Law Firm Political Contributions: Why And How

Editor's Note: A&FP got lucky this summer when I sought an expert to advise our readers on law firm political contributions. Not only did Kurt Salisbury help me recruit his Arent Fox colleague Craig Engle, but he agreed to perform the interview on my behalf. Our readers thus gain not only the perspective of a major firm's PAC Director but also the perspective of the same firm's CFO. Major thanks are also due to Arent Fox's Scott Ward for preparing the sidebar.

Ironically, Engle's expertise in political matters almost cost this edition the article: he got so busy in connection with the GOP convention that the only time he could free up to check the interview transcript was on a long plane trip!

KS: Why does Arent Fox have a PAC?

CE: Every law firm that wants a strong government relations practice should have a PAC. A PAC is an important part of a law firm's political tool kit. Clients come to our firm knowing we can provide legal, legislative and political solutions to their needs. Having a healthy PAC lets us find political solutions to our client's problems.

KS: How does our PAC raise money?

CE: We have a fundraising drive that starts every year in February. One of the things we do at Arent Fox is make sure that anyone who wants to contribute to the PAC is encouraged to do so. Our PAC is not for partners only. Associates, professional staff and lawyers of all levels are encouraged to give to our PAC, and they do. Second, we have made it very easy to contribute. We allow lump sum gifts, occasional gifts when partner draws are good, and payroll deduction.

KS: How do you decide on how the PAC spends its money?

CE: At the beginning of every year, we establish a budget and our government relations group decides what sort of political contributions we should make. We don't talk about particular candidates; we talk about the type of candidates and officeholders we'd like to support and how much we would like to give. For example, although the law allows us to give up to $10,000 to a candidate running for the House or Senate, we have determined to limit ourselves to only $2,000 or $4000. That way we can make contributions to more people. We've also decided not to make contributions to Presidential candidates or state parties. It is important to husband your resources, and spend your partners' money wisely.

KS: To what do you attribute AFPAC's success?

CE: First, our management is 100% behind our PAC, and every member of the firm's Executive Committee sets a good example by giving first. Second, every member of our government relations staff contributes more than the guideline amount. It's important for us to lead in giving, so others in the firm will follow.

We've also been very successful in increasing the number of donors to AFPAC and the amount they typically give. I think that's because we make sure everybody who donates to our PAC understands why they are giving to our PAC, what our PAC does for our firm and how a PAC benefits our clients. And it's important to give a little treat to the donors as well. Several times a year, we have parties and get-togethers with our PAC donors to tell them what we're doing with their money. You can't expect people to give money to a fund that they don't feel a part of. Giving out information is very, very important when raising money for a PAC.

KS: What are the legal rules we must comply with?

CE: Politics has now become a regulated industry. The Federal Election Commission supervises all aspects of campaign finance. It is important to do three things when you are operating a PAC: abide by the contribution limits, abide by the expenditure limits, and report all your receipts and disbursement on time. Unfortunately, abuses by some political committees have caused the penalties for campaign finance violations to increase. That shouldn't dissuade firms from getting involved with a PAC; it means they should get involved correctly. [See, "Political Action Committees: Rules & Resources" below.]

KS: Do you have advice to law firms thinking about starting a PAC?

CE: Yes! Do it! But they also may want to hire an outside counsel to help get it started. Outside counsel can be very helpful when starting a PAC. It is also a good idea for your PAC to have a political accounting firm that can handle all the recording of receipts and disbursements.

There are professionals in the business who file FEC reports for a living. After a point, a law firm could probably do this for itself, but it is a good idea if they hire an expert to help them get started.

KS: You probably get more requests for donations than we have funds available, right?

CE: Yes, and that is why it is important to have rules ahead of time. After we set up the rules for making contribution decisions, individual members of the firm will come to me as PAC manager and ask for a check for a candidate. The most important criterion is that the candidate seeking a contribution from Arent Fox is having an event that a member of our firm or client can attend. We do not send PAC checks through the mail, nor do we give PAC checks to everyone who asks. Instead, we make sure that our contributions are given to those candidates we think share our points of view and will take the time to discuss our issues face to face.

KS: How do AFPAC and Arent Fox work together?

CE: Side-by-side. Just like our law firm has a pro bono committee and hiring committee, we also have a political committee. It is needed to attract top-flight lawyers and top-flight clients. Oftentimes, a client's concern cannot be answered by legal research alone. Sometimes it requires a legislative solution. But does making a PAC contribution to a Member of Congress ensure a legislative result? No, not at all. PAC contributions don't change politicians' points of view, they follow them. We support Members of Congress who already support our clients and who are predisposed to ensuring the tax code is fair, that business and industry can remain competitive, and that the government treats our client in a fair manner.

