The law that stole Christmas

The weather outside is not the only thing that’s frightful this winter inside the Beltway. Dampening yuletide cheer in the public and private sectors alike is the recently enacted Honest Leadership and Open Government Act.

HLOGA imposes new restrictions that inhibit lobbyists and their employers from spreading holiday cheer among members of Congress and their staffs in the form of gifts, entertainment and meals.

The new law generally prohibits lobbyists and entities directly employing lobbyists from giving any gifts to members and staff, except as permitted by one of the preexisting exceptions in the Senate and House gift rules. Thus, lobbyists and entities employing lobbyists may continue to sponsor widely attended events, food and refreshments of nominal value, and gifts of personal friendship.

HLOGA dramatically increased the penalties for violating the congressional gift rules. Under the old regime, the recipients of improper gifts were primarily liable. As long as lobbyists and their employers steered clear of bribery and gratuities, they were immune from sanctions. That is no longer the case. HLOGA amended the Lobbying Disclosure Act (LDA) to require registered lobbyists to sign certifications that they have not caused any violations of the congressional gift rules. If such statements turn out to be false, violators are subject to criminal prosecution. LDA violations are also generally punishable by civil fines up to $200,000 (quadruple the old maximum penalty), and up to five years imprisonment for knowing and corrupt conduct.

Members of Congress and their staff may attend holiday receptions sponsored or paid for by lobbyists or entities employing lobbyists under the exception for food and refreshments of nominal value. Meals of any value are forbidden under this exception. Instead, lobbyists may treat members and staff to anything that is customarily eaten while standing up (aka the “toothpick rule”). Thus, appetizers, beverages, pastries, donuts, and bagels would be allowed. Items associated with full meals, such as hot dogs or pizza, or lavish items such as caviar, are out of bounds.

Lobbyists and their employers who wish to invite members and staff to more sumptuous holiday entertainment, including full meals, may be able to invoke the widely attended events exception. First, the invitation must come from bona fide event sponsors. A lobbyist may not purchase a ticket or table to the event for a member or staffer. Second, the event sponsor(s) must reasonably expect attendance by at least 25 individuals outside of Congress, representing a range of interests, although they can be from within a single industry or profession. Finally, the event must bear a reasonable relationship to an invitee’s official duties.

Lobbyists who simply cannot connect an event to official duties, and who wish to go beyond nominal value foods like eggnog and chestnuts roasting on an open fire, have one remaining option: the personal friendship exception. This one is tricky — the person must be more than a casual or business acquaintance. The inquiry examines a totality of the relationship. Friends of many years — from high school, college, or business — might be a safe bet, assuming you’ve kept up that relationship. On the other hand, claiming 535 “friends” on the Hill would be imprudent. Other relevant factors include the reciprocity of gift giving, and whether the gift was paid for personally or deducted on tax returns. Under this exception, members and staff may accept gifts up to $250 in value without prior ethics committee approval.

Were HLOGA’s provisions limited to lobbyists, it would not pose as profound a problem as the one it has presented for their employers. Any firm or organization with lobbyists on its payroll generally is subject to the same restrictions. For the legions of law firms that increasingly include lobbyists, whether as employees, partners or shareholders, they now may be equally hamstrung in their ability to treat legislators and staff.

The regulations governing the executive branch have not changed. Individuals and entities, regardless of whether they are lobbyists or employers thereof, may generally give gifts not exceeding $20 per occasion, and not exceeding $50 in total per calendar year. Generally, the executive branch rules prohibit gifts from any person or entity that has any business or interests that may be affected by the recipient’s department or agency, unless such gifts fall within an exception.

The executive branch gift rule exceptions largely mirror those for Congress. The main difference for holiday festivities concerns widely attended events. Under this exception, executive branch employees must first receive an agency determination that their attendance will serve the agency’s interests. Unlike the congressional rule, there is also no general threshold in the executive branch for the number of non-government individuals who must attend if the invitation is from the event sponsor. Non-sponsors may also extend invitations to such events, in which case there must be a reasonable expectation that more than 100 persons (from any sector) will attend.

This holiday season, lawmakers, lobbyists and entities employing lobbyists may feel like they’re walking a tightrope over the new ethics regulations. But if they keep their events within reason, follow the rules, and consult legal counsel or the relevant government ethics offices when in doubt, the season can still be a winter wonderland.

Honigberg and Wang are attorneys at Blank Rome LLP. They can be reached at honigberg@blankrome.com and wang@blankrome.com .