Thursday, April 5, 2001
Page 7
PERSPECTIVES
(Column)
Is the City Ethics Commission Correctly Interpreting
Lobbyist Reporting Requirements?
By ROGER M. GRACE
Across the way, on the opposite page, is a "letter to the editor" jointly signed by the president and the executive director of the City of Los Angeles Ethics Commission. The letter takes issue with my columns of last week. It raises these issues:
1. Whether lobbyists who are lawyers must, in fact, make a report to the city of any free services they perform for elected officials worth $25 or more; and
2.) Whether the commission’s press release of Oct. 30 was misleading.
A tenable basis is presented for arguing that the rendering of free legal services must be reported on lobbyists’ quarterly statements.
However,
the letter fails, in my view, to refute the assertion that the press release
conveyed misinformation.
REPORTABILITY OF SERVICES: I’m a bit surprised to find the commission taking issue with my statement that free legal services to candidates and elected officials that are performed by lobbyists are not reportable. After coming to that conclusion, based on looking at statutes and ordinances, I contacted the commission on Friday, March 23 to make sure I wasn’t overlooking something. A spokesperson for the commission, senior analyst Barbara Freeman, the following Monday confirmed that "actual pro bono services are not considered a contribution" and are "not reportable."
Well, now Krinsky and Pelham say that such services, if they are worth $25 or more, must be reported. Under the Municipal Lobbying Ordinance, they say, such services are to be listed in a quarterly statement under "activity expense." The letter defines an "activity expense" as "any payment, including any gift or other item or service of value, that benefits an elected official."
Note, however, that the letter does not place the definition in quotes and there is no citation to the section of the Municipal Code in which the definition appears. Indeed, §48.02 of the Municipal Lobbying Ordinance defines "activity expense" as "any payment, including any gift, made to or directly benefiting any City official or member of his or her immediate family, made by a lobbyist, lobbying firm, or lobbyist employer." It makes no mention of reporting a "service of value."
Upon inquiry, Pelham, in an interview late Tuesday, explained the basis for the assertion that a lobbyist must report the value of services. She said that in interpreting the Municipal Code, the commission looks to definitions in the Political Reform Act. Government Code §82044, the executive director pointed out, says: "‘Payment’ means a payment, distribution, transfer, loan, advance, deposit, gift or other rendering of money, property, services or anything else of value, whether tangible or intangible."
So, under her reasoning, "activity expense" includes the performance of any service (provided the value of the service is equal to the minimum reportable amount, $25).
It’s heartening to know that the commission does want the public to have access to information as to free services rendered by lobbyists to city candidates and elected officials. And it’s good to know that there’s at least an arguable basis for maintaining that such a disclosure is presently required by city law.
It is, however, not clear that Pelham’s interpretation of the law is correct.
The Municipal Code provision, on its face, does not communicate a need to report the donation of services. It refers to "payments." My dictionary defines "payment" as "1. The act of paying 2. money given to pay for something (payments on a car) (payment for a day’s work)." There’s no reason for a lobbyist to suppose that the term is used in other than its normal sense, connoting the transfer of money.
It’s true that §48.02—which contains a batch of definitions—is kicked off with this announcement: "The following terms used in this article shall have the meanings set forth below. Other terms used in this article shall have the meanings set forth in the California Political Reform Act of 1974, as amended, and in the regulations of the California Fair Political Practices Commission, as amended, if defined therein." What that signals is that where terms used in the Lobbying Ordinance are undefined, it’s necessary to look elsewhere for their meanings. It does not strike me as reasonable to expect one who is looking at a definition—such as the definition of "activity expense"—to anticipate that non-technical words used within that definition [here, "payment"] are themselves subject to a definition contained in some other source.
Certainly, there is no indication in the sections of the Government Code which comprise the Political Reform Act that those definitions apply to provisions appearing elsewhere. Sec. 82000 says: "Unless the contrary is stated or clearly appears from the context, the definitions set forth in this chapter shall govern the interpretation of this title." It does not say it will govern interpretations of city ordinances.
Lobbyists, like anyone else, are entitled to fair notice. They should not have to ascertain how the commission is interpreting a code requirement when that requirement seems clear on its face.
