Pay to Play Law Blog

Colorado Supreme Court Finds Pay-to-Play Law Unconstitutional

Pay-to-Play Blogger — Wed, 03 Mar 2010 13:35:01 -0500

The below Colorado update was written and circulated today by Government Contracts attorneys C. Richard Pennington and Tyson Bareis out of McKenna Long & Aldridge LLP’s Colorado office.

The Colorado Supreme Court recently struck down a law that prohibited holders of sole-source state and local government contracts from making contributions to elected officials in Colorado. As we previously reported, this case is the latest episode in the continuing tension between a public that is increasingly skeptical of government contractors’ campaign contributions and the First Amendment rights, including the right to participate in the political process, that are afforded to all individuals and organizations. While the Colorado Supreme Court’s decision should rightfully be viewed as a victory for contractors and the First Amendment, the decision will not be the end of this tension or such laws.

In November 2008, Colorado voters narrowly passed Colorado’s Pay-to-Play law, which took the form of Amendment 54 to the Colorado Constitution. Citing a "presumption of impropriety between contributions to any campaign and sole source government contracts, "Amendment 54 prohibits holders of sole source state and local contracts from contributing to any political party or any candidate for elected office in the state. The law defines a sole source contract as “any government contract that does not use a public and competitive bidding process soliciting at least three bids prior to awarding the contract.”

The Colorado Supreme Court held that the Pay-to-Play law was unconstitutional in its entirety because, among other things, the law was not drafted narrowly enough to achieve its goal of eliminating the appearance of impropriety in the award of sole source contracts without significantly limiting constitutionally protected activity. The Court also noted that the cross-jurisdictional nature of the Amendment meant that fundraising in local governments would be limited by a donating entity’s contractual relationships with other, unrelated jurisdictions, like state government.

For contractors doing business in Colorado, the state’s Supreme Court decision means that they are no longer subject to the Pay-to-Play law’s prohibitions on political contributions. Importantly, however, the decision does not eliminate the possibility that Colorado may seek to enact laws similar to the “Pay-to-Play” law that was found to be unconstitutional. Instead, the Court’s decision implied that similar laws, even if they specifically target contractors, may be constitutional as long as the laws are drafted narrowly enough to address the laws’ stated concerns without significantly limiting constitutionally protected speech.

While it is impossible to predict future legislation, in light of the current anti-contractor sentiment and the political gains that can be had by proposing sweeping legislation to eliminate perceived “corruption,” contractors in Colorado and elsewhere should not expect the Colorado Supreme Court’s decision to prevent attempts to enact similar “Pay-to-Play” laws. MLA will continue to follow efforts to enact such laws, and contractors may wish to involve themselves in responding to such proposed laws by educating lawmakers and the public as to the ineffective and counterproductive nature of such laws.

BREAKING NEWS: Indiana Ethics Bill Passes Without Pay-to-Play Language

Pay-to-Play Blogger — Wed, 03 Mar 2010 10:51:51 -0500

In a move that avoids an inevitable constitutional challenge, the Indiana House yesterday unanimously passed House Bill 1001, authored by House Speaker Patrick Bauer and co-sponsored by Minority Leader Brian Bosma, without the original pay-to-play language which was struck from the bill by the Senate.

Pay-to-Play Still Up In the Air for Indiana

Pay-to-Play Blogger — Tue, 02 Mar 2010 21:52:45 -0500

Last Thursday, the Indiana State Senate passed a comprehensive piece of ethics legislation by an impressive 50-0 vote. Conspicuously absent from the Senate bill was previously-included language containing "pay-to-play" language, including a provision that would bar vendors holding or seeking state contracts worth $100,000 or more per year from donating to the campaigns of candidates seeking state office. At issue now is whether a House-Senate conference committee will reinstate the stricken language before sending the bill to Governor Mitch Daniels for signature.

Even without the pay-to-play language, the proposed legislation has teeth, in that it imposes a one year “cooling off period” on lawmakers seeking to become lobbyists, a requirement that lobbyists report conflicts of interest involving more than one of their clients, and a ban on incumbents or candidates for statewide office raising campaign funds during budget-writing legislative sessions.

The once on again, now off again, perhaps on again, pay-to-play language is notable for its breadth as well as in the sanctions it imposes for non-compliance. The proposed pay to play language requires all entities whose business with the state aggregates more than $100,000 to maintain registration information in an online, downloadable format, for four years from the award of the contract or for a year after the termination of the contract, whichever is longer, and prohibits the company , its “executives”, their spouses, and their minor children, from making any contributions to any state officeholder or candidate.

