Global Regulatory Enforcement Law Blog : Global Regulatory Enforcement Lawyers & Attorneys: Reed Smith Law Firm: Government Contracts & Compliance

This post was written by Christopher L. Rissetto and Robert Helland.  

Numerous press reports indicate that House Oversight and Government Reform Chairman Darrell Issa (R-CA-41) intends a broad investigation of the federal grant and loan application process, in the wake of the recent bankruptcy of the solar company, Solyndra. Up until now, the primary committee in the House investigating and holding hearings on the decision to award $535 million in loan guarantees to Solyndra has been the House Energy and Commerce, Subcommittee on Oversight and Investigations, chaired by Rep. Cliff Stearns (R-FL-6). It held a recent hearing with Energy Secretary Steven Chu, where committee members grilled the Secretary on the Department’s decision to restructure the terms of the loan guarantee to favor private investors, and whether that was influenced by political considerations. As a result of that hearing, Chairman Stearns has called for Secretary Chu’s resignation. And as investigation continues, both Chairman Stearns and full committee Chairman Fred Upton (R-MI-6) are pressing the White House for additional documents on the loan guarantee, as well as the testimony of senior White House staff.

But what Chairman Issa promises is a broader investigation – not just into Solyndra, but also into the federal investment in renewable energy, and possibly beyond. We have seen evidence of this broader line of inquiry in a recent hearing by Oversight and Government Reform into possible politicization of grants at the Department of Health and Human Services Office of Refugee Resettlement. In fact, it seems as if Mr. Issa is planning on looking at the entire Federal assistance apparatus, to determine if merit, and not politics, count for final award decisions. As a result, all loan guarantees and grants could come up for review, especially those to entities facing financial difficulties. Administration officials, and executives, should be ready for the subpoenas.

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This post was written by Christopher L. Rissetto and Bob Helland.

Those of us who follow the Hill are beginning to feel like Bill Murray's character in Groundhog Day: waking to news of another potential shutdown, we wonder if we will spend the next 13 months until November 2012 in a state of permanent impending doom. Most remember the partisan bickering over spending levels that almost closed the federal government earlier this year. Last week the House failed to pass a continuing resolution that would have temporarily funded the federal government at $1.043 trillion, in order to provide additional time for Congress to pass the 12 spending bills needed to fund the federal government for the entire year. Many Republicans balked because they wanted lower amounts agreed to in an earlier budget resolution passed by the House. Most House Democrats on the other hand, opposed the bill because some of the funds for disaster relief efforts were offset by cuts to a government program that supports the production of energy-efficient cars.

While Republican leaders promise there won’t be a shutdown, the threat of one throughout the year has had continuing implications for federal contractors and employees. Under the Anti-Deficiency Act, agencies may not obligate the government to spend money exceeding amounts lawfully appropriated to date. Lorraine Campos and Joelle Laszlo provide six strong recommendations to government contractors in "Preparing for a Federal Government Shutdown". Since the end of the Federal Fiscal Year is September 30th, one thing we can say here is that Federal contractors and grantees would be well-served to submit, and have received by the government, payment requests by that date. Of course, if the government hasn't also paid by that date, you can expect a delay as the funds technically expire and confusion reigns.

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This post was written by Christopher L. Rissetto, and Robert Helland.

Earlier this month, President Obama proposed a $447 billion package of tax cuts and new spending to help the economy. In a joint session to Congress, the President laid out the terms of his proposal, which includes over $100 million for upgrading highways; mass transit; rail, both freight and intercity; aviation; schools; and local neighborhoods - both by direct expenditure as well as through financing. Since then, the President has hit the road to build support.

Coming at a time when Congress is considering at least $1.2 -$1.5 trillion in cuts to the federal debt, it would seem that any proposal for additional infrastructure spending would seem – at the risk of understatement - difficult to pass. However, unemployment continues to remains high. In addition, there is a pent up demand at the state and local level for funds, given Congress’ failure to date to re-authorize the multi-year transportation program known as SAFETEA-LU and the fact that the nation’s infrastructure continues to earn low grades from groups such as the American Society of Civil Engineers. As a result, it is worthwhile to take a look at the President’s infrastructure proposal to see which elements might have a chance in Congress.

Over $100 billion for infrastructure investment. The President proposes to spend

•  $50 billion for highways, transit, rail and aviation projects;
• • $25 billion for school infrastructure, including such projects as greening and efficiency upgrades and new science and computer labs;
• $15 billion for rehabilitating vacant and foreclosed homes and businesses;
• $5 billion for modernizing community colleges, including tribal colleges.
• $10 billion to create a “National Infrastructure Bank”. The President also wants $10 billion for the establishment of a National Infrastructure Bank to “invest in a broad range of projects of national and regional significance” (www.whitehouse.gov).

The President proposes, Congress disposes. As we noted, new infrastructure spending - during a time when the focus is on the nation’s debt - may seem a stretch. And politics plays a factor – no surprise here – when Congress considers any legislation. However, there has been some movement in Congress on the need to spend more, especially on transportation projects, which have a dedicated source of funding in the fuel tax. For example, both Congressman John Mica (R-FL-7) and Senator Boxer (D-CA), chairs of the respective congressional committees, have offered separate proposals to re-authorize SAFETEA-LU, which derives most of its funding from the 18.4 cent tax paid at the pump. In addition, Congress is currently considering a 6 month “clean” extension of SAFETEA-LU – independent of re-authorization efforts – that would continue to fund highway and mass transit programs at current level. H.R. 2887, the Surface and Air Transportation Programs Extension Act of 2011, passed this week in the House of Representatives by voice vote and is expected to face a similar vote in the Senate.

But if the appetite for more infrastructure spending is limited, there are a number of financing proposals in Congress similar to the President’s call for an infrastructure bank, including: S. 652, the Build Act, sponsored by Senator Kerry (D-MA); and S. 1300, the Lincoln Legacy Infrastructure Development Act, sponsored by Senator Mark Kirk (R-IL). Each would provide $100 million in seed money for grants and low interest loans for transportation projects. In fact, the Kerry bill was the basis for the President’s proposal.

While we know that House Transportation and Infrastructure Chairman Mica has expressed his opposition to the President’s Infrastructure Bank proposal, the actions of these other members of Congress and the President show that, in a challenging economic environment, infrastructure financing remains an option for policy makers looking to promote economic activity in general as well as create jobs.
 

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• Did you hear that the U.S. sanctioned a company that doesn't exist? Of course you did, it was kind of a big deal. But in case you didn't and wanted to sound current in your legal circles.
• Some people like to claim that higher education is a racket. Turns out some if it is.
• A Short List of job growth ideas by someone who might actually know something: a small business owner.
• Dilemma: You just ordered a pizza and the Noid guaranteed it would be there in 30 minutes, when suddenly you realize you have no reports on the cost effectiveness of government contractors. Been there … been there. This ought to get you through.
• Since the Solyndra investment was such a big hit, here's a summary of 9 stimulus studies.  Armchair politicians prepare for battle.
• Blogs are allowed to self promote, right?
• Speaking of taxes, whenever I have to cut the government a check, I always dream of pulling a Lebowski: rather than paying the tax man, I think of spending my money on a rug that really ties the room together. It seems as though a bunch of government contractors have a little Dude in them, with outstanding payments of 209 Million.
• In Fake Legal news: Its OK to Laugh

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This post was written by Christopher L. Rissetto, Robert Helland and Melissa E. Beras.

As we noted last week, the $900 million cut from the federal budget to avoid default of the nation’s debt obligations is only just the beginning. The Budget Control Act of 2011 (“Act”) guarantees that another $1.2 to $1.5 trillion will be cut from the federal debt over the next ten years (Public Law 112-35). The only question is how these cuts will come. Will the bipartisan congressional debt “Super Committee” meet the tight deadlines mandated in the Act and come to a consensus on a debt reduction package? If they do, how much will the cuts affect Medicare, Social Security and other mandatory spending programs, as well as defense? And will the package include any revenue increases? If the Super Committee does not come to a consensus, then the Act’s “Automatic Trigger” kicks in: spending for both discretionary and mandatory programs, including Medicare, would be cut from 2013 through 2021. The cuts would be 50-50, between defense and non-defense. However, the Medicare cut could not exceed 2% in any given year.

With a daunting task in front of it - and the fallback of the Automatic Trigger - it would be somewhat understandable if the Super Committee was set up to fail. However, Republicans and Democrats have appointed members to the Super Committee who are serious, at least at this point, in bridging the partisan divide in Congress and coming to a consensus on a debt package. The Co-Chairs of the Super Committee are Senator Patty Murray (D-WA) and Rep. Jeb Hensarling (R-TX-5). The remaining members are: Senators Max Baucus (D-MT); John Kerry (D-MA); Jon Kyl (R-AZ); Rob Portman (R-OH); Pat Toomey (R-PA); and Reps. Dave Camp (R-MI-4);.Fred Upton (R-MI-5); James Clyburn (D-SC-6); Chris Van Hollen (D-MD-8); and Xavier Becerra (D-CA-31). We note that these Senators and Representatives have an understanding of the spending issues in the programs at risk for cuts. For example, two of the Members chair congressional committees with jurisdiction over Medicare [Senator Baucus, Chair of the Senate Finance Committee, and Rep. Camp, Chair of the House Ways and Means Committee].

The timetable is tight, though. Under the Act, the Super Committee has until November 23rd to produce a debt reduction package and Congress has until December 23rd to send that package to the President’s desk (the President has until January 15th to sign the bill into law). As we also noted previously, the Act does give the Super Committee, and Congress, some tools to expedite package and avoid delaying measures used by other Members of Congress in the past, such as requiring any debt package to face an up-or-down vote and thus avoid any amendments on the House or Senate floor that could be deal breakers. Moreover, there are other parallel legislative events -- the likely Omnibus Appropriations bill and certain Re-authorization bills -- that may also influence final budget issues. It remains to be seen, however, whether in the end the Super Committee can bridge partisan differences on principles central to each party, such as spending for safety net programs and opposition to any tax increases. In other words, stay tuned….

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This post was written by Christopher L. Rissetto and Stephanie E. Giese.

Those of us who have an interest in compliance with the federal Cost Accounting Standard (“CAS”) are not surprised that the CAS Board eliminated the Overseas Exemption effective October 11, 2011. See 76 Fed. Reg. 49365 (Aug. 10, 2011). What may be more surprising than the elimination of the exemption is that the CAS Board is eliminating the exemption that it first promulgated in 1973 without ever offering its interpretation of how the exemption should be applied. So, for contractors who have relied on this exemption or will rely on this exemption for contracts and subcontracts awarded prior to October 11, 2011, we will never know which federal agency’s interpretation of the exemption is correct. The CAS Board’s failure to interpret this exemption introduces some uncertainty for contractors who have relied on the exemption, particularly in the event of a CAS compliance audit.

