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DC Circuit Court of Appeals Provides Major Support For the Constitutionality of Pay-to-Play Laws . . . And Probably Makes an Executive Order Mandating Contractor Disclosure of Political Spending Likely

Ever since the US Supreme Court’s landmark rulings in Citizens United and McCutcheon, significant questions have been raised (mostly by real scholars but also by agitators and pot-stirrers such as myself) as to whether pay-to-play laws – based as they are on appearances of potential corruption and not direct bribery – are constitutional.   The DC Circuit has now weighed in to provide significant legal and factual justification for the constitutionality of laws limiting personal campaign activity in order to prevent the appearance of corruption and to promote the “merit-based administration” of our government (which is only a GRADE 3 oxymoron, falling as it does on the scale between “pretty ugly” and “jumbo shrimp”).

The case in question is Wagner v. FEC in which a number of federal contractors brought free speech and associational challenges to a federal law prohibiting their planned contributions to federal candidates and political parties.  Federal law (2 USC 441c) prohibits government contractors from making campaign contributions to candidates, political committees, or political parties. 2 USC 441b imposes similar restrictions on corporations, national banks, and labor unions.  Of most importance to those of us tasked with pay-to-play compliance is not that 2USC 441c was upheld, that law has been on the books a long time and really only impacts individuals who directly contract with the federal government (in contrast with the myriad of people who work as employees of government contractors).  The Court also did not examine the issue of whether federal contractors may give to independent expenditure groups (SuperPACs).  What is significant about Wagner is the fact that the DC Circuit appears to contravene the US Supreme Court’s analysis in McCutcheon to hold that federal and state governments may enact pay-to-play laws admittedly abridging speech and associational rights in order to assure the public believes that government servants are not corruptible and are fulfilling their public duties “effectively and fairly”, free of “improper influence or corruption”.  (Wagner, Slip Op. 12-15).

Other federal courts have not agreed with the DC Circuit’s reading of McCutcheon to allow such latitude:

Our Supreme Court has made clear that only certain contribution limits comport with the First Amendment. Since contributing money is a form of speech, preventing quid pro quo corruption or its appearance is the only governmental interest strong enough to justify restrictions on political speech. Citizens United v. FEC, 558 U.S. 310, 357-61 (2010). More recently in McCutcheon, the Court concluded that “the possibility that an individual who spends large sums may garner influence over or access to elected officials or political parties . . . does not give rise to such quid pro quo corruption.” Id. at 1438. In effect, it is only direct bribery—not influence—that the Court views as crossing the line into quid pro quo corruption.

New York Progress and Protection PAC v. James Walsh, 13 Civ. 6769, S.D.N.Y, April 24, 2014, Slip Op. 3.

It will be interesting to see whether the Supreme Court reads its own opinion in McCutcheon as the DC Circuit does.  Recent reversal statistics of DC Circuit cases might indicate that the DC Circuit’s reading is not a slam dunk.

One civil servant who might not be inclined to wait for additional guidance from the Supreme Court on the issue is the one who resides at 1600 Pennsylvania Avenue.  As we have written previously, the White House is very serious about mandating contribution and issue advocacy disclosure obligations on federal contractors.  There are many who now believe that the Wagner decision will encourage President Obama to issue a long-awaited Executive Order mandating contractor disclosure of all political spending.  Recent reports by The Brennan Center that in the 2014 cycle, the top 25 federal contractors all made disclosed contributions through their PACs and, in total, gave more than $30 million are sure to spur additional calls for mandatory contractor disclosure.

DC Circuit Court of Appeals Provides Major Support For the Constitutionality of Pay-to-Play Laws . . . And Probably Makes an Executive Order Mandating Contractor Disclosure of Political Spending Likely

Is it Illegal “Pay-to-Play” for a Government Contractor or National Bank to Contribute to a Super PAC?

