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Compliance Warnings on Both Coasts: Connecticut and California Both Issue Pay-to-Play Warnings

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There is nothing like a snow day to focus the mind on compliance and there is nothing like public admonition and discipline of others to induce night-sweats on a cold day.  Just this week, both the Connecticut Office of Government Accountability and the California Fair Political Practices Commission have used different vehicles to remind us all that pay-to-play compliance is not simply theoretical.  The consequences for circumvention are very real.

The Connecticut Office of Government Accountability’s State Elections Enforcement Commission (“SEEC”), which oversees enforcement of Connecticut’s pay-to-play law (Ct. Gen. Stat. 9-612), chose to offer a friendly warning not to use federal political party accounts to circumvent the state’s pay-to-play regulatory scheme.  As we have previously noted, Connecticut takes some degree of pride in its restrictive pay-to-play statute, and in the fact that the statute’s constitutionality was upheld in federal court.  Connecticut is one of those states which will debar (which is just a fancy lawyer word for “put in the contracting penalty box”) a state contractor or prospective state contractor from future business for a full year if it, or its employees, directors, spouses, or children, engage in impermissible contribution activity.  (**Kids, want to get back at Mom for taking the car away? Make a contribution to the Connecticut State Treasurer and debar her company from state contracts for a year!  That’ll teach her! **).

You can thus imagine that the Connecticut State Elections Enforcement Commission was none too amused to read news reports earlier this month highlighting Connecticut Governor Malloy’s prowess in raising funds in $10,000 chunks from state contractors for the Connecticut Democratic Party’s federal account (which some contractors have concluded is “juuuusssst a bit outside” of  SEEC’s enforcement reach). Thus, on February 11, 2014, the SEEC convened a special meeting for the purpose of issuing an unsolicited advisory opinion “clarify[ing] and publish[ing] advice on the use of money and assets of the federal account in Connecticut elections”.  Mostly, however, the SEEC used the opportunity to clarify that “[o]f most concern is the fact that much of the reported fundraising has involved Connecticut state contractors, who are prohibited from making contributions to party committees registered with the SEEC,” and to make clear everyone understands that federal “funds that are generally prohibited from being used in Connecticut elections are not, in fact, used to make expenditures in Connecticut elections.”

One state contractor is already under the microscope
 and the SEEC wants it known that it will not tolerate “loophole jumpers” when it comes to pay-to-play.

Meanwhile, on the Left Coast, state regulators opted for a less subtle approach in imposing a record-setting fine of $133,500 against a Sacramento lobbyist for violating state laws prohibiting lobbyists from making campaign contributions.  Interestingly, just as the SEC did in the Goldman Sachs case, California’s Fair Political Practices Commission used the largest ever fine it has imposed to date to remind us that “in-kind contributions” from lobbyists in the form of free wine, liquor, and cigars at in-home political fundraisers count are just as illegal under state law as monetary contributions.  In case the message wasn’t clear enough, Governor Brown, Lt. Governor Gavin Newsome, and forty other public officials received formal warning letters from the CFPPC against accepting such campaign largesse from state lobbyists.  Not surprisingly, members of California’s General Assembly are “shocked, shocked to learn of such behavior going on in their state” and have introduced legislation (that somehow will never become law) banning lobbyists from hosting fundraisers at their homes.

Members of the Regulated Community, we have been warned: seeking out pay-to-play loopholes may “seem like a good idea at the time” but have the capacity to cause more trouble than the exercise is worth.