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Enforcing Pay-to-Play Violations

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I recently had an interesting dialogue with a city attorney in a pay-to-pay state about a new and – from the perspective of candidates everywhere – concerning state trend in pay-to-pay enforcement: mandatory candidate reimbursements.   States and local jurisdictions are taking a hard look at revising their statutes to add language that requires the recipient of violating contributions to provide a refund under penalty of law and further imposes an additional  penalty upon that elected official for failing to do so.

Most provisions, such as in the granddaddy state of New Jersey, mirror their rules on relatively standard provisions developed by at the state level that puts the burden on the donor to “seek and receive reimbursement” when trying to cure.  Saddle River New Jersey’s pay-to-play law represents a good example of such a law.  Clearly, these laws as drafted require the return of the donation by the recipient, but they do not expressly mandate that the recipient “shall” or “must” return the requested donation under penalty of law.  For the recipient of those precious funds – the local politician – that is a very, very important distinction with a difference.

Similarly, many state and local provisions have “curing” language which follows the SEC’s federal regulation of investment advisors, Rule 206(4)-5, which mandates that the “contributor must obtain a return of the contribution”.  While that language requires more effort than a simple request of the refund, it does not expressly place a dictate upon the official to return the money upon penalty of law.

This is not to say that such laws are unprecedented or that the momentum is not headed in that way.  The City of Houston’s statute provides:

It shall be unlawful for any contractor to contribute or offer any contribution to a candidate, or for any candidate to solicit or accept any contribution from a contractor during a contract award period. In the event that a candidate unknowingly accepts a contribution in contravention of the foregoing provision, it shall be the duty of the candidate to return the contribution within ten days after he becomes aware of the violation.  Sec. 18-36(a) (emphasis added).

Similarly, Albuquerque’s City Charter provides:

Ban on Contributions from Business Entities and City Contractors. No candidate shall accept a contribution in support of the candidate’s campaign from any corporation, limited liability company, firm, partnership, joint stock company or similar business entity or any agent making a contribution on behalf of such a business entity. No candidate shall accept a contribution in support of the candidate’s campaign from any person, other than a City employee, who at the time of the contribution is in a contractual relationship with the City to provide goods or services to the City. The remedy for an unknowing violation of this subsection shall be the return of the contribution.  A.C. Art. XIII §4(f) (emphasis added).

Such laws clearly represent the directional trend in pay-to-play enforcement.  It is hard to dispute the facial appeal of any law transferring compliance obligations upon both the donor and the recipient of such funds.  More enforcement and deterrence is always better than less, right?  Possibly, possibly not.   If this blog has shown anything over the years, pay-to-play enforcement is filled with the potential for unintended consequences and such consequences abound if the recipient of such funds cannot be shown to know of the violation occasioned by the contribution and willfully refuses to refund.  As one who represents candidates as well as donors, it is clear that in even the smallest of races, the candidate herself is not always aware of contributions and certainly does not always know the business interests of the donors.  The potential for political shenanigans abounds if one were inclined to set an incumbent up.

Enforcing Pay-to-Play Violations

Major Ethics Reform Passes New Mexico House, But Dies on Senate Floor; Changes May Come During Special Session

Despite the numerous “pay-to-play” scandals that have rocked Sante Fe in recent years, numerous pieces of major ethics reform died on the floor of the New Mexico State Senate during the waning hours of the 2010 regular legislative session.

Specifically, HB 118, which would have placed significant restrictions on the activities of lobbyists and certain state contractors, passed the House less than 48 hours before the end of the session. Despite hope from supporters of HB 118 that it would find its way through the Senate, the legislation stalled in the upper chamber.

Had it passed, HB 118 would have arguably made New Mexico one of the toughest “pay-to-play” jurisdictions in the country. The legislation, which passed the House 46-24, broadly prohibited contributions from lobbyists, state contractors and principals of state contractors. Indeed, HB 118 placed total prohibitions on contributions from lobbyists, state contractors, principals of state contractors, and even “seekers of targeted subsidies” to any “candidate for nomination or election to a state public office or political committee established the candidate.” Contributions to certain political committees would have been similarly prohibited.

Notably, legislation which would have allowed for the creation of an Ethics Commission in New Mexico, as well as a series of other open government initiatives that were lauded by advocates of transparency also failed to pass the Senate.

Due to the failure to adopt any reforms, there is speculation that some package of legislation will be addressed during an upcoming Special Session.

Given the upcoming election season, it would seem as if New Mexico legislators would try to adopt some sort of legislation that can be sold to constituents as “good government reform” during the Special Session. We at the Pay-to-Play to Law Blog will continue to monitor this situation for any new developments.

Major Ethics Reform Passes New Mexico House, But Dies on Senate Floor; Changes May Come During Special Session

New Mexico Chief Investment Officer Resigns after Investigation

The pay-to-play probe related to U.S. public pension systems led by New York Attorney General Andrew Cuomo, the U.S. Securities and Exchange Commission and the Justice Department has claimed another victim. Bloomberg reports today that New Mexico’s chief investment officer has resigned after being drawn into the nationwide investigation.

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New Mexico Chief Investment Officer Resigns after Investigation