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State Pay to Play Laws Have Real, Revenue Threatening, Consequences

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Like the nagging parent stressing the dangers of a hot stove, unappreciated Chief Compliance Officers and General Counsel everywhere have been on a p5-types-of-burns-and-how-to-treat-themperpetual mission to warn fellow employees of the dangers inherent in mixing contribution activity and state procurement without proper oversight.  Such is the lot of the under-appreciated “Cost Center” compliance personnel.  Like the tear-filled 8 year-old icing red fingers, many of the high flying boys and girls on the “Revenue Center” sales side of those same companies are not paying sufficient attention to pay-to-play compliance warnings until it is too late.

Our most recent example of this cautionary tale comes from Paterson, New Jersey, where the prominent law firm McManimon, Scotland & Baumann, LLC just learned that a mere $500 in contributions upended a 20 year relationship as bond counsel to the cityPaterson’s pay-to-play law debars any contractor from receiving contracts for a full year if ANY of its executives (or partners . . .  or their spouses . . .  or their children . . .  or their subcontractors, etc.) make contributions in excess of $300 to local officials.  Just in case the pain were not sufficient for the firm’s partners who didn’t participate in any way in the offending contribution, Paterson Business Administrator Nellie Pou made a point to emphasize that

the decision not to rehire the firm had nothing to do with the quality of the firm’s work. “They’ve always been first-rate,” she said. “We’ve had nothing but excellent relations with them.”

Edward McManimon did not respond to a phone message seeking his comment for this story.

It is important to note that the initial contract in question was simply to be an extension of a contract awarded two years ago and that the recipient of the offending contribution had recused himself from the vote to approve the extension.  None of this was sufficient to prevent small fingers from getting burned.

We have seen in the past (especially in New Jersey) that pay-to-play violations can result in significant criminal consequences as well as major fines.  Some, like the authors of this blog, have shouted warnings into the wind; largely to no avail.  Hits to bottom line revenues should be enough to get the C Suite to take pay-to-play compliance seriously.

Don’t let it be said that the purpose of your compliance program is only to serve as a warning to others.

State Pay to Play Laws Have Real, Revenue Threatening, Consequences

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

The Potential Consequences of Paying to Play: Birdsall Services Group

New Jersey engineering firm Birdsall Services Group realized the full consequences of violating state pay-to-play laws on August 30th after a state court judge ordered that the contractor pay $1M in criminal penalties, the maximum allowable by law.

Under the state’s pay-to-play law, which many agree requires an overhaul, business entities are prohibited from making reportable contributions (in excess of $300) to elected officials prior to the award of certain government contracts and during their pendency. See N.J.S.A. 19:44A-20.3 through 20.25. In a scheme designed to work around these restrictions, Birdsall bundled several non-reportable $300 contributions written by individual employees, sent them to elected officials as one contribution, and reimbursed the employees with bonuses. The scheme stretched over six years, during which Birdsall contributed over $1M to various campaigns and netted millions of dollars in revenue on public contracts subject to the restrictions – contracts for which Birdsall was technically ineligible under state law.

The recent $1M penalty ordered by the state court was only the most recent in a series of consequences faced by the company and its executives. Indicted on charges of money laundering and the making of false representations for government contracts in March of 2013, Birdsall declared bankruptcy just three days after the state moved to seize company assets, and the company pleaded guilty to such charges in June. Money laundering, conspiracy, and a laundry list of similar criminal charges against seven employees – including the firm’s largest shareholder and former CEO – are pending, and two marketing employees have already pleaded guilty to participating in the scheme. Potential penalties for these individuals include fines of up to $1M and 20 years in state prison. Birdsall has already paid the state $2.6M to settle a civil forfeiture action relating to the case and has agreed to be debarred from federal contracting for 10 years. News outlets have also obtained and published lists of the contribution recipients.

Birdsall’s case demonstrates the severe consequences of a contractor’s attempts to work around pay-to-play rules, even those with seeming loopholes or unclear restrictions. There is little doubt that the highly publicized scandal will spark election law reform in New Jersey and perhaps other states as they work to broaden their state-level “False Claims Acts” and similar restrictions on state contractors. (We also continue to await the Wagner case as it heads to oral argument before the en banc D.C. Circuit, which will decide the issue of whether the Federal Election Campaign Act’s more general ban on political contributions by federal government contractors is unconstitutional.)