A new complaint was filed with the Federal Election Commission yesterday alleging that Chevron USA violated campaign finance laws and corollary “federal pay-to-play” laws by contributing $2.5 million to the Congressional Leadership Fund, a Super PAC tied by press reporting and former staffers to House Speaker Boehner. While the FEC complaint was filed by organizations likely more interested in “poking the bear” because of Chevron’s environmental footprint than its politics (Public Citizen, Friends of the Earth, Greenpeace, and Oil Change International, hereinafter referred to as “The Usual Suspects”), the complaint has facial merit and needs to be on the radar screen of government contractors, national banks, and foreign nationals everywhere.

The logic of the complaint is relatively straightforward and not new. Federal law (2 USC 441c) prohibits government contractors from making campaign contributions to candidates, political committees, or political parties. 2 USC 441b imposes similar restrictions on corporations, national banks, and labor unions. “Chevron”, as a government contractor, the complaint alleges, thus violated federal law by making a $2.5 million contribution to the Super PAC Congressional Leadership Fund (technically, an “independent expenditure political committee”).

At issue is whether the landmark Supreme Court opinion in Citizens United v. FEC has changed the rules with regard to contributions to independent expenditure committees (one of too many law firm “client alerts” on the meaning of Citizens United can be found here). There has not been a case addressing this precise issue squarely since that case. Arguably, the same United States Supreme Court which found corporate and labor union finance of political speech to enjoy First Amendment protection notwithstanding federal law to the contrary will likely extend such protections to government contractors, national banks and potentially foreign nationals notwithstanding the laws referred to above.

The Usual Suspects, in their complaint against Chevron, allege as a matter of fact that “The Federal Election Commission has appropriately interpreted the prohibition against contractor contributions to “any political party committee, or candidate for public office or to any person for any political purpose or use” to include political committees and super PACs involved in Federal elections.” (The Usual Suspects Complaint, p.3, emphasis added). This might be news to three of the six commissioners of the Federal Election Commission.

It is true that a Democratic commissioner of the FEC testified to this effect before Congress in a House Oversight hearing. It is also true that the FEC, in a footnote I am convinced the Republican Commissioners failed to catch before publication of an explanation of FEC policy, wrote “Foreign nationals, government contractors, national banks and corporations organized by authority of any law of Congress cannot contribute to … separate [independent expenditure] accounts.  §§ 2 U.S.C. 441b, 441c, and 441e.”

It is also true that the Usual Suspects’ complaint cites a prominent law firm blog for this same proposition although, if one reads the actual blog post cited, one gains a new appreciation for the phrase “selective, out-of-context, quoting”.

Chevron argues in its own defense that the “Chevron” that made the contribution is a distinct company from the “Chevron” which contracts with the government. I guess I’d argue that too were I Chevron, but this fight will ultimately be won or lost at the Altar of the First Amendment.

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Is it Illegal “Pay-to-Play” for a Government Contractor or National Bank to Contribute to a Super PAC?

Pay-to-Play Developments to Watch For in 2013: Is Federal Lobbyist Pay-to-Play on the Table?

In a post I wrote for the Politics, Law and Policy Blog, I noted that change is coming to Washington in the form of an anticipated overhaul of federal election and tax laws. Federal lobbyists – and those who employ them – should take particular note of an initiative launched this week by an organization known as “United Republic”. This group represents the tip of a grass-roots spear pointed at Washington and no one can argue they have a political agenda. Any organization with as diverse a Board of Advisors as United Republic can boast (representing as they do Wall Street, the Occupy Movement, Jack Abramoff, former FEC Chairman Trevor Potter, academics, nonprofits and political operatives) defies partisan categorization.

A little-noticed element of United Republic’s recent proposal – termed the American Anti-Corruption Act – seeks to impose elements of municipal pay-to-pay prohibitions on the federal lobbying community and the Congress they woo. While UR’s proposal has a certain emotional charm, one must be mindful of the myriad unintended consequences and compliance challenges that accompany all feel-good populist proposals.

