Contents

Letter of Transmittal -- CURRENTLY UNAVAILABLE ONLINE

Executive Summary

Introduction

Recommendations of the Study Commission on Lobbyist Ethics

  1. Ethics Commission - Administration and Enforcement of Lobbyist Regulation
     
  2. Lobbyist Registration
     
  3. Lobbyist Activity Reporting
     
  4. Prohibited Practices
     
  5. Political Campaign Activity and Reports of Contributions
     

Appendices

Appendix AProposed Lobbyist Ethics Reform Bill for 2001 Session (Ethics Law - Lobbyist Ethics Reform)
  
Appendix BSenate Joint Resolution 3 and House Joint Resolution 20 (1999)
  
Appendix CMeetings of the Study Commission
CURRENTLY UNAVAILABLE ONLINE
  
Appendix DCorrespondence Between the Study Commission and the Governor and Presiding Officers of the General Assembly Regarding Extension of the Study Commission's Work
CURRENTLY UNAVAILABLE ONLINE
  
Appendix EAdvice Letter from Assistant Attorney General Robert A. Zarnoch to Donald B. Robertson, Chairman of the Study Commission
CURRENTLY UNAVAILABLE ONLINE
  
Appendix FWritten Testimony and Other Communications
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EXECUTIVE SUMMARY

Introduction

In this Final Report, the Study Commission on Lobbyist Ethics ("Study Commission") recommends a number of changes in the Maryland Public Ethics Law ("Ethics Law") as it relates to the regulation of lobbyists. These changes would broaden the coverage of the law and impose a number of new restrictions and obligations on those covered. The Study Commission has concluded that these changes are necessary and appropriate to address actual and perceived problems in the relationship between lobbyists and government officials.

The Study Commission's recommendations should be taken in context. Lobbying is an honorable undertaking and is an important and valuable part of the governmental process. Government officials are required to analyze and make decisions on literally thousands of issues on diverse subjects. Lobbyists -- whether they be hired contract professionals, employees of a corporate entity, representatives of state or local government or of educational institutions, agents of interest groups, or private citizens -- provide facts, theory, and argument that is essential in the decision-making process.

Notwithstanding the legitimate and valuable role of lobbying, the General Assembly concluded many years ago that some constraints on the relationship between lobbyists and government are necessary and appropriate to avoid abuse and maintain public confidence in the governmental process. Thus, legislation was enacted that required certain lobbyists to register with the State and periodically to report their expenditures in attempting to influence legislative action and certain kinds of executive action.

This general system of regulation of lobbyists has remained relatively unchanged over the years. In that period, however, the number of regulated lobbyists has increased greatly, and the expenditures by such lobbyists have expanded exponentially. There have been changes in the operations of lobbyists and in the political scene that were not contemplated by the drafters of the current law. Moreover, the expectations of the public with respect to limiting inappropriate relationships between lobbyists and officials are much higher. Finally, in the last decade there has been a series of high-profile criminal proceedings involving lobbyists that have increased the focus on the relationship between lobbyists and officials and raised questions about how government business is conducted.

As a result, the General Assembly concluded in 1999 that the Ethics Law as it relates to the regulation of lobbyists should be re-examined, and this Study Commission was created. The Study Commission identified a number of actual and perceived problems in the relationship between lobbyists and government. Accordingly, this Report makes a series of recommendations for strengthening the regulation of lobbyists.

It should be emphasized that the problems that are addressed by the Study Commission's recommendations are, for the most part, the result of the abuses of a few within a large lobbying community. Moreover, those problems are not caused entirely by lobbyists. A lack of sensitivity to ethical issues on the part of some government officials, as well as a failure on the part of some officials to maintain an appropriate professional relationship with lobbyists, have contributed significantly to the creation of these problems.

Recommendations of the Study Commission on Lobbyist Ethics

I.

Ethics Commission - Administration and Enforcement of Lobbyist Regulation

A. Lobbyist training

B. Enforcement of the Ethics Law

C. Electronic Filing and On-Line Public Inspection of Regulated Lobbyist Reports

D. Staffing and Budget Requirements for the State Ethics Commission

II.

Lobbyist Registration

III.

Lobbyist Activity Reporting

IV.

Prohibited Practices

The Study Commission recommends amending the Ethics Law to prohibit regulated lobbyists from engaging in the following activities:

V.

Political Campaign Activity and Reports of Contributions


INTRODUCTION

In this Final Report, the Study Commission on Lobbyist Ethics ("Study Commission") recommends a number of changes in the Maryland Public Ethics Law ("Ethics Law") as it relates to the regulation of lobbyists. These changes would broaden the coverage of the law and impose a number of new restrictions and obligations on those covered. For the reasons set forth in greater detail in various sections of this report, the Study Commission has concluded that these changes are necessary and appropriate to address actual and perceived problems in the relationship between lobbyists and government officials.

The Study Commission's recommendations should be taken in context. Lobbying is an honorable undertaking and is an important and valuable part of the governmental process. As stated by Professor Alan Rosenthal of Rutgers University, a leading academic authority on the subject of state legislatures and legislative ethics:(2)

Lobbyists have as their job trying to advance or protect the interests of their clients. They represent legitimate ideological, social, and economic concerns and attempt to persuade legislators of the substantive and political merits of their cases. They accomplish this through a variety of techniques. . . .

Legislators and other government officials are required to analyze and make decisions on literally thousands of issues on diverse subjects. No official is an expert on all issues; all officials need more than their own resources, or those of the governmental staff, on most issues. Lobbyists -- whether they be hired contract professionals, employees of a corporate entity, representatives of state or local government or of educational institutions, agents of interest groups, or private citizens -- help to fill this need. They provide facts, theory, and argument that is essential in the decision-making process. As stated by Professor Rosenthal with respect to professional lobbyists:(3)

When legislators are asked about the business of lobbying, they overwhelmingly acknowledge the essential role of lobbyists in providing them with the information they need in lawmaking. The fact is that no one can be expected to make the case better than lobbyists. They can explain why a group needs legislation; how it serves the state's broader interests; what it will cost; its likely utility; who favors the measure and who opposes it; where other legislators and executive-branch officials stand; the opposition's position and strategy; and the political effects of the legislator's support or opposition. A lobbyist will usually communicate both the upside and the downside for the legislator. Lobbyists on the other side of the issue will present a counter case. On the basis of lobbyist information, as well as other factors, legislators make their decisions.

Notwithstanding the legitimate and valuable role of lobbying, the General Assembly concluded many years ago that some constraints on the relationship between lobbyists and officials are necessary and appropriate to avoid abuse and maintain public confidence in the governmental process. Thus, legislation was enacted, which in 1979 became part of the Ethics Law, that required certain lobbyists to register with the State and periodically to report their expenditures in attempting to influence legislative action and certain kinds of executive action.

This general system of regulation of lobbyists, and the entities they represent, has remained relatively unchanged over the years. In that period, however, there have been many changes in circumstances. The number of regulated lobbyists has increased greatly, and the expenditures by such lobbyists have expanded exponentially. There have been changes in the operations of lobbyists (e.g. emphasis on legislative unit entertainment instead of individual meals) and in the political scene (the increased cost of campaigns, the level of contributions by interested entities, and the participation by some lobbyists in that process) that were not contemplated by the drafters of the current law. Moreover, the expectations of the public with respect to limiting inappropriate relationships between lobbyists and officials are much higher. Finally, in the last decade there has been a series of high-profile criminal proceedings involving lobbyists that have increased the focus on the relationship between lobbyists and officials and raised questions about how government business is conducted.

As a result, the General Assembly concluded in 1999 that the Ethics Law as it relates to the regulation of lobbyists should be re-examined, and this Study Commission was created.(4) In response to the mandates of the Resolutions creating it, the Study Commission identified a number of actual and perceived problems in the relationship between lobbyists and government. Accordingly, this Report makes a series of recommendations for strengthening the regulation of lobbyists.

