The Ethics Bill: The Devil’s in the Details


(UPDATE: The bill analyzed here died on the Senate floor before the sine die session ended on June 19, 2014.)

The South Carolina Senate is about to pass what some are still calling ethics reform. This is the bill that started out, in 2013, as an attempt to decriminalize the ethics code and punish citizens and organizations for testifying at public hearings. It’s also the bill repeatedly rewritten in secret caucus and leadership meetings. And it’s the bill Speaker Bobby Harrell’s allies have used – repeatedly – to try to protect Harrell from potential prosecution.

Large omnibus bills like this one are almost always dangerous. They are deliberately complicated and long. The goal? To ensure that no one reads them closely enough to catch the hidden loopholes and exceptions that are inevitably included. The current bill is  23 dense pages (the conference report is available here). It was quickly pushed to the floor of both the House (where it passed overwhelmingly) and the Senate (where it was fortunately delayed until lawmakers return on June 17).

Even with the delay, however, it’s unlikely that most lawmakers have read the bill in detail, and certainly most members of the public have not. H.3945 contains some serious loopholes that could allow PACs to avoid any disclosure, and it effectively guts the law against converting campaign funds to personal use. The bill could give lawmakers permission to lobby government entities (which is currently prohibited) and even get around the income disclosure provision that would have marked at least some progress toward real reform.

The loopholes:

The Committee “Major Purpose” Loophole (Sections 25, 28, and 30)

Political action committees, or PACs, could  exempt themselves from any reporting requirements at all. They’ll effectively be able to “go dark.” The bill redefines “committee,” “noncandidate committee,” and “ballot measure committee” as, among many other provisions, one that has as its “major purpose” the support of or opposition to political candidates. But in order to meet that “major purpose criterion,” one of the following must be true of the committee: its bylaws state that its major purpose is to elect candidates; more than 50 percent of its disbursements go to support nominations or elections of a candidates; or its public statements, fundraising solicitations, etc., indicate that supporting or opposing candidates is its major purpose.

It would appear, then, that as long as the group avoids these three criteria, it isn’t a PAC and doesn’t have to abide by any of the regulations governing PACs – including reporting requirements. So if a PAC keeps its expenditures to candidates under 49.9 percent, and if its bylaws and other literature remain vague enough, it doesn’t have to disclose anything about anything. It goes dark. While federal courts have ruled in favor of the major purpose doctrine in the past as it pertains to defining a political committee, there is no federal or state court decision supporting the right of entities that spend on direct electoral advocacy to keep their contributions secret. Under this law, PACs would have this unsupported right of non-disclosure.

Forcing Non-Electoral Advocacy Groups to Disclose Top Donors (Sections 31 and 38)

This section broadly defines electioneering communications as any person or group that, through broadcast, cable, satellite, mass postal mailing, or telephone bank, even references a candidate within 60 days of a general or 30 days of a primary election. This broad definition would force many non-political groups to disclose their top donors – an easy way to silence issue-oriented groups that aren’t involved in elections. This means that, with some exceptions, if you’re an issue-oriented organization that doesn’t engage in elections but happens to mention a candidate’s name before an election, you may have to disclose your donors – potentially exposing them to intimidation.

The supposed justification for this change is to put South Carolina law in compliance with Supreme Court decisions on free speech. Yet the Supreme Court has previously rejected this kind of forced disclosure in such cases as NAACP v. Alabama. In that case, the state issued a subpoena for NAACP membership lists.

Even more pertinently, in the Supreme Court Case Buckley v. Valeo the Court held that laws aimed at regulating political speech were only permissible in situations where the speech is “unambiguously related to  the campaign of a particular … candidate.” The bill’s definition of “electioneering” under which speech can be regulated (see esp. Section 38 of the conference bill) covers speech that isn’t unambiguously related to the campaign of a particular candidate. Unambiguous speech would involve material saying things like “Vote for Smith.” The definition of “electioneering communication” in H.3945 goes far beyond that.

Spending Campaign Funds on Almost Anything (Section 45)

Under current law, incumbents are allowed to spend campaign funds beyond simply for campaign activities. but only on “reasonable expenses” in connection with their “official duties.” On things associated with the “office,” the definition of “official responsibilities of the office holder” will become broad to the point of meaningless: “Official responsibilities of the officeholder shall include, but not be limited to, political party events, official appearances or meetings for which reimbursement is not offered by the governmental entity, and educational forums or conventions to which an officeholder is invited in their official capacity [emphasis added].” Officials can even take family members along and bill the campaign fund, which is clearly not permitted under the current definition.