If the Political Reform Act is consulted, the conclusion is far from inevitable that lobbyists must report the services they provide gratis. Sec. 82044 does define "payment" in broad terms which include "services." However, there are other statutes in the chapter containing definitions which, taken together, indicate that a "payment" to a candidate or elected officeholder is either a "gift," a "contribution," or "income."
"Income" does not include services, either as that term is commonly understood or as it’s defined in the PRA. Government Code §82030, which defines "income," makes clear that salaries and wages and such are envisioned, not services.
There can, of course, be a gift or a contribution of services. Distinguishing between the two is essential to an analysis of Pelham’s interpretation of the ordinance.
A "gift," in general, is characterized in §82028(a), as "any payment that confers a personal benefit on the recipient." A "contribution" is defined in §82015(a) as "a payment...unless it is clear from the surrounding circumstances that it is not made for political purposes."
The term "political purposes" is broadly construed. Under an administrative regulation promulgated by the Fair Political Practices Commission, a payment received by a candidate or elected officeholder is a contribution "unless it is clear from surrounding circumstances that the payment was received" by the donee "for personal purposes unrelated to his or her candidacy or status as an office holder."
In Thirteen Committee v. Weinreb (1985) 168 Cal.App.3d 528, it was held that a post-election libel action prosecuted by a successful mayoral candidate was for "political purposes" and that an amendment of the candidate’s campaign financing statement to reflect payment of attorney fees paid in connection with that action was required.
A 1982 attorney general’s opinion, in illuminating what gifts are, said, by way of example, that "to finance a vacation for an official or to send an official’s child to college" would constitute "true gifts."
The Fair Political Practices Committee in 1989 advised then-state Sen. Joseph Montoya, who faced federal racketeering charges, that any funds given to him to defray costs of a defense would be contributions, not gifts. The opinion explained that the funds being collected by Montoya were "[u]nlike payments made by a candidate for legal expenses in a personal lawsuit, for example a divorce case." Rather, it said, the funds "will have a direct relationship to his status as an officeholder, since the illegal activities alleged in the indictment all concern Senator Montoya’s conduct in his capacity as a member of the Legislature"
My columns last week specified that what I was talking about was the providing of free services—and I zeroed in on legal services—to a person in his or her capacity as candidate or officeholder. Such services, under the authorities just discussed, would not be "gifts." They would qualify as "contributions," and be reportable as such, but for one factor. Government Code §82015(g) says that the term "contribution" as defined by that section "does not include volunteer personal services."
Where does that leave us? Municipal Code §48.02 defines "activity expense" as "any payment…made to or directly benefiting any City official" by a lobbyist. A subsequent section (§48.08(B)(4)) requires the reporting of an "activity expense" valued at $25 or more. Assuming it is appropriate to read-in definitions contained in the PRA (which is questionable), surely all relevant definitions must be imported. A "payment," under Government Code §82044, includes a "service," as Pelham notes. Thus, when a payment in the form of a service constitutes a personal "gift"—such as providing free legal representation in a divorce or in a custody matter—the lobbyist must report it (assuming definitions in the PRA apply), for there is no exclusion of "personal services" from the definition of "gift."
However, when a payment by a lobbyist to an elected official is for "political purposes," it is not a gift, and is defined as a "contribution"—unless it is in the nature of "personal services," in which event, under §82015(g), it is not a contribution.
Can there be a "payment" in the form of personal services that is neither a gift nor a contribution? No. As the Ethics Commission’s director of enforcement, Luis A. Lavin, said in a pleading in connection with the action against Bernson and Papiano’s firm:
"Under City law, any payment received by an elected City officer such as Councilman Bernson ‘shall be considered either a campaign contribution, income, or a gift.’ Los Angeles Municipal Code Section 49.7.5."
Thus, it appears that even if definitions in the PRA are superimposed on the Los Angeles Municipal Code, personal services provided to a candidate or elected public official (in his or her capacity as a candidate or elected public official) are non-reportable under the Municipal Code. If they are provided to the recipient in such a capacity, they are necessarily for a "political purpose" and are, by definition, not a "gift"; they are, in light of the exception in §82015(g), not a "contribution"; they are, by virtue of being personal services, not "income." Accordingly, the services do not constitute any species of "payments" cognizable under the city lobbyist reporting law.