Birdsall’s experience demonstrates the importance of reviewing business development practices and establishing internal controls that track compliance with state and local ethics rules, in addition to federal restrictions. Instituting such controls and consulting experts capable of advising on such state laws not only helps to ensure compliance, but also shows an intent to fully comply with relevant restrictions in the event an investigation arises.

The Potential Consequences of Paying to Play: Birdsall Services Group

A Smart Proposal in the Garden State

Jeff Brindle, the Executive Director of the New Jersey Election Law Enforcement Commission has made a sensible proposal on pay-to-play reform which deserves both our attention and state action.

One could populate an entire pay-to-play blog with entries culled from the Garden State. We have pointed out that New Jersey enjoys the most complex, and challenging, web of pay-to-play compliance schemes in the country. We’ve even gone out on a limb and editorialized to a large degree that “Until Governor Christie (or someone at the state level) succeeds in implementing a uniform statewide protocol for procurement efforts such as the one proposed, New Jersey will extend its dubious distinction of having more varieties of pay-to-play legislation than its Turnpike has exits”

For this reason, I generally avoid posting on the now-routine Police Blotter of New Jersey criminal indictments arising out of Garden (State) variety bribery and campaign finance violations. Admittedly, last week’s indictment of seven Birdsall Services Group executives in an alleged scheme to use straw donors to avoid disclosure of contributions that would have disqualified the contractor from being awarded public contracts is a pretty big deal. Birdsall’s executives are facing prison terms between 10 to 20 years and a state action to seize the company. Ultimately, however, if the allegations are true, the conduct in the Birdsall case likely would have resulted in criminal enforcement action under state bribery, campaign finance, and money laundering statutes even absent the existence of New Jersey’s myriad of pay-to-play laws.

What is interesting about the Birdsall case – and the bird dropping-like splatter effect on state contractors and politicians alike – is the effect it has had on Jeff Brindle, the Executive Director of the New Jersey Election Law Enforcement Commission. In an Op Ed posted on newjerseynewsroom.com, Mr. Brindle echoed the words of this blog’s postings cited above to observe:

Overlooked in the news coverage [of the Birdsall case] is a central issue involving the Pay-to-Play Law: it is way too complicated.

Benjamin Franklin said: “Laws too gentle are seldom obeyed; too severe, seldom executed.”

Put another way: Laws with loopholes are often ignored; too convoluted, difficult to enforce.

New Jersey’s Pay-to-Play statutes pose both problems.

. . .

Making matters worse, the Pay-to-Play Law allows for municipalities and counties to pass their own ordinances “as long as they are consistent with the theme of pay-to-play.”

While local laws almost always can be more restrictive than state law, this broad language implies that local pay-to-play laws can be less restrictive as well.

Finally, besides State law and almost 60 local ordinances, several gubernatorial executive orders have been issued dealing with contracting at the State level. The level of complexity is mind-boggling.

Count this blog as standing with Mr. Brindle and his proposal. New Jersey would be well served to have a single, state level, pay-to-play proposal that is relatively easy to understand, comply with and enforce. Bad boys (and girls) are still going to do bad things in an effort to get a competitive edge and New Jersey is well equipped to deal with those folks under existing criminal statutes. The current state pay-to-play scheme is indecipherable to both local regulators and those simply trying to do business legally in New Jersey.

A Smart Proposal in the Garden State

Dollars to Donuts…Federal and State Pay-to-Play Rules Make 2013 New Jersey Political Engagement a Veritable Minefield for Current and Prospective Government Contractors, Investment Advisers, Municipal Securities Professionals and Swap Dealers

While 2013 may be a quiet year on the federal election front, there will still be plenty of political noise made this fall in the Garden State as New Jersey’s state and local elections take center stage. The ardent politicos among our readers are probably disappointed that we won’t be seeing the “rising star” gubernatorial showdown between incumbent Chris Christie and Newark Mayor Cory Booker, but there will still be high-stakes drama along the Turnpike as both parties tussle over important state and local offices this November. These races will present ample opportunity for political participation throughout the year by individuals, corporations, unions, trade associations, PACs and organizations from around the country. After all, Governor Christie and other state candidates can’t win reelection with only donuts in their pockets… they might need some financial resources as well.

