The Federal Election Commission (FEC) officially dipped its toes into the ongoing national debate around artificial intelligence (AI) regulation, publishing a Federal Register notice seeking comment on a petition submitted by Public Citizen to initiate a rulemaking to clarify that the Federal Election Campaign Act (FECA) prohibits deceptive AI-generated campaign advertisements.  The Commission unanimously approved publication of the petition at its August 10 meeting. 

The public is being asked to comment on whether the FEC should initiate a formal rulemaking to specify that using false AI-generated content, sometimes called “deepfakes,” in campaign ads would violate FECA’s prohibition on fraudulent misrepresentation of campaign authority (52 U.S.C. § 30124).  Currently, there are no AI-specific FEC regulations or guidance governing campaign ads or fundraising.

The decision to seek comment on the petition follows the FEC’s June deadlock on an earlier petition from Public Citizen. FEC Republicans, led by Commissioner Allen Dickerson, argued that the FEC has no authority to address AI-generated or “deepfake” campaign ads under FECA, and should not make rules without further guidance from Congress.  

However, the decision to seek public comment does not mean that the Commission will ultimately issue a proposed rulemaking, much less adopt new AI-specific rules.  The Commission remains divided on whether it has the statutory authority to address AI issues at all.  In voting to advance the petition in June, Democratic FEC Chair Dara Lindenbaum indicated she was “skeptical” that the FEC has existing authority to regulate AI, but supported publishing the petition in the hope of receiving helpful comments on the issue.  At the August 10 meeting, Commissioner Dickerson, despite voting to publish the petition, reiterated his view that this remains an issue for Congress and noted “serious First Amendment concerns lurking in the background of this effort.”

Partisan divisions in Congress also mean an expansion of the Commission’s authority to encompass AI-generated ads is unlikely to become law anytime soon.  In May, Rep. Yvette Clark (D-NY) introduced the REAL Political Advertisements Act legislation to give the FEC authority to regulate the use of AI in campaign ads.  Senators Amy Klobuchar (D-MN), Cory Booker (D-NJ), and Michael Bennet (D-CO) have also introduced a Senate companion bill.  No Republican Members of Congress have yet cosponsored either bill, nor did any congressional Republicans join 27 of their House and Senate colleagues on a July letter to the FEC urging it to move forward with the rulemaking petition.

The FEC will accept public comments on whether to initiate a rulemaking process until October 16, 2023.  

Last week, a bipartisan, bicameral group of legislators introduced the Retroactive Foreign Agents Registration Act (“RFARA”) in the U.S. Congress.  Led by Chairman Mike Gallagher (R-Wis.) and Ranking Member Raja Krishnamoorthi (D-Ill.) of the U.S. House Select Committee on the Chinese Communist Party, the bill would amend the Foreign Agents Registration Act (“FARA”) to clarify that foreign agents have an ongoing obligation to register under the statute even after ceasing to act on behalf of a foreign principal.  The bill was prompted by a recent decision in Attorney General of the United States v. Wynn, which interpreted the statute’s requirements.

Wynn Decision

In Wynn, the Department of Justice (“DOJ”) pursued a civil injunction to force Stephen Wynn to register retroactively for activities allegedly conducted on behalf of the People’s Republic of China (“PRC”).  In a ruling that surprised the FARA bar, a federal district court judge in Washington, D.C. dismissed the complaint, holding that because Mr. Wynn terminated his agency relationship with the PRC — if one even existed — prior to the lawsuit, as both parties has acknowledged, Mr. Wynn no longer had an obligation to register.  The court concluded that he therefore could not be enjoined to register under FARA, even retroactively. The court’s reasoning underlying its holding was complicated and based on a prior D.C. Circuit case, United States v. McGoff, and textual analysis of the statutory provision relating specifically to civil injunctive actions.  The government has appealed the district court decision, and the appeal is pending.

Congress’s Response

Although the Wynn decision only applies in the D.C. Circuit, Members of Congress have expressed concerns that the Wynn decision could have more far-reaching consequences.  For example, a recent press release lamented that “an unregistered agent could simply announce that he is ending the agent relationship, never register, and face no penalty.”

The new legislation is designed to overturn the conclusion in Wynn.  The bill provides that DOJ “may make application for an order requiring a person to comply with [FARA and its regulations] . . . while the person acts as an agent of a foreign principal or at any time thereafter.”  Additionally, the bill makes clear that it applies to any individual who “serves as the agent of a foreign principal . . . at any time before, on, or after the date of the enactment [of the Act.].”  Accordingly, agents that have previously relied on the Wynn decision as a basis for non-registration would have new registration obligations under this bill, if enacted.

