Welcome to the December 2022 edition of the Political Law Playbook. This month’s coverage is heavily influenced by the tidal wave of media coverage concerning the 2022 midterm elections and their wide-ranging impact on the political landscape in Washington and across the country. In the wake of early November’s multi-layered results, businesses, government affairs firms, and other policy stakeholders have begun to prepare strategies aimed at closely-divided government in the new Congress and a delicate political balance looking ahead to the 2024 presidential election.
Outside of Washington, the 2022 midterm elections saw the passage of several new state and local level lobbying and campaign finance rules destined to impact political and policy advocacy in 2023 and beyond. Of particular note in this space, the Louisville (KY) Metro Council passed an ordinance creating regulations and enforcement mechanisms for lobbyists. As a result of the new local framework, businesses and organizations working with the municipal government will be subject to registration, disclosure, and financial reporting requirements in addition to related gift and ethics provisions. The State of California also increased its existing limits on political contributions and gifts under applicable law. Beginning in January of next year, individuals, business entities, committees, and PACs will be allowed to contribute up to $5,500 per election to state legislature candidates and up to $36,400 per election for gubernatorial candidates. Under the new rules, state and local officials will be able to receive gifts valued at up to $590 per year, though gifts from lobbyists are still capped at $10 per month.
Federal Elections & Campaign Finance
FEC Scales Back Scope of Proposed Digital Ad Transparency Regulation After Backlash – The FEC made several changes to its proposed regulations of digital advertisements last month in advance of its December 1 open meeting. The FEC initially planned to forgo a public comment period and vote on a controversial rule requiring “paid for” disclosures on online paid political promotions, including on social media and influencer marketing promotions. After backlash from outside transparency groups, the FEC rescheduled its meeting and removed the phrase “or promoted” from its proposed rule. An additional rule containing that language will now be considered separately and receive its own public comment period.
Campaigns Skirt Political Ad Rules by Paying Influencers – During the 2022 midterm elections, political campaigns increasingly turned to social media influencers to get their messages across to young voters – a new, and unregulated, strategy for promoting policy and electoral themes. Influencer strategy programs pay influencers to make social media posts promoting political messages, which do not face the same regulations that apply to traditional political advertisements. While the FEC requires political communications on television and radio to comply with applicable disclosure and notification standards, sponsored influencer advertisements are not overtly subject to the same requirements. Transparency advocates have increasingly begun to question this enforcement discrepancy and call on the FEC to take action to regulate influencer engagement in elections. As this becomes an increasingly common means of political communication in future elections, the Commission is likely to consider further action in this space.
Federal PAC Supporting Potential Ron DeSantis Presidential Bid Sues FEC Over List-Sharing Ruling – Federal PAC Ready for Ron recently filed a lawsuit against the FEC in response to an advisory opinion the Commission issued, which the group alleges violates its First Amendment rights and chills its prospective political speech. The FEC advisory opinion in question found that Ready for Ron’s proposed provision of a petition with the names and contact information of 80,000 supporters to Governor Ron DeSantis, an anticipated 2024 presidential candidate, could constitute a possible in-kind contribution to DeSantis if transferred during a period of time when he was a federal candidate or adjudged to be “testing the waters” on federal candidacy. The FEC also claimed that the value of such a substantive petition would likely well exceed applicable campaign contribution limits in such a setting. The Commission opinion did not speak to whether the transfer of the petition would be protected speech rather than an in-kind contribution if given prior to any testing the waters period, but Ready for Ron’s suit takes issue with the FEC analysis in its entirety.
GOP Committees and Candidates Challenge Constitutionality of Coordinated Party Expenditure Limits – In the days before the November general election, the National Republican Senatorial Committee (NRSC), National Republican Congressional Committee (NRCC), Ohio senator-elect J.D. Vance (R-OH), and Representative Steve Chabot (R-OH) filed a lawsuit against the FEC in the U.S. District Court for the Southern District of Ohio. The lawsuit challenges limits imposed on NRSC and NRCC coordinated party expenditures—payments for outlays such as political advertisements, rather than direct contributions—that require the groups to request permission from the national parties or their state affiliates before they are permitted to spend up to the state’s predetermined limits. The litigation also challenges all spending limits on coordinated party expenditures, arguing that they are unconstitutional under the First Amendment.
Candidates Recoup $5M in Old Campaign Loans Thus Far Thanks to Cruz Supreme Court Victory – At least 18 current lawmakers and former candidates have already taken advantage of the U.S. Supreme Court’s May 2022 ruling in FEC v. Ted Cruz for Senate that invalidated the candidate loan repayment provisions of the Bipartisan Campaign Reform Act (BCRA). Following the court’s ruling this spring, candidates who make personal loans to their campaign committee are no longer time barred in their ability to use contribution funds to repay a relevant obligation. In the just over six months since the decision, Congressional representatives from both sides of the aisle have recouped $5 million that had previously been written off from elections dating as far back as 2010. As candidates can recoup these funds indefinitely, this is a trend likely to continue.
