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General Assembly - to Be or Not to Be - a Registered Lobbyist

The "drama" over alleged ethics violations involving lobbyists, high-paid CEOs and politicians has spawned new ethics laws and regulations, sometimes creating unintended confusion over what constitutes regulated lobbying activity. Among the ethics reforms enacted by the Maryland General Assembly and the state Ethics Commission over the last several years are new restrictions on lobbyists and new "triggers" that require persons (including for profit and nonprofit entities) to register as lobbyists. Despite recent attempts to clarify the law, many persons who in the past never considered themselves lobbyists are left in a quandary: to be a registered lobbyist and subject oneself to arduous reporting requirements and restrictions on political activity, or not to be a registered lobbyist and risk violating the law and exposing oneself to civil penalties that can go as high as $5,000 for each violation. (Md. Code Ann., State Government Article, §15-405(d).) This ethical dilemma is amplified by the fact that a knowing violation of the law can lead to a misdemeanor conviction subject to a fine not to exceed $1,000 and imprisonment not exceeding a year. (§15-903(a).) Lawyers have to be especially careful because they often advocate on behalf of clients or causes before the General Assembly and the executive offices of the state. This article examines those activities that may trigger lobbyist registration. The most recent wave of lobbying restrictions first unfolded when the General Assembly enacted HB 2 during the 2001 session. The legislation was based on recommendations of the Study Commission on Lobbyist Ethics, created in 1999 in response to a series of high profile ethics scandals that led to the expulsion of a state senator and the resignation of a delegate. The law introduced new restrictions on communications with the executive branch, created new registration triggers on remote communications with elected officials, and imposed many new reporting requirements on lobbyists. Amid growing concerns that the new ethics laws were denying citizens their First Amendment right to communicate with elected officials, the General Assembly passed HB 1076 during the 2002 session, attempting to circumscribe lobbyist registration triggers without creating loopholes for professional lobbying efforts. The preamble to HB 1076 contains a clarification that: "the State's extensive registration and disclosure laws for paid lobbyists do not apply to private citizens representing their own interest." (2002 Laws of Maryland Ch. 405 at 3099.) Nevertheless, serious disputes as to the reach of the ethics law continue,1 and the state Ethics Commission has since issued its own regulations, further clarifying lobbyist activities. Registered lobbyists As a threshold matter, it is necessary to understand the restrictions and burdens on lobbyists. The dilemma over whether to register as a lobbyist is particularly vexing for professionals such as lawyers, accountants, and persons who are officers or board members of for-profit and non-profit organizations or local and regional chambers of commerce. These individuals communicate with state legislative and executive branch officials and employees about existing and proposed laws, regulations and policies that affect their business, membership or clients. Individuals and organizations that register, however, often must relinquish political activities, financial investments, and positions on boards and commissions. Requirements Following the passage of HB 2, a regulated lobbyist is required to attend training once during every two-year period.(§15-205(e)(1).) A lobbyist must register separately for each entity that has engaged him or her, on separate forms, and obtain written authorizations from each entity that must be filed with the state Ethics Commission. (SG §§15-702, 15-703(a)(2).) The regulations also require the lobbyist to identify any others he or she will represent on matters covered by the registration, and, if known, the specific bill number, regulation number, state contract or other identification of the matter or matters that are the subject of the registration. (COMAR 19A.07.01.04 (B)(5) and (6).) Once registered, the lobbyist must file, under oath, a report for each registration at the end of each lobbyist reporting period. (SG §15-704.) Each report must contain the total expenditures in connection with lobbying, including compensation, office expenses, professional and technical assistance, publications, witness fees and expenses, lodging, and a breakdown of costs for lodging, entertainment, tickets, meals and beverage expended on members of the General Assembly and executive branch. (§§15-704 to 15-708.) The detail required has become increasingly arduous. For example, the reports must include the date, location, and total expense for each meal, reception, event or meeting. (§15-704 (b)(c).) A lobbyist who invites all members of a legislative unit to a meal or reception must report