Curiously, the language of the bill only applies to “any individual who serves as the agent of a foreign principal.”  This language would seemingly not extend to partnerships, associations, corporations, organizations, or any other combinations of individuals currently covered by the definition of a “person” under the statute.  It is unclear whether Congress intends that the bill will only cover individuals like Mr. Wynn or whether the reference to “any individual” was a drafting error that could be changed in future iterations of the bill.

What Comes Next?

Given the strong bicameral and bipartisan support to regulate foreign agents, there may be an appetite in the full House to consider the bill.   As we previously reported, there are a number of other bipartisan bills related to FARA reform pending in Congress, revealing Congress’s continued bipartisan attention to the statute.  Covington will continue to monitor developments in changes to FARA and its regulations.

California recently passed a series of new regulations affecting its “pay-to-play” laws that limit political contributions by state and local government contractors and others involved in proceedings on contracts, licenses, permits, and other “entitlements for use” in the state.  These regulations implement changes to the law that took effect this year, which include applying the law to contributions to local elected officials and extending the prohibited period through 12 months after the end of a proceeding covered by the law.  The regulations also clarify some previously vague issues in the law. 

A summary of the changed regulations is below.

  • Application of changes in the law to past activities: A new regulation clarifies that the expansion of the law to local elected officials does not have retroactive effect—proceedings and contributions involving directly-elected local agency officers prior to January 1, 2023 are not covered.    
  • Affected officers and agencies: An amended regulation implements the major change that took effect this year, making decisions of and contributions to local elected officials subject to the pay-to-play laws.  This regulation also revises who is an “officer” under the law, so that members of the governor’s cabinet are sometimes covered by the law; clarifies that any person serving in an elected position is covered, even if appointed to or otherwise not elected to that position (e.g., appointed to fill a vacancy), or not the head of the agency; and adds that any person with decision-making authority in a covered proceeding who is also a candidate is covered.
  • “Pending” and Proceedings: Under California’s pay-to-pay law, any party or party’s agent may not contribute more than $250 in the aggregate to a state or local government agency officer while a proceeding is pending and for twelve months after the decision is made.  The new regulation clarifies that this provision prohibits contributions to an officer during a proceeding only if the proceeding is pending before that specific officer.
  • Agents: The law applies to contributions by agents, as well as parties to a proceeding and “participants” who attempt to influence the proceeding.  The revised regulations clarify that an agent is someone who represents a party or participant in a pending proceeding for compensation through appearances or communications, rather than applying a broader definition of “agent.”
  • Aggregation of contributions: An amended regulation specifies that covered contributions include not only those by agents, participants, and parties, but also contributions of an individual who directs or controls an entity’s contributions, as well as contributions by any other entity that individual directs or controls, or by any entity directed and controlled by a majority of the persons that direct or control the party, participant, or agent.  This aligns the law with aggregation rules found elsewhere in California campaign finance law.
  • Solicitation, direction, and receipt of contributions: The law applies to contributions not only received by, but also solicited or directed by, an official or candidate.  The amended definition explains that covered contributions include those requested by the officer or their agent for any other recipient. 
  • Prohibitions and disqualification: A revised regulation provides guidelines for determining whether an officer knows or has reason to know of a participant’s financial interest.  It also creates a process that allows an officer to participate in a proceeding before returning a contribution.

The new regulations will be important for anyone who makes contributions in California and has matters before state and local officials.  Covington regularly advises on the state’s pay-to-play law and will continue to monitor developments around its regulations.

On Thursday, the Senate passed two bills — The Lobbying Disclosure Improvement Act (S. 264) and Disclosing Foreign Influence in Lobbying Act (S. 289) — that attempt to increase disclosure of Foreign Agents Registration Act (“FARA”) activity through amendments to the Lobbying Disclosure Act (“LDA”).  The Senate passed versions of these bills late last year, although the full House of Representatives did not consider the bills before the 117th Congress adjourned. Senators Chuck Grassley (R-Iowa) and Gary Peters (D-Mich.) re-introduced the bills earlier this year, and the Senate passed the bills Thursday by unanimous consent.

