A Question of Ethics

Is TARP Lobbying Allowed at Widely Attended Gatherings?

October 27, 2009

Q: I am a lobbyist with a question about the new restrictions on lobbying for TARP funding. As I understand it, we are now prohibited from talking to government officials regarding any pending funding applications. While this seems a bit onerous, I suppose it is OK so long as everyone is playing by the same rules. However, some of my peers in the field have said that they plan to continue discussing specific projects with government officials by utilizing what they say is a loophole in the new rules. According to them, there is an exception allowing discussions regarding pending applications so long as those discussions take place at a widely attended gathering. I’m not sure about this. I don’t want to break the rules, but I also don’t want to lose out to lobbyists who plan to take advantage of this exception. What do the rules say?

A: In January, Treasury Secretary Timothy Geithner announced that there would be new restrictions governing lobbying for funds provided through the Troubled Asset Relief Program. In a memorandum published last month, the Treasury Department issued those new restrictions. Note that these restrictions are different from the rules governing lobbying for stimulus funding that the Office of Management and Budget issued in April and then revised in July.

In any event, the purposes of the new restrictions on TARP lobbying are to “limit the influence of lobbyists and special interests” and to ensure that TARP decisions are “guided by objective assessments in the best interest of the health and stability of the financial system.” Regardless of whether the restrictions will have that effect, they will certainly change the way that people lobby for TARP funding.

One of the most significant restrictions is the one you mention. It prohibits any oral communications with Treasury officials regarding pending applications for TARP funds. This prohibition applies during the period beginning with the submission of a formal application for TARP funds and ending with the preliminary approval of such funds. During that time, substantive communications with Treasury officials regarding the application must be written, and even those must then be made public by the Treasury. Note that this bar on oral communications applies not only to lobbyists but to just about everyone. The only people to whom it does not apply are Treasury employees and officials of other executive agencies, presumably because it would be virtually impossible for them to do their jobs without discussing pending applications for TARP funds.

There are a handful of exceptions. The one you mention covers oral communications at “widely attended gatherings.” According to the recent Treasury memorandum, the reason for this exception is that the new restrictions are aimed at increasing transparency of oral communications regarding TARP funding. Because oral communications at widely attended gatherings are already transparent, the new rules impose “no further restrictions on such oral communications.”

For purposes of this exception, a gathering qualifies as “widely attended” if it is attended by a large number of people from throughout an industry or profession and if they represent a wide range of interests. In the past, the Office of Government Ethics has issued guidance interpreting the term “widely attended gathering” in other contexts. It says a key aspect of a widely attended gathering is that there is an “interchange of ideas with a variety of individuals.” Thus, under the OGE guidance, a small dinner party is not a widely attended gathering, and neither is an event primarily attended by employees of a particular company. Moreover, the presence of a “token” representative of a divergent interest group will not cure an otherwise nondiverse gathering.

Some of your peers appear to believe that this exception allows them to have private discussions regarding pending TARP applications with Treasury officials so long as those discussions happen to take place at a widely attended gathering. I’m not so sure that’s right.

In fact, the recent Treasury memorandum specifically closes off this potential loophole. The memorandum states that “private conversations at a widely attended gathering are not covered” under the exception. Thus, the bar on conversations regarding pending applications does apply to private oral communications that “may happen to occur at, in connection with, or immediately before or after, a widely attended gathering.”

In sum, while some of your peers may hope to evade the new restrictions by pulling aside officials at widely attended gatherings, I would caution against you doing the same. You can do as these peers do or you can play by the new rules. But you can’t do both.

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