the invitation, including the time and location, to the Department of Legislative Services at least five days before the event so that it can be published in advance. (§15-708.) Two weeks after the meal or reception the lobbyist must file a report with the commission disclosing the total costs incurred. (§15-708.) A lobbyist must report "the name of each official, employee, or member of the immediate family of an official or employee who has benefited from one or more gifts with a cumulative value of $75 during the reporting period from the regulated lobbyist, regardless of whether the gift is attributable to more than one entity or was given in connection with lobbying activity." (§15-704(c).) A similar provision requires a registered lobbyist to file a separate report disclosing the name of any executive branch official or member of their immediate family, who has benefited during the reporting period from gifts, meals or beverages from the lobbyist, whether or not in connection with lobbying activities. (§15- 705.) Persons and business entities not required to register as lobbyists are often surprised to learn they must file campaign finance statements with the state Board of Elections if they hire and spend at least $500 on one or more regulated lobbyists and contribute more that $500 to a General Assembly or statewide candidate during the applicable reporting period. (§15-715.) Restrictions In addition to daunting reporting requirements, a registered lobbyist is prohibited from engaging in certain practices, including: requesting a state official or employee to recommend to a potential client the lobbying services of a lobbyist; engaging in any charitable fundraising activity at the request of a state official or employee; knowingly concealing the identity of a lobbying client from a state official or employee; serving as an officer or participating in fundraising or in actions relating to filling a public office vacancy while serving on a state or local central committee; organizing or establishing a political committee for the purpose of soliciting or transmitting contributions; and, forwarding fundraiser tickets or solicitations to benefit a member of the General Assembly, the incumbent in one of the four statewide offices, or candidates for any of those positions. (§§15-713 and 15-714(d)(1).) A registered lobbyist may serve on state boards and commissions if he or she follows specific disclosure requirements and conflicts of interest prohibitions. (COMAR 19A.07.01.05-.06.) The regulations require a lobbyist to file a report with the commission within five calendar days of appointment to a board or commission. The report, filed under penalty of perjury, details all clients the lobbyist is representing before a governmental unit and all contractual relationships that those clients have with the state. The report discloses current stock or other financial interest held by the lobbyist, whether held separately or together with spouse and children, in corporations or businesses subject to regulation by or doing business with the board or commission on which the lobbyist wishes to serve. Registration triggers Seven categories of activities will trigger lobbyist registration under Maryland law. The most noteworthy modifications to these registration triggers over the last two years are compensation thresholds and provisions that regulate remote communications and communications with the executive branch. Recent amendments emphasize the distinction between face-to-face communications and those that are not "in the presence" of the state officials and employees. Traditionally, lobbying was perceived as an activity that involved face-to-face communication. As the study commission noted, however, "[b]y consciously remaining outside the physical presence of an official, a person engaged in this type of lobbying activity can totally avoid registration and the reporting of compensation and expenditures under the existing law." (Report of Study Commission on Lobbying Ethics, p. 15-16 (2000).) The General Assembly carefully distinguished between remote and face-to-face communications in the registration triggers. Previously, people could make unlimited telephone calls, send faxes and write letters without worrying about a $5,000 compensation threshold. Today, a highly compensated CEO may have to register for making just a few telephone calls to influence legislative or executive action. The law is cumulative, so all time spent communicating with state officials (in their presence or not) is added together toward the compensation threshold if made during one reporting period. (COMAR 19A.07.01.02.) Consider an attorney who represents 20 different clients, each concerned about the effects of proposed tax regulations. If the attorney charges five clients $500 or more each for work in connection with any in-person communication with a legislative or executive branch employee or official concerning the proposed regulations, then the attorney must register as a lobbyist. The registration and reporting requirements encompass any communications with