I. Introduction
“Ethics” has been defined as “conforming to professional standards of conduct”, “a set of moral principals or values”, and “the discipline dealing with what is good and bad and with moral duty and obligation”. There are certain legal standards set out in state and federal statutes, and those have to be met by everyone engaged in the lobbying profession. There are standards for lawyer lobbyists as contained in the North Carolina Rules of Professional Conduct. Many of us are members of the North Carolina Professional Lobbyists Association and that organization has its own Code of Conduct. Additionally, we have what I will call our “intuitive ethics” which require honesty and integrity in our daily lives including our professional lives as lobbyists.
II. Federal Law Requirements
Federal law centers around the concept that citizens have the right to a government official’s “honest services”. A legislator must exercise his or her independent judgment on issues and must provide his or her honest, faithful, and disinterested service on behalf of his or her constituents. Neither a lobbyist nor a legislator may do anything through their activities that will interfere with a public official providing such honest services. It is important that we be aware of these federal laws as they have been the basis of investigations launched in Arizona, Kentucky, Louisiana, Massachusetts, West Virginia, and South Carolina.
A. The Hobbs Act (18 U.S.C. Sec. 1951)
This statute was initially enacted in 1946 as an amendment to the Anti-racketeering Act of 1934 and was designed to protect interstate commerce against injuries from extortion. As amended, it is the public official who is subject to liability under the Act. The pertinent part of the Hobbs Act provides that whoever in any manner affects commerce by robbery or extortion, violates the Act and is guilty of a felony. The key is that Congress defined “extortion” to mean “ . . . the obtaining of property from another, with his consent, induced . . . under color of official right.” The term is defined in such a way that if someone is induced to part with his or her property for an “official right”, an offense has been committed. The U.S. Supreme Court has held that an election official can commit extortion in the course of financing an election campaign. The elements of the offence are: 1) the receipt of a campaign contribution by an elected official; 2) in return for an explicit promise or undertaking by the official to perform or not perform an official act- a quid pro quo. The official does not have to actually fulfill the quid pro quo to be guilty of a Hobbs Act violation. A public official’s passive acceptance of a benefit can be sufficient to form the basis of a violation if the official knew that the official was being offered the payment in exchange for a specific requested exercise of official power. The payments don’t have to be campaign contributions, and other items of value such as gifts, meals, or travel expenses can constitute a violation if the necessary elements are present.
B. Theft or bribery concerning programs receiving Federal funds (18 U.S.C. x666)
This statute is the flip side of the Hobbs Act and governs the conduct of the lobbyist. The statute penalizes any person who “corruptly gives, offers, or agrees to give anything of value to any person, with intent to influence or reward an agent of . . . a State, local, or Indian tribal government, or any agency thereof, in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more.” Courts have construed this statute to be applied not only to traditional concepts of bribery, but also to illegal gratuities, which can mean a payment which is not reported in violation of a state statute.
C. Definition of “scheme or artifice to defraud” (18 U.S.C. Sec. 1346)
The Mail and Wire Fraud Chapter of Title 18 prohibits the use of the mail or wires in furtherance of a scheme to defraud. In response to a Supreme Court case, in the late 1980s, Congress amended that chapter so the Mail Fraud chapter of Title 18 now contains this statutory definition: “For purposes of this chapter [18 USCS Sec. 1341 et seq.], the term “scheme or artifice to defraud” includes a scheme or artifice to deprive another of the intangible right of honest services.” This chapter applies to both legislators and lobbyists and is the weapon of choice for federal prosecutors. In the case of our old friend from Massachusetts, the insurance lobbyist Mr. Sawyer, the Court held that a conviction for honest services mail fraud does not require proof of violation of state law, given that the duty of honest services owed by government officials derives from fiduciary duties at common law as well as from statute. U.S. v. Sawyer, C.A.1 (Mass.) 2001, 239 F.3rd 31. Under federal law, it is clear that:
1) All citizens have a right to the honest services of their state legislators;
2) Every legislator has a fiduciary obligation to provide honest services;
3) No person, particularly a lobbyist, can interfere with that right and that duty.
