Welcome to the March 2022 edition of the Political Law Playbook. Of particular note in this month’s edition is the release of a number of advisory opinions by the Foreign Agents Registration Act (FARA) Unit of the Department of Justice (DOJ). The most notable of these newly-public advisory opinions focus on the registration exemption under FARA for individuals and entities that are engaged in bona fide religious, scholastic, academic, and scientific pursuits. This exemption has traditionally been utilized by international universities, think tanks, and other nonprofit organizations to avoid registration and reporting under FARA for their activities and operations. With the release of these advisory opinions, however, the FARA Unit has signaled to those entities and their agents that this exemption does not provide blanket protection from FARA compliance obligations when religious, scholastic, academic, and scientific endeavors are coupled with political activities on behalf of a foreign principal. By way of example, in one of the new opinions, the FARA Unit found that a foreign-owned charitable organization established to foster friendship and goodwill between a foreign country and the rest of the world was engaging in registerable political activities. Similarly, in another of the advisory opinions, the FARA Unit concluded that a government affairs professional for a foreign-financed university operating in the US would need to register under FARA given that part of his activities at the scholastic institution were aimed at influencing US foreign policy.
The release of these new advisory opinions coincides with the DOJ’s ongoing review of public comments in response to the Advanced Notice of Proposed Rulemaking (ANPRM) that closed on February 11, 2022. It remains to be seen how expansive and substantive the DOJ’s future FARA rulemaking will be, but the content of the recent ANPRM coupled with the guidance provided in these newly-released advisory opinions indicates that interpretive and enforcement changes are on the way for the regulated community. Foreign stakeholders and their representatives should take heed.
Federal Elections & Campaign Finance
Lack of Transparency Concerning The Implementation of President Biden’s 2021 “Promoting Access to Voting” Executive Order Draws Questions and Concerns from Government Accountability Groups and Republicans in Congress – In March of last year, President Biden signed an executive order on “Promoting Access to Voting,” which directed federal agencies to develop plans to expand citizen opportunities to register to vote and to obtain information about, and participate in, the electoral process. Included in the order were directives asking federal departments with no responsibility over elections to: promote state and federal voter registration websites; distribute registration and vote-by-mail applications; assist people in completing such registrations and applications; and allow third-party organizations to register voters on agency premises. Frameworks for these efforts were supposed to be completed within 200 days of the EO’s publication, but very few – if any – details have been released to the public. In response, several government accountability groups have filed Freedom of Information Act (FOIA) requests seeking information concerning the various plans and the involvement of outside advocacy and political groups in their development. Recently, a group of 37 members of Congress led by Rep. Ted Budd (R-NC) have submitted a letter to the White House asking the Biden administration to provide copies of all agency plans created in response to the EO and answer specific questions related to their formation. It remains to be seen what response, if any, President Biden plans to provide.
Facebook Parent Meta Rethinks Election Ads Ban Ahead of 2022 Midterms – Facebook owner Meta Platforms Inc. and its employees are rethinking their current policy on banning political advertisements in preparation for the 2022 midterms. The policy first went into effect during the final week of the 2020 presidential race as a nominal attempt by the social media company to prevent last-minute election manipulation. Internal corporate discussions and re-evaluations on how the policy was executed during the 2020 US election and whether there were potential unintended consequences are currently ongoing – but no final decisions have been made regarding an official policy change. In the months ahead leading into what promises to be a contentious election season, it will be interesting to see how Meta and other social media companies balance competing economic, moral, and liberty interests.
New FEC Price Index Adjustments for Federal Lobbyist Bundling Disclosure Threshold – The Federal Election Commission (FEC) recently published its price index adjustments to the federal lobbyist bundling disclosure threshold for 2022, raising the relevant amount from $19,300 to $20,200. This threshold amount is adjusted on an annual basis. Federal law requires authorized committees of federal candidates, leadership political action committees (PACs), and political party committees to disclose contributions bundled by lobbyists and lobbyist PACs.