It should be emphasized that the problems that are addressed by the Study Commission's recommendations are, for the most part, the result of the abuses of a few within a large lobbying community. Moreover, those problems are not caused entirely by lobbyists. A lack of sensitivity to ethical issues on the part of some officials, as well as a failure on the part of some officials to maintain an appropriate professional relationship with lobbyists, have contributed significantly to the creation of those problems.

Appointment and Charge of the Study Commission

During the 1999 legislative session, the General Assembly passed Senate Joint Resolution 3 and House Joint Resolution 20 establishing the Study Commission (copies of which are attached as Appendix B of this Final Report). The Study Commission held a series of 10 meetings from September 1999 to January 2000, and 7 meetings from May to October of 2000 (a summary list of which is attached as Appendix C of this Final Report). The Joint Resolutions directed the Study Commission to accomplish the following:

In its initial meetings, the Study Commission was briefed on the current provisions of Maryland law relating to the regulation of lobbyists and on the organization and activities of the State Ethics Commission ("Ethics Commission") relating to lobbyists. Thereafter, the Study Commission continuously examined the Ethics Law as it relates to the regulation of lobbyists.

In its early deliberations, the Study Commission was briefed on lobbyist practices and lobbyist regulation in other states, the federal government, and Canada. The Study Commission reviewed the Practice Guidelines of the Maryland Government Relations Association and heard testimony from its past two presidents(5) regarding standards of conduct for lobbyists. The Study Commission also examined federal and state case law regarding lobbyist regulation and lobbyist activities.

The Study Commission conducted two public hearings, one in the Fall of 1999 as the Study Commission assembled information about issues to address, and one in the Summer of 2000 to receive comment on a draft of proposed legislation. In addition, at the end of each work session, the Study Commission provided an opportunity to any individual in attendance to make brief comments regarding issues discussed at the meeting. The Study Commission also received written comments from several individuals and groups (copies of which are attached as Appendix F of this Final Report).

The Study Commission discussed at length the feasibility of developing and implementing a code of ethics. In doing so, it examined various potential code sources, including other states' laws in the area of lobbyist regulation, the Practice Guidelines of the Maryland Government Relations Association, and certain provisions of the Code of Professional Responsibility for licensed attorneys. Although some states prohibit certain activities by regulated lobbyists, no state appears to have a comprehensive statutory code of ethics for lobbyists. As discussed in greater detail in the Recommendations section of this Final Report, the Study Commission decided not to attempt to develop a comprehensive code of ethics that would include protection of lobbyists' clients and other lobbyists. Instead, the Study Commission determined that it would be more appropriate to propose a series of statutory prohibitions and requirements that are closely related to the protection of the public and the governmental process.

The Study Commission proposes a number of statutory changes to the Ethics Law relating to lobbyists. These proposed changes are set forth in draft legislation (a copy of which is attached as Appendix A of this Final Report) and are described in the Recommendations section of this Final Report.

The creative Joint Resolutions provided for the Study Commission to complete its work by December 31, 1999. Due to the scope of the issues under review by the Study Commission, the Commission requested, and was granted, an extension from the Governor, President of the Senate, and Speaker of the House to continue its study and report its findings not later than November 1, 2000 (copies of the Study Commission request and responses extending its study are attached as Appendix D of this Final Report). The Study Commission issued an Interim Report to the Governor, Senate President, and House Speaker on February 9, 2000, describing the activities of the Study Commission to that date. In accordance with the terms of the extension, the Study Commission submits this Final Report on its activities and recommendations.

Lobbying-related issues not addressed by the Study Commission

The Study Commission discussed a number of issues in the course of its deliberations that are not addressed in this Final Report or in the attached legislative proposals. Some issues were not amenable to statutory change, while others are more appropriately addressed in venues other than this Study Commission. Still others were the subject of recent legislation and need not be re-examined at this time. These issues are summarized below.

Agencies of the State government, as well as most local jurisdictions, engage in activities that are essentially indistinguishable from private sector lobbying of legislative action. Nonetheless, the current lobbying law does not generally address these activities, either in the reporting of expenses or in the restrictions on gifts. Additionally, organizations that represent groups of local governments are explicitly exempt from lobbyist registration.

The Study Commission considered addressing this subject in its proposed legislation, but determined that issues relating to governmental lobbying should be studied in another forum. The Study Commission urges the General Assembly to designate an appropriate body to take up this issue. The options for addressing this issue range from merely requiring the reporting of certain categories of gifts to legislators (a possibility explored in detail by the Study Commission) to a full imposition of restrictions and reporting similar to those currently provided for private-sector regulated lobbyists.

Some problem areas in the enforcement of the current law were judged by the Study Commission to be better dealt with by the Ethics Commission administratively, at least in the first instance, without a change in the statute. One such issue relates to the determination of when the fee structure negotiated by a regulated lobbyist constitutes a contingent fee, which is illegal under the Ethics Law. Another issue relates to procedures to be followed when a regulated lobbyist is dismissed by the lobbyist's client.

The Study Commission's recommendations did not address two issues that have been the subject of recent legislative action by the General Assembly. The first relates to regulating the solicitation and acceptance by officials of gifts from lobbyists, an area that was substantially amended in 1999 and is outside the charge to the Study Commission. The second relates to the regulation of private business activity between lobbyists and officials, a subject that was reviewed preliminarily by the Study Commission in January 2000 at the request of the presiding officers and, thereafter, was acted upon by the General Assembly in the 2000 legislative session.


RECOMMENDATIONS
OF THE
STUDY COMMISSION ON LOBBYIST ETHICS

I.

Ethics Commission - Administration and Enforcement of Lobbyist Regulation

Background

The focus of the regulation of lobbyists under the existing provisions of the Ethics Law is on registration and reporting requirements that disclose the identity of regulated lobbyists and their clients and subsequently describe the lobbying activities of those regulated. The State Ethics Commission ("Ethics Commission") administers and enforces those requirements through annual registration of regulated lobbyists and semi-annual lobbyist activity reporting. The current law does not generally address standards of ethical conduct expected of regulated lobbyists.

As part of its regulatory function, and often in response to inquiries from regulated lobbyists, the Ethics Commission provides guidance and advice to regulated lobbyists through the issuance of advisory opinions and memoranda, as well as through more informal communications. If there is an alleged ethics violation, the Ethics Commission is authorized to initiate administrative proceedings and may issue enforcement orders but is required to petition the court in order to secure compliance with those orders.

The Study Commission concludes that the current statutory structure of reporting requirements and indirect sanction authority unduly limits the Ethics Commission to a largely reactive and passive regulatory and enforcement role. Accordingly, as described in greater detail below, the Study Commission makes a number of recommendations to strengthen the role of the Commission, including proposals for mandatory training of regulated lobbyists, increased advisory staff resources, and a significantly expanded role in enforcement. The latter would provide authority to assess administrative fines directly and to suspend or revoke the registration of a regulated lobbyist. The Study Commission also recommends greater public access to and availability of lobbyist activity reports. Finally, to assist the Ethics Commission perform its assigned duties, we recommend the expansion of its funding and staff resources.

Proposed Changes in the Law

A. Lobbyist Training

Proposal: Require the Ethics Commission to enhance educational resources for regulated lobbyists.

The Study Commission believes that the Ethics Commission needs to play a more active and consistent role in educating and informing regulated lobbyists about the requirements of the law.

The Ethics Commission currently provides an annual orientation program for regulated lobbyists that focuses on the legal obligations of lobbyists under the Ethics Law. In addition, the Ethics Commission staff is available on a continuous basis to answer written or verbal inquiries from regulated lobbyists. Despite these efforts, increased attention to this function is required.

Compliance with the law requires knowledge of the law. The Study Commission received complaints that various provisions of the Ethics Law are extremely complex and often difficult for even the most seasoned lobbyist to understand or interpret. Providing more opportunities for regulated lobbyists to review the requirements of the law with the staff of the Ethics Commission would reduce unnecessary confusion or misinterpretations.

Accordingly, the Study Commission recommends that the Ethics Law be amended to require the Ethics Commission to provide a training course for regulated lobbyists and prospective regulated lobbyists at least twice each year. The training course would review the provisions of the Ethics Law relevant to regulated lobbyists. One of the courses would be required to be conducted during the month of January to correspond to the beginning of each legislative session.

