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May 28, 2010

Lobbying? Awareness of Rules, Transparency Important

From YourABA, May 2010

In the past few years, ethics scandals have led to stricter rules for lobbying, making it increasingly important for companies engaged in such activities to pay close attention to compliance. In the CLE program “Demystifying Government Affairs for the Corporate Counsel,” moderator Jennifer A. Lee, a former associate with Nielsen Merksamer Parrinello Mueller & Naylor LLP in Marin County, Calif., along with speakers Constance Campanella, Cleta Mitchell and J. Scott Hardin, discussed how companies can best comply with the laws on government affairs work.

“For the corporate legal officer, the challenges of compliance are daunting—and that’s the understatement of the century,” said Campanella, president of Stateside Associates, sharing that more than half of the states have made changes to their lobbying disclosure rules in the past few years.

Campanella reminded listeners that non-compliance not only affects the elected official and the lobbyist—but also the client. “Clients are often swept up in the ethical lapses of the lobbyist as well as the elected officials and candidates whom they support—even though the client has been pristine in their compliance with the laws,” warned Campanella. “So, whom you hire and whom you support should be your first ethical consideration.”

Campanella cautioned on hiring lobbyists through third parties such as brokers, warning that companies may be limited in their ability to know the terms and conditions of the contract, even if the lobbyists are working on their behalf. “It may be legal and it may be technically compliant, but it does present challenges to your ability to enforce your corporate ethical standards.”

Mitchell, partner in the Washington, D.C., office of Foley & Lardner LLP, and a member of the firm’s political law practice, provided some background about filing requirements under the Federal Lobbying Disclosure Act.  Simply hiring a lobbyist does not automatically necessitate registration under the act with either the House of Representatives or Senate.  Mitchell explained that a company must register under the FLDA if it meets three criterion: (1) The company must have spent more than $10,000 on lobbying in one calendar year, (2) one employee must have spent 20 percent or more of his or her time lobbying, and (3) one employee must have two or more “lobbying contacts.”

Further, regarding state and local rules, Mitchell warned that different jurisdictions have different requirements for when companies need to file their lobbying activities, but all are based on some time question, a dollar figure and a lobbying activity, the latter of which can vary significantly.   The definition of “lobbying contacts” varies with state or locality, Mitchell mentioned.

Complying with the law may be confusing, then, but Campanella offered a few tips in doing so. She stressed the value of transparency in all facets of a company’s compliance program. It is also helpful, Campanella pointed out, for a company to maintain written contracts with all government affairs people with whom it works and to invest as many resources as needed to ensure compliance.  If a company is conducting lobbying efforts in multiple jurisdictions—which, of course, means having to be aware of registration requirements in each of the localities—it may become necessary to hire outside counsel to assist

The best compliance systems include management oversight and internal audits, said Campenella. “Setting up a system to audit your own record keeping and that of your retained lobbyist for work performed on your behalf will save a lot of time and stress when you have reporting deadlines to meet.”  Such audits will also help identify systemic problems, she added.

Hardin, associate general counsel of Corporate Affairs and Government Relations for Wal-Mart Stores, Inc., added that it is important for a company to properly scrutinize all workers hired both within the firm and with whom a company has as a third-party relationship.

Panelists also spoke on the issues of political contributions and working effectively with government affairs departments.  Additional resources were provided, among them URLs for the National Conference of State Legislatures and the Federal Election Commission.

The program was sponsored by the Business Law Section Government Affairs Practice Committee and Corporate Counsel Committee and the ABA Center for Continuing Legal Education.

Lobbying? Awareness of Rules, Transparency Important” is from the May 2010 issue of YourABA, a e-newsletter for ABA members.