We’re watching this one. If the proposed pay-to-play language is reinserted and signed by (purported dark horse presidential candidate) Governor Daniels, Indiana will join the ranks of those states imposing extremely stringent contribution limitations that the regulated community will struggle to comply with. Indiana will also join the ranks of states in possession of a statute likely to encounter significant difficulty in overcoming First Amendment challenge in the courts.

Major Ethics Reform Passes New Mexico House, But Dies on Senate Floor; Changes May Come During Special Session

Pay-to-Play Blogger — Thu, 25 Feb 2010 12:45:27 -0500

Despite the numerous "pay-to-play" scandals that have rocked Sante Fe in recent years, numerous pieces of major ethics reform died on the floor of the New Mexico State Senate during the waning hours of the 2010 regular legislative session.

Specifically, HB 118, which would have placed significant restrictions on the activities of lobbyists and certain state contractors, passed the House less than 48 hours before the end of the session. Despite hope from supporters of HB 118 that it would find its way through the Senate, the legislation stalled in the upper chamber.

Had it passed, HB 118 would have arguably made New Mexico one of the toughest "pay-to-play" jurisdictions in the country. The legislation, which passed the House 46-24, broadly prohibited contributions from lobbyists, state contractors and principals of state contractors. Indeed, HB 118 placed total prohibitions on contributions from lobbyists, state contractors, principals of state contractors, and even "seekers of targeted subsidies" to any "candidate for nomination or election to a state public office or political committee established the candidate." Contributions to certain political committees would have been similarly prohibited.

Notably, legislation which would have allowed for the creation of an Ethics Commission in New Mexico, as well as a series of other open government initiatives that were lauded by advocates of transparency also failed to pass the Senate.

Due to the failure to adopt any reforms, there is speculation that some package of legislation will be addressed during an upcoming Special Session.

Given the upcoming election season, it would seem as if New Mexico legislators would try to adopt some sort of legislation that can be sold to constituents as "good government reform" during the Special Session. We at the Pay-to-Play to Law Blog will continue to monitor this situation for any new developments.

The SEC Considers Exemptions for Pay-to-Play Proposal on Registered Broker-Dealers

Pay-to-Play Blogger — Fri, 19 Feb 2010 16:23:14 -0500

As we previously reported in our blog entry “SEC Bans Third Party Solicitations of Municipal Investors,” the investment industry has been in an uproar over the SEC’s proposed ban on the use of third party intermediaries (such as placement agents registered as broker-dealers with the SEC) by advisors in the government arena. In what appears to be a response to numerous comment letters the SEC received urging alternatives to the outright ban, the SEC is contemplating exemptions to its pay-to-play proposal. As reported in Reuters, “the agency appears to be willing to allow broker-dealers to act as legitimate placement agents if the Financial Industry Regulatory Authority (FINRA) the broker-dealer watchdog, implements strict pay-to-play rules.”

In a December letter to FINRA, an SEC official was quoted as saying “It occurs to us that an exception to the ban for registered broker-dealers acting as legitimate placement agents might be feasible if FINRA were to implement rules that would prohibit pay-to-play activities by those persons.” Herb Perone, a spokesman for FINRA acknowledged that FINRA had received letters from the SEC and that the proposal was under discussion.

The SEC proposal must be put to a final commission vote before the proposal becomes a rule. The SEC is still evaluating public comments and has not yet made a final recommendation to the commission.

The Perils of Watered Down Reform

Pay-to-Play Blogger — Tue, 16 Feb 2010 11:37:38 -0500

Last week, the State of New York provided a graphic illustration of the perils confronting legislators as they attempt to balance public calls for dramatic reform against their own natural self-interest in blunting the impact of the restrictions they are imposing upon themselves.

Responding to public concerns over several high-profile scandals to plague the state, the New York State Assembly recently passed, by a significant margin, what it had advertised to be a comprehensive ethics, lobbying and campaign finance package. On February 2, 2010, New York Governor David Paterson vetoed that legislation on the grounds that the Assembly had effectively neutered the reform package called for by the public. The Assembly had touted the proposed legislation as delivering significant ethics reform by granting the legislature authority to appoint a commission designed to permit the legislature to police itself.

Despite the fact that the measures had garnered widespread support and had originally passed both chambers of the state legislature by wide margins, Governor Paterson vetoed the legislation saying it failed to provide solutions in multiple areas, including campaign limits and the establishment of an independent ethics body to oversee the Assembly.