Whether dealing with donuts or dollars, however, due to the combination of federal pay-to-play rules and New Jersey’s highly restrictive state and local pay-to-play framework, the Garden State will be a treacherous political playing field for those individuals and entities that “do business” in one manner or the other with state, county and municipal government. This is particularly the case for those who are current or prospective government contractors, and those who fit the definition of investment advisers, municipal securities professionals, or swap dealers.

Readers of this blog should be intimately familiar with federal pay-to-play provisions such as SEC Rule 206(4)-5, MSRB Rule G-37, and CFTC Rule 23.451, which prohibit “covered” investment, municipal finance and swap firms, their covered employees, and any political action committees (PACs) under their control from making, soliciting or coordinating contributions on behalf of covered officials. New Jersey Officials covered under these rules include Governor Christie (who appoints individuals to the State Investment Council and other entities that may select an investment adviser or issue municipal bonds) and various other county and local elected officials who have the authority to directly or indirectly select or influence the hiring of governmental investment advisers, municipal securities dealers, or governmental special entity swap dealers.

Due to these federally-imposed restrictions, potentially-covered firms, employees and their PACs should think carefully about the pay-to-play consequences of engaging politically on behalf of the Governor or any other covered elected officials or candidates for elected office. After all, anything more than a de minimis contribution to a covered official or candidate by an investment adviser, municipal securities dealer, swap dealer or affiliate can lead to a two year ban on the receipt of compensation for services provided to state or local government. Contribution solicitation or coordination activities by covered firms and their affiliates can also lead to similar disqualifications from government engagements.

Federal pay-to-play rules, however, do not represent the only potential political activity traps awaiting those who do business with state and local governments in New Jersey. Existing or prospective government contractors must also be weary of the expansive pay-to-play framework in place at the state, county and municipality levels in the Garden State. At the state level, pay-to-play restrictions set forth in N.J.P.S. §19:44A et seq., N.J.A.C. §19:25-24 et seq., and the provisions of Executive Orders #117 & #118 effectively limit the political giving and fundraising abilities of commercial entities and associated individuals that do business with state government, the state legislature, and various county and municipal governments.

These rules limit political activity by banning certain prospective contractors from entering into agreements with the state if their business entities have solicited or made more than de minimis contributions to candidates for Governor or Lieutenant Governor, or to any legislative leadership committee or state/county/municipal party committee within 18 months of commencing negotiations for a contract or agreement. The state pay-to-play provisions also prohibit existing government contractors from soliciting or contributing money to the same covered officials and committees during the life of their contract or agreement. Additional restrictions likewise limit the political donations and solicitations of state-legislative, county and municipal contractors to de minimis levels within 12 months of seeking a government contract or agreement and during the life of such contract or agreement when the contributions or solicitations involve covered officials. In certain settings, state law also places similar restrictions on redevelopment contractors and individuals or entities that seek to evade the normal pay-to-play rules through indirect, earmarked contributions to covered officials via intermediary groups.

As a result of these restrictions, a wide range of “business entities” and affiliated individuals must weigh whether New Jersey political engagement is worth the potential cost of losing business opportunities with state, county and municipal governments. Potential affected parties include corporations and their officers, partnerships and their partners, LLPs and their partners, professional corporations and their shareholders or officers, LLCs and their members, sole proprietorships and their proprietors, and other organizations and their principals/officers/partners. Directly or indirectly controlled subsidiaries of such business entities, PACs and SSFs directly or indirectly controlled by such business entities, and the spouses and dependent children of affiliated individuals also face a similar dilemma.

