Tag: politics

Choosing the Next Vice President [PODCAST]

Every election, months before an official candidate is nominated, the names of potential vice presidents are floated around. For each presidential candidate there are different factors to consider, and over the years the role of the vice president seems to have changed. This podcast, featuring Vincent C. Immel Professor of Law Joel K. Goldstein, will explore what the future holds for the candidates and for the office itself.

Corie:

I’m Corie Dugas. Thanks for joining us. We have Professor Joel Goldstein, the Vincent C. Immel Professor of Law and highly respected scholar on the Vice Presidency. Today we will explore what the future holds for the candidates and for the office itself. Welcome to the show Joel.

Joel:

Hi, Corie.

Corie:

Well to start things off, can you give the listeners a refresher on the important responsibilities of the vice president once elected?

Joel:

The constitution gives the vice president two responsibilities. He or she is the president of the Senate and is the first successor in case of a death, resignation, removal or disability of the president. But, in fact, that doesn’t really describe very well what the modern Vice President does. The Vice President rarely presides over the senate. Instead, ever since Walter Mondale was Vice President in 1977, the vice presidents become a highly important, engaged, involved member of the Executive Branch, who works closely with the president in the White House, is a close presidential advisor, and takes on assignments from the president.

Corie:

Ok, so now that things have sort of changed since Mondale, what makes a good vice president?

Joel:

It’s a difficult job because for a vice president to be successful, he has to have a good relationship with the president. He has to add something substantive to the administration that it needs, whether it’s the ability of a spokesperson, or as a diplomat or a congressional liaison. But, really a vice president has to be both a leader and a follower. A vice president has to be able to deal with world leaders and congressional leaders as an equal, but also has to be able to operate in a situation where he or she isn’t the decider; rather they’re implementing what somebody else has decided.

Corie:

 So we’re really amping up into the election season. In general, what are the presidential candidates that we have out there looking for in a potential vice president?

Joel:

The basic things that a presidential candidate looks for in a vice president is somebody at the least who hopefully can help them improve their chances of being elected, but who at least won’t hurt them. They don’t want the vice president to become a major drag on their candidacy. So there’s an elaborate vetting process that takes place to see, to examine the potential vice presidential candidates in detail. Find out everything about their lives. Joe Liebermann said that it was like having a colonoscopy without an anesthesia. So they do this to try and eliminate candidates who will have negative baggage that will hurt the ticket. But they usually are looking for somebody who could at least provide or who could hopefully provide some boost. Sometimes it’s a question of picking somebody who could help unify the party. Sometimes it’s helping them with a demographic where they’re weak or where they’re a part of the party or the constituency where the presidential candidate is weak.

Corie:

Are there any particular personality characteristics that you think are important for a vice candidate?

Joel:

Well vice presidential candidates I think needs to be presidential. There’ll be a debate of probably 90 minutes where the vice presidential candidates and if you’re a presidential candidate, you don’t want to be sitting watching that debate as your campaign goes down the tubes because people see that you’ve put somebody potentially a heartbeat away from the presidency who doesn’t belong there. Moreover, you want somebody who is presidential because who you choose as vice president is often sort of the first presidential decision that a presidential candidate makes. So it’s sometimes viewed as sort of a test on how good of a decision maker somebody is. The other thing you need in a vice presidential candidate is somebody who is a good follower. Somebody who will recognize that two greats they’re being given a plan, a script and they need to follow it. They’re not the person who gets to dictate strategy. They help implement a strategy that others have set.

Corie:

So, if the vice presidential candidates are followers, which seems that that is really important and that makes perfect sense, can they really be influential in the policy that’s presented in the campaign?

Joel:

Well they can be in some respects. I mean, they can be influential with the presidential candidate and his or her advisors to the extent that they’re respected by the presidential candidate. I mean for instance when Michael Dukakis chose Lloyd Benson, Dukakis and Dukakis’s top aides really grew to respect Benson a lot and sometimes Dukakis’s aids would even go to Benson and ask Benson to say things to Dukakis as a way to persuading him. But they also can be influential in the campaign, to the extent that they’re an effective sales person for the presidential candidate, to the extent that they are good at articulating themes that the campaign wants to get across. In 1960, when John Kennedy was running for president, he was attacked on the ground that he was Catholic. Lyndon Johnson very effectively went through the south and would talk about JFK’s war record and the war record of John F. Kennedy’s brother who was killed in World War II, and would say that when those young men went out to fight for their country, nobody asked what religion they were. And so a vice presidential candidate who is an effective messenger and an effective articulator of the themes that the campaign wants to get across can also be influential in the campaign.

Corie:

So you’ve listed a number of characteristics and given some great examples of some excellent vice presidential candidates and what they’ve helped the presidential candidates with. What do you think are some of the names that we will be hearing on the democratic ticket in the upcoming election?

Joel:

Well it’s always a bit unpredictable until you get closer, but I think some of the people that might be considered, especially if Secretary Clinton is the nominee, would be Secretary Castro, who is the Secretary of Housing and Urban Development, and Secretary Lopez, who is the Secretary of Labor – have both been widely mentioned. They are two candidates who are young – relatively new to the national scene, but are thought to be helpful in terms of mobilizing support among the Hispanic community. Senator Cory Booker from New Jersey is sort of a up and coming new member of the senate. Senator Ted Cain of Virginia was one of the ten finalists that then Senator Obama considered in 2008. He’s an influential senator from a potential swing state. Senator Sherrod brown from Ohio is another who, I think, Secretary Clinton might consider. Again, somebody who is well thought of by the more liberal wing from the Democratic Party also comes from Ohio. So I think those may be the people who will be considered on the democratic side.

