On September 14, 2007, President George W. Bush signed S.1, the Honest Leadership and Open Government Act of 2007 (“S.1” or the “Act”), finishing the most comprehensive lobbying and ethics reform movement Washington has seen in years. The Act will change the way trade associations, companies, and – more importantly – their lobbyists do business with the federal government. Amending both congressional rules and federal law, S.1:

• imposes new restrictions on how lobbyists and lawmakers may interact;
• imposes comprehensive new disclosure requirements on registered lobbyists and the companies that employ them; and
• subjects registered lobbyists to harsh penalties for failure to comply with applicable rules and reporting requirements.

Certain provisions of S.1 will take effect immediately. Other provisions, which require implementing regulations and guidelines, will become effective over the course of the next year.

Persons and organization engaged in lobbying activities must follow these new rules. Companies and organizations who engage in lobbying will likely need to revise – or craft for the first time –internal record keeping policies with respect to lobbying activities to ensure compliance with the new law.

Reporting by Lobbyists Increased, Expanded

Of greatest importance to lobbyists and companies who have their own in-house lobbyists is S.1’s dramatic overhaul of the lobbyist registration and reporting system. The Act significantly amends the Lobbying Disclosure Act (LDA), requiring that lobbying activity reports be filed on a quarterly basis – an increase from the semi-annual reporting schedule that has existed since 1995. In addition, lobbying reports, previously due 45 days after the end of a reporting period, will now be due 20 days after the end of a reporting period.

Similarly, the lobbying expense thresholds, which trigger registration for lobbying firms and organizations, have been cut in half to track the switch to quarterly reporting. Lobbying firms are now required to register if they earn more than $2,500 in a calendar quarter – down from $5,000 – and organizations employing in-house lobbyists must register upon expending $10,000 in a calendar quarter on lobbying activities – down from $20,000.

The Act also requires lobbyists to report with more detail regarding their clients and their former government positions. Reports must include a statement disclosing whether a client is a state or local government. In addition, lobbyists must list any “Covered Official Position” held within 20 years of first acting as a lobbyist for the client or organization. Previously, lobbyists were only required to disclose covered official positions held within two years of first acting as a lobbyist for the client or organization.

Under the new law, lobbying coalitions must now disclose with more detail the sources of their funding and direction. The law now requires lobbyists to disclose the identities of organizations, other than the named client, that contribute more than $5,000 in a quarterly period to fund lobbying activities and that actively participate in the planning, supervision or control of such activities.

The Act also mandates that registered lobbyists, lobbyist organizations and the lobbyist employees of such organizations individually report their political and charitable donations by filing a semi-annual report disclosing:

• The names of PACs they have established or control;
• Contributions made to federal candidates and PACs;
• Contributions to presidential library foundations and inaugural committees;
• Payments made to finance the cost of meetings or conferences affiliated with a government official; and
• Contributions made to entities affiliated with government officials.

Congressional Gift and Travel Rules Imposed on Lobbyists

Until now, congressional gift and travel rules applied only to Members of Congress and covered congressional officials. S.1 imposes congressional gift and travel rules on registered lobbyists for the first time.

In addition, as part of their reporting obligations under the LDA , registered lobbyists are required to certify they have (1) read and are familiar with the congressional gift and travel rules, and (2) have complied with those rules. Lobbyists found to have violated the gift and travel rules could be subject to fines and imprisonment.

Lobbying Disclosure Act Gets Teeth

Under the prior Lobbying Disclosure Act, the lobbying industry was essentially self-policed. Lobbyists registered and reported without any real government oversight, the accuracy of lobbying reports was basically assumed, and civil fines were rarely imposed. S.1 changes that by mandating strict government oversight of the lobbying industry and by significantly increasing the penalties for violations of the LDA. Specifically, the law:

• Amends the LDA to increase the maximum civil penalty for non-compliance to $200,000 and – for the first time – establishes criminal penalties (up to five years imprisonment and fines) for knowing and corrupt violations of the LDA;
• Authorizes the Comptroller General to audit randomly registered lobbyists as part of its obligation to provide Congress with annual reports on LDA compliance levels; and
• Requires the U.S. Attorney General to report to Congress twice yearly on the number of enforcement actions taken by the Justice Department and any sentences imposed as a result of those enforcement actions.