Add to this mix the hodgepodge of unique county and municipal pay-to-play provisions layered on top of the statewide rules, and New Jersey political engagement becomes a very risky proposition for potential or existing government contractors, investment advisers, municipal securities professionals, swap dealers, and others who do a great deal of business with government. As such, before our readers dive headlong into political engagement in New Jersey this cycle, it is imperative that they seek out experienced political law counsel and stay tuned for our latest updates from the Garden State.

And for those sticking to donut donations this year, be sure to keep your in-kind contribution of Krispy Kremes to de minimis levels and pay-to-play compliant.

Dollars to Donuts…Federal and State Pay-to-Play Rules Make 2013 New Jersey Political Engagement a Veritable Minefield for Current and Prospective Government Contractors, Investment Advisers, Municipal Securities Professionals and Swap Dealers

Pay-to-Play Legislating Gets Heated in the Garden State

 

Another Episode of Jersey Shore City

 

And here you were feeling empty because MTV has taken “Jersey Shore” off the air . . .

Last night, the New Jersey City Council agreed unanimously to pass a revised pay-to-play ordinance restricting vendor contributions to Board of Education candidates. No real news there. The story, as they say, is in the story that got them there.

The ordinance only passed when Ward F Councilwoman Michele “Snookie” Massey rescinded her support of a competing proposal offered by Ward E Councilman Steve “The Situation” Fulop just two hours after casting the deciding vote in favor of The Situation’s proposed ordinance. According to accounts of the meeting, The Situation was not pleased and publicly accused Snookie of being a “rubber stamp” for the administration of Mayor Jerramiah “Pauly D” Healy, the Situation’s political rival.

“Do not insult me”, Snookie responded. “You are so rude.”

As is always the case, the hostilities were due to a misunderstanding caused when Snookie showed up late for the council meeting, just as The Situation’s proposal was being voted on and cast her ballot the wrong way.

Of course, the competing pay-to-play ordinances had gotten the Jersey City gang riled up only two weeks before when their discussion caused The Situation to get into a heated shouting match with Corporation Counsel Bill “Vinny” Matsikoudis.

It seems Vinny publicly accused The Situation of protecting his chief contributor who benefitted from the Board of Education. The Situation objected, noting that the contributor in question had contributed $1,000 to Pauly D’s campaign and accused Vinny of being “soft” on the city’s pay-to-play ordinance when it was originally proposed in 2008. Those were apparently fighting words.

“That’s a lie,” Vinny retorted, causing Ward D Councilman Bill “Ronnie” Gaughan to chide the boys to show “a little respect for the city council here,” or otherwise “take your petty nonsense outside.”

The cause of the friction among the Jersey City gang? It appears that The Situation’s proposed revision to the pay-to-play ordinance extended beyond Pauly D’s proposal to additionally prohibit vendor contributions to state Senate and Assembly candidates. Snookie and Vinny expressed strong concerns that Pauly D’s proposal would have been neither constitutional nor enforceable.

In this regard, Snookie and Vinny’s constitutional analysis appears sound.

Pay-to-Play Legislating Gets Heated in the Garden State

Local Pay-to-Play Provision To Be Put Before the Voters In South Jersey, While DC Mayor Vincent Gray Makes A Push for New Pay-to-Play Rules in the Nation’s Capitol

With Labor Day weekend at hand and the Republican and Democratic National Conventions upon us, much of the American electorate is finally beginning to tune back into politics and prepare themselves for what will certainly be a very interesting close to the 2012 campaign season. News regarding the race for The White House will certainly dominate the media over the coming months, and rightfully so, but Pay-to-Play Law Blog is here to offer our readers, particularly those residing in swing states, a brief respite from the 24-7 presidential election coverage. We know our readers love Super PAC advertisements, political campaign internet pop-ups, and robo-calls as much as (if not more than) anyone, but we also know that they like to stay up to date on the important state and local pay-to-play news that might otherwise be slipping through the cracks between now and November 6th. With that in mind, we offer up a few recent items of interest from the Garden State and D.C.

New Jersey

In New Jersey, where individuals and businesses alike must already deal with restrictive pay-to-play provisions at the state level, we are continuing to see similar (and often more serious) restrictions contemplated and put in place at the municipal level. For example, consider recent developments in Gloucester Township, an exurb of Philadelphia, which has had an extraordinarily busy summer when it comes to “pay-to-play” developments.

