What’s Next for the FEC?

Commissioner Ann Ravel’s decision to resign from the Federal Election Commission will have short term and long term effects on an agency empowered to interpret and enforce the federal campaign finance laws and disclose the money raised and spent in federal elections.  Its short term effects should be minimal.  The statute requires four votes for all significant agency actions, and with three Republican and two Democratic commissioners remaining, all decisions will still require a bi-partisan consensus.  The long term effects could be more significant.  Ironically, Commissioner Ravel is the only FEC Commissioner serving a current term.  All other commissioners’ terms expired years ago.  This presents the President with the opportunity to replace the entire FEC, though if history is a guide, the consequences of that may be less dramatic than it first appears.  We discuss both short and long term effects below.

Immediate Effect of The Departure of Commissioner Ravel

Commissioner Ravel has announced that she will send a letter of resignation to President Trump this week.  The FEC will soon have three Republican commissioners and two recommended by Democrats (technically Commissioner Steven Walther is registered as an Independent, though he was recommended by then Senate Majority Leader Harry Reid for a “Democratic” seat).  By statute all rulemaking, enforcement, and similar agency actions require the vote of at least four commissioners, assuring that there is bipartisan support for all agency actions.  While Commissioner Ravel was frequently willing to join Republicans to form a consensus early in her term, over time she has been reluctant to do so. Instead, she has become a vocal critic of the Republicans on the FEC, especially over a lack of support for enforcement.  Currently, Commissioners Walther and Matthew Petersen are more frequently the source of consensus on the Commission.  So the loss of Commissioner Ravel should not significantly impede those few areas where a bipartisan consensus is possible.

Long Term Effect of the Departure of Commissioner Ravel

The departure of Commissioner Ravel presents the President and the leaders of both political parties with some interesting choices.

First:  How many commissioners to appoint?  As noted above, all of the remaining Commissioners are holding over in expired terms.  Commissioner Lee Goodman’s term expired in 2015, Commissioner Caroline Hunter’s in 2013, Commissioner Petersen’s in 2011, Commissioner Walther’s in 2009 and Commissioner Ellen Weintraub’s in 2007.  By statute, none can be re-appointed.  While the President has the ability replace the entire FEC, the backlog of confirmations for other administration positions, and a desire for some continuity may lead the administration to make two or four nominations, instead of six.

Second: How will the President make his selections?  By statute, no more than three FEC commissioners can be of a single political party.  Historically, the President has turned to the opposing party’s congressional leadership for recommendations.  While at least twice in the past, Presidents have refused to honor the opposing party’s recommendation (Carter and Reagan), the confirmation process moves most smoothly if each party picks its own commissioners.  While some have speculated that the President might seek an ideological coup at the FEC by appointing a single non-Republican libertarian, this will spark a messy confirmation fight on issues that put the President at odds with his “drain the swamp” campaign theme.  Instead, we expect President Trump will follow tradition and turn to Congressional Democrats for recommendations.

Third: What kinds of people will be nominated?  On the Republican side, President Trump’s White House Counsel, Don McGahn, previously served as an FEC commissioner and knows the agency well.  McGahn also has a long and close working relationship with Senator McConnell, who cares more than any other Republican in Congress about campaign finance law.  Senator McConnell and Mr. McGahn share a deregulatory, First Amendment-focused approach to campaign finance law, so we should expect the nominee(s) on the Republican side to follow in that tradition.

The Democrats face a more complicated set of choices.  First, who decides?  In the past, there was a sense that the Democratic side of the FEC had a House seat, a Senate seat and a White House seat.  That tradition eroded over time and in recent years, most decisions were made in the Senate.  So what role does Minority Leader Pelosi play in the process?  Second, Democrats have consistently selected commissioners more concerned with enforcing the restrictions in the law, imposing penalties when wrongdoing is found, and closing loopholes.  But there is a split within the party between the Democrats’ reform wing and its more pragmatic side.  With the fervency of the anti-Trump movement within the party, and the sense among Democrats that the Republicans at the FEC have refused to enforce the law regardless of how clear the evidence was of a violation, does the party select a more combative, reform-minded voice?  While neither Commissioner Ravel nor Weintraub began their tenure at the FEC in that role, they have both migrated to it out of frustration with how difficult it has been to find Republican support for what they thought of as moderate positions.

