Virginias

2015 Ethics Reform: An analysis of HB2070 and its

impact on gift giving in Richmond

Table of Contents
Virginias 2015 Ethics Reform: An analysis of HB2070 and its impact on gift
giving in Richmond ................................................................................................................. 1
Summary .............................................................................................................................................. 2
Impact of HB2070 on 2014 Reported Gifts ............................................................................... 2
Loopholes ............................................................................................................................................. 4
Travel .................................................................................................................................................................... 4
Prohibited givers ............................................................................................................................................. 5
Personal friends ............................................................................................................................................... 5
Widely attended events ................................................................................................................................ 6
Aggregate gift cap ............................................................................................................................................ 6
Virginia Conflict of Interest and Ethics Advisory Council .................................................... 6
Travel Waivers ................................................................................................................................................. 7
Audits ................................................................................................................................................................... 7
Central Watchdog ............................................................................................................................................ 8

Summary
Around 8pm on Friday, February 27th, the Virginia General Assembly approved an
omnibus ethics bill with little debate. The conference report differs significantly
from the original ethics reform bills introduced in the House of Delegates and State
Senate and contains loopholes that impact its ability to curtail gifts.

Travel loopholes would create a system under which some gifted travel would not
only be unregulated but also unreported. A change in the way the gift cap is applied
expands the ability of legislators to accept freebies from lobbyists and lobbyists
principals. Narrowly defined categories of prohibited givers provide opportunities
for entities seeking to influence business in Richmond to circumvent the rules. And
the failure to give authority to the ethics council to audit filings, accept and
investigate signed complaints, and refer findings for prosecution means there is
little oversight for the system or a central watchdog for citizen information.

Key findings:
79% of gifts reported by legislators in 2014 would still be allowable under
HB2070, including 70% of gifts from lobbyists and their principals.
Travel loopholes would allow for any lobbyist or principal to pay for a
legislator to fly around the state for official meetings without violating the
cap or any required disclosure
Travel loopholes would allow unlimited gifted travel to conferences such as
ALEC with no disclosure
Narrow categories of prohibited givers provide significant opportunities for
special interests to circumvent the gift cap
Eliminating the aggregate gift cap opens the door to an increase in special
interest gifts
Significant discrepancies between gifts reported by legislators and lobbyists
underscore the need for a stronger ethics council

Impact of HB2070 on 2014 Reported Gifts

HB2070 would establish a $100 per gift cap for gifts from lobbyists or lobbyists
principals to members of the Virginia General Assembly. The bill redefines what is
not considered a gift under the code (and therefore not subject to limits or
disclosure.) Those items include:
An offer that is not used
Honorary degree
Scholarship
Campaign contribution properly reported
Gift related to private profession of elected official or immediate family
Food or beverage at an event where the official is performing official duties
Food/beverage or registration/attendance fees at event where official is
speaker/presenter/lecturer

Unsolicited awards
Inheritance
Travel disclosed under the Campaign Finance Act
Travel paid for by US, state, local government or a subdivision
Travel to attend a General Assembly session, legislative committee or
commission, or national conference approved by the Rules Committee
Travel related to an official meeting of the Commonwealth, political
subdivision, board, commission, entity, or affiliated charity the official is
appointed or elected to because of public office or private employment
Gifts from relatives or personal friends [Lines 2011-2045]

Additionally, HB2070 creates several categories of gift exemptions, including food
or beverages consumed at a widely attended event, gifts from foreign dignitaries
that are accepted on behalf of the Commonwealth and archived by the library of
Virginia, a gift from a lobbyist or lobbyists principal who is also a personal friend,
and travel for which a waiver has been granted by the ethics council. [Lines 2098-
2112]

ProgressVA Education Fund analyzed the impact these rules would have on gifts
reported by legislators in 2014. In total, members of the legislature accepted 753
gifts in 2014, with a value of $184,562. Of those gifts, 79% would be allowed under
the provisions of HB2070. Gifts from lobbyists and principals account for 70% of the
total gifts received by legislators in 2014, worth over $100,000. Our analysis
projects 70% of those lobbyist gifts would be legal under HB2070. An additional
10% of lobbyist gifts were not reported with sufficient information to determine
whether they qualify for an exemption.

Total
gifts
Gifts under cap
Total gifts allowed
Total lobbyist gifts
Total lobbyist gifts allowed
Total lobbyist gifts
prohibited
Total lobbyist gifts unclear
Total nonlobbyist gifts

Number of
gifts
Percentage Value
753
$184,562
301
40.0% $23,199
594
78.9% $144,632
523
69.5% $102,530
364
69.6% $62,600
104
53
229

19.9%
10.1%
30.4%

$30,638
$9,292
$82,032

*Based on data from the Virginia Public Access Project

ProgressVA conducted a similar analysis of the original ethics reform bill in 2014,
based on gifts received in 2012. The bill as introduced would have blocked few, if

any gifts. While HB2070 is an improvement, the numbers also demonstrate the
impact of loopholes on Richmonds culture of largesse. In 2012, members of the
legislature reported 695 gifts worth $247,608. While the total value of gifts has
dropped significantly over two years, the volume of gifts has risen to 753 in 2014.

