The Washington Post reported yesterday on new lobbyist regulations being proposed by the American League of Lobbyists. According to the report, ALL recommends eliminating the 20 percent loophole for lobbyists for hire. That would mean powerful stealth lobbyists like Tom Daschle, Newt Gingrich and Jon Corzine would have to register. ALL’s proposal would reduce the size of the loophole for in-house lobbyists, but just barely. It would allow lobbyists who work in-house to fly under the radar by claiming they spent less than 15 percent of their time lobbying. Sunlight has been advocating closing the 20 percent loophole for all lobbyists since before it was cool.

Sunlight’s position is simple. If you lobby, and you are paid to lobby, you should register to lobby. Twenty percent, fifteen percent, in house or not, it makes no difference.

Any carve out will be exploited, giving power players a way to hide their activities. Take Chris Dodd. The head of the Motion Picture Association of America is a former powerful senator who undoubtedly has the private numbers of many current members of Congress programmed into his cell phone. He’s not registered now, and there is no reason to think he would register simply because the threshold was lowered from 20 to 15 percent. Yet he has far more access and far more power than I, an outside lobbyist consultant to Sunlight, or the vast majority of lobbyists-for-hire could hope to have. Why give him a pass?

ALL is not the only group with a proposal to reform lobbying. The American Bar Association has a set of recommendations (that includes eliminating the 20 percent loophole, among other things), as of course, does Sunlight. Lobbying reform legislation has been introduced in Congress, and the President continues to talk about the issue. With all of the suggestions, ideas and competing (and overlapping) proposals, the time is ripe for Congress to take the issue of lobbying reform seriously. A start would be to hold hearings so that advocates could fully explain their positions and members of Congress could start to build a record and build a consensus for meaningful reform.

MPAA head lobbyist Chris Dodd threatened Congress and the President last week, suggesting that lawmakers should remember that they've been bought, and that if they want to continue to enjoy their piece of the entertainment industry's largesse, they should mind their leash:

"Candidly, those who count on quote 'Hollywood' for support need to understand that this industry is watching very carefully who's going to stand up for them when their job is at stake," Dodd told Fox News. "Don't ask me to write a check for you when you think your job is at risk and then don't pay any attention to me when my job is at stake."

The corruption here is blatant -- Chris Dodd thinks that his industry's contributions should be able to purchase congressional results. This isn't just money in politics buying access, or systemic corruption, or some theoretical statistical link -- Chris Dodd is threatening the Congress with his industry money.

That money buys votes and affects public policy is nothing new. Boehner wasn't handing out tobacco industry checks on the House Floor in 1995 as party favors, after all. But donors' influence over specific public policy decisions are usually left unspoken, or at least not publicly aired. Chris Dodd's sense of influence entitlement has strayed outside the bounds of normal Washington discourse, and perhaps thankfully so. Dodd is doing a fantastic time of demonstrating everything that's wrong with the system.

On top of the sweetheart mortgage treatment Dodd enjoyed as Senator, he parlayed his position as former Senator to become head of the MPAA, where his connections won him a high salary and influential position. His public pledge to forswear lobbying and related revolving door restrictions weren't even a speed bump on Dodd's path through the revolving door, since directing a team of lobbyists and managing political contributions don't count as lobbying under the law. (Common sense, of course, dictates otherwise -- he's a lobbyist.) Cashing in on connections is often par for the course, as is avoiding lobbying disclosure -- both are de rigueur for former Members of Congress looking for lucrative careers.

But as MPAA head Dodd's signature legislative effort (SOPA and PIPA) ran off the rails, Dodd decided to flex his campaign finance muscles, and threatened his former colleagues to get in line.

And that's where things get weird.

Because Senate Democrats have repeatedly told us that they are interested in protecting the integrity of our elections, and that public service and representation should be protected from the undue influence of money in politics. In fact, here's Senator Chris Dodd, talking about the Citizens United decision:

 "If corporations -- foreign as well as domestic -- are allowed even greater and more direct influence over our elections, our democracy as we know it will cease to exist. I won't stand for that. I urge my colleagues, and the American people, to join me in defense of democracy by supporting this amendment and other interim steps to mitigate the damage done by this decision."

Senator Dodd was concerned about corporations having greater direct influence over our elections, but as MPAA head, Dodd feels empowered to dictate public policy to elected representatives, and strongarm them into passing it.

But this shouldn't be awkward just for Dodd.