Finally

Finally, and perhaps most importantly, will President Trump consider the overall make-up of the FEC in selecting new commissioners.  Over the last eight years, the FEC has been a turbulent place, with commissioners turning to talk radio, the blogosphere and comedy shows to take their disputes to the public.  Discord at the top has led to a poisonous atmosphere within the building, and the plummeting of employee satisfaction to the lowest depths of any federal agency.  At the same time, the courts have re-written the scope of what can be regulated, and chastised the agency for not regulating enough.  The amount of money raised and spent has grown, and there is a sense that there is no sheriff in town.

The President has an opportunity to work across the aisle to find commissioners who – even if they don’t agree on all questions of the law – can find an amicable way to provide clear guidance on what laws will be enforced and then do so.  Finding the right commissioner(s) to set that tone takes time and focus, and for too many administrations, the FEC has just not seemed worth it.  Events set in motion by the resignation of Commissioner Ravel will show us if it is different this time.

FEC Increases Contribution Limits to Party Committees, Leaves Candidate Limits the Same

The Federal Election Commission has announced contribution limits for the 2017-2018 election cycle.  The new limits are effective January 1, 2017.

The FEC did not change the limit on the amount an individual can contribution to a candidate, leaving the limit at $2700 per election.  Because the primary and general count as separate elections, individuals may give $5,400 per candidate per cycle.

The limit on contributions from individuals to national party committees has increased from $33,400 to $33,900.  This increase also affects the limit on contributions to additional specialized accounts of the party committees, which were first allowed through legislation passed at the beginning of the last election cycle.  Each of these accounts can receive contributions that are triple the amount that can be given to the main party account, or $101,700 per account per year.  These accounts can be used to pay for expenses related to presidential nominating conventions, headquarters buildings of the party, and election recounts, contests, and other legal proceedings.

The following chart shows more details on the limits for individuals in 2017 and 2018:

An individual may contribute to …
Federal Candidates $2,700 per election
National party committees — main account $33,900 per year
National party committees — convention account (RNC and DNC only) $101,700 per year
National party committees — party building account $101,700 per year
National party committees — legal fund account $101,700 per year
State or local party committees’ federal accounts $10,000 per year
Federal PACs $5,000 per year

Covington Publishes Comprehensive Advisory Comparing Trump and Obama Executive Orders on Ethics

President Donald Trump this weekend signed his promised “drain the swamp” Executive Order, which imposes ethics restrictions on incoming and outgoing Trump Administration appointees. Incoming appointees would, of course, do well to carefully review the provisions of the Executive Order. But companies that deal with the Administration—whether by lobbying the executive branch, by seeing a former executive take a Presidentially appointed position, or by hiring a former Administration appointee—must also be mindful of these, in some cases, extremely restrictive provisions, lest they unwittingly get caught up in an ethics scandal.

While some in the media are claiming that the order is a significant weakening of a similar Obama-era Executive Order, the new Trump order is, in several subtle but key respects, much more restrictive than the Obama order.  Today, Covington has published a comprehensive advisory discussing these restrictions in more detail and comparing them to those imposed by President Obama when he assumed office.

Trump Administration Executive Order on Ethics Breaks New Ground

President Trump signed an executive order on ethics this weekend that is similar in key respects to the Obama Administration’s executive order governing ethical conduct by presidential appointees. But in one key respect it is significantly broader in scope than the previous Obama executive order. The Trump executive order incorporates the concept of “lobbying activities,” a defined term that it imports from the federal Lobbying Disclosure Act.

