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On January 28, 2017, President Trump signed an Executive Order that imposes an extra layer of ethics obligations on presidentially appointed members of the White House and Executive Branch.

Overall, President Trump’s Executive Order takes a somewhat different approach than the “Ethics Pledge” issued by the Obama administration, expanding some restrictions and loosening others. In general, under the Trump Pledge, the restrictions imposed on the revolving door out of the government are stricter, while the restrictions on the way in are more flexible and not as rigorous.

On the way in, President Trump’s Ethics Pledge permits lobbyists to seek and accept jobs at an agency that they have lobbied within the last two years, subject to certain recusal obligations. Other front-end changes include:

  • Waivers of the Ethics Pledge are not public, as they were in the Obama administration; and
  • Waivers are granted by President Trump himself (or his designee), not by the Director of the Office of Management and Budget, as was the case under President Obama.

On the post-employment side, President Trump’s Pledge seeks to plug a loophole in the Obama Pledge that had been widely criticized — that only “lobbying” as defined under the Lobbying Disclosure Act, was prohibited, while behind-the-scenes activity known as “shadow lobbying” was permitted. Other post-employment restrictions include:

  • The post-employment revolving door ban applies to more than just lobbying contacts; it also applies to lobbying activities, which includes research, planning, and other behind-the-scenes activities that support lobbying contacts;
  • The post-employment revolving door ban has been expanded to prohibit former officials from representing a foreign government or political party, as those terms are used in the Foreign Agents Registration Act of 1938 (this ban was also in place under President Bill Clinton);
  • Former officials are banned for a period of five years from engaging in lobbying activities related to the former official’s agency; and
  • Former officials may not engage in lobbying activities with respect to any covered executive branch official (or non-career Senior Executive Service) in the entire executive branch for the remainder of the administration.

One thing that both Obama’s and Trump’s Ethics Pledges contain is a prohibition on gifts from lobbyists — the Executive Order bars appointees from accepting gifts from registered lobbyists and organizations that employ them.

For a full comparison of both ethics pledges, please click here.

Practical Effects

What are the practical effects for individuals going into the Administration, and for their former and future employers?

Understand what Happens if a Lobbyist from your Company or Organization goes into the Administration: If a former government relations professional for your organization, or even a hired lobbyist, is appointed to a position in the Trump administration, your company or organization may be affected. For example, if your lobbyist on environmental issues receives an appointment to an EPA post, he or she may be barred from reviewing matters in which you were represented (or even entire issues that he or she lobbied on). Under the Obama administration, this was not an issue because lobbyist were banned from serving in certain capacities. But now, you may need to develop alternate strategies to accommodate the presence of former lobbyists in the administration.

Understand the Scope of the Ban in the Future: Because the five-year post-employment ban applies to behind-the-scenes activities in support of lobbying, the employment prospects for administration officials will be significantly more limited than in the past. The Pledge appears to prevent hiring a former Trump political appointee to serve as a strategic advisor for government affairs, even if that person operates in a manner that does not require registering as a lobbyist. The five-year post-employment ban also appears to bar other types of behind-the-scenes work in support of lobbying, such as research, drafting leave-behind documents, and creating issue scorecards.

Whether your organization has a seasoned government affairs program or is newly considering the opportunities presented by a change in administration, Venable’s Political Law Practice Group can help you navigate gift rules and other ethics issues that arise along the way.

The Department of Justice Inspector General’s (IG) office recently released a highly critical audit of DOJ’s Foreign Agents Registration Act of 1938 (FARA) enforcement program. The audit, combined with recent news stories potentially involving FARA, may foreshadow an increased awareness of this sometimes overlooked registration requirement. But increased attention likely does not mean an increase in prosecutions, at least based on DOJ’s initial response to the audit.

Background on FARA

FARA is a federal criminal statute requiring certain persons acting on behalf of foreign principals to register and file periodic reports with the Department of Justice. The law requires any agent of a foreign principal to register with DOJ within ten days of engaging in political or quasi-political activities. These include activities such as lobbying, public relations, and direct or indirect political activities. FARA also requires foreign agents to file copies of informational material disseminated on behalf of a foreign principal to two or more persons with DOJ within 48 hours of their dissemination.

