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Home My WebLink About00-1008 ConfidentialOPINION OF THE COMMISSION Before: Daneen E. Reese, Chair Austin M. Lee, Vice Chair Julius Uehlein Louis W. Fryman John J. Bolger Frank M. Brown Susan Mosites Bicket DATE DECIDED: 4/13/2000 DATE MAILED: 4/28/2000 00 -1008 Re: Lobbying, Principal, Contract, Lobbyist, Procurement, State Contract, Legislative Action, Administrative Action, Contingent Compensation, Prohibition. This Opinion is issued in response to your confidential advisory request received on March 28, 2000. I. ISSUE: Whether a lobbyist, who enters into two contracts with a client, one for lobbyin servi and the other for marketing products in pursuit of state contracts, would be prohibited under the Lobbying Disclosure Act from receiving commissions that are contingent on the sales he makes as to the state contracts. II. FACTUAL BASIS FOR DETERMINATION: You are a registered contract lobbyist for several principals /clients. You have recently discussed an arrangement with a prospective client to provide lobbying services and to procure state contracts on its behalf. You contemplate entering into two separate contracts with the prospective client. Under the first contract, you would provide lobbying services, for which you would be paid a monthly retainer. Under the second contract, you would market the client's products, particularly in pursuit of state contracts, for which you would be paid a commission based upon the percentage of sales generated. You quote Confidential Opinion, 99 -1021 in part: [A]n effort or attempt to influence the award of a contract or financial arrangement with an "Agency" would not in and of itself constitute "lobbying," because such would neither constitute an effort to influence "legislative action" nor an effort to influence "administrative action" as those terms are defined by the Act. Confidential Opinion, 99 -1021, at 5. After also quoting Section 1307(a) of the Lobbying Disclosure Act (Act) which prohibits lobbying based upon contingent compensation, you ask whether that Section of the Act would prohibit you from receiving contingent compensation for the procurement of state contracts on Confidential Opinion 00 -1008 Page 2 behalf of the client if such services would not constitute "lobbying" under the Act. You opine that if the pursuit of state contracts would not constitute an effort to influence legislative action or administrative action, then Section 1307(a) would not preclude you from entering into the second contract described above. By letter dated April 3, 2000, you were notified of the date, time, and location of the executive session at which your request for a confidential Opinion was to be considered. At the executive session on April 13, 2000, you and your counsel appeared and offered the following commentary. Your client would create an apparatus that would be sold to Pennsylvania. You want to assist in the effort as a business consultant but not as a lobbyist. Your counsel argues that if the award of a contract does not constitute administrative action, then the procurement of a contract cannot be lobbying under the Act. III. DISCUSSION: It is initially noted that pursuant to Section 1308(c) of the Act in conjunction with Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. § §1107(10), (11), advisories are issued to the requestor based upon the facts which the requestor has submitted. The Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts which have not been submitted, in issuing advisories. It is the burden of the requestor to truthfully disclose all of the material facts relevant to the inquiry. An advisory only affords a defense to the extent the requestor has truthfully disclosed all of the material facts. In order to provide a thorough response to the questions which you have posed, this Commission shall review numerous provisions of the Act and related Regulations. Section 1303 of the Act defines "lobbying" as follows: "Lobbying." An effort to influence legislative action or administrative action. The term includes: (1) providing any gift, entertainment, meal, transportation or lodging to a State official or employee for the purpose of advancing the interest of the lobbyist or principal; and (2) direct or indirect communication. 65 Pa.C.S. §1303. The key terms "legislative action," "administrative action," "direct communication," and "indirect communication' that are within the definition of "lobbying" are themselves defined as follows: "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 legislation; legislative motions; overriding or sustaining a veto by the Governor; or confirmation of appointments by the Governor or of appointments to public boards or commissions by a member of the General Assembly. "Administrative action." Any of the following: (1) An agency's: Confidential Opinion 00 -1008 Page 3 (ii) development or modification of a guideline or a statement of policy; or (iii) approval or rejection of a regulation. (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. 