Introduction

Welcome to the December 2024 edition of the Political Law Playbook, and happy holidays from all of us here at Dentons. This edition’s federal coverage includes the Federal Election Commission’s (“FEC”) recent request for comments on a proposed rulemaking to address contributions made through certain types of electronic payments and the Commission’s assessment of a nearly $100,000 fine against a Senate campaign as part of a conciliation agreement reached with the committee for admitted campaign finance violations. This edition also highlights President-Elect Trump’s transition team’s progress on its transition agreements with the federal government. One notable point of contention is the new administration’s ethics pledge’s seeming exclusion of the President-Elect. 

On the state level, Kansas City’s mayor has been accused of evading the city’s gift rules by having a nonprofit pay for his travel expenses. In Arizona, the state’s Court of Appeals upheld what is arguably the most comprehensive election spending transparency law in the country against claims that its donor disclosure scheme violates the First Amendment. In this edition’s East Coast coverage, New Jersey’s election oversight body approved higher contribution limits ahead of the jurisdiction’s 2025 statewide elections, and a former Florida state senator was sentenced in a “ghost candidate” case.

Federal Elections & Campaign Finance

FEC Seeks Public Comments on Proposed Rulemaking to Address Contributions Made Through Untraceable Electronic Payment Methods – In late November, the FEC published a notification of availability seeking public comments on a petition for rulemaking submitted by Texas Attorney General Ken Paxton. The petition asks the Commission to adopt two amendments to its regulations concerning the use of credit cards and prepaid cards to make political contributions. First, the petition requests an amendment to provide that records for contributions made by credit, debit, prepaid, or gift cards must include documentation confirming that a cross-check occurred between the contributor’s self-reported identifying information with the card issuing institution’s own information on the name and billing address of the cardholder. Second, the petition requests an amendment to provide that contributions cannot be accepted from prepaid or gift cards unless the information from those prepaid or gift cards can be cross-checked with the card issuing institution to confirm the name and billing address as required under the previous proposed amendment. The FEC has requested that all comments associated with the petition be submitted by January 27, 2025.

FEC Issues $95K Fine to Senate Campaign Over Campaign Finance Violations – In November, the FEC released a conciliation agreement with John James’ US Senate campaign committee over alleged campaign finance violations. Mr. James ran for US Senate in Michigan in 2020. According to the FEC, the campaign received $578,306.72 in excessive contributions and $9,100 in prohibited corporate contributions. Under federal campaign finance law, excessive contributions must be refunded within 60 days and corporate contributions must be refunded within 30 days. The FEC determined that the $578,306.72 in excessive contributions was refunded between 76 days and 1,293 days after receipt, and the $9,100 in prohibited corporate contributions was refunded between 62 days and 242 days after receipt. Under the conciliation agreement, the committee agreed that it had violated campaign finance law by knowingly accepting the excessive contributions and the prohibited corporate contributions. The committee agreed to a $95,000 civil fine and will have 30 days from the effective date of the agreement to comply.

Senator Paul’s Campaign Committee Draws Questions Regarding European Travel and Event Expenditures – According to recently filed FEC reports, the candidate committee for US Senator Rand Paul (R-KY) spent nearly $50,000 this past summer on hotels, restaurants, and travel services related to a trip to Sweden and Denmark. Expenses reported included $13,627 paid to Stockholm’s five-star Grand Hotel and $7,474 at fine dining restaurants in Stockholm and Copenhagen. While campaign finance law forbids candidates for federal office from using committee funds to pay for personal trips or expenses, and likewise bars political engagement by foreign nationals, a spokesperson for Senator Paul’s office answered questions about the spending by characterizing the costs as permissible fundraising expenses. These recent European expenditures by the Paul campaign follow in the footsteps of other domestic fundraising events the committee has held at various luxury destinations, including multiple 2022-cycle fundraising events held at ski resorts in the western US. 

