90.06

OPINION NO. 90-6

An advisory opinion has been requested regarding whether and how the lobbyist registration and expenditure disclosure provisions of the Public Ethics Law (Article 40A, Title 5, Annotated Code of Maryland, the Ethics Law) apply to various activities of a large corporation (the Corporation) in connection with policy lobbying, marketing, and other relationships with officials and employees in State agencies. We advise the Corporation that whether its activities require registration and reporting under the Law depends on the specific facts involved and their relationship to the purposes of the Law and the statutory language that has evolved over the years.

The Corporation has registered legislative and executive branch lobbyists, and also has substantial business dealings with State government. It has in the past reported a variety of expenses related to legislative lobbying and executive policy lobbying, but has inquired about the impact of other activities of the Corporation and its employees which involve State government directly or indirectly. In connection with its preparation of its lobbying activity reports pursuant to Title 5 of the Law, and coordination of this activity with Commission staff, several categories of expenditures have been identified and further advice has been requested regarding whether they trigger the registration and reporting requirements, and if so how they are to be reported. The categories include:

1) provision of meals and refreshments at local customer seminars;

2) provision of meals and lodging in connection with attendance by officials at seminars or educational activities at a company facility outside of Maryland;

3) provision of meals, receptions and souvenir items in connection with business shows where State officials may be among the attendees;

4) gifts of sports tickets, meals and entertainment in connection with a program directed at disadvantaged youth; and

5) reporting of compensation and other expenses of Corporation sales personnel that may buy meals and beverages for State employees in connection with sales and marketing activities.

The Corporation manufactures equipment purchased by the State, and is one of the largest suppliers of this equipment in the State. The Corporation's Account Executive for the State of Maryland indicates that the company has a centralized office that handles marketing for State government customers. It also maintains in Baltimore a customer center which it uses for a variety of activities. In the area of local customer seminars, for example, he indicates that regular monthly seminars are held to provide educational briefings and carry out other functions, such as new product announcements. The existence of these briefings is included on calendar mail-outs to all customers, and the meetings are open to all. Apparently though marketing staff may encourage persons with whom they deal to participate, the decision to take advantage of the seminar is the customer's. These activities are all non-fee activities, and are likely to include snack refreshments or a lunch if the meeting lasts for a full day.

The customer center is also used to provide more specific and detailed programs that may be directed at particular issues or problems, where the purpose is to enhance the user's ability. Meals and refreshments are provided as in the shorter seminars. The company also provides the customer center for use by "business partners," whose use may involve a variety of arrangements which may include employees of State agencies that are customers of the "business partner." The Corporation itself may also conduct specialized workshops or planning sessions at the Center, which would involve participation by State personnel in agencies with established business and technical relationships with the Corporation. The purpose described for most of these activities is to provide a forum to address issues relating to the use of the equipment and to provide technical training and support. Corporation representatives recognize that such activities present potential for marketing follow-on, but would say that the focus for them is technical.

The Corporation also conducts courses and other programs at locations outside of Maryland. These programs are again offered to all customers on a first come first served basis, and may be at any of several facilities. Where the facility has housing as part of its operation, this housing and meals are offered to participants without charge. The courses themselves may include a fee especially if they involve programming or other technical subjects. Courses are included in a calendar that is provided to branch offices for distribution to customers. Also there may be special courses where marketing teams have the responsibility of notifying customers. In all of these programs participants are responsible for their own transportation. Also, in all cases customers are offered the option to pay these expenses. Apparently, however, the Corporation does not now have a mechanism to keep track of whether State personnel involved in these activities opt to pay for the room and board.

