State Ethics & Lobbying Laws
Applications and Implications for
Local Governments
Municipal and County Administration
Fall 2009
Norma Houston
UNC-CH School of Government
Who Should Pay Attention?
 Public officials and employees subject to the
state’s ethics and lobbying laws
 Individuals serving on state boards
 Lobbyists and their principals
 Local government officials, employees, and
their attorneys
 Individuals who seek to influence executive
and legislative action even though they may
not be considered a “lobbyist”
General Coverage of the Ethics And
Lobbying Laws
 Establishes statutory Ethical standards for
certain state public officials by imposing
obligations, prohibitions, and penalties for
violations – G.S. Chapter 138A
 Regulates Lobbying which includes both
direct and goodwill lobbying activities for both
legislative and executive branch actions –
G.S. Chapter 120C
 Expands the Legislative Ethics Act for
members of the General Assembly
Is It Ethics or Is It Lobbying?
Ethics Law
Applies in all contexts
G.S. 138A
Lobbying Law
Some provisions overlap
Applies generally in
the context of lobbying
and some other
interactions with
legislators and certain
public officials
G.S. 120C
Who is covered under the
Ethics and Lobbying
Laws?
Ethics Law – Who is Covered?
Persons” are . . .
 Legislators
 Judicial Officers (All justices and judges, DA’s, and
 “Covered
Clerks of Court)

Public Servants

Includes individuals appointed or elected to these
positions who have not yet assumed office, or persons
working under contract in one of these positions
 Legislative employees – are not “covered
persons” but still subject to some provisions
of the Act
G.S. 138A-3(10),(21)
Ethics Law – Who is a Public Servant?
 Constitutional Officers
 Chief Deputies and
Chief Administrative
Assistants
 Cabinet Secretaries
 Chief Deputies and
Chief Administrative
Assistants
 Confidential assistants
and secretaries to all of
the above
 Governor’s Office
employees
 Certain exempt policy-
making employees and
their confidential
secretaries
 Certain Judicial
employees
 Voting members of nonadvisory State Boards
 UNC and Community
College trustees,
presidents, chancellors
and certain other officials
G.S. 138A-3(30)
Ethics Law – What is a “State Board”?
“Any State board, commission, council,
committee, task force, authority, or similar public
body, however denominated, created by statute
or executive order, as determined and
designated by the Commission, except for those
public bodies that have only advisory authority.”
– G.S. 138A-3(1c)
 Categories of Boards – Which are covered?
- Statewide
- Quasi-Statewide
- Local Gov’t
- Quasi-Local Gov’t
Ethics Law and Local Governments
Question #1:
Are Local Government Officials
“Covered Persons”?
Answer:
NO!
So Why Pay Attention? . . .
Ethics Law and Local Governments
The Ethics Act may apply in some situations:
 Local official or employee serving in a
dual position that is a “covered person”
 Some “local boards” may be covered
 Potential application of conflicts of
interest prohibitions
 Potential application of lobbying laws
Lobbying Law – What is Lobbying?
 Direct – Influencing or attempting to influence
legislative or executive action through direct
communication with a designated individual or that
person’s immediate family
 Indirect – Developing goodwill through
communications or activities, including building
relationships, with a designated individual or that
person’s immediate family with the intent of influencing
current or future legislative or executive action
 Does not include communications and activities such
as business, civic, religious, fraternal, personal or
commercial relationships if not connected to legislative
or executive action
- G.S. 120C100(9)
Lobbying Law – Who Can Be “Lobbied”?
A “designated individual” is a:
 Legislator
 Legislative employee
 Public Servant

Includes individuals appointed or elected to these
positions who have not yet assumed office, or
persons who have filed notice of candidacy for
office, or persons working under contract in one
of these positions
- G.S. 120C-100(2), -104
Lobbying Law – Who is a “Lobbyist”?
Anyone who engages in “lobbying” and:
 Represents another person or governmental
unit, but is not an employee, and receives
payment for services for the purpose of lobbying
 Contracts for economic consideration for the
purpose of lobbying
 Is an employee whose job duties include
lobbying as a significant part
A person or governmental unit on whose behalf a
lobbyist lobbies is a “principal”
-G.S. 120C-100(a)(10), (11)
Lobbying Law – Are You Covered?
You Might Be A Lobbyist If You Are . . .

