Lessons Learned from the Della Pello Decision

Earlier this year, a government contractor lost just over $7 million in New Jersey state government contracts because of a single political contribution that was inadvertently made payable to the WRONG political recipient. Don’t let this happen to your company:

  • If an invitation for a political event gives you a choice of recipients to which you can write your check, always evaluate your options and understand the pay-to-play limits with respect to each recipient committee. Different pay-to-play restrictions apply to different types of recipients. Choose wisely …
  • Always have a clear understanding of each type of recipient committee. Ask yourself – are we writing our check to a candidate, party, PAC, Super PAC or legislative leadership committee?
  • Look at the check before it goes out to make sure the check is payable to the intended recipient. Ask yourself – does the name on the check match up with the name on the invitation? Is this the committee to which we want to contribute?
  • Use a cover letter with each contribution. Stick to the basics – Who, What , When, Where – remember less can sometimes be more – there is no need to include a Why!
  • Review your canceled checks on a regular basis to make sure your check was deposited by the intended recipient and didn’t end up in the wrong pile of checks (sometimes recipient committees share a Treasurer).
  • Train relevant people within your company about the “Dos and Don’ts” of political activity compliance (although too many cooks in the kitchen can sometimes be a recipe for disaster, having more than one set of eyes involved in the process is usually helpful).
  • Do not participate as a matter of routine – recipient committees will always be happy to accept your contribution after an event – contact the recipient committee if you need additional information and take your time to make an informed decision – remember – political contributions are NOT an emergency!
  • And, if a mistake occurs because you did not have (or follow) the proper procedures at the time of the contribution, review the refund provisions and do everything in your power to get the check back within the correct time-frame.

For more information on how you or your company may safely participate in the political process while preserving eligibility for government contracting opportunities, please contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at rfreed@genovaburns.com or 973-230-2075.

NJ’s Gubernatorial Election – Public Matching Funds and the Role of Outside Money

On the same day that it was announced that Kim Guadagno and Phil Murphy both qualified for public matching funds in New Jersey’s 2017 gubernatorial election, the New Jersey Election Law Enforcement Commission issued a News Release reporting that independent spending reached an all-time high in New Jersey’s 2017 primary election. This means that, as we look toward the general election, our gubernatorial candidates will be limited in what they can spend in the general election ($13.8 million to be precise) while independent groups will not be subject to contribution or expenditure limits—this type of “outside spending,” which arises from sources other than candidates, is likely to become increasingly important in the 2017 gubernatorial election.

Under the First Amendment, independent groups are permitted to spend unlimited amounts of money in connection with an election provided they do not coordinate their activities with a candidate, his or her agents, or his or her campaign. Many think that Super PACs and independent-expenditure only committees are the only outside groups that play a role in elections; however, individuals, corporations, labor organizations and trade associations are also free to engage in the process and spend unlimited funds in New Jersey elections so long as there is no coordination with the candidate, his or her agents, or his or her campaign. Especially in New Jersey, home to strict pay-to-play restrictions that limit contributions to no more than $300 per election to a gubernatorial candidate and no more than $300 per calendar year to a party committee by a government contractor (and certain individuals associated with that contractor), independent spending is likely to play a big role in the upcoming general election.

For more information on how you or your company may participate in the political process, please contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at rfreed@genovaburns.com or 973-230-2075.

How will the Looming New Jersey Government Shutdown affect your Business?

In a letter to Cabinet officials yesterday, Governor Christie’s Acting Chief Counsel instructed all State departments to draft contingency plans and prepare for short-term shutdown if the State budget for FY 2018 is not passed by midnight, July 1. In the event of a shutdown, only essential services to protect the health, safety, and property of New Jersey citizens will function. All other State services will cease until the budget is passed.

If the shutdown occurs, anyone who has a matter before a State government body will likely be delayed for a period of undetermined length. State courts will be closed, except in certain emergency cases. The State procurement process will also stall, impacting various entities who are seeking State contracts, and those with State contracts will also likely see a work stoppage, unless they are involved in providing “essential services.” However, some departments and agencies will continue to run because they are considered necessary for the well-being of New Jerseyans, such as the State Police.

As of now, the situation in Trenton is fluid. There is still time for a deal to be made to prevent a shutdown, though the Executive and Legislature remain at loggerheads.

For assistance in determining how the potential government shutdown may affect your business, please contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at rfreed@genovaburns.com or 973-230-2075, Avi D. Kelin, Esq. at akelin@genovaburns.com or 973-646-3267, or Paul M. Rozenberg, Esq. at prozenberg@genovaburns.com or 973-646-3283.

