Happy new year and welcome to the January 2023 edition of the Political Law Playbook. This month’s coverage highlights a flurry of December activity at the Federal Election Commission (FEC), including agency action to strengthen the Commission’s civil penalty enforcement structure and a unanimous request from commissioners for legislative action addressing the rise of “scam PACs” in federal elections. The current edition of our newsletter also details the recent bi-partisan passage of the Electoral Count Reform and Presidential Transition Improvement Act.
At the state level, the close of the year saw an uptick in legislative and executive activity making changes to campaign finance and lobbying compliance frameworks in a variety of jurisdictions. Campaign contribution limits were raised across the board in Illinois, while ethics laws in Alabama were revised to increase the de minimis amount lobbyists can expend on behalf of public officials. Meanwhile, in Minnesota, new legislation was passed that restricts the ability of state legislators to lobby as part of their outside employment, and state regulators are pushing regulation and seeking further legislative action curbing the influence of money in politics.
Federal Elections & Campaign Finance
Electoral Count Act Reform Signed Into Law – Last month, President Biden signed into law the Electoral Count Reform and Presidential Transition Improvement Act as part of the broader omnibus appropriations package passed by the House and the Senate. The new federal law provides some updates to the Electoral Count Act of 1887, which outlines Congress’ procedures for presidential election certification. Relevant updates within the new law include: provisions clarifying the role that the Vice President plays in the certification process; language increasing the threshold for members of Congress to object to electoral results (to one-fifth of each chamber); and a requirement ensuring that there is one conclusive slate of electors presented by each state. The new law also establishes an expedited review process for any electors who are challenged in court.
FEC Adjusts Civil Penalties for 2023 – The FEC recently published its updated civil penalty and administrative fine framework for 2023, which was revised in light of adjustments to cost-of-living figures published by the Office of Management and Budget (OMB). Violations of federal campaign finance law will now result in increased civil penalties ranging from $7,028 to $82,188. The previous range for such violations was $6,523 to $76,280. The FEC administrative fine range was also increased in accordance with the OMB’s COLA ratio calculations as outlined in the following table published in the Federal Register.
FEC Asks Congress To Take Action On ‘Scam PACs’ – All six FEC commissioners recently urged federal lawmakers to address the rise of “scam PACs” in a memorandum sent to Congress last month. Scam PACs operate by soliciting contributions from potential donors with the promise of supporting candidates, but ultimately expend little for such purpose. Instead, the money raised by such committees ends up being spent on administrative and operational costs designed to pay the PAC stakeholders and fund additional fundraising efforts. In their correspondence to Congress, the FEC commissioners requested that lawmakers legally characterize these fundraising tactics as fraudulent and give the Commission enforcement authority to directly address scam PAC schemes.
Scam PAC Operator Pleads Guilty In Federal Court – Scam PAC operator Matthew Tunstall is the latest of three individuals to plead guilty to federal wire fraud, false statement, and money laundering charges as part of a scheme to deceive donors into giving money allegedly designed to support 2016 presidential candidates. The $3 million raised by the scam PAC instead went to pay for more solicitation efforts and advertisements, as well as to enrich the committee’s operators. Tunstall was charged alongside co-conspirators Robert Reyes and Kyle Davies, who both pled guilty in 2022 to conspiracy to commit wire fraud, conspiracy to lie to the FEC, and multiple counts of wire fraud. Tunstall faces up to 25 years in prison and will be sentenced – along with Reyes and Davies – sometime later this year.
FTX Founder Sam Bankman-Fried Charged With Campaign Finance Violations – Sam Bankman-Fried – the controversial co-founder of the crypto exchange FTX who gave millions in contributions to mostly Democrat candidates and causes during the 2022 cycle – was charged with violating multiple federal campaign finance laws last month. The alleged campaign violations – which were included in an indictment along with charges of wire fraud, securities fraud, and money laundering – include claims that Bankman-Fried donated at least $25,000 to campaigns and PACs that were reported in the names of other persons. In addition to the federal criminal charges recently filed against Bankman-Fried, the former FTX executive also faces an administrative complaint filed with the FEC by a private watchdog group seeking an investigation into his political contribution activities.
Pledges To Reject Corporate PAC Money On The Rise For Incoming Congress – More than 70 members of the incoming 118th Congress have made pledges rejecting the acceptance of contributions from corporate PACs (separate segregated funds in federal campaign finance parlance). While pledges like these have not resulted in sweeping campaign finance reform in the past, the rejection of corporate PAC funds by these legislators demonstrates that many elected officials feel that voters view the rejection of corporate political influence as a winning optical issue. Business PAC representatives believe that promises such as these are misguided and rooted in a fundamental misunderstanding of how PACs work. After all, unlike so-called “dark money” organizations or super PACs, corporate PAC spending is limited by very clear campaign contribution limits and fully disclosed for the sake of public transparency. Political observers do not anticipate these recent pledges to have a significant impact on campaign giving in the present cycle or to spur any relevant campaign finance reform in the present Congress, but do understand the calculus behind such pledges for many legislators – particularly those representing more progressive jurisdictions across the country.
