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Home My WebLink About10-1002 Confidential OPINION OF THE COMMISSION Before: Louis W. Fryman, Chair John J. Bolger, Vice Chair Donald M. McCurdy Raquel K. Bergen Nicholas A. Colafella Mark Volk DATE DECIDED: 6/22/10 DATE MAILED: 7/9/10 10-1002 This Opinion is issued in response to your advisory request letters dated March 29, 2010, and April 12, 2010. I. ISSUE: Pursuant to Pennsylvania’s lobbying disclosure law (“Lobbying Disclosure Law”), 65 Pa.C.S. § 13A01 et seq., whether a registered lobbying firm: (1) would be permitted to accept contingency fees from a prospective client; and (2) would be subject to the registration/reporting requirements of the Lobbying Disclosure Law with respect to representation of a client in the pursuit of financial assistance/funding through the Commonwealth. II. FACTUAL BASIS FOR DETERMINATION: As the A for the firm of [name of firm] (“the Firm”), you request a confidential advisory from this Commission under the Lobbying Disclosure Law. You have submitted facts that may be fairly summarized as follows. The Firm is a registered lobbying firm in Pennsylvania. The Firm was contacted by a prospective client (hereinafter referred to as “the Company”) to represent the Company in seeking financial assistance/funding through the Commonwealth. Such financial assistance/funding would be used to support the Company’s expansion and redevelopment activities in Pennsylvania. The Company is seeking a low-interest, long- term source of funding or loan guarantees to obtain private financing. The Company would like to explore funding opportunities that might be available through Commonwealth agencies. The Company would like to compensate the Firm on a contingency fee basis. Based upon the above, you ask whether the Firm would be permitted to accept contingency fees from a prospective client. Additionally, you ask whether the Firm would be subject to the registration/reporting requirements of the Lobbying Disclosure Law with respect to representation of the Company in the pursuit of financial assistance/funding through the Commonwealth. By letter dated April 20, 2010, you were notified of the date, time and location of the Confidential Opinion, 10-1002 July 9, 2010 Page 2 executive meeting at which your request would be considered. At the executive meeting on June 22, 2010, you appeared with the Firm’s President and CEO, Individual B, who offered brief commentary. Individual B noted that this request raises issues of common concern pertaining to the circumstances under which a lobbying firm may engage in lobbying for a contingency fee, and the proper application of the registration/reporting requirements of the Lobbying Disclosure Law when lobbying services are provided on a contingency fee basis, for example, to a client that could not otherwise afford to pay for such services. III. DISCUSSION: It is initially noted that pursuant to Section 13A08(a) of the Lobbying Disclosure Law, 65 Pa.C.S. § 13A08(a), in conjunction with Sections 1107(10) and 1107(11) of the Public Official and Employee Ethics Act (“Ethics Act”), 65 Pa.C.S. §§ 1107(10), (11), advisories are issued to the requester based upon the facts that the requester has submitted. In issuing the advisory based upon the facts that the requester has submitted, this Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts that have not been submitted. It is the burden of the requester to truthfully disclose all of the material facts relevant to the inquiry. 65 Pa.C.S. §§ 1107(10), (11). An advisory only affords a defense to the extent the requester has truthfully disclosed all of the material facts. As a registered lobbying firm in Pennsylvania, the Firm is subject to the prohibitions, restrictions and requirementsimposed upon lobbying firms by the Lobbying Disclosure Law. The following terms are relevant to your inquiry and are defined in the Lobbying Disclosure Law as follows: § 13A03. Definitions. "Lobbying." An effort to influence legislative action or administrative action in this Commonwealth. The term includes: (1) direct or indirect communication; (2) office expenses; and (3) providing any gift, hospitality, transportation or lodging to a State official or employee for the purpose of advancing the interest of the lobbyist or principal. "Administrative action." Any of the following: (1) An agency’s: (i) proposal, consideration, promulgation or rescission of a regulation; (ii) development or modification of a statement of policy; (iii) approval or rejection of a regulation; or Confidential Opinion, 10-1002 July 9, 2010 Page 3 (iv) procurement of supplies, services and construction under 62 Pa.C.S. (relating to procurement). (2) The review, revision, approval or disapproval of a regulation under the act of June 25, 1982 (P.L.633, No.181), known as the Regulatory Review Act. (3) The Governor’s approval or veto of legislation. (4) The nomination or appointment of an individual as an officer or employee of the Commonwealth. (5) The proposal, consideration, promulgation or rescission of an executive order. "Legislative action." An action taken by a State official or employee involving the preparation, research, drafting, introduction, consideration, modification, amendment, approval, passage, enactment, tabling, postponement, defeat or rejection of: (1) legislation; (2) legislative motions; (3) a veto by the Governor; or (4) confirmation of appointments by the Governor or appointments to public boards or commissions by a member of the General Assembly. "Legislation." Bills, resolutions, amendments and nominations pending or proposed in either the Senate or the House of Representatives. The term includes any other matter which may become the subject of action by either chamber of the General Assembly. 65 Pa.C.S. § 13A03. The Lobbying Disclosure Regulations similarly define the above terms. 51 Pa. Code § 51.1. Section 13A07(e) of the Lobbying Disclosure Law provides as follows: § 13A07. Prohibited activities. (e) Contingent compensation.-- (1) A person may not compensate or incur an obligation to compensate a person to engage in lobbying for compensation contingent in whole or in part upon any of the following: (i) Occurrence, nonoccurrence or amendment of legislative action. Confidential Opinion, 10-1002 July 9, 2010 Page 4 (ii) Occurrence, nonoccurrence or amendment of an administrative action other than procurement described in paragraph (1)(iv) of the definition of “administrative action” under section 13A03 (relating to definitions). (2) A person may not engage in or agree to engage in lobbying for compensation contingent in whole or in part upon any: (i) Occurrence, nonoccurrence or amendment of legislative action. (ii) Occurrence, nonoccurrence or amendment of an administrative action other than procurement described in paragraph (1)(iv) of the definition of “administrative action” under section 13A03. (3) This subsection shall not apply to vendors. 