Jack Abramoff probably never dreamed he would be as famous as he is today. His name has become virtually an icon in the American public consciousness, alongside such infamous names as Tom DeLay and Jeff Skilling.
Abramoff was sentenced in January to eight years in prison for orchestrating a fraud and bribery campaign that involved an alarmingly large cast of characters, from Rep. Bob Ney to David Safavian, a senior official in the Bush administration. Not since the Abscam bribery scandal a quarter-century ago have so many public officials exchanged their wool suits for prison orange.
But as public officials have faced prosecution, companies involved in lobbying those officials have likewise come under fire. The most dramatic example is the $615 million settlement Boeing agreed to in May to end the Justice Department’s ethics case against the company. The DOJ was investigating a procurement scandal that landed Boeing’s CFO and a former Air Force undersecretary behind bars and prompted a management shakeup at Boeing.
“The Boeing case goes to the heart of what Abramoff is about,” says William Farah, a partner with Oldaker, Biden and Belair. “It comes down to inducements to curry favor with public officials.”
More such cases are likely to emerge as investigations proceed, dragging additional lawmakers, lobbyists and corporations into the glare of public scrutiny. In addition, the recent spate of corruption scandals has inspired a legislative response from Congress. While the statutory changes in the Legislative Transparency & Accountability Act would pose only minimal administrative headaches for lobbyists, in the post-Abramoff era they add another layer of compliance risks that general counsel cannot afford to ignore.
Vigilance Is Golden
Lobbying ethics are always a volatile political issue. But arising as they have in the middle of a campaign season, the current lobbying scandals have created an extra impetus for legislators to enact rule changes.
“People are disgusted with the corruption they see in these high-profile cases,” says former Rep. Jennifer Dunn, R-Wash., now a partner with DLA Piper Rudnick Gray Cary in Washington, D.C. “It is a political year, so there’s a sense in Congress that they must pass something.”
At press time, House and Senate conferees were gathering to reconcile two different lobbying-reform bills (S. 2349 and H.R. 4975). Neither proposes major changes, but both incrementally tighten the old standards and increase reporting requirements. “There is a greater focus on enforcement, and penalties would increase,” says Tom Spulak, a partner with King & Spalding in Washington, D.C.
Specifically, the legislation would require lobbyists to report their activities four times a year instead of just twice and would establish a public Web site for reporting such data. It would require legislators to clearly identify sponsors rather than use anonymous earmarks in budget bills. The bill would prohibit lobbyists from accompanying legislators on privately sponsored junkets and would require lawmakers to disclose any employment negotiations that might present conflicts of interest.
Both the House and Senate bills would double penalties for lobbyists that violate disclosure requirements in the Lobbying Disclosure Act (LDA), from $50,000 to $100,000, with the Senate bill also adding criminal penalties, and extending to lobbyists the penalties for violating the LDA gift ban.
The House and Senate language contains notable differences in other areas as well. For example, both restrict lawmakers and their staff members from accepting gifts and meals from lobbyists, but the Senate language bans it outright while the House reduces the allowable annual value of such gifts from $100 to $50 a year. Moreover, the Senate voted to double the one-year period a retired legislator must wait before lobbying Congress. The House rejected such language.
How the conferees might resolve such issues was unknown at press time, but a final bill might preserve some of the differences in the two bills because each chamber of Congress customarily sets its own procedures and rules.
“Everyone from corporations to lobbyists to Congress itself will be feeling their way on this for a while,” says Steve Meister, a former Los Angeles County deputy district attorney, and now a criminal defense lawyer with the Law Offices of Mark Werksman.
Under The Microscope
In the current climate of heightened sensitivity to ethics concerns, the consequences of public exposure can be just as important as regulatory enforcement actions.
“Companies are taking more responsibility for knowing that their lobbying activities are permissible,” says Beth Nolan, a partner with Crowell & Moring in Washington, D.C. “This is a good outcome, and it is related as much to the general atmosphere today as it is to the proposed legislation.”
Many organizations, hoping to avoid a Boeing-like nightmare, are conducting internal audits of their government-relations activities. “The biggest change we’ve seen is a greater sensitivity to ethics issues,” says William Minor, a partner with DLA Piper Rudnick Gray Cary. “Smart GCs are reviewing their lobbying practices to make sure everything is consistent with the letter and spirit of the law.”
Specifically, this means in-house counsel are engaging with their political agents to review compliance measures and make changes as necessary to ensure all government-relations staff and counsel understand both legal requirements and the company’s own ethics standards.
“GCs need to stay on top of things to make sure they don’t have a Jack Abramoff out there acting on the company’s behalf,” Farah says. “They need to develop a level of mutual trust with their Washington offices and make sure they have the right attitude and culture.”
Such cultural imperatives can help provide GCs with a level of comfort that their lobbying activities will lead to neither enforcement actions nor embarrassing headlines.
At the end of the day, though, there is only so much the legal department or Congress can do to rein in over-eager lobbyists. In the scandals involving Jack Abramoff, Rep. Randy “Duke” Cunningham, R-Calif., and Boeing, the defendants were convicted of violating laws already on the books.
“The problem is you cannot legislate human nature,” Dunn says. “It is very hard to stop someone from acting unethically if they want to get around the law.”
As a result, fostering a culture of compliance may be the strongest prophylactic measure companies can take. Setting policies and validating processes will help, but a culture of compliance will encourage behavior that reflects the organization’s values.
“It sounds general, but go with your gut,” Meister says. “If your lobbyist is pushing something that gives you a sense of discomfort, then hire a new lobbyist. Maybe the law wouldn’t prevent you from moving forward with the idea, but nobody wants to look bad in the public eye.”