The Study Commission also recommends that the Ethics Commission be required to provide newly registered regulated lobbyists with information relating to the provisions of the Ethics Law relevant to lobbyists at the time of initial registration.

Proposal: Require periodic attendance by regulated lobbyists at training courses.

More frequent training courses for regulated lobbyists will not create a greater understanding of the Ethics Law if lobbyists do not avail themselves of the resource. Provisions of the Ethics Law are frequently amended, and the Ethics Commission from time to time issues opinions and memoranda interpreting the law. Required attendance at a training session would provide the opportunity for each regulated lobbyist to learn about and discuss those changes and other provisions of the law affecting lobbying activities. Several groups, and some individual regulated lobbyists, recommended mandatory attendance by lobbyists at training courses.

Accordingly, the Study Commission recommends requiring each regulated lobbyist to attend at least one training course conducted by the Ethics Commission within each two-year period during which the lobbyist is registered.

Proposal: Require the Ethics Commission to provide counsel to advise persons subject to the Commission's jurisdiction.

To promote compliance with the Ethics Law, the Ethics Commission should be properly staffed to advise and guide officials, employees, and regulated lobbyists about the requirements of the Ethics Law. Those regulated by the law are entitled to receive reliable and consistent advice about the requirements of the law. The Study Commission believes that additional advisory staff is necessary for the Ethics Commission to carry out this function.

Accordingly, the Study Commission recommends that the Ethics Commission be required to provide, in accordance with the State budget, such staff counsel as may be required to advise persons who are subject to the jurisdiction of the Ethics Commission.

B. Enforcement of the Ethics Law

Background

The Study Commission believes the Ethics Commission has insufficient enforcement authority. The problem is two-fold. On the one hand, the penalties for violations are less than stringent; on the other, to impose even these modest penalties, the Ethics Commission must adhere to a statutory scheme that discourages effective enforcement. The Ethics Commission is required to investigate and pursue complaints of ethics violations, but is limited to issuing reprimands and orders of compliance and, for reporting problems, assessing late fees. Compliance with Ethics Commission orders and the assessment of civil fines for violations must be accomplished by petitioning the court to take the action. This requirement adds delay and complication to the administrative process required to make a determination on an alleged violation.

Current Law

Under current law, the Ethics Commission may conduct an administrative hearing on a complaint. If it determines that a violation has occurred, the Ethics Commission may: (1) issue a cease and desist order; (2) issue a reprimand; or (3) recommend other appropriate discipline to a supervising authority (a remedy not relevant to a violation by a regulated lobbyist). The decisions of the Ethics Commission are subject to judicial review.(6)

To enforce its order or for other relief, the Ethics Commission is required to petition the circuit court. Upon such a petition, the court is authorized to: (1) issue a cease and desist order; (2) grant injunctive relief; (3) impose a civil fine of up to $5,000 for each day of the violation; and (4) void an official act of an official or employee.

Criminal sanctions are equally modest. Knowing and willful violations of the Ethics Law by regulated lobbyists are misdemeanors that subject the violator, upon conviction, to imprisonment not exceeding 1 year or a fine not exceeding $1,000, or both.

Recommendations for Enhanced Enforcement

The Study Commission has concluded that the sanctions authorized and enforcement procedures required by the Ethics Law for lobbyist violations fail to provide meaningful, timely, and effective enforcement and that the enforcement authority of the Ethics Commission should be significantly expanded.

Accordingly, we recommend amending the Ethics Law to authorize the Ethics Commission to impose a range of new sanctions for violations of the provisions relating to the regulation of lobbyists. Specifically, the Study Commission recommends the following changes to the enforcement authority of the Ethics Commission:

Proposal: Authorize the Ethics Commission to require a regulated lobbyist in violation to file additional reports or information.

The Study Commission recognizes that many reporting and other minor violations may be resolved administratively. It also has concluded that the Ethics Commission may need to request additional information in order to determine whether, in fact, there has been a violation.

Under this recommendation, the Ethics Commission would be authorized to require a respondent who is a regulated lobbyist to file additional reports or information that reasonably relates to information required under the registration and lobbyist activity reporting provisions of the Ethics Law.

Proposal: Authorize the Ethics Commission to directly impose administrative fines.

This proposal would allow the Ethics Commission to impose a fine administratively, without having to petition the court, for ethics violations by regulated lobbyists. An order by the Ethics Commission under this provision could be challenged and would be subject to the same level of judicial review as any other order of the Ethics Commission under existing law.

John O'Donnell, the Executive Director of the Ethics Commission, testified that, to provide effective and timely enforcement, the Ethics Commission needs flexibility to levy civil fines without the need to obtain a court order. He pointed out that the court approval process can delay enforcement for more than a year from the date of the Ethics Commission's finding of a violation.

The power to impose fines has long been established in State law for other administrative agencies. Under this proposal, the Ethics Commission would be required to consider, in setting the amount of a fine, the severity of the violation, the good faith of the violator, and the history of prior violations.

Proposal: Authorize the Ethics Commission to suspend or revoke the registration of an individual regulated lobbyist.

As suggested by several organizations, as well as by some regulated lobbyists, the Study Commission recommends that the Ethics Commission be authorized, under appropriate circumstances, to suspend or revoke the registration of an individual regulated lobbyist for a violation of the Ethics Law or certain other violations. According to information compiled by staff to the Study Commission, approximately 25 states have comparable authority. Additionally, the Counsel to the General Assembly with the Office of the Attorney General has reviewed the proposal and has expressed the view that suspension and revocation of lobbyist registration appears to be constitutionally permissible.(7)

Specifically, the Study Commission recommends amending the Ethics Law to authorize the Ethics Commission to suspend the registration of an individual regulated lobbyist if the Commission determines that the lobbyist: (1) has knowingly and willfully violated the lobbyist regulation subtitle of the Ethics Law; or (2) has been convicted of a criminal offense arising from lobbying activities. Under the recommendation, if the Ethics Commission suspends the registration, the individual regulated lobbyist may not engage in lobbying for compensation for a period of up to 3 years.

The Study Commission also recommends that the Ethics Commission be authorized to revoke the registration of an individual regulated lobbyist if the Commission determines that, based on acts arising from lobbying activities, the lobbyist has been convicted of bribery, theft, or other crime involving moral turpitude. If the registration is revoked, the individual regulated lobbyist would be prohibited from engaging in lobbying for compensation.

Under the recommendation, there are several features that are common to both the suspension and revocation sanctions. Neither could be imposed unless the Ethics Commission determines that it is necessary to protect the public interest and the integrity of the governmental process. A complaint seeking suspension or revocation would be required to be initiated within two years of the Ethics Commission's knowledge of the violation or of the date the conviction becomes final. The termination or expiration of a registration would not limit the authority of the Ethics Commission to suspend or revoke the right of the lobbyist to register.

Though employed by the private sector, regulated lobbyists are a part of the governmental process. The relationship between lobbyists and government officials and employees affects the public perception of the ethical standards of government, which is a significant reason why lobbyists are regulated by the State. Regulated lobbyists have a responsibility to adhere to a high standard of ethical conduct. When that standard is abused through criminal activity such as bribery, theft, or other types of fraudulent crime arising out of lobbying activities, or by serious violations of the Ethics Law, public confidence in the integrity of the governmental process is seriously compromised.

Authorizing the Ethics Commission to suspend or revoke the registration of an individual regulated lobbyist would provide an important enforcement tool to encourage more diligent compliance with the Ethics Law. The possibility of being prohibited from engaging in lobbying activities for compensation would provide a strong financial incentive to professional lobbyists to comply with the law. Additionally, the authority of the Ethics Commission to suspend or revoke the registration of a lobbyist based on a criminal conviction arising from lobbying activity would help restore public confidence in the process by demonstrating that criminal activity has consequences affecting the ability to engage in lobbying.

Proposal: Authorize the Ethics Commission to reinstate a suspended or revoked registration.

The Study Commission believes that the Ethics Commission should also have the flexibility, under appropriate circumstances, to reinstate a registration that has been suspended or revoked.

