Welcome to the February 2022 edition of the Political Law Playbook. Of particular note in this month’s edition is recent activity in the U.S. Senate surrounding federal election reform efforts. Senate Democrats saw their legislative package on electoral matters fail to muster the support of enough Senators to pass in regular order, after the attempt to create a carve-out to the filibuster rule was rejected by 52 Senators.

The proposed bill – the subject of much debate and constitutional concern from many opponents - would have made Election Day a national holiday and federalized a wide range of election law matters historically left to the states, including:

• requiring that all 50 states implement two-week early voting periods,
• creating a national standard for no-excuse voting by mail,
• and mandating a host of reforms related to state redistricting, donor disclosure, and money in politics.

While the prospects of such a comprehensive voting and election reform bill now appear dim, a narrower set of reforms targeting the Electoral Count Act and how Congress counts Electoral College votes from each state during presidential elections seems to be picking up some bipartisan steam. While Senate Minority Leader Mitch McConnell (R-KY) has indicated his willingness to explore options in this area, Senate Majority Leader Chuck Schumer (D-NY) has not yet signaled the willingness of his caucus to support such efforts in the absence of broader legislative change, and the White House is reportedly taking a wait and see approach. While we are just under three years away from the next convening and counting of Electoral College votes, readers should still expect the issue to pick up steam during this midterm election year as matters of voting rights and election procedure once again become front and center.

Federal Elections & Campaign Finance

Senate Democrats Suffer Defeat on Elections Bill After Vote to Change Rules Fails – Last month, Senate Democrats suffered a major defeat in their efforts to change filibuster rules in order to pass their expansive election and voting rights package. The attempt to change the filibuster rules failed amid opposition from Democrat Senators Manchin (D-WV) and Sinema (D-AZ) and the entire Republican Senate caucus. The legislative package then ultimately failed by a vote of 49-51, effectively ending a key part of President Biden’s platform on election and voting matters.

Senators Working Aggressively on Electoral Count Act Reform – A growing group of bipartisan Senators are working to update the 19th century Electoral Count Act given the challenges that occurred during the certification of President Biden’s 2020 victory. The collection of Senators faces both political and temporal hurdles to their efforts, and a deal will likely take a few months to be reached, if at all.

Biden Taps New FEC Commissioner – President Biden has nominated campaign finance lawyer Dara Lindenbaum to replace Federal Election Commission (FEC) vice-chair Steve Walther, who recently announced his intention to step down from the Commission after over 16 years of service. Lindenbaum’s potential replacement of Walther would not alter the Commission’s 3-3 partisan makeup, which is mandated by statute. If confirmed, however, Lindenbaum would bring to the FEC a substantial amount of experience working on election law matters for Democrat candidates and allied groups, including the Lawyers’ Committee for Civil Rights Under Law and Stacey Abrams’ 2018 Georgia gubernatorial campaign.

FEC Agrees to Acknowledge Super PACs on Statement of Organization – On January 13, the FEC approved a motion to allow independent expenditure-only committees (i.e., Super PACs) and committees with a separate non-contribution account (i.e., Hybrid Committees) to designate such status on the Statement of Organization Form required to be filed with the Commission by all new political committees. Previously, registering committees could only designate such status by filing a letter with the FEC as an attachment to the Statement of Organization.

Why More Inexperienced Candidates Are Running — And Winning – Recently, voters of both parties are showing a greater willingness to support first-time political candidates. Research on this particular phenomenon found a substantial increase in the number of inexperienced candidates beating out experienced candidates, especially in the past three election cycles. This growing trend is said to be attributed to changes driven by campaign fundraising, voter attitudes, political rhetoric and weak political parties. Inexperienced contenders also currently do not face the same barriers they once did in regard to attracting financial support from interest groups and donors.

Federal Lobbying & Ethics

Pelosi Signals Her Openness to Stock Trading Ban for Congress – Last month, Speaker Nancy Pelosi (D-CA) reversed her previous stance on stock trading limitations for Members of Congress – now suggesting that she is open to a ban on such financial transactions. Pelosi said she trusts lawmakers but would be willing to back a ban if it had the support of her caucus. In the Senate, a pair of Democrats and one Republican introduced competing bills that both have the objective of prohibiting members of Congress from trading stocks while in office. Under the Stop Trading on Congressional Knowledge Act of 2012, or STOCK Act, members of Congress are barred from using nonpublic information they receive as part of their job to turn a personal profit. They are also required to disclose any financial transactions within 45 days of their occurrence. A number of members, however, have failed to abide by the rules when it comes to reporting trades and the restrictions set forth in the law are considered by many to be ambiguous and difficult to enforce.

