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Influence Peddling

It used to be that if you were an attorney working for a company that does a little political lobbying, and you had an old friend working on the Hill whose ear you could bend, you might invite him or her to lunch and pick up the tab. Naturally, you'd expense the cost.

Nowadays, however, buying lunch--even for a close friend working in Congress--might run afoul of the Honest Leadership and Open Government Act of 2007, which President George Bush signed into law in September. In fact it might even land you in jail.

But don't fault Bush for the new law. The person who deserves the blame is Jack Abramoff, who received a five-year, 10-month sentence in March 2006 after pleading guilty to fraud charges related to lobbying and fundraising.

"Fundraising and lobbying abuses have been in the news for the past number of years, but the Abramoff scandal is what really put them into the public consciousness," says Mark Heilbrun, a partner in Jenner & Block's Washington, D.C. office.

Abramoff's transgression led Congress to tighten up its own rules on members accepting gifts and also provoked legislation that prohibits offering and giving gifts to members of Congress.

"The new law targets not only lobbyists and lobbying firms, but companies and associations who employ them," says William Minor, a partner in DLA Piper's Washington, D.C., office.

No Free Lunch
Previously House and Senate rules governed receipt of gifts and travel by members of Congress and their staffs. But the new Leadership Act prohibits the giving of gifts and travel to members and their staffs.

The scope of the prohibition on gifts is extremely broad--even relatively minor items such as free meals or tickets to entertainment and sporting events are included unless they fall within certain narrow exceptions.

"These rules apply even in the extreme case of a U.S. multinational that has a branch in Oregon where an employee offers to buy a sandwich, a bag of chips and a soda for a staff member at a Congressman's local office," Minor explains. And the "exceptions," such as the one governing "personal friendship," have their pitfalls.

"People need to understand that if you're buying lunch under the exception, you can't expense it anymore," says Mary Streett of Mayer Brown's Washington office. "This will change the way things have been done in Washington."

Similarly, the law severely restricts lobbyists--or the companies that employ them--from arranging or funding travel for members.

The legislation bars multiday trips outright; requires presidential candidates, senators and Senate candidates to pay charter rates for trips on private planes; and bars House candidates from taking such trips altogether.

While transgressing a rule that forbids treating someone to a Big Mac may seem a tad on the trivial side, compliance with the new law turns out to be serious business.

Public Information
To begin with, the Leadership Act features enhanced civil and criminal penalties as well as buttressed enforcement powers for non compliance. On the criminal side, judges can impose penalties of up to five years in prison for persons who "knowingly and corruptly" fail to comply with any provision of the Lobbying Disclosure Act of 1995 (LDA). Meanwhile, civil penalties for failing to correct identified reporting errors rise from $50,000 to $200,000.

Other provisions ensure that enforcement isn't likely to fall by the wayside over the long run. The Leadership Act requires the Attorney General to prepare a semiannual enforcement report for Congress and also authorizes the Comptroller General to conduct random audits aimed at determining compliance with the LDA. The Comptroller General's powers include the right to request materials needed to improve compliance and strengthen enforcement.

All this will be very much in public view. The government must make available to the public over the Internet at no cost all registrations and reports filed under the LDA. And the information must be posted in a searchable, sortable and downloadable format.

While there will be no shortage of such information online--companies employing in-house lobbyists have had to detail their lobbying activities in disclosure reports since the enactment of the LDA in 1995--the Leadership Act makes the filing requirements more onerous.

To begin with, companies that employ in-house lobbyists will have to file more information and will have to do so quarterly rather than semiannually. They also will have only 20 days after the end of the quarter to comply, instead of the previous 45-day grace period. Failure to comply on time after the receipt of a warning would expose a company to the $200,000 civil penalty.

In addition, companies' lobbying disclosure reports will now have to certify that their lobbyists have read and are familiar with the rules relating to the provision of gifts and travel and have made no gift that violates those rules. The required form and details of the certification were not available at press time.

The most complex provisions, however, relate to the practice known as bundling.

Bundler Labels
The Leadership Act imposes new semiannual reporting obligations on federal candidate and party committees who receive "bundled" contributions. Bundling is the practice by which individuals or companies (which the law prohibits from making direct political contributions) raise money from other individuals for political purposes.

The new law treats contributions as bundled if a lobbyist or a company represented by a lobbyist collects and forwards them to a committee or if the committee receives them directly but credits them as having been collected by the lobbyists or their clients. The rules kick in whenever a
lobbyist raises more than $15,000.

"Being reported as a bundler is not a crime but a way of making public who's really raising money for whom," Heilbrun says. "Companies will have to consider whether they want to be so identified."

Companies wishing to avoid the spotlight must be careful that associated individuals collecting money for candidates or members don't use company facilities such as Web sites or e-mail systems. "The use of corporate facilities, however small, exposes the company to being named as the bundler," Heilbrun says. "It's here that general counsel will have to be the arbiters."

Further complicating matters are the disparate effective dates of the Leadership Act's various provisions. While the gift and travel rules and increased penalties took effect in September, changes to LDA disclosure provisions won't be in force until the new year. Bundling provisions won't take effect until three months after the Federal Election Commission promulgates its final rules on the subject.

"The upshot is general counsel must have a much greater awareness of what the company's lobbyists are doing than they ever did before," Minor says.


Julius Melnitzer

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