In the digital age, it has become common to accuse opponents of propping up their online presence through paying influencers, buying followers or likes, or of being supported by bots.  A California law new this year is looking to shed light on at least some of that activity.

The California Fair Political Practices Commission recently approved rules that tighten the reporting requirements of committees that pay to “amplify” online advertising.  The change may be notable for any committee that makes or may make expenditures to digital strategy consultants for social media “likes,” shares, followers, or similar activity.  The rules require committees with reportable expenditures for amplification measures to specifically describe the payments in their reporting statements.

The new regulation defines amplification as “efforts to create or increase the appearance of support or opposition for a candidate, committee, or measure online through the purchase of followers, friends, shares, follows, reposts, comments, likes, dislikes, or similar electronic registrations of approval or disapproval” that are visible to users of a digital platform or Internet site.  Under the new rules, committees must provide information about the type of amplification it bought, as well as a “detailed description” of the number of shares, follows, reposts, comments, likes, and dislikes purchased.

Currently, California law requires a candidate or committee that makes an expenditure to pay for amplification services to report the expenditure, including a “brief description of the consideration for which each expenditure was made.”  However, the disclosure must not specifically indicate that the committee paid to amplify a communication, a gap the new regulation aims to fill.

The House Judiciary Committee Subcommittee on the Constitution, Civil Rights, and Civil Liberties held a hearing on Tuesday on potential reform of the Foreign Agents Registration Act (“FARA”), the first FARA hearing by the House Judiciary Committee in over 30 years.

FARA is an arcane statute that requires “agents of foreign principals” engaged in certain enumerated activities to register with the Department of Justice (“DOJ”) and file both detailed disclosure reports and copies of any “informational materials” that are distributed within the United States. As the witnesses and members of the Subcommittee pointed out, the 1938 statute contains sweeping provisions that are famously vague and that have not been modernized to meet the realities of the 21st Century.

While the witnesses broadly acknowledged the problematic ambiguity and lack of clarity of the statute, they varied in their views about how to reform FARA and provide more certainty to the regulated community. A representative of the Project on Government Oversight, Dylan Hedtler-Gaudette, sharply criticized the Department of Justice’s lax enforcement, testifying that it “has not and continues to not sufficiently prioritize the enforcement and administration of this law.” On the other hand, law professor Jonathan Turley criticized the Department of Justice’s aggressive use of overbroad provisions of the statute in its enforcement. Professor Turley highlighted free speech concerns and the Department’s broad interpretation of the statute as applied to nonprofits in a recent advisory opinion, calling the opinion an “alarm for Congress.”

This divide between more aggressive enforcement of FARA and narrowing the statute was a common theme throughout the hearing, by both the witnesses and the members of the Subcommittee. There also seemed to be few substantive openings for bipartisan consensus.  The minority members of the Subcommittee principally focused on FARA as a potential mechanism to pursue investigations of Hunter Biden. As a result, the prospect of bipartisan legislative reform appears dim.

Surprisingly, the hearing addressed very few substantive proposals that FARA practitioners and the Department of Justice have focused on recently in the context of DOJ’s Advance Notice of Proposed Rulemaking (“ANPRM”) to modernize FARA. These potential administrative changes might address some of the concerns expressed by the witnesses and members of the Subcommittee. For example, nearly all of the witnesses called for more clarity and “clear lines” with respect to the exemptions to FARA, but they offered few practical solutions for how common exemptions like the commercial exemption or the legal exemption should be changed.  Accordingly, while there may not be much hope for broad consensus for legislative reforms, the Department of Justice may still provide more clarity through regulation.

Corporations, trade associations, non-profits, other organizations, and individuals face significant penalties and reputational harm if they violate 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, Covington has published a detailed survey—over 300 pages—that summarizes the campaign finance, lobbying, and gift rules adopted by all 50 states and the District of Columbia.

In the survey, the entries for each state are divided into three sections, one section addressing lobbying rules, another section addressing the rules governing the giving of gifts and items of value to government officials and employees, and a third addressing campaign finance laws. 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 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 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 state law governing 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, individual states or groups of states may be made available at discounted rates. For questions or to purchase the survey, please contact 50statesurvey@cov.com.