D. Noerr-Pennington Antitrust Immunity Doctrine
The United States Supreme Court has carved out an antitrust exemption for activities involving the petitioning of governmental bodies, including state legislatures. In Noerr, the issue was petitioning the legislature for the passage of laws with anticompetitive intent. In Pennington, the doctrine’s coverage was expanded to petitioning the executive branch of government for the enforcement of laws. However, this immunity doctrine has limitations, and will not apply if it is a sham to cover an attempt to interfere directly with the business relationships of a competitor. For an in depth review of Noerr-Pennington and the “sham” exception, see 177 ALR Fed 371.
III. State Law Requirements A. State Law Requirements of Legislators
It is important for lobbyists to know what is required of legislators for several reasons. First, we should not do anything that would put a legislator in a compromising position. Second, we should be alert to conduct of a legislator that would subject that legislator to a violation of some statute or regulation. Third, the Code of Conduct of the N.C. Professional Lobbyist Association requires that we as lobbyists comply with all standards of conduct applying to officials and staff of the General Assembly.
Article 2 of Chapter 120 sets out the “Duty and Privilege of Members”, and the relevant sections of that Article have been in place for over two hundred years. The first codified ethical standards for members of the North Carolina General Assembly were not enacted until 1975. They are codified as the Legislative Ethics Act in Article 14 of Chapter 120. This same Act created the Legislative Ethics Committee which deals with issues involving ethical considerations for members of the General Assembly. That Committee has established a set of ethics guidelines and has issued a series of opinions interpreting those guidelines in response to inquiries from legislators.
1. Duty and Privilege of Members (Article 2 Chapter 120)
Penalty for failure to discharge duty (G.S. 120-7)
If a member fails to appear or neglects to attend to the duties of his office, he shall forfeit and pay for not appearing ten dollars ($10), and two dollars ($2) for every day he may be absent from his duties during the session. The members of either house may remit such fines and forfeitures when the member has been prevented from attending to his duties by sickness or other sufficient cause. This has been the law since 1787.
Expulsion for corrupt practices in election (G.S. 120-8)
“If any person elected a member of the General Assembly shall by himself or any other person, directly or indirectly, give, or cause to be given, any money, property, reward or present whatsoever, or give, or cause to be given by himself or another, any treat or entertainment of meat or drink, at any public meeting or collection of the people, to any person for his vote or to influence him in his election, such person shall, on due proof, be expelled from his seat in the General Assembly.” This is also 1787 law.
2. Legislative Ethics Act
Bribery (G.S. 120-86)
It is a felony for any person to offer or give to a legislator (or a member of the legislator’s immediate household or a business with which the legislator is associated) anything of monetary value, including a gift, favor, or promise of future employment, based on any understanding that the legislator’s vote, official actions or judgment would be influenced thereby, or where it could be reasonably inferred that the thing of value would influence the legislator in the discharge of the legislator’s duties. Note: it is also a violation of this section for the legislator to solicit a gift, favor, or promise of future employment.
The statute also prohibits a legislator or any other person from threatening economic harm to a member of the General Assembly to attempt to influence a member’s vote or discharge of official duties.
Personnel-related action unethical (G.S. 120-86.1)
It is unethical for a legislator to take, promise, or threaten any legislative action for the purpose of influencing or in retaliation for any action regarding State employee hirings, promotions, grievances, or disciplinary actions.
Disclosure of confidential information (G.S. 120-87)
No legislator shall use or disclose confidential information gained in the course of or by reason of his official position or activities in any way that could result in financial gain for himself, a business with which he is associated or a member of his immediate household or any other person.