Accordingly, the Study Commission recommends that the suspension and revocation provisions be accompanied by a provision permitting an individual whose registration as a regulated lobbyist is revoked or suspended to apply to the Ethics Commission for reinstatement. Under this recommendation, the Commission would be authorized to reinstate the registration only if the Commission determines that reinstatement would not be detrimental to the public interest and the integrity of the governmental process and only after consideration of: (1) the nature and circumstances of the original misconduct or violation leading to revocation or suspension, (2) the individual's subsequent conduct and reformation, and (3) the present ability of the individual to comply with the provisions of the Ethics Law.

Proposal: Increase the maximum fine for criminal violations of the Ethics Law.

For a criminal violation of the Ethics Law by a regulated lobbyist, current law provides for a fine of up to $1,000 or imprisonment for up to one year. As with many misdemeanor offenses that carry a maximum of one year in prison, the courts are more likely to impose a fine than to order imprisonment. Mr. O'Donnell testified that the current maximum fine does not provide enough of a disincentive to possible violators. The Study Commission has determined that the maximum fine should be increased.

Accordingly, the Study Commission recommends amending the Ethics Law to increase, from $1,000 to $10,000, the maximum fine that can be imposed for a misdemeanor conviction for a knowing and willful violation of the lobbyist regulation subtitle of the Ethics Law. The increased fine would not apply to a violation of a new provision recommended by the Study Commission, that relating to the disclosure of campaign contributions by the employer of a regulated lobbyist. That provision parallels existing provisions of the Election Code (Article 33, Title 14 of the Annotated Code), as to which a criminal violation carries a fine of $1,000.

Proposal: Increase the statute of limitations for criminal violations.

This recommendation is designed to allow the Ethics Commission sufficient time to properly investigate and refer potential criminal violations to prosecuting authorities and for prosecuting authorities to investigate and initiate criminal proceedings.

At present, criminal violations of the Ethics Law are misdemeanor offenses that, unless otherwise specified under the law, must be prosecuted within one year after the offense is committed.(8)

Due to the passage of time involved in many of the reporting requirements of the Ethics Law, and the investigation required once a criminal violation is alleged and the required referral of an alleged criminal violation is made to a prosecuting authority, it is difficult for prosecuting authorities to pursue criminal charges against an alleged violator within the one-year period for prosecution.

Accordingly, the Study Commission recommends that 5-106 of the Courts Article be amended to increase, from 1 year to 2 years, the statute of limitations applicable to the prosecution of a criminal violation of the Ethics Law.

C. Electronic Filing and On-Line Public Inspection of Regulated Lobbyist Reports

The Study Commission believes that greater public access to lobbyist activity reports is desirable and could be achieved through use of Internet technology. We note that information regarding lobbyist registration is already available on-line.

Proposal: Provide for electronic filing and Internet accessibility of lobbyist reports.

The Study Commission recommends that the Governor and the General Assembly provide the Ethics Commission with appropriate funding and staff resources to establish on-line Internet access to lobbyist reporting records.

To facilitate placing the information on-line, the Ethics Law should be amended to require the Ethics Commission to develop procedures for allowing any regulated lobbyist reports to be filed electronically without additional cost to the filer.

D. Staffing and Budget Requirements for the State Ethics Commission

Proposal: Provide adequate funding and staff resources to the Ethics Commission.

The State Ethics Commission has been in existence for over 20 years, and it has a wide array of powers and duties. The Ethics Commission's effectiveness has been hampered throughout that entire period, however, by the restrictions of a very modest budget. Notwithstanding its small staff, the Ethics Commission has been very effective in carrying out its statutory responsibilities, which include overseeing the conflict of interest standards for 65,000 officials and employees in all three branches of State government, financial disclosure by over 8,000 officials and candidates for office, and over 1,800 lobbyist registrations each year. Additionally, the Commission monitors the ethical standards adopted for a vast number of local officials and employees. The job is done well -- but it could be done better by a larger staff.

Moreover, the recommendations of the Study Commission will place additional burdens and responsibilities on the Ethics Commission. The improvements contemplated by these recommendations cannot be fully realized unless the resources of the Ethics Commission are increased.

Accordingly, the Study Commission recommends that the Governor and the General Assembly assess the staffing needs of the Ethics Commission and provide a budget that allows the Ethics Commission to optimize the performance of its duties.

II.

Lobbyist Registration

Background

The current law sets out five classes of circumstance that require a person to register with the Ethics Commission and become a regulated lobbyist under the law. With one exception, the classes have been unchanged since the 1979 enactment of the current Ethics Law. Early in its deliberations, the Study Commission received testimony from Mr. O'Donnell pointing to a need to broaden these lobbyist registration "triggers." Mr. O'Donnell noted that some unregulated activities are quite similar in nature to the current criteria for registration. In some cases, the mode of communication (e.g., face-to-face rather than by telephone) is all that separates regulated lobbying activities from totally unregulated and unreported conduct.

Lobbyist registration and reporting is one of the core elements in the structure of the Ethics Law. As noted in the law's statement of legislative intent, the confidence and trust of the people "is eroded when the conduct of the State's business is subject to improper influence or even the appearance of improper influence."(9) It is clear to the Study Commission that the public's confidence and trust in the impartiality of decision-making in the Legislative and Executive Branches can be maintained best by shining the light of required disclosure on the activities of those who spend or receive money to influence legislative or executive action.

To that end, the Study Commission proposes to expand the criteria that require lobbyist registration, to set out additional minor exemptions from registration, to prohibit lobbying requiring registration by officials and employees of the State, and to clarify certain provisions of the existing law.

Current Law

The actions that currently trigger the necessity to register as a lobbyist are codified at 15-701(a) of the State Government Article. They are as follows:

     1. For the purpose of influencing "legislative action":

          (i) communicating face-to-face with an official or employee of the Legislative Branch or Executive Branch; and

          (ii) either incurring expenses of at least $100 (not including travel and subsistence), or earning at least $500 as compensation.

     2. In connection with or for the purpose of influencing "executive action", spending a total of at least $100 for gifts (e.g., meals, events, etc.) for one or more officials or employees of the Executive Branch.

     3. Being employed to influence executive action on a procurement contract that exceeds $100,000. (Bona fide salespeople and commercial selling agencies are exempt.)

     4. Spending at least $2,000 on "grass-roots" lobbying to solicit others to communicate with officials to influence legislative or executive action.

     5. Spending at least $500 to compensate a lobbyist who is required to register under categories 1 through 4, above.

Proposed Changes in the Law

Proposal: Apply legislative lobbying registration "triggers" to Executive Branch activities relating to regulations and executive orders.

The Study Commission notes that the development and adoption of regulations and the issuance of executive orders are similar in many respects to legislative actions. State government has become more complex in recent decades, with large-budget programs and substantial regulatory authority being transferred from the federal government to the states. Understandably, these executive actions increasingly attract the attention of professionals whose job it is to influence the outcome in favor of a client or employer. These individuals clearly "lobby" governmental officials in pursuit of favorable outcomes, often receiving significant compensation and making noteworthy expenditures. However, unless their efforts include the giving of gifts of $100 or more in a 6-month period, the expenditures and compensation go unreported to the public.

According to the State Ethics Commission, approximately 20 states have some degree of lobbying standards relating to efforts to influence regulatory activities. Early in its deliberations, the Study Commission determined that an updating of Maryland's law in this area was an important step in the effective monitoring of lobbying activities.

The Study Commission recommends that the Ethics Law be amended to apply the legislative lobbying registration triggers to a person who seeks to influence the development or adoption of regulations or the issuance of executive orders. Under this proposal such a person would be required to register as a regulated lobbyist and subsequently file reports if the person: (1) communicates face-to-face with an official or employee of the Legislative Branch or Executive Branch, and (2) either incurs expenses of at least $100 (not including travel and subsistence), or earns at least $500 as compensation.

Proposal: Require registration for a person who lobbies by means of communication other than "face-to-face" and who receives significant compensation.