Companies doing business with state and local governments or operating in regulated industries are subject to a dizzying array of “pay-to-play” rules. These rules effectively prohibit company executives and employees (and in some cases, their family members) from making certain personal political contributions. Even inadvertent violations can be dangerous: a single political contribution can, for example, jeopardize the company’s largest public contract.

To ensure compliance with these rules, some companies have adopted pay-to-play policies that require employees to obtain pre-approval from the legal or compliance department before making certain political contributions. But it is not always easy to determine whether a particular contribution should be pre-approved. Analyzing how the rules apply to a contribution and identifying the universe of applicable pay-to-play rules is a daunting challenge.

To help in-house lawyers and compliance professionals with making these decisions, Covington annually updates a detailed survey of the pay-to-play laws of the 50 states and multiple cities and counties. This over 400-page survey:

  • Details all statewide pay-to-play rules.
  • Describes over one hundred “specialty” pay-to-play rules that apply to contractors doing business with certain agencies or companies operating in certain regulated industries, including those that apply to investment firms that manage state or local public funds, lottery and gaming companies, public utilities, redevelopment contractors, and insurance companies.
  • Includes pay-to-play laws, where applicable, for all capital cities, all cities with a population of over 100,000 (200,000 for California and New Jersey) and many counties.

The survey also includes user-friendly charts and legal citations answering questions such as:

  • Which donors are affected?
  • Which contributions are restricted?
  • Is there a de minimis exception? What are the other exceptions?
  • Which types of contracts are covered?
  • How long after a contribution does the restriction run?
  • Does the rule restrict political fundraising and other solicitations?
  • Are there reporting and disclosure requirements?
  • What are the penalties?

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

Yesterday, the House Select Committee to Investigate the January 6th Attack on the United States Capitol filed a highly consequential brief in ongoing litigation relating to a subpoena seeking documents involving attorney John Eastman’s alleged participation in efforts to thwart Congress’s certification of the results of the 2020 Presidential election.  Not surprisingly, the Select Committee’s assertion that it has reason to believe that former President Trump and others “engaged in a criminal conspiracy” has drawn the bulk of the media’s attention.  Comparatively little analysis, however, has explored the underlying legal reason that the Select Committee made this newsworthy pronouncement.  The answer provides important clues regarding the applicability of the attorney-client privilege in congressional investigations.

As we have explored elsewhere, Congress has long argued that the attorney-client privilege, the work product doctrine, and other common law privileges do not apply in congressional investigations, while many—including the Supreme Court—have noted that the protections often apply in practice.  Although privilege disputes have arisen in connection with congressional oversight, to date, leaders in both parties have generally avoided directly litigating the issue in federal court.  The Select Committee’s brief in the Eastman litigation appears to be the most recent and high-profile example of Congress’s effort to avoid obtaining a judicial ruling on its position that it is not bound to respect attorney-client privilege or other protections.

Rather than declaring outright that privilege does not apply in the context of congressional oversight, the argument advanced by the General Counsel for the House of Representatives (on behalf of the Select Committee) proceeds largely on the premise that Congress is bound by the privilege.  Indeed, the vast majority of the 58-page brief is dedicated to reasoning that the attorney-client privilege does not guard against disclosure in this case because, among other reasons, the privilege does not apply to legal advice relied upon to engage in illegal conduct.  This invocation of the so-called “crime fraud exception” explains the headline-grabbing summary of then-President Trump’s alleged criminal conduct.

By arguing with little fanfare that the privilege was waived or did not apply due to a narrowly defined and well-established exception to the general rule that confidential attorney-client communications are privileged, the Select Committee’s brief seems to proceed on the implicit  assumption that the privilege generally would apply to its oversight work.  Nonetheless, in a short, easy-to-miss footnote, the Select Committee sought to preserve Congress’s historical position:

Congress has consistently taken the view that its investigative committees are not bound by judicial common law privileges such as the attorney-client privilege or the work product doctrine. . . . Here, Congressional Defendants have determined, consistent with their prerogatives, not to submit an argument on this point.  This is not, however, intended to indicate, in any way, that Congress or its investigative committees will decline to assert this institutional authority in other proceedings.