Corie:

Is there any names that come to mind if Bernie Sanders moves forward as the nominee?

Joel:

Well I think that if Senator Sanders was the nominee, I think some of the same names. You would expect that he would try and strengthen himself in some of the areas where he’s been weaker. Let’s say some of the traditional democratic constituencies, African Americans, Hispanics –where he hasn’t run as well. He also would be somebody who, unlike Secretary Clinton, who doesn’t have perceived national security credential. So, he also would be looking for somebody stronger in that area. You know, where as in her case, she doesn’t really need to cover that.

Corie:

That makes a lot of sense. Is there anybody that you see potentially popping up on the Republican ticket?

Joel:

Well the Republican ticket a lot depends on who the nominee is. But one person who has been mentioned widely and who would be considered on the Republican side would be Governor Nikki Haley of South Carolina. She was the person chosen to give the response to President Obama’s State of the Union address in January. She’s supported Senator Rubio, which would mean if somebody other than Senator Rubio is the nominee she would be perceived as a bridge to that part of the party. Also is a woman and somebody who I think is perceived as an effective governor of South Carolina. She would be helpful in a race against Secretary Clinton. I think there could be some people from Donald Trump –said he would take a political insider and said Governor Haley would fit that bill. People like Senator John Thune from South Dakota or Senator John Corn from Texas might be sort of people who might be considered. It could be a long list and this point it is sort of unpredictable to say. There could some different dynamics that play out on the Republican Party that we have encountered in recent times.

Corie:

How will the naming of the Vice Presidential candidate, when we get there, change how the campaigns look?

Joel:

Well once you name one vice presidential candidate and then two vice presidential candidates, instead of the race becoming a competition between two people; it becomes a competition, in a way, between two couples. Particularly, if either of the running mates is a new face, there is almost a feeding frenzy that takes place as America is introduced to somebody new. Paul Ryan in 2012. Governor Palin in 2008. Even somebody like Senator Biden, who had been in the Senate for 36 years, have shared major committees, run for president and so forth; the level of coverage that you receive as a vice presidential nominee is well beyond anything you have ever received in any other type of political life. So there’ll be a focus of the new candidate and what that selection says about the person who selected him or her. I mean ultimately people vote based upon their preferences of the presidential candidates but how they perceive the vice presidential candidates, what messages it sends about the presidential candidates are things that some people take into account. I think those are ways in which selection changes the dynamic of the campaign. It gives us somebody new to talk about, somebody new to write about. And often times, new candidates – in which the presidential candidates have been doing this for long periods of time, I mean it is if they’re in mid-season farm. Vice presidential candidates is somebody who is selected and hasn’t been used to doing this. So, sometimes in the early stages they have committed gaffes and those create their own sort of patterns of coverage and problems for a ticket.

Corie:

And by the time we get to the naming of Vice Presidential candidates, we’ll have been with months and months of hearing of hearing form the presidential candidates, so it might be fresh new voices in there as well. In the recent elections, have you seen any examples of vice presidential candidate that have stood out as good picks that have really helped elevate the presidential candidate?

Joel:

Well, I think there have been a few. I think that, depending on how far back one goes, in 1976, I think that pretty clearly that Jimmy Carter would not have been elected if not have been for Mondale’s role in the campaign. And in the vice presidential debate, Mondale helped Carter in a couple of decisive states. I think that in 1992, Al Gore really helped Bill Clinton reinforce the image of Clinton as a young southern democratic centrist. Gore was the same thing. So when you put the two together, the picture of the two of them, their spouses, really presented a image of change that was more powerful than just seeing Governor Clinton. I think that Dick Cheney in 2000, lent gravitas to President Bush’s candidacy. I think it was reassuring that where you had somebody who could governor, but had someone with no national security experience to be bringing on to his ticket somebody who had experience leading the defense department during the Persian Gulf War. I think the choice of Governor Palin in 2008, initially really energized the Republican base, the conservative part of the republican party who had never been enamored with Senator McCain became enthusiastic about him for the first time. Ultimately, over the course of the campaign, I think Governor Palin had some fairly disastrous interviews and so forth. Her numbers went down and she became something of an albatross for the campaign, but the initial period of selection, she really provided some energy and boost for his campaign. But one of the lessons I think is that sometimes presidential candidates choose somebody who will look good in July and August and while that may be important, ultimately it’s also important as to how they’re going to be perceived in October and November.

Corie:

Professor Goldstein also has a new book on this topic, The White House Vice Presidency: The Path to Significance, Mondale to Biden. This book is out now. So thank you so much for joining us today Joel. I hope you all had a chance to read the book. This has all been very informative and interesting discussion.

Joel:

Thanks Corie, it’s been fun.

Trump Trump Trump Trump Trump Trump Everywhere All the Time, Including in Workplace

Ddonald trum larry kingonald Trump has become part of the national conversation. Not a single day goes by now without Mr. Trump filling up at least one news cycle.  His recent success reminds me of a fantastic exchange in Private Parts when a researcher is explaining Howard Stern’s improbable success to the infamous Pi … let’s just call him Phil Vomitz:

Researcher: The average radio listener listens for eighteen minutes. The average Howard Stern fan listens for – are you ready for this? – an hour and twenty minutes.