Senator Whitehouse and Several Colleagues Ask POTUS To Require Disclosure Of Political Spending By Federal Contractors – Senator Sheldon Whitehouse (D-RI) and 19 other Democrat Senators recently drafted a letter calling on President Biden to issue an executive order requiring increased public transparency in federal government contracting by requiring contractors to disclose their political spending upon award of a federal contract. Senator Whitehouse and his co-authors argue that reform is needed in this setting to sure up protections against both actual and apparent quid pro quo corruption, and they contend that additional campaign finance disclosure requirements for federal contractors will allow the public and government officials better insight into how potential federal vendors use campaign spending to influence federal procurement.
Federal Lobbying & Ethics
President Biden Signs Federal Contractor Conflict of Interest Bill Into Law – As part of the omnibus appropriations package he approved last month, President Biden signed into law the Preventing Organizational Conflicts of Interest in Federal Acquisition Act, which revises the Federal Acquisition Regulation (FAR) to strengthen rules governing conflicts of interest for government contractors who work with both federal agencies and the private sector. The new law requires contractors to agree to and certify new contractual provisions dealing with solicitation activities and operational conflicts that open the door to ethical challenges for contractors straddling the line between public and private engagement.
Sen. Cruz’s Podcast Deal With iHeartMedia Called Into Question by Ethics Watchdog Group – The Campaign Legal Center recently filed a complaint against Senator Ted Cruz (R-TX) with the Senate Select Committee on Ethics, alleging that he violated federal ethics rules when he received services from iHeartMedia, a registered lobbyist organization, for producing his podcast “Verdict with Ted Cruz.” Federal law prevents lawmakers from receiving gifts, including services, from registered lobbyists. Certain government ethics experts weighing in on the partnership suggest that it could be permissible under Senate rules that allow members to benefit from outside employment. Utilization of this exemption to the Senate gift rules would, however, require Senator Cruz to reveal the terms of the deal on annual financial disclosures.
Foreign Agents Registration Act (FARA)
Former U.S. Rep. David Rivera Arrested In Venezuela Probe – The DOJ’s most recent target in its crackdown on foreign influence in U.S. politics is former Florida Congressman David Rivera, who was arrested last month on charges of money laundering and failing to register as a foreign agent for Venezuela. The DOJ’s eight-count indictment against Rivera alleges he was part of a conspiracy to lobby on behalf of Venezuela with the Trump administration where he attempted to coordinate meetings between U.S. lawmakers and high-ranking Venezuelan officials. Rivera denies the allegations raised by federal prosecutors and has been released on bail as the case proceeds.
DOJ Continues to Crack Down on Foreign Influence – Speaking at a conference last month, the Chief of the DOJ’s Counterintelligence and Export Control Section – Mr. Jay Bratt – emphasized the agency’s commitment to bringing “hard cases” when it comes to enforcing the Foreign Agents Registration Act (FARA) and pushing back against foreign influence in U.S. politics. In his remarks, Bratt touted DOJ efforts to increase staffing within the FARA unit and highlighted recent federal legal action against prominent figures such as casino magnate Steve Wynn and financier Tom Barrack as prime examples of the government’s renewed commitment to policing foreign actors in Washington. Consistent with Bratt’s commentary, the DOJ also recently filed a notice of appeal in its case against Wynn, which was dismissed by the U.S. District Court for the District of Columbia late last year (as we detailed in the November edition of the Playbook). The viability of the government’s appeal remains to be seen, but its decision to continue pushing the case against Wynn signals that there is legitimacy to Bratt’s claims that the DOJ will continue to be active and explore creative legal strategies to pursue enforcement actions in this space moving forward.
Non-Federal Elections & Campaign Finance
Illinois Increases Campaign Contribution Limits for 2023 – Increased contribution limits went into effect in the state of Illinois this month, after 2022 caps were increased in December to keep up with inflation. Under the newly-adopted limits, corporations and labor organizations may now contribute up to $13,700 to any candidate committee and up to $27,400 to any political party, legislative caucus committee, or PAC per election cycle. Individuals may now contribute up to $6,900 to any candidate committee and up to $13,700 to any political party, legislative caucus committee, or PAC per election cycle. The maximum amount that PACs are able to contribute to any candidate committee, political party committee, legislative caucus committee, or PAC each election cycle was also increased to $68,500.
Campaign Finance Reform Bill Back Under Consideration in New Jersey – The New Jersey Assembly’s Appropriations Committee approved the Elections Transparency Act late last year, after the legislation first stalled earlier in the summer. If passed into law, the bill would: require political committees to report contributions over $2,000 within 96 hours of receipt; double the maximum contribution limits for non-gubernatorial campaigns; sunset the state’s local pay-to-play ordinances; and permit business entities to make state and local contributions so long as they are properly disclosed to state regulators. The bill would also require independent expenditure committees to report campaign contributions exceeding $7,500.
