Companies that have a robust government affairs operation will have an interest in how the U.S. Supreme Court decides a case it heard last month on who is, and isn’t, a government employee for purposes of influencing policy decisions.
In Percoco v. United States, a company contracted with a former governor’s aide to influence an agency contracting decision while the aide was working to reelect his former boss.
Although the lobbyist was in the private sector when hired, he continued to have access to his former government office and its support functions, blurring the distinction between his public and private sector roles.
Government prosecutors during oral arguments before the top court offered up a test to provide clarity on influencers’ status when they’re straddling the two worlds. But given the line of questioning justices pursued, they appeared to struggle with how realistic creating a bright-line test could be.
“If I’m a person paying the individual, how do I know whether or not they’re still exercising authority or they’re just influencing authority?” Alison Anderson of Boies Schiller Flexner and a former federal prosecutor told Legal Dive.
Knowing the status of a lobbyist you hire is crucial because it amounts to corruption if you seek to influence a decision by paying a fee to someone who’s in the government.
“The company might find itself in the uncomfortable position that, if they’re paying this person to accomplish a certain goal and that person is found to be a de-facto or a functional government employee or official, then they just paid a bribe,” said Anderson.
The revolving door between the public and private sectors makes ambiguous situations like the one in Percoco not as rare as it might seem.
“It happens all the time at the state level,” said Anderson. “Every time an administration is in office, they have all their people, then they leave office or … somebody leaves office so they can go campaign and at that time they take money to get something done.”
It’s not clear how the justices will come down on the matter but there’s plenty of case law they can look at about agency and what it means to be acting as a government employee.
“They may turn to that and try to use that to help define this honest services fraud,” Anderson said.
Vetting process
For in-house counsel, no matter how the court rules, the key is to build in robust due diligence as part of your compliance program.
“You don’t want to find yourself arguing in a courtroom that you didn’t know,” Anderson said. “You want to be far ahead of that.”
Anderson recommends reevaluating how you’re vetting contractors for your government affairs operation.
“What questions are you asking to make sure they’re not even coming close to” crossing that line? she said.
The problem is likely to arise more for small to mid-sized companies because they tend to rely on independent contractors rather than big firms to lobby on their behalf.
“It’s the one-off individuals people are going to have to be careful about,” Anderson said.
The court is likely to announce its decision next year.