Federal Lobbying & Ethics

Trump Team Bucks Typical Transition Agreement Process, but Reaches Recent Arrangements with the White House and Department of Justice  – In late November, President-Elect Trump’s transition team signed a memorandum of understanding with the White House. This agreement will allow the incoming administration to begin the presidential transition, enabling it to access resources provided by the federal government, such as personnel and documents belonging to federal agencies. During the campaign, President-Elect Trump’s team ignored an October 1 deadline to enter a memorandum of understanding with the White House. Earlier this month, the Trump team also signed a memorandum of understanding with the Justice Department that will allow for the processing of security clearance requests for presidential nominees. It is not anticipated, however, that the Trump transition organization will enter into a memorandum of understanding with the General Services Administration for the provision of secure office space, government email accounts, financial support, and other public aid associated with the administrative changeover process. Incoming presidents have traditionally signed all three of these agreements to facilitate a smooth transition of power between administrations and to meet the obligations set forth in the Presidential Transition Act, but President-Elect Trump’s team has charted an independent and privately funded path. 

Trump Transition Team Ethics Pledge Silent as to President-Elect – As part of the ongoing transition process underway ahead of the January 20, 2025 inauguration of President-Elect Trump, the Trump transition organization recently submitted an ethics plan guiding the conduct of its members throughout the transition period that is silent as to its application to President-Elect Trump. While the language of the plan and associated pledge aligns with the technical ethical requirements mandated by the Presidential Transition Act, the structure of both documents is unique—when compared to plans developed by past transition entities—in that it makes no specific reference to their applicability to the president-elect. Despite this structural distinction, the plan nevertheless requires transition team members to “avoid both actual and apparent conflicts of interest,” and to “safeguard classified information” and “non-public information and other information that is not readily available to the public.” It also prohibits transition members from being registered federal lobbyists or foreign agents, and restricts those who have participated in lobbying activities in the last year from engaging on transition matters related to their federal advocacy. Each transition team member is likewise required to sign a code of ethical conduct detailing their assent to the overarching plan and a range of specific limitations.

The Courts & Free Speech

US Supreme Court Rejects Challenge to Alaska Campaign Finance Law – In November, the US Supreme Court declined to hear a challenge based on constitutional free speech protections to a voter-approved ballot initiative in Alaska that requires greater public disclosure of certain state political donations. The initiative, called Ballot Measure 2, included a series of changes to Alaska’s campaign-finance laws to address the use of “dark money” in elections. The term “dark money” generally refers to election spending by certain organizations that do not disclose the identity of their donors. The new law requires anyone who contributes $2,000 or more annually to an organization making independent expenditures to support candidates in elections to report their donations within 24 hours or face a penalty of up to $1,000 per day. The measure also requires political donors to report the “true sources” of their contributions, which means that advocacy groups that derive funds from donations, dues, or gifts must disclose who provided them their funding. Additionally, the initiative mandates that groups running television ads to influence elections that receive most of their funding from donors outside Alaska include a disclaimer in capital letters stating that fact for the ad’s entire duration. The case before the US Supreme Court argued that the disclosure requirements violate the rights of donors under the First Amendment. A trial court declined to block the law’s enforcement and the United States Court of Appeals for the Ninth Circuit upheld that ruling, saying the disclosure requirements were “reasonably tailored to the state’s important interests in keeping the public informed.”

Non-Federal Elections & Campaign Finance

Colorado Supreme Court to Hear Ballot Measure Donor Disclosure Case – The Colorado Supreme Court has agreed to consider whether state election officials were allowed to fine a political group for refusing to disclose its donors after it spent millions of dollars on state ballot questions in 2020. In March of this year, the Colorado Court of Appeals held that state elections officials have discretion to consider spending on ballot propositions in the aggregate, instead of just considering spending for each proposition, to determine whether a group meets the threshold for having to disclose donors as an “issue committee” under the state’s constitution. The decision affirmed the Colorado Department of State’s $40,000 fine to the organization at issue, Unite for Colorado, for failing to disclose its donors. In its petition to have the state’s highest court review the appellate decision, Unite for Colorado said the Court of Appeals’ opinion is in direct conflict with an earlier intermediate appellate decision interpreting this standard, conflicts with state law, and creates a confusing standard for political groups. 