As Covington previously reported, the Lobbying Disclosure Improvement Act would require LDA registrants to identify on their LDA registration “whether the registrant is exempt under” FARA’s LDA exemption. This is an administrative change that would require certain LDA registrants to check a box on their filings. Congress appears to have intended to make it easier for the public to identify LDA registrants engaged in FARA registrable activities, which could also make it easier for the FARA Unit of the Department of Justice to flag and scrutinize the activities of such LDA registrants. The wording of the bill is somewhat ambiguous with respect to how this change affects current LDA registrants. Because most changes to the information on an LDA filer’s registration are made on the filer’s quarterly activity reports, it is relatively rare to file an amended LDA registration report. The bill does not address how current registrants should handle the new requirement if they are likely never to be in a position to file another registration report. The bill also does not address filers who initially file under the LDA because they have crossed LDA registration thresholds, but later engage in FARA registrable activities and take advantage of the LDA exemption based on their existing LDA registration. This change, if enacted, would present new challenges for the regulated community. The amendment assumes that it is always clear when a filer has a FARA registration obligation and is relying on the LDA exemption, but that is not always the case. This amendment would force LDA registrants to take a position on whether or not they believe they are engaged in FARA registrable activities.

The Disclosing Foreign Influence in Lobbying Act would amend the LDA registration requirements to require that LDA filers “identify any connection with a foreign government or political party that plans, supervises, directs, or controls any effort of that lobbyist, regardless of those entities’ financial contributions to the lobbying effort.” Currently, LDA registrants are required to identify certain foreign entities associated with the registrant or its lobbying activities. This change would expand that requirement to focus specifically on the involvement of foreign governments in a registrant’s lobbying activities. Responding in the affirmative to the new disclosure requirement could amount to an admission that the LDA exemption would not apply and that LDA registration would not be sufficient on its own, presumably steering registrants to file under FARA.

Both the “Lobbying Disclosure Improvement Act” and “Disclosing Foreign Influence in Lobbying Act” now await House action.  Despite the divided 118th Congress, the prompt re-introduction and passage of the bills in the Senate reveal the bipartisan appetite for FARA reform.  While there is general agreement that FARA requires legislative reforms to update the statute and to provide more clarity to the regulated community, these bills propose relatively modest administrative changes that may introduce more confusion than clarity.  The Department of Justice endorsed more comprehensive legislative reform last year, and it is expected to issue new proposed regulations this year. Covington will continue to monitor developments in changes to FARA and its regulations.

The Department of Justice’s FARA Unit released several new advisory opinions in recent weeks that interpret the Foreign Agents Registration Act (“FARA”) and its regulations.  While the newly published opinions addressed a number of topics, the FARA Unit’s broad reading of the FARA triggers and the jurisdictional scope of the statute are common themes.  One particularly noteworthy opinion could have implications for digital media platforms and technology companies that host and support online content for foreign entities, though the opinion provides little actionable guidance.

In this client alert, we highlight important parts of the new advisory opinions.

Late last week, the Committee on Oversight and Accountability published the House of Representative’s “Authorization and Oversight Plans.” The massive 241-page report is required by the House rules, and the Oversight Committee’s report collects the individual oversight plans that each standing committee of the House is required to create at the start of a new Congress. The report is the most comprehensive collection of the committees’ plans for investigations in the coming Congress.

In this client alert, we summarize key portions of the Oversight Plan with implications for the private sector and other individuals and entities that routinely interface with government.

At the start of a new Congress, the House and Senate, and their committees, adopt internal rules that govern their operations, including rules that affect congressional investigations. These rules are often revised from Congress to Congress. To assist our clients responding to congressional investigations, this alert summarizes the rules for the 118th Congress of the House, Senate, and key investigative committees related to congressional investigations, with a particular focus on the rules related to subpoena authority, depositions, and, where applicable, confidentiality.

Covington annually publishes a detailed survey of state campaign finance, lobbying, and gift rules.  Now, for the first time, Covington is releasing an updated survey that details federal campaign finance, lobbying, and gift rules, in addition to those of the 50 states and the District of Columbia. Corporations, trade associations, non-profits, other organizations, and individuals face significant penalties and reputational harm if they violate federal or state laws governing corporate and personal political activities, the registration of lobbyists, lobbying reporting, or the giving of gifts or items of value to government officials or employees. To help organizations and individuals comply with these rules, this detailed survey—now 327 pages—summarizes the campaign finance, lobbying, and gift rules adopted by the federal government, all 50 states, and the District of Columbia.