Presidential appointees are required to agree that they will not engage in “lobbying activities” with respect to their agency for five years after the end of their term of office. Lobbying activities is a broad and amorphous term that covers not just actual lobbying contacts that may trigger lobbyist registration but also behind-the-scenes strategic advice and other work related to the lobbying contacts of others. In other words, whereas the restrictions in the Obama executive order applied to individuals who engaged in activities requiring lobbyist registration, the Trump executive order reaches even activity by non-registered lobbyists. This closes one of the major loopholes that President Obama had included in his administration’s executive order on ethics.

The Trump executive order also bars appointees from engaging in “lobbying activities” with respect to any covered executive branch official or non-career Senior Executive Service appointee for the remainder of the Administration.  This provision applies not just to the appointee’s former agency but to the entire executive branch. And again, because it applies to “lobbying activities,” as that term is defined in the LDA, it applies to behind-the-scenes strategic advice that supports someone else’s lobbying contacts.

Incorporating the term “lobbying activities” will have very significant consequences for Trump administration appointees, subjecting them to much broader post-employment restrictions than was so for Obama administration appointees. It would be difficult for Trump appointees who sign the pledge to pursue employment as strategic advisors, much less lobbyists, for a period of time after leaving the administration.

The change in language is quite subtle, probably understood only by Lobbying Disclosure Act aficionados at this point. But it is likely to draw considerable attention as appointees begin to focus on the consequences of signing the pledge.

New Executive Order on Ethics in Missouri Includes Lobbyist Gift Ban, Revolving-Door Provision; Legislature Considering Additional Restrictions

Earlier this month, newly-installed Missouri Gov. Eric Greitens issued Executive Order 2, applying strict ethics rules to executive branch employees in that state.  The order includes a ban on gifts from lobbyists, conflicts of interest rules, and a “revolving door” provision that prohibits employees who leave Greitens’ office from later lobbying his administration.  The state House of Representatives overwhelmingly passed a similar bill, HB 60, banning gifts from lobbyists to legislators and other elected officials.  That bill now awaits action in the State Senate.

The gift rule in the executive order prohibits any employee of the executive branch, except those reporting to separately-elected officials, from soliciting or accepting any gift from a lobbyist.  A gift includes anything of value, but there are some exceptions.  The gift ban does not prohibit:

  • unsolicited tokens or awards of appreciation; honorary degrees; and plaques and similar items, so long as they cannot be converted easily to cash;
  • samples, promotional items, and similar tokens routinely given in the usual course of business to customers and suppliers;
  • gifts from family members;
  • gifts from other state employees;
  • gifts from personal friends not motivated by the employee’s position; or
  • benefits arising from the business or employment of the employee’s spouse, if not enhanced because of the employee’s position.

However, other state laws may limit these gifts.

The order also prohibits employees working directly in the Office of the Governor (not for an agency) who leave government from later lobbying the Greitens administration.  Finally, state employees may not participate in matters where they may have a financial relationship with a participant that would raise questions about their partiality, or receive any benefit from a state contract that is inconsistent with “conscientious performance” of their official job.

The order comes as an important reminder that gift rules are not solely found in state bribery laws or ethics statutes.  More and more states are enacting executive orders on gifts similar to this one.  We have previously blogged on executive orders in Illinois and Virginia, to name just two examples.

Covington Updates Investigations Manual for House and Senate Chiefs of Staff

Covington today released an updated version of its manual for Chiefs of Staff to Members of Congress concerning best practices for responding to government investigations of Members and their staff.  Titled “A How-To Guide for Chiefs of Staff,” the manual describes how government investigations unfold and the steps that Chiefs of Staff need to take during the initial stages of any investigation.

New Executive Branch Ethics Rules on Gifts and Procedures for New Hires, Appointees, and the Presidential Transition

The start of 2017 brings two changes to the federal Office of Government Ethics (“OGE”) rules for executive branch officers and employees.

First, important changes to the executive branch gift rules went into effect this week.  We detailed those changes in this alert.