Phil Vomitz: How can that be?

Researcher: Answer most commonly given? “I want to see what he’ll say next.”

Phil Vomitz: Okay, fine. But what about the people who hate Stern?

Researcher: Good point. The average Stern hater listens for two and a half hours a day.

Phil Vomitz: But… if they hate him, why do they listen?

Researcher: Most common answer? “I want to see what he’ll say next.”

Not surprisingly, not a single day also goes by without a workplace water-cooler (or better yet, chat room) conversation about Mr. Trump (or any of the other presidential candidates.) It can run the spectrum from some friendly banter among co-workers, to a serious dialogue about the issues facing this country, all the way to a heated disagreement coupled with threats of violence.  And it begs the question: how can employers respond to employee political speech in the workplace?  This post addresses that issue.

Few Laws Exist Protecting Employee Political Speech in Private Workplaces

Generally private employers can take adverse actions against employees based on their political speech, unless (i) the employer operates in a state or city that specifically protects employees against discrimination because of political speech, or (ii) the employees are subject to a collective bargaining agreement that does the same.  (The story is quite different for public sector workers, but we do not address them here.)

Many workers live in jurisdictions that provide at least some protection against political speech discrimination – typically in the form of protecting an employee’s political activities, expressions and/or affiliations.  But those laws come in all shapes and sizes, so employers must proceed carefully before banning political speech or disciplining an employee.  For example, Washington D.C.’s human rights law limits its reach to actual or perceived political affiliations only, while Seattle’s law is a bit broader, extending to one’s “political ideology.”  Wisconsin protects those declining to attend a meeting or to participate in any communication about political matters.

More often than not, these laws protect workers from discrimination because of their political activities outside instead of inside the workplace.  For example, with limited exceptions, Colorado law prohibits employers from firing someone because of their lawful off-duty activities, which includes engaging in political speech, and it also prohibits employers from making any rule prohibiting employees from engaging or participating in politics or running for office.  New York’s law protects employees engaging in certain “political activities” outside the workplace, during off hours, but it contains an exception where the employee’s activities would create a “material conflict of interest related to the employer’s trade secrets, proprietary information or other proprietary or business interest.”

There is no federal law that specifically protects employees from discrimination or retaliation because of their political activities, affiliations or expressions.  And the First Amendment is not much of a help as it only protects a person’s right to free speech from government interference, not from interference by private employers.

Therefore, unless you live in a jurisdiction that protects you, if the boss overhears you in the cafeteria campaigning for Team Trump or going haywire for Hillary, he or she can generally send you packing.

Political Speech May Invoke the Protections of Other Laws, However

Of course, it’s a bit more complicated than the above analysis indicates, and will only become more so as the primary, and then general election, season unfolds.  To explain, consider the following hypothetical.

Employees A and B are talking in the break room about the upcoming Democratic debate.  Employee A says to Employee B that Hillary is the only candidate who can deliver on increasing the minimum wage, and “maybe they’ll stop underpaying us here if that happens.”  Employee B disagrees emphatically, placing his bet on Bernie Sanders as the only viable candidate to get the job done, and eventually the conversation turns uncomfortably vocal such that Employee C, an older Hispanic woman, cannot help but overhear Employee B comment to Employee A that he fully expects Hillary Clinton to play the female victim card to stave off criticism about her e-mail scandal.  Employee D, who supervises Employees A, B and C, chimes in and enthusiastically sides with Employee B stating that women always do this, and that Employee A should really stop griping about her wages if “she knew what was good for her.”  Employee E, a senior executive, then gets in on the conversation by professing his love for Trump, including by echoing his views on immigration and in particular, Mexican immigrants, and then he goes on to say that he thinks Hillary is just too old to assume the Commander in Chief Position.  Meanwhile Employees F, G, and H are sitting there stunned with their turkey sandwiches in hand, saying to themselves “awwwwwkward!”

This hypothetical, drawn directly from The Cat in the Hat Comes Back: Workplace Edition, shows that while the employer doesn’t necessarily have a political speech problem on its hands, it may instead have sex, age, race and national origin discrimination and/or NLRA interference complaints coming its way – just from one spirited election-related conversation in the break room.  Yes, politically-related conversations often invoke passionate feelings on both sides of the aisle on issues ostensibly about public policy, but they also often touch on issues that may relate to someone’s membership in a protected class, leaving employers vulnerable to discrimination and other claims.

Potential Employer Responses to Political Speech in the Workplace

As we head into Super or SEC Tuesday and the (17-month+ long!) election season plods along, you should be asking yourself what level of political discourse do you want in your workplace.  Do you want everyone to keep their political opinions to themselves or do you want to encourage robust debate or somewhere in between?  Discussion of politics and campaigning in the workplace puts you on tricky terrain, and may lead to conflict among your employees and thus, wherever you fall on this spectrum, consider addressing these issues in your code of conduct or in your handbook, including more specifically in your anti-discrimination/harassment, complaint reporting, non-solicitation/distribution and social media and electronic use policies.  In doing so, remain mindful of certain laws like the state and local laws mentioned above and the National Labor Relations Act, which restrict your ability to limit certain politically-based conversations/activities in the workplace.