Conflict of Interest (G.S. 120-88)
If a legislator is called upon to act on a legislative matter as to which he, a member of his family, or a client has an economic interest that would impair his independence of judgment, then he should not take action to further the economic interest and shall ask that he be excused from taking any further action. If the legislator has a material doubt as to whether he should act, he may submit the question to the Legislative Ethics Committee for an advisory opinion.
Statement of Economic Interest (G.S. 120-89 through 120-98)
Candidates for election to the General Assembly and elected members must file a statement of economic interest with their county boards of elections. After his or her successful election, the statement is forwarded by the elections board to the Legislative Services Office where it remains on file as a public document.
3. Legislative Ethics Committee (G.S. 120-99 through 120-106)
The Legislative Ethics Committee consists of 5 members of the Senate and 5 members of the House, appointed by the respective presiding officers. The President Pro Tem of the Senate appoints 2 from a list of 4 submitted by the Majority Leader, 2 from a list submitted by the Minority Leader, and 1 of his own choosing. The Speaker does likewise. Members of the committee serve for 2 years. The Pro Tem and Speaker designate co-chairs. The Committee prescribes forms for the statements of economic interest and maintains those records. The Committee also prepares a list of ethical principles and guidelines to be used by each legislator. That list is available in the Legislative Library. A series of advisory opinions issued by the Committee is also available.
4. House and Senate Rules
Each body adopts rules at the beginning of the session and those rules remain in effect throughout the session. Copies of the rules are printed and available in the Principal Clerk’s Office of both the Senate and House. Those rules impact on lobbyists is many ways and we should have a good working knowledge of both sets of rules.
B. State Law Requirements of Lobbyists History
North Carolina statutory law has regulated persons who lobby members of the General Assembly since 1933. Since that date, lobbyists have been required to register with the Secretary of State and file written authority from their employer. Detailed statements of expenses had to be filed within 30 days after final adjournment of the General Assembly. Contingent fees for lobbyists have been unlawful for almost 70 years. The current statutory requirements for all lobbyists in the General Assembly have been codified in Article 9A of Chapter 120.
Definitions (G.S. 120-47.1)
“Lobbying” means (a) influencing or attempting to influence legislative action through direct oral or written communication with a member of the General Assembly or (b) solicitation of others by lobbyists to influence legislative action.
A “lobbyist” is a person who is paid by someone for the purpose of lobbying.
Being reimbursed for travel and subsistence expenses is not considered being “paid” for lobbying unless a significant part of the person’s duties involve lobbying before the General Assembly.
A “legislative liaison” is a State officer or employee whose principal duties in practice or as set forth in that person’s job description involves lobbying the General Assembly. (Such persons must register as lobbyists and are subject to the expense reporting requirements of lobbyists. Each State department may have no more than two.)
Registration (G.S. 120-47.2)
Before engaging in any lobbying, each lobbyist must file with the Secretary of State a separate registration statement for each of the principals that lobbyist represents and must amend that filing within 10 days of any change in the information supplied. The registration is valid for the two-year biennial session.
Registration fee (G.S. 120-47.3)
The registration fee is currently $75 for each principal.
Written Authority from lobbyist’s principal to be filed (G.S. 120-47.4)
Within 10 days after the lobbyist registers for a principal, the lobbyist must file a written authorization to act on behalf of that principal, signed by the principal.
Contingent lobbying fees (G.S. 120-47.5{a})
The compensation for the lobbyist cannot be dependent in any manner upon the passage or defeat of any proposed legislation or upon any other contingency connected with any action of the General Assembly.
Election influence (G.S. 120-47.5{b})
It is unlawful for any person to influence the action of any member of the General Assembly by the promise of financial support of the member’s candidacy, or by threat of financial contribution in opposition to the member’s candidacy in any future election.
Statements of lobbyist’s lobbying expenses required (G.S. 120-47.6)
We are all familiar with these reports that must be filed within 60 days of the last day of the regular session and by February 28 of the following year.
