Welcome to the June 2022 edition of the Political Law Playbook. Of particular note in this month’s edition are the commencement of multiple investigations into alleged ethics violations by Members of Congress. In the past month, the Office of Congressional Ethics has taken on an investigation regarding two Congressmen who purportedly breached federal ethics rules – specifically the STOCK Act – by not disclosing stock trades within an appropriate timeframe. The House Committee on Ethics is also investigating ethics accusations lodged against three separate federal lawmakers concerning several matters, including the acceptance of free or discounted foreign travel benefits from a vendor.
While the House Committee on Ethics educates members and staff on the various applicable ethics rules and is responsible for investigating and sanctioning violations of these rules, we highlight these investigations to remind our readers that government ethics rules exist to regulate and promote proper conduct of public officials and employees as well those interacting with government in various capacities. Working with government officials and employees has its own set of potential risks, which is why it is valuable for those intent on conducting business with the public sector to be familiar with their ethical obligations and implement an effective compliance system to minimize risk.
Federal Elections & Campaign Finance
Sen. Ted Cruz Secures Win in Campaign Finance Case – As we wrote about in our Dentons Policy Soapbox post last week, the U.S. Supreme Court last month struck down a federal campaign finance law that imposed a cap of $250,000 on the use of post-election contributions to retire campaign debt. In a 6-3 decision, the Court held that the statutory cap on the use of post-election contributions to repay candidate loans violated the First Amendment by limiting core political speech. In the wake of the Cruz decision, federal candidates may now loan their campaign an unlimited amount of money, carry that balance forward, and repay themselves with contributions raised after the applicable election. The Court’s decision may also have an impact on certain state laws that impose similar loan repayment restrictions.
The Little Red Boxes Making a Mockery of Campaign Finance Laws – Across many states, Democrat candidates at the federal level are using “little red boxes” on their official campaign websites to highlight the aspects of their biographies that they want amplified and the skeletons in their opponents’ closets that they want exposed. Campaign watchdogs argue that these candidates are effectively working around the prohibition on coordination with Super PACs and independent expenditure groups by posting detailed directions to such entities inside boxes posted on public pages that are continuously monitored. Transparency advocates argue that the practice blurs the regulatory lines meant to keep big-money interests from influencing people running for office and constitutes a direct evasion of the strict donation limits imposed on federal candidates.
Federal Appeals Court Rules Lehigh County (PA) Mail-In Ballots Without Dates Must Be Counted – The U.S. Court of Appeals for the Third Circuit ruled last month that Lehigh County, Pennsylvania must count mail-in ballots from last year’s November elections that had not been dated by voters pursuant to the state’s election law. The 3-0 decision reversed a lower court’s ruling that the plaintiffs – five Lehigh County voters whose ballots were not counted in the 2021 election – could not sue as individuals under the federal Civil Rights Act. The three-judge panel’s decision asserted that the lack of dates on mail-in ballots by voters was immaterial in establishing whether the voter was qualified to vote under Pennsylvania law. The determination that the undated ballots can be counted could well impact the result of a Lehigh County Court judicial election that has been pending since November and have larger implications for statewide elections in the Commonwealth. On May 31, however, the U.S. Supreme Court issued a temporary stay of the Third Circuit’s decision.
Klobuchar, Warren Introduce Bill to Provide $20 Billion for Election Administration – Senate Rules Committee Chairwoman Amy Klobuchar (D-MN) and Sen. Elizabeth Warren (D-MA) introduced a piece of legislation that would provide $20 billion in federal funding to assist states and localities to conduct elections, train poll workers, and ease access to the ballot box. The bill also professes to secure election infrastructure by funding upgrades of voting equipment and registration systems, recruitment and training of nonpartisan election officials and poll workers, the provision of security to election officials, and the expansion of ballot access for minorities, Native Americans, voters with disabilities, and citizens residing overseas.
Spotify Stopped Political Ads in 2020 But Now Has Slowly Brought Them Back – In 2020, Spotify halted the dissemination of political ads through its platform due to a “lack of robustness in its systems” to handle such communications. Now, two years later, Spotify has confirmed that it is gradually authorizing the return of political ads. A spokesperson for the company recently stated that Spotify has strengthened and enhanced its processes, systems and tools to validate and review the content that is posted on its platform. Like Spotify, many other media companies – such as Twitter and Netflix – are currently reevaluating how to approach political ads for the 2022 midterms and beyond.
Federal Lobbying & Ethics
OCE Finds Two Congressmen Violated Ethics Laws – The Office of Congressional Ethics recently found substantial reason to believe Congressmen Pat Fallon (R-TX) and John Rutherford (R-FL) breached House ethics rules, specifically the Stop Trading On Congressional Knowledge Act (STOCK Act), by not disclosing stock trades in a timely manner. Probes into potential violations have transitioned to the bipartisan House Committee on Ethics for further review. The STOCK Act requires representatives to report their securities transactions to the House Clerk’s office within 45 days, but both representatives purportedly failed to report over a hundred transactions each over the last few years.
