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Rules? In a Lobbying Fight?
The Ethics of State and Local Lobbying
By Tony Driessen
Business lawyers are often asked to either directly advocate their company's or client's public policy positions on an issue or manage outside contract lobbyists. Given their expertise on state laws and politics affecting their employer or clients, there is an expectation that business lawyers can successfully navigate the currents of political influence. Perhaps this is true, but bear in mind that violations of ethics and lobbying laws typically include criminal penalties against both the business and the lobbyist. Furthermore, the adverse media attention and publicity a company may incur for an ethics or lobby law violation can be very disturbing (and memorable) to top management and shareholders. Hence, a thorough understanding of the applicable standards is not only beneficial but also essential. It may be unwise to assume that any lawyer is fully conversant with them. Without reservation, "better safe than sorry" is the prudent watch-phrase to apply.

Ethical Risks
Unfortunately for those who retain them, some contract lobbyists take an anything-goes approach to winning an issue. A great quote that illustrates this point is from the movie Butch Cassidy and the Sundance Kid: "Rules? In a knife fight!?" While overly aggressive actions may reap short-term rewards in the political arena, the painful truth remains that such disregard for ethics and lobby laws, including related administrative rules and guidelines, can create huge liability and long-term grief for the business attorney who has the responsibility to manage lobbyists.

Hence, the appropriate question for both those business attorneys who initiate their own lobbying efforts and those who manage the efforts of others is: What specific and practical actions can be taken to minimize the risk of an adverse ethics situation arising? While a complete response to this inquiry would require a state-by-state examination of the laws that govern ethics and lobbying, there are a number of prominent and generally applicable guideposts that can be identified. As a primer, the following best practices are recommended to prevent ethics and lobby law violations from arising in the first place.

Best Practices
The first rule of thumb is to be aware of the ethics laws in the state or municipality in which you are lobbying. Before you engage in a legislative initiative, administrative rule making, or public-sector contracting matter, do your regulatory homework. Every state's laws are different, but there likely are some state or local requirements that are applicable to lobbying actions, others that are applicable to the conduct of public officials (state or local), and still different standards for efforts to gain profitable state contracts. In addition to those multiple standards, campaign finance and election laws may become relevant. For example, your contract lobbyist may recommend that you attend a political fundraiser while a contentious issue of great importance to your company is pending. Might you be at risk of violating a prohibition against lobbying principals making political contributions by contributing to the public official's election committee? What about the risk of illegally laundering funds if your contract lobbyist seeks to be reimbursed for the amount of the campaign contribution your lobbyist made? Without a clear understanding of the laws in your state, or the ordinances in a particular municipality, and how they apply to your specific situation, your best intentions could inadvertently cause great professional embarrassment to you and attract negative media attention to your business or client.

A second best practice is to not assume the applicable ethics laws or ordinances are logical or intuitive. For example, in several states a lobbyist and business principal generally cannot furnish anything of value to a legislator, which includes even things for which the legislator reimburses the lobbyist. This means there is no picking up the check for lunch or dinner with any legislator or state agency official. However, the potential for crossing the line is even more subtle than that. For example, your own legislator may not be able to accept a ride to the state capitol from you, even if the legislator pays you for the ride. (On the other hand, your legislator may be able to buy you lunch or provide a ride to you.)

Also, a state or local public official cannot accept anything of value that is offered to him or her because of the position he or she holds. This includes such common items as tickets to a sporting event or concert, or more significant offerings such as joining you at a charitable golf outing to which your business made the charitable contribution. The trap further deepens when you consider that this ethical prohibition applies even if your business is not registered as a lobbying principal and does not have an authorized registered lobbyist.

Government Contracting
Oddly, some states do not include efforts to gain state contracts in the definition of "lobbying." Thus, you need not register your business or client as a lobbying principal, or have your state contracts person register as a lobbyist, if your state activity is limited to attempting to gain state contracts. Nevertheless, the prohibition against giving a state official anything of value still may apply as well as the prohibition against their accepting anything of value that is offered to them. Is that intuitive or logical?

Beware of Success "Bonuses"
Another best practice regarding lobbying and ethics is to be very careful about including success bonuses in lobbying representation agreements. Almost all states have laws that prohibit contingent-fee lobbying arrangements, with stringent penalties applicable for violations. These prohibitions become particularly sticky in the procurement or state contracts arena when the lobbyist is a salesperson whose compensation typically entails a sales commission component.

Administrative Rules and Regulations
If the issue of concern to your business or client involves a proposed administrative rule or regulation (not legislation), be aware that your attempts to influence the substantive wording or application of the rule constitute lobbying in many states. Do not rely on an assumption on your part that, because you are an attorney and an administrative rule is involved, some type of attorney exemption from the lobby law applies. Such an erroneous assumption could become very problematic for you, after the fact.