FEC Increases Coordinated Party Expenditure Limits for 2022 – The FEC also recently published its 2022 adjustments to the coordinated party expenditure limits that national or state party committees can make on Senate nominees, House nominees, and nominees to the offices of Delegate and Resident Commissioner. The new Senate nominee limits range from $109,900 to $3,348,500 depending on each state’s voting age population. Meanwhile, the new House nominee limit is set at $109,900 for states with only one U.S. House Representative, and $55,000 for nominees in jurisdictions with more than one U.S. House Representative or that elect individuals to the office of Delegate or Resident Commissioner. These adjustments are calculated annually based upon a statutory formula that accounts for changes in the annual cost of living in the US.
Federal Lobbying & Ethics
Fed Approves Rules Restricting Trading Following Scandals – In the wake of a series of trading scandals involving Federal Reserve officials and staff, the Fed has officially adopted rules that would restrict its top officials from owning many securities, including stocks, bonds, and cryptocurrencies. The Federal Open Market Committee (FOMC) announced that most of the restrictions will take effect May 1, 2022, although the new rules on the advance notice and preclearance of transactions will take effect on July 1, 2022. The rules will not only cover FOMC members, but also regional bank presidents and a host of other officials. Included among the covered personnel are staff officers, bond desk managers, and Fed employees who regularly attend board meetings, as well as their spouses and minor children. In addition to barring the ownership of stocks, bonds, and cryptocurrencies, the ban prohibits covered officials from holding commodities, foreign currencies, sector index funds, derivatives, short positions and agency securities, and restricts them from using margin debt to buy assets.
Watchdog Finds Ryan Zinke Broke Ethics Rules While Leading Trump’s Interior Dept. – The internal watchdog for the Department of Interior (DOI) concluded last month that Ryan Zinke, former Secretary of the Interior under President Donald Trump, violated federal ethics rules by improperly participating in real estate negotiations with energy company Halliburton and other developers on behalf of his family foundation, and by utilizing official resources and staff to facilitate such negotiations. Despite highlighting these ethical contraventions, the DOI Inspector General’s final report did not find evidence that Zinke attempted to use his official position for private gain or that he sought to conceal his personal or staff actions to avoid detection with regard to ethically-questionable behavior.
Congress to Conduct a Formal Hearing on Banning Lawmakers From Trading Stocks – The Committee on House Administration has scheduled a hearing for March 16, 2022 to discuss the merits of banning Members of Congress from trading individual stocks. The hearing follows a December publication of Business Insider’s “Conflicted Congress” project — a five-month investigation that found that dozens of lawmakers and at least 182 senior congressional staffers had failed to comply with the reporting requirements of the STOCK Act. In anticipation of the hearing, the Committee has requested testimony from a variety of nonprofit organizations focusing on anti-corruption matters, the Congressional Research Service, and at least one nonpartisan research institute.
Foreign Agents Registration Act (FARA)
New FARA Advisory Opinion Impacting Global Charities – In a recently released opinion from the FARA Unit at the Department of Justice, Unit staff concluded that a global charity headquartered in a foreign country and funded by a foreign government was not able to use the bona fide religious, scholastic, academic, or scientific pursuits exemption to FARA registration and reporting because part of the charity’s mission was to increase friendship and goodwill between a foreign country and the rest of the world. Since the charity’s leadership believed and intended that its actions would influence how members of the US public view the foreign country and foster beneficial US foreign policies in regard to the foreign country, the FARA Unit determined that the charity was engaging in covered activities on behalf of the foreign country. As noted previously, the language of the advisory opinion highlights that the Department of Justice may no longer view the bona fide religious, scholastic, academic, and scientific pursuits exemption to FARA as applicable in scenarios where the relevant party or organization couples such activities with other FARA-covered conduct.