Arizona Court of Appeals Upholds Donor Disclosure Law – The Arizona Court of Appeals recently issued an opinion upholding the state’s onerous donor disclosure law approved by voters in 2022, ruling that the framework’s mandated political spending disclosure rules are constitutional. This is just the latest update in the legal fight over the voter-backed campaign finance disclosure law called Proposition 211, which we have covered in previous editions of the Playbook. Proposition 211 requires any person or organization making campaign media expenditures of more than $50,000 to statewide elections or $25,000 to local elections to disclose the original source of any contributions totaling more than $5,000. The legal challenge at issue in this appeal was brought by the advocacy group Center for Arizona Policy and the Arizona Free Enterprise Club. The organizations argued that mandating disclosure of their sources of political spending violates the Arizona Constitution’s protections of free speech, association, privacy, and separation of powers. The suit also included two anonymous donors who alleged they feared harassment and violence if their political giving was disclosed. In its opinion, the three-judge state appellate panel said the claims of the appellants were outweighed by the Arizona Constitution’s intent to compel financial disclosure of groups that seek to influence the results of an election. The judges found that neither organization was able to provide proof of a chilling effect on their political speech, nor that their financial supporters would face harassment and reprisals. The panel similarly reasoned that the anonymous individuals had failed to identify any incident where a donor experienced harassment or retaliation because they donated to a covered organization.

Portland, Oregon City Council Candidate Allegedly Offered Patrons Free Bar Entry in Exchange for Campaign Contributions – On the last Saturday of August, Portland (OR) City Council candidate Ben Hufford allegedly told municipal bargoers waiting in line that they could donate to his campaign in order to forgo paying the bar’s cover charge. Others recall Hufford saying that they could not enter the bar unless they donated to his campaign. Recently released campaign finance records show that Hufford received 170 campaign donations, nearly all of which were $10 or multiples of $10, on the night in question. Hufford claims the bar was hosting a “fundraising event” for him that night at the bar. However, patrons told the Willamette Week that they had never heard of Hufford prior to arriving in line to go into the bar, nor were they aware they were attending a fundraising event. Nothing occurred at the bar that appeared to signal a campaign event, the patrons recalled. Asking for a campaign donation in exchange for free entry to the bar likely violates the state’s campaign finance law, which prohibits a candidate for political office from offering something of value to solicit a donation. The bar’s co-owners stated that they were told by Hufford that he was hosting a “campaign event” at the bar for supporters, but that it was “not aware of the details” of the cover charge offer. Hufford is one of 12 city council candidates who are under investigation by the Oregon Secretary of State for participating in donation-swapping agreements with other candidates, a situation we covered in the October Edition of the Playbook. 

New Jersey Election Law Enforcement Commission Approves Higher Contribution Limits – The New Jersey Election Law Enforcement Commission (“ELEC”) recently approved significant hikes to the state’s campaign contribution limits. In 2025, the limit on contributions to legislative and other non-gubernatorial candidates from individuals, corporations, unions, and some other groups will be raised from $5,200 to $5,500—a more than 5% raise. Maximum allowable donations to municipal party organizations, political committees, and continuing political committees will rise from $14,400 to $15,200, and the latter two types of groups will be permitted to give candidates $17,300 per cycle, up from $16,400. The limit on contributions to state and county party organizations will rise from $75,000 to $79,000, while national party committees will be permitted to give state and county parties $152,000 per cycle, up from $144,000. The adjustments are the first made under the state’s Elections Transparency Act. This 2023 law requires ELEC to index donation caps for inflation every two years.