Loopholes
Travel
HB2070 carves out significant loopholes for public officials when it comes to
privately financed travel. The bill excludes travel provided to facilitate attendance
by a legislator at a regular or special session of the General Assembly, a meeting of a
legislative committee or commission, or a national conference where attendance is
approved by the House or Senate Committee on Rules from the definition of a gift.
[Lines 2028-2031] Travel for these purposes is not a gift, no matter who pays. And,
because this travel is not a gift, it is not required to be reported. This language
appeared in the final conference report but was not included in previous versions of
the House or Senate bill.

In practical effect, a corporation otherwise subject to a $100 gift cap could fly a
lawmaker from Southwest Virginia to Richmond and back for the legislative session
without violating gift limits and without either party needing to disclose the
transaction.

The bill also excludes travel for national conferences that have been approved by
the House or Senate Rules Committee. This provision essentially allows the Speaker
and the Chair of Senate Rules to provide waivers by which their members may
accept free travel without having to disclose.

For example, Speaker Bill Howell sits on the national board of the American
Legislative Exchange Council, a corporate front group which partners legislators
with lobbyists to write model legislation behind closed doors. Speaker Howell
regularly approves requests for his colleagues to travel to ALEC conferences, with
both privately subsidized and taxpayer funds. Just in 2014, ALEC spent $2,616 for
members of the Virginia legislature to travel to their conferences1. Since 2001,
ALEC has spent close to $100,000 to subsidize Virginia legislators attendance at
their conferences2. Under HB2070, those gifts would no longer need to be reported.
Furthermore, ALECs corporate members could also pay for travel without any limit
or disclosure. Corporations like Dominion and Verizon, which bestow thousands of
dollars of gifts and campaign contributions year, are members of ALEC. This travel
loophole would allow these corporations to continue to make substantial gifts to

1 Virginia Public Access Project
2 Virginia Public Access Project

members of the legislature while circumventing the gift cap and reporting
requirements.

Prohibited givers
In 2014, following ProgressVA Education Funds report on ethics reform, legislators
broadened the categories of prohibited givers to include not only lobbyists, but also
lobbyists principals and individuals seeking to do business with the state (or
locality for local officials). HB2070 maintains those categories of prohibited givers
for local officials, but deletes the prohibition on gifts from individuals or businesses
seeking a contract with the state for members of the General Assembly [Lines 2103-
2104]. Gifts from any other source are not subject to the $100 cap and are not
required to be reported.

A perusal of gifts received in 2014 illustrates how officials might circumvent these
rules. Thirteen legislators reported receiving gratis tickets to Virginia Tech football
games from the University. An additional five legislators reported free tickets to
University of Virginia sporting events3. Under HB2070, none of these gifts would be
prohibited, because the university proper does not employ a lobbyist. Instead, each
school employs lobbyists through an affiliated foundation. Similarly, while
associations such as the Old Dominion Highway Contractors Association or the
Virginia Agribusiness Council employ lobbyists and therefore are subject to the gift
cap, their members are not. Any individual business member could legally provide
gifts over the cap even though a lobbyist is representing their interests in Richmond,
so long as they do not directly serve as the principal.


Personal friends
HB2070 exempts gifts from regulation in two ways. First, it narrowly defines what is
considered a gift to apply the regulation to a small range of freebies. Second, the bill
also separately carves out exemptions for some gifts. These two treatments create
significant confusion around gifts from personal friends. Under HB2070, freebies
from personal friends do not qualify as a gift, and therefore are not regulated and
not required to be reported [Line 2039-2041]. That exemption only applies to gifts
from personal friends who are not a lobbyist or lobbyists principal. However, the
bill separately sets criteria by which a lobbyist or principal could qualify as a
personal friend and therefore exempt a gift from the $100 gift cap [Line 2123-2134].
Unlike the other specified exemptions from the cap, however, HB2070 does not
specifically define whether gifts over the cap from lobbyists who are also personal
friends must be disclosed. Because the bill does not specify, legislators could likely
accept gifts over the cap from lobbyists who meet the personal friend criteria
without disclosing the gift.


