Ethics Commission Update

The Texas Ethics Commission met in April and did several things that are important to us...whether impacting how we operate individually as lobbyists, or how they affect your clients, company or associations.

The most important of the Commission’s actions fell into three distinct categories:

• Citizens United Opinion: Advisory opinion dealing with corporate direct expenditures (EAO 489);
• Political Expenditures: (1) Disclosure requirements for political advertising on social media sites (EAO 491), and (2) The rules on purpose of expenditures for candidates and PACS; and
• Fines and Waivers: Discussion about fines and waivers and what it means for the future.

Our summary of these topics is below. Feel free to e-mail or call if you have additional questions.

Citizens United Versus the FEC: EAO 489

The Commission’s action on Citizens United v. FEC can be summed up by saying that the Commission adopted Ethics Advisory Opinion 489 which will give all corporations (and unions) some degree of certainty if they choose to make the Texas equivalent of “independent expenditures” (called “direct campaign expenditures” in Texas law).

Key areas addressed in EAO 489:

• Question of whether a corporation would have to put a disclaimer on any advertising it runs on its own with corporate dollars. In EAO 489, the Commission determined that the same political advertising disclaimer is required for corporate ads funded with direct campaign expenditures as would be required for traditional political campaign ads.
  
• Question of whether there was a reporting requirement for entities that made corporate or union direct campaign expenditures in Texas. The Commission determined that it would have been the legislative intent that all expenditures would have to be reported, both to the Texas Ethics Commission as well as to the candidate supported by the expenditure (if any), so therefore the requirement to report was applicable and was required.
• The Commission decided to not address the question of “coordination” of direct campaign expenditures at all in its opinion. So the cautious advice is that until either the Commission or the legislature decides to address this question, the safest practice for a corporation to follow if it decides to make direct campaign expenditures in Texas will be to not coordinate or discuss the expenditure with anyone outside of the corporation itself.

Political Expenditures

(1) Internet Advertising Disclaimers: EAO 491

Commission adopted EAO 491 that answered the question of campaign advertising on social media sites (a la facebook). The limitation on available characters meant that the disclaimer couldn’t work in a traditional fashion on the ad itself, and the Commission had a lengthy discussion about whether the law actually could allow an ad to run without a disclaimer. While several Commissioners were interested in exploring a more strict application of the law (which may be seen in future actions), all commissioners voted for the opinion.

• Summary of EAO 491: The opinion says that for an Internet site that limits the ability of the advertiser to place a full disclaimer on the ad, the ad only has to say “pol ad” and give a direct link where the full disclaimer can be viewed. As a word of caution, if you or your clients have a situation to which this opinion may apply, be careful to recognize that the opinion will only give protection if your fact situation is the same or very similar to the one given as the example in the opinion. And this is a fairly narrow opinion.

(2) TEC Rule Update on Purpose of Expenditures for Political Filers

The Commission adopted a new subsection to the purpose of expenditure rules and updated the reporting forms to include the new requirements. For each political expenditure, filers will be required to choose a general category from a drop down list and then also provide a more detailed description of the expenditure. The newly adopted subsection provides illustrative examples of how to complete the purpose of the expenditure section of the report under the new rules.

TEC Proposed Rules for PAC Fine Waiver
If you have a client or company with a PAC you should consider filing positive comments.

The Commission outlined its proposed rules for PACs allowing waivers for technical, clerical, or de minimis violations in the sworn complaint process. The sworn complaint factory mill has so far concentrated its attention primarily about officeholders and PACs, on minor technical violations. These proposed rules establish a process to allow the PAC to avoid a costly complaint process and to minimize its exposure. The resolution would be confidential and could be implemented by the Commission Executive Director. A big incentive is that the Commission's docket has become overloaded with these technical complaints. In all of 2009, the Commission had 274 complaints, while through just the second quarter of 2010, there have already been 171 complaints filed.

As always, let us know if you have questions or comments.

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