Second, OGE’s overhaul of the Executive Branch Ethics Program regulations (5 C.F.R. Part 2638) also took effect at the start of the year.  Most of these rules address the operation of ethics programs at federal agencies and their relationship with OGE.  There are several rules that should be of interest to prospective or incoming agency officials.  Some highlights:

  • Certain high-level appointees must participate in a briefing on their “immediate ethics obligations,” usually within fifteen days of their appointment, including the individual’s financial conflicts and recusal obligations, and a plan to comply with the requirements of their ethics agreement.
  • Agency written job offers must now include a notice of the ethics rules and laws that will apply should the offeree accept employment, instructions on how to get more information on ethics, and any applicable timeframes for receiving training or completing a financial disclosure.
  • Employees who become supervisors will receive written information about agency ethics, in addition to the normal training requirements.
  • A year before the Presidential election, each agency must assess whether it has sufficient ethics staff to support the presidential transition. The regulation also explains that OGE will offer training on counseling incoming and outgoing employees and officials, and assist the transition with preparing for nominations and any new ethics initiatives.

These requirements are especially relevant as Inauguration Day approaches and the incoming administration begins the hiring and appointment process.  Individuals considering entering the administration should also consider our guidance on financial disclosures, interacting with the transition, and the appointee vetting process.

Presidential Appointees Can Take Advantage of 2014 OGE Guidance on Hedge Funds

As the President-elect begins to nominate individuals for Senate-confirmed positions in his administration, one of the major hurdles these individuals face is the statutory requirement that the Director of the Office of Government Ethics (“OGE”) review and certify a public disclosure of each source of income exceeding $200 and each property interest exceeding $1,000 in value.  While for many classes of assets, identifying and disclosing the relevant assets is relatively straightforward, it is often much more difficult to file a compliant report for pooled investment fund assets, such as hedge funds, since the details of the underlying assets are often undisclosed to the investor by the fund manager or subject to a confidentiality agreement between the investor and the fund manager.  This alert explains the most recent OGE guidance applicable to hedge funds and other pooled investment fund holdings.

Prior to 2014, OGE maintained a strict “disclose or divest” policy, requiring a nominee to divest their undisclosed assets—regardless of whether or not the filer had access to information about the fund’s underlying holdings—unless the fund qualified as an “excepted investment fund.”  This strict policy, OGE recognized, “can conflict, for no substantive reason, with the goal of attracting and placing talented professionals in public service.”  Thus, in 2014, OGE issued revised guidance clarifying that the investor may not be required to “disclose or divest” if either (1) a fund is an “excepted investment fund” or (2) if the investor has no access to information on certain underlying assets, which allows OGE to certify that the investor may report only what is known about the fund.

The advisory linked above provides additional details on this disclosure requirement, the potential exemptions, and other relevant considerations for potential nominees.

New Year, New Gift Rules for the Federal Executive Branch

Corporations, trade associations, and others who interact with federal executive branch employees should be aware of the Office of Government Ethics’ (OGE) recent amendments to the executive branch gift rules, which go into effect on January 1, 2017. Seeking to encourage transparency and advance public confidence in the integrity of federal officials, OGE redefined some of the gifts executive branch employees can receive from outside sources and suggested when permissible gifts should be declined because they may create an appearance of impropriety. The new amendments include some of the most detailed changes to the executive branch gift rules in many years.  This alert outlines the most significant changes.

The 2017 Presidential Inauguration: Ethics and Compliance Issues

With Election Day 2016 in the books, the political world turns to the transition of power and the January 20, 2017 Inauguration of President-elect Donald Trump and Vice President-elect Mike Pence. With the swearing in of the new President and Vice President will come the traditional balls, parties, and receptions. The inauguration and related events are costly, and paid for largely with private funds. Individuals, businesses, and other organizations donating to the inauguration, hosting related events, or giving out tickets to either should remember that they are operating in a highly regulated space. In this alert, we profile three common compliance issues.

Persons interested in this alert may also wish to review our alerts on the Presidential Transition and the political appointee vetting process.

LexBlog