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But, there are a lot of ways to improve PAC fundraising.

A Florida-based trade association voluntarily came forward to the FEC to disclose that it had reimbursed travel expenses for PAC contributors and was fined $9,000. The FEC found that the group developed a schedule for reimbursing travel expenses based on the amount given or pledged to the PAC. Under that system, the association reimbursed approximately $55,000 in travel expenses over the course of four years. Because of those travel reimbursements, the FEC concluded that the association had, in effect, reimbursed the PAC contributions. As such, it made impermissible corporate contributions and contributions in the name of another.

The reimbursement formula depended on the amount given or pledged to the PAC. Those who gave $1,000 per year, would get $750 in travel for each of two meetings, or a total of $1,500 per year. $100 contributors got $150 per meeting, or $300 total. If the association had reimbursed all directors for travel regardless of PAC contributions, that would have been fine. The problem was that the reimbursements were tied to the PAC contributions.

The FEC has said that the method for reimbursement does not matter. Bonuses, expense reimbursement, etc. are all impermissible. There are, however, permissible ways to incentivize PAC giving:

Continue Reading Don’t Reimburse Contributions. Period.

Overview

Pay-to-play laws restrict or prohibit businesses, as well as their owners, officers, and in some cases, their employees, from making political contributions (the “pay”) if they have been awarded or are trying to obtain government contracts (the “play”). These laws, which are found at the federal, state and local levels, are an outgrowth of government contracting scandals and can strike at a company’s bottom line by disqualifying bids and voiding contracts. Violations also can result in fines, damaging publicity, and even jail.

Government contractors should have a pay-to-play compliance plan that takes into account the jurisdictions where covered owners, officers, and employees are located, and where the company does or seeks to obtain business with government agencies. In addition, contractors should have a process for training covered employees, a mechanism for pre-clearing contributions, and protocols for meeting registration and ongoing reporting requirements.

Here are a few questions to help determine whether pay-to-play laws pose a risk to your business:

  • Do pay-to-play laws apply to my business activities?
  • If so, which affiliated individuals and entities are subject to the law?
  • What are the consequences for covered individuals and entities (prohibitions, reduced contributions limits, reporting, other)?
  • What are the penalties for violating applicable pay-to-play laws?

Continue Reading Pay-to-Play Law Update: Political Activity Can Put Government Contracts at Risk

Since the Bipartisan Campaign Reform Act was passed in 2002, the Federal Election Commission (FEC) indexes contribution limits based on inflation every two years. For the first time, the FEC did not increase the individual (and non-multicandidate PAC) limit to candidates because inflation was running so low. Individuals are still allowed to give $2,700 per election to candidates. Some of the other higher limits to party committees from individuals (and non-multicandidate PACs) were adjusted slightly:

  • Individual contributions to national party committees were increased $500 from $33,400 per year to $33,900 per year.
  • Individual contributions to party accounts for presidential nominating conventions, legal and election recount expenses, and building funds were increased by $1,500 from $100,200 to $101,700 per year.

For a detailed chart of the contribution limits for the 2017 – 2018 cycle, the FEC reporting deadlines for 2017, and the federal lobbying reporting deadlines for 2017, please click here.

Maryland has had a pay-to-play law for many years, which requires government contractors to register and file reports concerning political contributions to state and local candidates. Since 2015, the law has been in a state of flux as legislators and regulators have written and re-written the requirements, creating a complex reporting system.

The law is triggered when a business receives a contract from a Maryland state or local government body with a total value of $200,000 or more. The parent company of the business holding the contract must register with the State Board of Elections, and then keep the registration up to date with new contracts it and its subsidiaries receive. Every six months, the parent company must disclose certain contributions made by it and each of its subsidiaries, as well as contributions by each of those entities’ officers, directors, and partners. In addition, it must disclose contributions made by other individuals, such as employees and lobbyists, if they make contributions at the “direction or suggestion” of these officers, directors, or partners.

With the next report due Wednesday, November 30, covering the period from May 1 through October 31, it is a good time to review some of the most recent changes.

Extended Registration Deadlines

The State Board of Elections has extended the deadline for a filer to update its registration statement to include a new contract.

  • Contracts with the same jurisdictions: If any additional contracts are awarded from a jurisdiction with which a filer already has a registered contract, the filer has 30 business days to update the registration statement to include the new contract. 
  • Contracts with new jurisdictions: If a contract is awarded by a jurisdiction in which the filer does not hold a registered contract, the registration must be updated within 15 business days of the award to reflect the new contract. Additionally, the filer must submit an “initial report” within 15 business days of updating the registration, disclosing contributions made to (or “for the benefit of”) officials and candidates for office in that jurisdiction in the preceding 24 months.

Suggesting that Someone Make a Contribution

Under the new regulations, a communication to an employee, agent, or other affiliated person is considered a “suggestion” for a contribution if a reasonable person would understand it that way. The Board of Elections provides the following examples to help guide that determination:

  • If the filer, or an officer, director, or partner of the filer, forwards an email containing a fundraising solicitation to an employee or agent (e.g., a state lobbyist), a contribution that results from this “suggestion” must be reported by the filer.
  • An expression of public support – on social media, for example – is not, by itself, considered a “suggestion” for a contribution, and thus contributions made in response to such postings do not have to be reported.

Thus, officers and directors must be very careful about fundraising from employees, company lobbyists, and others. Simply forwarding an email containing a fundraising invitation can significantly expand the number of reportable contributions.

CEO’s Duty to Request Information from Covered Persons

In order to complete the report, the law requires a filer’s CEO, or his or her designee, to ask covered persons if they have made any covered contributions during each reporting period and obtain information about the date and amount of the contributions. Although the law does not impose a specific date by which the request for information must be sent, covered persons must provide information to the filer within 5 business days after a reporting period ends. For the upcoming report, the CEO or designee must request that covered persons provide the necessary information by November 7, 2016 (covering the period from May 1 – Oct 31).

