SPECIAL ETHICS LAW MEMO

TO: State Officials, Employees, and Interested Persons

SUBJECT: Testimonial Fundraising

In 1986 the State Ethics Commission received an opinion from the Attorney General regarding testimonial fundraising. The opinion was requested in order for the Commission to properly advise those covered by the Ethics Law about the gift solicitation, receipt, and disclosure requirements of the Public Ethics Law. Md. Code Ann., State Gov’t §15-102(p) (Supp. 2001) defines gift as the “transfer of anything of economic value regardless of form, without adequate and lawful consideration.” A gift does not include the solicitation, acceptance, receipt, or regulation of political campaign contributions regulated in accordance with the provisions of Article 33 of the Md. Code or any other provision of State law regulating the conduct of elections or the receipt of political campaign contributions.

In his Opinion (71 Opinions of Attorney General, 1986), the Attorney General concluded that funds provided to an official as a result of a testimonial are not a gift if the testimonial is for the purpose of raising funds for a future or past election campaign. If funds are for these election purposes, their receipt, disclosure and use is governed by the election law. The opinion lists criteria to be considered in evaluating whether the testimonial is for campaign purposes. The Ethics Commission determined that if the funds are not for the campaign purposes outlined in the Attorney General's opinion, they are gifts as defined in the Ethics Law, and the various provisions of the Ethics Law applicable to gifts govern based on the particular facts in each situation. This general concept was further discussed in Ethics Commission Opinion No. 93-5 barring certain fundraising for litigation purposes. The Attorney General's Opinion and the State Ethics Commission's views are based on the fact that the Ethics Law and the Election Law are intended to work together so as not to leave gaps regarding the solicitation or acceptance of gifts. Specifically, the following Ethics Law provisions now apply to non-election related testimonials:

1. Section 15-505(a)(1), prohibits officials or employees from soliciting any gift. This is further supplemented by §15-505(a)(2), which specifically prohibits officials from direct or indirect solicitation of individual regulated lobbyists even on behalf of another person or entity (including, for example, on behalf of non-profit entities).

2. Section 15-713, prohibits regulated lobbyists from making certain gifts to officials and employees, and it bars a lobbyist from making a gift directly or indirectly as a result of a prohibited solicitation.

3. Section 15-505(b), generally prohibits an official or employee from knowingly accepting any gift (with certain limited exceptions) directly or indirectly from any person whom the official or employee knows or has reason to know:

(a) Is doing or seeking to do business of any kind with his agency;

(b) Is engaged in activities that are regulated or controlled by his agency;

(c) Has financial interests that may be substantially and materially affected in a manner distinguishable from the public generally by the performance or non-performance of the official’s or employee’s official duties; or

(d) Is a regulated lobbyist with respect to matters within the jurisdiction of the official or employee.

There are certain exceptions to the general prohibition but testimonial donations are not a listed exception.

4. Section 15-607(e), requires, as part of an official's annual financial disclosure statement, that gifts in excess of $20, or a series of gifts totaling $100 be disclosed if received by the person making the statement (or by another person at the direction of the person making the statement) where the gifts are directly or indirectly from persons doing business with the State, regulated by the State or a regulated lobbyist.

5. The lobbying provisions of the Public Ethics Law (Subtitle 7) require registration and reporting when certain expenditures are made on gifts to officials and employees and the donor is involved in influencing executive or legislative action. The lobbying provisions also prohibit a lobbyist from making a gift that he law prohibits the recipient from accepting. (See #2 above).

In summary, when a testimonial is held and it cannot be demonstrated that it is for the purpose of raising funds for a future or past election campaign under the election law as described in the Attorney General's Opinion, it is likely that the activity will be significantly circumscribed by the provisions of the Ethics Law. Officials, employees, lobbyists or others who have specific questions regarding this issue, should contact the Ethics Commission before making the contribution.

(1/16/02)