New FARA Advisory Opinion Impacting University Officials – In this opinion, the FARA Unit determined that a VP for Government Relations of a foreign-financed university operating in the United States was not able to use the exemption for engaging in bona fide scholastic or academic pursuits because the VP’s duties included conducting outreach and advocacy to US officials to promote the foreign-owned university’s mission, goals, and financial priorities. As the role also included seeking grant money from the US government, the FARA Unit determined that these activities constituted registerable conduct under the law and thus the VP was not exclusively engaging in bona fide scholastic or academic pursuits.
Non-Federal Elections & Campaign Finance
States Consider Record Wave of Voting Bills – A report from the Brennan Center for Justice suggests that state legislators this year will be considering more than 600 bills to “expand” or “restrict” the right to vote within their respective jurisdictions. Based upon subjective criteria assigned by the progressive-leaning nonprofit, the report found that legislators in over half of American states have introduced nearly 250 pieces of legislation designed to “restrict” various voting processes and procedures. The report likewise found that nearly two-thirds of state legislatures have introduced measures that would “expand” voting opportunities for their citizens. While the majority of the described bills will not become law, the rapid growth of voting-related bills in recent years underscores the degree to which state legislatures have become more focused on the elections space.
Virginia Senate and House of Delegates Approve Bills to Make Elections Agency Bipartisan and ‘Truly Independent’ – In early February, the Virginia Senate unanimously voted to approve SB 371 – a piece of legislation designed to overhaul the makeup and structure of Virginia’s State Board of Elections, which oversees the execution of elections under Virginia state law, and supervises, coordinates, and adopts regulations governing the work of Virginia’s 133 local electoral boards. This legislation, if adopted, would move Virginia away from a partisan-run state board setup (favoring the party in charge of the Governor’s mansion) and shift the Commonwealth toward a more neutral arrangement with an even representational split between major parties. If passed, the bill would also make the Commissioner position within the Virginia Department of Elections a board-appointed role rather than one directly selected by the Governor. The bill easily cleared the Democratic-leaning Virginia State Senate after multiple adjustments to address concerns about the new system’s ability to handle partisan gridlock and member vacancy scenarios. After consideration by the Virginia House of Delegates in late February, a similar version of the bill passed the full House earlier this week with almost unanimous support, clearing the way for the likely presentation of a compromise bill to the Governor in the coming weeks. Further updates on this legislation will be provided in next month’s playbook.
Florida Bill Would Further Shield Names of “Dark Money” Donors to Nonprofits and Other Organizations – A group of Florida Republican state legislators have introduced legislation that would shield nonprofit organizations, corporations, associations, and other groups engaged in political activity in the state from being forced to reveal information about their corporate and individual donors to state and local government agencies. The proposed legislation in the Florida House would prohibit government entities from seeking public disclosure of funding sources for corporations, associations, and nonprofit organizations in conjunction with efforts to promote public disclosure concerning political communications and activities, and would likewise bar government entities from disclosing any such information they may have in their possession due to other regulatory activities.
Non-Federal Lobbying & Ethics
Audit: FirstEnergy Improperly Used Ratepayer Money to Fund Dark Money Efforts Supporting Ohio Legislation – A new audit, released by the Federal Energy Regulatory Commission (FERC) last month, found FirstEnergy was improperly accounting for part of roughly $71 million that the company spent on lobbying efforts supporting passage of Ohio House Bill 6 in 2019. The report found that the extent of the lobbying expenses improperly led the Akron-based electric utility to raise prices on customers and seek to conceal the nature and purpose of their advocacy payments from the public. FERC has given the company two months to develop a plan to issue customer refunds with interest. FirstEnergy was also charged last summer by the US Department of Justice with conspiring to commit honest services wire fraud in relation to a purported bribery scheme involving the passage of HB6 and agreed to pay a $230 million fine as part of a deferred prosecution agreement.