Gov. David Paterson further stated he is preparing a different, harsher version of the bill, and that he is planning to release new draft legislation containing tighter external controls on local politicians and stricter campaign contribution limits. With concerns that such proposed legislation would be forthcoming, the New York State Senate last week attempted, but failed, to gain the two-thirds majority needed to override the Governor's veto. As is typical, the parties traded barbs over responsibility for the failure with New York's Democratic Majority Leader accusing Senate Republicans of having killed ethics reform in Albany and the Senate Minority Leader accusing Democrats of trying to ram through an override even if it meant a weaker bill was enacted.

Common Cause New York released a statement urging the governor and both houses to stop the political grand-standing and work together to negotiate a compromise that means a strong ethics bill for the State of New York.

Ultimately, for now, the State of New York is left with no reform at all and the setback serves as a cautionary tale for other state legislatures as they attempt to balance public outcry for "reform" against restrictions they can live with.

California Proposes Registration of Placement Agents as Lobbyists in Order to Regulate Pay to Play

Pay-to-Play Blogger — Fri, 12 Feb 2010 16:40:26 -0500

New legislation in California, if passed, would prohibit a person acting as a placement agent in connection with any political investment made by a state public retirement system, unless the person is registered as a lobbyist and is in full compliance with California’s Political Reform Act of 1974 as that act applies to lobbyists. California’s law would not be as restrictive as New York, which has an outright ban on placement agents in this area.

The bill defines a placement agent as: “any person or entity hired, engaged, or retained by, or acting on behalf of, an external manager, or on behalf of another placement agent, as a finder, solicitor, marketer, consultant, broker, or other intermediary to raise money or investment from, or to obtain access to, a public retirement system in California, directly or indirectly, including, without limitation, through an investment vehicle.”

There is an exemption for employees of external managers who spends at least one-third of their time managing the assets of their employer.

The bill is sponsored by the California Public Employees’ Retirement System (CalPERS), state Controller John Chiang and Treasurer Bill Lockyer. Mr. Lockyer says “This legislation will help protect the integrity of those decisions by increasing transparency and reducing the ability of high-paid middlemen to use money and gifts to win favorable treatment,” he says. “And it will help make sure the interests of workers, retirees and taxpayers remain paramount.”

“Our legislation puts the interests of taxpayers, public pension fund members, and retirees first,” Chiang said. “Subjecting placement agents to the same ethics rules as lobbyists will help safeguard public pension fund investments from individuals seeking questionable influence.”

What Does Citizens United v. FEC Really Mean?

Pay-to-Play Blogger — Mon, 25 Jan 2010 17:54:57 -0500

I received an email from a law student who posed a question about the impact of the recent Supreme Court decision in Citizens United v. FEC. The student asked:

"After the recent Supreme Court decision in Citizens United v. Federal Election Commission, it seems to me that pay-to-play laws across the nation will now serve even more of a purpose as corporations are now free to contribute to the political process (although not directly to candidates).

In saying that, I was wondering about your take on the matter. Am I missing something, or does Citizens really mean what I think it does?"

It’s a very good question because, while Citizens United doesn’t directly affect state pay-to-play issues, its impact is certain to be felt this legislative session. States and municipalities have already been struggling to respond to voter angst about the political process - and recent election results combined with breathless media reporting is certain to exacerbate that angst.

In a nutshell, Citizens United is a landmark ruling for corporations, unions and groups of individuals interested in participating in any aspect of the federal political debate. The ruling is particularly relevant because it is predicated upon a recognition that corporations, tax exempt groups and unions have a First Amendment right to use unlimited corporate funds for independent expenditures that expressly advocate the election or defeat of federal candidates. For those interested in reading more about the decision, a link to our firm’s client alert is attached here.

The ruling does not directly impact state pay-to-play laws because it expressly left intact existing federal and state limitations on campaign contributions and upon the ability of federal candidates to “coordinate” their activities with outside groups. It would be an error, however, to conclude that the Supreme Court’s ruling will not affect state legislative action on pay-to-play simply because the ruling doesn't affect contributions, coordination or any of the quid pro quo issues that pay-to-play laws are generally looking to capture. If anything, it is more likely that Citizens United is going to cause a number of state legislatures and municipal bodies to feel they need to pass tougher pay-to-play laws to counter the perceived invitation for corporations and unions to overwhelm the political process.