If you will tolerate political discussions in the workplace, consider whether it’s necessary during this election season to conduct workplace professionalism training seminars for all staff members to reduce the likelihood that a healthy debate will turn into a contentious or inappropriate one.  Or consider distributing an election-focused one-pager with helpful talking points.  For example, it may remind employees that a politically-laced, yet well-intentioned conversation, even between the best of friends, can quickly turn contentious, and thus, even though you are not banning such conversations, you are asking your employees to think twice before engaging in one.  Or if the employees do engage in such a conversation, they should be sensitive to others’ beliefs and should not pressure anyone into discussing politics at work.  It also should remind them to utilize your complaint reporting mechanisms if a problem does arise from such a conversation.

Overall, employers should aim for outcomes where employees can engage in a dialogue about important issues, whether in person or electronically, during non-working hours while remaining respectful of others’ points of view and aware of key discrimination and labor laws.  Employees should also understand that they may be subject to discipline for failing to meet your standards of conduct regarding political discourse.  Taking this approach should allow employers to create realistic workplace social conditions, maintain employee morale, and reduce their exposure to a lawsuit.

Article By Michael S. Arnold of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

DNC, Bernie Sanders’ Data Breach – Breaches Are Not Just About Social Security Numbers or Payment Cards

Are pundits discussing the personal information allegedly accessed by a campaign staffer for Bernie Sanders? No, not really, and that is the point.

In Saturday’s debate at St. Anselm College in Manchester, New Hampshire, Democratic presidential candidates Bernie Sanders and Hillary Clinton jousted over an alleged intrusion into Clinton’s voter data by a Sanders campaign staffer. According to reports, the staffer accessed confidential voter data maintained by a vendor, NGP VAN, while the firewall protecting that data had been removed. (hmmm…a third party vendor) In response, the Democratic National Committee (DNC) terminated the Sanders campaign’s access to all voter data, including the campaign’s own data. Litigation followed, a deal was reached, but reverberations continue. Turn to your favorite cable news channel.

One hears “data breach” and immediately Social Security numbers, credit card data, or medical information come to mind. In this case, the personal information reported to be involved included names, addresses, ethnicity, and voting history, hardly considered to be sensitive personal information in the United States. In fact, none of the state data breach notification laws would require notification based solely on these data elements. (But see, e.g., FTC settlement involving email addresses). But, some of the information, particularly analytical data concerning voter preferences, can be tremendously helpful to a campaign. So it is easy to see why it is causing such a stir, particularly for the Sanders campaign.

Why is this important beyond presidential politics?

Organizations are beginning to recognize the need for data breach preparedness. This is good – we are seeing more internal teams being assembled and comprised of key stakeholders within organizations. They are meeting, learning and developing data breach response plans including sample investigation checklists and policies, template notification letters, vendor relationships and engaging in tabletop exercises.

Their initial focus, however, is often exclusively on breaches involving personal information that would trigger notification obligations under federal (e.g., HIPAA) and state laws. The Sanders breach and others before it should make clear that these teams need to look beyond Social Security numbers and payment cards and account for data breaches that could initiate an entirely different set of concerns, exposures, considerations and mitigation steps.

If breached, an organization’s proprietary data, internal email communications among executives and management, customer or client data, sales information, and as we are seeing even voter data can have catastrophic consequences for an organization. A breach exposing insensitive email correspondence in the c-suite about customers, or suggesting systemic discriminatory employment practices, or outlining detailed labor management strategies can have significant implications for a company’s market position and workforce management. It can also trigger unwanted litigation and adversely impact the organization’s reputation. Putting data belonging to others at risk also could result in the loss of access to critical business information help by others, as in the Sanders breach. These are only a handful of examples and one need only think about some of the sensitive business information maintained or accessed by their own organizations that is not personal information to understand the effects of a breach of that information.

Organizations cannot prevent all unflattering emails that are sent and received by members of their workforce, they cannot avoid collecting or accessing sensitive business information entirely, nor can they prevent all data breaches from occurring. But they can take steps to be prepared in the event of a breach and in doing so, should consider the broad range of breaches they could encounter. Organizations engaged in data breach response planning, therefore, need to consider a wide range of data breaches that could affect their organizations – those affecting personal information and those affecting other sensitive and critical business information.

Article By Joseph J. Lazzarotti of Jackson Lewis P.C.

Jackson Lewis P.C. © 2015

Marijuana-Legalization Efforts and Their Impact on the Presidential Race

With the race for the White House heating up, the “politics of marijuana” is looming as a possibly significant factor.

marijuana-leaf white background

Twenty-four state ballot initiatives on marijuana legalization in 16 states have been filed already and will be voted on in November 2016, including in the “swing states” of Arizona, Colorado, Florida, Michigan, Missouri, Nevada, and New Mexico.

This is important because marijuana-legalization ballot initiatives are widely acknowledged to “turn out the vote” of single-issue, first-time, and younger voters – all of whom disproportionately vote Democratic. In close races and swing states, they may make the difference. Insiders have reported that these voters have determined the outcome in several contested races and states in the last two election cycles (e.g., in Barack Obama’s defeat of Mitt Romney in Colorado in 2012).

Moreover, the marijuana-legalization issue is increasingly a focus in U.S. Senate and House races and in pro- and anti-marijuana bills. Recently, the House Republican leadership successfully stripped out pro-marijuana-legalization amendments to two pending bills.

