REQUESTED BY: Senator Bernice Labedz, Fifth Legislative District.
QUESTION: Are officers, directors, shareholders, employees or members of a corporation employing a lobbyist considered principals under the Act?
You state that you intend to solicit contributions to assist you in defraying legal expenses which you recently incurred. You state that you are aware of the prohibitions contained in Section 49-1490 which restrict a principal or a lobbyist from giving a gift to a public official, except for those things specifically excluded from the definition of gift.
For the purposes of this opinion we are assuming that the legal expenses you refer to are not legal expenses which can be considered the legitimate expenses of your campaign for public office. The provisions of Section 49-1490 prohibit you from soliciting or accepting a gift from a principal, a lobbyist or anyone acting on behalf of a principal or lobbyist. For the purposes of Section 49-1490 a gift is a "payment, subscription, advance, forbearance, honorarium, campaign contribution from a lobbyist, or the rendering or deposit of money, services, or anything of value, the value of which exceeds $25 in any one month period, . . ."
There is no prohibition of your solicitation or acceptance of "legal defense fund" contributions from non-principals, non-lobbyists, or from persons not acting on behalf of either, except that these contributions obviously cannot be made or accepted based upon some agreement or understanding that your official actions would be affected thereby. See Section 49-14,101. Your concern is how to identify who is a principal or lobbyist.
Lobbying is defined in Section 49-1433 as "the practice of promoting or opposing for another person the introduction or enactment of legislation or resolutions before the legislature or the committees or members thereof. . ." The definition also includes the practice of promoting or opposing executive approval of legislation or resolutions. The definition for principal is found in Section 49-1434 and is simply that a principal is a person who authorizes a lobbyist to lobby on behalf of that principal. Section 49-1434 also defines lobbyist as a person who is authorized to lobby on behalf of a principal and includes an officer, agent, attorney or employee of the principal whose regular duties include lobbying.
It seems first appropriate to point out that Section 49-1490 prohibits an acceptance of gifts from anyone who fits the above definitions. A person who fits the definition of a lobbyist but is not registered is still a lobbyist. A person who has employed a lobbyist, be he registered or unregistered, is still a principal.
You specifically ask if the term principal includes officer, director, shareholder, or employee of a "for profit" corporation which has employed a lobbyist. You also ask if the term principal includes officers, directors, members or employees of a nonprofit corporation which has employed a lobbyist. For our purposes here, there is no difference based upon the profit or nonprofit status of a corporation. We believe that your question may best be answered with reference to the law of corporations in this state.
In Slusarski v. American Confinement Systems Inc., 281 NEB 576, 357 NW 2d 405 (1984) the Nebraska Supreme Court reaffirmed the long held legal theory that "a corporation is a legal entity complete and separate from its shareholders and officers". Thus, officers, directors, shareholders and members are not principals simply by virtue of the corporation being the principal. An employee who has no interest in a corporation other than being paid a wage is certainly not a component of the corporate entity and thus is not a principal. It is possible, however, for a person falling into any of these classifications to become a person acting on behalf of a principal or a lobbyist for the purposes of Section 49-1490. This is accomplished by such a person transmitting a gift from a corporation which is a principal to a public official. Regardless of the name in which the gift is given, if it is given because the corporate principal wants it to be given the gift is from the corporation. One must also consider whether or not the gift being given has the corporate principal as its ultimate source or if the ultimate source is the director, officer, etc. For example, if an officer who is not a registered lobbyist gives a gift of his own funds which are not in any way controlled by the corporate principal, the gift is not prohibited. If a gift is made by an officer out of funds over which he has wide discretion, but the funds were provided by the corporation for certain purposes, the gift is from the corporation even if the "purposes" are rather general.
Without a doubt, a public official soliciting for a legal defense fund is in a rather precarious situation because that public official will not always know when the ultimate source of a contribution is from a principal or a lobbyist. It is, however, an obligation of the solicitor to avoid these types of contributions and the solicitor must take reasonable steps to do so. In some manner the public official must make it clear that he or she does not wish to accept funds from a principal, lobbyist, or a person acting on behalf of either. Certainly, a method of doing so would be to state this intention in any written solicitation of funds. While a public official is prohibited from soliciting or accepting gifts from a principal, a lobbyist, or anyone acting on behalf of either, it should also be understood that a principal, lobbyist, or anyone acting on behalf of either may not give a gift to any official of member of any official's staff. See Section 49-1490(1).
This is a matter in which the Commission cannot and will not permit form over substance. To do so would severely gut the provisions of Section 49-1490 and frustrate the intent of the legislature. In summation, a public official may solicit funds to defray legal expenses from officers, directors, shareholders and employees of corporate principals, but the funds must be from the individual's personal funds, not the corporate funds and given solely upon the decision of the individual.
It should be noted that the public official receiving contributions for his or her legal defense fund who is required to file an Annual Statement of Financial Interests pursuant to Section 49-1493 or Rule 2 of the Commission will need to provide information about these gifts on the annual statement if a contribution to the legal defense fund exceeds $100, the name, address, occupation or nature of business of the contributor must be listed on the Annual Statement of Financial Interests. See Section 49-1496(2)(e).