On February 17, 2009, President Obama signed into law the $787 billion American Recovery and Reinvestment Act (“Recovery Act”), which, among other things, authorized $525 billion for federal funding of new and existing projects and programs, with a goal of jump-starting job creation and long-term growth in key sectors of the economy.
A month later, on March 20, President Obama issued an Executive Memorandum entitled: “Ensuring Responsible Spending of Recovery Act Funds.” The March 20 Memorandum significantly limited communications by federally-registered lobbyists on behalf of their clients regarding specific Recovery Act projects. In April 2009, Kelley Drye & Warren LLP prepared for Citizens for Responsibility and Ethics in Washington (“CREW”), a detailed memorandum advocating for reconsideration of the lobbyist restrictions contained in the March 20 Memorandum. CREW, along with other advocacy groups, including the American League of Lobbyists and the American Civil Liberties Union, consulted with the White House and the Office of Management and Budget (“OMB”) regarding these March 20 restrictions. For its part, Kelley Drye’s memorandum included both a constitutional analysis of these restrictions and an empirical review of the make-up of the federal lobbying community which revealed a wide and, perhaps surprising to many, diversity in registered lobbyists and their clients. (Click here to view Kelley Drye’s April 24 memorandum).
Last Friday, July 24, OMB Director Peter Orszag issued a Memorandum for the Heads of Executive Departments and Agencies announcing changes intended to provide for clearer and more consistent application of the restrictions on communications related to the Recovery Act. (Click here to view the new July 24 OMB guidance). Director Orszag explained the most noteworthy change to the original March 20 guidance in the following terms:
The prohibition on oral communications between Federal agency officials and federally registered lobbyists regarding specific Recovery Act projects that was contained in the President’s Memorandum has been clarified. The restriction applies in the context and at the stage where concerns about merit-based decision-making are greatest – the period beginning after the submission of formal applications for, and up through awards of, competitive grants or other competitive forms of Federal assistance under the Recovery Act. The restriction has been expanded to cover, generally, all persons outside the Federal Government (not just federally registered lobbyists) who initiate oral communications concerning pending competitive applications under the Recovery Act.
Director Orszag’s July 24 Memorandum explained that additional disclosure requirements will still apply to lobbyist communications with executive branch officials and staff regarding Recovery Act projects and policies that are not logistical, made at a widely attended gathering, or are in response to questions from program officials and staff about a proposal or bid.
Notably, these disclosure requirements are in addition to two pre-existing disclosure requirements relating to lobbying activity. First, the Lobbying Disclosure Act (“LDA”) requires disclosure of communications with covered legislative and executive branch officials. Under the updated OMB guidance (as under the President’s March 20 Memorandum), any person or entity, including but not limited to a registered lobbyist, is not prohibited from communicating with a member of Congress or congressional staff regarding Recovery Act projects. Such communications are subject to LDA disclosure, if threshold registration and disclosure requirements apply. The LDA would also require disclosure of communications by representatives of LDA registrants with personnel in the Executive Office of the President, including OMB staff, and certain categories of senior agency officials.
Second, and less well known, the so-called Byrd Amendment requires disclosure of communications by representatives of federal lobbying registrants on behalf of their clients relating to federal contracts and grants. If these communications are made, a prospective contractor or grant applicant is required to file OMB Form LLL along with its grant application or bid/RFP response and/or at a later appropriate juncture. The form is to be filed with the contracting officer or other responsible program official and is to be updated as required.
The President’s March 20 Memorandum explained that it was designed to increase transparency and efficiency for Recovery Act program implementation, and to empower department and agency officials not to fund “imprudent projects.” Section 3 of the Memorandum specifically sought to limit the activity of federally-registered lobbyists, prohibiting executive agency or department officials or staff from discussing orally any application for funding of a Recovery Act project with a registered lobbyist, and requiring that any written communication from a registered lobbyist be posted on the Internet. Further, to the extent that the registered lobbyist’s communication related to “general Recovery Act policy issues,” federal officials were directed to promptly document meeting details on the Internet. Upon publication, the President instructed OMB to review the implementation of the Memorandum and, within 60 days, offer recommendations for modification or revision.