Federal Agency Interpretations of the Overseas Exemption Differ. Some federal agencies such as the U.S. Agency for International Development (“USAID”) have interpreted the application of the exemption narrowly in acquisition policy guidance such that the vast majority of U.S. companies could not rely on the exemption (if any costs, direct or indirect, are incurred in the U.S. and charged to a USAID contract). Other federal agencies, including the U.S. Department of Defense (“DoD”), have stated in acquisition policy guidance that a U.S. company may rely on the Overseas Exemption if all direct costs incurred in connection with a government contract are incurred overseas.

The CAS Board’s Limited Jurisdiction was the Basis for the First Promulgation of the Overseas Exemption. You may ask why the Overseas Exemption was first promulgated in light of the fact that the federal agencies do not agree on its application. The Overseas Exemption was first promulgated in the Armed Services Procurement Regulation (“ASPR”) in 1973. The original basis for the exemption was that the CAS Board’s jurisdiction was limited to contracts awarded in the U.S., its territories and possessions pursuant to Section 2168 of the Defense Production Act (“DPA”). Thus, by default, contracts and subcontracts executed and performed entirely outside the U.S. were exempt from CAS. The CAS Board ceased to exist under the DPA in 1980, but was reestablished in 1988 under the Office of Federal Procurement Policy (“OFPP”) Act without the overseas limitation on the Board’s jurisdiction. In 1992 and again in 2008, during the time when its jurisdiction included contracts performed overseas, the Board reviewed its rules and chose to retain the Overseas Exemption without offering any further interpretation of the applicability of the exemption.

CAS Compliance May Depend on Your Agency’s Interpretation of the Overseas Exemption. This month the CAS Board again offered no further interpretation of the Overseas Exemption when it eliminated the exemption. So a government contractor may want to consider the federal agency that awarded the contract before relying on the Overseas Exemption to CAS -- while the exemption lasts!
 

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This post was written by Christopher L. Rissetto, Robert Helland and Melissa E. Beras.

Last week, the House of Representatives and the Senate each voted to pass the Budget Control Act of 2011 (“Act”) raising the nation’s debt limit and averting the real threat of a default on our debt obligations. President Barack Obama promptly signed it into law the same day, narrowly averting default (Public Law 112-35). However, a compromise called by some as a “Satan Sandwich” still has major ramifications on federal spending priorities for months to come.

Some pain now, more pain later. The Act immediately gave President Obama the authority to raise the debt ceiling by $400 billion. A second $500 billion adjustment in the debt ceiling, which is subject to a congressional vote of disapproval that can be vetoed by President Obama, will likely come this September 2011. These first two increases, totaling $900 billion, are offset by $917 billion in 10-year savings in non-defense federal discretionary spending – i.e. funding not mandated by federal law, such as through the Medicare or Social Security programs. This will be achieved by cutting annual appropriations down to $1.043 trillion in 2012 and then slowing the rate of future growth in following fiscal years to a fraction of inflation.

The Act also mandates another $1.2 trillion to $1.5 trillion in deficit reduction. This will happen one of two ways: either through the recommendations of a Joint Committee of House and Senate members or by automatic across-the-board cuts that would be split equally between mandatory programs, including Medicare and Social Security, and defense.

Why some are calling this a “Super Committee”. No later than November 23, 2011, the Joint Committee is required to vote on a report that contains a detailed statement of its findings, conclusions, and recommendations for what programs should be cut. There are a number of provisions in place to give the Joint Committee additional powers to come to a decision on cuts and get that enacted into law. For example, they have a freedom to include matters not ordinarily included in similar legislation, such as policy issues that do not impact the federal debt, for example changes in the recently heath care reform or Dodd-Frank finacial regulatory reform laws. Also, any legislation reported would not face amendments and only require a simple majority in each house of Congress for final passage. For these reasons, the Joint Committee is also being known as the “Super Committee”.

The “Automatic Trigger”. A lesser of two evils? Failure by the Joint Committee to hit at least $1.2 trillion in savings would trigger automatic cuts in both discretionary and mandatory programs, including Medicare, from 2013 through 2021. The cuts would be 50-50, between defense and non-defense. However, the Medicare cut could not exceed 2% in any given year. So for all those who rely on Medicare - from the pharmaceutical industry, to hospitals, to nursing homes, to doctors - it would likely make sense to hope the Joint Committee does not come to a consensus on cuts. Given the lobbying expected by the Defense Industry, it is highly possible that the Joint Committee could make non-defense programs suffer the greater amount of cuts.

This also guarantees that lobbying activity of Congress will be at a fever pitch for the next six months.
 

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This post was written by Christoper L. Rissetto, Philip G. Lookadoo and Marco A. DeSousa.

In another move demonstrating the Defense Department’s commitment to renewable energy, the U.S. Navy recently announced that it intends to make its largest purchase of biofuels ever for a test run in 2012 of its “Great Green Fleet.” For several years the Navy, as well as other military branches, has been testing biofuels as an alternative to traditional fossil fuels. The Navy uses biofuels to power surface ships and aircraft.

The Defense Department is a major player in the renewable energy space, especially with respect to biofuels. Because of the Defense Department’s incredibly large appetite for energy, the Navy and other military branches have become market makers in the immature biofuels markets. Such large purchases provide much needed revenue to biofuel producers. The Navy has been as emphatic as any branch by setting a goal of procuring 50% of its energy from renewable sources by 2020.

The primary objective of the Navy’s progression towards renewable energy is national security. The security benefits of sourcing biofuels from domestic and diverse, non-domestic producers are obvious, but the profound effect on the economics of these developing markets is also a vested interest, and this is encouraging for renewable energy companies and for the broader goal of combating climate change. The large demand created by the Navy and other military branches for the physical delivery of biofuels is only one aspect of the influence these branches have on the biofuel markets. In addition to purchasing fuel from producers, the Navy has contracted with cutting-edge biotech companies in the R&D stage of production. It is clear that all companies in the biofuels space need to keep abreast of the Defense Department's biofuels development initiatives.

When so much talk about the federal government involves the perception, whether real or fictional, of its encroachment on the private sector, the Defense Department’s significant influence in the biofuels markets is a net positive for all Americans.

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This post was written by Christopher L. Rissetto and Robert Helland.

A flurry of legislative activity in the House of Representatives and Senate on measures affecting transportation infrastructure projects may signal movement on a multi-year spending in the 112th Congress. The need is clearly there: the American Society of Civil Engineers ("ASCE") in its 2009 "Report Card for America's Infrastructure", 33% of America's major roads were listed as being in poor or mediocre condition and 36% of the nation's major urban highways were congested. The ASCE gave our roads and bridges a grade of "D-". Our transit systems face a similar situation and only got a slightly better grade of "D". As any commuter will tell you, this situation has not improved.

The question is, how does the federal government pay to 1) maintain and 2) improve the nation's road and rail infrastructure with decreasing gas revenues flowing into the Highway Trust Fund (which is the main mechanism on the federal level to pay for such projects)? The answer may lie with fewer direct outlays of federal funds for transportation --compared to prior years-- and an increased reliance instead on the leveraging of funds, through the greater use of existing federal financing programs, the creation and capitalization of state "infrastructure banks" to provide financing for projects, and policies that will attract private sector investment i.e. through public-private partnerships. That's the emphasis in a transportation funding proposal released this week by the House Transportation and Infrastructure ("T&I") Committee Chair, John L. Mica (R-FL-7). The Public Policy and Infrastructure Practice takes a look at what is being proposed and how likely any measure will be enacted into law, given the nation's fiscal situation.

Leveraging is a key component in the SAFETEA-LU reauthorization proposals from the House Transportation and Infrastructure Committee.
At issue is the re-authorization of the multi-year transportation law known as "SAFETEA-LU" which provides funds for road and rail programs and projects. The law should have been re-authorized before its September 30, 2009 expiration, however, decreasing revenues into the Highway Trust Fund, which is funded primarily by the tax on motor fuels, has resulted in an impasse on any decision for new law. Instead the existing law has been subject to a series of temporary extensions, the latest expiring on September 30th of this year. A sign that this could change occurred this week when House T&I Chairman Mica introduced a six year, $230 billion SAFETEA-LU re-authorization proposal. This is over $50 billion less than the $286.5 billion included in SAFETEA-LU when it was signed into law in 2005. (Public Law-109-59) In a recent press conference and PowerPoint presentation, Chairman Mica detailed three tools to help stretch this lower dollar figure further: 1) He authorizes $6 billion to fund the Transportation Infrastructure Finance and Innovation Act ("TIFEA") program. TIFEA provides low interest loans, loan guarantees and lines of credit "to finance surface transportation projects of national and regional significance". According to the Chairman, this would fund at least $120 billion in transportation projects. 2) Chairman Mica would authorize and capitalize “State Infrastructure Banks” to provide loans and loan guarantees for state and local transportation projects. States would be able to dedicate 15% of the formula funds received under SAFETEA-LU to help do this. 3) Chairman Mica would encourage private sector investment in transportation. He would do so by increasing the use of financing programs, such as TIFEA, which fund projects with private-sector funding. He would also encourage public-private partnerships for transportation projects by providing greater credit towards a “local share” of a project’s cost to those that utilize such partnerships. In addition, he would remove barriers that he says prevents the private sector from offering public transportation services.

We note that Congressman Mica’s Senate counterpart, Senate Environment and Public Works Chair Barbara Boxer (D-CA) proposed her own version of a SAFETEA-LU re-authorization bill and has criticized Congressman Mica’s bill as inadequate for the nation’s transportation needs. Her bill would provide a greater amount of annual funding but over less time ($109 billion over two years). Whether both the House and Senate can agree upon a figure will depend on whether the pent-up demand by state and local governments and the business community for a steady stream of transportation funds will overcome any concerns about the cost to the federal purse. However, it is probable if not definite that any measure that reaches the President’s desk will include a financing mechanism for transportation projects

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• Of Russians and nuclear energy …
• Line of the Day goes to Sen. Patrick Leahy (D-VT) from this article about the Civilian Extraterritorial Jurisdictions Act: "CEJA will also protect Americans by providing the option of prosecuting them in the United States." Finally, what we have all been waiting for, multiple international jurisdictions chomping at the bit to lock us up. If this goes through, what's going to happen to my favorite show? 
• I'm not sure how much traction this will get, but if you are in the bribery business, consider this your warning. The standard search for recording devices 'aint going to cut it anymore. (Fighting the urge to write: "there's an app for that." Oh well.)
• With kids heading off to camp, I'm finding myself a bit nostalgic for summer days spent making up games and then fighting endlessly with friends over the rules. It seems like a few senators share my feelings
• Who doesn't love a top 10?  Spoiler alert: contractors who didn't make the list.
• And to think, we all used to complain about the late fees at Blockbuster
• Its OK to Laugh

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This post was written by Chris Rissetto and Bob Helland.

Across the country, federal, state and local governments have enacted - and strengthened - conflict of interest restrictions on how their elected officials vote as a way to prevent those officials from voting in their own self-interest To those who argue that such a restriction on voting violates his or her First Amendment Right to free speech, the Supreme Court has unanimously said no. In the case of Nevada Commission on Ethics v. Carrigan, 563 U.S. ___(2011), the Court has decided that the First Amendment Rights of a city council member from Sparks, Nevada were not violated when he was censured by the state Commission on Ethics for a vote on a project connected to his campaign manager. This decision continues the trend going on the local, state and federal level to hold government more accountable and serves as a warning for those who serve in government as well as those seeking to do business with it.