Away from Capitol Hill, twenty-four states and Washington, D.C., already allow for “medical”-marijuana use – at least under some circumstances. Four states (Alaska, Colorado, Oregon, and Washington) and the District of Columbia allow adults to smoke marijuana “recreationally.”

However, proponents’ efforts to introduce marijuana into the legal and cultural mainstream have met with opposition in the workplace and the courts. Even as many states allow “medical” or “recreational” use of marijuana to some extent, the courts have upheld employers’ interests in maintaining drug-free workplaces against challenges by job applicants or employees who were not hired or have been terminated because of marijuana-related substance-abuse-prevention policy violations. Employers have prevailed in every court case brought by employees claiming a “medical”-marijuana justification for their positive drug tests after the company’s adverse employment action – including many decisions in California, Colorado, Michigan, Montana, Oregon, and Washington.

This litigation results from a clash between a culture that increasingly accepts marijuana and companies that prohibit illicit drug abuse because of legitimate safety and productivity concerns. The conflict ultimately will be resolved by Congress or the courts (four lawsuits currently are pending to invalidate Colorado’s legalization of marijuana). Meanwhile, the current Administration, through the U.S. Justice Department, has acquiesced in states legalizing marijuana, essentially by refusing to enforce the federal Controlled Substances Act in those states – an unprecedented policy. This policy could change on January 20, 2017, when a new president is inaugurated.

Thus far, most presidential contenders have shied away from the issue. However, former Texas Governor Rick Perry (R) has endorsed decriminalization. Kentucky Senator Rand Paul, a Libertarian, has consistently supported states’ rights to establish their own marijuana policies and supports decriminalizing marijuana possession. Former Secretary of State Hillary Clinton (D) has hinted that she is comfortable letting the states continue to experiment.

Conversely, New Jersey Governor Chris Christie (R) and Texas Senator Ted Cruz (R) have strongly opposed marijuana legalization, and Florida Senator Marco Rubio (R) also is on record as opposing marijuana legalization.

What the Congress does between now and mid-2016 may be critical. Supporters of marijuana legalization are gearing up. The marijuana industry has hired well-positioned lobbying firms. One of their top issues is to fix the rules that bar marijuana businesses from using banks. The well-funded National Cannabis Industry Association (NCIA) is supporting legislation that would change federal law to recognize the rights of local jurisdictions, including Washington, D.C., to create and regulate their own marijuana laws.

Finally, the U.S. Senate Appropriations Committee voted in support of opening banking services to state legal marijuana business. Senate Bill 683, the CARERS Act of 2015, introduced by New Jersey Senator Cory Booker (D), seeks to amend the federal Controlled Substances Act (21 U.S.C. § 801 et seq.) to ensure that CSA would not apply to anyone acting in compliance with state law relating to the production, possession, and distribution of medical marijuana. The proposal transfers marijuana from Schedule I to Schedule II of the CSA and prohibits federal banking officials from discouraging depository institutions from providing financial services to a marijuana-related, state-permitted legal business. A similar amendment was passed by the full House of Representatives in 2014. The House has not yet taken up the issue in 2015. House Republicans, however, supported a budget plan that would prevent legal sales of marijuana in the District until at least 2017.

Estimates indicate that the value of the legalized marijuana industry currently approaches $3 billion nationwide and is growing. Obviously, a lot is at stake.

The resolution of the marijuana-legalization issue, at both the federal and state levels, could play a significant role in determining the outcome of the upcoming presidential election.

Article By Mark A. de Bernardo & Robert Horn of Jackson Lewis P.C.
Jackson Lewis P.C. © 2015

Pay-to-Play Law on Gov. Christie’s Desk Poses Potential Threat to National Parties

Covington & Burling LLP

A little-noticed sentence in a bill sitting on New Jersey Governor Chris Christie’s desk could, if it becomes law, threaten to curtail the ability of national party committees to raise money from Wall Street and financial industry executives.  The Republican and Democratic Governors Associations, the Republican National Committee, the Democratic National Committee, and the federal congressional party committees could all be impacted.

New Jersey State Investment Council rules prevent the state pension fund from hiring an investment management firm if, within the two years prior, certain executives and professionals at the investment firm made a covered “political contribution or payment to a political party.”  The term “political party” means “any political party or political committee organized in the State” but does not include “a Federal or national campaign committee or a non-State political committee.”

The bill recently passed by the state legislature, however, would change that.  The bill—which we  flagged when it was making its way through the legislature—provides: “Regulations adopted by the council that address political contributions shall apply equally to contributions to any federal or national committee or a non-State political committee as to any other committee covered thereby.”

This poorly drafted provision could be read to apply only to political parties “organized in the State” such as the federal account of a New Jersey political party.  But it could also be read to apply to all federal or national party committees such as the RGA and the DNC.  Indeed, on passage, a sponsor stated that “the legislation would require the investment council to put in place a rule prohibiting firms it selects to invest pension funds from making contributions to any national political organization.”

The statute could therefore restrict federal and national political contributions in ways that reach further than any other pay-to-play law in the country.  Moreover the State Investment Council chairman suggested that the state would have to liquidate existing investments if executives from those investment firms made contributions to national party organizations, even if the contributions were permissible at the time.