It is likely that such concerns are somewhat exaggerated. Rather than being incentivized by this enhanced recognition of rights to engage in pay-to-play politics, if anything, corporations and unions now have the opportunity to exert much more leverage with politicians simply by threatening to fund independent expenditures either for or against candidates depending on how responsive they are to the corporate or union cause. These groups no longer have to make contributions to exert leverage - they can do just fine on their own, thank you. As was seen just last week when a group of 40 corporate executives notified congressional leaders that they were tired of being solicited for campaign contributions, the ruling has already begun to change the political landscape away from the candidates and parties and towards the “independent expenditure”.

Governor Christie Issues Pay-to-Play Executive Order

Pay-to-Play Blogger — Fri, 22 Jan 2010 16:56:46 -0500

As we mentioned in our previous blog entry, New Jersey is giving even further attention to its pay-to-play laws. Yesterday, to show the seriousness of his promises of reform, Governor Chris Christie issued an executive order that curbs political donations by labor unions and is intended to prevent pay-to-play politics from this donor group. Specifically, unions are now included in the group of donors who are barred from having state contracts worth more than $17,500 if they had donated more than $300 to a campaign for Governor or county political committee in the previous 18 months.

Democrats are voicing their opposition saying it is "over the top", as an important portion of their base is made up of labor unions. They do not believe the order will stay in place, denouncing it as an unconstitutional violation of free speech. Governor Christie claims that this simply applies the same rules as other similar types of businesses must comply with such as law and engineering firms.

Pay-to-Play Winds Blowing in New Jersey

Pay-to-Play Blogger — Tue, 19 Jan 2010 10:23:43 -0500

For those that interact with this area of the law, it is well known that New Jersey has some of the most robust pay-to-play laws in the nation, at both the state and local levels. Perhaps not surprisingly, due to the numerous recent political scandals in New Jersey, the pay-to-play heat in the Garden State has been turned up even further.

At the state level, newly elected Governor Chris Christie made strengthening pay-to-play laws a central issue in his November 2009 campaign against John Corzine. Additional pay-to-play legislation at the state level seems likely, and the issue has already come up for the Governor personally during the short time after his victory.

Despite the fact that New Jersey's statewide pay-to-play statute applies in part to municipalities, local jurisdictions have joined in the rush to act. With the coming of the new year, New Jersey's media has been abuzz about pay-to-play in recent weeks in towns and cities across the state:
South Bergen
Seaside Park
Morristown

We at the Pay to Play Law Blog will continue to monitor the developments in New Jersey closely, as 2010 is sure to bring more complexity to an already difficult procurement environment. Stay tuned.

Governor Paterson Announces Sweeping Ethics and Campaign Finance Reform Legislation

Pay-to-Play Blogger — Wed, 06 Jan 2010 15:03:18 -0500

New York Governor David A. Paterson has announced extensive ethics and campaign finance reform legislation, the "Reform Albany Act", which will be a focus of his second State of the State address.

The proposed legislation calls for the creation of a single, independent State Government Ethics Commission with advisory and enforcement powers regarding campaign finance, ethics and lobbying; and which would replace the New York State Commission on Public Integrity. It also provides for increased oversight and enhanced reporting by state officers of outside business activities, and enhanced reporting requirements for lobbyists. And, it would replace the State Comptroller as sole trustee of the New York State Common Retirement Fund (one of the largest pension funds in the U.S.) with a 5-member Board of Trustees.

The legislation also includes sweeping campaign finance reform: drastically reducing maximum contribution limits, limiting contributions to housekeeping accounts, and banning corporate contributions; as well as providing for a new system for the public financing of campaigns. The Governor has also proposed term limits for members of the Legislature and statewide officials (which would require a State Constitutional amendment).

The sweeping ethics reform initiative follows the recent trial and conviction former Senate Majority Leader Joseph L. Bruno on corruption charges, which exposed weaknesses in State ethics laws; as well as Attorney General Andrew Cuomo's investigation of Pay to Play activity involving the administration of the Common Retirement Fund under the former State Comptroller.

While several of the concepts in the legislation have been the subject of prior proposals, the reform package faces an uphill battle in the State Legislature. The State Senate and State Assembly are developing their own ethics initiatives. And, the estimated 30 million dollar price tag for public financing of campaigns comes at a time of financial crisis in the State, with the budget deficit in 2010 estimated at between 7 and 9 billion dollars.

Broad, Bipartisan Ethics Legislation Being Considered in Missouri

Pay-to-Play Blogger — Thu, 17 Dec 2009 14:35:33 -0500

With the opening of legislative sessions nationwide, 2010 is sure to be one of the busiest years ever for pay-to-play legislation. As the Kansas City Star reports, numerous pieces of ethics reform legislation have already been filed in advance of Missouri's 2010 legislative session, which begins on January 6.