Michael Carrigan, a member of the Sparks City Council, was found by the Nevada Commission on Ethics to have violated the Nevada's Ethics in Government Law -- which broadly defines conflicts of interest -- when he voted to approve an application for a hotel/casino project in Sparks that his friend and long-time campaign manager worked for as a paid consultant. The Nevada Supreme Court decided that his First Amendment rights had been violated.

When it comes to the First Amendment, a vote by an elected official is not the same as a vote by a private citizen. In reversing the decision by the Nevada Supreme Court, the Court took care to distinguish the fact that the elected official was acting in his official capacity, in this case by voting. This is not protected speech when it comes to the First Amendment, wrote Justice Scalia, speaking for the majority: "A legislator's vote is the commitment of his apportioned share of the legislature's power to the passage or defeat of a particular proposal. The legislative power thus committed is not personal to the legislator but belongs to the people; the legislator has no personal right to it" (slip opinion at Page 8). Justice Scalia also strongly rejected the argument that a vote represents some form of symbolic speech that merits protection under the First Amendment, questioning how a legislator would indicate, or whether he would even wish to indicate, the symbolic meaning behind his vote.

What's next? The Court's decision upholding Nevada's Ethics in Government Law as constitutional supports the many conflicts of interests restrictions on elected officials that are in place across the country. However, an opening may remain to challenge part of Nevada's law: that which bans activity affected by an elected officials "commitment in a private capacity to the interests of others" Nev. Rev. Stat. Section 281A.420. Justice Kennedy, in his concurring opinion, noted that this might be too broad a category and could encompass an elected official's relationship with supporters, many of who might reasonably expect the official to vote a certain way on a matter. Kennedy writes that "the possibility that Carrigan was censured because he was thought to be beholden to a person who helped him win an election raises constitutional concerns of the first magnitude" (slip opinion at Page 4). This question was not brought up before the Court however and therefore not considered in its decision. But governments should consider Justice Kennedy's opinion as a warning when writing and enforcing their conflicts of interest restrictions. Defining a conflict of interest as broadly as Nevada may have future constitutional concerns.

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This post was written by George Hoare.

On 6 June 2011, the European Commission (EC) outlined measures to tackle the problem of corruption within the European Union (EU). According to figures quoted in the press release, four out of five EU citizens regard corruption as a major problem in their Member State, with corruption estimated to cost the EU economy €120 billion per year.

The most significant of the new initiatives is the establishment of the EU Anti-Corruption Report (the Report). The Report will be issued by the EC every two years, starting in 2013, and is intended to give a clear picture of anti-corruption efforts and achievements within the EU, as well as pointing out failures and vulnerabilities across the 27 Member States. It is hoped that the Report will stimulate peer learning and exchange of best practices between Member States.

Further initiatives to tackle corruption are expected over the coming years. These include: proposals for modernising rules for confiscating criminal assets; an action plan for how to improve the gathering of crime statistics; and a strategy to improve criminal financial investigations in Member States. In parallel, the EU will put greater emphasis on anti-corruption considerations in its relevant policies. These initiatives are part of a wider agenda to protect Europe’s licit economy, as set out in the EU Internal Security in Action presented by the EC in November 2010.

According to Cecilia Malmström, European Commissioner for Home Affairs, implementation of anti-corruption legislation among Member States is “very uneven”. She considers that there is “not enough determination amongst politicians and decision-makers” to fight corruption and the Report is designed to generate the political will to tackle the problems associated with corruption.
 

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This post was written by Christoper L. Rissetto and Robert Helland. 

At times, Federal grantees reconsider the wisdom of applying for, and spending, Federal grant dollars. Unfortunately, the result of such reconsideration is a demand by the Federal grantor to repay the grant funds already spent.

A grantee facing this predictable Federal decisionmaking has a number of options before pulling out the peoples’ checkbook (or running to court). A grantee, particularly a State, may have a number of ways to significantly pare down any announced “debt” of the United States.

• Ask for, and conditionally accept, any agency “offer” and use it as a base for negotiations and claims.
• Make all good faith claims possible under the subject program (e.g., whether housing, environmental, transportation, and the like). These can act like sponges to offset some of the federal debt repayment. A State will have a broader range of options here, versus a city, county, or special district.
• Ditto on making claims where Federal funding might presently be absent, but the costs would have been funded if monies were available. Make “dry grant” requests, where the eligible, but unfunded, amounts might also act to offset federal claims.
• Inventory every conceivable grant claim, in every federally-sponsored program, that the grantee might make – then make them. By this point, the message is clear, if a grantee is acting as a “debtor” then all steps must be taken to simply reduce the potential debt.
• Treat the “termination”, if applicable, as a government-directed one (i.e., as a de facto termination for convenience). If so, then the grantee and Federal government must negotiate the terms of the termination.
• Consider claiming that Federal repayment demands are inconsistent with the Debt Collection Act, in that it makes the political entity non-viable economically, or even bankrupt. A grantee can always argue, with sufficient proofs, that it simply cannot repay a Federal debt and can seek relief accordingly. Further, if the grantee is a State, it is important to note that States cannot file under bankruptcy law, so it should be placed into bankruptcy, involuntarily, by Federal collection action.
• Alternatively, offer a very limited repayment amount, which would form the basis for future government negotiations.
• Further, a grantee might offer an “in-kind” contribution, at least for part of the repayment amount.
• Seek to have included within an appropriations bill direction to the affected Federal agency that its final decision on the dispute for grant XXX will be that made by the grantee. After all, this is Congress’ money, and it can decide to direct a Federal grantor’s decision to be that of its grantee.

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• The US military does the Hokey Pokey in Iraq.
• Edward Siedle of Forbes provides some insight into the failure of effective whistleblower enforcement.
• The Obama Export Initiative is starting to resemble Punxsutawney Phil, whenever either rear their head we are left with several months of the same.
• Ezra Klein is back at it, this time breaking down the stimulus / deficit connection.
• It's OK to Laugh.

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This post was written by Christoper L. Rissetto and Robert Helland.

In April, the President and Congressional Republicans agreed on a deal to cut $38.5 billion in discretionary spending from the federal budget for the remainder of Fiscal Year ("FY") 2011, averting the threat of a government shutdown. As we have noted however, that decision was "easy" when compared with the more difficult decisions Congress and the Obama Administration face on revenue and spending priorities for FY 2012 and beyond. One event triggering these decisions is the need for the federal government to raise its debt limit. This week, Treasury Secretary Geithner notified Congress that he was taking "extraordinary measures" to fund federal operations as the United States has hit the $14.3 trillion debt ceiling and could not borrow additional funds. To avoid the U.S. defaulting on its obligations, Congress will have to vote to raise the debt ceiling, and soon. However before there is a vote to do so, Speaker of the House John Boehner (R-OH-8) and other Republicans have made it clear that they want an agreement on significant cuts in spending, while Senate Democrats and the Obama Administration want revenue increases on the table as well. And even if all sides reach an agreement, another agreement will need to be reached to fund the federal government for FY 12, set to begin on October 1st. Lurking behind all of these decisions is the threat of a government shutdown - or worse - if an agreement is not reached.

Living on borrowed time. The Federal Government has already hit the $14.3 trillion debt ceiling, as Secretary Geithner has noted in his letter to Congress. Without an increase, the United States can no longer borrow funds needed for the federal government's operations and in addition runs the risk of defaulting on its existing debt obligations. In his letter to Congressional leaders, Geithner indicates that Treasury has secured "additional headroom" by suspending investments in federal retirement funds. However, this only will buy a limited amount of time: by August 2nd "the borrowing authority of the United States will be exhausted". Before August 2nd, Congress must vote to raise the debt limit - something it has done repeatedly over the years. However, the decision to raise the debt limit has been tied to efforts to reduce the amount that the federal government borrows. As noted above, House Speaker Boehner has made clear the position of the House Republican majority that any reductions in borrowing must come from spending cuts. The problem is to get the spending cuts needed to make significant reductions in the debt, House Republicans could not simply focus on discretionary spending programs, as was done in the April budget deal. This only constitutes about 1/3 of the federal budget. Now it must also cut spending for mandatory programs, including Social Security and Medicare, which make up the remaining two-thirds. House Republicans, led by House Budget Chairman Paul Ryan (R-WI-1), would do this in part by cutting spending to Medicare. On the other side, a number of Democrats, including Vice President Biden and Senate Budget Committee Chairman Kent Conrad (D-ND), are leading negotiations that consider other debt reduction measures, including tax increases and the end of certain tax breaks. While the details of a final debt reduction package are not yet known, it is expected that it will include both spending cuts and revenue increases. And expect to see Social Security and Medicare somewhere in the mix too. The need to address the spending for both programs was reinforced this week when Treasury announced that the trust funds for each program will be exhausted a bit earlier than anticipated. The Medicare Trust Fund will be exhausted by 2024 and the Social Security Trust Fund will be exhausted by 2036.

How this plays out in spending decisions for FY 12. The House of Representatives is moving forward on appropriations for the 12 annual spending bills that will fund the federal government for FY 12, with discretionary spending levels of $1.019 trillion among the 12 bills. This represents a cut of $30.4 billion for discretionary spending in FY 11. However, the Senate has never agreed to these numbers. Further, Democrats argue that the $1 trillion number for FY 12, which is $30.4 billion below FY 11 levels, is too low. So now all eyes are on the debt negotiations, to see if greater numbers for discretionary spending for FY 12, and beyond, are agreed to.

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This post was written by Christopher L. Rissetto and Robert Helland.

The Chairs of the House Oversight and Government Reform and Small Business Committees have announced a joint hearing of their respective committees on a sweeping proposal by the Obama Administration requiring the disclosure of political contributions and expenditures by those bidding on government contracts. The Public Policy and Infrastructure Group has been monitoring this draft executive order since it was first proposed and noted that it would have a significant impact on the contract community. It would require the disclosure of (a) all contributions or expenditures to or on behalf of federal candidates, parties or party committees made by the bidding entity, its directors or officers, or any affiliates or subsidiaries within its control; and (b) any contributions made to third party entities with the intention or reasonable expectation that parties would use those contributions to make independent expenditure or electioneering communications.

The most recent development is the scheduling of the joint congressional hearing on the proposal, which will happen on 1:30 Thursday, May 12th in the Oversight and Governmental Reform Hearing Room, 2154 Rayburn House Office Building. The House Oversight and Governmental Reform Committee is a powerful one with jurisdiction over any issue it wishes to examine. As we have previously noted, its Chairman, Darrell Issa (R-CA-49) has indicated his intent to move forward on an aggressive plan of oversight of the Obama Administration. Both Chairman Issa and Small Business Chairman Sam Graves (R-MO-6) have requested that White House Budget Director Jack Lew testify at this hearing, but he has declined. Both Chairmen have indicated their interest to subpoena the Budget Director, indicating the tension underlying this proposed Executive Order. A list of other witnesses has been made available and includes representatives of government contractors and trade associations as well as scholars.