House Ethics Committee Investigating Reps. Cawthorn, Jackson & Mooney – The House Ethics Committee is investigating three GOP lawmakers – Rep. Madison Cawthorn (R-NC), Rep. Ronny Jackson (R-TX), and Rep. Alex Mooney (R-WV) – over allegations of potential ethics violations. In Rep. Cawthorn’s case, he is being investigated regarding whether he used his office to promote a cryptocurrency in which he had an undisclosed financial interest, and also whether he engaged in an improper personal relationship with a staffer. Rep. Jackson is being investigated for allegedly reporting improper campaign disbursements, and Rep. Mooney is being investigated for several potential violations, including purportedly accepting a free or discounted trip to Aruba from a third-party source.
Former U.S. Ambassador Accused of Illegal Foreign Lobbying – Richard Olson, an American diplomat and career foreign service officer, who formerly served as the United States Ambassador to Pakistan under President Obama, was recently charged by the Justice Department for knowingly falsifying ethics paperwork as well as defying laws that restrict foreign lobbying by ex-federal officials. According to the criminal information filed by the federal government, Olson allegedly solicited foreign work while in public office, and supposedly used his political influence to advance Qatari interests in Washington after leaving government. Olsen has stated in court filings that he plans to plead guilty to the above misdemeanors.
Foreign Agents Registration Act (FARA)
DOJ Sues Wynn Over Alleged Foreign Agent Work – The Justice Department recently filed a civil enforcement action against billionaire and former Republican National Committee finance chair Steve Wynn to compel him to register as a foreign agent of the Chinese government under the Foreign Agents Registration Act (FARA). In its complaint, the DOJ argues that Wynn advocated on behalf and at the request of the Chinese government during the Trump administration without properly registering under FARA. Specifically, the DOJ asserts that Wynn worked with a senior Chinese government official to secure the extradition of Guo Wengui, an outspoken Beijing critic and ally of former White House strategist Steve Bannon.
Non-Federal Elections & Campaign Finance
TN Governor Signs Ethics Reform Bill Into Law Despite Call for Veto – Tennessee Governor Bill Lee recently signed a financial transparency bill into law that will require 501(c)(4) nonprofit social welfare organizations that put cash into political campaigns to disclose their expenditures before elections. Specifically, the new legislation requires certain politically active nonprofits to disclose spending on communications that contain a state candidate’s name or likeness when such expenditures aggregate to at least $5,000 within 60 days of an election. Opponents argue that the law will harm free speech as well as improperly blur the lines between election transparency and non-political, nonprofit activity.
New California Rules Target Amplification of Online Advertising – This April, the California Fair Political Practices Commission (FPPC) approved new regulations that strengthen reporting requirements for state and local political committees that pay to boost online advertising. In the current digital age, it is common to accuse opponents of propping up their online presence through paid influencers, purchased followers and likes, and the utilization of “bot” supporters – practices generally known as amplification. The FPPC’s new rules require political committees to provide information about the types of amplification they purchase and to disclose specifics regarding the number of shares, follows, reposts, comments, likes, and dislikes they procure.
ACLU Points to SCOTUS Cruz Decision in Fight Against Florida’s Ballot Initiative Contributions Cap – American Civil Liberties Union (ACLU) lawyers challenging a 2021 Florida law limiting large contributions to political committees gathering signatures for state ballot initiatives filed a motion in state court asserting that Senator Ted Cruz’s previously mentioned win in the U.S. Supreme Court bolsters their claims that the State of Florida’s caps on personal contributions to ballot committees are an unconstitutional restraint on political speech. Only a day after the issuance of the USSC’s opinion in Cruz, the ACLU Foundation of Florida filed a motion in their case contending that the Supreme Court’s decision bolsters their core argument against the state’s initiative contribution limit. Attorneys for the Florida Elections Commission, the defendant in the ballot-initiative matter, countered the motion with arguments that the ACLU’s filing references only supplemental authority that has no direct impact on the key issues in the state case.
Texas Issues New Advisory Opinion Regarding Political Contributions – Last month, the Texas Ethics Commission (TEC) issued an advisory opinion concerning the question of whether a corporation is permitted to coordinate with candidates or political committees on advertisements that criticize or praise candidates for opposing or supporting certain legislative policies. Texas state law prohibits corporations from making direct campaign contributions but does not specifically address the question of indirect support for candidates through legislative-oriented communications. In its new opinion, the TEC tackles this issue directly and reaches the determination that making an expenditure for advertisements coordinated with a candidate or political committee that criticizes or praises a candidate or the candidate’s opponent is a prohibited corporate contribution. Such advertisements, the TEC determined, are considered campaign contributions because they are items of value given with the intent to be used in connection with a campaign for elected office and with the prior consent or approval of the candidate or committee on whose behalf the expenditure is made.