Fed Ethics Scandal Reignited Over New Disclosures by Top Official – Last month, Federal Reserve Vice Chair Richard Clarida admitted that he failed to fully disclose financial trades he made at the onset of the pandemic. The Fed Inspector General is investigating trading activity by top officials, and Senator Elizabeth Warren (D-MA) has called on the Securities and Exchange Commission to look into the matter. In late October, Fed Chair Jerome Powell announced a major overhaul of conflict of interest rules, saying Fed policymakers and senior staff will be prohibited from active trading and will be able to purchase only diversified investment vehicles like mutual funds. Under this new policy, central bank policymakers and top staff will have to give 45-days notice and obtain prior approval from internal ethics staff before purchasing or selling securities, and will also be required to hold all investments for a period of at least one year.

Foreign Agents Registration Act (FARA)

Reminder: The Clock is Ticking on Sending Comments to DOJ for FARA Update – Last month, in an Advanced Notice of Proposed Rulemaking (ANPRM), the DOJ threw out a series of questions on ways to clarify and modernize FARA’s regulations, and invited comments from the public. The ANPRM’s public comment period does not close until February 11, 2022, after which DOJ will publish a Notice of Proposed Rulemaking that contains its suggested amendments to the regulations. Only after yet another public comment period will DOJ be able to publish its final regulations.

Non-Federal Elections & Campaign Finance

Former Senator Perdue Challenges Georgia Campaign Finance Law Permitting Establishment of Leadership Committees for Select Candidates and Officeholders – Last year, a new state law passed by Georgia legislators and signed into law by Governor Brian Kemp authorized select elected officials and candidates in Georgia, including the governor and certain party nominees for statewide office, to create “leadership committees” that can raise and spend unlimited funds. Unable to set up such a leadership committee in support of his 2022 gubernatorial run, former Georgia Senator David Perdue and his campaign are challenging the constitutionality of the state law in a federal lawsuit filed last month. The relevant complaint alleges that the new state law creates “an uneven election playing field” and gives Governor Kemp an unfair financial advantage in the Republican gubernatorial primary this spring.

Alaska Supreme Court Upholds Elections Ballot Measure, State Will Use Ranked-Choice Voting – Following an Alaska Supreme Court decision issued last month, Alaska will now become the second jurisdiction across the country to implement ranked-choice voting at the state level, a system that asks voters to rank multiple candidates vying for the same elected office in order of preference. Alaska will use it in state and federal general elections but not in municipal races or the statewide primary. The decision comes 15 months after Alaska voters narrowly approved Ballot Measure 2, which authorized the new system.

New York State Senate Approves Bill Aimed at Banning Large Corporate Campaign Donations – The New York State Senate approved the Democracy Preservation Act last month, which is meant to ban major multinational corporations from making campaign donations and spending money on state political campaigns. The bill would apply to companies in which more than 1% of the corporation is owned by a single foreign national or more than 5 percent of the corporation is cumulatively owned by foreign nationals, and would block such companies from making political donations in state and local campaigns in New York.

Virginia State Senate Committee Blocks Bill Aimed at Limiting Campaign Contributions – Last month, the Virginia Senate Privileges and Elections Committee voted against a proposal to impose a $20,000 cap on the amount of contributions that a Virginia state candidate could receive from a single source in an election cycle. Current state law allows unlimited contributions to state candidates.  The vote came on the heels of another proposal to bar state public utilities from making contributions to state candidates, PACs, and campaign committees.

Washington Supreme Court Upholds $18M Campaign Finance Fine Against Grocery Industry Group – In a 5-4 ruling issued last month, a majority of the Washington State Supreme Court upheld a 2020 state appeals court decision that determined an $18 million fine assessed against the Grocery Manufacturers Association (GMA) was not excessive. The fine arose out of GMA’s actions in connection with an over $11 million advocacy campaign designed to defeat a 2013 ballot initiative that would have required labeling of genetically modified food products. The industry group, which allegedly failed to disclose the corporate funders of its advocacy efforts in accordance with state campaign finance laws, was hit with the fine following a lawsuit filed by the Washington State Attorney General’s office.

Ohio Redistricting Commission Proposes Updated Congressional Map in Light of State Supreme Court’s Invalidation of Initial Map Approved by State Legislature – A divided majority of the Ohio Supreme Court struck down the state legislature's initial proposed congressional district map last month, saying Republican legislators violated the Ohio Constitution by drawing districts that favored GOP candidates. The Ohio Redistricting Commission – a panel of statewide elected officials and state lawmakers – has since delivered an updated map to the Ohio Supreme Court for review, which will has a limited timeframe for assessment with the filing deadline for the state’s primary is March 4.