This is expected to be part of an ongoing effort by Congress to block or otherwise limit the implementation of this proposed order.
 

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• I never figured the Oracle of Omaha to be much of a Parrot Head -- they do spell their names differently. But in this piece  the FCPA Compliance and Ethics Blog breaks down Warren Buffet's Changes in Latitudes, Changes in Attitudes.
• Some anti-trust football analysis that isn't related to the NFL.
• I know people love to complain about how expensive lawyers are. Don't worry, we love to listen. So while I know that my legal services aren't free, at least it's not a 21,000% (thats right) mark-up.
• While we are on the topic of government spending, how about some US debt history?
• Week 2 of Its OK to Laugh.

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This post was written by Christoper L. Rissetto and Robert Helland.

The Internet has been ablaze over the past 24 hours with reports that the Obama Administration is considering requiring "all entities submitting offers for federal contracts to disclose certain political contributions and expenditures that they have made within two years prior to the submission of their offer". This was first disclosed by Hans A. von Spakovsky, a former Federal Election Commissioner and scholar with the Heritage Foundation. The Public Policy and Infrastructure and Government Contracts Groups offer this analysis of the Administration’s proposal, as it is known so far, and will monitor efforts to implement it as well.

The proposed order requires the following to be disclosed:

(a) All contributions or expenditures to or on behalf of federal candidates, parties or party committees made by the bidding entity, its directors or officers, or any affiliates or subsidiaries within its control; and
(b) Any contributions made to third party entities with the intention or reasonable expectation that parties would use those contributions to make independent expenditure or electioneering communications.

The Impact of these Rules on the Contracting Community Will be Significant. If implemented, these disclosure requirements would have a broad impact both in terms of what needs to be disclosed and who needs to disclose it They would apply, for example, to any entity seeking to do business with the federal government. So those seeking to contract with the federal government would have to put a compliance system in place – as part of putting together its bid – in order to keep track of the contributions and expenditures made. Also, the proposed disclosure requirements would reach far into the bidding entity, to include affiliates or subsidiaries under its control. For an entity with many subsidies, this would not only mean creating an effective compliance system but enabling the coordination within that system among many pieces and players, in order for effective disclosure. Finally, they would apply not only to political contributions to candidates and political parties but also to contributions made to a third party that spends money for advertisements advocating the election or defeat of a candidate for federal office. So, for example, if an officer of a bidding entity also belongs to an organization that runs ads calling for the defeat of a candidate, then he or she must disclose dues any other payments made to that organization, in the context of the bidding entity seeking the federal contract. That goes beyond any requirement in place today and in real terms means that those entities which run these advertisements could see the disclosure of those behind them.

Many legal issues are likely raised by an Executive Order that would be issued with this content. Among these issues are: (1) constitutional, third party, and other statutory rights that might be disturbed by compliance with the requirements of the Executive Order; (2) whether such an Executive Order exceeds the President's authority; and, (3) potential third party liability that might be incurred by implementation activities of covered entities (e.g., employment disputes), among others.

This proposed executive order is clearly a response to the Supreme Court’s decision in Citizens United v. FEC, which reverses decades of statutory and case law that prohibit corporations from using their general treasuries to fund independent political advertising supporting or opposing candidates for local, state or federal office.  And those on the right clearly consider it to be drafted in favor of organizations favoring the Democratic Party. van Spakovsky, for example, notes “federal employee unions that negotiate contracts for their members worth many times the value of some government contracts are not affected by this order. Neither are the recipients of hundreds of millions of dollars of federal grants”. We would note that this is a proposal only and the final details of the Executive Order are still not in place.

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This post was written by Christoper L. Rissetto and Robert Helland.

Late Friday evening, with only minutes remaining before a partial shutdown of the federal government, the White House, Senate Democrats and House Republicans came to an agreement on spending and policy decisions necessary to fund the federal government for the remaining six months of Fiscal Year 2011. In the end, $38.5 billion was cut from the discretionary side of the budget, i.e. spending for programs whose spending levels are not mandated by federal law such as Social Security and Medicare. While more detail will be made available in the next days and weeks about where the budget knife will fall, we know that programs at the Departments of Labor, Education and Health and Human services will be cut by $13 billion. $18 billion will come from cuts in programs considered to be "unnecessary" by the Department of Defense. The remainder will be spread across agencies ranging from State to Housing and Urban Development. In addition, some, but not all of the policy riders sought by Republicans were included, such as restrictions on the District of Columbia spending its own funds to provide abortions and requirements and the reauthorization of a program to continue a school voucher program in the District.

The compromise agreement took a lot of effort, however the work on this agreement will seem slight in comparison to the decisions needed to be made 1) on the next federal budget, for Fiscal Year 2012; and 2) on the upcoming increase needed on the federal debt ceiling. A more grueling battle in both areas is expected, with cuts in both discretionary and mandatory spending to be under consideration. We will see more detail on the President's plan when the Obama Administration makes its own budget request of Congress this week, in response to a plan already put out by House Republicans that will cut $5 trillion over ten years.

Companies would be advised to at least monitor the budget activities, and to lobby for needed clarifications and amendment. Significant budget policies, possibly including the structuring of the tax code and other key program directions, are certain to be debated and revised.

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• Perhaps I'm not that creative, but I keep thinking that illegally exporting jet engines has to be more difficult than people think. I guess the arrests would lend credence to my belief.
• $ 16.2 Billion … sneak attacks … the cover of darkness. The only thing Robert Creamer's summary of lobbying effort against the Wall Street Reform Law is missing is a reference to Chuck Norris. That's better.
• Following a lot of chest thumping about its new enforcement weapon, the Bribery Act, the UK appears poised to let some air out of its own balloon.
• How many government employees does it take … to conclude that fixed price contracts have built in financial cushions? Apparently just one.

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• Pun Alert: Obama's proposal for high speed trains is picking up some speed (ouch), with the help of a couple Mad Men.
• Headline of the Week: If BIS Can't Understand the EAR, How Are You Supposed To?
• In defense of military spending. Colin Clark argues that the passage of a Continuing Resolution, and the failure to pass the annual defense spending bill, could end up costing the military more money that it saves.
• We've had Too Big to Fail; now the FCPA Professor brings us Too Lucrative To Fix (*my words, not his*). Here is the Professor's take on the birth of industry resulting from an increase in FCPA enforcement including: prosecution, legal defense, compliance certification, and insurance.
   

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• During law school, I sort of liked having to carry a copy of Blacks Law Dictionary, it made me feel extra-smart. The distinct benefit of carrying a dictionary is that is serves as a (heavy) reminder of the importance of defining your terms. Because the FCPA doesn't, we get to read posts like this.
• In breaking news … some government contracts are wasteful.
• I always have a moment of anxiety when my bag has to go through the scanners at the airport. Did I get out my shaving cream? Is there a water bottle left in there? Did I accidentally pack my cigar cutter? I have never once had to worry if the scanners would find the dissembled remains of 60 firearms I was illegally exporting out of the US.
• Free advertising and fishing expeditions are two justifications for why GAO bid protests have reached a 15 year high. This article by Robert Brodsky draws back the curtain in a discussion of the flaws, as well as those taking advantage, of the current system of government contracting.
• I'm a lawyer; so unlike that baby in the cars.com commercial, I have very little experience fighting fires. However, given my stated lack of experience, I feel rather confident that fighting fires with gasoline probably isn't going to settle things down. Please allow Robert Reich to explain.

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This post was written by Christopher L. Rissetto and Robert Helland.

Attention has been fixated on efforts in Wisconsin and other states as governors seek concessions from public employee unions in efforts to balance their budgets. Governor Scott Walker (R) of Wisconsin has gone the furthest, so far, by seeking to eliminate the collective bargaining rights of public employee union, prompting Democrats in the State Senate to flee the state to avoid that legislative body from reaching a voting quorum on the issue. If Governor Walker should eventually be successful, however, Wisconsin faces a potential grant issue it may not have initially anticipated: the potential loss of transit assistance it receives from the federal government. Federal law requires governing bodies receiving federal transit assistance to keep all the collective bargaining rights it had in place at the time that assistance began.

The attached client alert discusses the potential grant issue, who might be affected, as well as ambiguities and a possible fix.

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This post was written by Matthew J. Thomas.

The US Federal Maritime Commission (FMC), which regulates US international ocean shipping services, has made life easier for thousands of logistics companies and their import/export customers.

The FMC regulates a broad range of “ocean transportation intermediaries,” the logistics providers and forwarders who connect importers and exporters with global shipping lines. Many of these (called “non-vessel-operating common carriers or “NVOCCs” ) act as resellers of ocean transportation services. NVOCCs buy space in bulk from vessel operators, then resell it, often bundled with additional services, to manufacturers and retailers.

On February 16th the FMC announced a plan to waive longstanding requirements that licensed NVOCCs publish their pricing in public freight tariffs and file all individual customer contracts with the FMC. Cutting these anachronistic filing rules will help over 3300 companies, according to the FMC, and should help encourage more individualized negotiations for international transportation solutions. The changes should take effect later this spring, but logistics companies still will need to comply with FMC licensing, bonding and recordkeeping rules.

The FMC cited the White House’s latest mandate for agencies to review rules and reduce burdens, set out in President Obama’s January 18, 2011 Executive Order 13563, and signaled a willingness to consider further cuts.

Hopefully the FMC’s zeal for streamlining will be contagious, given the rigorous regulatory landscape for logistics providers. Companies providing integrated supply chain solutions must navigate an impressive array of agencies, including the FMC, the Department of Transportation (air freight forwarding), Federal Motor Carrier Safety Administration (motor carrier forwarding and broking), Transportation Security Administration (facility security) and Customs and Border Protection (carrier bonding and manifest filing). With additional requirements and regulators for dual-use goods, arms, food, drugs, and hazardous materials, compliance planning quickly becomes an exceptionally sophisticated undertaking.  

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With a title like "Tactical Secrets" I was expecting a insiders look into fly fishing for Steelhead trout . But then I realized I was reading the New York Times. Instead, this piece addresses the government's assertion of the state-secrets privilege in General Dynamics Corp v. US.

Déjà vu all over again. Nick Silver compares the political landscape that President Clinton faced with the current congressional make up now facing President Obama.

When blogs reference other blogs, we here in the Round Up office get excited. Howard Sklar at Open Air Blog explains why he disagrees with the FCPA Professor and Alexandra Wrange (of TRACE) over the impact of the UK Bribery Act.

Sudan Watch: With referendum results showing overwhelming support for secession, Khartoum is calling for an end to the US embargo. In news that should surprise absolutely no one, the US has decided to wait and see.

The National Institute of Standards and Technology has issued new guidelines for cloud computing. If "safeguarding data in the public cloud" is something you are in to, or have no idea what it means, you may want to read this.
 

