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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.

Two such cautionary tales have recently emerged from many a pay-to-play blogger’s favorite states: Illinois and New Jersey.

DuPage County, Illinois fits the predictive model perfectly. A controversial governor with a… ahem…questionable record on ethics matters seeks to demonstrate his compliance bona fides by pushing a highly intrusive and punitive pay-to-play ordinance. Consequently, Illinois law prohibits state vendors and bidders from contributing to state officers who oversee or award their contracts. Among other things, that law capped campaign contributions at $5,300 per election to county board members. In January of 2010, DuPage County concluded that the state statute was inadequately permissive and amended its Ethics Ordinance (Section 2-475) so as to reduce the contribution limit imposed on vendors, unions, consulting firms, their officers, and their owners to $1,000 per year. At the time, the DuPage County Board applauded itself for passing an ordinance designed to demonstrate that its county was “the leader on ethics reform in Illinois.”

Alas, this past month, Illinois First Assistant State’s Attorney Nancy Wolfe informed DuPage County that it lacked statutory authority to deviate from the State of Illinois’ statutory wisdom on the topic: “The state has set the limits (and) has not given a non-home rule entity authority to enact anything more restrictive or less restrictive.” While many, including the Illinois Campaign for Political Reform, disagree with that analysis, the fact remains that the county ordinance was found to be unenforceable and eliminated.

Moorestown, New Jersey has a similar story to tell. Just last month, the Moorestown Township Council passed a pay-to-play ordinance favoring disclosure of every dollar contributed by contractors but increasing the maximum contribution limit from $300 to $2,600. Now, it would appear, those changes have produced a backlash and a petition to repeal. 1,400 signatures later, those changes don’t look quite as good to the Township Council or to Moorestown’s Mayor (who was for the ordinance before she was against it). The Township Council has agreed to take the matter up again for reconsideration later this month.

Finding a balance between the need to ensure fairness and transparency in procurement policy with the need to ensure the rules can actually be followed by the regulated community is a tricky balance to strike.

Less can be more. More is sometimes too much.

Rethinking Pay-to-Play Legislation

Chicago – It Was All About Pay to Play All Along

It just wouldn’t be right to have a pay to play blog and not post a comment about recent developments in the grand daddy of all pay to play trials: United States v. Blagojevich. According to recent AP reports, the Governor’s former top aid testified today that it was concern over Illinois’ recent pay to play legislation that compelled Governor Blagojevich to make a deal to sell President Obama’s Senate seat. As we reported here, Governor Blagojevich had vetoed Illinois legislation banning state contractors from making campaign contributions to the politicians who controlled those contracts and had an interest in ensuring that the Illinois State Senate did not override his veto.

According to the testimony of Alonzo Monk yesterday, Governor Blagojevich was so sufficiently concerned about the impact the new legislation would have on his fundraising efforts that he reached a deal with former state Senate President Emil Jones to let the veto stand in exchange for his agreement to appoint a state legislator to the US Senate seat. Ultimately, as we know, the deal fell apart when then President Obama urged Jones to action on the veto and US Attorney Fitzgerald revealed that he had been listening in on Blagojevich’s dealings.

And they said pay to play law was boring!

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Chicago – It Was All About Pay to Play All Along

Blagojevich Ignites Pay-to-Play Firestorm in Illinois

It seems as if the rancor over “pay-to-play” reaches a fever pitch once every few years. In years past, “pay-to-play” scandals have rocked state houses in New Jersey, Connecticut, and South Carolina, just to name a few. Inevitably, such scandal leads to a public outcry for legislation to address the inappropriate and illegal activities that weaken the public trust, and waste the public’s money. Unfortunately, much of the legislation that is quickly passed by well-intentioned state legislatures does not fully contemplate the unreasonable, and often unnecessary, impact that such legislation will have on the private sector.

2008-2009 have been particularly bad years for “pay-to-play” scandals. Specifically, “pay-to-play” has been dominating headlines and public sentiment since late 2008 when Illinois Governor Rod Blagojevich attempted to “sell” President Barack Obama’s empty senate seat to the highest contributor. His pick to fill that seat, Sen. Roland W. Burris, is also under investigation.  Burris implicated himself with the statement that he would “personally do something” for Blagojevich’s campaign fund if he were appointed.  Blagojevich was indicted by a Federal Grand Jury and sent packing, but the fire was already lit. That fire is“pay-to-play” legislation, and it has spread quickly across the nation.

It’s true that the idea of “pay-to-play” isn’t really a new one, and it has always been established that government favors, much less political seats, are not to be bought in America. But the changes have been coming at a more rapid pace recently. As public outcry has increased, so has the pressure for lawmakers to do something about it.

Nowhere has the outcry to “do something” been greater than in Illinois. In September 2008, then-Gov. Blagojevich originally vetoed pay-to-play legislation passed by the Illinois General Assembly and subsequently issued Executive Order 3. Ironically, Executive Order 3 actually contained broader pay-to-play restrictions than the vetoed legislation, primarily because Executive Order 3 differed from the passed legislation in that it significantly restricted contributions to members of the Illinois General Assembly. The General Assembly subsequently passed a new pay-to-play statute to override the Blagojevich veto. The end result of this legislative in-fighting was incongruent legislation which left entities attempting to comply with Illinois law little guidance.

Shortly after taking office, Illinois Gov. Pat Quinn issued Executive Order 09-09, which repealed Blagojevich’s Executive Order 3. As such, the General Assembly’s legislation remains in place. Specifically, the current “pay-to-play” statute prohibits contributions to state executive officers and candidates by state contractors and their political action committees, the company’s affiliates, 7.5% owners and executive employees of the company, and their spouses and minor children. This restriction is generally in place from the date of the request for proposal (“RFP”) to the day after the contract ends. For current contractors, no covered contributions may be made for the term of the incumbent that awarded the contract, or two years after the contract ends, whichever is longer. It should be noted that even a single violation can void a contract, and that a three year ban may be levied on businesses that have three or more violations of this provision with a 36-month period.4

Further, an entity must disclose the names and addresses of all covered donors. This disclosure must be amended within two days of any change, or within ten days if the there are no pending proposals. Of note is that an automatic $1,000 per day penalty is triggered for a failure to disclose all such contributors.

Blagojevich Ignites Pay-to-Play Firestorm in Illinois