89.04

OPINION NO. 89-4

A request has been presented by a lobbyist who has several registrations covering both executive branch and legislative branch activities, concerning whether the lobbyist may be paid a referral fee from a former client in connection with its securing of State business possibly in part as a result of the individual's lobbying efforts. The request relates to a potential fee that is not being pursued, and the specific situation is therefore now moot. Since the situation is one that could be presented in the general lobbying context, however, we issue this Opinion as general guidance for lobbyists and their employers. We advise that generally the acceptance of a referral fee or other compensation contingent on the receipt of executive business by a client would not be barred by §5-104 of the Public Ethics Law (Article 40A, §5-104, Annotated Code of Maryland, the Ethics Law). However, any executive branch work and compensation must be clearly distinguishable from legislative activities, and this separation must be able to be clearly documented and properly justified in both form and substance.1

Section 5-104 of the Ethics Law prohibits a person from being "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." We considered this provision recently in our Opinion No. 88-13, concluding there that compensation is calculated on an accrual basis and that the fact that payment was outstanding did not mean there was no compensation during a particular reporting period. We particularly considered in Opinion No. 88-13 the question of a future retainer fee, and concluded that such a fee could be viewed as compensation, reward, benefit or value to be transferred for past services rendered. In that Opinion we advised that where the compensation was contingent upon the successful conclusion of legislative action, then it would be barred by §5-104 of the Law.2

Generally, then, a person can be a registrant or required to be a registrant based on legislative activities and the anticipation of future payment if that payment meets the statutory criteria and if the activities otherwise come within the statute. Also, it is possible that receipt of a future retainer or other fee could be viewed as compensation for activities in connection with that registration. The statute does not, however, bar receipt of contingent compensation as to purely executive action where this is clearly unrelated in substance and in compensation justification to legislative matters.

Thus it is possible that a lobbyist could be registered only to engage in activities to influence executive action and (without violating the Ethics Law) receive compensation that is contingent upon the taking of executive action favorable to the client. Lobbyists should note, however, that where a lobbyist is registered to engage in both legislative and executive branch activity, and is in fact active in the legislative action area, or where the subject matter of the executive branch action is in any way subject to legislative review or activity, the burden of justifying a contingent fee arrangement based on a distinction between the legislative and executive activities will be substantial.

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

Date: April 20, 1989

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1 We want to make it clear that this Opinion deals strictly and specifically with the application of the Ethics Law, particularly its prohibition against lobbying for contingent compensation. This Commission does not undertake to address or comment in any way on other questions that could arise, for example, under § 7-221 of the State Finance Article, the State procurement laws and regulations, or other provisions of State law.

2 The Ethics Law defines legislative action to mean the "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."