The Study Commission received information regarding ongoing efforts by some individuals to influence legislative action, in a professional capacity, through communication other than face-to-face contact. By consciously remaining outside the physical presence of an official, a person engaged in this type of lobbying activity can totally avoid lobbyist registration and the reporting of compensation and expenditures under the existing law. It is evident that such a loophole in the law becomes even more significant as advances in communications technology bring additional tools to the business of lobbying. The activities of a well-paid professional lobbyist are no less worthy of public scrutiny merely because the communication is carried out at a distance, rather than in face-to-face meetings.

Accordingly, the Study Commission recommends that the Ethics Law be amended to add an additional trigger requiring lobbyist registration by those who communicate with officials or employees for the purpose of influencing legislative action or (as added pursuant to the proposal described above) influencing executive action relating to the development or adoption of regulations or to the issuance of an executive order. The new trigger would apply to a person who: (1) communicates by any means, and (2) receives at least $5,000 in compensation for the activity.

Proposal: Require registration for lobbying for a major business grant or loan.

With increasing competition among states to attract and retain private business entities, Maryland has been using grant programs such as the Sunny Day Fund as incentives. Reports in the media note that consultants often play one state off against another in negotiations, creating bidding wars that drive up the amounts being offered by states. In return, some of these consultants reportedly receive as compensation a significant percentage of the dollar amount won from the state.

Registration of business-incentive consultants as regulated lobbyists would accomplish two goals. First, it would bring public scrutiny to an activity that has significant economic consequences for the taxpayers of the State. Additionally, once registered as a regulated lobbyist, the consultant would be prohibited under a provision of current law from working for contingent compensation. The Study Commission has determined that contingent compensation paid to lobbyists in business-incentive negotiations may tempt those involved to act improperly, which is why such compensation has long been prohibited for regulated lobbyists. Moreover, contingent compensation may distort the lobbyist's motivations, causing the lobbyist to bargain with the State to promote his or her own financial self-interest, rather than acting in the interests of the client.

It is not the intention of the Study Commission to interfere with the actions of regular officials or employees of businesses seeking incentives from the State. The focus should instead be on paid consultants whose activities more closely resemble the work of contract lobbyists in the State procurement process, who are already required to register.

Accordingly, the Study Commission recommends that the Ethics Law be amended to require registration as a regulated lobbyist by a person who is compensated by a business entity to influence executive action to secure from the State a business grant, or a business loan, with a value of more than $100,000. Under the proposal, an exception would be made for a bona fide full-time official or employee of a business entity seeking a business grant or loan.

Proposal: Exception for certain appearances before Executive Branch units.

Current law provides exemptions from lobbyist registration for an individual who either appears before the legislature at the specific request of the legislative body involved or appears as a witness before a legislative committee at the specific request of a regulated lobbyist. The Study Commission believes that it is reasonable and appropriate to grant comparable exceptions to individuals who appear before units of the Executive Branch.

Accordingly, the Study Commission recommends that the Ethics Law be amended to exempt from lobbyist registration a person who appears before an Executive unit at the specific request of the Executive unit involved. Additionally, an exemption should be granted to appearances before an Executive unit at the specific request of a regulated lobbyist, if the witness notifies the Executive unit that the witness is testifying at the request of the regulated lobbyist.

Proposal: Require termination of lobbyist registration by an individual who becomes subject to the Ethics Law as an official or employee.

As a matter of public policy, the Study Commission finds it unacceptable for government officials and employees to be engaged in activities that require registration as regulated lobbyists. Even if there is not a direct conflict of interest involved in the dual roles, an appearance of impropriety is created, and public confidence in the impartiality of government is diminished.

Nonetheless, the Study Commission believes that it is appropriate for short-term advisory governmental bodies, such as task forces conducting studies during the legislative interim, to contain members who are regulated lobbyists. Indeed, this Study Commission is required to have regulated lobbyists among its members.

Accordingly, the Study Commission recommends that the Ethics Law be amended to require immediate termination of registration by a regulated lobbyist who is or becomes subject to regulation under the Ethics Law as an official or employee. An exception should be made as to a regulated lobbyist appointed to an advisory governmental body of limited duration.

Clarifications in the Lobbyist Registration Law

The Study Commission proposes several minor clarifications in the law relating to registration of regulated lobbyists.

Clarification - Procurement lobbyists

The provision of the Ethics Law relating to lobbyists who seek to influence executive action on procurement contracts that exceed $100,000 currently addresses persons who are "employed" for this purpose. Consistent with the current interpretation, and to avoid a potential loophole based on the meaning of the term "employed," this provision should be clarified to apply explicitly to any person who is "compensated" for that purpose.

Clarification - Grass-roots lobbyists

The lobbyist trigger relating to "grass-roots lobbying" requires registration by a person who "spends at least $2,000, including postage, for the express purpose of soliciting others to communicate with an official to influence legislative action or executive action." This provision should be clarified to provide notice that the range of possible expenses goes well beyond postage and may include salaries, contractual employees, telecommunications services, electronic services, advertising, printing, and delivery services.

Clarification - Termination of registration

There has been some confusion regarding the sequence of events for termination of a lobbyist registration prior to its normal expiration date. The Study Commission recommends amending the Ethics Law to clarify that termination entails the following sequence of events: (1) ceasing all activity that requires registration, (2) filing a notice of termination with the Ethics Commission, and (3) filing all required reports within 30 days after filing the notice of termination.

III.

Lobbyist Activity Reporting

Throughout each legislative session, dozens of citizens groups, associations, and other advocacy groups come to Annapolis and hold receptions or other events in order to meet with and convey their messages to their elected officials. Most of these groups, or the individuals who represent them, are regulated lobbyists who conduct these events in order to bring together clients or members of an interest group and the elected officials they are attempting to influence.

The Study Commission believes that timely public disclosure of these meals and receptions is important to avoid abuse and to maintain the public's trust.

Current Reporting Requirements

The Ethics Law generally prohibits an official or employee from accepting a gift from a regulated lobbyist. A statutory exemption to that restriction exists for gifts of food or beverages received by officials of the Legislative Branch as part of a meal or reception to which were invited all members of a legislative unit. A "legislative unit" is defined as the entire General Assembly, either house, a standing committee, or a county or regional delegation recognized by a presiding officer.

This exemption originated -- and for many years continued -- as a "special event" exemption to the general requirement that regulated lobbyists report by name gifts made to individual legislators. The exemption was established out of a recognition that often it is difficult or impossible for the sponsoring lobbyist to allocate expenses for such an event to individual legislators. As a result, the "special events" reporting exception was created to provide for disclosure of expenditures based on the identity of the group entertained rather than the identity of any individual legislator in attendance.

The 1999 legislation resulting from the Cardin Commission transformed the concept from a disclosure exemption to an exemption from the provision of that legislation that prohibited individual legislators from accepting meals paid for by regulated lobbyists.

Lobbyist activity reports are required to be filed by May 31st (describing the lobbyist's activities from November 1st through April 30th) and November 30th (describing the lobbyist's activities from May 1st through October 31st) of each year. A majority of the legislative unit meals and receptions occur during the legislative session from January though April, and the lobbyist activity report that covers that period is not due until May 31st, well after the conclusion of the legislative session.

Growth and Alleged Abuse of Legislative Unit Entertainment

As noted above, in 1999 the General Assembly, based on the recommendation of the Cardin Commission, enacted legislation generally prohibiting legislators from receiving from regulated lobbyists gifts of meals and alcoholic beverages but exempted from that prohibition meals and receptions for legislative units. This change is expected to cause an increase in expenditures by regulated lobbyists for legislative unit entertainment. Even before the 1999 legislation went into effect, however, there had been a massive shift in lobbyists' entertainment expenses.

Mr. O'Donnell reported to the Study Commission that, from 1994 until 1999, the amount of money spent by lobbyists on special events for legislative units increased significantly. In the 6-month lobbyist reporting period ending in April of 1994, regulated lobbyist expenditures on special events was approximately $245,000. In the 6-month reporting period ending in April of 1999, that figure had more than doubled to approximately $522,000. Significantly, for the one-year period ending October 31, 1999, the amounts spent on individual meals for legislators had declined since the previous year from approximately $57,000 in 1998 to approximately $28,000.