state officials about legislation or regulations made in anticipation of their introduction. The most sweeping reform is the regulation of communications with executive branch officials and employees. Formerly, communications with the governor, cabinet secretaries, state highway officials or any executive branch employee about regulations or executive orders were not regulated by the state as lobbying activities, so long as no gifts were involved. Communications with executive officials were, and still are, regulated in situations where an entity spends $100 or more on any gifts, including meals, on one or more official or employee of the executive branch for the purpose of influencing "executive action." (§15-701(a)(2).) "Executive action" is defined as any act taken by an official or employee of the executive branch for which the executive branch is responsible. (§15-102.) Therefore, if a person spends $100 on one or more lunches with one or a series of employees of the executive branch and tries to influence "executive action," lobbyist registration is triggered. The state does not seek to regulate communications that attempt to influence application of existing regulations or generalized discussions concerning the regulations. The law applies only to communications with the clear purpose of amending existing or establishing new regulations. Therefore, a CEO who meets with officials at the Maryland Department of the Environment in order to persuade them that existing regulations do not apply to the company's building project does not have to register as a lobbyist. The CEO would have to register as a lobbyist, however, if he or she earned $2,500 or incurred expenses of $500 or more to meet with state officials about modifying the regulations. The CEO or the company would have to register if the company spent at least $2,000 during the reporting period to, for example, enroll its dealers to go to Annapolis and lobby state officials. The registration requirement for someone compensated by a "business entity" to influence executive action to make a business grant or loan over $100,000 is similar to the registration requirement for lobbying for a procurement valued at over $100,000, in that neither includes a compensation threshold or an "in the presence" requirement. Thus, one telephone call made by someone who is compensated at all, other than an employee of the business seeking the grant or loan, can trigger registration. At the heart of the lobbyist registration debate is how compensation is defined. Under SG §15-102(f), compensation is "money or any other valuable thing, regardless of form, received or to be received by a person from an employer for services rendered." Compensation thresholds for lobbyist registration apply to situations where, for example, an attorney or consultant is hired by an employer or client specifically to influence legislation or executive action. The more controversial issue has become whether a salaried employee is considered "compensated" by the employer for that person's activities in a professional or nonprofit organization. The state Ethics Commission has opined that, where a member of a trade association lobbies directly on behalf of the trade association, that person's activities are part of the regular duties for which his employer is compensating him. Therefore the amount of time spent on these activities would count toward the lobbyist compensation registration triggers. (See Ethics Commission Opinion No. 81-12, cited as COMAR 19A.18.12.) In 2002, concerned about the reach of the registration triggers imposed under HB 2, the Maryland State Bar Association advised its members not to communicate with state officials without first notifying MSBA's lobbyist to coordinate those efforts. (See MSBA President's Bulletin, January 2002.) Some lawyers became concerned their volunteer efforts in Annapolis would run afoul of the new ethics laws. The General Assembly tried to address this issue directly by including in the Preamble to HB 1076 the following clarification: "WHEREAS, Because the misinterpretation of existing statutes has discouraged attorneys from volunteering their time to perform limited, yet important, services to reform the law through legislative and executive branch action, it is necessary to clarify that these activities taken on behalf of the organized bar do not fall within the purview of the State Ethics Commission. … (2002 Md. Laws Ch 405 at 3100.) While the preamble language may afford protection to attorneys volunteering for organized bar associations, it remains unclear what associations the legislature intended to include in the term "organized bar." Exempt activities A number of activities remain exempt from regulation under the ethics laws, including the actions of the news media in the ordinary course of business and the presentations of religious organizations to the extent their actions are intended to protect the religious practice. (§15-701(b)(1).) Also exempt are appearances before the General Assembly by elected officials or employees of the state, a political