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San Francisco’s Potential Anti-Corruption and Accountability Ordinance Includes New Compliance Provisions That Venture Beyond Standard Pay-to-Play Laws

For those of our readers with a latent East Coast bias or who have just been preoccupied with the latest political drama emanating from Washington, you may have missed the recent flurry of activity in the Bay Area that appears to be threatening the City of San Francisco’s efforts to pass a controversial ethics reform bill. The proposed Ordinance, known as the Anti-Corruption and Accountability Ordinance (ACAO), takes an aggressive tact on regulating political engagement within the City and seeks to implement a series of unique compliance obligations that venture beyond the standard approaches to eliminating pay-to-play politics.

At present, the ACAO has proven to be more of a political football than a legislative success story. The Chair of the City’s Ethics Commission recently stepped down following the Commission’s failure to approve its placement on the June primary ballot for voter consideration.  Despite this very public disappointment for backers of the measure, a motion has recently been introduced for the ACAO to be taken up for additional consideration by the Commission on April 3rd.  A similar request has been made to the San Francisco Board of Supervisors.  Given the political dynamics at play and the controversial nature of the ACAO in general, passage (or even a vote) on the ordinance next week is less than a certainty.  Some of its prospective contents, however, bear further discussion.

There are a litany of interesting regulations and restrictions included in the ACAO, including disclosure obligations related to so-called “behested payments” made on behalf of public officials and a new prohibition on certain political contributions made by entities with interests in specified land-use decisions.  But a recently inserted measure that would require large donors to state-level independent expenditure committees (Super PACs) to disclose certain personal business investments in San Francisco is catching our eyes.  This measure represents a novel disclosure mechanism obligating those wishing to politically engage through state-level Super PACs to open up their private business portfolio to public scrutiny.

The measure, sponsored by San Francisco Board of Supervisors Member Aaron Peskin, would require individuals who contribute more than $10,000 to Super PACs to disclose their financial investments of $10,000 or more in San Francisco businesses.  Such individuals would also need to report any businesses in San Francisco from which they receive compensation.   These disclosures would be required within 24 hours following the triggering contribution.

Supervisor Peskin’s proposal was met with at least some skepticism by the Ethics Commission, which questioned the constitutionality of such a disclosure obligation and the heavy regulatory burden such a provision would place on both donors and City compliance officials. Certain donors, the Commission noted, could have thousands of investments in the city, making compliance with the Peskin measure expensive and impractical.  The Commission also appeared to express some doubt as to the overall public policy value of implementing such a new requirement, which seems fairly disconnected from the stated goal of rooting out pay-to-play politics.  We here at the Pay-to-Play Law Blog would tend to agree with such skepticism.

Existing San Francisco ethics rules, which include a pay-to-play provision that prohibits contractor contributions to elected officials who have oversight responsibilities of those contracts, already seem well situated to curb the sort of unsavory political engagement elected officials and voters are most concerned about.  When paired with California’s additional disclosure requirements for entities that make contributions of $250 or more to elected officials before whom the entities have official business, it is somewhat difficult to find the added compliance value of the contemplated measure.  As our readers know well, however, that’s no true predictor of political passage in the pay-to-play context.

As April approaches, we here at Pay to Play Law Blog will continue to monitor the ACAO’s progress in San Francisco and its potential impact on pay to play compliance and political engagement within the City. Those in the regulated community with Bay Area business interests should stay tuned.

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San Francisco’s Potential Anti-Corruption and Accountability Ordinance Includes New Compliance Provisions That Venture Beyond Standard Pay-to-Play Laws

Taking Stock of The STOCK Act. . . . Wither “Political Intelligence”?

Proponents of ethics reform and increased political transparency in Washington don’t often see reform proposals pass through Congress by overwhelming margins, and rarely does anyone bemoan an excess of “political intelligence” in Washington, but that’s exactly what happened on Capitol Hill this past week. While the reform community can’t quite be sure what version of reform will survive the ongoing tug of war between the U.S. Senate and U.S. House of Representatives, it is clear that those trading on “inside political knowledge” are clearly in the transparency crosshairs.

If you are a consultant, a lobbyist, a law firm, or simply a person with inside knowledge of how Washington thinks, this post pertains to you (but you already know that, of course).

Two relevant reform proposals emerged in the wake of growing public outrage generated by CBS’ “Sixty Minutes” and other reports highlighting the ability of elected officials and their staff to trade on otherwise “non-public” information for personal investment gains. Near universal public outrage is about the only catalyst for Congressional action these days but, despite bipartisan grass-roots calls for reform, no singular solution is ever presented by Congress…. Instead, as many might have predicted, Congress produced two competing visions of what problems need to be addressed and how to go about it.