Lawmakers have indicated in press accounts that they are merely codifying current practices – practices that could be illegal under current law. The “ethics” bill would actually legalize what is currently not permitted. It seems clear, too, that the phrase “but not be limited to” makes this a catch-all loophole.

Pretending to Abolish Leadership PACs (Section 44)

The conference bill removes the language in the current Ethics Act that explicitly authorizes “leadership PACs” – political action committees run by a candidate or public official. This removal, however, is little more than sleight of hand: the same bill section that removes the existing leadership PAC language provides a work-around for public officials. While candidates may no longer directly control a PAC, the definition of “directly control” is now altered to remove a reference to committees run by agents of public officials or agents of their family members.

In short, a public official or one of his or her immediate family members can continue to run a PAC with impunity as long as the committee is nominally run by one of the official’s “agents.”

Campaign Pledges Don’t Count (Section 47)

Current law requires that written promises or pledges to make campaign contributions be reported in campaign reports. H.3945 would strike that requirement.

Allowing  Public Officials to Lobby (Section 15)

This provision adds a new exception to the general prohibition of public official representation before governmental entities. In current law, public officials may represent clients before governmental entities in contested cases. Under the newly reformed Ethics Act, representation would also be allowed in matters that “may become contested cases.” Of course, any case “may become contested.” On the face of it, then, the bill would allow legislators to lobby government bodies on almost any conceivable issue.

Representation isn’t limited here to legal representation. So a lawmaker could conceivably tell a regulatory board that a pending licensing regulation (one that could affect this lawmaker’s business) should or shouldn’t be passed, or else it might become a “contested case.”

Loopholes in Income Disclosure (Section 19)

The income source disclosure provision in the conference bill is an improvement and far stronger than current law, which only requires public officials to disclose government sources of income. Granted, some legislative leaders have ignored even that provision of current law, but the added requirements are welcome. There remain, however, two potential loopholes in the proposed income disclosure language.

First, the conference legislation lays out a few sources of income that don’t need to be reported. The most notable of these is income received from brokerage accounts. It’s possible to imagine lawmakers investing funds from other ventures into brokerage accounts in order to avoid reporting requirements. Without disclosure, the public will never know if this kind of practice is occurring.

Second, the new income disclosure provision fails to fix a longstanding loophole in disclosure law (2-17-90(E)), which allows public officials to keep sources of income confidential if reporting those sources may “compromise the confidentiality of a state or local economic development project.” In our view state officials shouldn’t be involved with these “economic development projects” at all. But if they must be involved in them, allowing public officials to be compensated by companies seeking these deals and then not reporting the income amounts to a flagrant conflict of interest.

Those with Open Campaign Accounts = “Candidates” (Sections 6 and 24)

The bill adds additional protection to incumbents by broadening the definition of “candidate” to include those who maintain an open bank account containing contributions. Since candidates have more restrictions on them regarding lobbying, spending, etc., this new provision may coerce incumbents’ opponents into emptying their accounts so they can’t contemplate another run without raising the same resources again.

Codifying Confidential Ethics Advisory Provisions (Section 12)

The current powers of the House and Senate Ethics Committees to issue advisory opinions upon request to members of their respective bodies are laid out in the House and Senate rules. The conference bill would add a new section to state law formerly codifying these powers, but also stating that members of ethics committees may vote to keep advisory opinions confidential and unavailable to the public. Regardless of whether this confidentiality is current practice, citizens as well as lawmakers have the right to know the law, and any formal interpretation of the law.

Currently, legislative ethics committees have no clear guidelines on transparency of formal opinions.  The proposed guideline would give them the ability to hide them.

Paying for Personal Services for Candidates no Longer Qualifies as a Contribution (Section 26)

Hidden in the altered definition of contribution is a provision declaring that paying an individual for personal services to a candidate no longer qualifies as a contribution, as long as that personal service isn’t rendered to influence an election. This means – or rather it appears to mean – that donors can avoid contribution limits by bankrolling a portion of a candidate’s staff as long as those staff members are not directly involved with the campaign or electoral advocacy. These personal services may include positions such as legal advisors who aren’t directly affiliated with a candidate’s campaign.

New Study Committee on Ethics Violations (Section 50)

The bill creates a study committee tasked with issuing a report advising which provisions of the Ethics Act should carry civil and which should carry criminal penalties. Under current law, all violations of the Ethics Act are criminal violations. While the recommendations of the committee would not be binding, lawmakers could use them to justify decriminalizing select violations of the ethics act, as they tried to do in an earlier version of H.3945.

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