Kelley Drye’s April 24 memorandum highlighted the fact that the rules did little to enhance transparency, as registered lobbyists already are bound by LDA reporting requirements, and other potentially influential individuals were not subject to the new restrictions. Further, Kelley Drye’s memorandum pointed out the rules’ limitation on the constructive role of lobbyists in meeting Recovery Act goals. To that end, Kelley Drye presented a detailed statistical analysis of LDA Act reports demonstrating that a large proportion of registered lobbyists represented cities and towns, nonprofit organizations, hospitals, and small businesses – precisely the groups in need of help navigating the complex Recovery Act process.
Kelley Drye’s memorandum also provided a detailed legal argument that the restrictions on registered lobbyists violated individuals’ First Amendment rights to petition government and their free speech rights. Consistent with the approach taken in Director Orszag’s July 24 Memorandum, the Supreme Court in general has considered disclosure a more appropriate method, under First Amendment principles, to regulate lobbying than bans on communications.
Director Orszag’s July 24 Memorandum identified four categories of communications with agency officials and staff regarding Recovery Act programs, and provided guidance to these federal representatives regarding each:
- Logistical Questions Relating to the Recovery Act. The President’s March 20 Memorandum did not limit these communications and they remain not subject to restriction. Examples of such questions include: (1) how to apply for funding under the Recovery Act; (2) how to conform to deadlines; (3) inquiries regarding to which agencies or officials applications or questions should be directed; and (4) requests for information and program requirements and agency practices under the Recovery Act.
- Oral Communications At Widely-Attended Gatherings. According to Director Orszag’s July 24 Memorandum, the President’s March 20 Memorandum was not designed to limit communications by federally-registered lobbyists, or anyone, at gatherings “attended by a large number of people from throughout an industry or profession who represent a wide range of interests.” Such communications are still not in any way limited, because the context and range of attendees provide for transparency. This represents an important clarification nonetheless, because press reports had indicated that, in certain instances, agency officials and staff had mistakenly excluded federally-registered lobbyists from such informational sessions. Notably, however, restrictions and disclosure requirements do apply to any private “one-on-one” conversations that may occur at a widely-attended event.
- Oral Communications Following Submission of Formal Applications for Competitive Grants or Other Forms of Federal Financial Assistance. As explained above, once a competitive application is filed, federal agency officials and staff are not permitted to communicate with anyone in the private sector (whether or not a federally-registered lobbyist) regarding a pending application unless the communication is “purely logistical” or “made at a widely-attended gathering.” Certain exceptions also apply to inter-governmental communications. Federal agency officials and staff are also able to initiate communications with applicants and others to obtain additional information regarding applications. Notably, Director Orszag’s July 24 Memorandum distinguished, in a series of Frequently-Asked Questions, non-competitive grants or applications, such as if federal assistance was to be awarded based on a formula. (Click here to view the FAQ’s included in the July 24 OMB guidance)
- Oral or Written Communications with Federally-Registered Lobbyists. In permitted communications with private parties regarding Recovery Act policies and projects for funding, Director Orszag’s July 24 Memorandum instructs federal agency officials and staff to ascertain whether the individual making the communication is a federally-registered lobbyist. If so, agency officials and staff will be required to post basic information regarding their communications (unless they are purely logistical or part of a widely attended gathering) with federally-registered lobbyists using either an electronic form or a web tool that is currently under development within 3 business days of the contact. Information to be disclosed includes the date of the communication, the names of the parties to the communication, the name of the lobbyist’s client, a “general one-sentence description of the substance of the conversation,” and any written materials submitted to program officials in connection with the meeting. The web tool will be designed to permit agency officials and staff to ask a lobbyist to enter the information required to be disclosed, and then the agency official or staff person can review and post the information. Written communications from lobbyists will be disclosed in a similar fashion.
Kelley Drye helps its clients succeed in the political arena by guiding them past the legal pitfalls that could lead to civil and even criminal penalties and adverse scrutiny. Through our comprehensive, continuing focus on evolving campaign finance and ethics rules and the tactics of enforcement authorities, we shape clients' advocacy programs, compliance approaches and defensive measures to reduce vulnerabilities and address problems. Many diverse corporations, trade associations and labor organizations turn to us for continuing assistance on government ethics, lobbying, and campaign finance and election law. We create tailored lobbying, government ethics, and political activity compliance programs for our clients designed to train employees on the relevant laws, reinforce the right behaviors, and clarify when to ask for guidance.
For more information on this client advisory, please contact:
David E. Frulla