Governor Christie has not said whether he plans to sign the bill.  If the law passes, the State Investment Council may promulgate regulations interpreting the law more narrowly.  And even if the law is interpreted to bar contributions to federal party committees and groups like the RGA and DGA, it seems highly vulnerable to challenge on First Amendment and federal preemption grounds.  But in the meantime, as we approach a Presidential election, the political contributions of many on Wall Street and in the financial industry could be chilled and fundraising for national party committees may take a hit.

ARTICLE BY

Zachary G. Parks
Covington & Burling LLP

Staying Above The Political Fray – The RIA (Registered Investment Adviser) Political Contribution Rule

Sheppard Mullin Law Firm

It is entirely understandable if after the recent hotly contested “mid-term” elections the general public would like to put political campaigns behind them– at least for the few months before the hype around the 2016 U.S. Presidential elections kicks into gear.  For many folks in the U.S. financial services industry, however, political campaigns have to be kept in mind all year round, every year.  This is thanks, foremost, to the U.S. Securities and Exchange Commission’s “pay-to-play” rules promulgated under the Investment Advisers Act of 1940 (the “Advisers Act”).  The so-called “pay-to-play” rules can be found in Advisers Act Rule 206(4)-5 (the “Political Contribution Rules”) (which can be found on page 194 of this PDF).  The Political Contribution Rule was first proposed in 2009, in the wake of the scintillating tales arising out of the unquestioned abuse of position by certain politicians at the pension plans for New York, California, Illinois and New Mexico, to name a few.  The Political Contribution Rule was adopted in 2010 (and went effective in 2011) and has found its place into the compliance programs of RIAs across the US.

In brief (and the Political Contribution Rule should not be thought of in brief, as it is a very complicated rule, and far reaching), the Political Contribution Rule provides that it constitutes fraudulent activity for an SEC registered investment adviser to accept compensation for the provision of advisory services to a US public pension plan (other than a federal pension plan) if within the prior two years certain folks at the firm (or their family members) made non-de minimisdonations (roughly, in excess of $350 or $150 per campaign, depending) to any government official or candidate whose governmental position puts (or would put) them in a position to influence the decisions of a public pension plan.  The express prohibition on “doing indirectly that which you are prohibited from doing directly” (see Rule 206(4)-5(d)) and coverage of political activity committees (PACs) make clear that the Political Contribution Rule is intended to capture a broad range of political giving.  For this reason, an RIA compliance policy designed to avoid any issues with the Political Contribution Rule will pick up RIA staff (regardless of title – to avoid any inference of firm directed giving by senior staff), their immediate family members (including children) and, most conservatively, prohibit all political giving, entirely.  Another reasonable response to the Political Contribution Rule is to simply not manage any money for or accept investments from public pension plans.

As invasive and hard to read as the Political Contribution Rule is, the SEC staff stand ready to enforce the rule.  In the first administrative proceeding brought under the rule, TL Ventures Inc. agreed to pay $295,000 to settle claims made by the SEC under the Political Contribution Rule.  The SEC action against TL Ventures arose out of a pair of political contributions made in 2011 (the year the Political Contribution Rule went into effect) by a “covered associate” of TL Ventures, who donated $2,000 to the governor of the State of Pennsylvania and another $2,500 to a Philadelphia mayoral candidate.  These donations resulted in a violation of the Political Contribution Rule when matched with the fact that TL Ventures had accepted investments by the Pennsylvania State Employees’ Retirement System in two TL Ventures venture funds formed in 1999 and 2000, as well as an investment by the Philadelphia Retirement Board in the TL Ventures venture fund formed in 2000. Although these fund investments were fairly dated by 2011, they were still generating fees to TL Ventures during their run off phase.  The dates involved might suggest to a more sympathetic observer that the violation was an oversight, but (as is often the case) other issues that arose during the SEC exam of TL Ventures likely exhausted any willingness on the part of the staff to give TL Ventures the benefit of the doubt.  The order describing and resolving the TL Ventures case presents an interesting set of facts, generally; you can read more about the TL Ventures settlement here.

However, and not without irony, political developments may draw the Political Contribution Rule out of the shadows of regulatory compliance and plop it squarely onto the political stump.  The reason is that in the upcoming 2016 presidential campaign certain candidates for higher office might find themselves at a disadvantage with deep pocketed would-be campaign contributors (i.e., owners and employees of financial services firms) due to the Political Contribution Rule.  A prime example would be New Jersey Governor Christopher Christie, who is widely expected to throw his hat into the ring for nomination as the presidential candidate for the Republican Party.  As the sitting Governor of New Jersey, Chris Christie is an “official” under the Political Contribution Rule, and as governor of New Jersey holds sway over the approximately $81 billion New Jersey’s Public Employees’ Retirement System, through the Governor’s ability to make appointments to the New Jersey State Investment Council.  The Political Contribution Rule does not apply to U.S. federal officials, but, as a sitting governor, any political contributions to Gov. Chris Christy’s presidential campaign would be picked up by the Political Contribution Rule.  Thus, any contribution to a Christie presidential campaign by an owner or employee of a hedge or private equity fund (or other asset manager) would side line her or his advisory firm from managing investments for New Jersey state pension plans.   And, of course, Governor Christie’s proximity to Wall Street and its deep pocketed financial services firms will make the issue that much more acute for him.