KS: What is the best thing that has happened to Arent Fox since we started our PAC?

CE: We've been able to triple the amount of money that has been contributed to our PAC in the last several years. That means we can attract more top-notch government relations professionals to Arent Fox because they know our firm “gets it.” That, in turn, helps attract more clients because they see our firm has the legal and political resources to get the job done.

All of this proves the lawyers at Arent Fox understand that a PAC is good for both the firm and the firm's clients.

KS: Anything else?

CE: Yes, how about increasing your contribution next year?

***

Political Action Committees: Rules & Resources

[Editor's Note: Scott Ward, Esq., an Arent Fox colleague of author Craig Engle, has kindly assembled the following handy summary of PAC regulations and informational resources.]

PAC Organization and Reporting

• The PAC must register with the FEC within 10 days of formation. 11 CFR '102.2.
• The name must include the full name of the connected organization. 11 CFR ”100.6(a), 102.14(c); FEC AO 2000-34.
• The PAC must have a separate bank account. 11 CFR '103.2; FEC AO 1986-33.
• Initially, each PAC must register as a non-multicandidate PAC. On the day that all three of the following conditions become true, the PAC must change its registration to a multicandidate PAC: The PAC has a) been registered for 6 months, b) received contributions from more than 50 contributors, and c) contributed to at least five federal candidates. 11 CFR '100.5(e)(3).
• The connected organization may pay for administrative and fundraising costs of the PAC. These amounts are not reportable contributions to the PAC. 11 CFR ”114.1(b), 114.5(b).
• The PAC must report to the FEC all contributions and expenditures, on either a monthly or quarterly basis. 11 CFR '104 et. seq.
• The PAC must keep records for 3 years. 11 CFR ”102.9(c), 104.14(b)(2) and (3).

PAC Solicitation Rules

• The PAC may only solicit members of its restricted class. 11 CFR '114(g)(1).

Restricted Class is:

1) Executive and administrative personnel, ie, salaried employees who have managerial, administrative, policy-making, or supervisory responsibilities.

2) Stockholders

3) Families of 1 and 2.

4) All rank and file employees, but only twice-yearly. 11 CFR '114.6(b)

• All contributions must be voluntary.

1) No threat of physical force, job discrimination, or financial reprisal is allowed. 11 CFR '114.5(a)(1).

• All solicitations must contain the following notices:

1) Political purpose of the PAC.

2) Solicitee's right to refuse without reprisal.

3) The guideline amount is merely suggestive; no minimum may be specified. 11 CFR '114.5(a)(2)-(5).

Approved Solicitation Methods

Payroll Deduction

• Employees may give written authorization for periodic deduction of PAC contributions from their paycheck. FEC AO 2000-15.

Newsletters and Publications

The PAC may place a solicitation in a firm newsletter or publication if recipients are only restricted class members. Exception: if less than 3% of the recipients are non-restricted class members and less than 1000 copies are going to non-restricted class members. FEC AO 1999-6.

Newsletters generally circulated to all employees may not contain solicitations. They may, however, contain an article about the PAC that does not encourage support but only announces the existence of the PAC, provides statistical information about PAC contributions and receipts, or identifies candidates supported by the PAC. FEC AO 1991-3.

• Internet or e-Mail

Basic rules on restricted class and notices apply.

If an Internet site contains a solicitation, it must be password protected or otherwise only accessible to restricted class members. FEC AOs 2000-7 and 1995-33.

PAC Contributions

• Person to PAC: $5000 per year. 11 CFR '110.1(d).
• Multicandidate PAC to:
  • Federal Candidate ' $5000 per election*
  • PAC ' $5000 per year
  • Local or State Party ' $5000 per year combined
  • National Party ' $15,000 per year

11 CFR '110.2(b).

• Non-Multicandidate PAC to:
  • Federal Candidate ' $1000 per election*
  • PAC ' $5000 per year
  • Local or State Party ' $5000 per year combined
  • National Party ' $20,000 per year

11 CFR '110.1(b)(1).

* The primary and general election are two separate elections. 11 CFR ”100.2, 110.1(j), 110.2(i)(1).

For More Information

• Federal Election Commission ' http://www.fec.gov/

This site contains links for all rules, regulations, and publications governing federal campaign finance.

• FECInfo ' http://www.fecinfo.com/

On this site you can research political contributions for PACs, parties, and candidates.

