Mr. Chairman, I rise in opposition to the bill because it does nothing to reduce corruption and lobbying. Mr. Chairman, I had an amendment that was adopted in the Judiciary Committee. That language…
Mr. Chairman, I rise in opposition to the bill because it does nothing to reduce corruption and lobbying.
Mr. Chairman, I had an amendment that was adopted in the Judiciary Committee. That language was subsequently stripped from the bill by the Rules Committee. That amendment would have simply required a study of the practice by which some lobbyists appear to be charging percentage contingent fees for obtaining earmarks in appropriations bills. Now, when you combine that idea with the K Street Project where you are supposed to be hiring a Republican lobbyist who is supposed to be contributing back to the legislators, you can see just how ugly a practice this can be. My amendment would have simply asked for a study of the prevalence of that practice.
Mr. Chairman, these kinds of contracts are illegal when lobbyists are representing foreign governments and are illegal in some activities involving the Executive Branch. They are illegal in 39 State legislatures. However, it does not appear to be illegal lobbying Congress under Federal law. The Congressional Research Service in a memorandum dated September 21, 2000 cites a legal treatise which says that these contracts furnish the strongest incentive to the exertion of corrupting and sinister influences and are utterly void against public policy.
Supreme Court Justice Oliver Wendell Holmes was cited in that same memorandum as saying that they have a tendency in such contracts to provide incentives towards corruption. In fact, an 1853 Supreme Court case said that common law will not lend its aid to enforce a contract to do an act which is inconsistent with sound morals or public policy, or which tends to corrupt or contaminate by improper influences the integrity of our social or political institutions.
Mr. Chairman, true lobbying reform ought to remove corruption from lobbying, and if we are going to be serious about that, we ought to at least study the prevalence of these contracts which everybody knows has a corrupting influence. By removing the amendment, it is clear that that was not the purpose of the bill, and I urge my colleagues to oppose the legislation.
Congressional Research Service,
Washington, DC, Sept. 21, 2000.
memorandum
Subject: Contingency Fees for Lobbying Activities.
From: Jack Maskell, Legislative Attorney, American Law
Division.
This memorandum is prepared in response to requests from
congressional offices for information about whether one may
lawfully have a contingency fee arrangement for ``lobbying''
activities in which the fee for such lobbying activities is
contingent upon the success of ``lobbying'' efforts in having
legislation passed in the United States Congress.
There is no statute under federal law which expressly
addresses the issue of contingency fees with respect to all
lobbying activities generally before the Congress.
Contingency fees may be expressly barred, however, under
certain circumstances. There is in federal law an express
prohibition against contingency fee arrangements with respect
to seeking certain contracts with the agencies of the Federal
Government. Activities which might generally or colloquially
be called ``lobbying,'' but which involve making
representations on behalf of private parties before federal
agencies to obtain certain government contracts, may thus be
subject to the contingency prohibitions. The reason for such
ban has been explained as follows: ``Contractors'
arrangements to pay contingent fees for soliciting or
obtaining Government contracts have long been considered
contrary to public policy because such arrangements may lead
to attempted or actual exercise of improper influence ....''
Contingency fees are also prohibited for lobbying the
Congress by persons who must register as agents of foreign
principals under the Foreign Agents Registration Act. The
prohibition is upon agreements where the amount of payment
``is contingent in whole or in part upon the success of any
political activities carried on by such agent.'' The covered
``political activities'' of such agents under the Foreign
Agents Registration Act include any activity which the agent
``intends to, in any way influence any agency or official of
the Government of the United States ... with reference to
formulating, adopting, or changing the domestic or foreign
policies of the United States ...,'' and thus include the
activities of ``lobbying'' Members and staff of Congress on
legislation or appropriations.
Although there is no general, express federal law barring
all contingency fees for successful lobbying before Congress,
there is a long history of judicial precedent and traditional
judicial opinion which indicates that such contingency fee
arrangements, when in reference to ``lobbying'' and the use
of influence before a legislature on general legislation, are
void from their origin (ab initio) for public policy reasons,
and therefore would be denied enforcement in the courts. In
some instances contingency fee arrangements based on the
success of legislation have been upheld in a few courts,
however, when the duties contracted for were professional
services that did not involve traditional, statutorily
defined ``lobbying'' or the use of personal influence before
the legislature, or where the client had a legitimate claim
or legal right to be asserted in a matter before the
legislature (e.g., ``debt legislation'').
The concern of potential temptations from overzealousness
and undue influences which certain ``all or nothing''
contingency arrangements might engender has also been the
reason behind the public policy disfavoring contingency fees
in the case of lobbying the legislature. As summarized in one
legal treatise: ``Agreements under which the compensation for
procuring or influencing legislative action is made
contingent upon the success of the undertaking furnish the
strongest incentive to the exertion of corrupting and
sinister influences to the end that the desired legislation
may be secured, and there is a long line of cases which holds
that if the agreement is one in which the compensation is
contingent upon success in accomplishing the end sought, it
is utterly void as against public policy.''