According to published reports, the most notable legislation is a bipartisan proposal aimed at overhauling Missouri's campaign finance system. Among other things, the legislation proposes to stop the common practice in Missouri of transferring funds between campaign committees, which can obscure the original donor of such funds. Additionally, the legislation would institute a mandatory online filing system for Missouri filing entities, and would require registration of some political consultants as "de facto lobbyists."

Notably, such legislation also has significant pay-to-play ramifications. Specifically, the new Missouri legislation would codify a prohibition on exchanging campaign contributions for legislative action. The Pay-to-Play blog will monitor this legislation as it goes through the legislative process, as well as similar legislation that is sure to be at issue nationwide in 2010.

MSRB Files Rule Change with SEC

Pay-to-Play Blogger — Tue, 15 Dec 2009 11:33:41 -0500

As we highlighted in our November 11, 2009 blog post, in June the Municipal Securities Rulemaking Board (“MSRB”) announced plans to file a rule change with the SEC to revise Rule G-37. The MSRB created Rule G-37 in 1994 to prevent municipal securities dealers from being awarded business based on political contributions. The rule prohibits dealers from engaging in municipal securities business with issuers for two years if they make certain contributions to the political campaigns of officials of such issuers. The proposed revision to Rule G-37 would require municipal securities dealers, their muni professionals, and political action committees to disclose the political contributions they make to bond ballot election campaigns. On December 4, 2009, the MSRB filed with the SEC amendments to Rule G-37 and Rule G-8. Rule G-8 pertains to books and records to be made by brokers, dealers, and municipal securities dealers. Below please find a link to the text of the proposed rule changes. The SEC must approve the rules before they would become effective.

NY Pay-to-Play Probe Continues

Pay-to-Play Blogger — Thu, 10 Dec 2009 16:13:41 -0500

Venture Capitalist Pleads Guilty

New York Attorney General Andrew Cuomo has announced that Elliott Broidy, chairman of Markstone Capital Group, has pleaded guilty to a felony charge of rewarding official misconduct, in cases involving senior officials in the office of former New York State Comptroller Alan Hevesi. Broidy funneled close to 1 million dollars in payments for the benefit of four senior officials in Hevesi's office, while he was pursuing work with the New York State Common Retirement Fund. The payments were made to friends or relatives of the officials. The Common Retirement Fund is one of the largest pension funds in the country, and the State Comptroller serves as its sole trustee.

Hevesi Implicated

It has been reported that the Attorney General's ongoing investigation has also directly implicated former state Comptroller Hevesi, for accepting luxury trips to Israel and Italy from Mr. Broidy. This is the first time that Mr. Hevesi has been implicated for receiving a direct financial benefit from an entity seeking work with the Common Retirement Fund.

Michigan Adds a New Wrinkle

Pay-to-Play Blogger — Fri, 04 Dec 2009 11:21:53 -0500

A bill has recently been introduced in the Michigan State Senate to curtail a new element of “pay to play” politics. Michigan State Senator Cameron Brown (R-Fawn River Township, MI), has introduced a bill to prohibit candidates from paying others to endorse their candidacy. Like virtually all new restrictive pieces of pay to play legislation (especially those of dubious constitutionality), this legislation arises from recent significant media attention paid in Detroit to an alleged practice by city council candidates to pay unions, community organizations and other organizations to endorse their candidacy.

Senate Bill 984, which has been referred to the Michigan Senate Committee on Campaign and Election Oversight, provides that “A person shall not make a contribution to another person with the agreement or arrangement that the person receiving the contribution will then endorse a particular candidate”. The bill contemplates that violation of this new prohibition shall be a criminal misdemeanor.

Senator Brown is quoted as saying that he introduced this criminal prohibition because the practice of paying others to endorse one’s candidacy “raises questions of political corruption and pay to play. The support of respected community organizations should not be up for sale to the highest bidder.”

While this is surely true, one has to wonder whether criminal prohibitions on speech serve as the best means available to accomplish this worthy objective. One would assume that mere disclosure of such payments, similar to those now required of federal lobbyists through Form LD-203, combined with the desire of respected community organizations not to be revealed as up for sale, would serve to squelch such “corruption” as surely as the proposed legislation.