First, the specifics. To counter a perceived lack of transparency in federal lobbying, the AACA proposes federal legislation amending the Lobbying Disclosure Act to expand the definition of the term “federal lobbyist” to capture greater “consulting” activities by insiders (referred to derisively by United Republic as “historical advisors” – cheap shot United Republic). The proposal on the table is to accomplish this by defining “lobbying” as

(1) Two lobbying contacts or providing strategic advice to lobbying efforts or directing or supervising the provision of strategic advice to lobbying efforts, and (2) 12 hours or more spent [per quarter?] engaging in lobbying activities.

Once the universe of “lobbyists” has been expanded, United Republic proposes implementation of a pay-to-play prohibition with severe restrictions on the ability of those lobbyists to contribute to, or raise money for, Members of Congress. The proposal calls for a $500 cap on lobbyist contributions, a ban on lobbyist bundling, and a requirement that lawmakers recuse themselves from committee hearings if they have received a contribution from a lobbyist or a lobbyist client that has a particular interest in that hearing. Finally, the proposal seeks to extend the “government contractor” ban on contributions to “the lobbyists, high-level executives and government relations employees and PACs of federal government contractors.”

It is certainly conceivable that legislation could be drafted to accomplish these objectives which would survive first amendment scrutiny. Less clear is whether such legislation – however well meaning and however grounded in legitimate concerns – makes for good public policy when one considers the compliance burden such legislation would impose.  The devil, as they say, is in the details. Does the definition of “high level executives” extend to spouses, siblings, pets, and anyone within two degrees of separation on LinkedIn? This blog is replete with examples of the challenges public interest “bans” impose on the regulated community when the rubber actually hits the road.

This will be the battlefield in the coming year. Keep your head on a swivel out there.

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Pay-to-Play Developments to Watch For in 2013: Is Federal Lobbyist Pay-to-Play on the Table?

The White House is Not Giving Up on Federal Contractor Pay-to-Play

The White House is very serious about mandating contribution and issue advocacy disclosure obligations on federal contractors.

We have reported several times on the various tell-tale signs, tea leaves and trial balloons that would lead one to believe that the White House is very serious about mandating disclosure by executive order. Much of the drama stemmed from a draft Executive Order that was floated last April and didn’t appear to get very far.

Most notably, the executive order under consideration would have required “every contracting department and agency” to “require all entities submitting offers for federal contracts to disclose certain political contributions and expenditures that they have made within the two years prior to submission of their offer” including:

(a) All contributions or expenditures to or on behalf of federal candidates, parties or party committees made by the bidding entity, its directors or officers, or any affiliates or subsidiaries within its control; and

(b) Any contributions made to third party entities with the intention or reasonable expectation that parties would use those contributions to make independent expenditures or electioneering communications.

Congress responded with language inserted into the 2012 Defense authorization bill and again in the December 2012 omnibus spending bill.

With apologies to Jack Nicholson, they’re baaaack . . .

On Monday, Senator Susan Collins of Maine announced on the US Senate Committee on Homeland Security and Government Affairs website that the White House Fiscal Year 2013 budget seeks to reverse the prohibition on such requirements included in the Fiscal Year 2012 omnibus appropriations bill.

Sure enough, she’s right. Check it out yourself. The 2013 budget seeks to remove Section 743 which contained the prohibition against requiring such disclosures.

Said Senator Collins: “What possible good can come from linking political information to a process which must be grounded solidly and unequivocally on providing the very best value to American taxpayers?  It is unfathomable why this Administration would consider a move that would, at worst, corrupt the process, and at best, create a perception that political beliefs of private citizens is to be considered in selecting the winners and losers among businesses vying for federal contracts.”

I’m guessing that’s a rhetorical question.

Contractors, lock your doors. This ain’t over yet.

