88.13

OPINION NO. 88-13

An opinion has been requested as to whether an arrangement for a future retainer agreement between a law firm lobbyist and a client would be prohibited by the bar in §5-104 of the Public Ethics Law (Article 40A, §5-104, Annotated Code of Maryland, the Ethics Law) against lobbying for contingent compensation, where the future services could be viewed as contingent on the success of lobbying efforts. Based on the information regarding this particular relationship that was available in connection with our review of this request, we advise the firm that the arrangement under consideration would be inconsistent with the lobbying provisions of the Law, if the Firm or its representatives engage in lobbying activities regarding the matter at issue. 1

This request was presented by an individual who is a partner in a law firm (the Law Firm or the Firm). It involves the Law Firm's representation of a manufacturer and seller of helicopters (the Company) that is interested in the State's planned procurement of new medivac helicopters, and related matters. Since the death in 1986 of two medivac pilots, there has been significant legislative and other action, including the establishment of a legislative oversight committee, regarding the State's medivac program and the need for upgrading its helicopter capability. The Legislature took action in 1987 (Ch. 291) to establish a Maryland Emergency Medical Service System Fund, and to provide that $31,000,000 be transferred to it from the Transportation Fund.

These moneys are to be used "only for the procurement of new helicopters and auxiliary helicopter equipment, ground support equipment, and other capital equipment related to the helicopters and for equipment and related improvements to the emergency medical services' communication system." The law provides that expenditures may be made under it pursuant to an appropriation approved by the General Assembly in the annual State budget or by budget amendment, provided that any budget amendment be submitted to and approved by the Legislative Policy Committee. Funds were appropriated in the Department of Transportation's FY1988 budget and are currently available for expenditure without further legislative action. It was also provided that the Request for Proposals (RFP) as to the helicopter equipment was to be reviewed by a legislative committee (though legislative approval was not technically required). This review has been completed and the RFP has been issued, though apparently the Legislature continues to maintain an oversight function as to this program.

During the 1987 Session of the Legislature the Firm registered as a lobbyist to represent the Company. As a potential bidder, the Company was interested in the legislative action necessary to fund and approve the purchase of new helicopters. The Firm's activity reports submitted pursuant to §5-105 of the Law for that period disclose receipt of a small fee, which has been described to us as limited to the set amount regardless of the amount of work undertaken by the Firm in connection with the registration. Since the Firm has represented the Company in the past, it has been suggested that it would serve as counsel to the Company in connection with contract matters should the Company be the successful bidder.

This representation would involve payment by the Company of a flat retainer fee (described as a substantial fee) for performance of local counsel services, for example, in connection with negotiating the details of the contract, and representing the company in the continuing implementation of the contract. The Firm's representative indicates that these services would be necessary as the contract is not simply for the purchase and transfer of equipment. It would involve continuing obligations in areas such as training and repair of the equipment. The fee, however, would be paid regardless of whether services are performed under the agreement.

Neither the Law Firm nor its representative is currently registered on behalf of the Company, but it does have a registered lobbyist. The Firm's representative describes the Firm as counsel to a company seeking a contract, recognizing that in this position it could be involved in bidding on and negotiating the agreement as well as in its implementation. Being retained to implement the contract, however, is contingent upon the Company's being awarded the contract, and it is suggested that this process could involve contact with legislative officials. The question is whether this would be the kind of contingent arrangement that is addressed by §5-104 of the Ethics Law, providing that "a person may not be employed as a registrant for compensation dependent in any manner upon the passage or defeat of any proposed legislation, or upon any other contingency connected with any action of the General Assembly."2

A registrant is any person required to register under §5-103(a) of the Law, which in turn requires registration by a lobbyist, a person who compensates a registrant, or a grass roots lobbyist. Section 1-201(s) defines legislative branch and executive branch lobbyists. A legislative branch lobbyist is a person who appears before an official or employee of the executive or legislative branch with the intent to influence legislative action, and who either receives $500 or more in compensation or spends a defined amount of money. An executive branch lobbyist is a person who spends a certain amount of money on meals, beverages, special events or gifts for officials or employees in the executive branch for the purpose of influencing executive branch action.