If a filer requires that covered persons must preclear contributions through a corporate legal or compliance department, no separate notice is required. The preclearance policy must be in writing and annually reviewed by covered personnel.

A filer may also dispense with notice to officers, directors, partners, or employees of a subsidiary if (1) the subsidiary does not hold contracts in Maryland; (2) the subsidiary has “a written and well-publicized policy” prohibiting contributions in Maryland, which is annually reviewed by covered personnel; and (3) the filer annually submits the policy and related information to the Board of Elections. This written policy will be available to the public, but the Board of Elections has not yet determined whether it will be posted online.

If you need any assistance determining your obligations under these rules or filing reports, the Venable Political Law Practice can be of assistance. 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.

dollar signIt was the best of times, it was the worst of times. For investment advisers and others subject to the pay-to-play rules, that is. Although both vice presidential picks have gubernatorial experience, because Mike Pence is a sitting governor and Tim Kaine is a former governor, there are certain pay-to-play rules that apply to contributions to Trump/Pence that do not apply to Clinton/Kaine. Thus, the Pence pick has important implications for many companies and firms engaged in the financial services industry.

As reported by various news outlets, Governor Pence’s role with the Indiana Public Retirement System subjects contributions to the Trump/Pence ticket to the SEC’s and other pay-to-play rules. Violations of these rules can carry significant penalties. And the shadow of the pay-to-play fundraising restrictions has even caused some to speculate that Pence should resign as governor.

Continue Reading A Tale of Two Vice Presidents: Pay-to-Play and the Running Mates

The question of when a politically-active, nonprofit 501(c)(4) group must publicly disclose its donors has been on the front burner in various states—most, like New York and California, have called for greater regulation, while others like Arizona have loosened the reins. At the federal level, silence has been the norm because the statute is generally read as only requiring disclosure by a 501(c)(4) (or other nonprofit such as a 501(c)(6)) if a donor contributes for the purposes of funding a particular ad. The FEC has consistently deadlocked on complaints alleging either that a donor gave for the purpose of supporting an ad or that a 501(c)(4) should be treated as a political committee and disclose all of its donors.

Last week, however, details were released from an FEC enforcement matter that met this stringent test and, as a result, the Commission levied fines totaling $233,000 against three nonprofit groups for failing to identify donors behind specific advertisements. These three settlement agreements, released as a group, provide significant guidance to nonprofit 501(c)(4)s and other actors as to what type of conduct will trigger donor disclosure at the federal level.

Continue Reading The FEC Levels Fines on Nonprofits over Donor Disclosure

Please Join Venable LLP for a Complimentary Webinar (CLE Available*)

Wednesday, June 8, 2016
12:00 p.m. – 1:30 p.m. ET – Webinar

The 2016 election cycle is in full swing, and major changes to the financial services regulatory landscape, including the Dodd-Frank Act and the Consumer Financial Protection Bureau (CFPB), could turn on the outcome of the election. Whether your company wants to play a role in the election or your executives are personally supporting candidates, it’s important to understand the rules.

Continue Reading Election-Year Political Activity: A Primer for Financial Services Providers

Long before Citizens United allowed corporations to fund independent expenditures to support candidates, the Supreme Court allowed corporations to contribute to ballot measure committees. Until recently, disclosure was a fairly straightforward matter: give to the official committees supporting or opposing the measure and the contribution would be disclosed; give to other entities (like a nonprofit) that give to the official committees, and the corporation’s contribution would not be disclosed. After Citizens United, however, states’ fear of corporate involvement in candidate races led many states to require disclosure of “upstream” contributions. Those changes often applied not only to contributions for candidate independent expenditures, but also to contributions for ballot measures.

We have written about California before. Recently, Washington State has focused on the intermediary issue of when a nonprofit must disclose its donors. A trial court in Washington State ruled that a trade association should have registered itself as a ballot measure committee based on a special project it undertook to challenge state initiatives about food labeling. The result of this decision is that member companies had to disclose their contributions to the association for the special project. Continue Reading Ballot Initiative Disclosure

nomoneyThe Federal Election Commission recently concluded an investigation into contributions from a Canadian citizen to a candidate for governor. Why would the FEC investigate a state contribution? Because the ban on contributions from foreign nationals applies not just to federal candidates, but to state and local candidates as well.

The FEC dismissed the case because the state candidate did not know the contributions were illegal. In fact, he had checked with state election officials, who told him there was no issue under state law. There wasn’t, but there was an issue under federal law.

Foreign nationals are individuals who are not U.S. citizens or non-citizens who do not have permanent resident (i.e., green card) status, as well as any companies incorporated, organized, or located abroad. U.S. citizens living in other countries are permitted to contribute.

Continue Reading Don’t Forget: Recent FEC Case Is a Reminder That Federal Law Prohibits Contributions at the State and Local Levels Too

As we get closer and closer to the elections, candidates will be working harder and harder to raise money. One tried and true method is the fundraiser: an individual agrees to put together an event where his or her closest friends will make substantial contributions to the candidate, attend a breakfast, lunch, cocktails, or dinner, meet the candidate, and, if they contribute enough, get a picture with the candidate. While this may seem simple and straightforward, companies often get into trouble when they use their corporate resources to help put on fundraisers.

The largest fine in FEC history ($3.8 million) came as a result of corporate facilitation back in 2006. Others have followed. The FEC just unveiled an enforcement case involving a Nevada architectural firm that paid a substantial fine for using corporate resources to hold a fundraiser. The settlement provides a good example of how not to fundraise for federal candidates.  Continue Reading Hosting Fundraisers: One Company’s Example of How Not to Do it