The Importance of Verifying
It is valuable to confirm your interpretation of a state or local lobby law or ordinance, a separate ethics law applicable to state or local officials, or campaign finance law with either an experienced attorney-lobbyist or the professional staff of the regulatory agency that has oversight responsibilities. Recognize that the lobby law regulators may be different from the ethics law staff and from the campaign finance (elections) law agency. Of late, though, some states have consolidated—in one agency—lobby law compliance, ethics laws, and campaign finance and election laws. Not only do you need to be sure of the laws but also of who is monitoring and auditing compliance with them.

Retainer Agreement Provisions
Consider including in your written lobbyist representation agreement—even if it is with a lobbyist who is not an attorney—a provision that applies the Code of Professional Responsibility to the representation you are receiving. Some lobbyists are notorious for failing to discern a conflict of interest if a new client approaches them. In fact, in Wisconsin a prominent nonattorney lobbyist was sued for $1 million when one of his clients learned of an apparent undisclosed conflict of interest to their business on a significant policy issue. Do you suppose the business attorney who had oversight responsibility for the hiring of the lobbyist regretted not having performed more due diligence before hiring that particular lobbyist to represent his client?

If a questionable ethical situation does arise during the representation of your business by a contract lobbyist, how will you learn of it? Does your retainer agreement address that situation?

Participation by your company or your outside contract lobbyist in business and trade association-based lobbying efforts can also become a tricky proposition. Often, time is short for a joint position statement on a contentious issue to be sent out in time to influence a legislative committee or a key state agency. Only if you have clear understandings in place ahead of time may you avoid the risk of your company's or client's name being included on a position statement that you wished you had seen and reviewed before it was distributed and reported in the media.

Maintaining Compliance
Do your in-house and contract lobbyists understand that the tough ethics laws on the books in your state(s) apply equally even when they are attending regional or national meetings of organizations out of state? Regardless of where you find yourself, your state's prohibition against buying drinks, lunch, or dinner for legislators or other public officials at meetings that your in-house lobbyists attend with legislators, such as the National Conference of State Legislators (NCSL), the American Legislative Exchange Conference (ALEC), the Council of State Governments (CSG), the National Governors Association (NGA), or the National Association of Attorneys General (NAAG), still applies. You might be amazed at how frequently that concept is not considered or is forgotten. And think about how awkward it is to go back to a legislator or staff to your governor, after the fact, and attempt to correct payment for a lunch or dinner that should not have occurred. "What happens in Vegas, stays in Vegas" is definitely the wrong approach.

Some states require contemporaneous records to be kept regarding lobbying contacts made, including the specific issue involved. Are you confident that you have systems in place to ensure that those requirements are satisfied? If your in-house lobbyist has numerous states to cover, are you sure that the required contemporaneous records are being created and maintained? Or is the paperwork burden so great that it's just too easy for the lobbyist to create the necessary records several months later, shortly before an important lobby report filing is due?

The involvement of your business in a statewide or local referendum issue can trigger special reporting requirements as well. Registration of your interest in an issue may be needed before you commence any activity to influence the outcome of a state or local referendum question.

Does anyone keep track of the total contributions your top executives make each year or each election cycle? In Wisconsin, a number of prominent business leaders have experienced adverse publicity and paid forfeitures for violating the $10,000 annual maximum limit of campaign contributions permitted, in total, to state and local candidates.

If none of these points comes as a surprise to you, then you are definitely ahead of the curve on ethics laws related to state and local lobbying laws. The greater likelihood, however, is that as a business attorney with a full plate of pressing legal issues, you may not have the time to keep current with the ethics law requirements in the states or municipalities where your business or client is politically active. If that is the case, it may be wise to rely on experienced lawyer-lobbyists who have an earned reputation for ethical representation of their clients.

Yes, there are rules in lobbying fights.

Tips for Business Lawyers Who Incidentally Lobby

  • Know the definition of "lobbying" in your particular state. Review the statutes, related rules, and also any interpretations of the law and rules.

  • Become familiar with exceptions and exemptions to the lobbying, ethics, campaign finance, and related laws. Is there a threshold of contact days before the lobby law applies, or if you are an employee-lobbyist, does the grace period not apply?

  • Do you have a tickler or other reminder system in place to assure that necessary filings and reports are properly completed when they are due?

  • Before your business, other company executives, or you (or your spouse) make any political contributions, review closely the interaction of ethics laws, lobby laws, and campaign finance laws.

  • If your business is part of a coalition group that is working on an issue, are there procedures in place so you can make sure your approval is required before your business' name is added to a position statement or advocacy letter?

Driessen is a shareholder with the Wisconsin law firm of DeWitt, Ross & Stevens S.C., and has experience in representing a wide range of business clients before the Wisconsin legislature on regulatory, tax, and other issues. His e-mail is ahd@dewittross.com.

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