WA Appeals Court Largely Upholds Eyman Campaign Finance Violations – Last month, a Washington state Court of Appeals judge upheld four out of five violations of Washington’s Fair Campaign Practices Act brought against tax activist Tim Eyman in 2021. Eyman was originally found to have violated state campaign finance law by intermingling funds between his personal checking account and political committees he controlled from 2012 to 2017. As a result of these violations, Eyman was slapped with fines for failure to file campaign finance reports and restrictions on his ability to handle political money. In its recent decision, the state Court of Appeals upheld the $2.6 million in campaign finance fines levied against Eyman, as well as the award of $2.9 million in attorneys’ fees.
Non-Federal Lobbying & Ethics
Alabama Ethics Commission Increases Lobbyist Expenditure Cap – Last month, the Alabama Ethics Commission increased the amount of de minimis items a lobbyist or lobbyist employer may give to public officials. Under the new cap adopted by the Commission, lobbyists or lobbyist employers may now provide benefits to public officials of up $32 or less per occasion, with an aggregate of $64 or less per recipient per calendar year. The change will only affect the definition of de minimis in the Alabama code, and has no impact on the ethics rule exception for meals under Alabama law.
Chicago Mayor Lori Lightfoot Gives Back Nearly $45,000 in Campaign Contributions From Lobbyist’s Companies Made in Potential Violation of State Ban – Recent media coverage from the Chicago Sun-Times alleges that a dozen companies affiliated with Chicago city lobbyist and contractor Carmen A. Rossi made campaign contributions to Mayor Lori Lightfoot and several City Council members that may have violated applicable Chicago campaign finance rules. In accepting the contributions at issue, Mayor Lightfoot may have violated a 2011 executive order that prohibits Chicago mayors from receiving campaign contributions from registered lobbyists. While the Chicago Board of Ethics has not yet determined whether the contributions at issue would violate the applicable ban on lobbyist donations, Rossi nevertheless requested that the contributions be refunded to his affiliated companies to avoid any suggestion of impropriety. Mayor Lightfoot agreed to return $44,500 of the contributions she received in light of Rossi’s request.
Expanded Lobbying Law Could Squeeze Some Minnesota Legislators – A new Minnesota lobbying law went into effect this month that restricts state legislators from working outside of their public service roles for entities that deal primarily in lobbying, government relations, or government affairs. Given that Minnesota has a part-time state legislature, state senators and state house members frequently have outside occupations in addition to their elected position. The state’s new law aims to keep legislators from using their legislative access to profit from outside work focused on government affairs or lobbying activities.
Regulators Push for Financial Transparency in Minnesota Politics – Minnesota’s Campaign Finance and Public Disclosure Board issued numerous recommendations last month aimed at improving transparency in government and reducing the influence of money in politics. Its recommendations include regulating cryptocurrency donations for campaigns, expanding public reporting on lobbying and politically-oriented issue ads that do not explicitly champion a candidate, and requiring spouses of Minnesota officials to disclose financial interests.
Political Law Practice Pointers
This edition’s Practice Pointers focuses on the plethora of lobbyist reporting and registration deadlines that accompany the start of every new calendar year, and a range of new state training requirements that recently went into effect across the country. Some state deadlines for lobbyist registration renewals have come and gone, such as South Carolina’s January 5 deadline. Other state lobbyist registration renewal periods continue throughout the month of January, however – suggesting that now is the time for lobbyists who engage at the state and local level to double-check their registration status and determine whether renewal is necessary.
Several Illinois jurisdictions, including Chicago, require lobbyists to file registration renewals by January 20. At the end of the month, state lobbyist registration renewal periods close for states like Ohio and Alabama. January 31 also represents the filing date in many jurisdictions for expense reports, quarterly reports, and annual and semi-annual client reports.
January is also a useful time for lobbyists active in New York state to be mindful of mandatory compliance and ethics training requirements associated with their government affairs activities. New for 2023, both lobbyists and lobbyist clients will now be required to complete an expanded version of the state’s online ethics course. Lobbyists and clients registered prior to January 18, 2023 have until March 18 to complete the training, while those registered after January 18, must complete the training within 60 days of registration. State guidance urges lobbyists to alert their clients—both contractual clients and beneficial clients—of the need to verify their online state profiles in advance of the training deadlines to ensure compliance with applicable law.
While the myriad state and local deadlines for registration renewals, filings, and training requirements may be difficult to track, implementing a strong compliance management system in the new year is the best approach to monitoring and adhering to important due dates. As jurisdictions continue to impose additional burdens on the cost of doing business with the state, it is also important to stay apprised of regulations coming into effect in the new year so your organization can remain compliant. The Dentons Political Law Team regularly advises lobbyists and entities that employ lobbyists on jurisdictional compliance matters at both the state and local levels, so please do not hesitate to contact a member of our team if you have any questions.
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