Several months ago, a conservative transparency group known as South Jersey Citizens made an effort to launch citizen-crafted pay-to-play provisions through the township’s petition process, but were unable to gather the requisite signatures to advance the proposed legislation to the Gloucester Council and, if necessary, the November ballot. At nearly the same time, Gloucester Councilman Dan Hutchinson presented his own set of pay-to-play rules specifically targeting Super PAC donation disclosure, which were unanimously approved by the Council on first reading, but subsequently withdrawn before a final vote. Following the withdrawal of these proposed rules, a group of Democratic Gloucester residents took up the pay-to-play mantle by repackaging the Councilman’s draft ordinance and gathering the requisite petition signatures for its public submission to the Council. As a result of their work, the pay-to-play proposal came before the Council members for tacit approval on Monday and will appear on the November general election ballot for the voters of Gloucester Township to consider.

The content of Gloucester’s prospective pay-to-play ordinance, O-12-17, places a combination of contribution restrictions and disclosure requirements on prospective township vendors. Specifically, if passed, the proposed provision would prohibit any business entity from entering into any agreement or contract with Gloucester Township or any of its departments, instrumentalities, purchasing agents or authorities for a one year period following the solicitation or making of a contribution above the “monetary threshold” to any Gloucester-specific candidate, candidate committee, joint candidate committee, political party committee, or to any PAC or Super PAC that “regularly engages in the support of Gloucester Township municipal elections…” The monetary threshold for this one-year, cooling-off period is set at the following levels: $300 per calendar year for mayoral or governing body contributions; $500 per calendar year for joint candidate committees supporting mayoral or governing body candidates; $300 per calendar year to municipal political committees or municipal political party committees; $500 per calendar year to any PAC or Super PAC; and $2,500 in aggregate in to all Gloucester candidates, committees, joint committees, political committees and political party committees. The potential ordinance would also require all business entities entering into agreements or contracts with the township to file a certification statement disclosing all their contributions to Super PACs, regardless of whether or not those Super PACs actively engage in Gloucester elections.

All-in-all, the proposed ordinance appears to represent an honest attempt by the township to reign in pay-to-play corruption and encourage transparency in political giving. Like many of the municipal pay-to-play provisions in the Garden State, however, it takes a fairly heavy-handed approach and, if passed, may force many potential Gloucester vendors to either cool their political speech at the local level or avoid municipal contract work altogether. Regardless of this blog’s commentary, however, the residents of Gloucester Township will weigh in with their thoughts on the proposed ordinance on November 6th.

District of Columbia

Meanwhile, a few hours down I-95, embattled Washington, D.C. Mayor Vincent Gray made news this week by proposing a series of campaign finance disclosure requirements and donation restrictions that he claims will curb “pay-to-play” activities in D.C., and minimize the influence of lobbyists and contractors on District politics. While at least partially a public relations move designed to draw attention away from the continuing federal investigation into Gray’s fundraising and campaign spending activities, the proposals – if passed by the D.C. Council this fall – would leave Washington, D.C. with one of the strictest campaign finance structures in the country. Although not yet memorialized in legislative language, let’s nevertheless take a quick look at some of the rough proposals set forth by the Mayor and D.C. Attorney General Irvin Nathan this past Tuesday.

From a pure pay-to-play perspective, Gray and Nathan suggested putting in place legislative provisions that curb political donations from any city vendor who holds a municipal contract valued at $250,000 or more. Specific details regarding how significant this “curbing” would be have yet to be put forth, but Gray and Nathan pledged to have more definite plans for the D.C. Council’s consideration this fall. Stay tuned for updates on this front…

In addition to this proposed contribution restriction for D.C. government vendors, Gray and Nathan also called for additional legislation that would prohibit registered District lobbyists from bundling campaign contributions, ban corporations from donating to District candidates through linked or affiliated entities, and require candidates that receive campaign donations within 30 days of an election to disclose such contributions within 24 hours of receipt. They also floated two other proposals that, if passed, could have a profound impact on political participation in D.C. Specifically, the Mayor and Attorney General announced that they will be pursuing campaign finance rules that severely restrict political contributions from LLCs and corporations, and also seeking legislation that will require candidate-like donor disclosure for other types of political organizations in the District.

