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Zachary G. Parks

Zachary Park advises a wide range of corporate and political clients on federal and state campaign finance, lobbying disclosure, pay to play, and government ethics laws. Mr. Parks regularly advises corporations and corporate executives on instituting political law compliance programs and conducts compliance training for senior corporate executives and lobbyists. He also has extensive experience conducting corporate internal investigations concerning campaign finance and lobbying law compliance and has defended clients in investigations by the Federal Election Commission, the U.S. Department of Justice, and the House Oversight & Government Reform Committee.

Covington annually publishes a detailed survey of state campaign finance, lobbying, and gift rules.  Now, for the first time, Covington is releasing an updated survey that details federal campaign finance, lobbying, and gift rules, in addition to those of the 50 states and the District of Columbia. Corporations, trade associations, non-profits, other organizations, and individuals face significant penalties and reputational harm if they violate federal or state laws governing corporate and personal political activities, the registration of lobbyists, lobbying reporting, or the giving of gifts or items of value to government officials or employees. To help organizations and individuals comply with these rules, this detailed survey—now 327 pages—summarizes the campaign finance, lobbying, and gift rules adopted by the federal government, all 50 states, and the District of Columbia.

Newly added federal sections cover the Lobbying Disclosure Act, the Foreign Agents Registration Act, Congressional gift rules, executive branch gift rules, and the Federal Election Campaign Act. Information is provided in a table question and answer format intended to address common questions with practical guidance. Continue Reading Covington Releases Updated Survey of Federal and State Campaign Finance, Lobbying, and Gift Rules (2023 Edition)

February 16, 2023, Covington Alert

The 2023 proxy season is underway for public companies and their investors. Corporate secretaries, lawyers, and executives are actively engaged in the SEC’s shareholder proposal process. Consistent with recent proxy seasons, a significant number of companies are receiving proposals calling for new or enhanced political disclosures. Although these proposals have been around for some time, recent contentious election cycles, debate over hot-button issues, including the Supreme Court’s 2022 decision in Dobbs v. Jackson Women’s Health Organization, and increased investor focus on ESG matters (as well as criticism of such focus) have cast an ever-increasing focus on disclosure of corporate political expenditures.

Effectively responding to shareholder proposals on this issue is essential. Although shareholder proposals are non-binding, proposals that are approved – or that fail but with a substantial level of support – will give rise to an expectation that the company will address the subject matter of the proposal in the months following the annual meeting. A company’s failure to act on a shareholder proposal that is approved or that receives strong support can result in reputational damage to the company and could signal to shareholders and proxy advisory firms that the board is not responsive to a matter of significant shareholder concern. This can give rise to further shareholder proposals and potential votes against some or all of the company’s directors at the next annual meeting. In some circumstances, failure to effectively respond to a shareholder proposal could lead activist investors to threaten or initiate a proxy contest in advance of the next annual meeting.

In recent years, shareholders have submitted hundreds of proposals aimed at encouraging companies to voluntarily disclose more information on their websites with regard to their corporate political spending and processes. In Covington’s 2015 guide on “Responding to Corporate Political Disclosure Initiatives,” we noted that “although some have argued that these efforts are primarily intended to force companies to scale back their lobbying and political activities—not to promote transparency—they continue unabated.” The pace and breadth of these proposals has expanded in the ensuing years, with a significant number of shareholder proposals focused on two topics—political contributions and lobbying expenditures. According to the Center for Political Accountability (“CPA”), its model political disclosure resolution was used 22 times each in the 2021 and 2022 proxy seasons, resulting in six votes in excess of 50 percent in 2021 and two in 2022. We expect, and have begun to see, a similar number of politically-focused shareholder proposals this proxy season. As of December 2022, for example, CPA reported that its shareholder partners have “filed 25 proposals in the 2023 proxy season, with more expected over the coming months.”Continue Reading Tips for Responding To Corporate Political Disclosure Shareholder Proposals

For over a decade, Covington has published a detailed survey of the “pay-to-play” laws of all 50 states.  Now, for the first time, Covington is updating the survey with a new section covering federal pay-to-play rules, in addition to those of the 50 states and many cities and counties.  This new section details the federal

*This guide was originally published in 2018 and we have updated it periodically.

January 31, 2023, Covington Guide

In 1938, Congress enacted the Foreign Agents Registration Act (“FARA”), requiring “foreign agents” to register with the Attorney General. As amended over the years, it applies broadly to anyone who acts on behalf of a “foreign principal” to, among other things, influence U.S. policy or public opinion. Until recently, it was a backwater of American law—and a very still backwater at that, with just seven prosecutions between 1966 and 2016.