Engaged in direct or indirect communications
influencing or attempting to influence
legislative or executive action AND

Communicating with or to a designated
individual or that individual’s immediate family
AND

Doing so for payment for services or as a
significant part (or all) of your job duties
Lobbying Law – Who Is Exempt?
 Elected or appointed local government officials
and employees
 Individuals expressing personal opinions
 Persons invited to appear before committees
 Professional services drafting bills or advising
clients
 News media
 Persons responding to inquiries
 Political committees
- G.S. 120C-700
Lobbying Law – Who Is Exempt?
Local Government Exemption:
“A duly elected or appointed official or
employee of the State, a county,
municipality, school district, or other
government agency when appearing
solely in connection with matters
pertaining to the office and public duties”
G.S. 120C-700(3)
Lobbying and Local Governments
Question #2:
Are Local Government RETAINED
Attorneys Covered under the Local
Government Exemption?
Answer:
YES!
Appointed City and County Attorneys are
considered “employees” for purposes of
Lobbying Act
-G.S. 120C-700(3)
Lobbying and Local Governments
Question #3:
Are Local Government RETAINED
Contractors – such as architects or
engineers - covered under the
Local Government Exemption?
Answer:
NO!
(They are not “employees”)
Ethics, Lobbying and Local Governments
Question #4:
Are Local Governments that hire
lobbyists subject to the Ethics and
Lobbying Laws?
Answer:
YES!
They become “Principals”
- G.S. 120C-100(a)(11)
Ethics, Lobbying and Local Governments
Question #5:
Are Local Governments that belong to
the League of Municipalities or
Association of County Commissioners
subject to the Ethics and Lobbying Laws?
Answer:
(GENERALLY) NO!
Only the Association that hires a lobbyist
becomes a principal; its members do not
simply because they are members of the
Association
- G.S. 120C-100(a)(11)
Lobbying Law – Legislative Liaisons
“Liaison personnel” are state employees or
officers whose principal duties include lobbying
on behalf of state agencies – G.S. 120C-(8)
 Are not “lobbyists”, but still must
 Register with Secretary of State (no fee)
 File expenditure reports
 Comply with lobbyist gift ban for legislators and
legislative employees
 Local Government employees are exempt
from legislative liaison requirements.
- G.S. 120C, Article 5
What is required and what
is prohibited under the
Ethics and Lobbying
Laws?
Ethics Law – What is Required?
 Publicly disclose economic interest (must file SEI prior to
initial appointment/election/hiring and then annually) – G.S. 138A,
Article 3
 Participate in ethics education programs - G.S. 138A-14
 Take an active role in furthering ethics in public
service and ensuring compliance with the act (for
Department heads and chairs of covered boards) – G.S. 138A-15
 Determine whether a conflict of interest exists before
taking official action – G.S. 138A-35
 Where disqualifying conflict of interest is found,
remove conflict or resign from position - G.S. 138A-39
Ethics Law – What is Prohibited?
 Using or allowing use of
public position for
private gain, in private
advertising, or using
state funds for any
advertisement – G.S.
138A-31
 Accepting certain gifts –
 Using nonpublic
information for personal
financial gain – G.S. 138A34
 Participating in official
actions where there is a
personal financial
interest - G.S. 138A-36, 37
G.S. 138A-32
 Receiving outside
compensation for
official duties – G.S. 138A33
 Employing and/or
supervising family
members – G.S. 138A-40
Lobbying Law – What is Required?
 Register with Secretary of State

