Failure to File Discloses Weakness in Law

Posted March 21, 2008 at 5:28pm

The Sheridan Group has earned more than $3.3 million over the past three years lobbying for a handful of disease and anti-poverty groups. By law, all of that work should have been disclosed in semiannual reports to the Secretary of the Senate and the Clerk of the House.

But the firm, founded in 1991 by Tom Sheridan, appears to have stopped filing reports with the Senate midway through 2004 and with the House a year later, according to online lobbying databases maintained by the Secretary of the Senate and House Clerk.

Sheridan’s breach hardly makes the firm a standout. Since the Lobbying Disclosure Act took effect in 1995 — requiring, for the first time, that lobbyists publicly register and file the semiannual disclosures listing their clients and earnings — the Senate Secretary has referred 3,552 potential violations to the U.S. attorney’s office to follow up.

To date, only three cases have resulted in fines, totaling $47,000, according to the U.S. attorney’s office.

Sheridan spokesman Don Meyer said firm officials tried to submit the forms on time but believe technical glitches botched their delivery. He provided Roll Call with the missing reports and said the firm is working with Congressional record-keepers to fix the problem.

Pam Gavin, who runs the Senate Office of Public Records, which oversees compliance with the lobbying disclosure laws, declined to discuss any specific cases.

She said firms that fail to file will receive two notices and a 120-day window to comply. Afterwards, the office forwards cases to the U.S. Attorney’s Office for the District of Columbia, where violators are offered another chance to file before facing up to $50,000 in fines.

But in an interview, Sheridan said the firm received no notices from the Senate Secretary, House Clerk or U.S. attorney, and only realized the problem earlier this year when a prospective client pointed it out.

Now, less than a month from the deadline for the first quarterly reports under the new, beefed-up ethics law, lobbyists are bracing for stiffer penalties and tougher enforcement. Under penalty of perjury, their reports now have to certify that no one in their organization has run afoul of the zero-tolerance Congressional gift ban.

Violators face a maximum civil penalty of $200,000, up from $50,000 under the old law. Even more worrisome is the criminal penalty of up to five years in jail that false filings now carry. To keep lobbyists on their toes, the Government Accountability Office will be conducting random audits of the reports.

Since the lobbying reform legislation was signed into law in September, lobbyists have been fretting that clerical errors could land them behind bars. They’ve been packing into crash courses on compliance and overhauling their internal accounting systems to prepare.

But whether stricter standards will actually result in stricter enforcement is a separate question.

Steven J. Durham, the acting chief of the fraud and public corruption section in the U.S. attorney’s office, indicated prosecutors will be setting a high bar for criminal cases under the law.

“I would expect very few criminal prosecutions under this statute because we need to have evidence that someone not only knowingly failed to comply but also corruptly failed to comply,” he said. “I think we would be looking for what’s underneath. It’s not just a matter of somebody who has failed to file. We dig beneath the surface to find out why someone hasn’t complied. If it’s a matter of negligence, then that’s something not contemplated by the statute.”

He said the office would apply a similar standard to potential gift ban violations: “The question is really quite straightforward. It all comes down to what we can infer about someone’s criminal intent.”

Similarly, Keith Morgan, the top civil enforcement officer in the U.S. attorney’s office, said that for firms that come into compliance “relatively quickly” after receiving notice, “it’s unlikely that we’ll go after them.”

“I’m looking for them to be responsive,” he said. “I want everybody to get their forms in.”

Still, Morgan said, serial delinquents could face trouble. In case of civil fines, his office only needs to prove a willful violation. “I think you have to look at a couple of different cycles,” he said.

Ethics lawyers said they are counseling their clients not to take the goodwill of enforcers for granted and prepare for the worst.

“I know while they can say the bar is high, and I think the bar should be high, any time a prosecutor decides to go after somebody, that high bar goes out the window,” said Cleta Mitchell, a lobbying law expert at Foley & Lardner.

Ken Gross, with Skadden, Arps, Slate, Meagher & Flom, said that while he thinks criminal prosecutions will be limited, “the concern over [the law] is appropriate.”

“These cases never get viewed in a vacuum. They get viewed in the worst possible light when some screw-up has occurred,” he said. “I think most of the cases brought will be civil in nature, but undoubtedly there will be those aggravated circumstances.”

Another new requirement that ethics lawyers find troubling: Twice a year, the Department of Justice has to report to Congress the number of cases it has pursued under the law. “Whether that will place any pressure on the prosecutors to find a few scalps, it’s hard to tell, but the dynamic of it is not good,” Gross said.

Durham said the provision will not impact prosecutors’ decision-making. “One of the things we are obligated to do as prosecutors is to evaluate each situation individually and scrupulously respect the rights of individuals,” he said. “We have to call them as we see them.”

On the civil side, Morgan said his office is still working through a backlog of referrals from the Hill. He said the vast majority of the 3,552 cases his office has received arrived in batches over the past three years. Gavin declined to comment on why more cases weren’t referred in the earlier days of the law. The House Clerk was unavailable for comment.

Morgan said his office in 2006 set up an automated system to generate letters to violators and has sent 1,200 notices since. About 900 cases remain unresolved.

Meanwhile, the GAO has not yet determined what resources it will have available to audit reports or what it will do with those that appear out of line. “We’re still sorting those things out,” GAO spokesman Chuck Young said.