 

Candidates, Contributions & Compliance in Connection with New Jersey’s 2017 Gubernatorial Election

On Tuesday, June 6th, New Jersey held its 2017 gubernatorial primary election. Voters went to the polls to choose the Republican and Democratic candidates for Governor. Now that we know that the general election will feature a race between Phil Murphy and Kim Guadagno, here are a few campaign-finance and pay-to-play reminders to keep in mind as you decide how you would like to participate:

  • If your company holds New Jersey State government contracts or would like to remain eligible for New Jersey State government contracts in the future, you should limit your corporate contribution to a gubernatorial candidate to no more than $300 per election per candidate.
    • Compliance Tip – Regardless of how your company is organized, contributions by your company’s shareholders, officers, equity partners, equity members and the spouses, resident children and civil union partners of these individuals may impact your company’s eligibility for State government contracts.
  • If remaining eligible for New Jersey State government contracts is not a concern, and your company is organized as a corporation, your company may contribute up to $4,300 per election per candidate.
    • Compliance Tip – Please note that affiliated corporations may share a contribution limit.
  • If your company is organized as a corporation, shareholders, officers and directors enjoy individual contribution limits that are separate from the limit enjoyed by the company.
    • Compliance Tip – Please note that certain regulated-industry companies may not contribute with corporate funds, but individual officers and directors may participate individually.
  • If your company is organized as a partnership or limited liability company, your company may not contribute as an entity, but each partner or member is entitled to his or her own limit.
    • Compliance Tip – If your contribution is drawn upon a partnership or limited liability company check, be sure to follow the allocation rules set forth under NJ campaign finance law.
  • Even though the primary election was held two days ago, any contribution received thru June 23rd counts toward your 2017 primary election limit. So, if you already maxed out in connection with the primary, you should wait until June 24th to write your next check. On the flip side, if you have yet to contribute (and would like to), you still have time!
    • Compliance Tip – To help properly track your contribution with the relevant election cycle, use the memo line of  your check and review relevant ELEC reports to make sure your contribution was reported in connection with the appropriate election.

Tuesday’s primary made it clear that New Jersey’s 2017 election season is now in high-gear! As we head into the summer months, it is the perfect time to focus on political-activity compliance.

Is New Jersey’s Regulated-Industry Ban on Political Contributions Ripe for Challenge?

Since 1911, New Jersey law has prohibited the making of political contributions by such highly regulated industries as banks, utilities, and insurance companies. The reasoning underlying this prohibition was clarified by a New Jersey Attorney General Advisory Opinion, which explained that these “[c]omprehensive regulatory programs, vital to the protection of the public, could become prime targets of elected officials seeking to satisfy perceived debts to corporate benefactors affiliated within a regulated industry.” For more than a century, this law has remained in effect. But new legal developments raise questions about the constitutional validity of this ban on regulated-industry political contributions.

In early May of 2017, in Free and Fair Election Fund, et al. v. Missouri Ethics Commission, et al., the U.S. District Court for the Western District of Missouri declared unconstitutional a provision of Missouri campaign-finance law that prohibited banks, insurance companies, and telephone companies from making any political contributions to PACs. (Missouri law already prohibitions all contributions to candidates and political parties from corporations, without regard to whether the corporations in engaged in a heavily regulated industry.) The court determined that this complete ban on contributions from heavily regulated industries is unconstitutional because the law was not closely drawn to avoid abridging First Amendment rights to engage in the political process. This decision was based in part on the U.S. Supreme Court’s recognition that “there is not the same risk of quid pro quo corruption or its appearance when money flows through independent actors to a candidate, as when a donor contributes to a candidate directly.” In this case, making contributions to PACs did not give rise to the same risks of quid pro quo corruption or the appearance thereof because the PACs were independent entities that could determine for themselves how to use funds received from a contributor. This lessened risk was not reason, in the eyes of the court, to prohibit certain corporations from participating in the political process.

This issue is far from settled, as Missouri’s Attorney General announced that he will appeal the court’s decision, and there are key differences between New Jersey’s regulated-industry ban and Missouri’s regulated-industry ban and New Jersey campaign-finance law and Missouri campaign-finance law.  However, the Free and Fair Election Fund decision begs the question whether New Jersey’s regulated-industry ban is ripe for challenge.

 

What President Trump’s Executive Order Means for 501(c)(3) Political Activity

Recently, President Trump signed his Executive Order “Promoting Free Speech and Religious Liberty.”  It directs the Secretary of the Treasury to exercise discretion to avoid taking any adverse action against an individual, house of worship, or religious organization that speaks about moral or political issues from a religious perspective, including the revocation of 501(c)(3) status.  According to President Trump, this Executive Order “removes the financial threat faced by tax-exempt churches from the Internal Revenue Service when pastors speak out on behalf of political candidates.”

