Political Law Playbook - December 2021

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[co-author: Charlotte Alberts]

Welcome to the second edition of the Political Law Playbook. Of particular note in this month’s newsletter are a pair of high-profile bribery cases involving former and current officeholders at the state and local levels. A former Illinois state representative pled guilty to accepting improper benefits from a businessman in exchange for the promotion of legislation favorable to his sweepstakes machine business. In Philadelphia, a current city councilmember was found guilty of bribery due to his acceptance of sham job payments and sporting event tickets in exchange for the promotion of a major electricians union.

While these corruption cases are at the extreme end of the spectrum, we highlight them to remind our law-abiding readership that the provision of things of value to public officials - even in the absence of actual quid pro quo corruption - can generate a wide range of potential legal, reputational and optical risks. Given these hazards, it is well worth the time for those who seek to influence or do business with government officials and employees to review and monitor their internal compliance controls on a regular basis and ensure that they are properly balancing business prerogatives with legal and regulatory hazards.

Federal Elections and Campaign Finance

FEC Rules Foreign Nationals Can Finance Ballot Initiatives - In a recently released Federal Election Commission (FEC) enforcement decision questioning the legality of Montana state ballot initiative contributions made by an Australian mining company, a 4-2 majority of the FEC Commissioners determined that such financial support was not expressly prohibited by the Federal Election Campaign Act (FECA) because the initiative in question was not inextricably linked to a political candidate or directly connected to a federal, state or local election. The decision likely opens the door to continued fights over the permissible limits of foreign spending on high-profile policy issues put before voters through state and local ballot measures. Given that the ruling only concerns the application and interpretation of FECA’s bar on foreign national engagement with ballot initiatives as they relate to federal, state and local elections, the decision will not have a direct impact on the ability of states and localities to separately prohibit ballot measure engagement by foreign individuals and organizations. In fact, seven states presently ban foreign nationals from making donations to state ballot measure committees, and several more jurisdictions are exploring similar prohibitions.

Senators Respond to FEC Ruling on Foreign Nationals - In the wake of the FEC’s recent enforcement decision in the Montana state ballot initiative matter, Sen. Kirsten Gillibrand (D-NY) introduced legislation prohibiting foreign nationals from financing US referendum campaigns. Gillibrand’s bill, the Stop Foreign Interference in Ballot Measures Act, would expressly amend FECA’s prohibition on foreign national donations to US political campaigns to include state and local ballot initiatives. Sen. Marco Rubio (R-FL) has also said that he plans to introduce legislation to erase any ambiguity surrounding the limits of FECA’s bar on foreign engagement in ballot measure campaigns.

FEC Enforcement Decision Determines that Twitter Account Verification Decision Was Not a Reportable Political Contribution - In a recent enforcement decision involving social media company Twitter - MUR 7832 - the FEC found that the company’s business decision to “verify” one candidate’s tweets while not verifying another’s did not constitute a reportable contribution under federal campaign finance law. As part of the decision, Republican FEC Commissioners Dickerson and Trainor wrote separately to discuss what constitutes a “thing of value” for the purposes of FECA, arguing that a Twitter verification, while helpful in some respects, has no objective commercial “value” that can be measured.

Gun Control Group Alleges Campaign Finance Violations in Lawsuit Filed Against NRA Entities - The Giffords Center to Prevent Gun Violence (“Giffords”) filed a federal lawsuit in the US District Court for the District of Columbia (DDC) against the National Rifle Association of America’s Political Victory Fund and its Institute for Legislative Action alleging that the entities violated campaign finance laws by illegally contributing tens of millions of dollars to GOP Senate and Presidential candidates through a number of shell corporations. The lawsuit comes in the wake of a recent DDC order directing the FEC to respond to a long-standing campaign finance complaint with a “reason to believe” determination concerning the allegations against the NRA entities. When the Commission failed to act within the court’s mandated 30-day period, Giffords was permitted to file suit against the NRA entities under FECA’s private right of action provision. While the allegations in the Giffords complaint may be of interest to many of our readers, the case is even more noteworthy because it is representative of what many commentators have characterized as a concerted strategic effort by Democrat FEC Commissioners to pave the way for private right of action cases rather than resolving matters through the Commission’s administrative complaint process.

