Considerations for Making Campaign Contributions

Considerations for Making Campaign Contributions

September 16, 2010

These "pay to play" prohibitions seek to ensure that no direct or indirect campaign contributions are made to any elected official who can influence the awarding of government contracts. The IVCA-PAC is in full compliance with the 2009 Illinois law prohibiting - œpay to play-  relationships between elected public officials who can influence the awarding of government contracts and those businesses or individuals seeking such contracts. The PAC will also ensure full compliance with the new SEC regulations as well as subsequent laws or regulations enacted at the federal, state or local levels affecting its contributions in Illinois.

Practically speaking, in Illinois there are five offices and one additional elected official that are deemed to have the ability to directly influence a pension fund investment. Any individual or business seeking pension fund investments should cautiously consider contributions to candidates for these offices.
  • The Governor appoints pension fund board members.
  • The Treasurer who serves on a pension fund board and invests the State's money.
  • The Comptroller serves on the Illinois State Board of Investments (ISBI).
  • One member of the Illinois House (no one is currently filling this seat) serves on ISBI's Board.
  • One member of the Illinois Senate (currently Senator James F. Clayborne) serves on ISBI's Board.
  • Justice Thomas E. Hoffman of the Illinois Appellate Court serves on ISBI's Board.
Illinois - œpay to play-  prohibition

Public Act 95-971 prohibits businesses with state contracts awarded under the Illinois Procurement Code and totaling more than $50,000 annually from making campaign contributions to the five state executive officeholders (or declared candidates for those five state offices) who are responsible for the contracts awarded to the covered business entity.
This law covers investments by Illinois public pension plans and designates the Governor as the official responsible for awarding contracts in this area. In addition to the Governor, the law defines the state executive officeholders as the lieutenant governor, secretary of state, attorney general, comptroller and treasurer.

For IVCA members the Illinois law does not affect their indirect political contributions (to non-affiliated PACs -- e.g., IVCA-PAC). IVCA members who contribute to the IVCA-PAC and who have or will seek Illinois pension fund investments have an additional level of assurance since the IVCA-PAC does not make campaign contributions to gubernatorial candidates.

For more information, click here.

SEC - œpay to play-  prohibition for investment advisers

Recently adopted SEC requirements are designed to prevent political contributions by SEC-registered investment advisers seeking pubic investment advisory contracts. Both direct and indirect campaign contributions by these investment advisers are prohibited to any official who has the ability to influence the awarding of such contracts. Unlike the Illinois law these officials are not defined and indirect contributions are also covered (e.g., contributions made by a non-affiliated PAC such as IVCA-PAC). If a campaign contribution has been made to an affected elected official by an adviser or a - œcovered associate-  of the adviser, the adviser is prevented from receiving compensation for advisory services for two years. This prohibition becomes effective on March 14, 2011.

With regard to pension fund advisory service contracts, the new SEC regulations in effect would expand the campaign contribution prohibition from the Illinois Governor to include the Illinois Treasurer and Comptroller since they sit on state pension fund boards, one judge (see above) as well as elected officials from the House and Senate who sit on the Illinois State Board of Investments Board (traditionally one member from each chamber sits on the ISBI Board). Since the SEC regulations also cover indirect campaign contributions, the IVCA-PAC will expand its list of officials deemed - œprohibited-  from receiving IVCA-PAC support to include the IL Treasurer, the IL Comptroller, the one judge who sits on ISBI, any House and Senate officials on ISBI's Board and whomever else deemed to have the power to influence pension fund investment advisory contracts. The IL Treasurer would also likely be excluded because of its TDA I investment allocations to Illinois private equity and venture capital firms.

In addition to this change in PAC policy, the IVCA-PAC is exploring bifurcating the PAC Board so that those Board members deciding which Illinois elected officials beyond the prohibited class outlined above are to receive PAC support would be individuals who do not currently have public investment advisory contracts nor would they plan to seek such contracts in the future.

For more information, click here and scroll down to SEC "Pay to Play"

Proposed Cook County - œpay to play-  regulations

On September 15, 2010, the Cook County Board of Commissioners enacted new - œpay to play-  regulations for Cook County as part of a broader ethics and reform package.

The new regulations include a prohibition on contributions to County officials by anyone seeking or having contracts in excess of $10,000 a year to County officials who can influence contract decisions (pay-to-play).

With rare exceptions IVCA-PAC has not made any contributions to Cook County or City officials and given the trend of - œplay to pay-  prohibitions, the PAC will not make any contributions to these local elected officials in the future.

Link to proposed regs here.

Each individual investment situation is different, however, so readers should seek legal advice on the applicability of these requirements to any specific investments.