The United Stats Supreme Court addressed the issue in
Hazelton v. Sheckells, in 1906. In that case the Court
refused specific performance of a contract to convey a deed
as compensation for services where ``the services
contemplated as a partial consideration of the promise to
convey were services in procuring legislation upon a matter
of public interest, in respect of which neither of the
parties had any claim against the United States.'' As
established in the conveyance document, such agreement
``was in substance a contingent fee,'' dependent upon the
passage of legislation by the Congress. Justice Oliver
Wendell Holmes, writing for the Court, explained that it
was the ``tendency'' in such contract agreements to
provide incentives towards corruption, and not necessarily
any actual corrupt activity in a particular contract or
case, that made these contingent arrangements void for
public policy reasons. Thus, the Court found that even
though the services in this case were legitimate, that
``[t]he objection to them rests in their tendency, not in
what was done in the particular case,'' especially since
if there had been undue or improper influence ``it
probably would be hidden and would not appear.'' The Court
stated that ``in its inception'' the contingency fee
arrangement ``necessarily invited and tended to induce
improper solicitations, and it intensified the inducement
by the contingency of the reward.'' The Court found that
earlier Supreme Court precedent had established ``that all
contracts for a contingent compensation for obtaining
legislation were void,'' and refused to enforce the
contract in question.
The judicial disfavor expressed by the Supreme Court for
contingency contracts for lobbying on general legislation
dates back at least to 1853, when in Marshal v. Baltimore &
Ohio R.R., supra, the Court with reference to secret
contingent contracts explained:
``It is an undoubted principle of the common law, that it
will not lend its aid to enforce a contract to do an act . .
. which is inconsistent with sound morals or public policy;
or which tends to corrupt or contaminate, by improper
influences, the integrity of our social or political
institutions. . . . Legislators should act from high
consideration of public duty. Public policy and sound
morality do therefore imperatively require that courts should
put the stamp of disapprobation on every act, and pronounce
void every contract the ultimate or probable tendency of
which would be to sully the purity or mislead the judgments
of those to whom the high trust of legislation is confided.
``. . . Bribes in the shape of high contingent
compensation, must necessarily lead to the use of improper
means and the exercise of undue influence. Their necessary
consequence is the demoralization of the agent who covenants
for them; he is soon brought to believe that any means which
will produce so beneficial a result to himself are ``proper
means''; and that a share of these profits may have the same
effect of quickening the perceptions and warming the zeal of
influential or ``careless'' members in favor of his bill.''
In a more recent federal case on this subject, a United
States Court of Appeals in 1996, in Florida League of
Professional Lobbyists, Inc. v. Meggs, upheld against a
constitutional challenge on First Amendment
grounds the State of Florida's specific legislative ban on
contingency fee contracts for lobbying. The court there
reaffirmed, albeit reluctantly, the long-recognized judicial
precedents concerning the general public policy against such
contingency fees for lobbying. The court noted that there was
no direct precedent overturning the older Supreme Court cases
directly on point on contingency fees and lobbying, but did
seem sympathetic and responsive to the plaintiff's arguments
that more modern cases on the First Amendment and
compensation for advocacy might eventually warrant a
different outcome on this issue:
``Florida points out that in cases decided well before the
articulation of `exacting scrutiny,' the Supreme Court
specifically held that contracts to lobby for a legislative
result, with the fee contingent on a favorable legislative
outcome, were void ab initio as against public policy . . .
[citations omitted]. The League does not contest the
applicability of these older decisions to this case. And, we
are persuaded that these decisions permit a legislature to
prohibit contingent compensation. The League, however,
suggested at argument that the extensive, interim
developments of First Amendment law established conclusively
that the Supreme Court today would strike a contingent-fee
ban on lobbying.
``This prediction may be accurate, but we are not at
liberty to disregard binding case law that is so closely on
point and has been only weakened, rather than directly
overruled, by the Supreme Court.''
As to State statutory bans on contingency fees for
lobbying, it should be noted that as of this writing most of
the States (39) have existing in their state codes an express
prohibition against such contingency fees for lobbying
activities. See, for example, Alabama (Sec. 36-25-23(c),
Michie's Ala. Code); Alaska (sec. 24.45.121 (a)(6), Alaska
Statutes); Arizona (sec. 41-1233(1), Arizona Rev. Statutes);
California (Government Code, Sec. 86205(f), Annotated Calif.