The SEC Has Been Busy With Pay-to-Play Compliance and Expects You To Be As Well

Pay-to-Play Blogger — Wed, 11 Nov 2009 10:11:10 -0500

The Securities and Exchange Commission (SEC) has given notice that it intends to take a very active role with respect to pay-to-play issues in the securities markets and has put the regulated community on notice that it expects private corporate compliance training to be well under way as well.

As we have recently reported, the SEC has announced its intentions to take a significantly more aggressive regulatory posture with regard to the confluence of campaign contributions and public investing. Just last week, the House Financial Services Committee saw to it that the SEC has the tools for the job when it voted to double the SEC’s budget and awarded the Commission significantly greater regulatory powers.

The Municipal Securities Rulemaking Board (“MSRB”) has also gotten into the act by recently announcing plans to file a rule change with the SEC to revise Rule G-37 to prohibit dealers from engaging in municipal securities business with issuers for two years if they make certain contributions to the political campaigns of officials of issuers. The proposed revision to Rule G-37 would require municipal securities dealers, their muni professionals, and political action committees to disclose the political contributions they make to bond ballot election campaigns.

Meanwhile, in a case which should get the attention of compliance officers everywhere, the SEC has recently notified Southwest Securities Inc. that it plans to recommend “administrative and cease-and-desist proceedings” against the company based, in part, on the company’s failure to conduct compliance training for its financial services staff. In that case, the SEC initiated the action as a result of the company’s alleged use of political donations to win municipal bank work. Southwest’s (now former) employee at the center of the allegations maintained that he only unintentionally exceeded the MSRB cap of $250 donation per election and that the SEC was “more concerned about Southwest Securities and their lack of compliance training of their bankers.” According to FINRA records, Southwest said the employee had failed to report political contributions as required by MSRB and the employee, in turn, faulted the company for failing to adequately inform him of the MSRB rules.

In another, very significant action, the SEC announced last week that banking powerhouse JPMorgan has entered into a multi-million dollar settlement with the agency over allegations that company employees made unlawful payments to friends of county officials. Under the settlement JPMorgan agreed to cancel interest-rate swap contracts between it and Jefferson County, Alabama, pay $75 million in civil fines and payments, and forfeit $647 million in claimed termination fees under the swap contracts.

The allegations giving rise to liabilities in excess of $722 million for JP Morgan ultimately arose from allegations concerning the actions of just two (now former) managing directors of JPMorgan. “The transactions were complex but the scheme was simple,” SEC Enforcement Director Robert Khuzami said in a statement. “Senior JP Morgan bankers made unlawful payments to win business and earn fees.”

These federal enforcement developments highlight the importance of instituting a proper compliance training program. Firms should review and revise policies, practices, and procedures to stay current on the most recent versions of the rules and regulations promulgated by the SEC and MSRB. The SEC has put the regulated community on notice that failure to implement proper compliance policies and train employees adequately can have significant negative consequences. By undertaking the effort to develop a comprehensive compliance program before problems arise, companies can better protect themselves from potential liability and its related, potentially catastrophic, costs and expenses.

Pay-to-Play Reform Enacted in Wake of Corruption Conviction

Pay-to-Play Blogger — Tue, 10 Nov 2009 11:37:26 -0500

Trends regarding the enactment of pay-to-play legislation remain remarkably consistent and robust nationwide. Typically, pay-to-play legislation is passed in the wake of a corruption scandal that befalls a high-ranking public official. In such an instance, the political pressure on governing bodies is so tremendous to act, that pay-to-play reform is inevitable.

This trend has just played itself out once again in Dallas, where the Dallas City Council just yesterday passed a series of Ethics reform measures in the wake of the corruption conviction of former Mayor Pro Tem Don Hill. The entirety of the legislation, which exceeds some 1300 pages, can be found here.

The ethics package contains numerous changes to existing lobbyist registration and disclosure requirements, City Council zoning powers and the disclosure of gifts to Council members. Most relevant to the pay-to-play space is that anyone bidding on a city contract is now prohibited from making donations during the bid period. Additionally, "major" zoning applicants can no longer make contributions to Council members during the window which begins on the date of public notice of the zoning case, and which ends 60 days after the zoning case is resolved. Such changes are not too surprising in this instance, given that the scandal involving Hill revolved around favorable treatment for developers.

Common Cause Georgia Proposes Pay to Play Ordinance for the City of Atlanta

Pay to Pay Blogger — Mon, 02 Nov 2009 13:14:50 -0500

We at the Pay to Play Law Blog have received the following from Georgia Common Cause concerning their proposal for a Pay to Play ordinance for the City of Atlanta. We appreciate the submission and attach it herein in its entirety and unedited. The positions taken here are entirely those of Georgia Common Cause.