subdivision of the state, the United States, or an association engaged exclusively in representing counties or municipal corporations (i.e., MACo and MML). Anyone can make an appearance before the General Assembly, a committee or subcommittee or an executive unit if the appearance is at the specific request of the body involved or at the request of a lobbyist. (§15-701(b)(2).) Elementary, secondary, or postsecondary school students and student organizations are exempt to the extent they communicate as part of a course or student activity. (§15-701(b)(3).) Professional services in drafting bills or rendering opinions to clients on the construction or effect of proposed or pending legislation are also exempt activities. What's next Lawmakers in Maryland have superimposed layers of rules and regulations on lobbying activity, usually in response to the latest ethics scandal. Unfortunately, the complexity of these laws may result in unknowing violations. While the populist movement to purge the state of special interests and back-room deals is virtuous in its intent, care must be taken not to wipe out grass-roots lobbying efforts only to have them replaced by big money interests and a smaller, more elusive social elite.2 For example, lobbyists hired by gambling interests spent millions of dollars during the first half of 2003 on their effort to persuade the General Assembly to pass legislation permitting slot machines in Maryland. The General Assembly and the Ethics Commission, as it interprets and enforces the law, have the difficult burden of balancing these First Amendment concerns against the need to maintain public confidence and trust by ensuring that the conduct of the state's business is not subject to improper influence.3 Endnotes 1 See Daniel M. Clements, "Public Ethics Laws Misinterpreted, Once Again," The Daily Record, May 15, 2002. 2 David S. Broder, "Pox Populi: Why the New Reform Really Serves the Elites," Washington Post, April 25, 1993. 3 See Section 15-101, State Government Article. -------------------------------------------------------------------------------- Andrea Leahy-Fucheck is of counsel to Whiteford, Taylor & Preston in Baltimore. John R. Stierhoff is a registered lobbyist and a member of Funk & Bolton in Baltimore. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Registration Triggers There are seven categories of activities that will trigger lobbyist registration requirements under Maryland law. Unless specifically exempted, an "entity," meaning a person, fiduciary, association or corporation, shall be deemed a lobbyist by the State and required to register with the Commission if, during the reporting period the entity: 1) Communicates in the presence of officials or employees of the Legislative Branch or the Executive Branch to influence any legislative action or "the development or adoption of regulations or the development or issuance of an executive order," and incurs expenses (exclusive of personal travel or "subsistence expenses") of at least $500 or earns at least $2,500. § 15-701(a)(1)(i) (emphasis supplied). 2) Communicates not in the presence of officials or employees of the Legislative Branch or the Executive Branch to influence any legislative action or "the development or adoption of regulations or the development or issuance of an executive order," and earns $5,000 or more as compensation for trying to influence action. 15-701(a)(1)(ii) (emphasis supplied). 3) Spends a cumulative value of at least $100 for gifts, including meals, beverages, and special events, on one or more officials or employees of the Executive Branch in connection with or for the purpose of influencing any executive action. §15-701(a)(2) (emphasis supplied). 4) Is compensated to influence executive action on a procurement contract that exceeds $100,000. § 15-701(a)(3). (This registration requirement does not apply to a bona fide salesperson or commercial selling agency employed for the purpose of soliciting or securing a procurement contract. § 15-701(b)(4)). 5) Is compensated by a business entity to influence executive action to secure from the State a business grant or loan with a value of more than $100,000. §15-701(a)(4). (This registration trigger does not apply to an official or employee of the business entity seeking the grant or loan, or to a person who is currently out of state and who seeks to secure a business grant or loan for the purpose of relocating or expanding their business into the State of Maryland. § 15-701(b)(5)). 6) Spends at least $2,000, including expenditures for salaries, contractual employees, postage, telecommunications services, electronic services, advertising, printing, and delivery services for the express purpose of soliciting others to communicate with an official to influence legislative action or executive action. § 15-701(a)(5). 7) Spends at least $2,500 to provide compensation to one or more entities required to register. § 15-701(a)(6). (The employer is exempt from this provision, however, if the lobbyist reports all of the employer's regulated expenditures and activities. §15-701(c).)