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The White House is Not Giving Up on Federal Contractor Pay-to-Play

McKenna Long & Aldridge Launches “Politics, Law & Policy” Blog

The team here at Pay to Play Law Blog wants to welcome a phenomenal group of commentators to the McKenna Long & Aldridge blogosphere.  Last week, MLA launched its newest blog, “Politics, Law and Policy,” authored by a bipartisan group of attorneys and public policy advisors in the firm’s nationally-recognized government affairs practice.  The blog will serve as an important resource for those seeking analysis and resources on the impact of federal and state politics and public policies on a wide range of issues and debates, including health care, energy, infrastructure, taxes, transportation, cybersecurity, and campaign and election compliance.

Led by  Eric Tanenblatt, head of MLA’s National Government Affairs practice, the MLA Politics, Law and Policy blog follows law and public policy developments and political campaigns at the state and national levels.  It features legal, political and policy insights from attorneys and professionals who have held public office and served as their advisors, including governors, mayors, ambassadors, attorneys general, congressional members, and senior administration officials.

Contributors to the Politics, Law and Policy blog from MLA’s Government Affairs practice include Speaker Emeritus Mark Burkhalter (R-GA); Cindy Gillespie, co-chair of the firm’s Health Insurance Exchange team and former special counselor to Massachusetts Governor Mitt Romney; and Governor Howard Dean (D-VT), former chair of the Democratic National Committee.  Other contributors include: former U.S. Ambassador to Canada Gordon Giffin; former Georgia Attorney General Thurbert Baker; former Washington, DC Mayor Anthony Williams; and former assistant to President William J. Clinton, Keith Mason to name a few.

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McKenna Long & Aldridge Launches “Politics, Law & Policy” Blog

Transparency Advocates Look to the SEC to Accomplish What Congress, The White House, and the IRS To-Date Have Not

It has been almost exactly 19 months since the Supreme Court handed down its controversial decision in Citizens United v. Federal Election Commission, but the plot continues to thicken as those favoring mandatory corporate disclosure of political activities look for a non-judicial fix to the ruling.

To date, the fields are littered with detritus of failed efforts at identifying a mechanism that compels corporations and wealthy individuals to disclose all exercise of their newly-recognized First Amendment freedoms. This blog has previously reported on failed efforts to mandate such disclosure in Congress, as well as the Obama White House’s proposed executive order circumventing both Congress and the Supreme Court.  To achieve these same goals, groups such as Democracy21 and the Campaign Legal Center have promoted changes to the Internal Revenue Code, while the American Bar Association has encouraged Congress to make pertinent amendments to the Lobbying Disclosure Act.

Our latest contestants in this Sisyphean legal drama are a united band of like-minded law school professors looking to utilize the Securities and Exchange Commission (SEC) as a vehicle to counter the perceived negative impact of Citizens United. It appears this group has concluded that the imposing moniker “Committee on Disclosure of Corporate Political Spending” (the “Committee”) sounds more authoritative than “a united band of like-minded law school professors”. I think I agree with them on that.

Under either moniker, this group has filed a petition for rulemaking with the SEC requesting draft regulations that require public companies to disclose to shareholders information regarding the use of corporate resources for political activities. The main gist of its petition – stricter SEC disclosure rules are necessary to ensure that corporate political activities are subject to the appropriate level of shareholder scrutiny in the wake of Citizen’s United. The Committee bases this conclusion on the following contentions:

First, it asserts that there is strong data indicating that public investors have become increasingly interested in receiving information about corporate political spending. To support this statement, the like-minded professors reference a 2006 Mason-Dixon poll indicating that 85% of shareholder respondents held that “there is a lack of transparency surrounding corporate political activity.” They also make note of a FactSet Research Systems analysis that indicates 50 out of 465 shareholder proposals appearing on public-company proxy statements in 2011 involved political spending issues.