Codes); Colorado (sec. 24-6-308, Colorado Rev. Statutes);
Connecticut (Sec. 1-97(b), Conn. Gen. Statutes Ann.); Florida
(Sec. 11.047 [legislature]; Sec. 112.3217 [executive branch],
Florida Statutes Ann.); Georgia (sec. 28-7-3, Official Code
of Georgia Ann.); Hawaii (sec. 97-5, Hawaii Rev. Statutes
Ann.); Idaho (sec. 67-6621(b)(6), Idaho Code); Illinois
(S.H.A. 25 ILCS 170/8); Indiana (sec. 2-7-5-5, Burns Ind.
Statutes Ann.); Kansas (sec. 46-267, Kansas Statutes Ann.);
Kentucky (sec. 6.811(9), Kentucky Rev. Statutes); Maine
(Title 3, Sec. 318, Maine Rev. Statutes Ann.); Maryland
(State Government, Sec. 15-706, Michie's Ann. Code of Md.);
Massachusetts (Ch. 3, Sec. 42, Mass. Gen. Laws Ann.);
Michigan (sec. 4.421(1) Mich. Compiled Laws Ann.);
Minnesota (sec. 10A.06, Minn. Statutes Ann.); Mississippi
(sec. 5-8-13(1), West's Ann. Miss. Code); Nebraska (sec.
49-1492(1), Revised Statutes of Neb.); Nevada (sec.
218.942(4), Nev. Revised Statutes Ann.); New Mexico (sec.
2-11-8, New Mexico Statutes); New York (Book 31,
Legislative Law, Sec. 1-k, McKinney's Consolidated Laws of
N.Y. Ann.); North Carolina (sec. 120-47.5(1), Gen.
Statutes of N.C.); North Dakota (54-05.1-06, N.D. Century
Code Ann.); Ohio (sec. 101-77, Page's Ohio Rev. Code
Ann.); Oklahoma (Title 21, Sec. 334, Oklahoma Statutes
Ann.); Oregon (sec. 171.756(3), Oregon Rev. Statutes);
Pennsylvania (65 Pa. Cons. Statutes Ann. Sec. 1307(a));
Rhode Island (sec. 22-10-12, Gen. Laws of R.I.); South
Carolina (Sec. 2-17-110(A), Code of Laws of S.C.); South
Dakota (sec. 2-12-6, S.D. Codified Laws); Texas
(Government Code, 305.022, Vernon's Texas Codes Ann.);
Utah (sec. 36-11-301 (Utah Code Ann.); Vermont (Title 2,
266(1), Vt. Statutes Ann.); Virginia (Sec. 2.1-791, Code
of Va.); Washington (Sec. 42.17.230(f), West's Rev. Code
of Wash. Ann.); Wisconsin (sec. 13.625(d), Wise. Statutes
Ann.).
As noted, the weight of judicial opinion has been either to
uphold such restrictions against challenges, or in some cases
in the absence of an express statute to judicially find such
contingency fee arrangements void for public policy reasons.
In one instance in the 1980's, however, a provision, enacted
as a result of a state initiative, barring all contingency
fees for legislative lobbying activities was struck down by a
state court as an overbroad intrusion into the right to
petition the government. The Supreme Court of Montana found
the law ``overbroad because it precludes contingent fee
agreements that are properly motivated as well as those that
are improperly motivated'' and as such, the ``ability of
individuals and organizations to fully exercise their right
to petition the government may be severely curtailed by this
broad prohibition.''
While the existing state of the law is clearly for most
States to continue to expressly prohibit by law contingency
fee agreements with respect to legislative lobbying on
general legislation, and to have those prohibitions upheld
(or to consider such contingency agreements void for public
policy reasons where there is no express law, as is the case
with respect to lobbying before Congress), other
interpretations have permitted such arrangements where an
agent, attorney or representative is seeking legislation
based upon a claim or similar legal interest or right to be
asserted against the government, or when such action involves
conduct and activity that is done in the normal course of
client representation by an attorney and is not expressly
contemplated by the original contract.
There have also been cases where legitimate professional
services are contracted for, such as, for example, the
drafting of legislative language, as opposed to merely
engaging another's ``influence'' to ``lobby,'' when such an
arrangement for services, even if based on the contingency of
the passage of legislation, has been permitted. Such cases
have been described as related to contracts where the
``services rendered thereunder did not partake of anything in
the nature of lobbying....'' Although relating to
legislation, the services in question were not necessarily
within a specific or narrow definition of ``lobbying'' in the
sense that nothing that was contracted for involved any
activities attempting to ``exert private or personal
influence with members of the legislature, or in interviewing
or bringing pressure to bear on them....'' In making
arguments for allowing such contingent fees in cases of
professional services rendered in relation to legislation
where no undue influences are contemplated or used, and no
traditional ``lobbying'' is conducted, it has been suggested
that such permissibility of the fee arrangement would have no
more ``influencing'' tendency than in the permissible
instance of one representing oneself before the legislature
(and thus having an even greater financial stake than an
agent in the outcome), or if an agent or attorney represented
a client before a judicial panel, i.e., a court.
Jack Maskell,
Legislative Attorney.