Just as with the pay-to-play proposal discussed above, the details of these legislative prerogatives are hazy at best. Gray and Nathan will be working in the coming weeks to put meat on the bone for D.C. Council consideration, but the final product (if any) that emerges from that body will almost certainly tackle the pertinent policy issues in a different manner than proposed by the Mayor and Attorney General. With that in mind, Pay-to-Play Law Blog will be here to monitor the process and keep our readers up-to-date on all the fun.

Local Pay-to-Play Provision To Be Put Before the Voters In South Jersey, While DC Mayor Vincent Gray Makes A Push for New Pay-to-Play Rules in the Nation’s Capitol

New Jersey Enforcement of Pay-to-Play – A Cautionary Tale for Vendors and Legislators Everywhere

 

If you have ever had the occasion – as I have – to exchange pleasantries with a representative of New Jersey’s Highway Patrol while idling on the shoulder of the New Jersey Turnpike, you know that the Garden State takes its law enforcement seriously and is not much inclined to entertain excuses. The same can certainly be said for the strict scrutiny the State’s Department of the Treasury accords to enforcement of New Jersey’s pay-to-play laws.

As this blog has noted previously, New Jersey is one of several states which imposes an absolute debarment on state contracting with any entity that has made relevant past state campaign contributions. Transparent contribution data, and strict state enforcement, make such debarment statutes fertile ground for bid protests and unintended disqualification for the unwary contractor. If it’s true as they say that “the purpose of one’s life may be nothing more than to serve as a cautionary tale for others”, Langan Engineering & Environmental Services, Inc. may win this month’s commemorative mug for their disqualification last week from a two year site environmental consulting contract over a $500 campaign contribution made over two years ago.

The New Jersey statute in question, N.J.S.A. 19:44A-20.14, provides, in relevant part:

The State or any of its purchasing agents or agencies . . . shall not enter into an agreement or otherwise contract to procure from any business entity services or any material, supplies or equipment, or to acquire, sell, or lease any land or building, where the value of the transaction exceeds $17,500, if that business entity has solicited or made any contribution of money [to] any candidate or holder of the public office of Governor or of Lieutenant Governor, or to any State or county political party committee: (i) within the eighteen months immediately preceding the commencement of negotiations for the contract or agreement;

Langan Engineering fell victim to this statute last week when the New Jersey Appellate Division ruled that a $500 contribution to a legislative leadership PAC made on April 7, 2010, disqualified it from participating in an October, 5, 2011 New Jersey Schools Development Authority procurement proposal because negotiations on that contract had “commenced” while Langan was still debarred.

Langan Engineering argued that the New Jersey statute’s “commencement of negotiations” language could not possibly be read to apply to entities such as the School Development Authority which, by law, are not authorized to “negotiate” contracts but must, instead, issue Requests for Proposal.

Like the kind State Trooper who is nonetheless unmoved by the protestations of a pay-to-play blogger that he had only briefly sped up to pass a tractor trailer and was again operating within the speed limit, New Jersey’s Appellate Division was unmoved by Langan’s protestations that it was “eligible” again because publicly bid contracts cannot be negotiated. For purposes of New Jersey’s pay-to-play law, “negotiations” commence at “the time when the government agency takes the bids into consideration or scrutinizes them.” (Order, p.8). Any contractor having made a disqualifying contribution within the eighteen months preceding first bid submission must remain in the penalty box – ineligible to bid on such contract – regardless of when contract performance will actually commence.

Let us resolve to learn from Langan Engineering & Environmental Services, Inc.’s misfortune and maintain strict corporate oversight over relevant contributions.

Many thanks to my friends at Genova Burns Giantomasi & Webster, authors of the fine Corporate Activity Law blog, for sharing their briefing in this case.

