Associations Say Sunshine Too Bright

Trade Groups Complain Ethics Law Mandate to Disclose Membership Is Unfair

Posted November 6, 2007 at 6:10pm

Most of K Street quietly swallowed its medicine two months ago when the president signed a sweeping lobbying reform package into law. But that doesn’t mean it’s too late to put up a fuss.

A little-noticed section in the bill is stirring new concerns among trade association officials. And as Congressional bookkeepers prepare disclosure forms and guidance that will determine the measure’s scope, some downtown are going as far as to threaten a lawsuit challenging its constitutionality.

At issue is a piece of the bill aimed at requiring new disclosures for “stealth lobbying coalitions” — those shadowy groups with seemingly harmless names that spring up to lobby while refusing to disclose who is behind them.

The new law requires the coalitions to disclose any organization that contributes at least $5,000 per quarter and actively participates in shaping the lobbying campaign.

But unlike earlier Democratic proposals, the language of the final reform package does not exempt established trade associations from the rule — which means they could be forced to disclose their members as well.

“We’ve been talking to a lot of associations about this and it’s a big concern,” said Jim Clarke, of the American Society of Association Executives. He said his group was waiting for guidance — expected in about a month — from the Secretary of the Senate and the Clerk of the House, the offices developing disclosure forms to conform with new requirements in the law.

If the forms require new disclosures from trade groups, Clarke said his group and others likely will push for a legislative fix.

Another trade association is poised to go a step further. Hank Cox, a spokesman for the National Association of Manufacturers, confirmed the group is considering filing suit to challenge the law if it ropes in registered associations.

The argument is that trade associations, organized under section 501(c)(6) of the tax code, already face regulations and reporting requirements from the Internal Revenue Service. There is no need to slap a new set of transparency standards on the groups, association officials said.

Indeed, they contend that forcing legal groups to name members who want to stay anonymous could constitute a violation of First Amendment protections for free assembly.

“These are real entities with real tax forms they file, and are highly regulated by the Internal Revenue Code, as opposed to ad hoc coalitions that fall off the radar screen. There is a basis to distinguish between them,” said Ki Hong, an ethics compliance expert with Skadden, Arps, Slate, Meagher & Flom.

NAM and other trade associations are planning to send a letter this week to the House Clerk and Secretary of the Senate outlining their proposed guidelines. But that effort, and others from private groups, are not likely to make much of an impact.

Pam Gavin, superintendent of the Senate Office of Public Records, indicated Congressional officials will not heed appeals from outside groups as an executive branch agency would in a rulemaking process.

“Frankly, we don’t do rulemaking the way the executive branch does because we’re not them,” she said. “The only thing I can really tell you is that the guidance is coming and there will be ample time to digest the nature of the change.”

House and Senate Democrats last year offered a reform package that included shining new light on stealth coalitions, but that provision exempted all 501(c) groups.

Likewise, Rep. Lloyd Doggett (D-Texas), who first began pressing for new disclosures from the groups in 2002 after witnessing a parade of them lobbying the Ways and Means Committee, left established groups out of a disclosure bill he wrote.

In February, amid evidence that some stealth coalitions were registering as 501(c) groups to avoid the pending disclosure, Doggett said he was fine with the development, since the trade associations were at least becoming legal entities.

The bill that passed the House in May included Doggett’s exemption for 501(c) groups, but Congressional leaders, who skipped a formal conference process to hammer out the final bill behind closed doors, ended up using the broader Senate approach.

“Disclosure is beneficial,” said a staffer for Homeland Security and Governmental Affairs Chairman Joe Lieberman (ID-Conn.), whose panel handled the disclosure portion of the bill. “It doesn’t matter whether the group is ad hoc or established, it’s important to have the information out there.”

The new reform law does provide some exemptions. Groups already listing their members online would simply need to report the Web page with that information. And individual donors don’t need to be disclosed.

But a section-by-section analysis Sen. Dianne Feinstein (D-Calif.) inserted into the Congressional Record the day the final ethics bill passed construed the provision even more narrowly.

“The bill closes a loophole that has allowed so-called ‘stealth coalitions,’ often with innocuous-sounding names, to operate without identifying the interests engaged in the lobbying activities,” it reads. It makes no mention of new disclosures from trade associations.

“There doesn’t seem to be much reason for well-known and highly respected associations and nonprofit organizations to be classified as ‘stealth coalitions’ with ‘innocuous-sounding names’ and have their First Amendment rights challenged in this manner,” said Jeff Altman, a lawyer at McKenna Long & Aldridge who advises trade associations on compliance with the law.

“I think the lobbying community really wants to work with Congress to make these rules workable, so I hope we can enter into a meaningful dialogue and end up with a good result,” he said.