Second, the Committee grounds its request in the belief that there is increasing momentum toward political spending transparency in the corporate community, as evidenced by the growing number of large public companies that have voluntarily adopted policies requiring disclosure of their political expenditures. To this point, and perhaps undercutting the urgency of their call to action, the professors highlight a study by the Center for Political Accountability indicating that nearly 60% of S&P 500 companies voluntarily provide shareholders with information regarding corporate spending on political activities.

Third and finally, the Committee bases its request on the idea that stricter SEC regulation of corporate political disclosure will lead to better corporate oversight and accountability mechanisms. At present, the professors assert, shareholders are unable to hold directors and officers accountable when they spend corporate funds on politics in a way that departs from the interests of the company. From the Committee’s point of view, this is due to the fact that public information regarding corporate political activity is out of the average shareholder’s reach (because it is either dispersed among too many regulatory bodies or not gathered at all). By requiring companies to disclose to one central entity (the SEC), it is the professors contention that there will be better information available to shareholders, and in turn, a subsequent improvement in corporate accountability.

Based upon these assertions, the Committee’s petition recommends that the SEC initiate a rulemaking project to adopt a series of regulations that mandate periodic disclosure of corporate political spending. Whether the SEC will take heed of the Committee’s request remains to be seen, but the petition itself has already begun to draw a mix of criticism and support from members of the business, legal, and academic communities.

For example, just a few days after the Committee’s petition was submitted, Keith Paul Bishop – the former California Commissioner of Corporations and an adjunct professor at the Chapman University School of Law – filed a response letter with the SEC refuting the professors’ contentions and requesting that no such rulemaking project be initiated by the Commission. In his response, Bishop contends that the Committee’s proposal will only add to the already extensive public disclosure burden faced by reporting companies and that it is unnecessary in light of the growing trend toward voluntary corporate disclosure. He also argues that it is not the role of the SEC to mandate corporate expenditure on public disclosure of political activity when statistics show that not even a third of 2011 proxy proposals on the subject enjoyed shareholder support.

In contrast, official comments filed by Mark Latham, founder of VoterMedia.org, and executives from the International Corporate Governance Network expressed strong support for the Committee’s request. Specifically, both comments revealed a common respect for the Committee’s belief that the disclosure of corporate political spending is necessary to help stave off abuse or the breach of business ethics by officers and directors.

The debate over who has the better side of the argument will rage on in the coming months as the SEC weighs the proposal and determines whether to take any action. One would have to expect the Obama Administration to lend its support to the Committee’s cause in it’s typical “no fingerprints here, I don’t know what you’re talking about” approach. The response from the corporate community will undoubtedly be more mixed and more direct, but it will be interesting to see what reaction emerges from groups such as the U.S. Chamber of Commerce and The Conference Board’s newly formed Committee on Corporate Political Spending (to which, BIAS ALERT, I am an advisor). Stay tuned….

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Transparency Advocates Look to the SEC to Accomplish What Congress, The White House, and the IRS To-Date Have Not

Pay-to-Play Disclosure For Government Contractors – UPDATE Strong Reactions and a Not-Too Transparent White House

Our last post focused on the trial balloon being floated by the White House to impose corporate political disclosure obligations on government contractors.  At the time of that post, all we had was a White House press secretary description.  Subsequently, draft orders have been floating around the internet.

If I do say so myself, I thought our firm’s government contracts department provided a pretty comprehensive analysis of the issue for our clients in a recent client alert.

Notably, that alert observed:

The proposed executive order would require every federal contracting department and agency to require all entities submitting offers for federal contracts to disclose certain political contributions and expenditures made within two years of the submission date of the offer.  The disclosures would include all contributions to or on behalf of federal candidates, parties or party committees by the bidding entity, its directors or officers, or by any affiliates or subsidiaries.  Any contributions to third party entities (such as trade associations or industry groups) made with the expectation or intention that the parties would use those contributions to make independent expenditures or electioneering communications would have to be disclosed.  The FAR Council would be directed to adopt rules and regulations that would, among other things, require bidders to certify that the accuracy of the information disclosed as a condition of award.

