United States: Congress Passes New Ethics, Lobbying, And Earmark Requirements

Before recessing for the month of August, the U.S. House of Representatives and the U.S. Senate passed the "Honest Leadership and Open Government Act" (S. 1). While the bill has not yet been sent to President Bush for his signature, Congress has already adopted, by rules changes and general practice, many of the legislation’s provisions regarding gifts, travel and earmarks.

The sweeping legislation would tighten ethics guidelines, restrict lawmakers’ interactions with lobbyists, increase lobbying disclosure, and impose new requirements on earmarking of federal funds. In some cases, there are differences in the rules that apply to the House and to the Senate.

S. 1 is the culmination of an effort to enhance ethical standards in Congress, curb certain lobbying practices, and bring greater transparency to the relationships between lawmakers and lobbyists. Until recently, each chamber had passed only incremental changes to ethics and lobbying guidelines.

Attached are summaries of the key provisions included in the "Honest Leadership and Open Government Act" (S. 1):

• Lobbying and Financial Disclosure Rules

Lobbyists are currently required to disclose their lobbying activities on a semi-annual basis. The "Honest Leadership and Open Government Act" requires more frequent disclosure of a significantly broader scope of activities than under current law. Lobbyists will now have to disclose their advocacy income and expenditures under the new bill on a quarterly basis and also will be required disclose certain political contributions twice per year. These rules generally apply to registered lobbyists and the companies, organizations, associations or firms that employ or retain lobbyists.

S. 1 lowers the thresholds that trigger the requirement to file a lobbying registration form with Congress, likely increasing the number of entities that will now be required to report lobbying activity. For organizations, such as lobbying firms, that determine whether they must register based on income received from lobbying activity for a particular client, the bill lowers the threshold from $5,000 over a six-month period to $2,500 over a three-month period. For entities, such as companies, non-profits, and trade associations, that determine whether they must register based on expenditures made for lobbying activities, S. 1 reduces the threshold for reporting from $20,000 over a six-month period to $10,000 over a threemonth period. When reporting lobbying income or expenditures, lobbyists must now round their total to the nearest $10,000, as opposed to the nearest $20,000 under the former rules.

Members of coalitions and associations that contribute more than $5,000 over a three-month period in funding for, and actively participate in planning, supervise, or control the lobbying activities of a registered entity must be listed individually on the lobbying disclosure (LD-2) report filed by or on behalf of the coalition or association. S. 1 makes an exception for an affiliate of or contributor to a registrant if the affiliate or contributor is listed on the registrant’s website as a member or contributor, unless it plans, supervises, or controls the registrant’s lobbying activities. Any foreign entity that contributes more than $5,000 in the quarterly reporting period to fund or direct lobbying activities must be reported on the registrant’s disclosure.

S. 1 changes the current schedule of LD-2 filings from semi-annually to quarterly. Filings must be made electronically, so that the information contained in each report and registration can be included in a searchable electronic database that is open to the public free of charge. The database will maintain files for a period of six years. LD-2 reports will be due 20 days after the close of the reporting period (as opposed to 45 days under current law). Lobbyists filing with the federal government under the "Foreign Agents Registration Act" also will be required to file electronically. This information will be maintained in a searchable database.

The bill requires lobbyists to provide information that was not solicited under the old rules. Lobbyists will be required to disclose their prior government service over the preceding 20 years from the point at which they register as a lobbyist. Lobbyists will also have to identify whether a client is a state or local government or a department, agency, special purpose district, or other entity controlled by one or more state or local governments.

These provisions will take effect January 1, 2008.

Another major change to current law is the requirement for the disclosure of certain political contributions made by lobbyists and organizations that employ lobbyists. Political contributions by individuals and political committees are already reported to the Federal Election Commission by candidates for federal office. Under S. 1, lobbyists and organizations that employ lobbyists also will be required to disclose to Congress all contributions above $200 made by the lobbyist, organization, or political action committee (PAC) controlled by the organization to any candidate, political committee, or presidential or inaugural committee. These reports must be filed twice per year.

In addition, lobbyists will have to certify in their disclosure reports that they understand House and Senate rules and that they have not provided, requested, or directed gifts or travel to lawmakers or staff members in violation of House or Senate rules. Although the legislative language is not clear, S. 1 seems to indicate that any entity that registers under the Lobbying Disclosure Act, not just individuals, must certify that the firm or organization, and presumably each employee, has abided by House and Senate gift rules. Under the bill, a lobbyist, or an organization employing a lobbyist (and registered under the Lobbying Disclosure Act) is now independently liable for violations of the Congressional gift and travel rules.