65 Pa.C.S. §1303. The terms "principal" and "lobbyist" are defined in the statute as follows: "Principal." Any individual, firm, association, corporation, partnership, business trust or business entity: (1) on whose behalf a lobbyist influences or attempts to influence an administrative action or a legislative action; Id. (I) proposal, consideration, promulgation or rescission of a regulation; or (2) that engages in lobbying on the principal's own behalf. "Lobbyist." Any individual, firm, association, corporation, partnership, business trust or business entity that engages in lobbying on behalf of a principal for economic consideration. The term includes an attorney who engages in lobbying. The term "Agency" is defined under the Act as: "A State agency, board, commission, authority or department. Id. As for the substantive provisions to be reviewed, Section 1305(b)(7) of the Act provides: §1305. Reporting (b) Content. -- (7) A registered principal or registered lobbyist that attempts to influence an agency's preparing, bidding, entering into or approving a contract shall ensure that the related expenses are Confidential Opinion 00 -1008 Page 4 included under paragraph (2). 65 Pa.C.S. §1305(b)(7). Finally, Section 1307(a) of the Act provides: §1307. Prohibited activities (a) Contingent compensation — (1) No one may compensate or incur an obligation to compensate any lobbyist, principal or individual to engage in lobbying for compensation contingent in whole or in part upon any of the following: (I) Passage or defeat, or approval or veto, of legislation. (ii) Occurrence or nonoccurrence of an administrative action. 65 Pa.C.S. §1307(a) (Emphasis added). Having quoted the relevant provisions of the Act, we shall now address your inquiry. As you have accurately noted, in Confidential Opinion, 99 -1021, we concluded that an effort or attempt to influence the award of a contract or financial arrangement with an "Agency," as that term is defined in the Act, would not, in and of itself, constitute "lobbying" under the Act, "because such would neither constitute an effort to influence 'legislative action' nor an effort to influence 'administrative action' as those terms are defined by the Act." Id. at 5. Because such activity would not constitute lobbying, and because Section 1307(a) of the Act restricts contingent compensation only as to lobbying, Section 1307(a) of the Act would not prohibit you from receiving commissions as to sales involving state contracts. The above ruling is conditioned upon the assumptions that the marketing services you would perform would not include lobbying or lobbying - related services and would be de facto under a separate contract from the contract for lobbying services, which contracts would be completely segregated from, and not in any way contingent upon, each other. You would be well advised to carefully structure and document any such arrangement. Sham arrangements which would shift compensation for what is in fact a lobbying effort to a contract for marketing or other services, so as to obtain contingent compensation for the lobbying efforts, would constitute a violation of the Act. Finally, pursuant to Section 1305(b)(7) of the Act, the expenses related to influencing an agency's preparing, bidding, entering into or approving a contract would be includable in Blocks 13 through 16 of the pertinent expense report(s), as required by Section 1305(b)(7) and Section 1305(b)(2) of the Act, when such a report would otherwise be required to be filed under the Act. The propriety of the proposed conduct has only been addressed under the Act and derivatively the Ethics Act to the extent applicable; the applicability of any other statute, code, ordinance, regulation or other code of conduct has not been considered in that they do not involve an interpretation of the Act. IV. CONCLUSION: A lobbyist, who enters into two contracts with a client, one for lobbying services and the other for marketing products in pursuit of state contracts, would not be prohibited under the Lobbying Disclosure Act from receiving contingent compensation for the marketing services, conditioned upon the assumptions that the marketing services would not include lobbying or lobbying - related services and would be de facto under a separate contract from the contract for lobbying services, which contracts would be completely Confidential Opinion 00 -1008 Page 5 segregated from, and not in any way contingent upon, each other. The lobbyist would be advised to carefully structure and document any such arrangement. Sham arrangements which would shift compensation for what is in fact a lobbying effort to a contract for marketing or other services, so as to obtain contingent compensation for the lobbying efforts, would constitute a violation of the Lobbying Disclosure Act. The expenses related to influencing an agency's preparing, bidding, entering into or approving a contract would be includable in the quarterly expense report pursuant to Section 1305(b)(2) when such a report is required to be filed under the Act. Pursuant to Section 1308 of the Act, a requestor who truthfully discloses all material facts in a request for an advisory and who acts in good faith based upon a written opinion of the Commission issued to the requestor shall not be held liable for a violation of the Act. This Opinion 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 §39.1. By the Commission, Daneen E. Reese Chair