Pennsylvania Lawmakers Suggest Candidates are Choosing to Pay Late Fee to Avoid Revealing Donors – A recently released Pennsylvania Department of State report showed 66 candidates for the state legislature—including 22 incumbents—missed a deadline for filing campaign finance reports just before the November 5^th general election. Some Pennsylvania lawmakers are alleging that candidates are choosing to pay the $250 late fee—the fee for missing a reporting deadline—in order to avoid revealing their donors. In response, several legislators are calling for a change to the fee structure, including increasing the late fee. State Representative Valerie Gaydos said she intends to file legislation in 2025 that would, among other things, increase late filing penalties and address delays at the Department of State in posting reports when they are received.

Former Florida Senator Sentenced in “Ghost Candidate” Case – A former Republican Florida state senator convicted last month of orchestrating a “ghost candidate” scheme was sentenced in November to 60 days in jail, five years of probation, and 500 hours of community service. Prosecutors alleged that Frank Artiles was the architect of a plan to run and promote a machine parts salesperson named Alexis Rodriguez as a third-party candidate in a 2020 state senate race in order to siphon votes from his Democrat opponent. Rodriguez was allegedly promised $50,000 by Artiles and ultimately garnered more than 6,000 votes. Artiles was found guilty of excessive campaign contributions, conspiracy to commit excessive contributions, and falsely swearing an oath, all felonies that could have carried five-year sentences. 

Non-Federal Lobbying & Ethics

Kansas City Mayor Accused of Evading City Gift Ban by Using Nonprofit to Pay for Travel – New media reports purportedly reveal that Kansas City (MO) Mayor Quinton Lucas and one of his aides allegedly used a nonprofit to fund thousands of dollars in National Football League tickets and travel during the Mayor’s first term in office. The Mayors Corps of Progress for a Greater Kansas City Inc., a nonprofit established 50 years ago to help attract economic development to Kansas City, is not required to disclose its financial information. However, receipts, emails, and other documents obtained by the Missouri Independent appear to illustrate that over the course of Lucas’ first term, the Mayors Corps spent more than $35,000 on Kansas City Chiefs tickets, hotel stays, flights, and dinners. In an interview with The Independent, Lucas defended the spending, saying that the organization allows him to promote the city and that all organizational expenses are open to review by the nonprofit’s board of directors. The Mayors Corps’ most recent filings with the Missouri Secretary of State show that the three-member board includes both Lucas and his former Chief of Staff. In February 2023, the Heavy Constructors Association allegedly made a $24,000 donation to the nonprofit. The donation, which was very close to the cost of Lucas and his aide’s Super Bowl trip that same month, has been referenced in media reports as a potential means to circumvent Kansas City’s ordinance barring elected officials from accepting gifts valued at more than $200.

Montana Auditors Say State’s System of Tracking Lobbyists Is Broken – A new report by the Montana Legislative Audit Division showed that the state tracks lobbyists using a cumbersome and outdated two-database system that is difficult to use and likely inaccurate, and that lobbying reports are submitted so late that they are of little value to anyone seeking to understand who is lobbying for or against certain bills. The audit, which examined the Montana Commissioner of Political Practices, found that the state lags behind most jurisdictions when it comes to tracking lobbyist activity. Furthermore, the audit found that there is no mechanism to check the accuracy of lobbying reports, and that the state’s databases often present and/or contain conflicting or inconsistent information. Additionally, “Montana’s lack of regular required report filings paired with a reporting threshold of $5,000 per month in lobbying expenses means Montanans may learn only after a legislative session has ended which companies or organizations supported or opposed bills or issue areas,” the report said. This, the auditors asserted, renders the reports functionally useless for those wanting to know which lobbyists and companies are testifying for or against particular pieces of legislation. In response to the audit findings, Montana’s Commissioner of Political Practices expressed that he agreed with the report’s major takeaways and supports overarching system improvements.