That now has changed. Like the once obscure Foreign Corrupt Practices Act, which prosecutors revived from hibernation some years ago, FARA is receiving its close-up. Prosecutors have brought more FARA prosecutions in the last several years than they had pursued in the preceding half century. In-house lawyers have scrambled to bone up on this famously vague criminal statute, at a time when the nation’s tiny bar of experienced FARA lawyers can still hold its meetings in the back of a mini-van.

While cases related to Special Counsel Robert Mueller’s investigation are the most salient examples, the renewed focus on foreign agents actually began prior to the Mueller investigation and has continued long after the Special Counsel closed up shop. A significant uptick in audits of registered foreign agents by the FARA Unit (the Department of Justice office that administers FARA), followed by significant staffing changes in the FARA Unit, and then noticeably more aggressive interpretations of the statute in advisory opinions and informal advice from the FARA Unit, all have signaled a sea change.Continue Reading The Foreign Agents Registration Act (FARA): A Guide for the Perplexed

The U.S. Securities and Exchange Commission (“SEC”) last week announced settlements with four investment advisory firms regarding alleged violations of the SEC’s pay-to-play rule, illustrating that federal regulators continue to aggressively pursue such cases.   The rule at issue, Rule 206(4)-5 (“the Rule”), prohibits investment advisors from, among other things, receiving compensation from certain government entities for two years after a person affiliated with the investment advisor makes a covered campaign contribution to an official of the government entity.  While the involved firms did not admit or deny the allegations in the settlement orders, an examination of the cases is instructive in assessing the current landscape of SEC pay-to-play rule enforcement.  Together, the four settlements are noteworthy in two major respects: (1) the circumstances of the underlying contributions that highlight the wide-reaching application of Rule 206(4)-5; and (2) the fact that one of the SEC Commissioners issued a sharp dissent that expressed deep concern about the breadth of the Rule.

The settlements involved covered associates at four different firms making contributions to four different recipients: an unsuccessful candidate for Mayor of New York City; the incumbent Governor of Hawaii ; an unsuccessful candidate for Governor of Massachusetts; and to a then-candidate for Governor of California.  In two cases, the firms managed public pension money and, in the other two, the firms managed state university endowments, an often overlooked category of government entity investors. 

While the SEC Rule is intended to prevent fraud, it seems highly unlikely that any of the contributions at issue in these four cases could have influenced state investment decisions: 

  • All four investment advisory firms had preexisting business relationships with the relevant government entities before the prohibited contributions were made and no new business was solicited after the contributions. 
  • One of the donors was not even a covered associate at the time of the contribution.
  • Only one of the four prohibited recipients was an incumbent officeholder at the time of the contribution. 
  • Two of the four recipients failed to win election to the offices they sought. 
  • Two of the cases involved situations where the donor either received a refund or requested a refund. 
  • The contribution amounts were a drop in the bucket in proportion to the tens of millions of dollars raised in these elections – three cases involved a single $1,000 contribution and the fourth involved a contribution of $1,000 and another $400. 

Continue Reading SEC Commissioner Says It’s “Past Time” To Reform Overly “Blunt” Pay-to-Play Rule

Perhaps no citation has been more favored in Federal Election Commission (“FEC”) decisions over the past decade than Heckler v. Chaney, 470 U.S. 821 (1985), a Supreme Court decision that gives an agency broad discretion over which enforcement cases to pursue.  But there is a category of cases where the FEC is not employing Heckler when it should:  Cases where the constitutional support for the statute no longer exists.  See Citizens for Responsibility and Ethics in Washington v. Federal Election Commission, 993 F.3d 880, 884 (D.C. Cir. 2021) (“New Models”); see also Citizens for Responsibility and Ethics in Washington v. American Action Network, No. 18-CV-945, 2022 WL 612655, at *2 (D.D.C. Mar. 2, 2022) (holding that an FEC dismissal that was supported by “constitutional doubts” that “militate in favor of cautious exercise of our prosecutorial discretion” was judicially unreviewable under Chaney).

The FEC continues to pursue enforcement penalties in several categories of cases where there is almost no chance that a majority of the Supreme Court would find the statute constitutional.  This resembles a sort of regulatory Russian Roulette, where the agency pursues enforcement actions until it finds a respondent that is willing to fully litigate the constitutional issues, mostly likely in a case with plaintiff-friendly facts.  The risk for the agency is that when one of these cases eventually comes before the Supreme Court, the justices may use a hammer, rather than a scalpel, in striking down the law. 

In two areas in particular, the FEC should exercise its prosecutorial discretion to decline to pursue cases based on statutes and regulations of dubious constitutionality.   