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The post was written by Robert Helland.

With the Republican Party in control of the House of Representatives this year, attention has focused on where the areas of conflict will be between the House, the Democratic-controlled Senate, and the White House. While a lot of attention has been focused on efforts to repeal health care and the upcoming hearings promised by new committee chairmen, including House Oversight and Government Reform Chairman Darrell Issa (R-CA-49), a bigger battle looms: Congress and the President must agree on a number of important spending decisions, from funding the government for the remainder of the current fiscal year to raising the national debt. Despite the recent calls for a more civil debate, the strong possibility exists that we could easily see a rerun of the budget stalemate that occurred in 1995 between then-President Clinton and the Republican-controlled Congress. This stalemate led not to one but two shutdowns of the federal government. As Yogi Berra once said: "Its déjà vu all over again".

Here are three budget tripwires to look for in the upcoming weeks, any one of which could lead to a budget standoff:

1. Talk about taking you time paying your bills: Congress and the President have still not agreed on a budget for the current fiscal year, which began over three months ago. Fiscal Year 2011 ("FY 11") began on October 1, 2010 and Congress and the President have still not come to agreement on the 12 spending bills needed to fund the operations of the federal government. Instead, they have chosen to pass a continuing resolution ("CR"), which keeps spending at FY 11 levels and puts off a decision on a final budget till March 4, 2011. Expect to see Republicans push for significant cuts in the FY 11 budget as the March 4th deadline approaches.

2. Oh, and about that $14 trillion we owe…well, we need more. One nice thing about being a debtor when you are the federal government: you can always give yourself the authority to borrow more money. And the government will need it too: at some point in March, the federal government will hit the current $14 trillion debt ceiling and will need to either raise it or run out of money and shut down.

3. Then there's FY 2012. And before the ink dries on any agreement on FY 11 spending or raising the debt limit, the decision making process on FY 12 begins, with the same differences on spending between the parties. President Obama laid down a marker down this week in his State of the Union address when he called for a targeted domestic spending freeze on all non-security domestic spending which would reduce domestic spending by $400 billion over ten years. This is in advance of the Obama Administration’s FY 12 budget proposal to Congress, which is anticipated in February. However, the gap between the President’s budget cutting proposal and those put forth by Republicans suggests that an agreement with the Republicans won't be easy to reach by the time a FY 12 budget needs to be in place, by October 1, 2011.

Both Republicans and Democrats are aware of the high risks for both parties – and the country - should there be a budget standoff leading to a partial or total government shutdown. The recent announcement from the Congressional Budget Office that the deficit for FY 11 will rise to a record $1.5 trillion may help parties come to an agreement on spending. But given the gulf that currently exists between Democrats and Republicans, a shutdown cannot be ruled out.
 

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• Just once I'd like a "pilot" program to be about Top Gun. This SBA program isn't, but it will help small businesses compete for large contracts.
• Ezra Klein takes a look at what it means to be pro-labor during these economic times.
• Here at the Round-Up we love all things in summary form -- so head over to the exportlawblog's update of the Iran sanctions.
• The FCPA Professor temporally moved his classroom to the Hill. Find out what the Professor taught Senator Specter.

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• Since there is no Nicorette equivalent for oil addiction, Stephen Stromberg takes a hard look at the cost of reducing U.S. dependence on oil. If that doesn't spark your interest, Stromberg also challenges his readers to accuse him of playing a role is a mysterious communist conspiracy to destroy civil rights. So the post has that going for it...
• Santa may be taking some time off right now, but rest assured when it comes to billions of U.S. tax dollars, someone is watching to make sure you aren't being naughty. Arnold Fields, Special Inspector General for Afghanistan Reconstruction, has stepped down amid questions of SIGAR effectiveness.
• Just to confuse everyone, UK regulators have begun paying fines to those they regulate. In other news, up is down.
• While the Roth ITAR case may never go away, it looks like Professor J. Reece Roth will be forced to. 

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• *Attention* government contracts attorneys: If your friends and loved ones stare blankly at you when you explain what it is you do, it turns out they are not the only ones who are confused. Check out this amusing breakdown of confused experts.
• New Year, new Congress, new rumblings about government fraud . An attorney involved in civil suits against the company formerly known as Blackwater is calling for the federal government to pursue cases involving allegedly corrupt defense contractors.
• Can't find time in your busy schedule to visit your grandparents? No problem, they may be coming to a work place near you.
• The Round-Up would like to wish a belated happy 33rd to the FCPA. One of our favorite FCPA commentators, the FCPA Professor has penned a worth-reading birthday announcement.
• Washington Technology peers through its crystal ball and forecasts how companies in the federal markets can continue to grow in 2011.
• If you saw the New York Times articles about OFAC, you may be wondering how Treasury decided to respond. By blog, of course.
• If you have not been paying attention to Sudan, now is the time to start. As the referendum concerning the unification of the country gets underway, the Guardian lets you catch up in a hurry.

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Around this time of year many people look forward to the ringing of bells. Bryan Rahija wants your help in ensuring that we have year-round blowing of the whistles.

If the estate tax was called the death tax, would we all try to live a little healthier? (It’s the holidays – I'll make and break my resolutions in a few weeks). Regardless of its title, the tax is on the table. So what should congress do about it?

As a child, my parents coerced my siblings and I to get along through the promise of presents from Santa. Turns out FCPA violators who play nice with the DOJ may be able to secure a present of their own: a Non-Prosecution Agreement.

Holiday takeaways: good = presents; bad = coal; Microsoft engineer who attempts to export ITAR controlled goods to China  = criminal complaint.

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• It seems that the business sector finds the requirements of regulatory compliance to be burdensome. Who knew?
• Ezra Klein gets two-thirds of the way to a Clint Eastwood analysis of the financial commission's final report. Make sure to check out his summary before Friday's vote.
• I've stressed the importance of the Davis Bacon Act on these pages before. In case you thought I was kidding, I'm not: check our Mike Purdy's blog for a reminder of the importance.
• Ineffective assistance of counsel. Need I say more? Read it.
• I know there's a clever line in here about students becoming the teacher or vice versa, but it isn't coming to me. Check out Dick Cassin's piece at thebriberyact.com on what the UK can learn from the FCPA.

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This post was written by Christopher L. Rissetto and Robert Helland.

What can the House Oversight and Government Reform Committee investigate? Pretty much anything it wants. With Republicans taking over the majority in the House of Representatives, the incoming Chair of the House Oversight and Government Reform Committee, Representative Darrell Issa (R-CA-49), is set to move forward on an aggressive plan of oversight of the Executive Branch. This is of importance to interested companies affected by government regulation, but especially those affected by the implementation of the recently passed health care and financial reform statutes; our nation's food safety system; the economic stimulus; and efforts by the Environmental Protection Agency to address greenhouse gas regulation and related environmental issues – areas where Representative Issa and other Republicans have been most critical. The Public Policy & Infrastructure Practice expects to see a number of Committee hearings in these, and other areas, throughout the 112th Congress. We know that Committee and the expected targets in the White House and at federal agencies are all "lawyering up."

To view the full client alert click here.

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This post was written by Christopher L. Rissetto and Robert Helland.

The midterm elections are (finally) over. With the Republicans taking over the House of Representatives next year and the Democrats keeping control of the Senate, albeit by a smaller margin, the question is what, if anything, will get accomplished in the 112th Congress? Overall, the chance for passage of major legislative initiatives in areas such as energy or immigration are dramatically reduced. However, those elected to Congress, both Republican and Democrat, have promised to deal with the nation's struggling economy, including the too-high unemployment rate. Also, there are a number of legislative matters which must be addressed next year, including the passage of legislation funding the operations of the federal government as well as legislation needed to raise the national debt. All of this occurs while the White House takes steps to implement the recently-passed health care and financial reform laws and the Republicans in the House of Representatives use their new majority to watch those steps closely.

All of this means all lot of activity next year, which has a lot of potential for progress, or mischief, depending on your point of view. Here are some things we expect to see in the 112th Congress:

1. The Obama Administration is moving forward with implementing the health care and financial regulatory reform laws. Despite the greater number of Republicans in Congress, repeal of either law is unlikely.
2. However, expect greater oversight and a slew of subpoenas headed to the White House.
3. "Follow the money". We expect must-pass spending bills to be a battleground over implementation of health care and financial reform.
4. Job creation; Tax credits; and Deficit reduction meets the debt limit.

Tell us in the comments what you expect out of the next Congress … and whether gridlock will prevent anything from getting done. 

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I bet you think pretty highly of yourself. I know I do … come on, I’m a lawyer! (Please insert stereotypical lawyer joke here – put a good one in the comments if you dare). From time to time, I’m “gently” reminded that not all of my accomplishments are oh-so noteworthy. As my brother used to say after I would regale him with some of my more humdrum endeavors: “what do you want, a cookie?” It looks like I’m not the one in search of a cookie.

As the great state of Wisconsin bids farewell to Russ Feingold, the rest of us begin to say goodbye to the legislation he is most known for.

When I think of auditors, the first thing I think of (after the Grim Reaper) is efficiency. So why then is the Defense Contract Audit Agency amending its procedures in a way that “could expose the government to massive overcharges by prime contractors?”

Interested in potentially saving millions of dollars? Yep, I thought so. Now lets play: Follow the Blogosphere Link Machine. This post is my reference to the FCPA Blog’s reference to an article written by Andrew Weissmann and Alixandra Smith discussing the potential for substantive FCPA revision.

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After the roaring success of the first Round-up (remember when I gave it the cool nickname) we are back for round two. Here is a quick jog around the regulated legal world.

• Have you ever known a professor who didn't love golf? I didn't think so. Have you ever been able to get a lawyer to stop talking about the law? Don't lie to me, its rude. It was going to happen sooner or later, but I'm hoping this one sticks around -- ladies and gentlemen, for your tee time banter: The FCPA Mulligan Rule.
• I hope you got all of your "Congress never does anything" jokes out of your system. These Lame Ducks could cost you a fortune.
• 10 years ago the thought of having two employers would have meant that I had: 1) two small paychecks, 2) a couple of lousy jobs, and 3) at least one terrible middle manager to report to. I'd much rather be a federal contractor in this day and age, where having joint employers means there are more people to sue.
• If you sit real still, watch closely, and are willing to have less fun than bird watching, you can witness the birth of the proxy advisor industry.

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This post was written by Christopher L. Rissetto and Robert Helland.

In Washington, all attention right now is on the rapidly approaching midterm congressional elections and the efforts by Democrats to retain their majorities in both houses of Congress. However, regardless of whether Democrats lose control of the House of Representatives or Senate, members of Congress are expected to return to Washington on November 15th to address unfinished business in a lame duck session of Congress. And there is a lot of unfinished business: Congress still must complete work on a budget for the fiscal year 2011, which began on October 1st. In addition, Democratic leaders have promised to address expiring tax cuts that were enacted during the Bush Administration as well as ratification of a strategic arms control treaty with Russia. And if this wasn't enough, Senate Majority Leader Reid (D-NV) has also promised votes on legislation that (1) regulates food safety; (2) provides tax rebates for those using natural gas and electric vehicles; and (3) addresses wage discrimination.

