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Federal Government Expands Its Prohibition Against Recovery Act Lobbying to Apply to All Persons, Not Just Lobbyists

Financial Services Task Force James D. Friedman, Jeff Peelen

We issued an email alert in early April that detailed the restrictions the federal government had placed on federal lobbyists with respect to their communications with federal agencies in the context of the distribution of federal Recovery Act funds. The centerpiece of the White House's effort was a so-called "lobbyist gag order," which prohibited federal lobbyists from having oral communications with agencies about the substance of specific projects, and required the documentation and posting online of other lobbyist communications with agencies.

The White House recognized that its initial cut would likely not completely achieve its goal of limiting external influence on the process, so it built in a 60-day review of the new policy. That review has been completed, and the Office of Management and Budget has issued revised guidance. We are writing to update you on this development.

White House Expands Limitations on Recovery Act Communications With Agencies to Include All Persons

As we noted in our previous alert, the restrictions contained in the initial policy applied only to federally registered lobbyists, not to any other individual or entity. Not surprisingly, the businesses, non-profit organizations and other groups trying to influence the distribution of federal funds found a way to deal with this restriction: They simply stopped sending their federal lobbyists to engage with agencies, and instead they used state lobbyists, former federal lobbyists (a number of whom are reported to have terminated their registration so as to avoid the gag order), attorneys or other experts and, in many cases, executives or other employees of the entity seeking funds. In short, the initial restrictions against federal lobbyists didn't work to foreclose the attempts of those who were seeking to influence the process.

The revised White House policy resolves this shortcoming by closing the "unregistered lobbyist loophole." This will be accomplished by:

(1) Expanding the prohibition against oral communications with agencies regarding the substance of a project to include all persons attempting to influence the process, not just federally registered lobbyists.

(2) Narrowing the prohibition against oral communications to the period after grant applications are submitted and before awards are made. During this period - when concerns about merit-based decision making are most acute - all communications by any person with an agency official must be in writing and must be posted to the agency's Web site.

(3) Continuing the requirement that all permissible communications with federally registered lobbyists be documented and posted to the agency's Web site, except those that concern purely logistical questions or those that occur in the context of a widely attended public event.

Fewer Opportunities to Influence Agency Decisions Requires a More Defined Plan

These new limitations continue to narrow the options available to influence the Recovery Act funds awards process. They again highlight the need to develop a well-considered plan prior to engaging in the process so as to deploy the right tactics and resources in order to maximize the increasingly limited opportunities to influence the process. Organizations involved in outreach with federal government officials in connection with Recovery Act funding and related federal programs will need to be mindful of these new limitations in developing their outreach strategies. Further, organizations should continue to consider the range of ethics, lobbying and related rules that exist at all branches of government and at each level of government (federal, state and local) that affect efforts to influence any governmental action.

Attorneys in Quarles & Brady's Government Affairs Compliance Practice Group are available to assist with the compliance issues arising in connection with public outreach efforts. If you would like additional information regarding how these enhanced restrictions may affect your organization, or information regarding public outreach strategies generally, please contact Jim Friedman at 414-277-5735 / [email protected], Jeff Peelen at 414-277-5773 / [email protected] or your Quarles & Brady attorney.

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