By Gordon J. Golum, Esq.
Wilentz, Goldman, & Spitzer P.A.

Jonathan M. Busch, Esq.
Wilentz, Goldman, & Spitzer P.A.

Businesses across New Jersey make millions of dollars each year from State and local public contracts. According to the Election Law Enforcement Commission (ELEC), in 2009, companies were paid at least $5.9 billion for their work for public entities such as the state, counties, municipalities and boards of education.

In view of complex and varying pay-to-play reforms at every level of government, it is incumbent upon businesses with public contracts and their employees, to proceed with extraordinary caution before making political contributions. Such contributions that run afoul of pay-to-play laws could jeopardize the business's public interests. Thus, it is incumbent upon companies with public contracts to carefully monitor the political contributions made by them and their employees. 

Keeping tabs on political contributions can be a tall order for any business and may require the implementation of significant internal controls. To ensure compliance, businesses should determine which contributions could ultimately prevent the award of a public contract. For example, in the case of a corporation, political contributions that could preclude the award of a State contract include those made by the business, its officers, or any person or entity that owns or controls more than 10% of the stock in the corporation.

Businesses are well advised to establish procedures for internal reporting and monitoring of political contributions by the entity and its principals, shareholders, officers and employees. They are advised to assign an individual or committee with the responsibility of analyzing each contribution request on a case-by-case basis. This responsibility often requires extraordinary familiarity with the pay-to-play laws governing the particular business’s current or prospective contracts.

This responsibility can be particularly tedious in the case of a business that performs services for local public entities, such as counties and municipalities. These entities are empowered with the opportunity to enact their own pay-to-play ordinances. (According to the Secretary of State, there are more than 160 local public entities that have enacted pay-to-play prohibitions, but some estimate that there are many more which have not yet registered with the Secretary of State.) The content of these local pay-to-play laws can vary significantly from one public entity to another, therefore it is important that the individual or committee responsible for review and approval identify the pay-to-play law relevant to the jurisdiction that the proposed contribution would impact.

For businesses with State contracts, the approval process for political contributions can be particularly intrusive to relevant individuals. For example, Governor Corzine’s Executive Order 117 amended pay-to-play laws that govern the award of State contracts to include contributions made by the relevant individual’s spouse or civil union partner, and any child residing with that individual. Thus, any business with State contracts will often be in a position of assessing the proposed political contributions of both their employees and their employees’ family members.

A clear accounting of all relevant political contributions by a business will be particularly helpful when that entity is required to fulfill its reporting obligations. Businesses with public contracts are required to submit political contribution disclosure forms with the appropriate public entity prior to the award of a contract. Additionally, businesses that receive $50,000 or more per calendar year in the aggregate through public contracts are required under State law to identify their reportable political contributions with ELEC each March following the year in which the money was earned. Businesses that maintain organized records of relevant political contributions on an ongoing basis are able to complete these filings with confidence and relative ease. If no method is used to measure and account for a business’s contributions, that entity runs the risk of losing its public contracts.

Gordon Golum is a shareholder with Wilentz, Goldman, & Spitzer P.A. and a member of the firm’s Real Estate Team, Governmental Affairs Practice Group and Administrative law Practice Group. Jonathan M. Busch is an associate with the firm’s Governmental Affairs Practice Group and Education Law Team. Visit Wilentz, Goldman, & Spitzer P.A. on the web at www.wilentz.com.