The Study Commission also received reports of abuses of the legislative unit entertainment exemption. This testimony included an allegation that one lobbyist has a standing invitation to a legislative unit to dine at a certain restaurant at the lobbyist's expense, as well as an allegation that some lobbyists extend verbal invitations to legislative units at times when only a small portion of the legislative unit is present, knowing that not all members of the legislative unit are aware of the invitation or are likely to attend. Both of these examples appear to evade the restriction against meals for individual legislators.

The existing reporting requirement also separates the public disclosure of the events from the activities of the legislative session. The majority of legislative unit events occur during the 90-day legislative session from January to early April. The lobbyist activity reporting period extends from November until the end of April. By the time the lobbyists have reported legislative unit meals and receptions, the legislative session has ended. As a consequence, events that may be closely tied in time and circumstance to issues being lobbied by the sponsors are not disclosed until well after the issues have been resolved.

Recommendations of the Study Commission

Proposal: Require advance written invitations, registration, public notice, and prompt subsequent reporting of legislative unit meals and receptions.

The Study Commission recommends that a regulated lobbyist who invites all members of a legislative unit to a meal or reception shall, at least 5 days before the date of the meal or reception: (1) extend a written invitation to all members of the unit; and (2) register the meal or reception with the Department of Legislative Services on a form prescribed by the Ethics Commission. The legislative unit registration report would include the date and location of the meal or reception and the name of the legislative unit invited (but not the names of the individual legislators invited).

The Study Commission also recommends that, based on the information contained in the legislative unit registration report, the Department of Legislative Services be directed to publish, once a week, a list containing the date and location of each upcoming meal or reception and the identity of the legislative unit invited. The Department would also be required to allow public inspection of any legislative unit registration report during regular business hours and maintain a photocopy or electronic copy of each report. Within 3 business days of receipt of the legislative unit registration report, the Department would be required to forward the original report to the Ethics Commission.

Additionally, the Study Commission recommends that a regulated lobbyist who files a legislative unit registration report shall report to the Ethics Commission the total cost of the meal or reception, including the identity of any sponsor who contributes to the cost and the amount of the contribution, within 14 days after the date of the legislative unit meal or reception. If any information required to be filed by the lobbyist is not known to the lobbyist within the 14-day period, the lobbyist shall, as to the information not known, specify the nature and estimate the amount of each item.

As noted, most legislative unit meals and receptions take place during the legislative session. Thus, most of these events occur while the regulated lobbyists are in the midst of attempting to influence legislators regarding their votes on bills of interest to the lobbyist or the lobbyist's clients. Public notice of these events in advance of the event, and disclosure of expenditures and sponsorship shortly after the event, would shed greater light on these events and their connection to legislation being considered by the General Assembly. Moreover, timely disclosure of the cost and identity of the sponsor of the legislative unit meal or reception would provide the Ethics Commission a greater opportunity to enforce lobbyist or legislator violations regarding gift acceptance and reporting.

Requiring the issuance of written invitations in advance of the meal or reception would reduce the potential for abuses of the gift exception resulting from verbal invitations or invitations of a continuing nature. The pre-event registration requirement also would establish a centralized source for information about legislative unit entertainment and create a record of the event for enforcement purposes.

The Study Commission recognizes that these recommended reporting requirements place additional burdens on regulated lobbyists. In order to avoid duplicate reporting, the Study Commission also makes the following recommendation:

Proposal: Exemption from duplicate reporting of event.

The Study Commission recommends amending the Ethics Law to provide that, if all information required under the preceding recommendation is reported accurately and completely within 14 days, the regulated lobbyist be relieved of the existing obligation to report the cost of the meal or reception in the lobbyist's next following semi-annual activity report.

Clarification - Reorganization of Lobbyist Reporting Law

Existing 15-704 of the Ethics Law, the principal section relating to various lobbyist activity reports, is extraordinarily complex. It has resulted in significant confusion, and the Study Commission has received a number of requests to attempt to clarify it. Additionally, the Cardin Commission suggested that "code revision" of certain parts of the Ethics Law, including 15-704, would promote better understanding of the many complex requirements of the Law. Moreover, the Study Commission is proposing several additional reporting provisions that would add to the length and intricacy of 15-704.

Accordingly, the Study Commission believes that a reorganization of the reporting provisions, including a division into separate, more specific sections, would help clarify the various requirements.

In the attached draft legislation, the reporting requirements have been reorganized as follows(10):

IV.

Prohibited Practices

One of the charges to the Study Commission was to formulate a code of ethics for lobbyists. The Study Commission deliberated at length with respect to how this charge should be satisfied. In the course of these deliberations, we examined various potential models, including other states' laws in the area of lobbyist regulation, the Practice Guidelines of the Maryland Government Relations Association, and certain provisions of the Code of Professional Responsibility for licensed attorneys.

Several states prohibit certain activities by regulated lobbyists, but none appears to have a comprehensive statutory code of ethics. Despite the absence of a model, the Study Commission discussed various common professional ethical standards such as the avoidance of conflicted client interests, contractual protections for lobbyist clients, and protection for lobbyists from unethical behavior of other lobbyists. In the course of these deliberations, Mr. O'Donnell advised the Study Commission that the Ethics Commission is not equipped to administer or enforce ethics provisions that protect these private interests.

In the end, the Study Commission decided not to attempt to develop a comprehensive code of ethics that would include protection for lobbyists' clients and other lobbyists from acts of lobbyists. Rather, we decided to develop a code of ethics comprised of a series of statutory prohibitions and requirements that, by focusing on the relationship between lobbyists and government officials, are closely related to and designed to enhance the protection of the public and the governmental process.

Although some of the activities proposed to be prohibited are currently illegal in other contexts, such as the initiation of legislation for the purpose of defrauding a client or counseling or engaging in fraudulent or criminal conduct, the significance of their inclusion here is to make a violation subject to the enhanced sanctions proposed for violations of the Ethics Law. As is generally known, there have been recent examples in this State of individual regulated lobbyists having been found guilty of engaging in criminal conduct relating to lobbying activity but that conduct not constituting a violation of the Ethics Law. In those circumstances, the ability of the offending lobbyist to continue to lobby has tended to undermine public confidence in the integrity of the governmental process.

Accordingly, the Study Commission recommends that the Ethics Law be amended to prohibit the following activities by regulated lobbyists:

Proposal: Prohibit initiating or encouraging the introduction of legislation for the purpose of opposing it.

This provision would prohibit "bell-ringing," i.e. a lobbyist attempting to promote the introduction of legislation that is adverse to the interests of a client or potential client for the purpose of prompting the client to use the services of the lobbyist to oppose or defeat the legislation. This practice was recently the subject of a criminal prosecution against an individual regulated lobbyist who was convicted of mail and wire fraud. Bell-ringing not only defrauds clients, but also potentially places legislators and other government officials in an untenable and possibly criminally-liable situation, even if there is no wrongdoing on their part, by exposing them to potential conspiracy or accessory charges. The practice of bell-ringing is damaging to the lobbying and legislative communities and helps contribute to a public perception of unethical and illegal activities between lobbyists and legislators.

Accordingly, the Study Commission recommends that a regulated lobbyist be expressly prohibited from initiating or encouraging the introduction of legislation for the purpose of opposing the legislation.

Proposal: Prohibit counseling any person to violate a law.

Any effort by a regulated lobbyist to counsel others to act in violation of the law, including counseling government officials to violate ethical standards, is unethical and serves to diminish public trust in the governmental process.

Accordingly, the Study Commission recommends that a regulated lobbyist be prohibited from counseling any person to violate the Ethics Law or any other State or federal law.

Proposal: Prohibit engaging in or counseling any person to engage in fraudulent conduct.

It is clearly evident that a regulated lobbyist should not engage in or encourage fraudulent conduct of any kind.

Accordingly, the Study Commission recommends that a regulated lobbyist be prohibited from engaging in or counseling any person to engage in fraudulent conduct.

Proposal: Prohibit knowingly making a false statement of material fact.