Political Operative Found Guilty of Facilitating Illegal Straw Man Donation to RNC for Russian National – Republican political strategist Jesse Benton was found guilty last month in federal court of six criminal charges related to facilitating an illegal foreign campaign donation. In 2016, Benton purchased a $25,000 ticket to a Republican National Committee event on behalf of Russian national Roman Vasilenko, who reimbursed Benton for the ticket. Vasilenko, who was a candidate for Russian parliament, got a picture with then-candidate Trump and entrance to a business roundtable event. Witnesses in the criminal case confirmed that the RNC had no knowledge of the origin of the funds for the ticket. Benton was previously convicted in May 2016 of conspiracy and involvement in filing false campaign finance reports, but was pardoned for those violations by President Trump.
Federal Lobbying & Ethics
U.S. Supreme Court Signals Its Intention to Continue Raising the Bar on Public Corruption Prosecutions – The U.S. Supreme Court recently heard oral arguments in Percoco v. United States, an appeal lodged by an aide to former New York Governor Andrew Cuomo and a construction company executive who were convicted in 2016 on federal fraud and corruption charges involving impropriety surrounding millions of dollars in New York state contracts. During last month’s arguments, both conservative and liberal justices voiced concerns about the breadth of the U.S. Department of Justice’s interpretation of the corruption standard in the Percoco prosecution, suggesting that the government’s interpretation was so extensive as to capture legal lobbying and government affairs efforts. In recent years, the Court has issued several prominent decisions reining in many of the most flexible statutory tools and theories that prosecutors have traditionally used to bring political corruption cases. Last month’s arguments suggest SCOTUS is taking a similar posture in its ruling here, which is expected in June 2023.
U.S. Judiciary Launches Online Database of Judges’ Financial Disclosures – In the wake of a recent Wall Street Journal report detailing examples of more than 130 federal judges who failed to recuse themselves from cases involving possible financial conflicts of interest, the Administrative Office of the U.S. Courts recently launched a public, searchable database of judicial financial disclosure submissions. In May of this year, President Biden signed into law the Courthouse Ethics and Transparency Act mandating the creation of this database, which is to house copies of annual financial disclosure reports and periodic financial transaction records filed by federal judges. Reports will be released within 90 days of their filing deadline for registered users to search for, sort, view, and download.
How K Street Has Been Prepping for the Midterm Election Fallout – In the build up to the 2022 midterm elections, many of Washington DC’s lobbying, law, and public relations firms were busy preparing new strategies for serving clients and influencing a newly-constituted Congress. In anticipation of a new balance of power on Capitol Hill, many firms have been building up their roster of Republican-leaning lobbyists and advisors in hopes of better positioning themselves to tackle bipartisan challenges with both Democrat and GOP leaders in Congress.
Foreign Agents Registration Act (FARA)
Barrack Acquittal Another Blow to DOJ’s Foreign Influence Crackdown – Former advisor to President Trump Tom Barrack was recently acquitted of federal charges alleging that he acted as an unregistered agent for the United Arab Emirates, delivering a blow to the DOJ’s efforts to ramp up its scrutiny of foreign activity in the U.S. In its case against Barrack, the government alleged that the former presidential advisor leveraged his influence with President Trump to shape U.S. foreign policy while failing to disclose his business relationships with the UAE to the federal government. Instead of bringing charges against Barrack under the Foreign Agents Registration Act, however, DOJ tried to prosecute Barrack under 26 USC Section 951, a foreign espionage law that does not require prosecutors to prove willful intent to secure a conviction. Moving forward, this and other failed prosecution efforts under FARA and Section 951 may lead federal prosecutors to begin exploring alternative statutes and theories for fighting foreign interference.
Feds End Ukraine-Related Foreign Lobbying Investigation Into Rudy Giuliani Without Filing Charges – Federal prosecutors investigating former New York City Mayor Rudy Guiliani’s alleged activity on behalf of the nation of Ukraine have closed their investigation after more than two years, deciding that they will not bring criminal charges. The multi-year investigation of Giuliani centered on claims that he may have failed to comply with the registration obligations of the Foreign Agents Registration Act when he allegedly acted on behalf of Ukraine officials to seek the ouster of the U.S. ambassador to Ukraine, Marie Yovanovitch, and to encourage the country to investigate President Biden and his son. Guiliani has denied ever representing a Ukrainian national or official before the U.S. government.
