s Potential Anti-Corruption and Accountability Ordinance Includes New Compliance Provisions That Venture Beyond Standard Pay-to-Play Laws

For those of our readers with a latent East Coast bias or who have just been preoccupied with the latest political drama emanating from Washington, you may have missed the recent flurry of activity in the Bay Area that appears to be threatening the City of San Francisco’s efforts to pass a controversial ethics reform bill. The proposed Ordinance, known as the Anti-Corruption and Accountability Ordinance (ACAO), takes an aggressive tact on regulating political engagement within the City and seeks to implement a series of unique compliance obligations that venture beyond the standard approaches to eliminating pay-to-play politics.

At present, the ACAO has proven to be more of a political football than a legislative success story. The Chair of the City’s Ethics Commission recently stepped down following the Commission’s failure to approve its placement on the June primary ballot for voter consideration.  Despite this very public disappointment for backers of the measure, a motion has recently been introduced for the ACAO to be taken up for additional consideration by the Commission on April 3rd.  A similar request has been made to the San Francisco Board of Supervisors.  Given the political dynamics at play and the controversial nature of the ACAO in general, passage (or even a vote) on the ordinance next week is less than a certainty.  Some of its prospective contents, however, bear further discussion.

There are a litany of interesting regulations and restrictions included in the ACAO, including disclosure obligations related to so-called “behested payments” made on behalf of public officials and a new prohibition on certain political contributions made by entities with interests in specified land-use decisions.  But a recently inserted measure that would require large donors to state-level independent expenditure committees (Super PACs) to disclose certain personal business investments in San Francisco is catching our eyes.  This measure represents a novel disclosure mechanism obligating those wishing to politically engage through state-level Super PACs to open up their private business portfolio to public scrutiny.

The measure, sponsored by San Francisco Board of Supervisors Member Aaron Peskin, would require individuals who contribute more than $10,000 to Super PACs to disclose their financial investments of $10,000 or more in San Francisco businesses.  Such individuals would also need to report any businesses in San Francisco from which they receive compensation.   These disclosures would be required within 24 hours following the triggering contribution.

Supervisor Peskin’s proposal was met with at least some skepticism by the Ethics Commission, which questioned the constitutionality of such a disclosure obligation and the heavy regulatory burden such a provision would place on both donors and City compliance officials. Certain donors, the Commission noted, could have thousands of investments in the city, making compliance with the Peskin measure expensive and impractical.  The Commission also appeared to express some doubt as to the overall public policy value of implementing such a new requirement, which seems fairly disconnected from the stated goal of rooting out pay-to-play politics.  We here at the Pay-to-Play Law Blog would tend to agree with such skepticism.

Existing San Francisco ethics rules, which include a pay-to-play provision that prohibits contractor contributions to elected officials who have oversight responsibilities of those contracts, already seem well situated to curb the sort of unsavory political engagement elected officials and voters are most concerned about.  When paired with California’s additional disclosure requirements for entities that make contributions of $250 or more to elected officials before whom the entities have official business, it is somewhat difficult to find the added compliance value of the contemplated measure.  As our readers know well, however, that’s no true predictor of political passage in the pay-to-play context.

As April approaches, we here at Pay to Play Law Blog will continue to monitor the ACAO’s progress in San Francisco and its potential impact on pay to play compliance and political engagement within the City. Those in the regulated community with Bay Area business interests should stay tuned.

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San Francisco’s Potential Anti-Corruption and Accountability Ordinance Includes New Compliance Provisions That Venture Beyond Standard Pay-to-Play Laws