Introduction

Welcome to the October Edition of the Political Law Playbook. With events in Israel and on Capitol Hill rightfully taking center stage for most news outlets over the past few weeks, a range of interesting and important happenings in political law may have slipped through the cracks for many of our subscribers. This edition highlights several notable developments, including a recent Senate hearing on the impact of AI on US politics, the sentencing of a former US diplomat for violations of federal executive branch ethics and “revolving door” rules, and media questions about recently indicted Senator Robert Menendez’s role in blocking potential legislative changes to the Foreign Agents Registration Act (FARA).

Federal Elections & Campaign Finance

Tackling AI in Politics is Quickly Becoming an Area of Interest for Congress – The Senate Rules Committee and its Chair – Senator Amy Klobuchar (D-MN) – recently held a hearing to gather testimony from policy experts and political stakeholders on what Congress should be doing to monitor and regulate the increasing use of artificial intelligence (AI) technology in politics leading into the 2024 presidential election.  Many witnesses and Senators participating in the hearing echoed a common fear about how more AI technology use in politics is likely to lead to the increased dissemination of false and misleading information (including “deep fake” videos and images) concerning US elections. Other hearing stakeholders were less alarmist in the face of increasing AI usage, pointing out that machine learning and other AI tools have already been in use for years in the political campaign world. The Rules Committee hearing follows on the heels of recent legislative efforts by Senator Klobuchar to regulate AI engagement in politics through the introduction of the “Protect Elections from Deceptive AI Act”. The Playbook will continue to monitor legislative and regulatory actions on this front, as this is sure to be an increasingly active policy issue at both the federal and state levels moving forward.

Federal Lobbying & Ethics

Former US Ambassador Pleads Guilty to Violations of Federal Revolving Door and Ethics Rules – Richard G. Olson, Jr. - former US Ambassador to Pakistan and the United Arab Emirates – recently pled guilty to violating federal ethics rules during his service as an American diplomat. As part of his guilty plea, Olson was sentenced to three years’ probation and a nearly $100,000 fine for violating federal ethics rules governing interactions with prospective employers while in public service and requiring former public officials to avoid serving as federal lobbyists for a one year “cooling off” period. According to court documents associated with Olson’s plea agreement, he pled guilty to accepting and not reporting a $18,000 first-class ticket to fly to London for a job interview with a Middle East investment firm and admitted to lobbying U.S. officials on behalf of the Qatari government in 2017 prior to the expiration of his statutorily mandated “cooling off” period. Olson faced up to a potential six months in jail under the Federal Sentencing Guidelines, but U.S. Magistrate Judge G. Michael Harvey chose to hand down a more restrained sentence.

International Lobbying & Ethics

Changes to Canada’s Federal Lobbyist Code of Conduct to Have a Substantial Impact on Interest Groups that Frequently Sponsor Travel for Government Officials – Recently-enacted amendments to Canada’s Lobbyist Code of Conduct are already having a substantial impact on policy and advocacy groups that frequently sponsor travel for public officials and employees in the Canadian federal government. The new rules, which require that outside groups that lobby Parliament and federal government officials in Canada treat sponsored travel costs as gifts to public officials rather than a special category of permissible benefits, place very low dollar limits on travel expenses provided to covered officials and employees in this setting.  Moving forward, travel costs of this sort paid for by lobbyists will be capped at $40 per occurrence and $200 per year. In light of the changes, it is expected that long-standing international fact finding and educational trips put on for Members of Parliament are likely to go by the wayside.

Non-Federal Elections & Campaign Finance

Arizona’s Citizens Clean Elections Commission Advances New Advertising Disclosure Obligations as Its Rulemaking Continues in the Wake of Proposition 211’s Passage – In the wake of last fall’s approval of Proposition 211 by Arizona voters, the state’s Citizens Clean Elections Commission (CCEC) has been hard at work drafting and proposing new rules and regulations designed to implement the technical components of the proposition language and associated Voters’ Right to Know Act (VRKA). The language of Proposition 211 and the VRKA seek to impose a comprehensive new campaign finance regulatory and disclosure framework on individuals and organizations looking to influence Arizona state and local elections.  Despite scrutiny from free speech advocates and ongoing lawsuits challenging the law’s constitutionality, the CCEC has begun promulgating a range of proposed rules seeking to implement and enforce the new structure. Recently, the Commission adopted final rules regarding advertising disclaimer requirements that mandate ad sponsors list their three largest sources of funds for covered political communications. Specifically, the new rule specifies the visual and audio requirements associated with source of funding disclosure on political television ads in the state and clarifies how such disclosure should be handled in the context of radio communications, print communications, billboard advertisements, text messages, and social media posts.

Hawaiian Super PAC Facing Regulatory Scrutiny for Allegedly Deceiving Donors in the Wake of Maui Fires – Transparency advocates and members of the media have in recent weeks begun to question potentially deceptive fundraising activities undertaken by a Hawai`i state Super PAC known as “Our Hawai`i Action”. The PAC, which is led by former Maui State Rep. Kaniela Ing and local community organizer Evan Weber, purportedly leverages deceptive development language throughout its online fundraising profile that some argue confuses donors into thinking that Our Hawai`i Action is a charitable organization supporting the people of Maui rather than a political committee designed to make independent expenditure communications in conjunction with Hawai`i elections. For example, the PAC’s Act Blue donation page prominently utilizes language that asks donors to “Support Maui Fires: Relief, Recovery, and Rebuilding”, while only tangentially referencing that donations to the group will go toward “political organizing and campaign operations”. Media reports indicate that Our Hawai`i Action’s activities and tactics are currently under review by both the Hawai`i Campaign Spending Commission and the Tax and Charities Division of the Hawai`i Attorney General’s Office. Depending upon the outcome of those reviews, formal investigative or enforcement action may be taken in due course.