Reporting of ‘Bundled’ Contributions

Further, the Act amends FEC law to require federal candidates and their political committees to include on their FEC reports any bundled contributions in excess of $15,000 received from a registered lobbyist. The FEC is required to promulgate regulations implementing this reporting requirement, which would close many of the loopholes in existing law that allow bundled contributions to go unreported.

Senate Gift and Travel Rules Overhauled; Similar to House Protocol

New Senate gift rules prohibit Members, officers and employees of the Senate (Senate Officials) from accepting gifts – regardless of value – from registered lobbyists or from private entities that employ or retain registered lobbyists. Senate Officials may, however, continue to accept things of value from lobbyists under several exceptions to the gift rule – for example, free attendance at widely attended events, gifts of a nominal value, or food and refreshments that are not part of a meal.

S. 1 also clarifies the protocol for valuing tickets to sporting and entertainment events, mandating that tickets be valued at their face value. Tickets that have no face value shall be valued at the cost of a ticket with the highest face value for the event.

The new law also changes Senate and House rules to prohibit Members from attending events at national party conventions if the event is held in honor of that Member and is paid for by a registered lobbyist or an organization that retains or employs registered lobbyists.

New travel rules generally prohibit Senate Officials from accepting trips hosted by entities that employ or retain registered lobbyists. Certain short, one-day trips are allowed, however, if: (1) the role of lobbyists in planning, organizing, arranging or requesting travel is kept to a de minimis level and (2) lobbyists do not accompany Senate Officials on “any segment” of the trip .

501(c)(3) organizations that employ or retain registered lobbyists are exempt from these new travel restrictions and, like other organizations not employing or retaining lobbyists, may continue to host officially-related congressional travel. Such travel may not be planned, organized, arranged or requested by registered lobbyists, and registered lobbyists may not accompany Senate Officials “at any point throughout [such trips].”

Like the House travel rules passed earlier this year, new Senate travel rules require Senate Officials to obtain pre-approval from the Senate Ethics Committee prior to participating in privately-hosted travel. Pre-approval will be conditioned upon receipt of a certification statement from the organization sponsoring the travel, which states that the proposed trip will comply with all applicable travel rules. Pre-approval forms will be drafted by the Senate Ethics Committee as it formulates implementing regulations in the coming months.

Other Notable Changes

Travel on Private Aircraft Limited, not Prohibited. Unlike the House, which imposed a blanket ban on the use of non-commercial (corporate) aircraft, the Senate now requires its officials to pay the fair market value for the cost of such travel. This is defined as the official’s pro rata share of the normal and usual charter fare for a comparable plane of comparable size. S. 1 also amends the Federal Election Campaign Act to impose the same reimbursement restrictions on candidates for federal office. This change does not affect House candidates, who remain subject to the House’s blanket prohibition on the use of such aircraft.

Longer Cooling-Off Period Imposed on Those Coming Off the Hill. The Act also subjects former Senate and high-ranking executive branch officials, including the vice president; the heads of Cabinet-level agencies; and their senior staff, to longer and broader post-employment lobbying restrictions. Former senators are now prohibited from lobbying the entire Congress (House and Senate) for a period of two years. Senior Senate staff (those making 75% of a Member’s salary) are prohibited from lobbying the full Senate for a period of one year. High ranking executive branch officials are subject to a similar ban on lobbying the executive branch for a period of one year.

Post-employment restrictions for House Members are unchanged by the new law.

Arent Fox Seminar Explaining This New Law

You are invited to attend a seminar detailing the scope and impact of these rules. The Lobbying and Ethics Reform Seminar will be held on Monday, October 29th, 2007, from noon to 2:00 pm at the Arent Fox office in Washington, DC. To register for this complimentary event, visit http://www.arentfox.net/gr/.

If you have any questions, please contact:

Craig Engle
engle.craig@arentfox.com
202.775.5791