Statements of principal’s principal lobbying expenses required (G.S. 120-47.7)
Likewise, principals must file reports that also include the amount of compensation paid to their lobbyist(s) for lobbying. Note that only that amount of compensation that is actually paid for lobbying as that term is defined is reportable.
Persons exempted from provisions of Article (G.S. 120-47.8)
Persons may lobby any or all legislators without registering if they aren’t paid for lobbying. A person can appear before a legislative committee at the request of a committee member or respond to inquiries from a member of the General Assembly and not have to register even if he or she is paid so long as that person engages in no further activities as a lobbyist in connection with that or any other legislative matter. (A lot of people forget about the latter portion of the statute.)
Punishment for violation (G.S. 120-47.9)
A willful violation is a Class 1 misdemeanor and also results in a 2 year ban on lobbying before the General Assembly.
IV. Non-Statutory Codes of Conduct for Lobbyists
NORTH CAROLINA PROFESSIONAL LOBBYIST ASSOCIATION
CODE OF CONDUCT
The professional lobbyist plays an important role in our system of government by helping to ensure that lawmakers have full and accurate information with which to make decisions. Members of the North Carolina Professional Lobbyists Association have an obligation to conduct themselves in such a way that they maintain public respect for their profession and for the legislative process.
Members of the North Carolina Professional Lobbyist Association:
1. Shall conduct with integrity and honesty all relations with public office holders, clients, potential clients, employers, the public, and other lobbyists.
2. Shall comply with all applicable laws and regulations governing lobbyists as well as standards of conduct applying to officials and staff of the North Carolina General Assembly.
3. Shall disclose the identity of the person or organization for whom they are acting.
4. Shall provide information that is accurate and factual to public office holders, and shall not engage in misrepresentation of any nature.
5. Shall not divulge confidential information unless they have obtained the informed consent of their client, employer, or organization, or such disclosure is required by law.
6. Shall not represent conflicting or competing interests without the informed consent of those whose interests are involved.
7. Shall not place public office holders in a conflict of interest by proposing or undertaking any action that would constitute an improper influence on a public office holder.
VIOLATIONS OF THE NCPLA CODE OF CONDUCT
Violation of the NCPLA Code of Conduct may result in loss of membership status in the Association. Final adjudication in a court of law violating the laws related to professional lobbying activity shall result in immediate removal of a member.
A written and signed complaint by a member of NCPLA alleging violation of this code may be filed with any officer of the Association. Upon receipt of such complaint, the Standards and Conduct Committee will inform the accused member and investigate the complaint. The Standards and Conduct Committee will make a recommendation for disciplinary action to the Board of Directors. Action will be determined by a majority vote of the Board of Directors.
Disciplinary action may include:
- Dismissal of the charges against the lobbyist.
- Reprimand of the lobbyist.
- Loss of membership in the Association
Rules of Professional Conduct
North Carolina State Bar
History
Each state adopts its own method for the licensing and regulating of lawyers in that state. In North Carolina, the General Assembly created a state agency known of the North Carolina State Bar which is governed by the North Carolina State Bar Council consisting of 55 councilors exclusive of officers elected by the various district bars across the state and 3 public members appointed by the Governor. The State Bar Council is vested as an agency of the State with the authority to regulate the professional conduct of licensed attorneys. Previously, our conduct was governed by the Canons of Ethics, then the 1973 N.C. Code of Professional Responsibility, then the 1985 Rules of Professional Conduct, and finally, since 1997, the Revised Rules of Professional Conduct. These various Codes and Rules originate with models promulgated by American Bar Association as recommendations, but each state must adopt its own and has done so. Our 1997 version actually went so far as to conform North Carolina’s rule numbers with the ABA Model Rule numbers which makes it a lot easier to compare rules and decisions from various states.