In his remarks, he's both threatening and imploring his former colleagues to stay on his side, and to understand that it's his job on the line. In other words, we paid you off, and if you want more industry money, you better toe the line. And by the way, we're friends.

This should be extraordinarily awkward for the rest of the Senate, and especially Dodd's colleagues.  Remember, Dodd was first elected to the Senate in 1980, and had various leadership and committee positions throughout his career. This isn't a one off backbench house Member. If a Senator with three decades of tenure behind him can do an about face and use campaign cash to dictate public policy, what about the rest of the Senate?

It's shocking to see Senators who usually rail against money in politics ignore the public threats from their former colleague. I haven't seen any public response at all from sitting Senators, while the public perception of the institution is taking yet another hit. While a public White House petition is calling for an investigation of Dodd, the rest of the Senate (and House) have just quietly ignored his threats, at least in public.

That shouldn't be enough. If the former colleague of all these Democratic Senators is going to accuse them of being bought, and threaten to withhold support, the least they can do is deny the influence of the MPAA's money on their actions. If it's not okay to publicly bully Congress with industry money, then somebody should say so.

And if we don't act, this is only going to get worse. All these outside influencers now have tools at their disposal to credibly threaten to spend tens or hundreds of millions of dollars supporting or opposing candidates, while covering their tracks, if they so choose. If a Senator who has publicly committed to protecting the integrity of representation is willing to bully Members with his industry cash, we can expect this is just a small piece of the action.

We should pass lobbying reform, get real disclosure for super PACs, strengthen ethics enforcement bodies, and follow the money as best we can. And maybe we should be glad when the influential have such hubris that they tell us what they're really up to.

About that black bar...

If you're reading this post on our website, you might have noticed the black bar covering our logo. It's there as an expression of solidarity with those opposing the Stop Online Piracy Act (SOPA).

SOPA is designed to protect the interests of intellectual property rightsholders more vigorously. Whether or not that's a wise or necessary course of action isn't for Sunlight to say--that's not our mission. But we can say that this bill poses a serious threat to the freedom of online speech. And that's a problem--for an organization that relies on the internet as much as we do, it's a big problem.

It's simply not acceptable for the government to grant itself the power to silence individuals and organizations without appropriate due process. Making this possible would be a mistake under any circumstances; that this extreme threat to free speech is being considered simply to protect an industry's bottom line is outrageous--as is the money that that industry has been spending on the politicians who are trying to pass SOPA into law.

The Sunlight Foundation joined ten organizations today in expressing concern over a provision of the Wall Street Reform and Consumer Protection Act that may hinder the public’s access to SEC oversight information. The full text of the letter and list of signatories is below and on POGO's website. I wrote about Sunlight’s concerns on Sunday, which focus on FOIA exemptions and subpoena compliance carve-outs.

Thus far, two bills have been introduced in Congress to respond to the perceived lack of transparency in the FinReg bill.

First, Representative Paul introduced HR 5970,  which focuses specifically on undoing section 929I, which contains the provision in question.

Second, Reps. Issa, Towns, and Bachus introduced HR 6038, which establishes data standards for a wide variety of entities affected by the FinReg bill.

August 3, 2010

Senator Christopher Dodd Chairman Senate Committee on Banking, Housing and Urban Affairs 534 Dirksen Senate Office Building Washington, D.C. 20510

Representative Barney Frank Chairman House Committee on Financial Services 2129 Rayburn House Office Building Washington, D.C. 20515

Dear Chairmen Dodd and Frank:

We, the undersigned organizations concerned with government accountability and transparency, are writing to express our concerns about Section 929I of the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). If interpreted broadly, this provision has the potential to severely hinder the public’s ability to access critical information related to the oversight activities of the Securities and Exchange Commission (SEC), thereby undermining the bill’s overarching goals of more transparency and accountability.