The Select Committee’s explicit decision “not to submit an argument” on Congress’s longstanding position seems clearly driven by a preference to avoid direct judicial consideration of the issue, even though it would be dispositive in this case were the court to rule on this basis.

If this initial briefing is any indication, the Eastman case could hold important implications not only for former President Trump and others involved in the events of January 6 but for any party involved in an investigation before Congress.  For those who are or may be the subject of congressional oversight requests, the parties’ further briefing on this issue—as well as any future decisional law arising from the case—merit close attention.

The Department of Justice’s FARA Unit released several new advisory opinions today interpreting the Foreign Agents Registration Act (“FARA”) and its regulations.  While the newly published opinions addressed a number of topics, the FARA Unit’s scrutiny of the activity of nonprofits was a prominent and recurring theme.

Many nonprofits, think tanks, universities, religious organizations, educational institutions, and charitable organizations, rely on the so-called academic exemption to FARA.  This exemption applies to those who engage “only” in activities in furtherance of bona fide religious, scholastic, academic, or scientific pursuits or of the fine arts.  However, regulations to the statute provide that this exemption does not apply where the agent of a foreign principal engages in political activities “for or in the interests of” the foreign principal.

The new advisory opinions shed important light on the scope and limitations of the exemption. In one opinion, the FARA Unit interpreted the exemption narrowly, concluding that the Vice President of a private foreign university was required to register under FARA for “conduct[ing] outreach and advocacy” to U.S. government officials “to promote [the foreign university’s] mission, goals, and financial priorities.”  The FARA Unit reasoned that the outreach involved advocacy to obtain grants from the U.S. government and was, therefore, not only in furtherance of the scholastic and academic pursuits of the University.

In another opinion, the FARA Unit concluded that a not-for-profit charitable organization established by a foreign government to increase “friendship and goodwill” between a foreign country and “the rest of the world” through exchange programs was required to register.  The FARA Unit reasoned that the activities would influence the U.S. public to view the foreign government “in a positive light” and “ultimately foster beneficial U.S. foreign policies” with respect to the foreign country.  Because the organization was engaged in political activities, the academic exemption did not apply.

Not all of the advisory opinions were as foreboding with respect to academic activity. The FARA Unit decided that a university professor was not required to register for providing a foreign government with factual, “independent analysis of issues of international law” within the professor’s expertise because the information was not intended to influence the U.S. public with regard to U.S. or foreign policy. The opinion did not reach the academic exemption, instead concluding that the professor’s activity did not meet any of the FARA-enumerated activities.

These interpretations of the exemption should prompt nonprofits and other organizations relying on the academic exemption to consider whether registration may be required. As Covington reported last year, the DOJ is currently considering changes to the academic exemption through an advance notice of proposed rulemaking (“ANPRM”).  While the ANPRM is still an early step in the administrative law process, further changes to the scope of the exemption may be significant for nonprofits that deal with foreign government and policy issues and that are not currently registered.

FCC Chairperson Jessica Rosenworcel issued a press release on Wednesday stating that she has circulated to her fellow FCC commissioners and proposal that, if adopted by the agency, will clarify that the TCPA and related FCC rules impose a consent standard on “ringless voicemails” delivered to a user’s voicemail inbox.

The proposed action responds to a 2017 Petition for Declaratory Ruling filed by a company called All About the Message that argued that because ringless voicemails bypass telephone networks and are transmitted directly to telephone company voicemail servers at no charge to users, they are not “calls” governed by the TCPA and FCC rules.

The text of the proposed action is not yet public; but, if adopted, the action is expected to impose a consent standard on ringless voicemails when they are transmitted to a recipient’s voicemail inbox.  It also may require those transmitting ringless voicemails to comply with other TCPA and FCC rules governing prerecorded calls.

Last week, the Department of Justice published an Advance Notice of Proposed Rulemaking (ANPRM), the first step toward a major rulemaking that DOJ says would “modernize” the current regulations, including by clarifying certain exemptions and definitions.

In a client alert today, we review key portions of the ANPRM and the direction it suggests the DOJ envisions for new FARA regulations, which would have implications for our clients, as well as other foreign entities and those who engage with them.