' Scott Ward

Editor's Note: A&FP got lucky this summer when I sought an expert to advise our readers on law firm political contributions. Not only did Kurt Salisbury help me recruit his Arent Fox colleague Craig Engle, but he agreed to perform the interview on my behalf. Our readers thus gain not only the perspective of a major firm's PAC Director but also the perspective of the same firm's CFO. Major thanks are also due to Arent Fox's Scott Ward for preparing the sidebar.

Ironically, Engle's expertise in political matters almost cost this edition the article: he got so busy in connection with the GOP convention that the only time he could free up to check the interview transcript was on a long plane trip!

KS: Why does Arent Fox have a PAC?

CE: Every law firm that wants a strong government relations practice should have a PAC. A PAC is an important part of a law firm's political tool kit. Clients come to our firm knowing we can provide legal, legislative and political solutions to their needs. Having a healthy PAC lets us find political solutions to our client's problems.

KS: How does our PAC raise money?

CE: We have a fundraising drive that starts every year in February. One of the things we do at Arent Fox is make sure that anyone who wants to contribute to the PAC is encouraged to do so. Our PAC is not for partners only. Associates, professional staff and lawyers of all levels are encouraged to give to our PAC, and they do. Second, we have made it very easy to contribute. We allow lump sum gifts, occasional gifts when partner draws are good, and payroll deduction.

KS: How do you decide on how the PAC spends its money?

CE: At the beginning of every year, we establish a budget and our government relations group decides what sort of political contributions we should make. We don't talk about particular candidates; we talk about the type of candidates and officeholders we'd like to support and how much we would like to give. For example, although the law allows us to give up to $10,000 to a candidate running for the House or Senate, we have determined to limit ourselves to only $2,000 or $4000. That way we can make contributions to more people. We've also decided not to make contributions to Presidential candidates or state parties. It is important to husband your resources, and spend your partners' money wisely.

KS: To what do you attribute AFPAC's success?

CE: First, our management is 100% behind our PAC, and every member of the firm's Executive Committee sets a good example by giving first. Second, every member of our government relations staff contributes more than the guideline amount. It's important for us to lead in giving, so others in the firm will follow.

We've also been very successful in increasing the number of donors to AFPAC and the amount they typically give. I think that's because we make sure everybody who donates to our PAC understands why they are giving to our PAC, what our PAC does for our firm and how a PAC benefits our clients. And it's important to give a little treat to the donors as well. Several times a year, we have parties and get-togethers with our PAC donors to tell them what we're doing with their money. You can't expect people to give money to a fund that they don't feel a part of. Giving out information is very, very important when raising money for a PAC.

KS: What are the legal rules we must comply with?

CE: Politics has now become a regulated industry. The Federal Election Commission supervises all aspects of campaign finance. It is important to do three things when you are operating a PAC: abide by the contribution limits, abide by the expenditure limits, and report all your receipts and disbursement on time. Unfortunately, abuses by some political committees have caused the penalties for campaign finance violations to increase. That shouldn't dissuade firms from getting involved with a PAC; it means they should get involved correctly. [See, "Political Action Committees: Rules & Resources" below.]

KS: Do you have advice to law firms thinking about starting a PAC?

CE: Yes! Do it! But they also may want to hire an outside counsel to help get it started. Outside counsel can be very helpful when starting a PAC. It is also a good idea for your PAC to have a political accounting firm that can handle all the recording of receipts and disbursements.

There are professionals in the business who file FEC reports for a living. After a point, a law firm could probably do this for itself, but it is a good idea if they hire an expert to help them get started.

KS: You probably get more requests for donations than we have funds available, right?

CE: Yes, and that is why it is important to have rules ahead of time. After we set up the rules for making contribution decisions, individual members of the firm will come to me as PAC manager and ask for a check for a candidate. The most important criterion is that the candidate seeking a contribution from Arent Fox is having an event that a member of our firm or client can attend. We do not send PAC checks through the mail, nor do we give PAC checks to everyone who asks. Instead, we make sure that our contributions are given to those candidates we think share our points of view and will take the time to discuss our issues face to face.

KS: How do AFPAC and Arent Fox work together?

CE: Side-by-side. Just like our law firm has a pro bono committee and hiring committee, we also have a political committee. It is needed to attract top-flight lawyers and top-flight clients. Oftentimes, a client's concern cannot be answered by legal research alone. Sometimes it requires a legislative solution. But does making a PAC contribution to a Member of Congress ensure a legislative result? No, not at all. PAC contributions don't change politicians' points of view, they follow them. We support Members of Congress who already support our clients and who are predisposed to ensuring the tax code is fair, that business and industry can remain competitive, and that the government treats our client in a fair manner.