But wait, as the commercial goes, there's more. Pressure remains in Congress to pass measures that would address certain segments of the economy. This runs from extending tax breaks benefitting various industries, addressing Medicare reimbursement rates for doctors, and providing a one-time payment of $250 to Social Security recipients. It is not clear how many of all these measures will make it through Congress before it adjourns at the end of the year. Given the level of partisanship that we have seen in recent months and through the campaign, there is not a lot of cooperation in place on many bills. However, we do see final action likely on legislation affecting budget and economic matters, such as a multi-bill "Omnibus" bill that funds government operations for the remainder of Fiscal Year 2011 (as well as individual projects requested by Members of Congress) and a tax bill that provides assistance to individuals and businesses. More importantly, we see the lame duck as a place where Congress will "set the table" for the efforts it will take in 2011. The Public Policy & Infrastructure Group remains available to advise clients how to develop a legislative strategy for the lame duck as well as the 112th Congress that will begin in January.

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This post was written by Michael A. Grant.

Hello good-looking regulatory attorneys. Welcome to the first installment of the Regulatory Round-up (catchy, I know). If you are reading this post, odds are someone in an office larger than yours is wondering why you aren't working -- but I'm glad you stopped by. The goal of this weekly installment will be to connect you to stories from around the blogosphere that impact those of us practicing in regulated industries. While the primary focus of the Round-up (look, I already gave it a trendy nickname) will be the 7 topics to the left, I'll be sure to mix in other stories that catch the eye. Here's hoping you see something new, have a laugh, or at least get some legitimate "professional reading" time.

• State and local agencies, you remember Davis-Bacon right? You met at that government contracting convention in Hawaii? You remember … the tiki torches, the pig roast, the Pacific breeze, and non sequiturs about the FAR … but I digress. Looks like you might want to spend some time getting reacquainted; after all, federally funded construction projects must comply with the prevailing wage requirements.
• Tax the bad or fund the good? Ezra Klein discusses differing approaches to combating climate change.
• Who’s left to review the competitive effects of this merger? (or) Why its better to regulate than be regulated. The Competition Law Blog breaks down the proposed merger of the Office of Fair Trading and the Competition Commission.
• You know that feeling you get when you think your banker is stealing from you? You may be on to something.
• I always liked the expression “a license to print money.” Securency International is in the businesses of printing other peoples money, so why are their businesses and homes being raided?

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This post was written by Lorraine M. Campos and Joelle E.K. Laszlo.

Federal grant awardees are about to join contractors in the transparent government revolution. Beginning in November, awardees of prime grants valued at $25,000 or more may be required to report certain executive compensation information about themselves and their subgrantees. The new reporting requirements, established under the Federal Funding Accountability and Transparency Act (“FFATA”), were greeted with open hostility at a recent Office of Management and Budget (“OMB”) Town Hall meeting. Not enough hostility to prevent them from taking effect, however, so prospective grant recipients should take note.

The new grantee reporting requirements are similar to those placed on contractors by the FFATA, about which we reported in August. Unlike the contractor reporting requirements, however, the grantee requirements will not be “phased in” over time. Rather, any new grant of $25,000 or more awarded as of October 1, 2010 will require reporting two types of information. First, the name and total compensation of each of the prime grantee’s five top executives must be reported if the prime grantee (A) receives more than 80 percent of its annual gross revenues from the federal government, which revenues exceed $25 million annually, and (B) does not already report its executive compensation through the Securities and Exchange Commission. Second, without exception, a prime grantee must report specific data about all first-tier subgrants it awards that are valued at $25,000 or more. That data includes the name of the subgrantee and the amount and purpose of the award, the subgrantee’s location and the place of grant performance (including the congressional district), and the award’s Catalog of Federal Domestic Assistance program number and program source. Additionally, if a first-tier subgrantee meets the conditions for reporting executive compensation of grantees (items (A) and (B) above), the grantee must report the name and total compensation of each of the subgrantee’s five top executives.
Possibly in an effort to take some of the sting out of the reporting requirement, OMB officials presenting at the Town Hall stressed that grant reporting under the FFATA only needs to happen once – there is no continuing reporting requirement. A prime grantee will have until the end of the month following the month of obligation of a grant or first-tier subgrant subject to the reporting requirements, to report related executive compensation and/or subgrant information. Thus, for example, reporting related to a grant awarded October 1, 2010 and subject to the FFATA requirements must be completed by November 30, 2010.

As with contractor reporting under the FFATA, grantee reporting will take place though the FFATA Subaward Reporting System (“FSRS”), at www.fsrs.gov. While FSRS is currently open for contractor reporting, the site’s grant reporting functionality will not be available until October 29. FSRS has been programmed to receive data through the Central Contractor Registration database, www.ccr.gov, in which all prime contractors and grantees (but not subcontractors or subawardees) are required to register.

On October 7, OMB held the first of two planned webinars for grantees on how to use FSRS. Those wishing to receive updates on training and other developments related to FFATA reporting are encouraged to register at USASpending.gov. Those wishing the reporting requirements will go away are advised to keep wishing (and learn how to use FSRS in the meantime).  

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This post was written by Christopher L. Rissetto, Lorraine M. Campos and Robert Helland.

The Public Policy and Infrastructure Practice continues to monitor the changes in the campaign finance world since the Supreme Court's landmark decision in Citizens United v. Federal Election Commission. Citizens United reverses decades of statutory and case law that prohibit corporations from using their general treasuries to fund independent political advertising supporting or opposing candidates for local, state or federal office, or what it is termed "express advocacy". 558 U.S. 50 (2010). It also removes restrictions on independent advertising released within close proximity to either a primary or general election and which refer to a clearly identified candidate for federal office (known as “electioneering”). This decision has been the equivalent of an earthquake in the campaign finance world, however, it does not provide corporations and labor unions with unlimited leeway when it comes to funding political advertisements. The attached alert from the Public Policy and Infrastructure Practice discusses one limitation that remains in place, post-Citizens United, which affects "coordinated communications" i.e. those coordinated with a federal candidate, campaign, or political party. Contributions that are coordinated with a federal candidate, campaign or political party are considered a direct, in-kind contribution and remain illegal in the case of corporations or labor unions, even with the Court's decision in Citizens United. 2 U.S.C. § 441b (a).

The Federal Election Commission has issued revised regulations as to what constitutes a "coordinated communication". These rules will take effect on December 1, 2010. The alert discusses these rules and what steps can be taken to ensure that a communication is truly independent.
 

To view the entire alert click here.

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This post was written by Christopher Rissetto, Larry Demase, Jennifer Smokelin, Bob Helland, and David Wagner.

In the weeks that have passed since our previous article on climate change activity in Congress and the Environmental Protection Agency, it has become evident that Washington is more likely to see a snowstorm this summer than congressional passage of a cap-and-trade measure for greenhouse gas emissions. Passage was never considered to be easy - something we noted in our previous alert. For example, the House of Representatives passed climate legislation in 2009 (H.R. 2454, sponsored by Congressmen Waxman (D-CA-30) and Markey (D-MA-7), but by only a six-vote margin. Still, the 2009 legislation, combined with the impact of the Gulf of Mexico Oil Spill, indicated to some that there was some momentum for a bill passing the Senate and reaching the President this year. But that momentum ran smack into the 60-vote requirement in the Senate, which all measures must clear before receiving a final vote. And the 60 votes were just not there - not for the Waxman-Markey measure or for the industry-specific compromise floated by Senators Kerry (D-MA) and Lieberman (I-CT) during the end of negotiations. It remains possible that the Senate could still take up a cap-and-trade measure, either when it meets from September 13 through October 8 or during its "lame-duck" session, set to begin November 15. But we would not recommend anyone holding their breath.

While action on cap-and-trade in the 111th Congress fizzled in the Senate, EPA has continued on its course of regulating greenhouse gas (GHG) emissions.  As reported in Reed Smith’s Environmental Law Resource blog, in response to EPA’s “Endangerment Finding,” a number of petitions for reconsideration were filed by various industry and special interest groups. These petitions challenge the validity of EPA conclusions that global warming is currently at an all-time high and assert that other geologic periods - e.g., the Medieval Warm Period and the Holocene period - were in fact warmer than present.  Specifically, the groups challenge data supporting reconstruction of historical earth temperatures and assert that certain e-mails involving scientists at the Climate Research Unit of the University of East Anglia in the United Kingdom demonstrate a deliberate and inappropriate manipulation of the data.  The petitioners also challenge the process by which EPA developed the scientific support for the Endangerment Finding; that is, they are claiming that EPA did not independently judge the underlying science and thus did not convene a truly independent external peer review.  Petitioners also claim EPA violated the Information Quality Act by failing to post the underlying data and scientific studies in the docket.  Finally, the petitioners assert that new scientific studies refute evidence supporting the Endangerment Finding.

On July 29, 2010, EPA denied all of the petitions for reconsideration and found, inter alia, that there were no significant errors in the Intergovernmental Panel on Climate Change’s (IPCC) Fourth Assessment Report, and that there was no conspiracy to manipulate the data. EPA also rejected the claim by petitioners that new scientific studies refuted evidence supporting the Endangerment Finding. The court challenges to the Endangerment Finding can now proceed. These challenges, however, are not as likely to be successful as the challenges to the Tailoring Rule, discussed next.

There are significant challenges to the Tailoring Rule, EPA's rule that "tailors" permitting programs to limit the number of facilities that would be required to obtain New Source Review and Title V operating permits based on their greenhouse gas emissions. If there is a chink in EPA’s armor, it rests in these challenges. The crux of these challenges focus on the threshold and timing determination in the final Tailoring Rule, in which EPA sets a threshold of regulation at 75,000 tons GHGs. This effectively leaves major industrial sources under that threshold unregulated until at least 2016, and perhaps beyond. In the draft regulation, EPA had proposed a 25,000-ton GHG threshold. Challengers to the Tailoring Rule argue that this switch from 25,000 to 75,000 tons is arbitrary and capricious with no scientific basis in the record to support it. And they may be right. Last week, 20 of the lawsuits against EPA's tailoring rule were consolidated by the U.S. Court of Appeals for the District of Columbia Circuit. The case's court date has not yet been set. For more discussion, see here.

On the regulatory front, EPA continues to press its authority under the Endangerment Finding. Following up on its Tailoring Rule, on August 12, 2010, EPA proposed two rules regarding GHG emission permitting under the Clean Air Act . In the first rule, EPA proposed to require permitting authorities in 13 states to make changes in their implementation plans to ensure that GHG emissions will be covered. Other states are to inform EPA if their existing permitting authority does not allow them to address GHG emissions. In the second rule, EPA is proposing a federal implementation plan that would allow EPA to issue permits for covered GHG sources located in states not able to develop and submit revisions to their implementation plans before the Tailoring Rule becomes effective. Neither of the rules has been published in the Federal Register yet. Once they are published, EPA will schedule a public hearing on the federal implementation plan rule likely in Arlington, Va., in September.