Newly added federal sections cover the Lobbying Disclosure Act, the Foreign Agents Registration Act, Congressional gift rules, executive branch gift rules, and the Federal Election Campaign Act. Information is provided in a table question and answer format intended to address common questions with practical guidance. 

The lobbying section addresses questions such as who is required to register and file reports, which activities trigger registration, and common exceptions; whether federal or state law covers procurement lobbying, grassroots, and/or goodwill lobbying; whether state law regulates local lobbying; and the timing for registration. It also covers common post-registration questions such as reporting deadlines and training requirements.

The gift section addresses whether federal or state law imposes a general restriction on gifts to government employees regardless of source and whether special restrictions apply to gifts from lobbyists or lobbyist principals. Common exceptions, including for meals and travel, and dollar thresholds, are addressed.

The campaign finance section addresses corporate contribution prohibitions and restrictions, corporate contributor registration and reporting requirements, and federal PAC registration and reporting requirements, among other topics.

Covington is pleased to be able to offer the survey for purchase in its entirety. Alternatively, groups of states may be made available at discounted rates. For questions or to purchase the survey, please contact 50statesurvey@cov.com.

The contentious 2020 election cycle, debate over hot-button issues, including the Supreme Court’s 2022 decision in Dobbs v. Jackson Women’s Health Organization, and increased investor focus on ESG matters (as well as criticism of such focus) have led to an increased focus on shareholder proposals requesting disclosure of corporate political expenditures.  This Covington Alert discusses how public companies can effectively respond to these proposals.

What happens in Arkansas does not stay in Arkansas.  Or at least not when federal prosecutors from the Department of Justice’s Public Integrity Section get involved.

A recent sentencing from Arkansas highlights the many options in DOJ’s toolkit to pursue “state-level” misconduct involving public officials.  In the case of former state senator Jeremy Hutchinson, DOJ obtained a “global” guilty plea for misconduct charged in three separate district courts.  The court sentenced Hutchinson to 46 months incarceration. 

According to the Government’s sentencing memorandum, Hutchinson accepted over $157,500 from the owner of an orthodontic clinic in exchange for advancing favorable legislation to deregulate the state dental industry.  The bribes masqueraded as payment for legal retainers, according to the Plea Agreement.  In addition, Hutchinson:

commingled campaign contributions and donations with his own personal funds and misappropriated and converted campaign funds for his own personal use, including, but not limited to, using campaign funds for a vacation, hotel stay, travel expenses, groceries, a gym membership, and jewelry.

Then, having misappropriated nearly $67,000 of state campaign funds, Hutchinson “materially underreported his gross receipts on his tax returns” for several years.  For these offenses, Hutchinson pleaded guilty to conspiracy to commit bribery and willfully filing a false tax return. 

As these charges illustrate, even where a defendant’s wrongdoing occurs at the state-level, implicates state officials, or involves state campaign finance issues, federal prosecutors nevertheless possess several statutory options to aggressively pursue misconduct.  Although not a new trend, federal enforcement actions involving state or local wrongdoing present significant risks for entities and individuals involved in state-level campaign giving, lobbying, and other political activity.

Hutchinson’s conduct extended beyond the facts described above.  In another, separate case pending sentencing in the Western District of Missouri, Hutchinson pleaded guilty to participating in what DOJ has described as “a multimillion-dollar public corruption scheme that involved embezzlement, bribes, and illegal campaign contributions for elected public officials.”  As in the other case, this scheme apparently also involved bribes that Hutchinson and others disguised (unsuccessfully) as lawfully provided legal services.  Furthermore, the defendants used a state-registered nonprofit organization to engage in “lobbying and political advocacy, political campaign contributions, and offering and giving money and other things of value to public officials for unauthorized, unjustifiable, and wrongful purposes” in violation of state law.  DOJ has obtained guilty pleas from several defendants and a Non-Prosecution Agreement from a state nonprofit that agreed to pay $8 million in forfeiture and restitution to the federal government.

Both prosecutions exemplify how DOJ can and often will enter the scene even when state criminal charges are available to address corrupt conduct, where certain factors are present, such as unethical behavior involving public officials.  Although in Hutchinson’s case the government described his behavior as “egregious,” the unwitting and the unwary can easily be swept up in an investigation or prosecution.  For this reason, companies, organizations, and people engaging in politics at the state level should proceed with an understanding of applicable laws and regulations, and obtain legal advice for any questions that arise.