Sens. Elizabeth Warren and Michael Bennet Introduce Bill Targeting ‘Zombie’ Campaigns - Sens. Elizabeth Warren (D-MA) and Michael Bennet (D-CO) are introducing legislation, titled the “Zeroing Out Money for Buying Influence after Elections” (ZOMBIE) Act, that would outlaw “zombie” campaign accounts for any politician who chooses not to seek re-election six months after they leave office. This proposed legislation would also require any retiring politician to shut down their campaign account prior to registering as a lobbyist or foreign agent, and likewise prevent such former elected officials from using unspent campaign funds to start a new nonprofit or political organization that they control or otherwise influence.

A Year Out, Political Groups Prepare for What Could be the Most Expensive Midterms Ever - Next year’s midterm elections, which will determine control of the House and Senate for the second half of President Joe Biden’s present term in office, are already set to break records, thanks primarily to big-money outside groups. Super PACs and other outside advocacy organizations have already committed extensive resources to fundraising for the 2022 elections, and have raised more than ever before at this stage prior to a mid-term federal election. Without a presidential contest on the ballot next year, our readership should not be surprised if we see political spending records broken across the country for hotly-contested Senate and House seats.

Federal Lobbying and Ethics

Sens. Warren and Whitehouse Call for Investigation into U.S. Chamber of Commerce Lobbying Filings - Sens. Elizabeth Warren (D-MA) and Sheldon Whitehouse (D-RI) recently sent a letter to the Secretary of the Senate and the Clerk of the House of Representatives asking for an investigation into whether the US Chamber of Commerce has violated federal lobbying disclosure laws. The pair of senators is alleging that the Chamber is violating a requirement under the Lobbying Disclosure Act (“LDA”) that trade groups disclose any companies or groups that contribute at least $5,000 per quarter toward their lobbying work and “actively participate in the planning, supervision or control of such lobbying activities.” We’ll see if the Secretary and Clerk have any formal response to the correspondence, as any change in application of this LDA reporting obligation would certainly have a large impact on trade associations operating across Washington, DC.

VP Harris’ McAuliffe Endorsement Video May Have Violated Federal Law - Leading into the November 2 state elections in the Commonwealth of Virginia, Vice President Kamala Harris taped an endorsement and get-out-the vote video for Democrat gubernatorial nominee Terry McAuliffe that may have violated federal law. The video was targeted toward African-American voters and disseminated to a number of primarily African-American churches in the days leading up to Virginia’s statewide elections. Critics of the video message assert that its content and dissemination violates the “Johnson Amendment” provisions of the Internal Revenue Code, which prohibit political campaign intervention or participation by Section 501(c)(3) organizations like churches. Running afoul of these prohibitions can lead to a revocation of tax-exempt status for violating organizations, as well as the imposition of certain excise tax penalties. While it is possible, in light of the publicity garnered by the video at issue, that the Internal Revenue Service could undertake a substantive enforcement or audit review of the described activity, such governmental investigation of church-related political intervention is generally rare and not an activity for which the Service has a large amount of resources dedicated.

Foreign Agents Registration Act (FARA)

Bipartisan Group of Lawmakers Introduce FARA Modernization Bill - A bipartisan group of lawmakers in both the House and Senate unveiled a bill recently with the aim of standardizing FARA registrations and making filings more easily accessible for public review. If passed, the bill would require the Department of Justice to create a standardized electronic database of foreign agent information, implement digital accessibility standards for FARA filings, and post filings online immediately upon receipt. The makeup of the group of sponsoring lawmakers – coming from different corners of both the Republican and Democrat caucuses – suggests a growing appetite for FARA reform on Capitol Hill.