The Courts & Free Speech

Connecticut Supreme Court Hears Oral Arguments Regarding the Permissibility of Certain Political Speech Restrictions within the State’s Public Campaign Financing System – Last month, the Connecticut Supreme Court heard oral arguments in a long running free speech case challenging the political communication restrictions placed on participants in the state’s public campaign financing system – the Citizens’ Election Program. The suit – brought by former Republican State Senator Joe Markley and current Republic State Senator Rob Sampson regarding their 2014 reelection campaigns – challenges the ability of the public financing system and the CT State Election Enforcement Commission to restrict system participants from utilizing public funds on certain forms of political communications. The crux of the case involves the fining of Markley and Sampson by the Commission for using public campaign finance grants to fund mailers that attacked former Governor Dannel Malloy during his reelection bid without procuring proper offsets from the state Republican Party or the Republican candidate for Governor. The legislators contend that the requirements of the public financing system are an arbitrary and unconstitutional restriction of political speech on candidates and campaigns, and likewise establishes a two-tier system of campaign finance enforcement in the state.  The CT Attorney General’s Office meanwhile argues that participants in the Citizens’ Election Program voluntarily relinquish certain First Amendment rights as part of the bargain of receiving public donations supporting their campaigns. A decision from the Court is expected in the coming months.

Nonprofit Compliance and Disclosure

Santa Clara City Council Members File Ethics Complaints Against Nonprofit Entity Linked to Mayor – A group of three Santa Clara, California councilmembers recently filed multiple ethics complaints against a nonprofit organization supposedly connected to the city’s Mayor – Lisa Gillmor – for purported violations of federal, state, and municipal law. The group at issue, a self-proclaimed Section 501(c)(3) nonprofit known as “Stand Up for Santa Clara”, was founded in 2015 as a grassroots watchdog organization focused on improving political transparency in the city. The councilmembers believe, however, that the organization is not actually functioning as a Section 501(c)(3) entity but rather as a political advocacy group that has failed to comply with applicable state and local disclosure rules and tax obligations imposed by the IRS. To this end, the trio of elected officials filed complaints with the Santa Clara City Clerk and Attorney and the California Fair Political Practices Commission accusing the nonprofit of failing to properly register and report as a political organization under state and local law. Additionally, the councilmembers have submitted a complaint to the IRS asking for the federal government to investigate Stand Up for Santa Clara for potentially violating the prohibition on political campaign intervention placed on Section 501(c)(3) nonprofits. The collection of complaints are currently under review.

Foreign Agents Registration Act

Media Reports Highlight Senator Robert Menendez’s Efforts to Block Passage of Past Foreign Agents Registration Act Reform Bill – In the wake of Senator Robert Menendez’s recent federal indictment for conspiracy to commit bribery, honest services fraud, and extortion in conjunction with an alleged influence-peddling scheme involving the Egyptian government, national news media have begun to look more closely at Menendez’s prominent role in blocking the passage of bipartisan legislation strengthening the Foreign Agents Registration Action (FARA) in 2020. The proposed bill blocked – the Foreign Agents Disclosure and Registration Enhancement Act of 2019 – would have: increased criminal penalties for willful violations and material disclosure misstatements under FARA; created a new criminal offense for meeting with members of Congress or staff without disclosing FARA registration status; required the Department of Justice to revamp its FARA enforcement strategy; and given the US Attorney General the authority to issue civil investigative demands for the production of documents in FARA cases. When a motion for unanimous consent to bring the bill to the floor of the Senate for passage was raised in December 2020, however, Menendez served as the lone objection – blocking any further movement on the legislation. Menendez claims the objection was a result of recommendations from his staff that the bill needed a more thorough review before receiving a floor vote. Media reports, however, indicate that Menendez was also worried about the political impact of strengthening the law in advance of the 2020 presidential race. With the Senator’s criminal case just beginning, further questions continue to be raised about the motivation behind his objection to FARA modernization and amendment.

________________

Practice Pointers

This month’s edition of Political Law Playbook spends time discussing a series of ethics complaints recently raised against a purported Section 501(c)(3) public charity for allegedly improper engagement in political activities under federal, state, and local law. This news item highlights a key consideration for all such tax-exempt public charities in the US – the Internal Revenue Code (IRC) prohibition on participating or intervening in any political campaign on behalf of any candidate for public office.

While it is easy in certain contexts to understand what the IRC qualifies as campaign intervention – direct political contributions and express advocacy communications, e.g. – there are a host of politically-adjacent activities that are not so easily analyzed under the IRS’ ambiguous “facts and circumstances” standard. Such borderline activities might include: engagement in issue advocacy communications; compiling voter guides and legislative scorecards; conducting certain forms of public opinion polling and research; engaging in voter education efforts; hosting candidate forums and debates; voter registration activities; and get-out-the-vote programs. Context will matter in each of these settings, but so is an effective understanding of the risks in each setting and how best to minimize them.

If your nonprofit charitable organization plans to conduct any of the above engagement activities leading up to this November’s election or the bigger battle in 2024, the Dentons Political Law Team is well versed in the legal compliance issues at play. Please do not hesitate to reach out if you have specific questions or concerns.

Please click here to contact authors of Political Law Playbook.