There may be no need to wait for the political fireworks to start popping on this issue.  The New York and Tennessee state Republican parties have already brought a legal action against the SEC to invalidate the Political Contribution Rule.  In that case, the plaintiffs allege that the SEC overstepped its authority because the Political Contribution Rule illegally attempts to regulate activity that is exclusively the responsibility of the Federal Election Commission.  (Copy of the complaint). This is similar to the claims of the law suit that lead to the “Goldstein” decision, which saw the SEC’s initial attempt at forcing hedge fund managers to register with the SEC as investment advisers invalidated in 2006.  However, on September 30, 2014, U.S. District Judge Beryl Howell dismissed the plaintiff’s challenge to the Political Contribution Rule, finding that the court lacked jurisdiction and that only the U.S. Court of Appeals for the District of Columbia Circuit had authority to hear the case. Presently, it remains to be seen whether the New York and Tennessee state Republican parties (or anyone else) will renew the complaint with the U.S. Court of Appeals for the District of Columbia.

The political winds seem to be blowing in such a way that the Political Contribution Rule may get blown out of RIA compliance programs.  The SEC staff’s rationale for wanting to address the pay-to-play scandals of the recent and not so recent past are entirely understandable.  But the breadth of the Political Contribution Rule does suggest that the behavior being targeted is best addressed by public pension plans, many of whom have already taken affirmative steps to address the SEC staff’s concerns about the temptations they present to fund manager (many or which are notably doing).  The Political Contribution Rule is hard to implement, cuts too close to the right to political speech, and, ultimately, may hit too close to home for many politicians.

ARTICLE BY

Thomas M. Devaney
Jung Yeon Son
OF
Sheppard, Mullin, Richter & Hampton LLP

Wisconsin Right to Life v. Barland (7th Cir. May 14, 2014)

Godfrey Kahn

On May 14, 2014 the Seventh Circuit U.S. Court of Appeals released its long-awaited decision in Wisconsin Right to Life v. Barland. Click here to read a copy of the court’s decision.

The opinion is authored by Judge Diane Sykes who was a member of the Wisconsin Supreme Court before being nominated by President Bush and then appointed to the federal Court of Appeals in 2004. The matter had been fully briefed, argued and pending since January 2013.

In 2010, the Government Accountability Board (the G.A.B.) adopted an administrative rule, GAB 1.28. In short, this rule greatly expanded the scope of communications subject to regulation as independent expenditures. As a result, issue advocacy communications in the 30/60 days before an election that identified a candidate would be presumed to be independent expenditures and subject to full PAC regulation under state campaign finance law, including donor disclosure.

In response to the G.A.B.’s adoption of this highly controversial rule, three lawsuits were filed almost immediately after the rule took effect. One of those lawsuits was filed in federal court in the Eastern District of Wisconsin by attorney James Bopp on behalf of Wisconsin Right to Life (WRTL). However, WRTL not only sued the G.A.B. about administrative rule GAB 1.28, it also challenged a multitude of other Wisconsin campaign finance laws. Today’s decision is essentially a resolution of WRTL’s lawsuit and all of those legal challenges.

WRTL prevailed in virtually all of its arguments, including:

  • Wisconsin’s ban on corporate political spending is unconstitutional under Citizens United;
  • GAB 1.28 which treats issue advocacy during the 30/60 day preelection period as fully regulable express advocacy/independent expenditures is unconstitutional; and,
  • GAB 1.91 which imposes PAC-like registration and reporting requirements on all organizations that sponsor independent expenditures is unconstitutional as applied to sponsors who are not superPACs (such as 501(c)(4) organizations and other non-committee sponsors).

The Court of Appeals reached its conclusions using very strong and clear language on government’s limited ability to regulate political speech:

  • “The effect of [Buckley] was to place issue advocacy—political ads and other communications that do not expressly advocate the election or defeat of a clearly identified candidate—beyond the reach of the regulatory scheme.” (p. 20)
  • “As applied to political speakers other than candidates, their committees, and political parties, the statutory definition of ‘political purposes’ in section 11.01(16) and the regulatory definition of ‘political committee’ in GAB 1.28(1)(a) are limited to express advocacy and its functional equivalent as those terms were explained in Buckley and Wisconsin Right to Life II.” (p. 62)
  • The G.A.B.’s administrative rule “sweeps a far wider universe of political speech into [state campaign finance laws], introducing confusion for ordinary political speakers who lack the background or assistance of a campaign finance lawyer.” (p. 64)
  • “Regulations on speech, however, must meet a higher standard of clarity and precision. In the First Amendment context, ‘rigorous adherence to [these] requirements is necessary to ensure that ambiguity does not chill protected speech.’ Vague or overbroad speech regulations carry an unacceptable risk that speakers will self-censor, so the First Amendment requires more vigorous judicial scrutiny.” (p. 65)

The WRTL decision also highlights the confusing nature of Wisconsin’s campaign finance statutes and the burdens these laws place on those organizations desiring to participate in the process:

Like other campaign-finance systems, Wisconsin’s is labyrinthian and difficult to decipher without a background in this area of the law; in certain critical respects, it violates the constitutional limits on the government’s power to regulate independent political speech. Part of the problem is that the state’s basic campaign-finance law—Chapter 11 of the Wisconsin Statutes—has not been updated to keep pace with the evolution in Supreme Court doctrine marking the boundaries on the government’s authority to regulate election-related speech. In addition, key administrative rules do not cohere well with the statutes, introducing a patchwork of new and different terms, definitions, and burdens on independent political speakers, the intent and cumulative effect of which is to enlarge the reach of the statutory scheme. Finally, the state elections agency has given conflicting signals about its intent to enforce some aspects of the regulatory mélange. (pp. 3-4)

The WRTL decision also is an excellent summary of the history of campaign finance regulation and litigation in Wisconsin during the last 20 years. It covers in detail successful legal challenges brought against the Elections Board / Government Accountability Board (the G.A.B) by our law firm on behalf of Wisconsin Manufacturers & Commerce (Wis. Supreme Court 1999); Wisconsin Realtors Association (W.D. Wis. 2002); and, Wisconsin Club for Growth / One Wisconsin Now (W.D. Wis. 2010). And, it discusses how despite losing in each of these instances, the G.A.B. continued to push for greater regulation—not less—of political speech.