The third issue presented in the request involves provision of minor gifts at business shows. We are advised that the Corporation sponsors some business shows on its own, putting on one such conference annually for each of about 20 different industry segments. These conferences tend to include invitees from throughout the country. It also sponsors annually in Washington, D.C. a conference for institutions of higher education in the mid-Atlantic area. In addition, the company also participates in a variety of ways in about 8 to 10 industry association or similar conferences. An example is the annual August meeting in Ocean City of the Maryland Association of Counties. The Corporation usually has an information booth at this conference and may also have speakers at some of the sessions. It may also be involved in sponsoring some other event involved in the social or entertainment part of the meeting agenda. The arrangement in this situation usually involves the company covering the cost of the event through arrangement directly with the organization.

The Corporation also participates in other events in collaboration with a major league sports activity in providing a sports outing for economically disadvantaged children. This event usually involves in addition to the children, some elected officials who receive box seat tickets to the event, as well as refreshments and limited souvenir gifts. The dignitaries are involved as a recognition of the special occasion for the children involved.

A fifth category of expenditures and activities relates to the Corporation's ongoing sales and marketing relationships with State agencies and employees. These activities involve dealings by the Corporation with State personnel directly in connection with the Corporation's efforts to sell its equipment to the State agency. It is presented as an issue in the context of the registration and reporting requirements of the Ethics Law, because these activities can often involve the purchase by the salespersons of meals and beverages for the State employees in the course of their business dealings.

Assuming that some of the expenditures discussed by the company are allowable gifts to executive branch officials,1 the initial question is whether expenditures in any of the five categories of activities are the type that would trigger the registration requirement of §5-103 of the Ethics Law. This section requires registration by persons who are lobbyists, as well as by persons who spend $500 or more to employ a lobbyist. The definition of lobbyist in §1-201(t) of the Law includes any person who expends a cumulative value of $100 or more during a reporting period on one or more officials or employees in the executive branch for meals, beverages, special events or gifts in connection with or with the purpose of influencing executive action. "Executive action" is defined in subsection (k) as any act taken by a State or public official or employee of the executive branch, for which the executive branch is responsible.

The definition of executive action is broad and many of the expenditures on meals, beverages, special event tickets and souvenirs would clearly seem to be within the categories of gifts intended to trigger the registration and disclosure provisions. The key question presented by the Corporation, then, is how the context of the gift should be viewed as in connection with or with the purpose of influencing executive action. If the activity is designed to influence executive action as contemplated in the Law, then registration and reporting would be required if the cumulative amount spent in a 6-month reporting period on one or more officials exceeded $100. In our view, the primary factor to be considered in evaluating if a particular activity would require registration is whether the focus of the activity is on executive action or on some more general goal, such as community relations, or if it is a more broadly focused activity only indirectly relating to the State.

More specifically, if the State participants are decision-makers or participants in the procurement process, if the marketing aspect of the activity seems to be a significant purpose of the activity, and if the gift is directed specifically to a particular State official, then the activity would likely be viewed as one requiring registration if the Corporation's expenditures meet the statutory threshold. Thus, even though we recognize that in a very general sense all of the Corporation's expenses discussed here may ultimately be aimed at influencing the marketing of its products and services, we believe that the following approach can be taken to the specific categories of activity addressed in the Corporation's request:

1. Large customer seminars having a technical and educational function and attracting a mixture of State and non-State attendees (category 1, in part), business shows with large mixed audiences (category 3), and general corporate citizenship activities (category 4) are generally likely to be too unfocused to be considered as a registration event under the Law.2

2. More focused seminars directed solely at State officials or employees (category 1, in part), out-of-State seminars (category 2), and salesperson gift expenditures for meals in a procurement setting (category 5) would be activities reasonably contemplated by the Law to trigger the registration requirements. In our view, these types of activities would meet the statutory criteria that registration and reporting be required where gifts are being given for the purpose of influencing acts of officials or employees of the executive branch for which the executive branch is responsible. Also, in settings where individual meals and beverages expenditures of a particular salesperson exceed $100 or more during a reporting period, the salesperson would also need to register and report in addition to any other corporate or individual registrations.

