By Elliot S. Berke & William J. Farah1
Even before announcing their intentions to run for office, it is safe to assume that the current crop of presidential candidates sought the advice of lawyers to address a variety of legal issues relating to their anticipated candidacies. But the imperative of legal counsel is not limited to presidential candidates. Anyone who is giving serious thought to running for political office should engage a lawyer to help him or her navigate the legal issues that modern day candidates and campaigns face.
A candidate who is contemplating a run for public office – particularly one who has not previously sought or served in elective office – is well advised to conduct a thorough review of his or her past business, professional and personal practices and experiences in advance of announcing or publicly signaling his or her political intentions. Such a review is important for identifying potential political issues that the media or a political opponent may try to inject into the campaign. Indeed, such self-examination has potentially positive aspects – identifying past experiences or accomplishments that may be political strengths that were previously overlooked. The self-examination should be supervised by legal counsel, who will be in the best position to maintain the confidentiality of the review and its findings within the attorney-client privilege. Conducting a detailed self-examination also is critical to being prepared to respond to inquiries and allegations about the candidate's past and making certain there are no inconsistencies in the candidate's or a spokesperson's explanatory statements. It's always better to find and correct a problem on your own then to have your opponents or the media do so and expose or exploit it on their terms.
Candidates seeking public office typically are required to file a Personal Financial Disclosure Statement (commonly referred to as the "FD"). For candidates seeking public office for the first time, the FD will serve as an introduction to the candidate's financial and business life. Expect it to be scrutinized. A candidate who has sizeable holdings or complicated financial arrangements must be certain the FD is accurate, and it is important to prepare follow-up materials on subjects likely to attract inquiries. Legal counsel should work closely with the candidate's accountant and/or investment advisers, providing them with the guidance and instructions they need for preparing the FD. In this regard, accountants and financial advisers sometimes make the mistake of assuming that financial disclosure statements are akin to tax returns and only require the disclosure of information relating to taxable income. This can result in significant reporting omissions. A candidate's failure to submit a complete and accurate FD not only creates a serious political issue but can lead to legal liability for filing a false statement with the government.
The formation and organization of a campaign committee is an important initial step in any campaign that requires the advice and assistance of legal counsel. It is essential for the candidate and senior campaign staff to avoid any personal exposure for campaign debts and other liabilities. This necessitates incorporating the campaign committee to limit liability and taking steps to ensure that the candidate does not personally assent to any contracts or make other financial commitments that could render the candidate personally liable. As an example, Karl Rove, as a Texas political consultant, successfully sued a client, former Attorney General Dick Thornburgh, who was seeking election to the United State Senate. Because the campaign was not incorporated and there was sufficient evidence to indicate that Thornburgh personally assented to an agreement to pay Rove's firm for certain services that the campaign was unable to pay, the candidate was found to be personally liable for the debt. This provides an important lesson for all candidates: NEVER sign contracts or negotiate agreements with consultants, vendors or suppliers. This is the responsibility of the campaign manager or other campaign designees, who should be acting (and signing) such agreements in their capacities as officers or agents of the incorporated campaign committee. Legal counsel can assist the campaign in the incorporation process, including the preparation of articles of incorporation, by-laws, organizational resolutions and general adherence to corporate formalities. Legal counsel also can assist the campaign in identifying any preparing any other applicable filings (e.g., taxes and business licenses) and making certain the campaign remains a corporation in "good standing" for purposes of state law.
One of the first requirements for a nascent candidacy is to find and engage qualified political consultants, fundraisers, and the various other vendors and suppliers necessary to launch a competitive political campaign. This necessitates contracting and in some cases providing financial assurances in order to obtain certain essential services the campaign will require (e.g., telephones, Internet/computer services/equipment and office space). Legal counsel is important for ensuring that the terms and conditions of these agreements are reasonable and do not expose the candidate or senior staff to personal risk. Campaigns that hire employees also must be knowledgeable of any applicable employment laws they may be subject to. This includes what, if any, benefits they are legally required to offer employees and making certain staff reductions can be made expeditiously if the campaign takes a turn for the worse. Finally, campaigns typically require various kinds of insurance, ranging from event insurance for activities staged at certain venues to liability coverage for campaign staff driving motor vehicles or performing other campaign activity that could result in injury or property damage. Again, legal counsel is best suited to advise the campaign on its insurance coverage and work with an insurance broker to obtain insurance that will meet the campaign's needs.
In addition to conventional legal issues, candidates and their campaign committees are subject to myriad regulatory prohibitions, limitations, and other requirements relating to their finances. In this regard, federal and many state campaign finance laws restrict who may contribute and how much may be given, impose detailed recordkeeping obligations and require campaigns to file periodic financial reports. Campaign communications, in particular political ads, are subject to special notice and disclaimer requirements. To comply with and/or take advantage of the campaign finance regulatory regime, expert legal advice is essential. In addition to the political consequences, non-compliance with these laws can lead to significant civil and possibly even criminal fines and other penalties. From the outset, therefore, it is important to have a compliance program in place so that all campaign contributions and disbursements are lawful and disclosed correctly and all campaign communications (i.e., solicitations and ads) are carefully reviewed. Legal counsel can work with a campaign to design an effective compliance program, including systems for processing contributions and disbursements in order to avoid the misuse or misappropriation of campaign funds as well as the filing of accurate, timely reports. Legal counsel can also help prevent routine requests for additional information by regulators from becoming a more significant issue.
A candidate should anticipate one or more complaints will be filed alleging a violation of ethics or campaign finance law. Legal counsel is necessary to rapidly respond to and rebut such claims and provide a legal explanation that can be related to the media in order to avoid any appearance of impropriety. For legal counsel to serve such a role, however, it is important they have an ongoing relationship with the candidate and campaign so as to minimize their response time, including the preparation of any legal documents they may need to file. Campaign complaints can sometimes lead to formal or informal investigations and enforcement proceedings, which will require experienced legal advice and representation.
Finally, in the last 10 years, lawyers are increasingly involved in helping clients challenge and defend election results. Well in advance of the election, legal counsel should review the various means for initiating/defending against demands for recounts, and on election day, it is important for legal counsel to be available to prevent polling abuses. These all requires preparation and the retention of experience legal counsel well in advance of election day.
The failure to properly "lawyer-up" at the outset of a campaign can result in serious problems for a candidate – both during and after the election. After the election is over, regardless of who wins or loses, legal proceedings initiated during the campaign will continue and new ones may be initiated, unpaid creditors may surface demanding payment, and other claims and accusations can arise suddenly. If a candidate has acted prudently and sought the assistance of legal counsel throughout the campaign, the time, cost and legal exposure of these developments can be reduced greatly.
Footnote
1. The authors are Co-Chairs of the Political Law Group at McGuireWoods LLC. They can be reached at eberke@mcguirewoods.comand wfarah@mcguirewoods.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