The Senate set forth its vision last Thursday when it passed the Stop Trading on Congressional Knowledge (“STOCK”) Act of 2012 in a lopsided, 96-3 roll call vote. In addition to tackling the fundamental problem not so subtly referenced in its title, the STOCK Act seeks to implement a number of aggressive ethics rules and revisions to the Lobbying Disclosure Act aimed at further restricting legislative and executive branch conflicts of interest and mandating more transparency in the area of non-lobbyist political consulting.

Most significantly for “Establishment Washington”, included within the Senate proposal’s ban on “insider trading” is a controversial obligation that all “political intelligence” consultants register and disclose their activities as if they were federal lobbyists, and a contentious legislative fix to the poorly-written “honest services fraud” statute that was recently-deemed unconstitutional by the U.S. Supreme Court in contexts outside of bribery and kickback schemes.

The language of the Senate bill would reach individuals and entities who engage in “political intelligence contacts” for the purpose of obtaining information from officials of the executive and legislative branches of government “for use in analyzing securities or commodities markets, or in informing investment decisions.” Any organization employing or retaining an individual who engages in one such contact would be required to register and report in the same fashion as if they were a lobbyist-registrant under the Lobbying Disclosure Act (LDA).  As such, they would be subject to the same quarterly and semi-annual disclosure requirements that lobbyist-registrants currently meet.

On a quarterly basis, via a Form LD-2, “political intelligence” registrants would need to disclose the “issue areas” their organizations are discussing, the legislative body or federal agencies they are contacting, the employee(s)/consultant(s) that engage in such contacts, and the total expenses incurred with regard to the intelligence-gathering activities. On a semi-annual basis, via a Form LD-203, political intelligence registrants would also need to disclose political contributions and contributions to events honoring or recognizing covered executive or legislative branch officials. Such contribution reports would be required of both individual consultants and their employing organizations, effectively opening up a new segment of the Washington political class to public scrutiny of its campaign and non-campaign donations. Certain limited exemptions to these disclosure requirements do exist under the Senate version of the bill, but they are not nearly as broad as those carved out under the LDA for current lobbyist-registrants.

Reform and transparency are all well and good, but these requirements proved too much for the House (and legions of the suddenly activated “political intelligencia”) to accept.

Yesterday morning, the House followed the Senate’s lead by passing its own amended version of the STOCK Act by a similarly enormous voting margin – 417 to 2 to be exact – but without the requirement that non-lobbyist “political intelligence” consultants register and report their activities. Likewise, the House version of the bill refrains from amending the honest services fraud statute to allow for its use in non-bribery and non-kickback scenarios.

House Majority Leader Eric Cantor (R-VA) articulated the House rationale when he commented that the Senate’s disclosure requirements were something “outside of what we do” and that they were not part of the original purpose of the STOCK Act legislation. Also criticized was the “vagueness” of the political intelligence provisions as pertains to anything that happens in Washington.

Thus, in as sure an effort towards “assisted suicide” as Congress has in its arsenal these days, the amended House STOCK Act calls for a federal study of the “political intelligence” industry for the purpose of making future legislative recommendations and additionally prohibits lawmakers from receiving access to initial public offerings of stock. THAT always results in action, right?

Looking to the future, many believe that the political intelligence requirements of the Senate’s STOCK Act are yet another reformulation of recent efforts attempting to compel increased disclosure, and thus disincentivize, political spending by corporations and wealthy individuals. This blog has discussed similar efforts by the SEC, Congress, the ABA, and the Obama Administration in the past. And as such, it is easy to understand the negative reaction that has come from these House Members and many on K Street. Particularly when coupled with the drastic effect the expansion of registration and reporting requirements would have on business activities in and around Washington, D.C moving forward.

In the end, it will be interesting to see whether the overarching goal of banning “insider trading” by Members of Congress and congressional staff becomes collateral damage in the battle over establishing political intelligence registration and reporting requirements. Stranger things have happened on Capitol Hill. Anyone selling information or access in Washington needs to be closely watching Congress in the coming weeks to see how this tug of war ends.

But you already know that.

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Taking Stock of The STOCK Act. . . . Wither “Political Intelligence”?

Deficit “Super Committee” Transparency – Will We Get to See the Budgetary Sausage in Production?