Two Former Hawaii Lawmakers Plead Guilty To Accepting Bribes – Two former Hawaii lawmakers who allegedly took part in a bribery scheme to benefit a wastewater company pled guilty last month to felony charges brought by the US Justice Department after a years-long investigation. The felony indictments stemmed from the former legislators’ failure to disclose the receipt of tens of thousands of dollars in cash payments and other gifts on mandatory annual gift filings filed with the state.
Jan. 6 Panel Sees Evidence of Trump “Criminal Conspiracy” – The House of Representatives Select Committee to Investigate the January 6th Attack on the United States Capitol filed a brief with the US District Court in the Central District of California on March 2, 2022, claiming that they had a “good-faith basis for concluding that … [former] President [Trump] and members of his Campaign engaged in a criminal conspiracy to defraud the United States” by allegedly spreading false information about the outcome of the 2020 presidential election and purportedly pressuring state officials to overturn presidential election results in their jurisdictions. The 221-page filing marks the Committee’s most formal effort to link President Trump and his associates to potential criminal activity, but it remains to be seen whether the Committee will make a formal criminal referral to the Department of Justice in regard to the investigation’s final findings.
The Courts and Free Speech
Federal Judge Invalidates Connecticut’s Unconstitutional Donor Privacy and Fundraising Registration Laws – A Connecticut law that forced paid solicitors to tell the state not only when they planned to speak to a potential donor, but also to provide the state with a script of exactly what they were going to say – was found to be unconstitutional by the United States District Court for the District of Connecticut. In addition to the negative effect these rules had on fundraisers, the court ruled that the law was a violation of a donor’s First Amendment rights. This is especially true in light of the recent US Supreme Court decision in Americans for Prosperity Foundation v. Bonta, striking down a California regulation requiring charities to disclose the identities of major donors, which we wrote about last summer.
Political Law Practice Pointers
This edition of Practice Pointers focuses on FARA compliance for nonprofits that may engage in political activities on behalf of a foreign principal, including a foreign government. For the uninitiated in our readership, FARA is a federal statute that imposes a series of onerous registration, disclosure, and compliance requirements on any individual or entity, subject to certain exemptions, that qualifies as an “agent of a foreign principal” by: undertaking “political activities” on behalf of the principal; serving as a “public relations counsel,” “publicity agent,” “information-service employee,” or “political consultant” for the foreign principal; soliciting, collecting, disbursing, or dispensing money or things of value on behalf of the foreign principal; or otherwise representing the interests of the foreign principal before the US government.
As noted earlier in this edition of the Playbook, nonprofit organizations have typically avoided the burdens of FARA registration and reporting by availing themselves of the statutory exemption for entities engaging in bona fide religious, scholastic, academic, or scientific pursuits in the US. In light of recent guidance from the Department of Justice (DOJ), however, if a nonprofit couples its educational activities with political activities or other registerable activity on behalf of a foreign government, registration is likely required. Political activities are defined as conduct intended to “in any way influence” either “any agency or official of the Government of the United States” or “any section of the public within the United States,” with reference to “the domestic or foreign policies of the United States or … the political or public interests, policies, or relations of a government of a foreign country of a foreign political party.”
If registration is determined to be required under FARA, a nonprofit would need to register with the DOJ within 10 days either agreeing to be an agent, or performing registrable activities. Qualifying for registration requires a nonprofit entity to disclose the names, nationalities, and residential addresses of the directors and officers of the organizations, as well as those of all employees performing non-clerical services for the foreign principal. Once registered under FARA, a nonprofit must file semiannual reports with the DOJ disclosing all activities, receipts, and disbursements in connection with services to a foreign principal during the reporting period, as well as submit all “informational materials” with the FARA Unit within 48 hours of dissemination on behalf of a foreign principal.
The Dentons Political Law Team regularly advises a host of clients, including nonprofits, on the compliance hurdles associated with FARA registration and disclosure. If your nonprofit has questions regarding its potential compliance obligations under this complex federal law, please reach out to us for assistance.
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