Fear Factor: Lobbying And Campaign Finance Reforms In The Nation's Capital

Monday, May 1, 2006 - 00:00

Editor: Much has been written in the Washington media about proposed changes in federal lobbying and campaign finance laws. If enacted, would these proposals change the way Washington does business or, more important, the way corporations conduct business in Washington?

Teague: It's essential to know the details of the legislation that Congress finally passes before advising clients on those requirements and the changes needed in their conduct to comport with new rules. Virtually all lobbying by corporations is a legal activity already subject to rigorous disclosure and reporting requirements. Moreover, most lobbying provides the lawmaker or regulator with the information needed that allows decision makers to make informed policy choices. The criticism of lobbying as inherently sinister and the attacks on lobbyists as shadowy manipulators are therefore both misguided. Overly stringent lobbying restrictions would eliminate the necessary flow of information to lawmakers and negatively effect deliberative policy making.

Editor: Are you advising current or prospective clients to do anything different with respect to lobbying or campaign finance?

Teague: We're advising them now, as we did in the past, to follow both the letter and the spirit of the law. We are, of course, as just noted, also advising them to wait and see what changes Congress and the executive branch agencies adopt before changing their conduct and record keeping. More frequent and more burdensome reporting requirements will simply increase administrative costs without necessarily improving either oversight of the existing lobbying and campaign finance systems or transparency. "Crooks will be crooks," and they will not comply with the new laws any more than they did the old laws.

Editor: Given all the discussion of reform in Washington, are corporations and trade associations already seeking advice and counseling? Are corporations and their D.C. offices worried that even a minor mistake in their lobbying and campaign finance efforts will come back to haunt them?

Smith: In April the Federal Election Commission (FEC) released MUR 5398, which fined the CEO and former Vice President for Government Affairs of Lifecare Management Services $100,000 and $50,000 respectively (in addition to a fine paid by the company), for campaign finance violations - even though the violation was first detected and reported by the company itself. So beyond unfavorable media attention, these campaign finance laws have bite. Unfortunately, they are complex. Most violations of campaign finance law are inadvertent. The one thing Congress and the FEC could do for a while is just stop changing the law. Endless tinkering with ethics requirements and campaign finance laws tends to create inadvertent violations.

Kappel: We have seen a marked increase in the number of questions we receive from clients regarding compliance with federal lobbying and campaign finance laws since the Jack Abramoff scandal broke in 2005. Interestingly, the most frequent questions we have received involve the House and Senate rules on gifts to Members of Congress and congressional staff. There appears to be a great deal of confusion as to how these rules apply to corporate employees engaged in lobbying as just part of their normal duties.

Editor: Can you explain what the current gift and travel laws are and how corporations might be affected by the new proposals?

Kappel: The House and Senate gift rules both impose dollar limits on the value of gifts that Members of Congress and congressional staff can receive from any source - not just lobbyists. Under existing House and Senate rules, a Member or staffer can accept a gift of less $50 on any one occasion and multiple gifts with a total value of less than $100 from the same source in the same year. So it's a two-dinner rule - you can take the same member or staffer to dinner twice a year and still comply with the existing rules. There are multiple proposals on Capitol Hill to revise these rules and they run the gamut - from making no changes to banning all gifts whatsoever.

Editor: Is there a need for politically active corporations and trade associations to conduct an audit of their internal compliance efforts?

Smith: It's definitely a good idea. As I mentioned earlier, most violations of campaign finance laws are inadvertent. Detecting problems early and getting policies in place to assure compliance is vital - especially with Sarbanes-Oxley, as well as the Federal Election Commission, lurking to nab the unwary.

Editor: Much of the discussion in Washington is about new legislation to address alleged lobbying and campaign finance abuses. What about increased enforcement of existing statutes by the Justice Department and the Federal Election Commission?

Smith: The Bipartisan Campaign Reform Act, better known as the McCain-Feingold bill, was enacted in 2002. This law added many criminal penalties to campaign finance law, and the Department of Justice has made such violations a higher priority. But most corporate violations are unintentional. There is little evidence of regular, intentional violations of campaign finance law. So on that front, I think enforcement is plenty vigorous as it is. More enforcement might snare a few more unwitting victims, but it won't address actual corruption.

Editor: But for so-called 527s and independent expenditures, campaign finance reform seems to have been given short shrift in the current debate. What is the FEC doing these days?

Smith: Things like 527s get the headlines, but they're the exception, not the rule. The meat and potatoes of the FEC's docket are routine violations made by inexperienced campaign volunteers, harried corporate PAC managers, and unwitting individual contributors. That's what corporations need to look out for more than 527 rules. Last year the FEC adopted new rules allowing trade associations to use payroll deduction for political action committee (PAC) contributions. That is a positive development and one that association PACs in Washington and around the country should use to their advantage.

Editor: Meanwhile, the U.S. Supreme Court is considering a case ( Randall v. Sorrel ) that involves a challenge to a 1997 Vermont statute that imposes limits on how much a candidate for state office can spend. How important is this case and what are its implications on campaign financing?

Smith: The case could dramatically reshape campaign finance law, or it could embrace the status quo. Its main impact will likely be on political parties and candidate campaigns, not corporate activities and PACs.

Editor: One interesting question this year involves Internet communications and campaign finance rules. The issue is whether Internet communications - ranging from Web logs to paid advertisements - should be exempt from campaign finance rules. The FEC recently issued a decision on this issue but others want Congress to pass legislation, specifically a bill introduced by Rep. Jeb Hensarling, R-TX. Is the FEC rule sufficient or is legislation needed?

Smith: The FEC rule is very deregulatory - it allows most all web activity, other than paid ads, to continue unhindered. For example, it clarifies that individuals may use corporate-provided computers for political activity if that is allowed, on a non-partisan basis, by the company. This is important, because otherwise an employee's use of a company provided computer could trigger an illegal corporate contribution. The benefit of legislation is that it would add certainty to the rule, and clarify that a deregulated internet is not merely a matter of FEC grace, but of congressional policy.

Editor: Many corporations are posting more information on their Web sites about contributions to candidates and issue-oriented groups. The Institutional Shareholders Service is recommending for the first time support for a shareholder resolution urging increased disclosure. Is this a growing issue for corporations?

Kappel: This is a small, but apparently growing trend. In addition to the support from the Institutional Shareholders Service, the trend has been driven to some extent by state and local enforcement officials, who increasingly are making such postings a condition of settling campaign finance cases.

Please email the interviewees at rcteague@vssp.com, bgkappel@vssp.com or basmith@vssp.com with questions about this interview.