Whether you agree with Justice Brandeis that sunlight is the “best of disinfectants” or with former American League of Lobbyists president Dave Wenhold that “too much sunlight causes cancer”, it should be readily apparent to the readers of this blog that public officials of all stripes have increasingly begun to listen to the chorus of voices calling out for more transparency in all levels of government. At PaytoPlayLawBlog, we often write about how the push for greater transparency at the federal, state and local levels is affecting the operation of government, as well as the interaction of the public with government officials. As strictly objective, rational observers (ahem), it seems to us that disclosure alone generally trumps both inaction and punitive regulation in the pay-to-play space. Over the past month or so, we have come to see new evidence of this welcome push for openness at the federal level, particularly with regard to the activities of the newly-formed Joint Select Committee on Deficit Reduction (or the so-called Deficit “Super Committee”).

For those who have spent all of their time recently tracking satellite orbits and running calculations on their chance of having to make a potentially uncovered homeowners claim, the Super Committee is a balanced delegation of six Democrats and six Republicans (split evenly between members of the U.S. House of Representatives and U.S. Senate) formed in August of this year as a means of permitting Congress and the White House the opportunity to avoid responsibility for identifying an additional $1.5 trillion in federal budgetary cuts over the next decade. Whether one agrees with the premise of granting 12 Members of Congress such extraordinary authority over federal, fiscal decision making, it is readily apparent that the ongoing work of the Super Committee has drawn a great deal of attention from political organizations and commentators across the ideological spectrum. Given the nature of the current (entirely justified) cynicism with the political process, and the enormity of the task before the Super Committee, it should not surprise readers of this blog to learn that much of this attention across the political continuum has been focused on increasing the political transparency of the Committee’s activities.

One of the more prominent efforts to accomplish this goal has been organized by the Sunlight Foundation, a non-profit organization dedicated to using the “power of the Internet to catalyze greater government openness and transparency.” On August 3, 2011, the Foundation issued a letter to congressional leadership urging them to adopt a series of recommendations that the Foundation believes will ensure the Super Committee operates in a fully open and transparent manner. Those recommendations included: (1) holding live webcasts of all official Committee meetings and hearings; (2) posting the Committee’s draft recommendations for at least 72 hours prior to a final committee vote; (3) promoting disclosure of every meeting held by Committee members with lobbyists and other “powerful interests”; (4) ensuring the immediate disclosure of all campaign contributions received by Committee members during their service on the Committee; and (5) demanding additional financial disclosure standards for Committee members and their staffers. In addition, the Foundation has teamed up with various transparency activists and supporters to launch a grassroots campaign designed to encourage greater accountability and openness from the Super Committee. The movement’s allies in this endeavor include such left-leaning organizations as The Brennan Center for Justice, the Project on Government Oversight, and Public Citizen.

Although not necessarily backing each of the Sunlight Foundation’s specific recommendations, many organizations and individuals on the conservative and libertarian end of the political spectrum have also echoed the Foundation’s calls for transparency in Super Committee activities. For example, Jim Harper of the CATO Institute and Rob Bluey of The Heritage Foundation’s Center for Media and Public Policy have both recently demanded that the Super Committee permit open public access to Committee meetings and legislative proposals as a means of ensuring that all citizens are kept abreast of the activities of this uniquely powerful legislative panel. Along those same lines, Harper and Bluey have also called for Committee transparency as a safeguard against the passage of expansive legislation that is subject to little or no debate or public input.

All of this makes perfect sense. As we have previously observed here, efforts to govern matters such as this from behind closed doors can lead to embarrassing exchanges.

Bi-partisan support for greater Super Committee transparency has even begun to emerge within Congress itself. In fact, in early September, Representatives Mike Quigley (D-IL), Dave Loebsack (D-IA), and Jim Renacci (R-OH) introduced H.R. 2860, the Deficit Committee Transparency Act, which would implement six transparency reforms along the lines of those recommended by the Sunlight Foundation. Similarly, Senators David Vitter (R-LA) and Dean Heller (R-NV) have also introduced two separate bills, S. 1501 (the Budget Control Joint Committee Transparency Act) and S. 1498  (the Super Committee Sunshine Act), that are designed to ensure the openness of Super Committee meetings and greater transparency in the political fundraising of Committee members.

At present, none of the aforementioned bills have been acted upon in Congress, but there does appear to be growing support on both sides of the political aisle for a more open and forthright framework for Super Committee action. Recognizing the growing momentum in support of such transparency, the Committee has taken the initial step of keeping its three preliminary meetings open to the public (and also available for video review over the Internet). It remains to be seen, however, whether this policy will continue as the Committee gets deeper into the task of formulating its deficit-reduction proposals. Likewise, it remains to be seen whether any of the other aforementioned transparency proposals will gain any traction with the Committee itself. Stay tuned in the coming months to find out.

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Deficit “Super Committee” Transparency – Will We Get to See the Budgetary Sausage in Production?