Late last week, the Supreme Court indicated that it intends to review a challenge by Senator Ted Cruz (R-TX) to federal limits on the use of post-election contributions to repay pre-election loans that candidates make to their own campaigns.  This follows an earlier three-judge district court decision that struck down those limits as unconstitutional under the First Amendment.  Although the question presented in Federal Election Commission v. Ted Cruz for Senate relates most directly to the relatively obscure rules governing the repayment of candidate loans, the case represents a continuation of the steady shift in the courts towards a less restrictive federal campaign finance system.

For decades, courts considering constitutional challenges to federal campaign finance regulations have weighed the government’s interest in preventing actual or perceived corruption against individual speech rights protected by the First Amendment.  Most famously, in Buckley v. Valeo, the Supreme Court upheld federal contribution limits as a means of preventing even the appearance of quid pro quo corruption while at the same time striking down campaign expenditure limits that the Court found did little to prevent actual or perceived political corruption.  Since Buckley, this emphasis on the degree to which a challenged regulation serves as an effective check on actual or perceived corruption has been a central feature of federal campaign finance law.

Though never explicitly retreating from this basic proposition, in recent years the Supreme Court has taken an increasingly cramped view of what actually constitutes political corruption.  For instance, the Supreme Court has rejected as insufficiently compelling the prevention of “generic favoritism or influence” (McConnell v. FEC) or merely seeking “influence over or access to” elected officials (Citizens United v. FEC).  Most recently, in McCutcheon v. FEC, the Court struck down aggregate individual contribution limits on the grounds that those limits did “little, if anything,” to address explicit quid pro quo corruption.  Cruz may be the latest example of this trend.

Indeed, a close reading of the earlier district court decision suggests that the case may have significant implications well beyond the loan-repayment rules themselves.  Most notably, the district court imposed a remarkably high factual burden in considering whether the loan-repayment rules serve to prevent demonstrable corruption.  The “appearance” of corruption, in either the form of how the public perceived these payments, or what donors expected, carried nearly no weight in the analysis.  Instead, it was actual corruption the government needed to show.  In striking down the rules, the court noted that the government did “not identif[y] a single case of actual quid pro quo corruption” in the context of the loan‑repayment limit, which the court contrasted with prior cases in which the government put forward evidence of an anti-corruptive effect through witness testimony and detailed factual findings.  According to the court, even “[a] lengthy record may not be sufficient to demonstrate corruption, but the absence of any record of such corruption undermines the government’s proffered interest.”

While the fate of the loan-repayment rules may be of little interest to those not currently running for office, the Court’s consideration of these little-noticed rules may offer important insights into the future of campaign finance regulation more broadly.  If the Supreme Court affirms the district court’s approach, rules that currently may have a weaker connection to threats of “actual corruption”—for example, spousal contribution limits and the remaining restrictions on independent corporate political activities (facilitation of contributions, communications to all employees, etc.)—may be the next to face a challenge.

In the meantime, if the district court decision stands, we would expect all future candidates to cease “contributing” to their campaigns and recast those payments as loans, with a suitable rate of interest.  Striking down the limits on post-election contributions to repay loans may also incentivize candidates who believe they can win to boost late-race self-funding.  This change could also mean that incumbent officeholders with such loans on the books will be more attentive to the fundraising needed to ensure that the loans are repaid.

This post was written with research assistance from Summer Associate Jacob Lichtenstein.

Congressional investigations have continued to play a significant role in the 117th Congress. In February 2021, we predicted that the Democratic majorities in both the House and the Senate would target investigations at the private sector, and this prediction turned out to be correct. Already in 2021, committees in both chambers have launched investigations across a broad range of subjects.

Congressional investigations are deeply infused with politics. Although investigations may seem to proceed by familiar legal process—including document productions and witness testimony—there is actually very little due process in congressional investigations. There are no motions to dismiss, protective orders, or limited discovery orders. There are, however, some rules, and the rules that exist are important.

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 House, Senate, and key committee rules relevant to investigations for the 117th Congress, with a particular focus on the rules related to subpoena authority, depositions, and, where applicable, confidentiality.