Government officials and employees often must depend on the expertise of regulated lobbyists. Purposefully abusing this reliance by making false statements is harmful to the trust and efficiency required for maintaining the effective operation of the governmental process.

Accordingly, the Study Commission recommends that a regulated lobbyist be prohibited, while engaging in lobbying activities, from knowingly making to an official or employee a statement of material fact relating to lobbying activity that the regulated lobbyist knows to be false. This recommendation is not intended to prohibit innocent misstatements or inaccuracies, or mere exaggeration, but focuses instead on intentional false statements of material fact.

Proposal: Prohibit lobbying without being properly registered.

The Ethics Law requires persons who engage in certain activities to register as regulated lobbyists. Although the law implicitly prohibits lobbying without a required registration, there is no explicit prohibition. We believe that a person who engages in lobbying activities without a required registration should be subject to the sanctions imposed for violation of the Ethics Law.

Accordingly, the Study Commission recommends that a regulated lobbyist be explicitly prohibited from engaging in lobbying without being properly registered as a regulated lobbyist.

Proposal: Prohibit requesting an official or employee to recommend to a potential client the lobbying services of the regulated lobbyist or any other regulated lobbyist.

A lobbyist requesting a government official or employee to recommend that lobbyist or another lobbyist to potential lobbying clients is inappropriate because, if acted upon, it may result in acts that would create the appearance of impropriety.

Accordingly, the Study Commission recommends that a regulated lobbyist be prohibited from requesting an official or employee to recommend to a potential client the lobbying services of the regulated lobbyist or any other regulated lobbyist. This recommendation would not prohibit an official from making an unsolicited recommendation.

Proposal: Transfer of existing provision relating to prohibited gifts.

This recommendation simply suggests that, for clarity, a current statutory prohibition be moved from one section of the Ethics Law to another. The Study Commission recommends that the prohibition contained in current 15-505(a)(2) of the State Government Article (against a regulated lobbyist making a gift, directly or indirectly, to an official or employee if the regulated lobbyist knows or has reason to know the gift is in violation of Subtitle 5 of the Ethics Law) be transferred to this proposed list of enumerated prohibitions in the lobbyist regulation subtitle of the Ethics Law.

Proposal: Prohibit making a gift that has been solicited in violation of law.

This proposal would prohibit a regulated lobbyist from making to a third party a charitable or other gift that the lobbyist knows has been illegally solicited by an official or the solicitation of which has been illegally facilitated by the official. Clearly, it is inappropriate for a regulated lobbyist to participate in a transaction, involving an official, that the lobbyist knows is in violation of law.

Accordingly, the Study Commission recommends that a regulated lobbyist be prohibited from making a gift directly or indirectly as the result of a solicitation or of the facilitation of a solicitation that the regulated lobbyist knows or has reason to know is prohibited under 15-505(a)(2) ( 15-505(a)(3) of the current law) of the State Government Article.

Proposal: Prohibit engaging in any charitable fund-raising activity at the request of an official or employee.

The legislation enacted in 1999 in response to the Cardin Commission recommendations prohibited officials from directly soliciting or facilitating the solicitation of a gift on behalf of a third party from an individual regulated lobbyist. The theory underlying that prohibition is that a charitable contribution by a regulated lobbyist at the request of an official or employee provides a benefit to the official or employee. As such, it is in the nature of a gift.

The Study Commission believes that theory is correct and that an individual regulated lobbyist should not have any role in charitable fund-raising at the request of an official or employee.

Accordingly, the Study Commission recommends that an individual regulated lobbyist be prohibited from engaging in any charitable fund-raising activity at the request of an official or employee, including soliciting, transmitting the solicitation of, or transmitting a charitable contribution.

Proposal: Prohibit making or facilitating the making of a loan to an official or employee.

The Study Commission believes that the making or the facilitation of a loan by a regulated lobbyist to an official or employee, unless it is in the ordinary course of the lobbyist's business, is inappropriate. At a minimum, such a transaction, unless it is the business of the lobbyist, creates an appearance of impropriety. In some cases, it constitutes actual impropriety.

The Study Commission recognizes that officials and employees need to be able to borrow money from an appropriate source. We do not intend to prohibit loans made or facilitated by a financial institution, an officer or employee of a financial institution, or any other regulated lobbyist of that nature. The Study Commission believes that such a loan should remain legal.

Accordingly, the Study Commission recommends that a regulated lobbyist be prohibited from making or facilitating the making of any loan of money, goods, or services to an official or employee unless the loan is made in the ordinary course of business of the regulated lobbyist.

Proposal: Prohibit knowingly concealing the identity of a lobbying client.

Officials and employees should know the actual source behind a position taken or information provided by a lobbyist. A lobbyist, particularly one who represents a number of clients, should not be able to mislead or knowingly conceal the identity of a client for whom certain lobbying activities are performed, particularly if the lobbyist is asked who is represented or the context otherwise calls for disclosure. If a lobbyist represents two clients with similar interests and conceals the identity of one of the clients in order to gain an advantage, the official or employee may be misled about the consequences of an action upon which the official or employee is lobbied.

Accordingly, the Study Commission recommends that a regulated lobbyist, while engaging in lobbying activities on behalf of an entity, be prohibited from knowingly concealing from an official or employee, the identity of the entity.

Proposal: Prohibit committing a criminal offense arising from lobbying activity.

Criminal convictions arising out of lobbying activity seriously erode the public trust and confidence in the governmental process. A lobbyist who commits a criminal offense arising from lobbying activities is subject to criminal penalties upon conviction but may not be subject to penalties under the Ethics Law, such as suspension or revocation. The Study Commission believes that a regulated lobbyist who commits a crime relating to lobbying activities should also be held accountable under the Ethics Law.

Accordingly, the Study Commission recommends that a regulated lobbyist be prohibited from committing a criminal offense arising from lobbying activity.

Proposal: Prohibit certain central committee activities.

Certain activities of a regulated lobbyist who is a member of a central committee may create potentially significant conflicts of interest between the role of lobbyist as an advocate and the role of active participant in political activities. One role of central committee members is to nominate individuals to fill vacancies in certain elective offices. Additionally, current law prohibits regulated lobbyists from serving on certain fund-raising committees or political committees. The Study Commission believes that regulated lobbyists who serve on central committees should not participate in certain sensitive activities or be an officer of the central committee.

Accordingly, the Study Commission recommends that a regulated lobbyist who is serving on a State or local central committee be prohibited from serving as an officer of the central committee and from participating in fund-raising activity on behalf of the political party or in actions relating to filling a vacancy in a public office.

V.

Political Campaign Activity and Reports of Contributions

Background

Involvement in campaign fund-raising activities by lobbyists and those who hire lobbyists is one of the most intensely-debated issues in current American politics. There is no doubt that interest groups, businesses, and their representatives make substantial campaign contributions, sometimes as individuals and other times through political action committees. Moreover, State officials and candidates for office actively solicit contributions from these willing sources of campaign funds. Such contributions are variously attributed to the donor's attempt to enhance access to decision makers, to promote elected officials' goodwill toward the donor, or to help elect candidates whose policies are aligned with the donor's interests and beliefs.

Professor Rosenthal noted:(11)
The prevailing belief is that for every campaign contribution there is a quid pro quo, an agreement by the legislator to do something in return for the donor. Although explicit agreement is rare and would legally constitute a bribe, special interests do not give for nothing.... There is no question that interest groups and lobbyists give for strategic reasons and not simply out of the goodness of their hearts. Their objective is to promote group issues, and campaign contributions are intended, in one way or another, to accomplish that objective.

Because of the prevalence of this belief, regardless of whether it is an accurate assessment or an unfair stereotype, the public and news media are deeply suspicious of the involvement of lobbyists and their employers in the fund-raising process.

In 1995, the General Assembly enacted legislation to remove individual regulated lobbyists from certain fund-raising activities on behalf of State officials and candidates for State offices. The law specifically allowed a lobbyist to make personal campaign contributions and to advise others regarding positions taken by a candidate. The Study Commission has concluded that this provision needs to be tightened somewhat to accomplish its original intent.