Bottom line, the WRTL decision makes clear that the government’s authority to regulate political speech extends only to money raised and spent for speech that is express advocacy and that “ordinary political speech about issues, policy, and public officials must remain unencumbered.” (p. 9) Hopefully, with the strong language in this opinion, the G.A.B. will now understand the statutory and First Amendment limitations on its ability to regulate political speech. And, hopefully, the State Legislature will now understand that “Wisconsin’s foundational campaign finance law is in serious need of legislative attention to account for developments in the Supreme Court’s jurisprudence protecting political speech.” (p. 80)

Article By:

Mike B. Wittenwyler
Godfrey & Kahn S.C.

New York Federal Judge Finally Tosses Aside Limits on Contributions to New York Super PACs (Political Action Committees)

COV_cmyk_C

Super PACs in the Empire State and in the Big Apple are about to become more “super.”  On April 24th, a New York federal court finally (albeit begrudgingly) struck down a state law that effectively capped contributions to state Super PACs at no more than $150,000.  Prior to today’s ruling, New York had been one of a few holdout states refusing to recognize the application of Citizens United to state laws limiting contributions to independent political groups.  Indeed, the New York Attorney General defended the limit even after the Second Circuit concluded that it was likely unconstitutional as applied to the Super PAC that challenged it.  It is not clear whether the state will appeal the decision and face a near-certain loss.  If the decision stands—as we expect it will—donors may now contribute unlimited sums to independent political committees that run ads for or against New York state or city candidates.

Article By:

Zachary G. Parks
Of: 
Covington & Burling LLP

Treasury and IRS Provide Thanksgiving Surprise: Proposed 501(c)(4) Political Activity Rules

Womble Carlyle

As most of America travelled over the river and through the woods to Grandma’s house before the Thanksgiving holiday, the Treasury Department and the IRS delivered their own holiday gift.  On Tuesday, November 26, they released proposed guidance aimed at clarifying which conduct by tax-exempt social welfare organizations – 501(c)(4) entities – qualifies as political campaign activity.

Under existing IRS regulations, the promotion of social welfare does not include direct or indirect participation in political campaigns on behalf of or in opposition to any candidate.  Over the years, the IRS has used a wide-ranging facts and circumstances test to determine whether an organization is engaged in an impermissible level of political campaign activity.  In the aftermath of the recent IRS scandal regarding the review of 501(c)(4) applications, Treasury and the IRS believe that more definitive political activity rules would reduce the need to conduct fact-intensive inquiries when applying the rules for qualification as a social welfare organization.

To accomplish this objective, Treasury and the IRS have coined a new term, “candidate-related political activity.”  This term encompasses existing definitions of political campaign activity from federal tax and campaign finance laws, and includes the following:

  • Express advocacy communications;
  • Public communications made within 60 days before a general election or 30 days before a primary election that clearly identify a candidate for public office, as well as any other communications that have to be reported to the FEC (including independent expenditures and electioneering communications);
  • Monetary and in-kind contributions to or the solicitation of contributions on behalf of campaign, party and other political committees, and other tax-exempt organizations that engage in political activity; and
  • Other election related activities such as voter registration and get-out-the-vote drives, distribution of candidate or political committee materials, and the preparation and distribution of voter guides.

The proposed rules raise many serious concerns.  For example, candidate-related political activity could include conducting nonpartisan voter registration drives and distributing nonpartisan voter guides.  Moreover, the proposed rules attribute to 501(c)(4) organizations, among other things, political activities conducted by their officers, directors or employees acting in that capacity.

Unfortunately, the draft rules do not elaborate on the possible differences between conduct taken in an official capacity and personal political conduct by an officer, director or employee.  Finally, many contributions from a 501(c)(4) to another tax-exempt organization would appear to qualify as candidate-related activity unless the contributor receives a written confirmation that the recipient does not engage in such activity and the contributor restricts the use of the contribution.

The proposed political activity rules also leave many important issues unaddressed.  Under existing rules, 501(c)(4) entities must be “primarily” engaged in activities that promote the common good or social welfare.  The proposed rules provide no guidance on what proportion of an organization’s activities must be dedicated to this purpose to qualify under section 501(c)(4).   The proposed regulations also do not apply to entities that qualify under Section 501(c)(3) (charitable organizations),  Section 501(c)(5) (labor unions),  Section 501(c)(6) (trade associations), or Section 527 (political organizations).  Treasury and the IRS are, however, accepting comments on the advisability of making changes in each of these areas.  Interested persons may submit comments to the IRS by February 27, 2014.

Article by:

Of:

Womble Carlyle Sandridge & Rice, PLLC