December 4, 2012
By Richard Winsten and Deanne Braveman Meyer, Suozzi, English & Klein
The Public Integrity Reform Act, which became effective in August 2011, contains a requirement that clients and lobbyists report any business relationships with any state person. Though this law took effect in August of 2011 the Joint Commission on Public Ethics (JCOPE) released guidelines in late September 2012 on how to report these relationships as well as the forms to do so.
This new disclosure requirement is intended to shed light on situations where lobbyists and clients pay elected officials, legislative staff, or state employees for goods or services. This article is meant to provide a guide on when unions, as a registered lobbyist or client, will be required to file a reportable business relationship under the Legislative Law.
The reportable business relationship requirement is separate and in addition to the gift ban, which bans any gift given to an elected official, legislative staff, or state employee. There are several exceptions to this including food up to $15 and invitations to widely attended events. While a lobbyist or client is allowed to pay an elected official, legislative staffer, or state employee for goods and services rendered (and complete the required reporting where applicable), they are not allowed to give a gift to those covered by the law.
What is a “reportable business relationship?”
A business relationship exists when a lobbyist or client pays, gives or promises compensation to a “state person” in excess of one thousand dollars annually. This relationship can be with the state person directly, with an organization that the lobbyist or client knows or should know the state person has an interest in or control over, or a third party as directed by the state person or an organization they have an interest in or control over. The compensation given to the state person must be in return for goods or services performed, provided or intended to be done by the state person. The agreement for these services or goods does not need to be formal and it does not need to be express or in writing or enforceable under contract law.
A “state person” is any individual who is a statewide elected official, state officer, state employee, member of the legislature or legislative employee.
Certain services provided to a lobbyist or client by a state person are not required to be reported. These include medical, dental, and mental health services and treatment. Legal services with respect to investigation or prosecution by law enforcement authorities, bankruptcy or domestic relations matters are not required to be reported either.
Compensation includes any salary, fee, gift, payment, benefit, loan, advance or any other thing of value. Any goods, services, discounts, or loan terms that are available to the general public are not considered compensation and are not required to be reported. Contributions to candidates for elected office are not reportable as a business relationship. (Example: Cable Company X is a client. State Senator Doe’s yearly cable bill totals $1,200 for a package of services that is available to the general public at the same rate. Because Cable Company X is providing a service that is generally offered, it does not qualify as compensation, and Cable Company X need not report its agreement with Senator Doe as a Reportable Business Relationship.)
If a lobbyist or client has multiple relationships with a state person the value of each relationship will be aggregated to determine if reporting is required. Where the aggregate value of the relationships is more than $1,000 for any 12-month period each relationship must be reported where all other criteria are met.
Any business relationships with a state person that a lobbyist or client engages in must be reported. Clients who are organizations must report any business relationship that their proprietors, partners, directors, or executive management may have with a state person. This is in addition to reporting any business relationship the organization engages in with a state person.
What to Report
The information required to be reported by a lobbyist on registrations and clients on semi annual filings is the same in regards to a reportable business relationship. The following information must be reported: name and official address of state person, description of general subject of the transaction, and the compensation, including expenses, paid to the state person.
When to Report
Reporting of business relationships must be done when a client files a client semi annual report (done in January and July of each year) when a business relationship existed during that period. Actual payment is not necessary for a business relationship to exist. If a good or service is intended to be performed or provided in the period it must be reported. Lobbyists must include information on reportable business relationships in registrations. The filing of a lobbying registration by the lobbyist, which includes any reportable business relationship, does not absolve the client of reporting this in their client semi annual filing.
Amendments are required to be filed by lobbyists and clients if they find that a reportable business relationship existed during the period. If a reportable business relationship is entered into after a lobbyist has completed the registration then an amendment is required. Amendments are also required by lobbyists and clients if the amount of compensation changes during the period. Amendments are required to be made within 10 days of the change. Failure to update a filing could result in a late fee and/or civil penalty levied on the lobbyist or client.
Any client who is also registered as a lobbyist on their own behalf is required to report any business relationship as both the lobbyist and the client. The business relationship must be reported during registration and then on client semi annual reports. It does not need to be reported on lobbyist bimonthly filings that the client does on its own behalf.
Lobbyists and clients are responsible for amending all filings to include reportable business relationships that may have existed starting August 2011 (the first filing affected by this would be the January 15, 2012 filing covering the period of July through December 2011). JCOPE has not set a deadline for when these amendments must be made but has said that they should be done “as soon as possible.” Moving forward the reportable business relationship due dates correspond with the client semi annual filing and registration due dates. Currently the forms are only available for download and printing in a PDF document that must be completed and mailed to JCOPE. In the future the forms will be available in an electric form.
JCOPE is still making determinations about the process of completing these required reports. JCOPE is still open to suggestions for reporting changes. Contact JCOPE with any questions you may have about how to complete this and any other required reporting. Training will be offered by JCOPE on reportable business relationships as well as source of funding requirements in December 2012. The training will be webcast and more may be offered if there is demand for it.
Richard D. Winsten is Co-Chair of Meyer, Suozzi, English & Klein, P.C.’s Government Relations practice, based in the New York State capital of Albany. Deanne M. Braveman is an Associate, where she also practices with the firm’s Government Relations group in Albany.