KS: What is the best thing that has happened to Arent Fox since we started our PAC?

CE: We've been able to triple the amount of money that has been contributed to our PAC in the last several years. That means we can attract more top-notch government relations professionals to Arent Fox because they know our firm “gets it.” That, in turn, helps attract more clients because they see our firm has the legal and political resources to get the job done.

All of this proves the lawyers at Arent Fox understand that a PAC is good for both the firm and the firm's clients.

KS: Anything else?

CE: Yes, how about increasing your contribution next year?

***

Political Action Committees: Rules & Resources

[Editor's Note: Scott Ward, Esq., an Arent Fox colleague of author Craig Engle, has kindly assembled the following handy summary of PAC regulations and informational resources.]

PAC Organization and Reporting

• The PAC must register with the FEC within 10 days of formation. 11 CFR '102.2.
• The name must include the full name of the connected organization. 11 CFR ”100.6(a), 102.14(c); FEC AO 2000-34.
• The PAC must have a separate bank account. 11 CFR '103.2; FEC AO 1986-33.
• Initially, each PAC must register as a non-multicandidate PAC. On the day that all three of the following conditions become true, the PAC must change its registration to a multicandidate PAC: The PAC has a) been registered for 6 months, b) received contributions from more than 50 contributors, and c) contributed to at least five federal candidates. 11 CFR '100.5(e)(3).
• The connected organization may pay for administrative and fundraising costs of the PAC. These amounts are not reportable contributions to the PAC. 11 CFR ”114.1(b), 114.5(b).
• The PAC must report to the FEC all contributions and expenditures, on either a monthly or quarterly basis. 11 CFR '104 et. seq.
• The PAC must keep records for 3 years. 11 CFR ”102.9(c), 104.14(b)(2) and (3).

PAC Solicitation Rules

• The PAC may only solicit members of its restricted class. 11 CFR '114(g)(1).

Restricted Class is:

1) Executive and administrative personnel, ie, salaried employees who have managerial, administrative, policy-making, or supervisory responsibilities.

2) Stockholders

3) Families of 1 and 2.

4) All rank and file employees, but only twice-yearly. 11 CFR '114.6(b)

• All contributions must be voluntary.

1) No threat of physical force, job discrimination, or financial reprisal is allowed. 11 CFR '114.5(a)(1).

• All solicitations must contain the following notices:

1) Political purpose of the PAC.

2) Solicitee's right to refuse without reprisal.

3) The guideline amount is merely suggestive; no minimum may be specified. 11 CFR '114.5(a)(2)-(5).

Approved Solicitation Methods

Payroll Deduction

• Employees may give written authorization for periodic deduction of PAC contributions from their paycheck. FEC AO 2000-15.

Newsletters and Publications

The PAC may place a solicitation in a firm newsletter or publication if recipients are only restricted class members. Exception: if less than 3% of the recipients are non-restricted class members and less than 1000 copies are going to non-restricted class members. FEC AO 1999-6.

Newsletters generally circulated to all employees may not contain solicitations. They may, however, contain an article about the PAC that does not encourage support but only announces the existence of the PAC, provides statistical information about PAC contributions and receipts, or identifies candidates supported by the PAC. FEC AO 1991-3.

• Internet or e-Mail

Basic rules on restricted class and notices apply.

If an Internet site contains a solicitation, it must be password protected or otherwise only accessible to restricted class members. FEC AOs 2000-7 and 1995-33.

PAC Contributions

• Person to PAC: $5000 per year. 11 CFR '110.1(d).
• Multicandidate PAC to:
  • Federal Candidate ' $5000 per election*
  • PAC ' $5000 per year
  • Local or State Party ' $5000 per year combined
  • National Party ' $15,000 per year

11 CFR '110.2(b).

• Non-Multicandidate PAC to:
  • Federal Candidate ' $1000 per election*
  • PAC ' $5000 per year
  • Local or State Party ' $5000 per year combined
  • National Party ' $20,000 per year

11 CFR '110.1(b)(1).

* The primary and general election are two separate elections. 11 CFR ”100.2, 110.1(j), 110.2(i)(1).

For More Information

• Federal Election Commission ' http://www.fec.gov/

This site contains links for all rules, regulations, and publications governing federal campaign finance.

• FECInfo ' http://www.fecinfo.com/

On this site you can research political contributions for PACs, parties, and candidates.

' Scott Ward