Reaction from all ends of the political spectrum has been immediate and prolific with objections to the proposal being found from Senator Collins in today’s Washington Post,others in the Senate, and the US Chamber of Commerce.  Most concerns surrounding the proposed executive order track those raised by the Chamber (and, of course, this blog which raised them first – wink) in observing that the order is of dubious constitutionality and a relatively clear effort to circumvent political challenges in getting Congress to pass the DISCLOSE ACT in the wake of Citizens United v. FEC:

The executive order would make every company that tries to contract with the federal government disclose spending that is confidential and used to fund core, First Amendment-protected political speech. Also troubling is the executive order’s reach beyond companies to their individual officers and directors, who would be forced by the executive order to disclose personal political spending undertaken with their own assets. This aspect of the order will both impair individuals’ First Amendment freedoms and interfere with the relationships between companies and their employees.

On the other hand, public interest groups such as Democracy21 rose in defense of the proposed order and against the Chamber’s efforts to stifle it.  Groups like Care2 have pointed out:

Its [sic] easy to see why the Chamber of Commerce would want to stop the order; it would effect a large number of their big business clients. Corporations often want to keep their political spending quiet, hoping to avoid the negative press and boycotts like the one Target was hit with after their donation to an openly anti-gay candidate was leaked to the public.

From a process standpoint, there is a delicious irony in the fact that the White House is currently unwilling to discuss publicly its internal discussions concerning the need for an Executive Order imposing political transparency on government contractors.  The nature of trial balloons in politics is that one does not want one’s fingerprints on something until one is willing to take ownership of it.  This political phenomenon resulted in the following exchange during a May 12 joint Oversight and Small Business Committee hearing on the proposed Order:

“Does it strike you at all as being ironic to invoke confidentiality and not answering questions when we’re having a hearing about transparency?” – Rep. Trey Gowdy (R-SC)

“It does not, sir. I think there are discussions, even about transparency and developing rules about transparency that we need to be able to have quietly and behind closed doors.” – Hon. Daniel Gordon, Administrator of the Office of Federal Procurement Policy, Office of Management and Budget, Executive Office of the President

Let’s go to the videotape!

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Pay-to-Play Disclosure For Government Contractors – UPDATE Strong Reactions and a Not-Too Transparent White House

President Obama (Again) Looks to Impose a Form of Federal Pay-to-Play Disclosure on Federal Contractors

Last year, we reported that certain elements of the Executive Branch have been looking into ways to impose federal pay-to-play restrictions and disclosure requirements on those doing business with the federal government. Today, the White House confirmed that President Obama is strongly contemplating issuing an executive order designed to impose pay-to-play disclosures on federal contractors in a big way.

As announced by the White House, the President is examining an order that would mandate that all federal contractors disclose any and all contributions to groups that engage in political activities. This is contemplated, the White House says, in direct response to the Supreme Court’s opinion in Citizens United v. FEC and Congress’ failure to enact the DISCLOSE Act.

To learn more about what, exactly, the President has in mind, one needed to be on board Air Force One (headed to California on a Presidential and DNC fundraising swing, ironically enough) to hear White House Press Secretary Jay Carney say the following:

Q Jay, there was — there were reports this morning that the administration is considering an executive order requiring companies seeking government contracts to disclose their contributions to groups that under current law would be secret. Is that correct?

MR. CARNEY: Well, what I can tell you is there is a draft — there’s a process, and it’s in the — it’s part of a process. There’s a draft, and the particular specifics of that executive order could change over time, so I can’t talk about the specifics. What I can tell you is the President is committed to improving our federal contracting system, making it more transparent and more accountable. He believes that American taxpayers deserve that, and that’s what he intends to pursue through this executive order.

Q Is there any political goals behind this?

MR. CARNEY: Quite the contrary. He believes very strongly that taxpayers deserve to know whether or not the contractors that their money is going to is being used — how they’re spending their money, and how — whether they’re — how they’re spending in terms of political campaigns. And his goal is transparency and accountability. That’s the responsible thing to do when you’re handling taxpayer dollars.