Under the Internal Revenue Code, 501(c)(3) charitable organizations are prohibited from engaging in partisan political activity.  This means: making political contributions, making statements that endorse or oppose a candidate, and asking candidates to sign pledges on any issue.  However, charitable organizations are allowed to engage in limited non-partisan activity, such as: voter-registration drives, limited lobbying on ballot initiatives, and educating candidates on issues that fall under the purview of the entity.  Also, the officers, directors, and employees of a 501(c)(3) retain the right to personally engage in partisan political activity.

So, does this Executive Order free religious 501(c)(3) charitable organizations to engage in partisan political activity without fear of tax-exempt status revocation?  Perhaps not. While the Executive Order may promote more relaxed enforcement, the restrictions on partisan political activity still exist in statute and legislative action would be required to change the law. In addition, this Executive Order may face legal challenges in court. The Executive Order also raises the question whether churches should be treated differently from non-religious 501(c)(3) entities. Until and unless the statute is changed, 501(c)(3) organizations would do well to refrain from participating in partisan political activity.

For more information on how this Executive Order may effect you, please contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at rfreed@genovaburns.com or 973-230-2075.

 

Is the Time Ripe for New Jersey Pay-to-Play Reform?

For more than a decade, New Jersey has had in place a series of pay-to-play laws that impose reduced contribution limits and heightened disclosure requirements for government contractors. The goal of these laws is to ensure fair contracting procedures and to remove favoritism from the procurement process.

But are these laws working as intended when seemingly innocent mistakes leading to relatively small political contributions remove otherwise qualified and competitive bidders from government contracts? News last month that a paving company was disqualified from $7 million in New Jersey Executive Branch contracts because of a $500 political contribution has government contractors throughout the State understandably concerned about their own compliance procedures. The disproportionate effect of a relatively small political contribution has highlighted the need to reform New Jersey’s pay-to-play laws.

And Jeff Brindle, the Executive Director of the New Jersey Election Law Enforcement Commission, agrees. The need for reform is not a new issue, but the dramatic nature of this ineligibility determination may provide the impetus to begin this process in earnest.

In the current legal landscape and a blockbuster New Jersey election year that will see the election of a new governor as well as 120 State legislative races, government contractors need to focus on their pay-to-play compliance. Merely assuming that you are in compliance is simply not good enough, when a contribution of only a few hundred dollars can disqualify your company from millions of dollars of contracts. At this point in the election cycle, even one unintentional contribution can disqualify your company for up to 5 ½ years and, starting in April, refunds will not cure an excessive contribution once we have entered the 60 days preceding the 2017 primary election.

Genova Burns LLC has been at the forefront of pay-to-play compliance since New Jersey’s law was enacted more than a decade ago. If you are unsure of your compliance procedures, Genova Burns LLC can assist you in navigating the current legal landscape as well as any reforms that the future may bring. If you have any questions or would like to discuss your pay-to-play compliance program, please contact Rebecca Moll Freed, Esq. at 973-230-2075 or Avi D. Kelin, Esq. at 973-646-3267.

Deadline for New Jersey’s Annual Pay-to-Play Disclosure is Approaching: Is Your Company Ready to File?

After ELEC sent out its reminder email on March 6, we are reproducing below a Genova Burns LLC client alert that was distributed last week for any potential filers who may require additional information about the annual pay-to-play disclosure.

The New Jersey Election Law Enforcement Commission (“ELEC”) requires each business entity that received payments of $50,000 or more (in the aggregate) as a result of government contracts during the 2016 calendar year to electronically file a Business Entity Annual Statement (“Form BE“) with ELEC no later than Thursday, March 30, 2017.

The obligation to file arises whenever payments from New Jersey government entities reach the $50,000 threshold. This includes contracts with the State of New Jersey Executive and Legislative branches, counties, municipalities, boards of education, fire districts, and independent authorities, regardless of method of award.

Additionally, detailed contract and contribution information must be disclosed whenever the business entity or a covered individual made a “reportable” contribution during 2016. A contribution is “reportable” when it exceeds $300 per reporting period. In light of these requirements, it is necessary to review personal political contributions made by a business entity’s partners, officers, and directors (and certain members of their families). Additionally, because of varying election cycles, it may be necessary to review contributions made over the course of several years to determine whether any 2016 contributions are reportable.