3 Virginia Public Access Project


Widely attended events
HB2070 creates a gift exemption for food or drink consumed at widely attended
events, which are defined as events to which 25+ people have been invited or it is
reasonable to expect so, or that are open to the public, or meet one of the below
qualifications:
o Open to people who share a common interest
o Members of a public, civic, charitable, or professional organization
o Are from a particular industry or profession
o Represent persons interested in a particular issue [Line 2093-2097]

However, unlike a similar congressional ethics rule regarding widely attended
events, HB2070 does not specify the event sponsor must provide the food and drink.
In 2014, Norfolk Southern Corp., a lobbyists principal, provided Senator Emmett
Hanger and his wife with $300 worth of meals at the Fiddlers Convention in Galax4.
While this amount would exceed the gift cap under HB2070, the Fiddlers
Convention qualifies as a widely attended event so the gift would not be prohibited.
This example illustrates how the loophole might be exploited by special interests in
the future.

Aggregate gift cap
While HB2070 lowers the gift cap from $250 to $100, in practicality it expands the
number of gifts any official might receive. The $250 cap instituted in 2014 was an
aggregate cap, meaning any combination of gifts from a single source could not
exceed that level. The Senate omnibus ethics proposal would have maintained the
aggregate provision while lowering the cap to $100. HB2070 eliminates the
aggregate cap altogether and applies the $100 limit to any single gift [Line 2098-
2112]. In practice, then, any official could accept unlimited gifts valued at $100 or
less from a single lobbyist or principal. Delegate Luke Torian, for example, reported
two golf trips paid for by Hunton and Williams in 20145. While together they would
exceed $100, HB2070 allows the gifts because each instance was under the cap.

Virginia Conflict of Interest and Ethics Advisory Council

Ethics legislation passed in 2014 established the Virginia Conflict of Interest and
Ethics Advisory Council. The Council was tasked with receiving disclosure forms,
establishing a searchable electronic database of forms, conducting ethics trainings
and providing formal and informal advisory opinions on compliance with the law.
HB2070 expands the Councils responsibilities to include granting travel waivers to

4 Virginia Public Access Project
5 Virginia Public Access Project

elected officials for privately financed trips that bear a reasonable relationship to
the office holders official duties.

Governor Terry McAuliffes blue ribbon ethics and integrity commission suggested
multiple reforms that were not adopted by the General Assembly, including granting
the Council the authority to randomly audit ethics filings, receive and investigate
signed complaints, or refer findings for prosecution6.

Travel Waivers
Under HB2070, the Council shall approve requests for travel waivers for trips that
are privately financed and which bear a reasonable relationship to the requesters
official duties [Line 2868-2892]. This vague wording leaves significant leeway for
the Council to approve or deny requests. However, HB2070 also provides that any
waiver which is not acted upon in five business days will be deemed approved,
providing an unusual out where the Council could deadlock or decline to rule on
the appropriateness of a trip and the requester would still be able to legally receive
the gifted travel [Line 2900-2902].

Additionally, earlier versions of both the House and Senate bills required approved
travel waivers to be posted online by the Council. That requirement was deleted
from the final version of HB2070.

Audits
Unlike an earlier version of the Senate omnibus ethics proposal, HB2070 does not
give the Council authority to randomly audit ethics filings to ensure compliance with
the law. Under HB2070, the council may inspect filings for completeness and
request filers submit a complete form, but those requests are exempt from the
Virginia Freedom Of Information Act.

Audits like those recommended by the Governors commission would identify
discrepancies on disclosure forms to ensure the public receives accurate
information. In a review of 2014 gifts disclosed by members of the General
Assembly and lobbyists, ProgressVA Education Fund found multiple instances in
which lobbyists reported providing legislators with gifts that were not also reported
by the legislator, and vice versa. In many cases, those gifts exceeded the reporting
threshold and should have been disclosed by both parties. The prevalence of these
errors undermines confidence in the accuracy of disclosure forms. Empowering the
Council to serve as an independent watchdog to oversee and verify filings would be
a significant step towards ensuring disclosure forms accurately reflect Richmonds
generosity.


6 Interim Report of the Commission on Integrity and Public Confidence in State Government

Central Watchdog
HB2070 does not empower the Council to receive or investigate signed complaints
by citizens, a key proposal from the Governors blue ribbon commission. While the
Council will receive and make available online some disclosure forms, they are not
authorized to serve as a central repository for ethics information or watchdog for
the public.

Under HB2070, state officials and constitutional officers are required to file their
disclosure forms with the Council [Line 1166-1271]. Local officials, however, will
file the form with the local clerk. It is unclear if those forms will be included in the
Councils searchable online database of filings. The various filing systems facilitate a
lack of transparency in disclosure and promote an inconsistent standard.

Since the Council has no real investigatory or enforcement power under HB2070,
its unclear where a citizen should turn with a question or whistleblower complaint.
HB2070 clarifies that a willful violation of the ethics provisions is a class 5 felony.
The Attorney General has the authority to provide a written advisory opinion and
assist in collecting civil fines for violation of the statute, but is not tasked with
explicit authority to investigate suspected wrongdoing. Citizen whistleblowers
would likely need to direct complaints to state or local police, or a local
Commonwealths Attorney.