The statute defines legislative action very broadly to include introduction, sponsorship, consideration, debate, amendment, passage, defeat, approval, veto, or any other official action or nonaction on any bill, resolution, amendment, nomination, appointment, report, or any other matter pending or proposed in a committee or subcommittee in either house of the General Assembly, or any matter which is within the official jurisdiction of the General Assembly, the Legislative Policy Committee or any committee or subcommittee thereof, or any legislative bill pending or presented to the Governor for signature or veto.

Assuming that the Law Firm does not spend money that would meet the expenditure criteria of the definition, it would not appear to be covered by the executive branch lobbying definition. As to legislative branch lobbying, however, we believe that the Firm probably would come within the criteria of the Law unless it leaves the representation involving the Legislature or legislators completely to the current lobbyist or another lobbyist, and strictly confines its own efforts to the non-lobbying contract action before the executive agency responsible for the procurement.

We emphasize that this division of responsibilities must be very carefully and rigorously made. In interpreting the definition of legislative action, we have generally recognized that it includes almost any matter potentially within the jurisdiction of the Legislature. (See Opinion No. 82-4.) It is therefore our view that as long as the Legislature continues to retain active policy and fiscal review over this program, then it is an item of legislative action. Involvement with members of the Legislature or others as to those aspects of the program in which the Legislature has a continuing interest would therefore bring the registration provisions of the lobbying law into effect.

Moreover, we do not believe that the absence of direct and current monetary payment by the Company to the Firm would necessarily relieve the Firm from coverage of the lobbying law, if the activity of the Firm or its representatives constitutes personal appearances in order to influence legislative action (as discussed above). We have generally said that compensation is calculated on an accrual basis, and that the fact that payment is outstanding does not mean that there is no compensation during a particular reporting period. The registration requirements of the Law can not be avoided simply by agreeing that payment will be delayed until a later time.

Thus, if there is involvement with officials that meets the lobbying activity criteria of the Law, then the promise of the future retainer as described here can be viewed as a compensation, reward, benefit or value to be transferred for services rendered as a registrant. If such an agreement is contingent upon the successful conclusion of some legislative action, then in our view, the prohibition of §5-104 would be violated. Though detailed facts as to the nature of the Legislature's review of the helicopter procurement cannot be known at this time, we believe that this could very well be the situation here. We therefore advise the Firm and its representatives that they should avoid personal communications with and appearances before the members of the Legislature or in the Executive Branch in connection with the legislative aspects of this issue if the Firm anticipates undertaking the retainer agreement as described. They should also take care not to engage in expenditures on meals and other gifts for executive branch officials as to executive matters, as this would require registration as an executive branch lobbyist.

As to the prior registration, we believe, based on the facts as described, that it would not give rise to an issue under the contingent compensation prohibition of the Law. The representative of the Firm indicates that the original registration was for a set hourly rate, and that the suggestion of a later retainer arrangement did not come up until after that lobbying activity had been completed. Though there have been some technical problems regarding the Firm's registration and reports, it would appear that this activity ended as of October 31, 1987 and an activity report covering the period was later submitted. According to the representative, the first discussion of the Firm's being retained to serve as counsel in implementing the contract came about after this date, near the end of December 1987. Under this statement of facts, we would conclude that the retainer contract is not a compensation or benefit transferred in conjunction with services rendered under the first registration.

M. Peter Moser, Chairman
   William J. Evans
   Rev. C. Anthony Muse
   Betty B. Nelson
   Barbara M. Steckel

Date: June 28, 1988

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1 While this request was pending, the particular award was made to a different vendor. The Opinion is issued for the benefit of others who may be similarly situated, even though it is now moot as to this particular requestor.

2 This section of the Law has not previously been the subject of an Opinion. In the course of reviewing the request, Commission staff reviewed approaches of other States with similar laws, including materials from the Oregon Government Ethics Commission and discussions with Connecticut Ethics Commission staff.