Applies to Principals
 Report lobbying expenditures

Applies to Principals
 Participate in educational programs (not
mandatory)
 Identify himself or herself as a lobbyist and
disclose his or her principal
Lobbying Law – What is Prohibited?
 No gifts to designated
individuals
 Applies to
Principals
 No campaign
contributions
 Cannot serve as
campaign treasurer
 No contingent fee
compensation
 Cannot serve on
body regulating
activities of clients
 No use of cash or
credit unless
present
– G.S. 120C, Article 3
What is a “Conflict Of Interest”
And
How Can Local Governments
Avoid It?
Ethics Law – Conflicts of Interest
Public Servants and Legislators are
prohibited from participating in an official
action that may result in a “reasonably
foreseeable financial benefit” to:


The Public Servant or Legislator, and
A person with whom they are associated
-G.S. 138A-36, -37
Questions:
 What is a “Financial Benefit”?
 Who is “a person with whom
associated”?
Ethics Law – Conflicts of Interest
A “Financial Benefit” is
“A direct pecuniary gain or loss to the
legislator, the public servant, or a person with
which the legislator or public servant is
associated, or a direct pecuniary loss to a
business competitor of the legislator, the
public servant, or a person with which the
legislator or public servant is associated.”
-G.S. 138A-3(14c)
Ethics Law – Conflicts of Interest
 “Person With Whom Associated” includes:
 A member of their extended family
 A client
 A business with which they or their immediate
family is associated
 A non-profit corporation with which they or
their immediate family is associated
 The State, a political subdivision of the State,
a board, or any other entity or organization
created by the State or a political subdivision
of the State that employs them or a member of
their immediate family.
-G.S. 138A(3)(27c), (27d)
Ethics Law – Conflicts of Interest
What does this mean to Local Governments?
A conflict of interest may exist where:
1. The Local Government employs:



A Legislator
A Public Servant
Immediate family members of a Legislator or
Public Servant
AND
2. That Legislator or Public Servant is in a
position to take official action that results in
direct pecuniary gain or loss to the Local
Government
Ethics Law – Conflicts of Interest
Some Questions Yet to be Answered:
 What constitutes “direct pecuniary gain or
loss” to a local government?
 What constitutes “employed” in the context of
local governments?
Clarification can come from either the
General Assembly or the State Ethics
Commission – Stay Tuned!
Ethics Law – Conflicts of Interest
Legislator Exemption:
“Notwithstanding G.S. 138A-37, if a legislator is
employed or retained by, or is an independent
contractor of, a governmental unit, and the legislator
is the only member of the house elected from the
district where that governmental unit is located, then
the legislator may take legislative action on behalf of
that governmental unit provided the legislator
discloses in writing to the principal clerk the nature of
the relationship with the governmental unit prior to, or
at the time of, taking the legislative action.”
-G.S. 138A-38(c)
To Give or Not To
Give . . .
What is the “Gift Prohibition”?
 Under the Ethics Law:
Covered persons & legislative employees
cannot RECEIVE gifts from certain
individuals or under certain circumstances
 Under the Lobbying Law:
Lobbyists, their principals, and other
individuals cannot GIVE gifts to covered
persons & legislative employees except
under certain circumstances
What is a “Gift”?
 Anything of monetary value
 Given or received without valuable
consideration
 By or from any of the following:
 Lobbyist
 Lobbyist principal
 Liaison personnel
 “Interested person”
- G.S. 138A-3(15)
Who is an “Interested Person”?
A person about whom the public servant knows
or has reason to know any of the following:
 Is doing or seeking to do business with the
public servant’s employing entity
 Is engaged in activities regulated or
controlled by the public servant’s employing
entity
 Has a financial interest substantially or
materially affected by the performance or
nonperformance of public servant’s official
duties
G.S. 138A-32(d)
Who is a “Person”?
“Any individual, firm, partnership,
committee, association,
corporation, business, or any other
organization or group of persons
acting together.”
G.S. 138A-3(27)
Ethics and Local Governments
Question #6:
Is a Local Government a “Person,” for
Purposes of the Gift Prohibition under
the Ethics & Lobbying Laws?
Answer:
NO!
(Local governments are exempt from the
definition of “person” and are NOT subject
to the “interested person” gift ban)
- G.S. 138A-3(27); S.L. 2007-348, s.23
Ethics Law – Gift Prohibitions
 Gifts from Lobbyists and Lobbyists Principals
 No de minimus exception
 Gifts from persons with business, regulatory,
or material financial interest in a public
servant’s officials duties (“interested
persons”)
 Gifts given as a “quid pro quo”
 Honorarium (beyond actual expenses)
 Solicitation of charitable contributions from
subordinate employees
Ethics Law – Gift Prohibitions
Quid Pro Quo
Solicit
Charitable
Contribution
From
Subordinate
Lobbyist,
Principal
“Interested
Persons”
Honorarium
Legislators
Covered
Covered
Covered
Not covered
Covered
Judicial
Officers
Covered
Covered
Not covered
Not covered
Covered
Public Servants
Covered
Covered
Covered
Covered
Covered
Legislative
Employees
Covered
Not covered
Covered
Not covered
Covered
- G.S. 138A-32
Ethics Law – Gift Prohibition Exceptions
 Exempted from “gift” are: - G.S. 138A-3(15)
 Items for which fair market value is paid
 Commercially available loans
 Arrangements made in normal course of
business
 Academic and athletic scholarships
 Lawful political campaign contributions
 Expressions of condolence at an individual’s
death
 Other exceptions to “Lobbyist/Principal” gift ban
and “Interested Persons” gift ban – G.S. 138A-32(e)
Ethics Law – “To Give or Not To Give”
Gift-Giving Analysis