Florida Opens Investigation Into Dark-Money Group Key to ‘Ghost’ Candidate Scandal – The Florida Department of Agriculture and Consumer Affairs opened an investigation into a dark-money nonprofit last month in relation to a “ghost” candidate scandal that took place during the 2020 election. “Let’s Preserve the American Dream,” a 501(c)(4) social welfare organization, is being investigated for its ties to the scheme that promoted three independent candidates who did no campaigning themselves during the 2020 elections. While social welfare nonprofits do not have to reveal their donors to the government or public at large, electoral spending by such groups is subject to certain disclosure obligations under state law, and the organization allegedly may not have fully complied with those rules.

Non-Federal Lobbying & Ethics

Cook County, Illinois Overhauls County Ethics Ordinance – Late last year, the Cook County, Illinois Board of Commissioners passed a substitute ordinance amending the County Ethics Ordinance to include a number of substantive changes. Most notably, the registration and reporting for any lobbying of Cook County officials must now be completed on the Illinois Secretary of State’s registration platform. The change comes on the heels of a bill that Gov. Pritzker signed into law in October of last year that extended the reporting requirements of the state’s Lobbyist Registration Act to cover municipalities with populations of 500,000 and less.

Pay-to-Play

After Guilty Plea in Federal Case, Former LA Councilman Now Faces Ethics Charges – Former Councilman Mitchell Englander was accused by the Los Angeles City Ethics Commission of violating city ethics laws by accepting thousands of dollars in gifts and not adequately reporting them. The charges come more than a year after Englander pleaded guilty to lying to federal authorities investigating the corruption case and he was ultimately sentenced to prison.

Congressional Investigations

Former Pence Chief of Staff Testifies Before House Select Committee – Marc Short, the former Chief of Staff for Vice President Mike Pence, recently testified before the U.S. House of Representatives select committee investigating the January 6 attack on the Capitol in response to a committee-issued subpoena. The testimony of Short, who was with the former Vice President at the Capitol on January 6, indicates that some individuals within former President Donald Trump’s inner circle may be starting to cooperate with the committee’s ongoing investigation.

The Courts and Free Speech

Ted Cruz Finds Friendly High Court Audience in Campaign Finance Challenge – On January 19, the Supreme Court heard oral arguments in FEC v. Ted Cruz, an intriguing campaign finance and political speech case arising out of events surrounding Senator Ted Cruz’s 2018 election campaign. Due to the restrictions set forth in the “millionaires amendment” to the Federal Election Campaign Act instituted by the Bipartisan Campaign Reform Act (BCRA), Senator Cruz (R-TX) was free to loan unlimited amounts of his personal funds to his 2018 re-election campaign, but was prohibited from utilizing more than $250,000 in post-election committee funds to repay his personal loans to the campaign. Cruz sued the FEC to challenge these repayment caps as an unconstitutional restriction of his First Amendment rights, and a panel of three federal judges ruled in his favor last year. In this month’s oral arguments before the high court, the justices signaled support for Cruz’s case, but did not telegraph any great appetite for rethinking major elements of BCRA or associated campaign finance rules.

Federal Judge Strikes Down Montana's Clean Campaign Act – The U.S. District Court for the District of Montana struck down Montana’s Clean Campaign Act last month, declaring the law unconstitutional. The law required any candidate or political committee that distributes or broadcasts negative campaign materials within 10 days of an election to notify the targeted candidates in order to give them a chance to respond. In addition to First Amendment issues commonly associated with such campaign disclosure laws, the District Court also found that the law’s distinction of negative ads violated the plaintiff’s equal protection rights under the 14th Amendment.

Political Law Practice Pointers

This edition of Practice Pointers focuses on the return to session of many state legislatures around the country, and the associated lobbying registration and reporting obligations facing those who endeavor to influence legislative action in the states. Lobbying compliance regimes at the state level vary widely from jurisdiction to jurisdiction with regard to what types of activities qualify as lobbying, what registration thresholds and exemptions exist, and what public disclosure requirements fall on lobbyists and lobbyist employers. Some states only require that lobbyists themselves file periodic disclosure reports on behalf of their clients, but many jurisdictions mandate that both lobbyists and their clients or employers file disclosure reports. Furthermore, many states set monthly frequencies for their disclosure reports, while other jurisdictions set their deadlines to correspond with particular dates during and after their legislative sessions. The bottom line is that businesses and organizations that seek to influence legislative outcomes at the state level need to have a robust compliance system in place to ensure that their internal employees and outside contractors meet disparate deadlines and filing obligations.

The Dentons Political Law Team regularly advises a host of state lobbying firms, corporate clients and nonprofit organizations on navigating the compliance hurdles associated with registration and reporting on lobbying activities in all 50 states and the District of Columbia. If your organization or client has questions regarding such registration and reporting obligations or any other state lobbying compliance issues now that legislatures are back in session, please reach out to us for assistance.

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