As to those activities discussed in paragraph 2 above where registration is required, the remaining issue is what should be reported. The general reporting elements for disclosure are set forth in §5-105 of the Law, and include all expenses in support of the activity, including compensation of the registrant and some routine overhead expenses. These are virtually identical to the expenditures that were required to be reported for legislative lobbyists under the lobbying law in effect prior to enactment of the Public Ethics Law in 1979. However, under the prior law a person required to register as an executive branch lobbyist only had to report gift activity. A review of the available legislative history suggests no reason for this change except for some media reports in 1978 that reference the possibility that this part of the Law might be strengthened. It is our view that the 1979 merger of both legislative and executive reporting requirements into §5-105 reflects the Legislature's intention to streamline and strengthen the language of the Law, but not to radically change the basic historical approach of the statute.

To apply a different interpretation would result in a significant change in operation of the program that does not seem to have been intended or anticipated in view of the absence of any legislative history regarding these issues. If, in fact, once gifts triggering executive lobbying registration are made then all expenditures relating the effort are to be reported and this could be quite difficult for compliance in many instances. For example, reporting could cover salesman's salary, seminar instruction costs, some advertising and a large number of other direct or indirect costs. This would result in very substantial reporting that has never occurred in the history of the program or to our knowledge elsewhere. Moreover, in defining the registration requirements, the 1979 Law continued its emphasis on gift-giving as a basis for including executive branch activities. We therefore believe that, as a general matter, the Law does not intend to cover normal routine sales, service, advertising and marketing expense activities for reporting except as to the gifts themselves.

Thus, as to seminar activities (to the extent that they require registration and are allowable), both in-State and out-of-State (categories 1 and 2), only the value of the event to the participant (such as any meals and beverages, permissible travel and related expenses, and a training fee) would be reported, but not the trainer's compensation, facility upkeep or other direct or indirect costs. Similarly, where the gift consists of meals and beverages incident to a sales or service meeting, only the value of the gift itself would be reported and not the salesperson's compensation, or related marketing, advertising or other expenditures.

It should be noted, however, that this narrow approach to reporting addresses those situations where the activity is clearly in the context of executive branch interaction that is narrowly directed at routine Corporation's sales and service efforts. Where the Corporation is also involved in lobbying higher level executive officials on broad policy matters that impact on procurement or other non-procurement matters, then other non-gift expenses are to be reported for these broader executive branch activities. Also, it should be noted that if the Corporation is involved in lobbying policy, procurement or other matters which are legislative action, but also has executive involvement that it believes is unrelated and where executive gifts are not made, then it is the Corporation's responsibility to justify and document any basis for treating this activity as unrelated executive branch action not requiring registration or reporting. Of course, all expenditures in connection with legislative action must be reported as required by § 5-105 of the Law.

William J. Evans, Chairman
   Robert C. Rice, Ph.D.
   Barbara M. Steckel

Date: May 9, 1990

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1 #032; The provisions of §3-106 of the Law prohibit the solicitation of gifts by officials and employees and also bar the acceptance of gifts from persons or entities that have defined business or other relationships with the individual or his agency (with certain exceptions). We have interpreted this in several prior opinions, and in the interest of focusing the discussion here on the lobbying issues presented, we do not fully address the employee and official acceptance and disclosure questions in the text of this Opinion. The Corporation and others similarly situated, however, should be aware that these provisions apply and that the advice provided here generally does not comment on the conflicts provisions of the Law as they apply to officials and employees. However, the Corporation should be aware of our Opinion No. 81-6 generally restricting out-of-State seminar activity funded by a private donor entity, and No. 81-46 generally prohibiting acceptance by officials and employees of travel and related expenses in connection with procurement matters. Also, the Corporation should be aware that officials are required to disclose gifts with a value of $25 or more or a series of gifts with a cumulative value of $100 from lobbying entities even if the gifts are not made in the lobbying context.

2 Note, however, if the Corporation is otherwise required to register, the requirement in § 5-105(3) that gifts from a registrant to an official or employee that exceed $75 in cumulative value must be reported even if not given in connection with the registrant's lobbying activities.