Why do we have to change the rules so often? I guess every 12 years is not so bad given the changes that have occurred in the practice of law. Look at the changes that are made every year to the general statutes to update our state laws. In any event, in 1997, the ABA Board of Governors determined that it was time to take another look at the Model Rules and appointed the “Ethics 2000 Commission” to make recommendations regarding amendments to the Model Rules. The North Carolina State Bar followed along and in 2001 appointed a Committee to review the ABA Commission report and make recommendations to the State Bar Council. That Committee met regularly for ten months, and the product of that work was approved by the State Bar Council during the July, 2002 meeting. The proposed rule amendments have now been circulated for comment to lawyers across the state and to the public. In your materials is a copy of the proposal and we will use that document as we discuss a few of the rules that are significant for lawyers engaged in lobbying in the General Assembly.
Rule 1.0: Terminology
(c) “confirmed in writing”: The rules do not currently require written documentation of a client’s consent to a conflict of interest. To reduce the number of disputes and convey the importance of a waiver to the client, it is proposed that written confirmation be required in almost every instance in which the lawyer is allowed to obtain client consent to a conflict. However, a writing to a client by the lawyer, including an e-mail is sufficient and the client’s signature is not required.
(e) “tribunal”: The definition of “tribunal” is expanded to include a proceeding before an arbitration panel, legislative body, administrative agency or other body acting in an adjudicative capacity.
Rule 1.4: Communication
The revised rule identifies specific circumstances when the lawyer’s communication with a client is necessary to ensure effective client participation in the representation.
Rule 1.6: Confidentiality of Information
This rule has been simplified to state the general prohibition on revealing any information acquired during the professional relationship unless the client gives informed consent or the disclosure is impliedly authorized in order to carry out the representation, or to prevent the commission of a crime by a client. There are some other exceptions and this rule should be read carefully.
Rule 1.7: Conflict of Interest: Current Clients
The substance of the rule is not changed. Paragraph (a) defines a concurrent conflict as a representation that is either “directly adverse” to a client or is “materially limited” by the lawyer’s responsibilities to another client, a former client, a third person, or by a personal interest of the lawyer. Paragraph (b) permits the representation even though a concurrent conflict exists if four conditions can be satisfied: (1) the lawyer reasonably believes that he or she can provide competent and diligent representation to affected clients; (2) the representation is not prohibited by law; (3) the representation does not involve the assertion of a claim by one client against another; and (4) each affected client gives informed consent in writing.
Rule 1.8: Conflict of Interest: Current Clients: Specific Rules
There are no substantive changes in this rule. One provision that is added is that a lawyer shall not solicit any substantial gift from a client.
Rule 1.9: Duties to Former Clients
This is not a new rule but there are some broad general concepts in the new Comment. It is made clear that “After termination of a client-lawyer relationship, a lawyer has certain duties with respect to confidentiality and conflicts of interest and thus may not represent another client except in conformity with this Rule.”
Rule 1.10: Imputation of Conflicts of Interest: General Rule
This rule is amended to eliminate the imputation of a conflict with respect to a personal interest of the prohibited lawyer if the personal conflict does not present a significant risk of materially limiting the representation of the client by the remaining lawyers in the firm.
Rule 1.11: Special Conflicts of Interest for Former and Current Government Officers and Employees
This rule applies to lawyers leaving government service for private employment as well as lawyers moving from one government agency to another. A new prohibition is added prohibiting a lawyer from participating in a matter in which the lawyer participated personally and substantially while in private practice unless the government consents.
Rule 1.18: Duties to a Prospective Client
This is a new rule that provides that when a person consults with a lawyer about possible representation in a matter but no attorney-client relationship is formed, information learned from the prospective client is confidential. Also, the lawyer is disqualified from representing an adverse party if the lawyer received information from the prospective client that could be significantly harmful to that person if used to represent the adverse party in the same or a substantially related matter.