The
city can easily change this—and should—by simply inserting the word "services"
in the definition of "activity expense" in §48.02.
MISLEADING PRESS RELEASE: The commission on Oct. 30 issued a press release announcing imposition of fines amounting to $7,000 in connection with "free legal services provided by the law firm of well-known City hall lobbyist Neil Papiano" to Los Angeles City Councilman Hal Bernson. The press release quoted Krinsky as saying:
"The Commission takes very seriously its responsibility to uphold all of the City’s contribution limits—whether those limits apply to campaign committees or to officeholder account funds. Those who provide free or discounted legal services to candidates and elected officials should be treated no differently than those who contribute any other services or monetary sums to elected officials. This enforcement action puts any provider of services, including those who provide legal services, on notice that they, too, are be subject to contribution limits under City law."
What this communicates is that lawyers who provide free legal services to a candidate or elected official are subject to contribution limits based on the monetary value of the services, just as if they gave cash. That isn’t true, as my columns pointed out. Those who provide free legal services (or other types of services) to candidates and elected officials are treated differently from those who contribute monetary sums. If a lawyer, including a lawyer who is a lobbyist, "volunteers" services, there is no contribution limit.
Krinsky and Pelham seek to create the impression that the columns took issue with the proposition that legal services are viewed, in connection with contribution limits, the same as other types of services. Not so. What was challenged was the accuracy of Krinsky’s assertion that free legal services were treated the same as monetary contributions. As noted, Government Code §82015(g) says that the term "contribution" "does not include volunteer personal services."
Two fines were levied, pursuant to a stipulated settlement, in connection with free legal services to Bernson by the firm of Iverson, Yoakum, Papiano and Hatch. Bernson paid $3,000 and Papiano’s firm coughed up $4,000. The fines were based on the firm exceeding the $1,000 ceiling (now $500) on a contribution to a City Council member’s officeholder account. The value of the services was reckoned on the basis of work done by lawyers in the firm who did not volunteer their services but were directed to do the work and were paid for it. Under an administrative regulation, cognizance was taken of such work only where it comprised more than 10 percent of the lawyer’s compensated time during any month. The period in issue was fiscal year 1996-97.
The fourth sentence of the letter deals with the fact that there was discussion of the true bases for the fines at a public session of the commission, and that tape recordings of the session and the minutes of that session are available. That’s dandy. But it does not obviate the fact that the press release erroneously portrayed the commission as having the power to fine a lawyer who donates services to a City Council member where the value of the services exceeds monetary contribution limits. Reporters who receive press releases are not apt to hold up writing a story based on the release in order to check the representations against minutes or a tape recording.
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UPDATE
The "Perspectives" column of Aug. 7, 2001 contained this item:
CLOSING A LOOPHOLE—In my columns of March 27 and 29, I pointed to a loophole in the City of Los Angeles’ laws regulating lobbyist activities. There is nothing limiting free legal services—or any other types of services—being personally provided by a lobbyist to a member of the City Council or other city official. One lobbyist/attorney, Neil Papiano, has been known to confer legal services, gratis, on City Councilman Hal Bernson. I’m heartened to see that in a proposed ordinance, drafted by the City Attorney’s Office at the behest of the Ethics Commission, there is a prohibition on an elected city official acting on a matter if, in the past 12 months, a lobbyist for one side has had a “business relationship” with the official. Such a relationship would include one where “[a]n elective City officer” garnered benefits “aggregating more than $1,000, including, but not limited to, free legal or other services.” The commission is scheduled to decide tomorrow whether to forward the proposed ordinance to the City Council with the request that it be enacted.
FURTHER UPDATE
As of Jan. 1, 2004, §49.5.16 of the Lobbying Ordinance has provided that an elective official must disclose his or her participation in, or attempt to influence, any decision where a lobbyist has solicited the official's support and the official "was the beneficiary of "free legal or other services" from the "lobbyist, lobbying firm or lobbyist employer aggregating more than $1,000."