In the closing hours of the legislative session, the North Carolina General Assembly passed sweeping changes to the state’s ethics, campaign finance and lobbying laws. According to Ran Coble, executive director of the North Carolina Center for Public Policy Research, “this is the biggest reform package in the area of ethics, of campaign finance and lobbying law reform since the mid-‘70s” (News & Observer, July 28, 2006). And, while the reform package is aimed at government officials and lobbyists, the changes that take effect on January 1, 2007, are far reaching and will most certainly have an impact on you and your business.
Ban on Gifts to Public Servants
The State Government Ethics Act (the “Act”) prevents a public servant, legislator or legislative employee from accepting a gift from a lobbyist or lobbyist principal. A “lobbyist principal” is defined as any person, company or association on whose behalf a lobbyist lobbies. In the case where a lobbyist is compensated by a law firm, consulting firm or other entity retained by a person for lobbying, the principal is the person whose interest the lobbyist represents. Simply put, if a lobbyist is representing your interests before the executive on legislative branches of state government, you are a lobbyist principal and are subject to the restrictions regarding gifts to public servants.
There are some exceptions to the gift ban including food and beverages for immediate consumption in connection with a public event. For legislators and legislative employees, a "public event" is defined as either an organized gathering open to the general public to which all legislators or legislative employees are invited or an organized gathering to which a legislator or legislative employee is invited along with the entire membership of the House of Representatives, Senate, a committee, a standing sub-committee, a county legislative delegation, a municipal legislative delegation, a joint committee, a joint commission or a recognized legislative caucus with regular meetings other than meetings with one or more lobbyists, and one of the following apply: (i) at least 10 individuals associated with the sponsoring entity actually attend, other than the legislator or legislative employee, or the immediate family of the legislator or legislative employee; (ii) all shareholders, employees, board members, officers, members or subscribers of the sponsoring entity located in North Carolina are notified and invited to attend and (iii) the sponsoring entity is a governmental body and the gathering is subject to the open meetings law.
In the Act, “public servants” includes the Constitutional officers of the State (Governor, Lt. Governor, Secretary of State, etc.), employees of the Governor, heads of state agencies and many of their employees, judicial branch employees, voting members of public boards, the Board of Governors of the UNC System as well as the executives and trustees on the constituent institutions and the State Board of Community Colleges along with the executives and trustees of each campus. For public servants, a "public event" is: (i) an organized gathering open to the general public to which at least 10 public servants are invited; (ii) a gathering of a governmental body, the gathering of which is subject to the open meetings law, and to which at least 10 public servants are invited to attend and (iii) a gathering to which at least 10 public servants are invited to attend and to which at least 10 individuals, other than the public servant, or the public servant's immediate family, actually attend or to which all shareholders, employees, board members, officers, members or subscribers or the person who are located in a specific North Carolina office or county are notified and invited to attend.
The Act does not consider informational materials relevant to the duties of the public servant, legislator or legislative employee to be gifts. Companies will still be allowed to make expenditures for public servants, legislators and legislative employees to attend educational meetings as long as certain conditions are met. The conditions include that the meeting must be attended by at least 10 or more participants, have a formal agenda and notice of the meeting has been given at least 10 days in advance. Additionally, food, beverages or entertainment must be provided to all attendees or defined groups of 10 or more attendees and be incidental to the principal agenda of the educational meeting. The Act specifically prohibits the University of North Carolina or any of its constituent institutions to give, for the purpose of lobbying, athletic tickets to legislators and legislative employees.
Expanded Definition of “Lobbyist”
Before now, North Carolina law defined someone as a “lobbyist” if they received compensation to influence only legislative action. The Act expands the definition of "lobbying" to include influencing or attempting to influence legislative or executive action through direct communication or activities. The definition of "lobbying" also includes developing good will through communications or activities, including the building of relationships with the intention of influencing legislative or executive action.
Members of the public relations community must be aware that a person who is not otherwise required to register as a lobbyist must register and report when the total expense incurred for "solicitation of others" exceeds $3,000.00 during any 90-day period. The Act defines "solicitation of others" as a solicitation of members of the public to communicate directly with or contact one or more designated individuals for the purpose of influencing or attempting to influence legislative or executive action to further the solicitor's position on that legislative or executive action. Registrations detailing such expenditures are to be made with the North Carolina Secretary of State.
Campaign Finance Changes
The Act specifically prohibits lobbyists from making campaign contributions to legislators and public servants. While the Act does not prohibit lobbyists from soliciting campaign contributions, it does prohibit the lobbyist from collecting contributions from multiple contributors, taking possession of them, and then delivering the contributions to the intended recipient.
These reforms join other campaign finance reforms passed this session such as a ban on the personal use of campaign funds and a prohibition of providing campaign checks with blank payee lines.
Stiffer Penalties
In the past, violations of the state lobbying laws were misdemeanors at worst and usually just involved civil penalties. However, the Act raises the punishments for some violations to the felony level. Needless to say, the General Assembly is serious about enforcing these reforms making it all the more important for you to take precautions and stay within the new law.
This alert does not contain an exhaustive analysis of the intricacies of state ethics and campaign finance laws and should not be considered as providing conclusive answers to specific legal problems. However, this alert should serve as a good reference as you explore opportunities for participation in public policy issues. Please contact a member of the Government & Public Policy Practice Group if you have any questions about specific aspects of the laws or need assistance in making a decision regarding advocacy.