Rule 3.3: Candor Toward a Tribunal
This rule could now apply in the legislative setting because of the revised definition of “Tribunal”. However, the intent here is to only require the applicability of this section to a legislative body when it is acting in an adjudicative capacity. Nevertheless, the rule is subject to interpretation. In any event, the rule simply requires the lawyer to be truthful and to disclose authority known by the lawyer to be directly adverse to the position of the client. Truthfulness is required by Rule 4.1. Read the rule and the comments.
Rule 4.1: Truthfulness in Statements to Others
“In the course of representing a client a lawyer shall not knowingly make a false statement of material fact or law to a third person.” There is no change in this basic rule.
Rule 5.3: Responsibilities Regarding Nonlawyer Assistants
The lawyer has a responsibility to make reasonable efforts to ensure that the nonlawyer’s conduct is compatible with the professional obligations of the lawyer.
This is not new, but the revisions to the rule clarify that this obligation applies to all lawyers in the firm, not just the managing partners or supervising attorneys.
Rule 5.4: Professional Independence of a Lawyer
Although there have been efforts to change the substance of this rule in several states, virtually every state has continued to come down on the prohibition of sharing fees with nonlawyers.
Rule 5.7: Responsibilities Regarding Law-Related Services
North Carolina does not currently have this Model Rule, but the Council has approved its adoption for comment. Examples of “law related services” are providing financial planning, accounting, trust services, real estate counseling, legislative lobbying, economic analysis, social work, psychological counseling, tax preparation, and patent, medical or environmental consulting. Under this rule, when a lawyer does any of those things, the lawyer is subject to the Rules of Professional Conduct.
Rule 6.6: Action as a Public Official
There is no change to this rule, but it is worthy of setting it out in full:
A lawyer who holds public office shall not:
a. use his or her public position to obtain, or attempt to obtain, a special advantage in legislative matters for himself or herself or for a client under circumstances where the lawyer knows, or it is obvious, that such action is not in the public interest;
b. use his or her public office to influence, or attempt to influence, a tribunal to act in favor of himself or herself or his or her client; or
c. accept anything of value from any person when the lawyer knows or it is obvious that the offer is for the purpose of influencing the lawyer’s action as a public official.
Rule 7.1: Communications Concerning a Lawyer’s Services
There are no proposed changes to this rule.
A Few Suggestions
1) Take an hour and read the N.C. Rules of Professional Conduct and the proposed changes to those rules. You may find that you want to submit comments to one or more of these proposed rule changes prior to the October Council meeting.
2) Always have a written fee agreement with your lobbying clients.
3) Never discuss policy issues or legislation with a legislator in the same conversation with contributions, fundraising, or PACs.
4) Carefully review solicitation letters, especially handwritten notations that may contain a mention of legislation. They must not imply that a favorable response would give influence or imply that they are asking for a reward for past acts.
5) Be careful about telephone solicitations that include references to past acts.
6) In discussing a contribution with a legislator or a legislative candidate, think about how your conversation would sound if it were to be recorded.
7) Avoid cash contributions at all times.
8) Always mail a contribution check; never hand money to a legislator or legislative candidate.
9) Always send your check with a generic cover letter that is totally consistent with the citizen’s right to the honest services of the legislator.
10) Never make or promise to make a contribution during a legislative session.
11) Contributions should be mailed to campaign or business offices, not legislative offices.
12) Think about how any conversation with a legislator would read in the News and Observer and the Insider.
V. The Lobbyist Feedback
In August, 2002, the North Carolina Center for Public Policy Research conducted a survey of the most influential lobbyists in the 2001 session of the N.C. General Assembly about lobbying technology, tactics and techniques. The Center will publish the results of this survey in N.C. Insight, and I know you will be interested in that information. With permission of the Center, I am at liberty to share the responses to one open-ended question: “What makes a lobbyist effective?” The responses to that question “centered on credibility, honesty, and personal integrity of the lobbyist.” Although not the least bit surprising, it is extremely heartening to know that our colleagues believe that to be the case.
