Since the Obama Administration published proposed new restrictions on gifts to federal employees from registered lobbyists and lobbying organizations, common themes have emerged that suggest the approach should be reconsidered. In its focus on Lobbying Disclosure Act (“LDA”) lobbyists, lobbyist registrants and those registrants’ other non-lobbyist employees, the proposed rule may act to stif le beneficial communications between policymakers and subject matter experts simply because the interactions might have a more social component. For instance, the proposal targets quite commonplace opportunities for interaction between lobbyists and government officials and employees, such as widely attended gatherings. This particular element of the proposal may result in unintended consequences, chilling speech and diminishing the ability of a wide variety of modest concerns to petition their government because they comply with the federal lobbying laws. This advisory seeks not only to identify such areas of concern with the proposal but, also, to emphasize that a more in-depth analysis raises important, though nuanced, questions about the lines the Administration is attempting to draw.
As background, on September 13, 2011, the Obama Administration issued a proposed rule that closely parallels the President’s 2009 Executive Order (“E.O. 13490”), Ethics Commitments by Executive Branch Personnel. E.O. 13490 significantly curtailed gift rule exceptions for gifts from “registered lobbyists” and “registered lobbying organizations” registered under the LDA to appointed, non-career (i.e., political) federal executive employees. The Administration is now proposing to extend those gift restrictions to the “millions” of federal career employees to whom E.O. 13490 does not currently apply. 76 Fed. Reg. 56330. The Office of Government Ethics (“OGE”) has invited comments on the proposed rule. Those wishing to submit comments on the proposal may still do so until November 14, 2011.
New Rule Targets Fostering of “Social Bonds”
The proposal would amend longstanding regulations set forth in the Standards of Ethical Conduct for Employees of the Executive Branch, 5 C.F.R. 2635, et seq., (“Standards”). Under these Standards, a federal official or employee may not accept a gift from prohibited sources. Certain items, such as modest food or refreshments other than as part of a meal, are excluded from the definition of “gift” before application of the prohibited source standards.1 A prohibited source is any person who does business with, is seeking official action from, or conducts activities regulated by the employee’s agency, or has interests that may be substantially affected by how the official or employee discharges his or her official duties. A federal official or employee may not, moreover, accept any gift from any source offered because of the recipient’s official position. These rules are subject to twelve exceptions.
The proposed rule would preclude federal executive employees from using four of the more frequently employed of these exceptions when the entity offering the gift is a “registered lobbyist” or “registered lobbying organization.” These four exceptions are:
- Gifts of $20 or less (also known as the “de minimis” exception);
- Widely attended gatherings;
- Social invitations from persons other than prohibited sources; and
- Meals, refreshments and entertainment in foreign areas.
Widely attended gatherings include conferences or other meetings attended by a large number of persons within a specified industry or by those representing a diverse group of interests. The exception, similar to that provided in a wide range of state and municipal gift rules, as well as federal congressional rules, is designed to allow for government officials and employees to interact in a public setting with a range of individuals interested in a subject. There can be a value in such interactions, as information and perspective can be exchanged and often debated. Under the proposed rule, a public official or employee would be permitted to attend a gathering funded by, for instance, a trade association employing an in-house lobbyist, only if the government employee or official were a speaker, panel participant or there to present information on an agency’s behalf.
Relative to policymaking, gift-giving has raised concerns regarding the potential for a quid pro quo, that is, an official act in return for a thing of value. Scandals involving aggravated conduct do erupt periodically. However, the proposed rule’s justification is different. It seeks to address the threat that certain modest gifts – such as attendance at a widely-attended gathering – can lead to “the fostering of social bonds” between lobbyists and certain federal employees. The rulemaking explains:
“It is increasingly recognized that the more realistic problem is not the brazen quid pro quo, but rather the cultivation of familiarity and access that a lobbyist may use in the future to obtain a more sympathetic hearing for clients…[It] is not just that …officials will engage in blatant [selling of their services] to lobbyists but, more subtly, that they will become partial to the causes of lobbyists’ clients because they spend a lot of time in lobbyists company.” 76 Fed. Reg. 56333.
The Amended Standards Will Likely Apply Broadly to All Employees of a Lobbyist Registrant, Not Just Its Lobbyists
Both the Standards and the OGE guidance on A.O. 13490 extend their limits or prohibitions on gifts, when applicable, to include those from any employee of a registered lobbyist or lobbying organization. Under the current OGE gift prohibitions, for instance, gifts from an employee of an organization will be treated as gifts from the organization. 5 C.F.R. § 2635.204(a)(Example 3). But is it so awful for a “lobbyist not only to discuss any pending issues with the [federal] employee but to foster a social bond that may be of greater use in the long run” as the proposed rule suggests? It is possible a government employee might learn something of value at a trade association-sponsored educational program.