Non-Federal Elections & Campaign Finance
California Raises Campaign Contribution and Gift Limits for 2023-2024 – More money will be allowed to flow into California elections during the 2023-2024 political cycle, after the California Fair Political Practices Commission (FPPC) recently raised the contribution limits for political campaigns in the state. Next year, individuals, business entities, committees, and PACs will be allowed to contribute up to $5,500 per election to state legislature candidates—up from $4,900—and up to $36,400 per election for gubernatorial candidates—up from $32,400. PACs that are separate from a political party can also spend up to $9,100 on state candidates—up from $8,100. The FPPC also raised gift limits, barring state and local officials from receiving gifts that exceed $590 per year—up from $520. Gifts from lobbyists are still capped at $10 per month. The new contribution and gift limits are effective January 1, 2023.
Advocates Seek to Ban Foreign Money in Maine State Ballot Referendum Campaigns – Maine voters may soon get the opportunity to decide whether foreign corporations will continue to be allowed to spend money on state referendum campaigns. An advocacy group in the state recently presented 80,000 signatures to Maine’s Secretary of State to put the issue before voters on the November 2023 ballot, giving them a chance to close a loophole in Maine law that allows foreign entities to contribute to state referendum campaigns. The initiative to ban foreign contributions has received bipartisan support from Maine lawmakers, but is expected to face opposition from Maine Governor Janet Mills, who vetoed a bill containing a similar ban on contributions from foreign entities last year.
New Mexico Ethics Commission Files Lawsuit Against PAC for Violating Ballot Initiative Disclosure Rules – The New Mexico Ethics Commission recently filed a lawsuit against Working Families Organization, Inc. (WFO) for violating the state’s Campaign Reporting Act in its efforts to pass a ballot initiative increasing instruction for at-risk children. The November 2nd complaint centers around a text-message campaign organized by WFO that purportedly lacked the required sponsorship and authorization disclaimers and which failed to comply with applicable registration and disclosure obligations under state law. The state took issue with WFO’s portrayal of “Unemployed Workers United” as the sponsor of an text-message campaign related to the initiative. WFO denies any wrongdoing with regard to either the disclaimer or registration requirements.
NRA Committee to Be Fined For Delay In Reporting Donation to Campaign Against Oregon Measure 114 Gun Control Initiative – Oregon’s Elections Division recently assessed an $8,200 fine against an NRA-aligned state political committee – NRA Oregonians for Freedom – for failing to report a $25,700 contribution from the NRA Political Victory Fund. The NRA Political Victory Fund made its donation to the state committee, which is opposing Oregon Measure 114 – a ballot proposal that would require the issuance of permits for gun purchases in the state and prevent the sale or transfer of large-capacity ammunition magazines. Oregon state law requires that contributions used to support or oppose ballot measures be disclosed within 30 days of payment. NRA Oregonians for Freedom allegedly failed to report the donation from the NRA Political Victory Fund until November 1st after receiving the funds on July 29th – leading to 64 days of late fee penalties from the state.
Chicago City Council Member Under Scrutiny for Failure to Disclose Use of $300,000 in Campaign Money – Chicago City Council member Walter Burnett Jr. is facing increased scrutiny over his use of campaign contribution funds, after a Chicago Sun-Times investigation revealed that he may have violated state campaign finance law. Burnett Jr.’s most recent campaign finance report did not list $300,000 of nearly $375,000 in previously-reported investments that he has made with campaign contributions.. The Illinois State Board of Elections is currently reviewing the matter and purportedly working with Burnett Jr.’s campaign to correct past reports and ensure that it files accurate reports going forward. Burnett Jr. has previously come under fire for amending 24 quarterly reports over a six-year span due to numerous substantive errors and for improperly receiving tax breaks on investment properties.
Non-Federal Lobbying & Ethics
Louisville Metro Council Approves New Lobbying Rules – The Louisville (KY) Metro Council recently approved additional registration and reporting requirements for lobbyists, which will go into effect in May 2023. The new municipal ordinance was modeled after Kentucky’s Code of Ethics and tasks the Louisville Metro Ethics Commission with enforcing a host of new requirements. The ordinance puts into place registration and financial disclosure requirements for individuals who meet the definition of lobbying, requires firms that hire lobbyists to disclose their policy targets, and imposes a $50 restriction on gifts from lobbyists with limited exceptions. As the Ethics Commission currently only consists of one person, Louisville Metro is currently investigating how to increase its ability to enforce the new compliance framework.