While we salute Mayor Franklin for her leadership in establishing a more ethical climate in City government, one of the things we see as little changed from past administrations is well-connected insiders continuing to show up in disproportionate numbers of the chosen few who are selected for work contracted by the City of Atlanta, and by the Atlanta airport.

While we can’t – and don’t want to try to - change human nature, we do believe in taking steps to increase trust that those whom we elect and employ to administer our procurement policies will not allow personal preferences to steer contracts to less qualified companies, and that our tax dollars will not be wasted. One reform we can implement, if we want to raise the level of confidence in how our tax money is spent, is to separate the offering up of campaign contributions from the awarding of contracts. That is what Pay-to-play reform is all about.

Pay-to-play has been at the heart of numerous news stories around the country within the past year: Alaska Senator Ted Stevens, Illinois Governor, Rod Blagojevich, The withdrawal of New Mexico Gov. Bill Richardson’s Cabinet nomination, and the collapse of the mortgage giants after Congress – which reaped millions from Wall Street in campaign cash – deregulated the industry and ignored repeated warnings of disaster. In August, New Jersey Governor Jon Corzine issued an order freezing the development approval process in cities and towns whose mayors have refused to resign despite being charged in a federal corruption probe involving bribes paid to local officials to speed up development projects.

Atlanta has had its share of scandals around pay-to-play. The Ronnie Thornton airport runway dirt deal dominated the headlines a few years ago. Airport advertiser Billy Corey and his Airport Services company continue to this day their five year court battle over alleged cronyism in the awarding of the 2002 advertising contract to Clear Channel Communications and their DBE partner Barbara Fouch, a close friend of Former Mayor Maynard Jackson, who has had a piece of the airport advertising business since 1981.

Rather than wait for a local scandal to prompt us, why not take steps to discourage practices that can lead to scandals? Let’s work together to find a way to make it work in the City of Atlanta, then make it work elsewhere in the state as well. Let’s start the process.

How does Pay to play reform work?
Common Cause has offered a model ordinance for consideration in the current Atlanta Mayoral and Council races. Our proposal is not structured as a campaign finance law change, but as a new condition of contracting. It’s quite a simple concept. People can either contribute freely to the campaigns of candidates, or they can qualify to receive contract work with the City of Atlanta. They cannot do both. All companies submitting bids and continuing contracting arrangements with the City would be asked to certify that they had not contributed more than a minimal amount to candidates for Mayor of City Council in the previous 12 months. Enforcement would rest with the contracting office. Companies or individuals violating the statute would be disqualified from further business with the City. To see a summary of the proposed reforms for Atlanta, click here. To read the model ordinance, click here.

We believe it’s time to take Atlanta to the next level of ethical government. No more inferences that those who play should pay. Let’s create a system where we are making sure that City contracts go to the best cost-effective service provider, not the best-connected company.

Bill Bozarth
Common Cause Georgia

We are grateful to Georgia Common Cause for their submission, and invite any interested commentary on the topic. Our personal views on Georgia Common Cause’s proposal were originally posted here.

In addition to the concerns addressed in our previous post, the regulated community should take notice - and contemplate the impact - of the proposed amendment to the City of Atlanta Procurement and Contracting Code. To be sure, the specter of campaign contributions to procurement officials from those seeking city contracts can be unseemly; but so can the prospect of a system in which only individuals wealthy enough to self-fund their campaigns have the means to seek elected office. In our view, public disclosure of contributions and transparency far better balance the competing ideals of democracy and procurement fraud prevention than outright contribution bans.

Moreover, the proposed City of Atlanta Procurement and Contracting Code as offered imposes considerably greater restriction than simply offering one a choice between contributing “freely to the campaigns of candidates, or [qualifying] to receive contract work with the City of Atlanta” as advertised by Georgia Common Cause. Rather, the proposal proffered seeks to disqualify any person or entity from obtaining - or keeping - a city contract, if that person or entity has

made, directly or indirectly, any payment, gift or other contribution to or for the benefit
of any holder of elective office of the City of Atlanta or to any employee;

It is easy to contemplate how that language - crafted as broadly and vaguely as it is - could capture a great deal of seemingly innocent behavior with dire consequences. Imagine being the compliance office who has to tell your boss the CEO that her company’s life-blood contract with the City of Atlanta has been terminated for cause, and the company is liable to the City of Atlanta for all damages resulting from the termination, because the aggregate of all the contributions to a City of Atlanta politician by all of the company’s officers, directors, partners and salaried employees of the company exceeded $250, or because a competitor alleged that the company made a single “indirect” gift “for the benefit” of an employee of the City of Atlanta.