Is the item a “gift”?

Is the intended recipient a covered person?

Is the giver a lobbyist, principal, or “interested
person”? . . .or . . .

Is the gift offered for a prohibited purpose
(quid pro quo, honorarium)?

Is the otherwise prohibited gift allowed under
an exception?
Local Government Reporting
Requirements under the Lobbying Law
Local Governments must still report to the
Secretary of State:
 Expenditures of more than $200 lobbying a
designated individual per calendar quarter– G.S.
120C-800(a)
 Expenditures of more than $200 for a designated
individual (“scholarships”) to attend a conference,
meeting, or similar event – G.S. 120C-800(c)
Enforcement
Enforcement
Ethics – State Ethics Commission



Issues opinions and rules
Conducts investigations
Reviews Statements of Economic Interest
Lobbying
 State Ethics Commission
Conducts Investigations
 Issues opinions and rules
 Secretary of State
 Manages registration of lobbyists and principals
 Develops registration and reporting forms
 Issues rules relating to registration and reporting

Enforcement
 Violations of Ethics Law:


Grounds for disciplinary action
Constitute misfeasance, malfeasance, or
nonfeasance in office
 Violations of Economic Disclosure Requirements:




Failure to file or complete SEI = $250 Fine
Failure to disclose = Class 1 misdemeanor
Providing false information = Class H felony
May also constitute perjury = Class F felony
Ethics & Lobbying – Other Laws
These laws do not override other existing ethics and
conflict of interest laws
 Influencing action through campaign contributions – G.S.
120C-301
 Other Conflict of Interest Prohibitions:




Contracting for self benefit – G.S. 14-234
Building inspectors – G.S. 153A-35
Project designers – G.S. 133-1,133-2
Hospital authorities and public hospitals – G.S. 131E-21,
131E-14.2
City and County officials’ voting – G.S. 153A-44, 160A-75
 Gifts from Contractors and Others – G.S. 133-32
 Misuse of Confidential Information – G.S. 14-234.1

Resources
 State Ethics Commission
(919) 807-4620
www.ethicscommission.nc.gov
 Secretary of State Lobbyist Registration Section
(919) 807-2219 www.secretary.state.nc.us/lobbyists/
 UNC-CH School of Government
 Fleming Bell (919) 966-4210 [email protected]

Norma Houston (919) 843-1903
[email protected]
 Local Government Law Bulletin # 116, October 2007
www.sog.unc.edu
 General Assembly Bill Look-up www.ncleg.net
(S.L. 2006-201, S.L. 2007-347, S.L. 2007-348, S.L. 2008-213)