A Question of Ethics

Congress' Gift Rules Now Apply to Businesses

September 10, 2007

Q: I work in the government relations department of a Fortune 500 company and am responsible for filing our lobbying registration and disclosure forms. I have had this role for years and filling out the forms has become second nature. However, I gather that the recent lobbying reform will bring changes to the forms. I haven’t seen the new forms yet. Are there any potential pitfalls?

A: The Honest Leadership and Open Government Act, which is expected to become law this week, contains the most significant changes to lobbying registration and disclosure requirements since the Lobbying Disclosure Act of 1995. Many lobbyists have shrugged off the reform, saying that they do not anticipate any impact on the way they conduct business. This seems a cavalier approach, especially given the sweeping nature of some of the changes.

Perhaps the most significant change is the introduction of criminal liability. While there always have been civil penalties for lobbying registration violations, anyone who “knowingly and corruptly fails to comply with any provision” of the Lobbying Disclosure Act will now be subject to a prison sentence of up to five years. Therefore, there is every reason to take the new requirements seriously. Even though the new lobbying registration and disclosure forms do not exist yet, you are sensible to be on the lookout for potential pitfalls.

So are there any pitfalls? In a word, yes. Perhaps the most puzzling, particularly for companies like yours, is the requirement that each person and organization filing a registration form certify that the person or organization “has read and is familiar with” the Senate and House rules “relating to the provision of gifts and travel.”

In the case of an individual lobbyist, as opposed to an organization, this requirement is not puzzling at all. Before filing your registration form, simply be sure to read and familiarize yourself with the House and Senate gift and travel rules, so you can certify that you have done so.

In the case of an organization, however, certifying familiarity with the gift and travel rules becomes more complicated and confusing. This is because organizations don’t read. People read.

Take a company like Exxon. Exxon employs its own in-house lobbyists, just as your company does. Consequently, Exxon must file lobbying registration and disclosure forms and has done so for years. Beginning in 2008, someone must certify on behalf of the company that Exxon “has read and is familiar with” the Senate and House rules relating to gift and travel. Yet Exxon can no more read ethics rules than it can drink beer or play tennis.

The odd requirement that companies must “read” and be familiar with the gift and travel rules leaves many questions unanswered. What does it mean for a company to read the rules? What does it mean for a company to be familiar with the rules? In order for a company to make the required certification, must certain employees read and be familiar with the rules? If so, how should a company identify which of its employees must do so? Once the company identifies the employees, what steps must it take to ensure that they actually read the rules and are familiar with them?

While there are many ways a company could answer these questions, perhaps the safest approach is to implement formal processes designed to ensure compliance. For example, a company’s managers could first identify all employees who they believe could be in a circumstance in which the gift and travel rules might apply. Next, the company could require such employees to certify to the company that they have read and are familiar with the rules. To be absolutely certain, the company might even go one step further and require certain employees to undergo training regarding the rules.

One advantage of formal processes like these is that the company would have the ability to document compliance. This would be particularly useful if the government were ever to question whether the company properly complied with its obligation to read and be familiar with the rules. Although such processes certainly would not be necessary to demonstrate compliance, they would make it much easier for a company to do so.

Formal processes and training would have other benefits as well. Under the lobbying reform, companies are required not only to read and be familiar with the rules but to obey them, too. In fact, in their disclosure forms they must now certify that they have complied with the gift and travel rules. Lobbyists and organizations that employ lobbyists can now be criminally liable for knowing violations of these rules. This is a major change to lobbyists’ legal exposure and is a reason all by itself for a company to make sure its employees are familiar with the rules.

Prior to the lobbying reform, the House and Senate gift and travel rules applied only to Members and their staff. Now, for the first time, the rules will apply to individuals and organizations outside of Congress. Companies that employ lobbyists will soon discover what Members and their staff have known for years: The rules are neither simple nor intuitive. Pitfalls abound.


© Copyright 2007, Roll Call Inc. Reprinted with permission. Widely regarded as the leading publication for Congressional news and information, Roll Call has been the newspaper of Capitol Hill since 1955. For more information, visit www.rollcall.com.

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