As you know, Section 929I states that the SEC cannot be compelled to disclose records or other information obtained from its registered entities—including entities such as hedge funds, private equity funds, and venture capital funds that will now be regulated by the SEC—if this information is used for “surveillance, risk assessments, or other regulatory and oversight activities” outlined in the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Investment Advisers Act of 1940.[1]

SEC Chairman Mary Schapiro wrote to you last week defending this provision. She argued that registered entities need to be able to provide the SEC with access to sensitive or proprietary information “without concern that the information will later be made public.” She further explained that, prior to the passage of the Dodd-Frank Act, “regulated entities not infrequently refused to provide Commission examiners with sensitive information due to their fears that it ultimately would be disclosed publicly.” She also claimed that investment advisers routinely refuse to turn over personal trading records of investment management personnel, “instead requiring staff to review hard copies of the records on the adviser’s premises,” which “materially impacts the staff’s ability to detect insider trading activity.”[2]

These arguments do not adequately describe the SEC’s existing regulatory authority, and they fail to acknowledge that the Freedom of Information Act (FOIA) already provides sufficient exemptions to protect against the release of sensitive and proprietary information. Furthermore, the SEC has a troubling history of being overly aggressive in withholding records from the public. For these reasons, we strongly urge you to repeal Section 929I, or to at least curtail the SEC’s broad authority to withhold critical information from the public.

First, we are not convinced by Chairman Schapiro’s claim that “existing FOIA exemptions were insufficient to allay concerns [about public disclosure] due in part to limitations in FOIA.” For instance, Exemption 8 protects matters that are “contained in or related to examination, operating, or condition reports prepared by, on behalf of, or for the use of an agency responsible for the regulation or supervision of financial institutions.” Chairman Schapiro argues that this exemption may not apply to all registrants, but it’s worth noting that the courts have broadly construed the term “financial institutions,” holding that it is not limited to depository institutions and can also include investment advisers.[3] In addition, Exemption 4 protects “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” The Department of Justice’s (DOJ) FOIA guide states that this exemption “encourages submitters to voluntarily furnish useful commercial or financial information to the government and it correspondingly provides the government with an assurance that such information will be reliable,”[4] calling into question Chairman Schapiro’s claim that additional exemptions are needed in order for the SEC to collect information from its registered entities.

Second, the SEC’s track record with FOIA raises additional concerns about giving the agency even more authority to withhold information from the public. Last year, an audit conducted by the SEC Office of Inspector General (OIG) uncovered a wide range of problems related to the SEC’s FOIA operations. We were particularly troubled by the OIG’s finding that the SEC Chief FOIA Officer was not operating in compliance with Executive Order 13392 or the OPEN Government Act; that few FOIA liaisons have written policies and procedures for processing FOIA requests, increasing the risk that the agency is unnecessarily withholding information from the public; and that there is an insufficient separation between the initial FOIA determination and the appeal process. The OIG concluded that the SEC’s FOIA release rate was “significantly lower when compared to all other federal agencies.”[5]

The OIG put forth a number of recommendations for correcting the glaring deficiencies in the SEC’s FOIA operations, such as ensuring that accurate searches are made for responsive information, providing guidelines or written policies for all FOIA-related staff that address the concerns raised by the OIG, and ensuring that all FOIA-related staff has access to sufficient legal expertise to process requests in compliance with FOIA. But according to the OIG’s most recent semiannual report to Congress, the SEC has not completed final action on any of these recommendations.[6] Rather than giving the SEC any more leeway to improperly withhold information from the public, we urge you to hold Chairman Schapiro accountable for the excessive delays in implementing the OIG’s recommendations.

Third, we notice that Chairman Schapiro is “asking the Commission to issue and publish on our website guidance to our staff that ensures [Section 929I] is used only as it was intended.” The solution for addressing the uncertainty surrounding this provision is not additional guidance. The solution is clarification in the law that public access is vital to accountability and that the existing FOIA exemptions can adequately protect confidential business information provided by regulated entities.

Fourth, Chairman Schapiro neglected to mention that the SEC already has the authority to compel registered entities to provide information and records. Under the Securities Exchange Act of 1934, the SEC has the authority to subpoena witnesses and require the production of any records from its registered entities. If these entities fail to comply, the SEC has the authority to suspend these entities, impose significant monetary penalties, and refer cases to DOJ for possible criminal proceedings.[7] But instead of using these existing authorities, Chairman Schapiro seems to think that Congress needs to provide blanket FOIA exemptions in order to convince the SEC’s registered entities to cooperate. We think such a blanket exemption fosters an environment that defers to the entities it regulates and is unadvisable.

Finally, it is unclear what Chairman Schapiro’s plans are for implementing other blanket FOIA exemptions in the Dodd-Frank Act, such as Section 404, which exempts the SEC from FOIA with respect to any “report, document, record, or information” received from investment advisers to private funds.

