Compliance Corner: How to Ensure Political Compliance Before Election Day

The Gold Dome.

With only days to go before the momentous 2022 midterm elections, the time is right to review last-minute political-compliance tips.

Do Your Homework Before Making a Political Contribution

While many of the campaign fundraisers have been held already, candidates and committees are still holding last-minute events and appearances. As the political world rushes toward Tuesday, mistakes can happen when normal procedures are not followed. We have seen businesses and individuals write contribution checks, without following normal compliance procedures, because a fundraiser was happening in two hours or because election day was quickly approaching.

The dangers of making contributions without proper compliance are clear—a contributor can make an excessive contribution, or a prohibited contribution under New Jersey’s criminal law (for such regulated-industry companies as banks, insurance companies, and utilities), or a contribution that jeopardizes eligibility for New Jersey or federal government contracts under varying pay-to-play laws.

The best approach is to follow normal compliance procedures and understand, before writing a check:

  • What is the exact name of the recipient committee?
  • Is the recipient a candidate committee, a joint candidates committee, a party committee, or a PAC?
  • For which election or reporting period will this contribution count?
  • Have previous contributions been made to this recipient during this reporting period?
  • Are there any pay-to-play implications—both contract eligibility and disclosure—involved in making this contribution?

Train Full Teams on Political Compliance

Although regular readers of this publication understand that politics is a year-round industry, the general population tunes in only as election day approaches. A business may have a compliance program in place that works well for the normal group of politically active owners, officers, and employees—but the program must also work for the occasional contributor. It is crucial that businesses ensure that all employees are aware of any compliance program and political-activity policy because one misstep—”My old college roommate is running for mayor and I didn’t know we had to pre-clear contributions”—can jeopardize eligibility for government contracts. Under New Jersey pay-to-play laws and ordinances, it is not merely 10% owners or officers of a company whose contributions are relevant for contract eligibility. Instead, in some cases, any equity partner or member of a partnership or LLC, or any employee with an annual salary of more than $100,000, can make a small contribution and jeopardize eligibility for million-dollar contracts. As a wider group of people become involved in the political process, any compliance plan must account for and be communicated to both the regular and occasional contributors.

Plan on Pre-Election Reporting Requirements

In this pre-election period, there can be heightened disclosure obligations for both political committees that receive or make contributions and for individuals and entities that make independent expenditures. These reports are often due within 24 or 48 hours after the transaction has occurred. The key challenge here is that there is no remedy if a required filing is not timely made—a 48-hour report filed on the 49th hour is still late, with no cure. Therefore, in light of the quick reporting turnaround, it is important that there is a reporting plan in place as soon as the transaction is made.

Avi D. Kelin is Counsel in Genova Burns LLC’s Corporate Political Activity Law Practice Group and Chair of the firm’s Autonomous Vehicle Law Practice.

This column is for educational and informational purposes only and is not intended and should not be construed as legal advice. It is recommended that readers not rely on this column, but that professional advice be sought for individual matters.

 

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