Labor Relations Today : Pay to Play Lawyer & Attorney : Bribery, Campaign Contributions

With the opening of legislative sessions nationwide, 2010 is sure to be one of the busiest years ever for pay-to-play legislation. As the Kansas City Star reports, numerous pieces of ethics reform legislation have already been filed in advance of Missouri's 2010 legislative session, which begins on January 6.

According to published reports, the most notable legislation is a bipartisan proposal aimed at overhauling Missouri's campaign finance system. Among other things, the legislation proposes to stop the common practice in Missouri of transferring funds between campaign committees, which can obscure the original donor of such funds. Additionally, the legislation would institute a mandatory online filing system for Missouri filing entities, and would require registration of some political consultants as "de facto lobbyists."

Notably, such legislation also has significant pay-to-play ramifications. Specifically, the new Missouri legislation would codify a prohibition on exchanging campaign contributions for legislative action. The Pay-to-Play blog will monitor this legislation as it goes through the legislative process, as well as similar legislation that is sure to be at issue nationwide in 2010.

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As we highlighted in our November 11, 2009 blog post, in June the Municipal Securities Rulemaking Board (“MSRB”) announced plans to file a rule change with the SEC to revise Rule G-37. The MSRB created Rule G-37 in 1994 to prevent municipal securities dealers from being awarded business based on political contributions. The rule prohibits dealers from engaging in municipal securities business with issuers for two years if they make certain contributions to the political campaigns of officials of such issuers. The proposed revision to Rule G-37 would require municipal securities dealers, their muni professionals, and political action committees to disclose the political contributions they make to bond ballot election campaigns. On December 4, 2009, the MSRB filed with the SEC amendments to Rule G-37 and Rule G-8. Rule G-8 pertains to books and records to be made by brokers, dealers, and municipal securities dealers. Below please find a link to the text of the proposed rule changes. The SEC must approve the rules before they would become effective.

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Venture Capitalist Pleads Guilty

New York Attorney General Andrew Cuomo has announced that Elliott Broidy, chairman of Markstone Capital Group, has pleaded guilty to a felony charge of rewarding official misconduct, in cases involving senior officials in the office of former New York State Comptroller Alan Hevesi. Broidy funneled close to 1 million dollars in payments for the benefit of four senior officials in Hevesi's office, while he was pursuing work with the New York State Common Retirement Fund. The payments were made to friends or relatives of the officials. The Common Retirement Fund is one of the largest pension funds in the country, and the State Comptroller serves as its sole trustee.

Hevesi Implicated

It has been reported that the Attorney General's ongoing investigation has also directly implicated former state Comptroller Hevesi, for accepting luxury trips to Israel and Italy from Mr. Broidy. This is the first time that Mr. Hevesi has been implicated for receiving a direct financial benefit from an entity seeking work with the Common Retirement Fund.

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A bill has recently been introduced in the Michigan State Senate to curtail a new element of “pay to play” politics. Michigan State Senator Cameron Brown (R-Fawn River Township, MI), has introduced a bill to prohibit candidates from paying others to endorse their candidacy. Like virtually all new restrictive pieces of pay to play legislation (especially those of dubious constitutionality), this legislation arises from recent significant media attention paid in Detroit to an alleged practice by city council candidates to pay unions, community organizations and other organizations to endorse their candidacy.

Senate Bill 984, which has been referred to the Michigan Senate Committee on Campaign and Election Oversight, provides that “A person shall not make a contribution to another person with the agreement or arrangement that the person receiving the contribution will then endorse a particular candidate”. The bill contemplates that violation of this new prohibition shall be a criminal misdemeanor.

Senator Brown is quoted as saying that he introduced this criminal prohibition because the practice of paying others to endorse one’s candidacy “raises questions of political corruption and pay to play. The support of respected community organizations should not be up for sale to the highest bidder.”

While this is surely true, one has to wonder whether criminal prohibitions on speech serve as the best means available to accomplish this worthy objective. One would assume that mere disclosure of such payments, similar to those now required of federal lobbyists through Form LD-203, combined with the desire of respected community organizations not to be revealed as up for sale, would serve to squelch such “corruption” as surely as the proposed legislation.

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