Over the course of its deliberations, the Study Commission discussed ways of addressing the public's concern regarding direct campaign contributions and determined that the best approach lies in enhanced public disclosure by lobbyists and their employers. It concluded that disclosure of contributions to candidates for State offices on a semi-annual basis would serve to highlight any concentration of contributions from particular persons and from entities with shared interests. The electorate could make use of that information in forming views about elected officials and candidates and when deciding for whom to cast their votes.

To accomplish these goals, the Study Commission makes the following recommendations for statutory change.

Proposal: Require an individual regulated lobbyist to file a separate report of campaign contributions.

Individual regulated lobbyists are the most visible element of interest-group activity in State government. For the same policy reasons that they currently report their lobbying compensation and expenditures, it is appropriate that individual lobbyists be required to disclose campaign contributions to State officials and candidates for State office.

A new provision should be added to require that a separate report be filed with the State Ethics Commission, disclosing cumulative contributions (regardless of amount) made during the standard 6-month reporting period to a member of the General Assembly, the Governor, the Lieutenant Governor, the Attorney General, the Comptroller, or a candidate for any of those offices.

Both direct and indirect contributions that benefit one of the specified officials or candidates would be reported. Thus, if a regulated lobbyist knows that his or her contribution to a political action committee will benefit one of the specified officials or candidates, the contribution to the PAC should be reported, even if the specifics of the PAC's subsequent contributions or transfers are not yet known. Additionally, a contribution by a family member of a regulated lobbyist may be a reportable indirect contribution depending on the circumstances of the contribution.

Proposal: Require the employers of regulated lobbyists to report certain campaign contributions.

While the Annapolis lobbying corps is the focal point of the public's attention, the bulk of interest-group campaign contributions come from the entities that employ individual regulated lobbyists. It is common for State officials and candidates for State office to use the list of lobbyist employers in preparing fund-raising solicitations, and many of the same motivations that influence the contributions of individual lobbyists apply equally to their employers. The Study Commission has determined that substantial contributions by persons who employ lobbyists should be specifically reported by those persons.

As with the proposal for enhanced reporting by individual regulated lobbyists, the Study Commission has determined that disclosure can promote public confidence in government by creating greater transparency in the political process. Although individual campaign contributions are already reported by the recipient candidates, it is often difficult to connect the named person with a particular interest, and it is nearly impossible for the public to get a full picture of the contributions made by various individuals who share a common business affiliation. For that reason, the Study Commission proposes that contributions by officers, directors, and partners of the business entity that employs a lobbyist should be attributable to the business entity. If made at the business entity's suggestion or direction, the contributions of employees, agents, and other persons should likewise be attributable to the business entity. If a business entity owns 30% or more of a subsidiary, the two entities should be treated as a single entity for reporting purposes.

In making this proposal, the Study Commission drew extensively on the long-standing reporting requirements for persons doing $100,000 or more of business with the State, or a local government of the State, that are codified in Article 33, Title 14 of the Annotated Code. This provision is largely unchanged from its enactment in 1974 and has provided an effective safeguard in the governmental procurement process by bringing targeted public scrutiny to contractors' political contributions. The Study Commission's proposal does not mirror the Article 33 law entirely (e.g., contributions to local candidates are not reported under the proposal), but the process is very similar. Indeed, many of the persons who would be required to file under the new proposal already file this same information in the reports currently required by Article 33, Title 14. For that reason, the reporting periods for both reports are the same, and both reports would go to the State Election Board. A person or entity that filed under Article 33, Title 14 could satisfy the new requirement merely by submitting a notice of the other filing in lieu of preparing a duplicate statement.

It is the intent of the Study Commission that the standards for reporting under this proposal be interpreted in the same manner as those in place under Article 33, Title 14. Therefore a contribution of at least $500 to a slate that contained an applicable recipient would be reportable even if the slate also contained candidates for offices not covered by the law. Likewise, a contribution of at least $500 to an independent PAC (not created by the business entity) would not be reported unless the PAC were created to support a specific candidate or group of candidates or the contribution were designated for transfer to a particular candidate.

Proposal: Prohibit an individual lobbyist from forwarding fund-raiser tickets or other fund-raising solicitations to benefit a member of the General Assembly, the incumbent in one of the four statewide offices, or a candidate for any of those positions.

When the General Assembly enacted significant restrictions on an individual regulated lobbyist's participation in campaign fund-raising activities for State officials and candidates for State office, the law left a loophole that has created the appearance that individual regulated lobbyists are still participating directly in the solicitation of campaign contributions from their clients.

Current law prohibits an individual regulated lobbyist from soliciting or transmitting a political contribution for the benefit of a member of the General Assembly, an official in any of the four statewide offices, or a candidate for any of those positions. As interpreted by the Ethics Commission, the law does not prohibit the lobbyist from acting as an impartial conduit for campaign fund-raising solicitations -- essentially being a mail forwarding service for candidates who wish to send solicitations. Given the intent of the law that individual regulated lobbyists not be involved in campaign solicitations, this loophole undermines public confidence in the Ethics Law by presenting the appearance of improper participation by the lobbyist in the fund-raising effort.

While it may be acceptable for an individual regulated lobbyist to respond to inquiries regarding the appropriate contact person within an entity that employs the lobbyist, it is inappropriate for the lobbyist to be forwarding solicitations. The law should be amended to explicitly prohibit the practice.

Technical change: Consolidation of provisions relating to lobbyist participation in fund-raising activities.

As sometimes happens in the legislative process, two provisions of law that address essentially the same subject -- the involvement of regulated lobbyists in campaign fund-raising activities -- were codified in separate parts of the statutory law. Both were enacted in 1991 in response to well-publicized instances of extensive participation by lobbyists in candidates' fund-raising committees. The Study Commission recommends that the two provisions be consolidated in the Ethics Law.

Section 15-707 of the State Government Article, discussed above, and Article 33, 13-201(a)(4) both prohibit individual regulated lobbyists from being involved in campaign committees that benefit members of the General Assembly, officials in the four statewide elective offices, or candidates for those positions. The Article 33 provision states that the lobbyist may not "organize or establish a political committee" for that purpose. The section in the State Government Article provides that the lobbyist may not "serve on a fund-raising committee or a political committee, or act as a treasurer or chairman of a political committee" for the benefit of the designated officials or candidates.

It serves the purpose of clarity and consistency in the law for the two provisions to be consolidated in current 15-707 of the State Government Article (renumbered under the proposed bill to be 15-714).


2. Alan Rosenthal, The Decline of Representative Democracy: Process, Participation, and Power in State Legislatures (Congressional Quarterly Books, 1997) at 215.

3. Id. at 216.

4. This Study Commission was established in the same session of the General Assembly in which were considered the recommendations of the Special Study Commission on the Maryland Public Ethics Law ("Cardin Commission"). The scope of that Commission's study was very broad, but it expressly refrained from examining the provisions of the Ethics Law relating to the regulation of lobbyists. See generally, Report of the Special Study Commission on the Maryland Public Ethics Laws, (1998).

5. Both of whom are members of the Study Commission.

6. If the Ethics Commission, while reviewing a complaint, finds reasonable grounds to conclude that a criminal violation may have occurred, it is required to refer the matter to an appropriate prosecuting authority, such as the Office of the State Prosecutor, a State's Attorney, or the United States Attorney.

7. See Appendix E: October 17, 2000 letter from Robert A. Zarnoch, Assistant Attorney General and Counsel to the General Assembly to Donald B. Robertson, Chairman of the Study Commission on Lobbyist Ethics.

8. Section 5-106 of the Courts Article provides a 2-year statute of limitations for criminal violations of the "State conflict of interest laws". The Study Commission understands that this reference may be ambiguous and that some authorities may interpret this current provision to already apply a 2-year statute of limitations to certain criminal violations of the Ethics Law.

9. Section 15-101 of the State Government Article.

10. As a result of the proposed reorganization, current 15-705(b), 15-706, and 15-707, respectively, are renumbered to be 15-712, 15-713, and 15-714, respectively.

11. Rosenthal, supra note 1, at 222.