Persons required to register must provide DOJ with information on the nature of their relationship with the foreign principal, the work to be performed for the foreign principal, and, on a semi-annual basis, a report of the activities performed on behalf of the foreign principal and funds received from, or disbursed on behalf of, the foreign principal. Penalties for failing to comply with FARA can include a fine of $10,000 or imprisonment for up to five years.

Key points from the audit

The IG’s audit was especially critical of DOJ’s failure to prosecute FARA cases. In particular, the audit focused on the high proportion of new registrants who fail to file within the required ten-day period. In its review, the audit found that only 23% of new registrants filed timely registrations. In addition, materials disseminated on behalf of foreign principals were filed within the required period only 39% of the time, and almost half lacked a proper disclaimer (explaining that the agent is disseminating the information on behalf of a foreign principal).

The IG audit called on DOJ to improve its controls and oversight of FARA registration. Does this mean that a crackdown is in the works? Probably not. In response to the IG’s findings, DOJ pointed to several reasons why stricter enforcement is neither likely nor warranted:

  1. There is no penalty for late filings;
  2. At least half of the filings that were considered late (beyond ten days) were filed within 30 days (it appears even DOJ has a grace period); and
  3. According to DOJ, “the primary means of achieving FARA’s main purpose of transparency is through voluntary disclosure in compliance with the Act.”

Takeaways

Criminal enforcement of FARA, except in the case of a willful violation, will probably continue to be rare. However, DOJ appears to be developing tools to monitor more effectively whether the public is complying with FARA. For example, DOJ is expanding its efforts to identify potentially non-compliant registrants. The Audit confirmed that DOJ had limited itself to web searches or research on LexisNexis, but that it now is reaching out to other government agencies to obtain information about potential non-filers. DOJ also indicated that it will seek to make its FARA advisory opinions available to the public, perhaps as early as March 2017.  These opinions will provide further insight into how DOJ is approaching FARA registration.

With renewed focus on FARA, and DOJ’s indication it will expand its voluntary compliance efforts, we expect to see an uptick in the FARA Registration Unit’s activities, including more letters to violators seeking voluntary compliance.

The best way to avoid being caught in a Justice Department audit is by taking FARA seriously and implementing a compliance program. Here are three best practices:

  1. Know who pays your bills — FARA covers direct and indirect activity by foreign principals, so be sure to perform adequate due diligence before you engage in political or quasi-political activity.
  2. Take advantage of the Lobbying Disclosure Act exemption — If you lobby on behalf of a foreign private sector principal and are registered under the LDA, you are exempt from FARA requirements. Not only are the registration and reporting requirements under the LDA easier to comply with, it’s also cheaper to register under the LDA (no fee) compared with FARA ($305 for each foreign principal). Note that this exemption does not apply to agents of a foreign government (or a foreign government-controlled entity) or to a foreign political party.
  3. Seek guidance — For now, DOJ’s FARA advisory opinions are not readily accessible, and the law is arcane and unclear in many respects. To avoid getting into hot water, seek legal guidance on the front end of your engagements with foreign principals or foreign-controlled entities.

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

The Lobbying Disclosure Act Guidance (Guidance) issued by the Clerk of the House of Representatives and the Secretary of the Senate was updated on June 15. The updates clarify currently existing provisions of the LDA, add additional examples, replace references to the LDA with hyperlinked citations to the U.S. Code, and remove references to Line numbers (the online reporting platform does not have Line numbers for drafting reports, but the final version of the reports available on the House and Senate websites still have Line numbers).  The Guidance is available here. A brief discussion of the changes to the Guidance is below:

Continue Reading Revisions to the Lobbying Disclosure Act Guidance: What These Changes Mean for You

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

Following a major rewrite last year of its “pay-to-play” disclosure rules, Maryland has made further changes that expand the obligations of state and local government contractors to report their political contributions, and those of their subsidiaries, officers, directors, partners, and PACs. Now, in addition to reporting direct contributions to candidates, contractors will also have to disclose contributions made to independent expenditure groups and political parties that are “for the benefit” of covered candidates. The new law also changes reporting deadlines, and clarifies that companies holding state or local contracts awarded prior to January 1 must file disclosure reports until performance is complete.