This requirement will take effect for the first semi-annual period beginning after the date of enactment. This period will cover Jan. 1 through June 30, 2008; the disclosure report for this period will be due July 30, 2008.

Failure to comply with the lobbying and financial disclosure requirements outlined in S. 1 will result in new civil and criminal penalties. The bill increases civil penalties for violations of the disclosure rules from a maximum fine of $50,000 to fines of up to $200,000. S. 1 also institutes criminal penalties of up to five years in prison for knowingly failing to comply with the new disclosure rules. As mentioned above, a lobbyist or an organization employing a lobbyist will be independently liable for violations of the Congressional gift and travel rules under S. 1. In addition, the U.S. Attorney General will regularly report to Congress on the number of enforcement actions taken by the Department of Justice against violators of the new disclosure rules.

S. 1 alters Senate and House rules by further restricting the receipt of gifts and travel by Members of Congress and their staff paid for by lobbyists and the organizations that employ or retain them. Where S. 1 is silent with regard to specific House gift and travel rules, changes enacted by the House in January 2007 by H. Res. 6 will control House procedures. The following provides an overview of the new rules, as well as other restrictions placed on Members of Congress, their staff, and their family members.

S. 1 prohibits Members of Congress and their staff from accepting gifts and meals of any value from registered lobbyists, entities that employ and retain lobbyists, and registered foreign agents. Nevertheless, 23 exceptions¹ to this ban that existed under the former Senate and House gift rules are still in effect.

In addition, S. 1 requires Members of Congress and staff to report all gifts received on their annual personal financial disclosure reports. The bill also makes it illegal for a Member or staff to knowingly and willfully fail to report any gifts or falsify information on a report. Those violating these rules can be fined a maximum of $50,000 (up from $10,000) and be imprisoned for not more than one year.

A provision in S. 1 adds a new exception to the gift rule that is not included in the House rules. It allows Senators to accept an offer of free attendance and food at a home-state constituent event at which the Senator will perform an official act (e.g. deliver a speech) so long as the cost of the meal provided is valued at less than $50; the event is sponsored by constituents or a group whose membership is primarily constituents; registered lobbyists are not attending the event; and attendance is appropriate given the Senator’s official position.

S. 1 also details how tickets to sporting and other events are valued, including those held in skyboxes. Tickets with face values must be valued at that price, provided it is the same price offered for that ticket to the public. Tickets without face value must be valued at the highest cost ticket available to the public for the event.

Under new travel rules in the House and Senate, entities may not pay for expenses related to travel by a Member of Congress or staff person, including transportation, lodging, or food for a trip in connection with the Member’s official duties unless the travel is approved in advance by the House or Senate Ethics Committee and satisfies specific time and other limits. Lobbyists, lobbying firms and foreign agents cannot organize, request, plan or pay for any trips for Members of Congress or staff, and lobbyists are not permitted to join lawmakers or staff on any segment of a trip. It is anticipated that a guidance on the new gift and travel rules will be issued by each chamber’s Ethics Committee to clarify the circumstances under which organizations that employ or retain lobbyists can facilitate the travel of Members of Congress in conjunction with their official duties. Changes to Senate travel rules included in S. 1 closely mirror new travel rules adopted by the House through H. Res. 6 in January. The bill does not address House travel rules.

In the Senate, paid travel is limited to one day and one night, unless the Senator receives specific authorization from the Ethics Committee. Senators must approve such travel for their staffs. Senators also are required to certify that their own travel is not paid for with lobbyist funds. The Senate Ethics Committee will develop additional guidelines for the approval of trips, including what de minimis role lobbyists can play with regard to lawmakers’ travel planning.

Senate rules regarding travel sponsored by organizations without lobbyists have fewer restrictions and allow for privately paid travel for three days domestically and seven days internationally. However, all such travel must be pre-approved by the Ethics Committee. S.1 exempts non-profit 501(c)(3) organizations from the above-mentioned restrictions on paying for Senators’ travel expenses. Current House rules do not include the same exemption but do exclude institutions of higher education from restrictions on paying for House members’ travel.