Non-Federal Lobbying & Ethics
Gov. DeSantis Signs Bills Prohibiting Florida Judges and Lawmakers From Lobbying Within Six Years Following the Completion of Their Term – Florida Governor Ron DeSantis signed two measures into law last month that will require lawmakers and judges who leave office to wait six years before lobbying the state legislature or executive branch. Under current law, there is a two-year ban on lobbying for former lawmakers and judges. The new laws, which will take effect starting January 1, 2023, will impose fines of up to $10,000 for those who violate the new “revolving door” restrictions.
After Years in Committee Limbo, a Statewide Ethics Code is Finally Adopted in Vermont – After many years of pressure from government transparency advocates and the state’s ethics commission, Vermont Governor Phil Scott recently signed into law the state’s first-ever code of ethics. The new code establishes rules for public officials in all three branches of state government, including guidelines concerning conflicts of interest, gifts, outside employment, and much more. Before passage of the new framework, Vermont was one of only five states nationwide without a comprehensive code of ethics for public officials.
Pay-to-Play
Anaheim Mayor Resigns Amid Corruption Probe Into His Role in Angel Stadium Land Sale – Anaheim Mayor Harry Sidhu resigned last month after being accused of bribery and fraud associated with his alleged action in conjunction with the city’s negotiations with the Anaheim Angels baseball franchise over the recent $320-million sale of Angel Stadium of Anaheim. The former Mayor is accused of bribery and fraud in association with the land sale deal itself, and likewise alleged to have committed both obstruction of justice and witness tampering during Orange County, California’s investigation of the transaction.
The Courts and Free Speech
Supreme Court Blocks Texas’s Social Media Moderation Law – The U.S. Supreme Court recently issued an emergency stay temporarily blocking the implementation of a new Texas law limiting the ability of tech companies such as Facebook, Twitter and YouTube to moderate content on their platforms. By a 5-4 vote, the justices granted an emergency request from impacted tech companies seeking to block a lower court ruling that would have allowed the Texas law to go into effect pending the results of existing legal challenges to the law’s constitutionality. While the Supreme Court’s stay decision grants the impacted companies a temporary reprieve, it is very likely that the Court will need to evaluate the legality of the law on the merits so as to resolve a circuit split on such statutory prohibitions.
11th Circuit Blocks Major Provisions of Florida’s Social Media Law – In a victory for tech companies seeking to protect their ability to moderate platform content, a three-judge panel from the U.S. Court of Appeals for the Eleventh Circuit ruled last month that certain portions of Florida’s new social media law are unconstitutional. Of particular note, the panel unanimously ruled that it was an impermissible government infringement of the First Amendment for Florida to bar social media companies from banning politicians on their platforms. The judges did find, however, that some of the new law’s provisions regarding platform data access and terms of use disclosure were not constitutionally problematic.
Supreme Court Turns Down Appeal of Criminal Conviction by Former Kentucky Democrat Official Who Made Illegal Donations – In 2019, the former head of Kentucky’s Democratic Party – Gerald Lundergan – was convicted for making over $200,000 in un-reimbursed contributions from his personal business to his daughter Alison Lundergan’s 2014 Senate campaign. He was sent to federal prison in 2021 after the U.S. Court of Appeals for the Sixth Circuit upheld his conviction. His attorneys argued that the money should not have been classified as an illegal corporate contribution and that his prosecution amounted to a violation of the First Amendment because the funds were given to a family member. Last month, the U.S. Supreme Court rejected Lundergan’s bid to contest his conviction.
Political Law Practice Pointers
As June rounds out the second quarter of 2022, this edition’s Practice Pointers serves as a reminder for those engaged in lobbying at the federal, state, and local levels to get a jump start on the collection of data so as to be prepared for the filing slog that is the month of July. As we have previously advised in this newsletter, lobbyist and lobbyist employer disclosure requirements at the state and local levels can vary widely from jurisdiction to jurisdiction when it comes to reporting frequency, disclosure content and registrant certifications. Most jurisdictions do, however, have quarterly or semi-annual reports due in July, so it is time for the regulated community to get started on data collection in the next few weeks.
Under the federal framework, July is the month in which federal lobbying registrants are required to submit their second quarter LD-2 filings to the Clerk of the House and Secretary of the Senate. LD-2 disclosure reports publicly highlight the amount of money registrants spend or receive on lobbying, the issues lobbied, and the targeted governmental entities lobbied during the quarter. Federal lobbying registrants and lobbyists will also be required to file their semiannual LD-203 contribution disclosure reports in July. Such reports contain information regarding certain political contributions and expenditures made by registrants and lobbyists in the previous six-month period, and include certifications concerning registrant and lobbyist knowledge of, and compliance with, House and Senate gift rules.
While July can be a brute, advance preparation and the implementation of adequate compliance systems can allow lobbying registrants of all shapes and sizes to meet their diverse reporting and recordkeeping obligations in various jurisdictions and to minimize applicable legal and optical risk. The Dentons Political Law Team regularly advises government affairs firms, businesses, and nonprofit organizations across the country on such matters at the federal, state and local levels, thus helping to ensure our clients head into August in fully compliant and ready to enjoy some much-needed rest and relaxation. Please click here to contact the authors of Political Law Playbook.