The contribution disclosure requirements for lobbyist-employers will also change so that the two disclosure regimes mirror one another.

These new changes take effect on June 1, 2015, just five months after the last round of changes and the rollout of a new online reporting system.

Key features of the new law include…

The Maryland legislature overhauled the state’s campaign finance law almost two years ago, but many of the key provisions did not take effect until January 1, 2015. These changes significantly affect state government contractors by introducing a new electronic registration system overseen by the State Board of Elections, and requiring electronic reporting of contributions made by the contractor, as well as by its PAC and subsidiaries, and its officers, directors, and partners.

The new law also increases the limits on contributions by individuals and business entities, and compels politically active nonprofits to register and disclose their donors. Stiff penalties may be imposed on nonprofits that knowingly and willfully fail to file registration notices or reports. Also, the State Board of Elections now has the power to issue civil citations for strict liability offenses, such as failing to keep accurate books and records.

To read the full article, please continue reading on our website.

The LD-203 obviously includes a number of different disclosures. In practice, many reports show very little activity because the categories to be disclosed are fairly narrow. However, the report is filed under penalties of making false statements, so organizations have to know that they did not make any covered payments.

The Whole Company

ChartAs our previous posts have explained, many of the contributions that must be disclosed are not necessarily in the purview of the government affairs department. For example, a corporate philanthropy department might make a contribution to a charity that focuses on hunger relief. But, if a Member of Congress established that charity, it has to be disclosed on the LD-203. Similarly, an executive might ask the company to contribute to a charity active in a community where the company is located. But, again, if the executive were responding to a request from the Congressman’s district director, and that DD serves on the board of the charity, it is a contribution “designated” by a covered official. Continue Reading LD-203 Compliance Tips

Yesterday, we focused on the honoring and recognizing categories of expenses that have to be reported. There are also three other categories that have to be disclosed on the LD-203 report.

  • Political Contributions: Contributions made by registered lobbyists, the connected PAC of a registrant, or a PAC controlled by a lobbyist must be disclosed on the LD-203 if:
  1. the aggregate contributions to an entity equal or exceed $200 during the six-month reporting period; AND
  2. the recipient is a federal candidate, leadership PAC, or federal political party.

Contributions to other PACs (e.g., a trade association PAC or a company’s connected PAC) from a lobbyist do not have to be disclosed. State contributions also do not have to be                 disclosed.

  • Presidential Library Foundations: If contributions to a presidential library foundation aggregate to $200 or more during the six-month reporting period, they must be disclosed.
  • Presidential Inaugural Committees: Contributions that equal or exceed $200 during the six-month reporting period must be disclosed. The Guidance makes clear that this includes payments to the official Presidential Transition Organization. It also would include payments to the official inaugural committees for tickets to inaugural events, but would not include payments to other entities that host inaugural events (e.g., a state society).

The LD-203 requires registrants and lobbyists to disclose a variety of payments made for the purpose of honoring and recognizing covered officials. Guidance issued by the House and Senate includes some very helpful examples.

Payments that need to be disclosed fall in four different categories.

  1. The cost of an event to honor or recognize a covered legislative branch official or covered executive branch official;
  2. Payments to an entity that is named for a covered legislative branch official, or to a person or entity in recognition of such official;
  3. Payments to an entity established, financed, maintained, or controlled by a covered legislative branch official or covered executive branch official, or an entity designated by such official; or
  4. The costs of a meeting, retreat, conference, or other similar event held by, or in the name of, one or more covered legislative branch officials or covered executive branch officials. Continue Reading Honoring and Recognizing