Court Upholds Stealth Lobbying Disclosure

The National Association of Manufacturers' (NAM) legal challenge to the stealth lobbying disclosure provisions in the 2007 lobbying and ethics reform law was rejected by the U.S. District Court for the District of Columbia on April 11. After the U.S. Court of Appeals and the U.S. Supreme Court refused to grant a stay pending appeal, NAM announced it would comply with the law while its appeal proceeds by disclosing members who contributed more than $5,000 toward lobbying in a quarter and have supervision, control, or active participation in NAM's federal lobbying efforts.

NAM filed suit in February 2008, challenging Section 207 of the Honest Leadership and Open Government Act of 2007 (HLOGA) and charging that the disclosure rules violate the group's First Amendment rights, are "vague, overbroad and burdensome," and could result in boycotts, shareholder suits, and other negative public reaction. In an April 11 opinion, the U.S. District Court for the District of Columbia rejected these arguments, holding that Congress had drafted the law to address a compelling need to stop corruption and that the law is narrowly tailored to meet that goal.

On April 18, Judge Colleen Kollar-Kotelly denied NAM's request for a stay of her decision. Her opinion noted Congress's intent to bring transparency to stealth coalitions with misleading names, such as "The Coalition: Americans Working for Real Change," which represents pharmaceutical companies. Her ruling was upheld by the U.S. Court of Appeals for the District of Columbia, which denied a stay and said NAM did not meet the narrow criteria for such relief. On April 21, Chief Justice John Roberts of the U.S. Supreme Court also denied a stay.

Section 207 of HLOGA limits coalition disclosure to non-individuals that contribute $5,000 or more to the lobbying efforts of an organization that meets registration and reporting thresholds under the Lobbying Disclosure Act (LDA) if the entity "actively participates in the planning, supervision or control of such lobbying activities." Disclosure can be made by providing a web address to a site that lists these members. It is not necessary for the coalition to be a legal entity for the disclosure requirement to apply, so ad hoc coalitions are also covered.

NAM had claimed that all 11,000 of its members may be subject to disclosure, since many companies volunteer support for NAM's legislative agenda. However, this was an overly broad reading of the law, as it is unlikely that all 11,000 members actively supervise or control NAM's efforts. On April 23, after the Supreme Court rejected its application of a stay, NAM's blog post admitted as much in announcing it would file the required reports on April 21. The post said that the threshold requirements mean that "our larger member companies will comprise the list, that is, the sample is not representative of the membership." Although NAM will pursue its appeal, it said, "On balance, it makes sense not to complicate things at this point by inviting an enforcement action."

When HLOGA was being considered in Congress, many trade associations and conservatives voiced strong opposition to proposed provisions that would have required disclosure of grassroots lobbying activities. The fight over that provision obscured debate over the stealth lobbying disclosure requirements, although at the last second, a number of organizations voiced opposition to those provisions, too.

Many good government groups have noted the role coalitions play in various lobbying campaigns. Prior to HLOGA, the LDA only required disclosure of the coalition name but not its members — or how much each is paying in to the coalition. Another approach often used is when a company provides the funding for a campaign but gives the money to one lobby firm, which then hires another firm. The second firm may choose to create a coalition with such funds. Prior to HLOGA, only the two lobby firms would need to disclose their activities, but the actual client would remain hidden.

These stealth coalitions have proved very powerful. For example, in 2006, Public Citizen and United for a Fair Economy released a report that showed how 18 families worth a total of $185.5 billion financed and coordinated a 10-year effort to repeal the estate tax, a move that would have collectively netted them a windfall of $71.6 billion. These wealthy families, such as those associated with Wal-Mart, Gallo, Campbell's, and Mars, kept their activities anonymous by using associations to represent them and by forming a massive coalition of business and trade associations dedicated to pushing for estate tax repeal.

As a member of the House Ways and Means Committee, Rep. Lloyd Doggett (D-TX) saw the role of these stealth coalitions in various tax bills. As early as 2002, Doggett spoke out for the need for more disclosure, noting that powerful companies joined with Republicans to keep such disclosure from occurring when the Lobbying Disclosure Act initially passed in 1995. Accordingly, he introduced legislation requiring the disclosure of stealth lobbying. Ultimately, a version of his bill made its way into HLOGA and became law. As soon as HLOGA was enacted, the American Society of Association Executives and others said they would challenge this provision in the courts.

Current enforcement of the stealth lobbying provisions, which are in effect, appears to be questionable. According to an April 29 article in Politico, many stealth coalitions aren't reporting who is funding their lobbying efforts; the article notes that some may be taking advantage of the fact that grassroots lobbying disclosure was dropped from HLOGA. Those coalitions that are reporting are doing so in a circumspect way, burying links to lists of coalition members deep within long disclosure reports. In fact, Politico noted that more information appears in many coalitions' SourceWatch profiles than in lobbying disclosure reports. SourceWatch is a project of the nonprofit Center for Media and Democracy.