This summer, EPA also issued its proposed “Transport Rule” to provide for the attainment and maintenance of the 1997 and 2006 fine particulate matter National Ambient Air Quality Standards and the 1997 ozone NAAQS. While targeting only reductions in emissions of NOx and SO2 transported between the states, many believe this rule will have a dramatic impact on the viability of coal-fired electric generating capacity in the eastern United States.  The Transport Rule is discussed in more detail at the Environmental Law Resource.

Finally, the Obama Administration is also considering a variety of actions it can take without Congress. In a report entitled, “Plan B: Near Term Presidential Actions for Energy and Environmental Leadership,” the Presidential Climate Action Project concluded that President Obama could implement the following ideas prior to the United Nations 16th Conference of the Parties in Cancun:

• Work with states and local governments to create a national roadmap to the clean energy economy
• Declare war on energy waste
• Begin reinventing national transportation policy
• Eliminate fossil energy subsidies under the Administration’s control
• Establish ecosystem restoration as a climate action strategy

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This post was writen by Chris Rissetto and Joelle Laszlo.

While most people probably do not associate actions of Congress with the 1970s American pop band The Carpenters, there is a nice reminder in the duo’s music that the passage of a bill on the Hill is often only the first step in an extensive process to draw up the actual rules that will govern how American businesses are to behave. According to an analysis by the U.S. Chamber of Commerce, for example, implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank” or “the Act”) will require 520 rulemakings, 81 studies, and 93 reports. Ten Federal entities, including the Federal Reserve (“Fed”), the Treasury Department (“Treasury”), the Securities and Exchange Commission (“SEC”), and two agencies created by the Act – the Consumer Financial Protection Bureau and the Financial Stability Oversight Council – will be responsible for solely or jointly issuing new rules under the Act. The SEC (both on its own and with the Commodities and Futures Trading Commission), the Fed, and Treasury’s Office of the Comptroller of the Currency have already issued a variety of requests for comments and notices of proposed rulemaking pursuant to the Act.

The Administrative Procedure Act sets forth the specific steps and timeline that Federal agencies must follow when proposing regulations pursuant to Congressional action, but the proverbial devil always lurks in the details. Furthermore, citing the extensive rulemaking that will take place under Dodd-Frank, the SEC has implemented a ‘pre-rulemaking’ process for accepting public comments on a number of issues within the Act’s purview, and other agencies are undertaking similar actions to enhance public participation in the rulemaking process, beyond what is required by law. All of this means that a company with even a passing interest in how the regulations shake out will be best served by developing a comprehensive rulemaking agenda. Such an agenda should take into consideration not only the rulemaking agencies (and their three-pronged goal to promulgate practically-, legally-, and politically- sustainable regulations) but also the Congressional Committees and Members who will be responsible for overseeing agency activities under and compliance with Dodd-Frank. Companies that take this kind of proactive approach will have the best opportunity for ensuring a regulatory future that isn’t all rainy days and Mondays.

The critical litigation and enforcement risks financial institutions will face as a result of Dodd-Frank were the subject of a teleseminar presented this week by Tom Allen, Roy Arnold, Amy Greer, and Chris Rissetto. The seminar was the third in a month-long Reed Smith series on Financial Re-Regulation. The final teleseminar in the series, addressing Dodd-Frank’s expected impact on securitization and related aspects of capital markets, will take place on Tuesday, August 31 beginning at noon EDT.

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This post was written by Stephanie Giese.

The passage of the Weapon Systems Acquisition Reform Act of 2009 (“WSARA”) signed into Public Law 111-23 on May 22, 2009, and most notably the Organizational Conflict of Interest (“OCI”) provisions of the WSARA, arguably marks the start of the Congress' tear to reform Department of Defense (“DoD”) contracting.  The reforms required by the WSARA OCI provisions alone have kicked off a restructuring of the defense industry, beginning with major weapon system developers like Northrop Grumman and Lockheed Martin selling their Systems Engineering and Technical Assistance business units – even before DoD promulgates the new OCI regulations implementing the WSARA, which are expected in the fourth quarter of 2010.

Congress’ reform theme is now being carried over to other aspects of DoD contracting in the 2011 National Defense Authorization Act (“2011 NDAA”).  Given the potential dramatic effect of past reforms mandated by the WSARA, defense contractors should understand the impacts of both the House (H.R. 5136) and Senate (S. 3454) versions of the 2011 NDAA, as well as plan to participate in the DoD rulemaking process that will ultimately implement many of the 2011 NDAA reforms.
Here are some of Congress’ latest proposed reforms for defense contractors to watch in the House and Senate versions of the 2011 NDAA:

• Contractor’s beware—the government may obtain “unlimited rights” to certain contractor technical data developed a private expense.  Among other changes related to technical data, the Senate proposes granting the government unlimited rights in technical data developed “without significant contribution by a contractor or subcontractor”.  “Without significant contribution” is not defined in the bill, but this proposed change would certainly expand the government’s unlimited rights to certain data funded, in part, at the contractor’s expense.
• Reform regarding government review of contractor business systems may increase compliance costs and delay payments to contractors.  For contractors subject to the Cost Accounting Standards, the Senate proposes that a “significant defect” in a contractor’s business system, which is one that undermines the reliability of the data produced by that system, is grounds for the DoD to withhold up to 10% of payments due to a contractor.  Business systems that may be reviewed by DoD include accounting systems, estimating systems, purchasing systems, earned value management systems, material management and accounting systems, and property management systems.
• DoD evaluation of contractor proposals may be limited to “best cost” to the government rather than “best value” to the government in the future.  The House proposes modifying current law to require DoD to weight cost or price at least equal to or greater than all other evaluation criteria in a government competitive source selection.  This would severely limit the DoD’s ability to conduct a best value evaluation of contractor proposals, including for procurements where contractor innovation is required such as in research and development contracts, and would essentially require the DoD to award to the lowest priced offeror for all its procurements.
• Due process lacking for defense contractors and subcontractors that supply cybersecurity products and services, information technology, and national security systems to the DoD.  Such DoD contractors should be aware that, in the name of reducing supply chain risk, the Senate intends to grant the head of a procuring agency, on the basis of a joint recommendation by the Director of the Defense Intelligence Agency and the Assistant Secretary of Defense for Networks and Information Integration, the authority to exclude a particular source from competing for a DoD contract on grounds that the supplier presents an unacceptable supply chain risk.  The bill does not require the DoD to allow the supplier to mitigate the risk before excluding the supplier.  For additional discussion of current cybersecurity issues facing DoD, please see the Reed Smith article, “Cloud Computing—The Key Risks and Rewards for Federal Government Contractors.”
• The U.S. space industrial base may get a boost from additional federal government investment.  The Senate proposes requiring the Secretary of Defense, in consultation with the National Aeronautics and Space Administration (“NASA”), to take steps to preserve the industrial base for liquid rocket propulsion systems and solid rocket motors. I n addition, the House proposes directing the Secretary of Defense and the Director of National Intelligence to jointly establish a national security space architecture to guide and coordinate each agency’s long-term investment in the space industrial base.
• Reminder that defense contractors, with the exception of weapon system developers, may soon be required to go “green” to compete for DoD contracts.  As currently drafted, the Senate bill requires DoD to report its progress to Congress in complying with Executive Order 13514 of October 5, 2009 which requires the head of a procuring agency to “advance sustainable acquisition to ensure that 95 percent of new contract actions including task and delivery orders, for products and services with the exception of acquisition of weapon systems, are energy-efficient (Energy Star or Federal Energy Management Program (FEMP) designated), water-efficient, biobased, environmentally preferable (e.g., Electronic Product Environmental Assessment Tool (EPEAT) certified), non-ozone depleting, contain recycled content, or are non-toxic or less toxic alternatives, where such products and services meet agency performance requirements.”

Industry’s Acquisition Reform Working Group provided its recommendations and concerns regarding the 2011 NDAA to the House and Senate Armed Services Committees on July 28, 2010.

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This alert was written by Edward Miller, Eugene Tillman, Cynthia O’Donoghue, and Leon Stephenson.

The arrival of the new UK Coalition Government has brought with it proposals to reform the health care system in the UK over the next four years, detailed in its much publicized White Paper “Equity and excellence: Liberating the NHS”.

The stated objectives are ambitious and if instituted will have a far reaching effect on both the way the British public access the health system and the role of the private sector in UK health care. Although the White Paper does not go so far as to indicate that privatization of the NHS as such is being considered, the Government’s tone is bold in as much as it advocates public choice and recognizes that resultant competition must include third party private providers.

The key themes of the White Paper are based on choice for the patient, flexibility for the commissioning consortia, encouraging competition and social enterprise. This, within an ambitious four year timetable, indicates that there will be room for unprecedented private, for profit and non-profit and third sector involvement in the reform of the UK health care system.

To view the entire alert, please click here.

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This post was written by Chris Rissetto, Larry Demase, and Bob Helland.

Summary

The oil spill in the Gulf of Mexico has increased the chances that Congress will send energy-related legislation to the President's desk before the midterm congressional elections in November. We note that last year the House of Representatives passed and sent to the Senate H.R. 2454, the American Clean Energy and Security Act of 2009, which sets goals for reducing emissions of greenhouse gases, including carbon dioxide, by a cap-and-trade system. The Senate has now gotten involved, with Majority Leader Reid (D-NV) soliciting proposals from Senate committees with jurisdiction on energy issues by the July 4 congressional recess. In addition, Republican and Democratic Senators recently met with the President to discuss compromise measures. Given the debate, and divisions, on climate change, it is not clear whether a cap-and-trade system for greenhouse gas emissions will ultimately be included in an energy bill that reaches the President's desk. However, if Congress fails to act in this area, it remains possible that the Environmental Protection Agency ("EPA") will step in and use its authority under the Clean Air Act (42 U.S.C. 7401) to create a cap-and-trade program. EPA has already taken several steps to regulate Green House Gases ("GHGs"). However, with climate legislation uncertain challenges to EPA's ability to regulate GHG's also mount. If Congress or EPA does not create a federal cap-and-trade program, a variety of existing state initiatives may fill the void.

The following Client Alert discusses the efforts to enact energy measures and where the fault lines lie in the ongoing debate. A thorough understanding of the actions both in Congress and the Obama Administration is required to understand the interplay of both legislation and regulations, and the opportunity that exists to address their impact within both the legislative and executive branches. Reed Smith's Public Policy & Infrastructure Practice, in collaboration with its Environmental Practice, has been monitoring energy and climate change deliberations throughout the 111th Congress, and is available to discuss how to develop an immediate lobbying strategy, as well as a longer-term effort that works with both Congress and the Obama Administration.

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This post was written by Chris Rissetto, Henry King, and Bob Helland.