Non-Federal Elections and Campaign Finance

Alaska Campaign Regulators Propose Higher Donation Limits - The Alaskan Public Offices Commission (APOC) recently proposed new limits on contributions to political campaigns in the state. Under the newly-proposed caps, an individual would be limited to $1,500 in donations per candidate or group per year and an organization would be limited to $3,000 in donations per candidate or group per year. The proposed limits are currently in a pending status subject to final approval by the five-member APOC, which is not scheduled to meet again until January 2022.

Pritzker Signs Law Banning Dark Money, Out-Of-State Contributions in Judicial Campaigns - A new law in Illinois aims to ban out-of-state contributions and “dark money” in judicial campaigns by requiring all candidates to disclose the sources of their contributions. Gov. J.B. Pritzker recently signed Senate Bill 536, which prohibits judicial campaign committees from accepting contributions from any out-of-state source or any person or entity that does not disclose the identity of those making the donation, except for contributions that are below the threshold for itemization. The newly-signed legislation also raises the monetary threshold for itemizing contributions under state law to $1,000.

Non-Federal Lobbying and Ethics

Lobbyists Were Not Eligible for PPP Money, But California Government Affairs Firms Still Received Millions (subscription needed) - A recent San Francisco Chronicle review of Paycheck Protection Program (PPP) loans given in California during 2020 revealed that a number of potentially ineligible lobbying firms across the state received millions in funds from the federal government. Although the PPP loan program was designed to provide emergency federal financial to struggling small businesses and the application process was purportedly subject to eligibility restrictions for applicants - including a prohibition on lending to firms “primarily engaged in political or lobbying activities” - the Chronicle found that as many as two dozen firms significantly engaged in lobbying California’s state government received PPP loans. The newspaper’s analysis posited that the possibly misdirected loans were most likely the result of a combination of factors, including a disorganized application process, insufficient lender due diligence, and rampant miscommunication between the federal government and banks with regard to processes, procedures and regulatory guidance.

Pay-to-Play

Cincinnati City Council Passes Ban on Developer Donations in Wake of Past Corruption Concerns - As we noted in our Pay to Play Law Blog last month, the Cincinnati City Council recently unanimously approved a new pay-to-play ordinance aimed at curbing the political influence of commercial real estate developers who have actual or prospective business with the city. The new ordinance prohibits the Mayor, City Council Members, their agents, campaign committees, and affiliated PACs from soliciting or accepting political contributions of any amount from “financially interested persons” with certain types of business matters before the city.

Philadelphia City Councilmember Convicted of Bribery in Federal Corruption Trial - Philadelphia City Councilmember Bobby Henon and electricians union head John Dougherty were both found guilty of conspiracy and honest services fraud in November, with Henon also being found guilty of bribery. Dougherty had been accused of providing improper benefits to Henon in 2015 and 2016 via a no-show union job and the provision of nearly $20,000 in tickets to Philadelphia Eagles games and other local sporting events. In exchange for these benefits, Henon was found to have misused his public office in a variety of schemes benefitting Dougherty, including pressuring large employers to hire union electricians and helping Dougherty attack his rivals in other unions.

Ex-Illinois State Rep. Luis Arroyo Pleads Guilty in Bribery Case Tied to Sweepstakes Machines - Former Illinois state Rep. Luis Arroyo recently pled guilty in a bribery scheme involving a lobbying effort to expand the use of sweepstakes gaming machines across the state. According to the indictment, Arroyo accepted bribes from a businessman tied to the gaming machine industry in exchange for the promotion of legislation beneficial to the sweepstakes machines business. Arroyo and the businessman also allegedly conspired in 2019 to pay a state senator $2,500 a month in kickbacks in exchange for the senator’s support on the proposed sweepstakes game legislation.