In the aftermath of the recent financial crisis, the need for greater transparency in our financial system is all too apparent. The SEC’s ongoing effort to withhold vital records from the public undermines the spirit of the transparency reforms in the Dodd-Frank Act, and flies in the face of President Obama’s guidance instructing agencies to adopt a “presumption in favor of disclosure, in order to renew their commitment to the principles embodied in FOIA, and to usher in a new era of open Government.”[8]

We call on you to repeal the unnecessary FOIA exemption in Section 929I, examine the SEC’s current record on withholding information, and take whatever steps are necessary to ensure that the SEC isn’t given any additional authority to keep its records under a veil of secrecy. We welcome an opportunity to discuss this issue with you further. To reach our groups, you or your staff may contact Angela Canterbury at the Project On Government Oversight at [redacted] or [redacted].

Sincerely,

American Library Association American Association of Law Libraries Citizens for Ethics and Responsibility in Washington (CREW) Essential Information Government Accountability Project (GAP) Liberty Coalition OMB Watch OpenTheGovernment.org Project On Government Oversight (POGO) Public Citizen Sunlight Foundation

cc: Senator Patrick Leahy

[1] “Dodd-Frank Wall Street Reform and Consumer Protection Act,” Pub. L. No. 111-203, Section 929I. http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h4173enr.txt.pdf (Downloaded August 2, 2010) [2] Letter from SEC Chairman Mary Schapiro to Representative Barney Frank and Senator Christopher Dodd, July 30, 2010. http://voices.washingtonpost.com/market-cop/frank.pdf and http://voices.washingtonpost.com/market-cop/dodd.pdf (Downloaded August 2, 2010) [3] Department of Justice, “Exemption 8,” Freedom of Information Act Guide, May 2004. http://www.justice.gov/oip/exemption8.htm (Downloaded August 2, 2010) [4] Department of Justice, “Exemption 4,” Freedom of Information Act Guide, May 2004. http://www.justice.gov/oip/exemption4.htm (Downloaded August 2, 2010) [5] Securities and Exchange Commission, Office of Inspector General, Review of the SEC’s Compliance with the Freedom of Information Act (Report No. 465), September 25, 2009. http://www.sec-oig.gov/Reports/AuditsInspections/2009/465.pdf (Downloaded August 2, 2010) [6] Securities and Exchange Commission, Office of Inspector General, Semiannual Report to Congress: October 1, 2009 – March 31, 2010, pp. 98-99. http://www.sec-oig.gov/Reports/Semiannual/2010/semiapr10.pdf (Downloaded August 2, 2010) [7] Securities Exchange Act of 1934, Section 21(b) - (d), Section 32. http://www.sec.gov/about/laws/sea34.pdf (Downloaded August 2, 2010). [8] “Memorandum of January 21, 2009 – Freedom of Information Act,” Federal Register, Vol. 74, No. 15, January 26, 2009. http://edocket.access.gpo.gov/2009/pdf/E9-1773.pdf (Downloaded August 2, 2010)

As news spreads that a consensus Wall Street bailout plan is being finalized, and leaders negotiate between proposals submitted from the Treasury Department, Senator Dodd, Representative Barney Frank, and others, two separate conversations are taking place. One is public, as the nation struggles to evaluate the urgency of the economic situation, and to understand the best course of action.  The other, however, is not public, as the compromises and deal making -- the real stuff of urgent policy-making -- are held in the dark.

The Sunlight Foundation is calling on Congress to publish the proposed bailout legislation as soon as possible, to give constituents and lawmakers themselves as much time as possible to examine the specifics of the proposal before it's voted on.  We will post the draft legislation to PublicMarkup.org as soon as possible, to give citizens a chance to weigh in on the proposal's specifics.

Congress faces urgent pressure from the Administration and from constituents to act. Regardless of the course of action Congress ultimately chooses, this is a decision that must be made in full public view. If citizens don't have a chance to evaluate the legislation, how can Congress possibly represent their constituents' needs?

The need for sunlight is especially required for urgent or emergency legislation. All too often, Congress praises transparency as a democratic value, but violates it in practice. Any lack of transparency in consideration of this legislation would be especially ironic since lawmakers have blamed the current crisis on financial malfeasance that was hidden from public view.

We have called the relevant congressional committees and have asked for copies of the new consensus legislation.  As soon we get it, we'll be posting the text of the legislation online at PublicMarkup.org.

Now more than ever,  Congress must represent the needs of all Americans, and to give everyone - citizens and lawmakers alike -- a chance to participate actively in the legislative process.

Before the bailout proposal is considered by lawmakers, it must undergo an even more important test: evaluation and assessment by the public.