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Enforcement Edge
July 15, 2020

The First Criminal Conviction Under the Lobbying Disclosure Act

Enforcement Edge: Shining Light on Government Enforcement

Yesterday, lobbyist Jack Abramoff pled guilty to violating the registration requirements of the Lobbying Disclosure Act (LDA), 2 USC. § 1606(b), and to an unrelated wire fraud conspiracy concerning the marketing of a new cryptocurrency. This was the first-ever criminal prosecution for violating the LDA, which was previously enforced only through administrative action and civil penalties. Abramoff's personal history may have contributed to the Department of Justice's (DOJ) decision to criminally charge the LDA violation, because that law was amended in 2007 in response to a wide-ranging federal lobbying scandal where Abramoff himself, federal officials, and others were convicted on a variety of public corruption-related charges. Moreover, the LDA may have been selected as a creative way to craft a plea agreement that both the government and Abramoff could accept. That said, given DOJ's newly aggressive enforcement of the Foreign Agents Registration Act (FARA), it is prudent to consider whether this first LDA prosecution may reflect a broader push for transparency about political influence exercised by foreign and domestic agents alike.

First enacted in 1995, the LDA requires organizations employing "lobbyists" to register with the Secretary of the US Senate and the Clerk of the US House of Representatives within 45 days after the earlier of when the lobbyist (1) was retained to make "lobbying contacts" with covered federal executive or legislative branch officials, or (2) in fact makes more than one "lobbying contact," if lobbying activities take up at least 20 percent of that lobbyist's time working for a particular client over a three-month period. (There is an exemption to this requirement if an outside lobbying firm's total income from a client does not exceed $3,000, or if a company with in-house lobbyists does not expend more than $13,000 on lobbying activity during a quarterly period.) The government can bring civil suits under Section 1606(a), with a $200,000 maximum penalty, against anyone who "knowingly fails" to timely remedy a defective filing or otherwise comply with the LDA.

Until now, criminal prosecution under the LDA has not been a DOJ enforcement priority. Indeed, the Federal Sentencing Guidelines, which provide advisory sentences for federal crimes, do not contain a provision related to Section 1606(b). Criminal LDA cases require a showing of  "knowing[] and corrupt[]" non-compliance to trigger a maximum statutory penalty of 5 years, as well as potential fines of up to $250,000. But the Sentencing Guidelines give no express direction to courts, prosecutors, or defendants about what an appropriate LDA sentence should be. (The trial judge in Abramoff's case did not set a date for sentencing, as the government expects Abramoff to testify against the head of the cryptocurrency company, who was separately indicted but has pleaded not guilty.) Given that prosecutors must prove beyond a reasonable doubt that a defendant's LDA non-compliance was accomplished "knowingly and corruptly" (a high standard of proof), that the LDA employs a complicated regime to prompt disclosure obligations (e.g., the 20-percent threshold), and that any potential sentence is uncertain, these considerations would ordinarily cause prosecutors to view civil enforcement as a sufficient remedy.

DOJ charged Abramoff on June 25 by information rather than indictment, and immediately announced his agreement to plead guilty. In addition to charging the separate marketing fraud conspiracy, DOJ alleged that a California-based entity retained Abramoff in March 2017 to lobby for changes to federal marijuana laws, and he then communicated with an unidentified member of Congress about those changes, but never registered under the LDA. DOJ further alleged that in April 2017, Abramoff was retained by an undercover FBI agent posing as a client (in an unspecified industry), and Abramoff then discussed the agent's requested legislative changes with an unidentified member of Congress, again without registering under the LDA. (The allegations are unclear about whether this congressperson was the same one referenced in the marijuana policy allegation.) DOJ also expressly alleged that Abramoff knew about the LDA registration obligations from his past lobbying experiences and the resulting 2007 statutory amendments.

However, the actual plea agreement filed by DOJ ahead of yesterday's hearing paints a more nuanced picture. First, unlike the government's earlier information, Abramoff's plea agreement did not reference any registration failure by Abramoff in connection with the California client or marijuana policy lobbying. Instead, his plea to the LDA charge explicitly cited only his failure to register his lobbying for the undercover FBI agent. The plea agreement also states that while Abramoff spoke to the unidentified congressperson about topics "unrelated to lobbying," he also "discussed topics" meeting the LDA's statutory definition of lobbying. Despite being aware of the need to register as a lobbyist, Abramoff "took affirmative steps not to do so," because he wanted to avoid the public stigma for his client (i.e., the undercover FBI agent) that his involvement could have for the project.

Despite Abramoff's singular reputation, this first-ever LDA prosecution carries broader lessons for companies (and their lobbyists) seeking to persuade federal officials. First, the LDA is a pro-transparency statute, rather than an anti-corruption statute, meaning that the underlying lobbying can be entirely legitimate and lawful—and yet a failure to properly disclose it could be illegal on its own. Indeed, there was no suggestion of public corruption in the plea agreement or DOJ's allegations, and the plea agreement only states that Abramoff avoided registration out of concern for his client's reputation.

Second, affirmative actions to avoid or conceal a registration obligation will make it far easier for the government to prove criminal intent. For all we know, DOJ might not have criminally charged Abramoff if he had simply failed to register, rather than taken "affirmative steps not to" register. The LDA's criminal intent standard of "knowingly and corruptly" typically requires proving that defendants intentionally acted with a wrongful purpose, and good faith compliance efforts are ordinarily a strong defense to such intent. But that defense can evaporate if the government can prove acts of concealment or affirmative avoidance of legal obligations.

Despite the unusual circumstances of this particular case, Abramoff's plea shows that DOJ will aggressively pursue violations of the LDA in cases where prosecutors believe they have clear proof of unlawful intent. Lobbyists, those who employ them, and anyone else seeking to influence public officials should be mindful of the LDA's registration and reporting requirements, and seek out guidance whenever there is any doubt about what those entail.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.