Policy Watchdog Challenges Georgia Nonprofit Over Lobbyist Filings – Officials from a prominent Georgia nonprofit organization, Frontline Policy Council, have come under fire for allegedly lobbying Georgia elected officials without properly registering with the state. According to a complaint filed by the Southern Poverty Law Center, Frontline’s president and founder, Cole Muzio, has not registered as a lobbyist since 2022 and its general counsel, Chelsea Thompson, has never registered. The complaint cites to photographs, social media posts, and promotional material describing Muzio and Thompson’s efforts to influence legislation, including a section on the organization’s website that describes Muzio as having registered as a lobbyist. The Georgia Government Transparency and Campaign Finance Commission did not immediately respond to media requests for comment on the matter. In response to the allegations, however, Muzio indicated that everything Frontline does is compliant with applicable law and asserted that the complaint was politically motivated.

Minnesota Revolving Door Rule Proposal to Resurface in 2025 – Minnesota State Senator Matt Klein recently announced that he plans to introduce state-level revolving door legislation in 2025. “Revolving door” rules regulate the practice of public officials or government employees becoming lobbyists after leaving their public positions. Roughly half the states in the country have revolving door laws. Minnesota is not currently one of them. The state’s House of Representatives does have a rule barring former members from registering as lobbyists for the first year after leaving office, but the rule only applies to current members. This means that once a member leaves the House, it no longer applies. Senator Klein’s proposed bill would prohibit former legislators from acting or registering as a lobbyist for two years after leaving office. It would also impose a civil fine of $25,000 or the former legislator’s payment as a salary, whichever is less.

Florida Commission on Ethics to Wait for Court Ruling on Challenge to New Financial Disclosure Requirement – The Florida Commission on Ethics recently rejected a proposal to begin discussing a settlement with attorneys for 26 cities and 74 public officials who sued the state in February regarding its new financial disclosure standard. Earlier this year, a federal judge issued a preliminary injunction against a 2023 Florida law that would have required the state’s mayors and city council members to disclose their finances for the first time. The group of more than 170 city and town officials who filed suit claimed the law violated the First Amendment and could discourage residents from running for local office. Prior to the injunction being issued, 125 municipal elected officials had quit rather than submit the financial disclosures. At a meeting in November, the Commissioners had a lengthy discussion on the merits of reaching out to the plaintiffs in a bid to find a middle ground on disclosure that the Florida legislature could enact, but the proposal was rejected in a six-to-two vote by the panel. 

Richmond, VA’s Top Election Official Resigns After Reports Show Numerous Ethics Violations – The Richmond Electoral Board recently voted to accept the resignation of Registrar Keith Balmer after two separate investigations found evidence of alleged nepotism, overspending, and procurement violations. The week before Balmer’s resignation, Virginia Inspector General James Osuna released a report that was critical of how Balmer and his deputy were running the election office. The report faulted the election office for improper uses of city-issued purchasing cards, overspending on decor for the election office, inappropriately buying a handgun so a temporary worker could act as an armed security guard, and spending public money on alcohol. An earlier investigation by Richmond human resources officials found nepotism violations after relatives of Balmer and the Deputy Registrar were either hired to full-time jobs or paid for election-related work. Balmer said he was proud of how his office had run elections but acknowledged “administrative sloppiness.” He disputed some of the allegations leveled against his office, but accepted others as accurately pointing out “mistakes” that happened on his watch.

Practice Pointers

This month’s Practice Pointers serves as a reminder to our readership to be mindful of government gift and ethics laws ahead of upcoming January inaugural events and swearing-in ceremonies at the federal, state, and local levels across the country. Whether your organization is approached about co-hosting or sponsoring an inaugural event, your employees are invited to attend a gathering or reception related to a swearing-in ceremony, or you want to send well wishes to a new public official, gift and ethics laws can pop up in unexpected ways. Compliance with these rules should be a top priority given the highly public nature of these events and occasions. The Dentons Political Law Team regularly advises clients on gift and ethics compliance issues to help minimize the risk of inadvertent noncompliance, so please do not hesitate to reach out if you or your organization has questions.

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