Earlier this week, a unanimous 11-member panel of the U.S. Court
of Appeals for the District of Columbia Circuit upheld the
long-standing ban on federal political contributions by federal
government contractors. The Circuit Court, in Wagner v. Federal
Election Commission, found the ban supported by the compelling
governmental interest in protecting against quid pro quo
corruption or its appearance. But the ruling was narrow in scope
and left unaddressed questions about the ability of federal
contractors to participate in political activities.
Current federal campaign finance law bars federal contractors from
making political contributions during the negotiation for and
performance of a contract. A separate section of the law prohibits
contributions from all corporations, including incorporated federal
contractors. The challenge in Wagner was initiated by
individuals who had personal services contracts with government
agencies.
The Circuit Court undertook a lengthy review of Congressional
efforts dating back to the 1800s to combat corruption in the
federal contracting arena and similar legislative efforts in the
states, as reflected in the significant expansion of pay-to-play
laws. In upholding the contractor contribution ban, the Court found
that in the government contracting arena, the risk of quid pro
quo corruption and its appearance has not dissipated. Writing
for the panel, Chief Judge Garland observed that "the record
offers every reason to believe that, if the dam barring
contributions were broken, more money in exchange for contracts
would flow through the same channels already on display."
Still, the Court underscored the narrowness of its ruling stating
that the only issue before it was the application of the ban to
contributions to a federal candidate or political party by an
individual contractor.
Narrowness notwithstanding, the anti-corruption rationale of the
Wagner decision further bolsters state pay-to-play laws that have
been enacted in more than 20 states and hundreds of localities.
Federal and state courts have largely upheld these laws when
closely tailored, and some of those decisions were cited in
Wagner. And, unlike the federal model, corporations are
permitted to make contributions in many states. The Wagner decision
is sure to be used to fend off future legal challenges to
pay-to-play contribution limitations.
Finally, the Wagner decision did not address one important
issue that has been up in the air since the Supreme Court's
Citizen United ruling in 2010 – whether federal
contractors can use corporate funds to contribute to Super PACs and
other groups that engage in independent political spending.
Therefore, as election season gets into full swing, contractors
would be wise to consult with counsel before considering the use of
corporate dollars for contributions to independent groups.
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