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Three years ago, Arthur Levitt strolled before the creme de la creme of the municipal securities industry, pulled out his rhetorical paddle and swatted bond lawyers for their continued campaign largesse to the elected officials who give them work on public debt deals. Most of the other big players in the industry had at least adopted a voluntary ban on such contributions, said Levitt, then chairman of the Securities and Exchange Commission. But not the attorneys. “It is unfortunate that the one group of professionals that has a code of ethics is unable to come to terms with a practice that unfairly casts a shadow over those awarded legal work by elected officials,” Levitt complained. The 1999 speech was a hard smack from the SEC chair. Since then, model ethical rules have been adopted by the American Bar Association and some local bar groups. A few firms have pared back on their campaign giving. By and large, however, the ethical mandates are voluntary or rarely enforced and have done little to change the behavior of firms that continue to give. If anything, campaign records show the top legal players in municipal finance are giving more money than ever. In the case of the biggest player in municipal finance — Orrick, Herrington & Sutcliffe — giving by the firm’s political action committee and individual employees to local and state candidates has increased from $340,000 in the four years before Levitt’s speech to $450,000 in the years following, according to state, local and federal campaign records. The speech, at a municipal market roundtable in Washington, D.C., was part of a long fight by the former chairman and the SEC during the 1990s to end “pay to play,” the practice by politicians of handing out government work in exchange for campaign contributors. Levitt’s calls for reform went further than most — he said he wanted to end the appearance of impropriety — even if nothing untoward had occurred. Many municipal finance lawyers disagree strongly that there is an appearance of wrongdoing. The National Association of Bond Lawyers, an industry group made up of individual bond lawyers, long ago said lawyers should avoid any agreement with a public official to give a campaign contribution in exchange for work. But the association drew the line there. “Lawyers play an integral role in the political process,” the association’s statement of principles on political contributions reads. “Such participation should not be discouraged and attorneys who participate in municipal finance engagements should not be penalized in comparison to other lawyers or citizens.” The association’s argument is similar to the one given by lawyers at Orrick. Roger Davis, the partner who heads the firm’s public finance group, contends efforts to ban contributions by lawyers in the municipal securities industry have been largely predicated on the misconception that the contributions are designed to get work. He said in Orrick’s case, nothing could be further from the truth. “We have thought about ending [contributions], but we don’t think withdrawing from the community is the right thing to do,” Davis said. “There is nothing wrong with what we do.” “There is never a quid pro quo” between the firm and a politician about getting work. “It is never discussed and never a factor,” he said. Davis said Orrick views contributions as part of its mission of civic involvement — one that includes giving to charities and nonprofit legal aid groups. And he said that political donations are a natural extension of the firm’s close involvement with the public officials it has come to know and represent. “This is part of what it means to be a major corporation or law firm,” Davis said. Nonetheless, the stigma surrounding contributions by bond counsel has caused a few firms to think twice about giving. Andrew Hall Jr., a partner at Jones Hall, a public finance boutique in San Francisco that handled 10 percent of the bond counsel work in California in 2001, said the firm has a policy of not making contributions, primarily because it does not want to be accused of paying to play. “Jesse Unruh [the former California treasurer] said money is the mother’s milk of politics,” Hall said. “We’re turned off by that. � We don’t want to be involved with that.” But Hall’s firm appears to be in the minority. And efforts by bar associations to pass model pay-to-play rules have been fought by bond lawyers. Five years ago, the New York City bar toyed with passing tough restrictions that would have limited contributions in all circumstances to candidates who gave out legal work. But a bar spokesman said bond lawyers insisted the ban take effect only if proof existed of a quid pro quo — a nearly impossible task for the bar’s disciplinary arm. The bar, however, agreed to accept the bond lawyers’ proposal. As a result, the New York bar has not disciplined a lawyer under its pay-to-play rules, said the organization’s general counsel, Alan Rothstein. The ABA went through similar turmoil when it considered a pay-to-play ban, and the result was similar: Model Rule of Professional Conduct 7.6 prohibits lawyers and law firms from accepting work “if the lawyer or law firm makes or solicits political contributions for the purpose of receiving such work.” Again, the onus is on the bar to prove the existence of a quid pro quo. In California, the State Bar hasn’t taken up the issue, assuming it was covered by other state laws, a bar spokesman said. For those who believe limits are appropriate, the issue is ensuring that the public believes the markets are free from corruption — whether or not the actual behavior follows the letter of the law. “For us, ending pay to play has always been about market reform, not campaign finance reform,” Levitt said in his speech. “It’s been said that trust is won with difficulty and easily lost. � We must all work to maintain and enhance public faith in this critically important market.”

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