The Lobbying Community Defies Facile Generalization
The lobbying industry is far from monolithic, and defies the type of facile characterization that serves to underpin the premises that appear to support the proposed rule. Recently, Georgetown Economic Services, LLC (“GES”)2 randomly sampled 100 LD-2 filings made in 2008 and contained in the Center for Responsible Politics’ databases to identify lobbying firms’ clients.3 Following the technique of the recent HLOGA-mandated GAO lobbyist compliance report, GES categorized the clients that retain lobbyists by various types or categories, such as large businesses, cities, and towns.4
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GES found that smaller organizations may be among the ones which need to hire lobbyists most often because they do not have the resources (e.g., time, manpower, etc.) to devote to advocating their causes directly with government officials. Further, the lobbying organizations themselves ranged from solo practitioners to large firms, with smaller firms predominating by number. Finally, many consultants and officials of major corporations and non-profit associations may not be registered lobbyists, not because they lack connections or gravitas, but because their duties are sufficiently broad that they are not required to register to lobby.
“Registered Lobbyists” And “Lobbying Organizations”
Like the Standards and E.O. 13490 restrictions, the new proposed rule on gifts from lobbyists will turn on whether the gifter meets the definition of a “registered lobbyist or lobbying organization.” The latter term includes employees of organizations filing lobbying registrations under the LDA, and is not limited to individual lobbyists. Moreover, the term applies equally to lobbying or law firms filing registrations and to corporations and other organizations that file registrations under the LDA because they employ at least one in-house lobbyist.
By operation of the LDA, the following entities are excluded from the proposed rule’s definition of the term “registered lobbyist or lobbying organization”:
- Entities that are listed on LDA registrations as “clients” (provided that they do not employ “in-house” lobbyists and register in their own right); and
- Entities that do not appear as either a registered lobbyist or lobbying organization on an LDA registration even though a parent, affiliate or subsidiary organization may be an LDA-registered lobbyist or lobbying organization.
The proposed rule also expressly excludes, for its purposes only, four categories of organizations from the definition of “registered lobbyist or lobbying organization.” These are:
- 501(c)(3) nonprofit corporations or associations;
- Media organizations, as defined in 2 U.S.C. § 1602(11) (only where such media organization makes a gift in connection with the gathering or dissemination of information to the public);
- Nonprofit institutions of higher education, as defined in 20 U.S.C. § 1001; and
- Nonprofit professional associations, scientific organizations and learned societies are excluded, but only where such association, organization or society makes a gift in connection with its educational or professional development activities.
It is important to note that these four categories of accepted entities still must be mindful that gifts from prohibited sources and gifts given because of the employee’s official position continue to be prohibited, subject to the Standards’ twelve exceptions. The proposed rule simply allows these entities to continue to invoke the widely attended gathering, de minimis, and foreign case exceptions.
The Proposed Rule Draws Imprecise and Arbitrary Lines Among Nonprofit Organizations
The exception for gifts of educational or professional development activities from nonprofit professional associations, scientific organizations or learned societies does not encompass the activities of trade associations. As expressed in the proposal’s justification, the OGE states that it does not consider the education and development of members of a profession or discipline to be the “concern” of trade associations. What, then, is to be made of industry organizations that also serve as standard setting bodies? And how will the ban affect the necessary intersection between these standard setting bodies—for example, those establishing materials specifications for public works infrastructure materials or specifications for products used in the oil and gas industries—and the federal officials who mandate these specifications in federal regulations?
The application of these additional restrictions to gifts of attendance at industry seminars hosted by trade associations will no doubt include industry-specific educational programs. Likewise, for-profit institutions of higher education are not excepted from the definition of “registered lobbyist or lobbying organization.” Should a non-profit university lobbyist be able to mingle at an event with a federal official while his or her counterpart from a for-profit institution cannot? Does an entity’s for-profit status disable its education mission to that extent? When viewed as a whole, the proposed rule seems to rely on a series of small, ad hoc value judgments and distinctions.
Standards Exceptions Not Affected by the Proposed Rule Change
The proposed rule will not affect federal executive employees’ (nor their essential support staffs’) ability to attend widely attended gatherings where the employee will participate as a speaker, panel participant, or otherwise present information on behalf of the agency. The proposed rules similarly will not affect the following current exceptions to the Standards:
- Gifts based upon personal friendship where the gift is motivated by the familiar or personal relations but not the recipient’s governmental position;
- Discounts and similar benefits including favorable rates and commercial offerings;
- Gifts resulting from a spouse’s business or employment; gifts resulting from an employee’s outside business or employment; and customary gifts provided by a prospective employer;
- Gifts to the President or Vice President, which typically are subject to the protocol and etiquette afforded heads of state;
- Gift approved by an agency’s regulations that supplement the Standards;
- Gifts specifically approved by statute;
- Honorary degrees or bona fide awards given for meritorious public service;
- Certain benefits, made available in the course of political activities permitted by the Hatch Act Reform Amendments of 1993, 5 U.S.C. § 7323.
Of the twelve exceptions to the gift rules enumerated in the Standards, only seven exceptions are available under E.O. 13490: gifts based on a personal relationship, discounts and similar benefits, gifts resulting from a spouse’s business or employment, customary gifts/gratuities provided by a prospective employer, gifts to the President or Vice President, gifts authorized by an OGE-approved agency supplemental regulation, and gifts accepted under specific statutory authority.