The District of Columbia has adopted a “pay-to-play” law that bans political contributions from city contractors, as well as personal political contributions from their senior officers. Violators may forfeit contracts, face disqualification on bidding for up to four years, and pay civil penalties. The law takes effect on November 4, 2020.
Other major municipalities, such as Chicago, New York City, and Philadelphia have similar laws that either restrict political contributions from contractors and their principals, require the contractor to file reports with the relevant election board, or both. A number of states also have pay-to-play laws, including Maryland, New Jersey, and Illinois.
Which individuals and entities are covered?
The Act applies to businesses if they hold—or are seeking—government contracts with the District of Columbia worth at least $250,000. In addition to banning contributions from the company with the contract, the Act also prohibits the firm’s senior officers (e.g., president, executive director, chief executive officer, chief operating officer, or chief financial officer) from making personal contributions.
The company and these individuals are prohibited from contributing to “covered officials,” a term that depends on who oversees the contract in question. If a firm is seeking or holds a contract that requires DC Council approval, the firm and its senior officers are prohibited from contributing to any candidates for the DC Council. Likewise, if a contract requires approval by the mayor or the attorney general, the firm and its senior officers are prohibited from contributing to the campaigns of candidates for those offices as well. The Act includes a few exceptions, such as allowing contractors to contribute to their own campaigns if they run for local office.
In most cases, the ban on government contractor contributions begins on the date the contract is solicited and remains in effect for varying periods, depending on the type of contract. For example, the prohibition extends one year after a contract terminates for the sale of goods, services, construction, and purchase or sale of land/buildings. In contrast, the prohibition extends for one year after entering into a contract for the lease of land/buildings, licensing arrangements, and certain loans.
What are the consequences for covered individuals and entities?
Government contractors and their senior officers who violate the pay-to-play law may have their current contracts terminated, may be disqualified from seeking future contracts (including extensions of existing contracts) for four years, are subject to a civil penalty, and will be included on a list of violators maintained by the Campaign Finance Board—a rogues’ gallery of pay-to-play violators.
A new enforcement agency
Finally, the Act restructures the Office of Campaign Finance into a newly created Campaign Finance Board—an independent, five-member board, which is empowered to enforce the District’s campaign finance rules. The Board is required to appoint a director of campaign finance to administer and enforce the rules, which includes the task of identifying violators of the prohibition and providing the contractors and the prohibited recipients with the opportunity to cure such violations.
We will track the Campaign Finance Board’s implementation of the pay-to-play ban, including any proposed rules and regulations. Please contact us if you have questions about establishing a pay-to-play compliance program. Venable’s Political Law Group has helped numerous clients to assess their risks in this area and develop a tailored compliance plan. For more information on developments in federal and state campaign finance, lobbying, and ethics laws, please visit Venable’s political law blog at www.PoliticalLawBriefing.com.