Regarding travel on private planes, S. 1 requires Senators and candidates to pay for these flights at charter flight or fair market value rental rates for a plane of comparable size. If a Senator or spouse owns an airplane, or has an ownership interest in a non-public entity that owns a plane, the Senator may use that aircraft. Current House rules prohibit Members and candidates from flying in any aircraft unless it is commercial, government, or owned or leased by the Member.

S. 1 places greater restrictions on bundled political contributions from lobbyists. The bill defines a "bundler" as a registered lobbyist, an individual listed on the registration of a lobbying organization, or a political action committee established or controlled by a lobbyist or lobbying organization. S. 1 defines a "bundled contribution" as multiple contributions grouped together and forwarded from the bundler to a candidate’s election committee, leadership PAC, or political party committee. Also included in the definition of a bundled contribution are those contributions received by a committee or candidate from multiple sources, but credited to the bundler. Political committees are required to ask donors if they are registered lobbyists and report bundled contributions to the FEC through a supplemental campaign finance document whenever a bundler has provided more than $15,000 in contributions in a six-month period. S. 1 requires the FEC to promulgate regulations to implement these requirements no more than six months after the bill is signed into law. The new reporting requirements will take effect three months after the FEC has issued its final rules.

S. 1 limits sitting Members of Congress and senior staff from negotiating private sector employment that involves lobbying activities unless they notify House and Senate officials within three days of commencing negotiations. Upon leaving Congress, House members are banned from lobbying for one year. Former Senators are banned for two years. S. 1 bans senior Senate staff from lobbying any Senate office for one year but does not change current law regarding senior House staff, who are only prohibited from lobbying their former office or committee for one year. These restrictions will take effect at the end of the first session of the 110th Congress or Dec. 31, 2007, whichever is sooner.

S. 1 changes House and Senate rules to prohibit the spouses of Members of Congress from lobbying the offices of their husbands or wives. The Senate rule also bans staff contact with any Senator’s lobbyist-spouse or immediate family member, unless a Senator’s spouse has been a lobbyist for more than a year prior to the election of the Senator or to the marriage. S. 1 also includes a "sense of Congress" that states that familymember lobbyists who use their relationship with a Member of Congress to gain special advantages over other lobbyists is inappropriate.

S. 1 ends the so-called "K Street Project" by prohibiting lawmakers from using their influence to pressure or encourage a private organization to make employment decisions on the basis of political affiliation.

S. 1 prohibits Senators from participating in events held in their honor during the national party convention period when such events are paid for directly by a lobbyist or organizations that retain or employ lobbyists. There is an exception for events honoring a Senator as a nominee for President or Vice President. House members cannot participate in an event held in their honor at the national party convention that is financed by a lobbyist or lobbying organization unless they are being honored as a candidate.

The bill does not change recently-adopted House rules that require requests for earmarks for special projects to include justifications and a certification that the provisions will not benefit lawmakers or their spouses. In addition to providing the purpose of the earmark, Members must report the name and address of the intended recipient or, if there is no specified recipient, the location of the intended activity. House rules adopted under H. Res. 6 in January require each committee-reported bill or resolution to include a list of earmarks that provides the name of the sponsoring Member. This requirement also applies to floor amendments and conference reports.

S. 1 requires that Senators requesting earmarks be identified in a database of special projects at least 48 hours before the chamber votes on the provisions. Lawmakers seeking earmarks in spending, tax or tariff bills must certify that they or their immediate family would not monetarily gain from an earmark. This includes earmarks that benefit a limited class of persons or enterprises. Failure to certify that the earmark list is complete and available for 48 hours before votes on a conference report would subject the report to a point of order. S. 1 allows the Senate Majority Leader to certify that earmarks included in bills not reported out of committee and those in conference committee reports meet the new disclosure rules.

S. 1 amends Senate Rules to provide that legislative provisions that were not included in either the House or Senate version of the bill being conferenced cannot be inserted into a conference report. The rule is enforced by allowing a Senator to raise a point of order challenging the new provision. If the point of order is sustained, the provision at issue is stricken (subject to a move to waive the point of order, requiring an affirmative vote of 3/5 of the Senators). S. 1 does not include a similar provision to amend the House rules.

S. 1 authorizes the Majority and Minority Leaders of the Senate to recognize a "hold," or objection to proceedings, only if it is submitted in writing and is made public through its inclusion in the Congressional Record within six session days. The objecting Senator must include a reason for placing his/her hold. The hold can be removed by a written notice, which will also be included in the Congressional Record.

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