One can envision that birthday parties for City of Atlanta employees would be lonely places indeed.

Stefan Passantino, Esq.
Partner, McKenna Long & Aldridge LLP

Missouri Campaign Disclosure: Are Unlimited Contributions with Full Disclosure a Growing Trend?

Pay to Pay Blogger — Wed, 28 Oct 2009 10:31:32 -0500

As media reports of criminal misconduct by legislators hit the airwaves and the public is inundated with tales of various unseemly financial relationships between politicians and their campaign contributors, state legislatures have worked anxiously to show action - any action - by passing “Campaign Transparency” legislation at a fever pitch. While most actors in the regulated community have recognized some virtue to increased disclosure of campaign activities, a companion effort by several states to permit unlimited contributions along with that disclosure remains controversial - it certainly is in Illinois on the last day of the Fall Veto Session. Clearly, the unintended pitfalls inherent to unlimited contributions can manifest easily. Nonetheless, there is a growing trend afoot at the state level (although decidedly not within the Congress or the SEC) to address “pay to play” scandals with transparency rather than limited contributions. One example of this phenomenon can be found in a state earning one disclosure advocacy group’s “Most Improved” award: the State of Missouri.

The Campaign Disclosure Project (CDP) recently ranked Missouri’s campaign disclosure law among its “top five” in 2008 and gave the state’s disclosure laws an “A-”. In so doing, the CDP pointed out several positive components of the Missouri campaign disclosure law: Candidates must disclose detailed information on contributions and expenditures in excess of $100; a reporting requirement of late contributions and independent expenditures before Election Day; and the requirement of detailed loan disclosures.

On the other hand, Missouri is among the growing number of states to repeal virtually all contribution limits to candidates. This has generated controversy as recent bribery cases, as they always do, have prompted calls to address past criminal behavior with increased “ethics reform” legislation. There is little doubt that some form of ethics reform legislation is on the docket for Missouri’s General Assembly in 2010 but Missouri’s Speaker of the House recently has indicated any ethics reform proposed in 2010 will focus on closing disclosure loopholes in the current law rather than revisiting the rights of individuals, corporations, unions, PACs, or associations to make unlimited contributions to candidates. An article dated October 26th in the Joplin Globe has quoted Speaker Ron Richard as saying “. . . people should be able to give what they want. It should be transparent and direct, to the campaign and not through committees.”

Should Missouri decide to broach ethics reform, and continue with its perfectly acceptable policy decision not to re-impose contribution limits, Missouri’s legislators will probably be well served in the current “pay to play” environment to examine the transparency of their own personal financial disclosures. This is because, while Missouri scores relatively well in campaign disclosure requirements, the Center for Public Integrity (CPI) awarded Missouri’s personal financial disclosure requirements with 70.5 out 100 points and a letter grade of “C”. Missouri’s personal financial disclosure laws were identified as failing to require the disclosure of: the legislator’s job titles; income amount from each employment interest; amount from each investment interest; identifying clients associated with filer’s outside interests; income amount for each client; spouses’ client information; and value amount of each real property interest. Further, the CPI identified the state as not publishing a list of delinquent filers on the Web or in printed document as well not making public a list of lawmakers who failed to file reports by the required deadline, or filed incomplete or inaccurate reports.

The public mood, if such a thing can ever be gleaned, is most distraught by concerns of “too cozy” relationships between legislators and donors in their financial activities outside the public system. Increased disclosure in that regard is likely to be perceived as a true “reform” more necessary than contribution limits.

New York Attorney General Investigates "Pay-to-Play" Donations by Charities

Pay to Pay Blogger — Tue, 27 Oct 2009 14:46:19 -0500

New York State Attorney General Andrew M. Cuomo has ordered dozens of charities to take back illegal political contributions, or risk losing their tax-exempt status, [the New York Post has reported].

Cuomo has uncovered improper campaign contributions by not-for-profit organizations to New York State lawmakers and New York City council members. Federal and state laws prohibit certain not-for-profit organizations from engaging in political activity, including making campaign contributions. Violation of these laws can jeopardize an organization's tax-exempt status.

It has been reported that Cuomo's investigation of campaign contributions is a by-product of an ongoing probe launched two years ago into pork-barrel spending -- also known as "member items" -- by New York State lawmakers. It is being reported that some illegal contributions have been made after an organization received a member item from state lawmakers.