Top Ten Political Law Compliance Issues for the 2012 Election

November 7, 2011


This is the first in a series of columns in Corporate Counsel magazine by O'Melveny lawyers that will examine the intersections of the political and legal worlds in the run-up to Election Day 2012. The original article is available on Corporate Counsel's website at the following link.

With hundreds of millions of dollars already pouring into the November 2012 campaigns, the opportunities for politics and business to mix in legally dangerous ways have never been greater. Overall, spending on next year's state and federal elections is projected to soar north of $6 billion, an all-time record. As fund-raising and other campaign activities intensify, so too will scrutiny of the relationships of candidates with the business community—making this a good time for a checkup on corporate political law compliance programs. Here's a rundown of ten key issues:

1. Contribution limits. Under Federal Election Commission rules for 2012, Political Action Committees (PACs) may contribute up to $5,000 per election to candidates, $15,000 per year to national parties, and $5,000 per year to other committees. Individuals may contribute up to $2,500 per election to candidates, $30,800 per calendar year to national parties, and $5,000 per year to other political committees, not to exceed a biennial cap of $117,000.

2. Citizens United. The U.S. Supreme Court's 2010 decision in Citizens United v. Federal Election Commission, 130 S.Ct. 876, did not lift the ban on direct corporate contributions to candidates, which remains in effect in federal elections (while being tested in court challenges around the country). The decision, however, does permit corporations to make unlimited independent expenditures on federal elections, so long as such expenditures are not coordinated with a particular candidate or political party.

3. Federal pay-to-play regulations. Federal pay-to-play rules impose substantial penalties for political contributions to state and local elected officials and candidates who have the ability to influence the hiring of certain financial services providers. Where applicable, if a key employee makes anything more than a de minimis contribution to a covered official, his employer may be barred from providing services for compensation for two years to the elected official's government entity. For example, an employee's $400 contribution to an incumbent state official's campaign for other office could bar a financial services firm from providing investment advisory services to that state's pension funds for two years. Financial services companies, especially, should have pre-clearance regimes in place for the campaign contributions of key employees.

4. State and local pay-to-play regulations. Similarly, many states and municipalities have their own pay-to-play regimes for contractors, including financial services firms that advise, manage, or invest money for those governments' pension funds. Because these regulations vary, financial services companies and other government contractors should have pre-clearance regimes for campaign contributions.

5. Fundraising in the workplace. Federal law prohibits any person from reimbursing another person's contribution to a federal candidate or PAC. Further, the prohibition extends to any appearance that an employee will benefit or be disadvantaged for contributing or not contributing to a campaign or PAC.

6. PACs. Company PACs may solicit contributions from the company's "executive or administrative personnel" (as defined by the FEC), as well as from stockholders and families of such groups. Contributions must be voluntary, and former or retired personnel may not be solicited. Companies or PACs may solicit personnel outside of the executive/administrative ranks only twice annually.

7. Use of corporate resources. A corporation may offer office space to a candidate at a discount or for free only if it does the same for others. Otherwise, the candidate must reimburse the corporation at the normal rental rate. If a corporation provides a candidate use of a corporate aircraft, then the candidate must reimburse the corporation for the fair market value of the flight, based on the charter fare or rental charge for a comparable plane.

8. Communications using corporate resources. While employees are permitted to use corporate technology resources for incidental volunteer campaign involvement, excessive time spent on political activities may constitute a prohibited contribution by the corporation. Corporate communications to personnel not deemed "executive or administrative" must not expressly advocate the election or defeat of a clearly identified federal candidate.

9. Lobbying Disclosure Act. Under the LDA, every corporate registrant must report federal campaign contributions made by the PAC that it sponsors. Each of the corporation's lobbyists active during the semiannual LDA reporting period must also separately report her personal federal campaign contributions.

10. Revolving-door restrictions. As the current political terms of office near their close and a new administration forms, the revolving door between public and private sector employment will swing briskly—and with peril for both the unwary employer and employee. Employers should be mindful of government post-employment restrictions, especially those concerning former high-ranking federal officials. These include a prohibition on certain representations before the federal government after leaving office. The Obama Administration's "Ethics Pledge" extends this restriction to prohibit lobbying by any former executive branch political appointee for the entirety of President Obama's time in office. Companies similarly should take careful account of expense reimbursement and recusal rules applicable to a prospective employee, among other considerations, when discussing possible future employment with current federal officials. Likewise, executives under consideration for appointment to federal office must manage their separation from employment carefully to ensure both compliance with ethics rules and full enjoyment of separation benefits.


Reprinted with permission from the November 2, 2011 edition of Corporate Counsel © 2011 ALM Media Properties, LLC. All rights reserved.