65 Pa.C.S. § 13A07(e). In addressing your questions, we initially note that a determination of whether particular services provided by the Firm would constitute “lobbying” subject to regulation under the Lobbying Disclosure Law would depend upon whether such services would constitute an effort to influence “legislative action” or “administrative action” as those terms are defined by the Lobbying Disclosure Law. In response to your first question, you are advised that subject to an exclusion pertaining to procurement lobbying, Section 13A07(e) of the Lobbying Disclosure Law, 65 Pa.C.S. § 13A07(e), expressly prohibits “contingent compensation” arrangements for lobbying. Stine, Opinion 10-1001. A “contingent compensation” arrangement would exist where a lobbyist/lobbying firm would receive compensation for lobbying contingent in whole or in part upon the occurrence, nonoccurrence or amendment of “legislative action” or “administrative action” as those terms are defined by the Lobbying Disclosure Law. Id. Therefore, pursuant to Section 13A07(e) of the Lobbying Disclosure Law, 65 Pa.C.S. § 13A07(e), the Firm would be prohibited from accepting a contingency fee for lobbying except to the extent the statutory exclusion for procurement lobbying would be applicable. As for your second question, the necessary conclusion is that pursuing financial assistance/funding through the Commonwealth would not constitute “lobbying” where there would be no effort to influence “legislative action” or “administrative action” as the Lobbying Disclosure Law defines those terms. 65 Pa.C.S. § 13A03. The controlling statutory definitions of the terms “lobbying,” “legislative action,” and “administrative action” would not encompass every type of effort to secure Commonwealth funding. For example, merely applying for financial assistance, grants, or loans through existing programs of Executive Branch agencies would not constitute “lobbying” under the aforesaid definitions of the Lobbying Disclosure Law. The Preamble to the Lobbying Disclosure Regulations (“the Regulations”) indicates that the Lobbying Disclosure Regulations Committee (“the Committee”) removed from an earlier, proposed version of the Regulations language that would have included “grants, the release of funds from the capital budget, loans and investment of funds” in the regulatory definitions of the terms “administrative action” and “legislative action.” Confidential Opinion, 10-1002 July 9, 2010 Page 5 Pennsylvania Bulletin, Vol. 39, No. 15, April 11, 2009, at 1939, 1941. The Committee concluded that such language would have broadened the statutory definitions of the terms. Id. For a similar reason, the Committee did not include in the regulatory definition of the term “legislation” language regarding the “release of funds from the capital budget” and the “investment of funds.” Id. at 1941. However, the Committee stated, “[L]obbying for the inclusion of funds in the capital budget is an effort to influence legislative action because it would be considered lobbying on legislation. Therefore, any costs related to lobbying for the inclusion of funds in the capital budget must be reported.” Id. Based upon our review of the controlling statutory definitions, we are in agreement with the aforesaid conclusions of the Committee. In the instant matter, we determine that the Firm would not be subject to the registration/reporting requirements of the Lobbying Disclosure Law with respect to representation of the Company in the pursuit of financial assistance/funding through the Commonwealth except to the extent that such effort(s) would constitute effort(s) to influence “legislative action” or “administrative action” as those terms are defined by the Lobbying Disclosure Law. The request for an advisory has only been addressed under the Lobbying Disclosure Law and, derivatively, the Ethics Act to the extent applicable. IV. CONCLUSION: As a registered lobbying firm in Pennsylvania, the firm of [name of firm] (“the Firm”) is subject to the prohibitions, restrictions and requirements imposed upon lobbying firms by Pennsylvania’s lobbying disclosure law (“Lobbying Disclosure Law”), 65 Pa.C.S. § 13A01 et seq. Based upon the submitted facts that the Firm was contacted by a prospective client (hereinafter referred to as “the Company”) to represent the Company in seeking financial assistance/funding through the Commonwealth, and the Company would like to compensate the Firm on a contingency fee basis, you are advised as follows.Pursuant to Section 13A07(e) of the Lobbying Disclosure Law, 65 Pa.C.S. § 13A07(e), the Firm would be prohibited from accepting a contingency fee for lobbying except to the extent the statutory exclusion for procurement lobbying would be applicable. The Firm would not be subject to the registration or reporting requirements of the Lobbying Disclosure Law with respect to representation of a client/the Company in the pursuit of financial assistance or funding through the Commonwealth except to the extent that such effort(s) would constitute effort(s) to influence “legislative action” or “administrative action” as those terms are defined by the Lobbying Disclosure Law. Pursuant to Section 13A08(a) of the Lobbying Disclosure Law, 65 Pa.C.S. § 13A08(a), a requester who truthfully discloses all material facts in a request for an advisory and who acts in good faith based upon a written Opinion of this Commission issued to the The requester shall not be held liable for a violation of the Lobbying Disclosure Law. protection afforded for reliance upon this Opinion will remain in effect until such time as any regulation, statutory enactment, or ruling precludes further reliance upon this Opinion. This letter is a public record and will be made available as such. Finally, a party may request this Commission to reconsider its Opinion. The reconsideration request must be received at this Commission within thirty days of the mailing date of this Opinion. The party requesting reconsideration must include a detailed explanation of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code § 21.29(b). By the Commission, Confidential Opinion, 10-1002 July 9, 2010 Page 6 Louis W. Fryman Chair