New Jersey Enforcement of Pay-to-Play – A Cautionary Tale for Vendors and Legislators Everywhere

New Jersey Has a Busy Week

We’ve noted before that New Jersey remains the hands-down leader in pay-to-play ordinance proliferation.  Until Governor Christie (or someone at the state level) succeeds in implementing a uniform statewide protocol for procurement efforts, New Jersey will extend its dubious distinction of having more varieties of pay-to-play legislation than its Turnpike has exits. (Think I’m kidding?  Read on.  It’s not even close).

This week saw two such ordinances seek admission to New Jersey’s growing family. First, Montclair, New Jersey proposed an ordinance, which would, if passed, debar contractors and their companies, which have made local political contributions in excess of $300 (and in some instances $500) within the preceding year from contracting with the township. The provision further provides for two relatively punitive provisions for its violation. First, the proposed law makes clear that a violation “shall be a material breach of the terms of a Montclair agreement or contract for Professional Services or Extraordinary Unspecified Services”, which virtually ensures that discovery of inadvertent violations of the ordinance shall be the first order of business for any losing bidder contemplating a bid protest. Second, making matters worse for the intentional or unintentional violator, contractors discovered to have transgressed (by a disgruntled bid protestor or others) would be barred from bidding on township contracts for four years. Ouch.

A second pay-to-play ordinance is being contemplated by the Bergen County, New Jersey Board of Chosen Freeholders. This  ordinance has drawn criticism not for the penalties it imposes but rather for the exemptions it contains (one payer’s “exemption” is another player’s “loophole”). At issue in the Bergen County ordinance is a provision that its penalties and restrictions do not apply to contracts procured via open, competitive bidding (the so-called “fair and open process” exception). While it might strike some (such as myself) that contracts awarded through a transparent and open bidding process do not require the same, strict level of safeguards in the form of complex, and often punitive, restrictions on campaign activity, the “fair and open process” exception has  drawn  fire in the township. This clause has drawn the ire of Jersey residents before and shows no sign of abating any time in the near future.

Until New Jersey finds a way to adopt a common regulatory standard throughout the state, it will remain safely ensconced as the clear national leader in multiple, contradictory political procurement regulatory schemes.

While you’re holding your breath for that development, I strongly recommend that any entities or individuals seeking to navigate New Jersey pay-to-play or doing business with the State’s numerous townships to bookmark this extremely handy reference to the State’s numerous (literally over 100) current pay-to-play provisions. I further recommend that anyone seeking to navigate the State’s famous turnpike be on the lookout for these signs.

 

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New Jersey Has a Busy Week

Atlanta Update: Cooler Heads Prevail

Atlanta’s Fulton County Commission met yesterday as predicted to take up its latest pay-to-play resolution.

Everyone’s dying to know what happened.

Drum roll . . . It failed.

Interestingly, Fulton County’s Commission didn’t simply reject the resolution, they made sure to give the bill sufficient medical attention to permit the orderlies to wheel it in to the room where they could execute it properly and with finality. The Atlanta Journal Constitution reported on the gruesome course of events thusly:

Fulton County commissioners didn’t just reject Vice Chair Emma Darnell’s proposal to limit contractors’ donations to political campaigns. They killed it.

Darnell sought to prohibit any company or individual from bidding for county work if they have donated more than $500 to a commission candidate, or have given gifts to commissioners or county employees, during the past year.

The board opposed the plan 4-2, then, on a motion from Commissioner Tom Lowe, voted 4-2 to officially deny it so it can’t be brought up again. Lowe called the idea stupid and bad for business.

Not everyone sees the issue the same way. On the same day Fulton County was doing its work, the Brigantine Beach, New Jersey, City Council voted a strikingly similar piece of legislation onto the books. The Brigantine Beach ordinance, based largely on an Atlantic County, NJ, ordinance, and drafted with the assistance of the Atlantic County counsel, bans all professional contractor contributions one year before bidding and limits successful bidders to $300 candidate contributions after that with aggregate total limit contributions from a corporation holding a city contract to no more than $2,500 annually.

The regulatory patchwork continues to be sewn together stitch by stitch with no sign of uniformity on the horizon.

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Atlanta Update: Cooler Heads Prevail