Companies that fail to file on time may be subject to monetary penalties. To ensure a timely and accurate filing, companies that have yet to begin preparing Form BE should not delay.

Genova Burns LLC can help your company comply with the Form BE filing requirements. Contact Rebecca Moll Freed, Esq., Chair of the Corporate Political Activity Law Group, at rfreed@genovaburns.com or 973-230-2075 or Avi D. Kelin, Esq. at akelin@genovaburns.com or 973-646-3267.

Plainfield Repeals Local Pay-to-Play Ordinance

New Jersey is home to a multitude of overlapping pay-to play laws. The State has a default statute covering pay-to-play restrictions at the municipal level. In 2006, however, the State Legislature allowed municipalities to craft their own pay-to-play ordinances further restricting certain political contributions from vendors. Although these local ordinances are supposed to be “consistent with the themes” of New Jersey’s statewide pay-to-play restrictions, variations exist among the local ordinance in effect in more than 100 municipalities across the State.

As of last week, the number of municipalities with local pay-to-play ordinances in effect dropped by one when, in a 4-3 vote, the Plainfield Municipal Council voted to repeal its 2011 pay-to-play ordinance. Until recently, Plainfield had a stringent pay-to-play ordinance in effect. Under the old ordinance, covered contributors were subject to reduced contribution limits for municipal candidates and political party committees, as well as for county political party committees and PACs that regularly engage in the support of Plainfield municipal or Union county elections. Additionally, all contributions were prohibited once negotiations for a contract began. Without the ordinance, the State’s default pay-to-play laws will be in force in Plainfield. This means, if the City of Plainfield awards contracts pursuant to a “fair and open” process, vendors may contribute up to $2,600 per election to a candidate for Plainfield municipal office. If, however, the City of Plainfield does not use a “fair and open” process, vendors must adhere to the reduced pay-to-play limit of $300 per election to a candidate for or holder of Plainfield municipal office and $300 per calendar year to a Plainfield municipal party committee.

Proponents of the repeal argue that this will bring more transparency to the political process by encouraging direct contributions to candidates and party committees instead of PACs (a sentiment that echoes ELEC’s recent calls to revisit the State’s pay-to-play laws). The repeal of this ordinance is part of a trend of New Jersey counties and municipalities that have revised or rescinded local ordinances in an effort to simplify the government-contracting process. Will other municipalities follow Plainfield’s lead?

When it Comes to Pay-to-Play, Not All Political Recipients are Created Equal

If any New Jersey State contractor or potential State contractor out there ever thought that it didn’t need to put political-activity and pay-to-play compliance at the top of its “To Do” list, we have a cautionary tale for you.

Earlier this week, after losing out on the opportunity to perform two separate NJDOT contracts worth just over $7 million, the Superior Court, Appellate Division in Mercer County held that a paving company would remain ineligible for New Jersey state government contracts through the end of Governor Chris Christie’s current term of office because the company made a $500 contribution to a county party committee. Under New Jersey’s pay-to-play laws, contributions that exceed $300 per calendar year to a county political party committee will disqualify the contributor for contracts with the State of New Jersey Executive Branch. In this case, the devil is in the details – the company wrote its check payable to the “Somerset County Republican Org to Elect Provenzano,” referencing a candidate for County Sheriff. The contribution was made in connection with an event sponsored by the Somerset County Republican Organization, which provided attendees with the option of making their checks payable to different recipients. Unfortunately for the paving company, the payee name on its check was ambiguous and was eventually deposited by the Somerset County Republican Organization. If the company check had been more clear, or had been deposited by the County Sheriff candidate (or had been made payable to the County Freeholder candidates that were also listed on the invitation), the paving company would not have been declared ineligible for contracts with the State of New Jersey. The company only realized the implications of the contribution after the close of the 30-day refund period, and thus finds itself sitting on the sidelines for the remainder of Governor Christie’s current term of office.

This case reaffirms that although both contributors and recipients sometimes make mistakes, New Jersey’s Executive Branch pay-to-play restrictions provide no room for “inadvertent” contributions except during the limited 30-day refund period. In this case, the President of the company “signed the check as a matter of office routine since he signs virtually all company checks every month.” There is nothing routine when it comes to New Jersey pay-to-play restrictions. What is the moral of the story?  If you hold a State contract with the New Jersey Executive Branch and are thinking of making a political contribution, be informed about the State’s stringent pay-to-play laws and implement careful compliance and oversight policies for political contributions. Make it crystal clear who the recipient of your contribution is.  Don’t let lax compliance and an inadvertent $500 contribution cost you $7 million in contracts.

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