Congressional Investigations

House Jan. 6 Committee Issues Subpoenas to 6 Top Trump Advisers, Including Pair Involved in Willard Hotel ‘Command Center’ - The US House of Representatives Select Committee investigating the January 6 attack on the Capitol recently issued subpoenas to six advisers to former President Donald Trump, including two who were active in The Willard Hotel “command center” where Trump’s supporters oversaw efforts in January to challenge the 2020 presidential election results. Those individuals subpoenaed included: William Stepien -Trump’s 2020 campaign manager; Jason Miller - senior adviser to the Trump campaign; Angela McCallum - national executive assistant to the campaign; attorney John Eastman; former National Security Advisor Michael Flynn; and former New York City Police Commissioner Bernard Kerik.

House Oversight and Reform Committee Leaders Call on the National Football League to Commit to Full Transparency and Cooperation in its Review of the League’s Investigation into the Washington Football Team - Following the issuance of an October document request letter to National Football League (NFL) Commissioner Roger Goodell, House Oversight and Reform Committee Chair Carolyn Maloney (D-NY) and Subcommittee on Economic and Consumer Policy Chair Raja Krishnamoorthi (D-WA) called on the NFL to honor Goodell’s commitment to full cooperation with Congress’ review of the League’s handling of its internal review of the Washington Football Team’s (WFT) “hostile workplace culture.” While the NFL partially responded to the inquiry by the reply deadline earlier this month, the League did not provide Committee staff with all the investigative findings and documents they requested, nor did the NFL commit to lifting any of the existing nondisclosure agreements preventing certain relevant witnesses from speaking freely to Congress about the nature of the WFT investigation. The Committee’s review is expected to expand in the months ahead and will likely culminate in one or more hearings focused on the NFL’s response to workplace harassment and discrimination claims made against its member teams and the League as a whole.

The Courts and Free Speech

Supreme Court Wrestles With the Proper Balance Between Constitutional Free Speech and Local Ordinances Restricting Digital Billboard Ads - In early November, the US Supreme Court heard oral arguments in the case of City of Austin v. Regan National Advertising. The case, on appeal from the US Court of Appeals for the Fifth Circuit, centers on the question of whether the City of Austin’s existing sign regulations unconstitutionally restrict the free speech of advertisers by permitting businesses to use digital billboard advertising on their own property, but barring it in off-site locations. Questions to the litigants from the justices centered on whether the municipal regulation constituted a content-based restriction on free speech under the First Amendment and whether the court would be right to apply its “strict scrutiny” standard to this particular government-imposed restriction on speech. A decision in the case is expected by late June 2022.

Political Law Practice Pointers

This edition of Practice Pointers focuses on the upcoming campaign finance filings due for federal PACs registered with the FEC. Given that 2021 is not a federal election year, registered PACs have had the option to file on a semi-annual basis, with disclosure reports due by the end July and January. The 2021 Year-End report for such committees is due by January 31, 2022, and must cover all committee receipts and disbursements for the period of time between July 1, 2021 and December 31, 2021. PACs that elected to file as monthly filers in 2021 - rather than opting for semi-annual filing - will likewise have their regular monthly disclosure due by January 31, 2022 covering financial activity in December 2021.

For 2022, PACs filing on a non-monthly basis should be mindful that their FEC reporting calendar returns to the standard quarterly schedule throughout the year. Such committees should also be mindful that the arrival of federal primary elections throughout the course of 2022 raises the specter of special pre-primary reporting obligations at various jurisdiction-specific intervals. PACs giving in connection with primary elections should thus be careful to monitor and comply with the pre-primary reporting schedule in all jurisdictions where they give, or alternatively should consider shifting to a monthly reporting schedule with the FEC that will exempt them from pre-primary submissions.

The Dentons Political Law Team regularly advises a wide range of federal corporate PACs (separate segregated funds), nonconnected PACs, leadership PACs and other political organizations with regard to the intricacies of FEC disclosure rules, including the above-mentioned reporting obligations. If your organization has questions regarding the FEC filing process, please reach out to our authors for assistance.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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