Q Is he likely to go ahead with the executive order? Or is there another way to accomplish it?

MR. CARNEY: I can’t — there’s an executive order in the draft process. I can’t give you any specifics on it because the specifics could change. That’s the nature of the process.

Q Jay, on a trip like this that combines presidential events with campaign events, can you talk about how it’s funded? For example, there are no presidential events in Los Angeles. Is that entire part of the trip funded through the campaign?

MR. CARNEY: Ari, you know the — when there is travel like this that involves official travel and also political travel, this administration very diligently follows all the same rules that the Bush administration did. And as far as the specifics on how that breaks down, I’ll have to get back to you. I don’t have that. But we’re very careful about making sure that all those rules are followed.

“Diligently [following] all the same rules that the Bush administration did” and breaking substantial new ground all at the same time. That’s a pretty impressive two-step.

One immediate challenge comes to mind: if all federal contractors and bidders are required to disclose their contributions to groups of any kind that engage in political or issue advocacy, how does one prevent federal contract officers from demonstrating bias against bidders supporting unpopular views or the party out of power? This is a decent enough effort at transparency that strikes me as having the potential to trod all over our constitutional rights to free expression and freedom of association. To quote David Wenhold, immediate past president of the American League of Lobbyists, “Sunlight is good, but sometimes too much sunshine can cause cancer.”

This is definitely one to stay tuned to.

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President Obama (Again) Looks to Impose a Form of Federal Pay-to-Play Disclosure on Federal Contractors

“Handbook on Corporate Political Activity: Emerging Corporate Governance Issues”

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!

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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“Handbook on Corporate Political Activity: Emerging Corporate Governance Issues”

Congress “Paves the Way” for Pay-to-Play Regulation of Federal Highway Administration Procurement Practices

My apologies for the headline, but sometimes one must succumb to the siren song of the obvious.

In one of its last acts before its Members left Washington to fight for their jobs, the House passed the “State Ethics Protection Act of 2010” to avoid a growing concern that Federal Highway Administration (FHWA) procurement rules were in direct conflict with the ever-growing roster of state-mandated pay-to-play laws. Lost in the noise of the shuffle out of town is the potential signal that Congress is getting closer to expanded pay-to-play regulation of its own.

Recently, government transportation officials recognized they had a problem. FHWA provides over $40 billion each year to states to offset the costs of various highway projects. As a condition of receiving those funds, state procurement rules must remain consistent with FHWA competitive bidding policies. Unfortunately (or fortunately, depending on your perspective), neither Congress nor FHWA have seen fit to impose procurement restrictions on contractors associated with individuals who contribute money to candidates or parties – which puts FHWA policy in direct conflict with the many states that do. Theoretically, this conflict would preclude pay-to-play states from entitlement to FHWA funds. According to the House Committee on Transportation and Infrastructure summary accompanying the proposed legislation, FHWA has gone so far as to threaten to withhold such funds in light of the conflict.

Not wanting to appear to disincentivize state pay-to-play reform, the House passed the State Ethics Protection Act of 2010 by a simple voice vote – a House procedure reserved for bills considered to be “noncontroversial”. In its entirety, the bill provides:

‘‘(h) PAY TO PLAY REFORM.—A State transportation department shall not be considered to have violated a requirement of this section solely because the State in which that State transportation department is located, or a local government within that State, has in effect a law or an order that limits the amount of money an individual or entity that is doing business with a State or local agency with respect to a Federal-aid highway project may contribute to a political party, campaign, or elected official.’’

The lack of fanfare and procedural efficiency attached to this legislation belies its potential significance. With this legislation, Congress has moved a large step towards imposition of federal pay-to-play legislation in the government procurement arena.

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Congress “Paves the Way” for Pay-to-Play Regulation of Federal Highway Administration Procurement Practices