Overview 

The Department of Energy ("DOE") has announced the availability of more than $171 million in grants, cooperative agreements, and technology-investment agreements "to expand and accelerate the development, commercialization, and use of solar and water power technologies throughout the United States".  This funding continues a strong emphasis in the DOE, since the passage of the Recovery Act, on projects that promote alternative energy development, sustainability, and green jobs.  The goal is to further the development of "evolving technologies," i.e., those that are not existing commercial technologies.  This Client Alert provides key details behind the two major initiatives included within these announcements, particularly what information is necessary to complete a competitive application.

The Public Policy & Infrastructure Practice has worked with a number of Reed Smith clients in crafting competitive applications for grant funding and complementary strategies to achieve funding, including obtaining support and assistance from members of Congress. We remain available to assist in the preliminary notice and development of a competitive application for funds under these Funding Opportunity Announcements ("FOAs").

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This post was written by Chris Rissetto, Bob Helland, Jonathan Benner and Matt Thomas.

The Department of Transportation has announced the availability of $600 million in grants for capital investments in surface transportation infrastructure for projects that "will have a significant impact on the Nation; a metropolitan area; or a region" (Docket No. DOT-OST-2010-0076).  This program is a continuation of a program begun under the "Recovery Act," known as the Transportation Investment Generating Economic Recovery ("TIGER") Discretionary Grant Program.  Under TIGER, $1.5 billion of grants were awarded in 2009.  Congress appropriated $600 million for TIGER, made some changes to the program for Fiscal Year 2010 in the Consolidated Appropriations Act, 2010, and the program is now known as the TIGER II Discretionary Grant program.

To view the entire alert, please click here.

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This post was written by Chris Rissetto, Jim Burns, and Bob Helland.

This week, President Obama signed into law a $17.6 billion jobs creation package passed by Congress, H.R. 2847, the Hiring Incentives to Restore Employment Act ("HIRE Act"). This legislation includes incentives for businesses to hire the unemployed; extension of infrastructure programs affecting surface transportation, energy, and school construction projects; and continuation of depreciation programs in effect for small businesses. We note that this legislation, when first taken up and passed by the House of Representatives in December 2009, was a much broader measure that included: tax credits for businesses for hiring the unemployed, as well as other credits directed at small businesses; extension of assistance to help to pay COBRA healthcare premiums; and funding for new infrastructure and clean energy programs, among other items. Senate Majority Leader Reid (D-NV), recognizing he did not have the votes to support such a measure at the time, instead wrote a smaller bill. That does not mean, however, that Congress will not consider additional measures to address the nation's economic woes. Legislation is already under consideration, for example, to 1) either provide additional tax incentives for businesses or extend expiring ones; 2) extend unemployment insurance and provide health insurance subsidies for the long-term unemployed; and 3) provide additional funding for infrastructure programs. All of this is being done against a background of continued economic concerns and a Congress where many members are facing difficult re-election races in the fall. As a result, an environment exists to pursue lobbying opportunities in these areas for the remainder of the 111th Congress.

To view the entire alert, please click here.

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This post was written by Chris Rissetto, Bob Helland, Michael Bleier, Peter Blasier, and Perry Napolitano.

The next few weeks are make-or-break for the Obama administration and Congressional Democrats as they consider separate and often competing proposals on the regulation of financial institutions. The House of Representatives last year passed its own version of legislation, H.R. 4173, the "Wall Street Reform and Consumer Protection Act of 2009," sponsored by the Chairman of the House Financial Services Committee, Rep. Barney Frank (D-Mass.-4) ("H.R. 4173"). This legislation would create a "Financial Stability Council" to identify those at-risk financial institutions whose failure would most likely hurt the nation's financial system; and it also establishes a process for dismantling those institutions without the need for taxpayer funds. In addition, it would create a Consumer Financial Protection Agency to protect consumers against unfair financial practices.

Over in the Senate, Sen. Christopher Dodd (D-Conn.), the Chairman of the Banking, Housing and Urban Affairs Committee, is working on his second proposal (the first effort last year having been withdrawn) and has held talks on this with both the Ranking Member of the Committee, Sen. Richard Shelby (R-Ala.), and another member of the committee, Sen. Bob Corker (R-Tenn.). While a full draft of Sen. Dodd's bill has not yet been made public, elements are being released for Senate comment, as Sen. Dodd attempts to produce a bipartisan bill. Finally, the Obama administration has upped the ante by recently proposing restrictions on (1) bank size and (2) the ability of banks to buy and sell financial instruments with their own funds, not their customers', customarily referred to as "proprietary trading."

The window for getting a bill passed by both Houses of Congress and to the president's desk is quickly closing. Congress has only a few months to consider the huge issues pending before it on health care, the economy, and financial regulation before it adjourns for the summer. We do not see any significant legislative activity occurring in the fall as members head home to campaign in the midterm congressional elections. So what happens next is pivotal to the success of the proposed reforms. This Client Alert provides (1) a discussion of some of the key issues in the regulatory reform proposals being debated between Congress and the Executive Branch and within Congress itself, and (2) suggested possible affirmative steps that might be taken to influence that process.

To view the entire alert, please click here.

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This post was written by Chris Rissetto, Lorraine Campos, Joelle Laszlo, and Bob Helland.

As we previously noted, the Supreme Court has ushered in a new dawn on corporate political spending in its recent decision in Citizens United v. Federal Election Commission, 558 U.S. ____ 2010. This decision reverses decades of statutory and case law that prohibits corporations from using their general treasuries to fund direct political advertising against candidates for local, state or federal office, or what it is termed "express advocacy." It also removes restrictions on electioneering advertising done within close proximity to either a primary or general election, and that also refers to a clearly identified candidate for federal office. The ramification of this decision will likely be felt for some time to come, and the Reed Smith Public Policy & Infrastructure Practice would like to note the latest development, a series of immediate steps that the Federal Election Commission ("FEC") announced in a February 5, 2010 press release, posted on its website. The FEC will also undertake a longer-term course of action to "fully implement" the Court's decision, and provides some basic guidelines to corporations and labor organizations intending to finance independent expenditures or electioneering communications. We offer this analysis of what has happened and what to expect.

Interim Steps: Enforcement and Rulemaking and Disclosure

One of the first things the FEC announced in its press release, not surprisingly, is that it will stop enforcing the statutes and regulations in place that ban either express advocacy or electioneering advertising. Thus, the FEC will no longer pursue claims, information requests, or audit actions related to those restrictions. Also, the FEC is reviewing all pending enforcement matters to determine which are affected by the Citizens United decision. Finally, the FEC "will no longer pursue information requests or audit issues" related to either express advocacy or electioneering claims.

This change in approach was anticipated in the aftermath of the Citizens United decision. In our January 25 teleseminar on the decision, we also predicted that the FEC would go beyond the Court's mandated disclosure for issue ads, and require organizations also to disclose their involvement in express advocacy. This is precisely the approach the Commission announced last week. Specifically, corporations and labor unions intending to undertake independent expenditures or fund electioneering communications must include the appropriate disclaimers on those communications, and must disclose independent expenditures on FEC Form 5, and electioneering communications on FEC Form 9.

Longer-Term Impacts: Formal Rulemaking Expected and Review as to What Constitutes a "Coordinated Communication"

The FEC will also conduct a formal rulemaking to revise the regulations directly affected by Citizens United, though it has not announced when that rulemaking will occur. In the meantime, the Commission is accepting comments about how Citizens United affects its ongoing rulemaking with regard to the "coordinated communication" test that governs when a corporate political expenditure is considered an in-kind contribution, subject to campaign finance limits and disclosure requirements. The FEC will hold a public hearing on the matter March 2 and 3, 2010; anyone seeking to testify must include such a request with their comments, which are due on or before February 24.

It is clear that we are only beginning to see the impact that Citizens United will have on corporate, union, and most likely trade association political activity. As we noted during our January 25 teleseminar on the decision, and as is visible in the specific questions posed by the FEC in its supplemental "coordinated communication" rulemaking, the Court's invocation of First Amendment rights has forced great scrutiny of both the basic outlines and the minute details of current regulations on organizational election expenditures. Until the dust settles, corporations and unions intending to finance independent expenditures or electioneering communications should continue to observe the disclaimer and disclosure requirements left unharmed by the Court's decision.

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This post was written by Lorraine Campos and Bob Helland.

Today, the United States Supreme Court issued a groundbreaking decision that impacts the political activity of every corporate entity. In Citizens United v. Federal Election Commission, 558 U.S. ____ 2010, the Court held that restrictions on corporate spending in political campaigns, whether directed to a candidate or to an issue, violated the First Amendment's protection of political speech. This decision, which is expected to be applied to labor unions, 527s, and trade associations, will radically alter the role such organizations will play in elections. While the application of this decision will likely be subject to further regulation by agencies, including the Federal Election Commission, we address key elements of the decision and how it will impact the ability of corporations and others to express their opinions on issues or political candidates.

The Supreme Court's decision in Citizens United has three elements that impact corporate political activity:

• Lifted Ban on Direct Corporate Political Expenditures. Most surprisingly, the Court held that a prohibition on corporations from using their general treasury funds to pay for campaign advertisements for or against an (1) issue or (2) political candidate was unconstitutional. However, corporations are still prohibited from making direct political contributions to candidates or political parties.
• Lifted Ban on Electioneering Activities Within Close Proximity of Primary or General Election. The Court held that a prohibition imposed by the McCain Feingold Bipartisan Campaign Reform Act of 2002 ("McCain Feingold') on "electioneering communication," i.e., those made by broadcast, cable or satellite, made within 30 days of a primary election or 60 days of a general election, was unconstitutional.
• Required Corporate Disclaimers. The Court held that a disclaimer requirement, also mandated by McCain Feingold, that identifies the corporation behind the advertisement was constitutional.

This decision upends the Court's precedent that corporations may not use their general treasury funds to support or oppose candidates, and radically transforms the political role of corporate entities. We anticipate additional regulatory guidance, and will be analyzing such guidance and providing assistance related to campaign donations, electioneering activities and disclaimer requirements.

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This post was written by Chris Rissetto, Lou Naugle, Bob Helland, and David Wagner.

Last week, the U.S. Environmental Protection Agency ("EPA") outlined what it terms a "rigorous accountability framework" for addressing pollution levels in the Chesapeake Bay and its tributaries. This is the latest in a series of federal efforts to address levels of nitrogen, phosphorus and sediment in the Chesapeake Bay watershed that are harmful to both animal and plant life. Most significant about these measures is that they include, for the first time in the 26-year history of the cleanup effort of the Chesapeake Bay, a number of punitive measures intended to force compliance with pollution controls by the six Chesapeake Bay states—Delaware, Maryland, New York, Pennyslvania, Virginia and West Virginia—and the District of Columbia.

This update outlines the punitive measures being imposed by the EPA, including the legal issues raised. It also describes the regulatory regime in place to address pollution levels. This regulatory approach was overhauled by the Obama administration in Executive Order 13508: Chesapeake Bay Protection and Restoration, dated May 12, 2009. This Executive Order, and the Draft Strategy proposed by the EPA that followed it, outlined a new strategy for cleaning up the Bay, including the punitive efforts announced this week. Finally, this update discusses what measures are expected in 2010.

To read the full client alert, please click here.

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