A Person Cannot Corrupt His or Her Spouse With a Campaign Contribution, No Matter How Large. 

Currently, the FEC follows the Supreme Court’s decision in 1976 to rather tentatively uphold the application of the contribution limits to contributions from intimate family members in the same way as contributions from lobbyists and corporate and union PACs.  But the law has evolved, and the Supreme Court has since been clear that generally the only legitimate interest the contribution limits play is to prevent quid pro quo corruption or its appearance.  It is nearly impossible to argue that a spouse who gives a contribution over $2,900 to his or her candidate/spouse presents the risk of quid pro quo corruption. Continue Reading Picking Battles: The FEC and the Constitution

Trade associations, 501(c)(4) social welfare organizations, other outside groups that pay for
political advertisements, and their donors now have more answers to long-running questions
regarding when donations to these groups are publicly reportable. After postponing
consideration of the issue during its previous meeting, the Federal Election Commission (“FEC”)
approved Wednesday an interim final rule on donor disclosure. The interim rule amends the
federal regulations that describe when outside groups that pay for independent expenditures–
advertisements that expressly advocate the election or defeat of a clearly identified candidate–
must publicly disclose on FEC reports the names of their donors. The amended rule will take
effect 30 legislative days after the FEC transmits the new rule to Congress, which the FEC
anticipates will be September 30, 2022.

The interim rule brings the FEC’s regulations into harmony with a 2018 court decision that
invalidated a long-standing regulation, 11 C.F.R. § 109.10(e)(1)(vi), requiring outside groups to
disclose only those donors who contributed at least $200 to the outside group “for the purpose
of furthering the reported independent expenditure.” The interim final rule strikes the regulation
entirely. However, the FEC added a note to 11 C.F.R. § 109.10(e)(1) that clarifies the remaining
portions of the regulation and the relevant statute are still in effect.

In the wake of the 2018 decision, many questions remained about when these groups must
disclose donor names. The revised regulation itself was not meant to answer those questions; it
was simply meant to harmonize regulations on the books with existing court decisions. Some of
these questions were answered by an unusual guidance document the Commission posted to
its website after the 2018 decision. That guidance, which remains in effect, provides that groups
(other than political committees) that pay for independent expenditures must disclose the names
of donors of over $200 who made contributions “earmarked for political purposes” during the
reporting period.Continue Reading FEC Commissioners Issue New Guidanceon Donor Disclosure for Groups Paying forPolitical Advertisements

Trade associations, 501(c)(4) social welfare organizations, other outside groups that pay for political advertisements, and their donors now have more answers to long-running questions regarding when donations to these groups are publicly reportable.  After postponing consideration of the issue during its previous meeting, the Federal Election Commission (“FEC”) approved Wednesday an interim final rule on donor disclosure.  The interim rule amends the federal regulations that describe when outside groups that pay for independent expenditures — advertisements that expressly advocate the election or defeat of a clearly identified candidate — must publicly disclose on FEC reports the names of their donors.  The amended rule will take effect 30 legislative days after the FEC transmits the new rule to Congress, which the FEC anticipates will be September 30, 2022.

The interim rule brings the FEC’s regulations into harmony with a 2018 court decision that invalidated a long-standing regulation, 11 C.F.R. § 109.10(e)(1)(vi), requiring outside groups to disclose only those donors who contributed at least $200 to the outside group “for the purpose of furthering the reported independent expenditure.”  The interim final rule strikes the regulation entirely.  However, the FEC added a note to 11 C.F.R. § 109.10(e)(1) that clarifies the remaining portions of the regulation and the relevant statute are still in effect.

In the wake of the 2018 decision, many questions remained about when these groups must disclose donor names.  The revised regulation itself was not meant to answer those questions; it was simply meant to harmonize regulations on the books with existing court decisions.  Some of these questions were answered by an unusual guidance document the Commission posted to its website after the 2018 decision.  That guidance, which remains in effect, provides that groups (other than political committees) that pay for independent expenditures must disclose the names of donors of over $200 who made contributions “earmarked for political purposes” during the reporting period.

But when is a contribution “earmarked for political purposes”?  If a donor provides funds for get-out-the-vote activities, is that donation “earmarked for political purposes”?  If a donor makes a contribution following a presentation from an outside group describing its political activities, is the donation reportable?  What about a donation intended to further a hard-hitting issue advertisement whose purpose, at least in part, is to defeat a particular candidate?  These questions are all left unaddressed in the interim final rule and the website guidance.Continue Reading FEC Commissioners Issue New Guidance on Donor Disclosure for Groups Paying for Political Advertisements