The Pittsburgh Symphony Orchestra Paid $15K to Take 2 Pennsylvania Lawmakers to Europe – Pennsylvania’s lax gift laws permitted several state representatives and their spouses to accept a $15,000 European trip financed by the Pittsburgh Symphony Orchestra in the middle of the 2022 legislative session. Pennsylvania is one of a few states without significant limits on gifts to elected officials and public employees—permitting the acceptance of gifts, transportation, and hospitality as long as they are not offered in exchange for official action. The Symphony, which receives millions of dollars from the state Department of Community and Economic Development and grants from the Pennsylvania Council of the Arts, provided complementary symphony tickets to the lawmakers, as well as airfare, lodging, food, and other benefits. Pennsylvania’s state legislature recently failed to pass House Bill 1009, a gift-ban bill that had been publicly backed by the state’s Republican leaders and that received a House committee vote.
Maryland’s Carroll County Commissioners Approve Updated Ethics Rules on Financial Disclosures and Gifts – The Board of the Carroll County (MD) Commissioners approved new ethics rules for county officials related to financial disclosures and gifts, updating the county’s ethics ordinance to comply with changes in state ethics requirements for local governments. Notably, Carroll County now treats gifts from the Maryland Association of Counties and the Maryland Municipal League like gifts from lobbyists, meaning recipient commissioners and government officials must disclose gifts over $20 or a series of gifts totaling over $100 from any of those sources. In conjunction with these changes, the new rules also require county officials to disclose any personal or business relationship with the University of Maryland Medical System, Maryland state or local government, or any quasi-governmental entity of Maryland state or local government.
Pay-to-Play
Real Estate Developer Convicted of Making Over $1 Million in Bribes to Former LA City Councilman – Three family members of former Los Angeles City Councilman Jose Huizar testified against him last month in a trial against development company Shen Zhen New World I, which was accused of bribing Huizar to support its building of an L.A. skyscraper. The $1 million in alleged bribes purportedly included Las Vegas getaways, private jets, lavish hotels, and alcohol, witnesses testified. After less than three hours of deliberations, the jury found Shen Zhen New World I guilty of five counts of bribery and three counts of wire fraud. Another development company was also previously convicted of paying Huizar $500,000 in cash. Despite prosecutors’ accusations that he used his office to secure over $1.5 million in illegal payments from developers seeking city approval for L.A. projects, Huizar maintains that he performed no official acts of significance for developers. Huizar left office in 2020 and has resided abroad since 2018. His trial is scheduled to commence in February 2023.
The Courts and Free Speech
Federal Court Rules SD Ballot Measure Law Illegally Curbs Free Speech – A South Dakota law that would require ballot petition circulators to disclose personal information remains blocked from going into effect, after a federal appeals court upheld a lower court’s preliminary injunction against the law. In 2020, the Republican-led South Dakota legislature passed a law that mandated disclosures of personal information from paid ballot petition circulators. Ballot measure groups argued that the law created additional hurdles for measures to get on the ballot. Affirming a district court’s ruling against the law, the U.S. Court of Appeals for the Eighth Circuit held that the law could have a chilling effect on ballot circulators that violates free speech protections under the First Amendment.
Political Law Practice Pointers
With the busy holiday season right around the corner, this edition’s Practice Pointers focuses on the variety of non-federal lobbying reports and registration renewals frequently due during December and early January. To remain compliant in the new year, it is crucial for those that interact with government in multiple jurisdictions around the country to stay vigilant regarding the numerous state and local lobbying regulations that govern organizational government affairs and procurement activities.
Lobbying registration requirements can be especially challenging to track given the variation in expiration and renewal dates by state, and vastly different registration requirements in each jurisdiction. For example, Ohio state lobbying registrations expire on December 31st with a registration renewal period stretching from December 15 to January 31, but have no mandatory training obligations. Alternatively, California’s lobbying registration renewal period is from November 1 to December 31 in each even-numbered year, and pairs with a mandatory ethics course each lobbyist must complete and certify with the state.
Lobbyists operating at the local level must also be careful to double-check jurisdictional registration and renewal requirements, as municipality regulations do not necessarily track state obligations. For example, New York State has recently expanded its training requirements to encompass both lobbyists and clients, who now must complete a new online ethics training program by March 18, 2023 in conjunction with their January 1st lobbying registration renewal deadline. Meanwhile, lobbyists – but not clients— who operate in New York City must complete training every two years and have until January 17th to renew their registration.
The bottom line is that it is both challenging — and extremely important—to keep track of the idiosyncratic registration renewal requirements for each jurisdiction in which you and your organization actively lobby. The Dentons Political Law Team regularly advises lobbyists and entities that employ lobbyists on jurisdictional compliance matters at both the state and local levels, so please do not hesitate to contact a member of our team if you have any questions.
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