Ethics: Advisory Opinion No. 2001-8

Advisory Opinion No. 2001-8
Advisory Opinion No. 2001-8

Application Of The Provisions Of The Lobbyist Code
To The Proper Valuation Of Receptions

Last month the State Ethics Commission and ESPN (a client lobbyist) entered into a Stipulation and Order whereby the Commission fined the lobbyist $30,000 for gift, reporting and notification violations. Specifically, ESPN had hosted a reception during the Republican National Convention at which 20 Connecticut officials, staff and immediate family members received food and drink valued at $97.00 per person (well in excess of the annual fifty dollar per person limit on such benefits). Additionally, ESPN failed to itemize the expenditures on its required financial disclosure reports and failed to notify the attendees of the actual cost of the event, as mandated by law.

In the aftermath of this matter, certain registered lobbyists have asked the Commission: 1. how to properly calculate the number of anticipated attendees at an event for purposes of determining the per person cost; and 2. whether, and to what extent, room rental can be deducted from the aggregate cost of the event, as overhead, in determining what benefits the attendees have directly and personally received.

1. With regard to the calculation of the fifty dollar per person food and drink limit, the Lobbyist Code states, "In making the calculation for purposes of such fifty-dollar limit, the donor shall divide the amount spent on food and beverage by the number of persons whom the donor reasonably expects to attend…" Conn. Gen. Stat. 1-91(g)(10) and (11).

Taking the ESPN case as an example, the Commission calculated the per person cost of the event at $97.00 based on the lobbyist's RSVP list of 205 attendees. ESPN alternatively asserted that the anticipated number of attendees should have been 300 (the claimed number provided to the restaurant).

The figure of 300 anticipated attendees would be acceptable under the relevant Code provisions, if it was based on a contract with the restaurant or otherwise substantiated by credible documentation. In the ESPN case, however, the lobbyist had no such written proof, other than the aforementioned RSVP list of 205 people. Under these circumstances, the Commission will not accept the unverifiable higher number. In fact, the lobbyist is potentially in violation of the Code requirement that it "…obtain and preserve all accounts, bills, receipts and other documents necessary to substantiate the financial reports required by Section 1-96, for a period of three years…" Conn. Gen. Stat. 1-96a(a).

In summary, the best method for calculating "the number of persons whom the donor reasonably expected to attend…" an event is a written agreement specifying the actual number of anticipated attendees the lobbyist has utilized in contracting with the caterer, restaurant, etc. Under the Code, the lobbyist must obtain and preserve for three years such contract, or analogous supporting documentation, verifying its anticipated guest list.

2. With regard to excludable overhead, "Gift" is defined in the Lobbyist Code as "…anything of value, which is directly and personally received…" Conn. Gen. Stat. 1-91(g). In implementing this definition, the Commission's Regulations state that, "In assessing the value of food and/or beverage provided at a reception or party, overhead costs such as in-house planning costs, invitations, rental fees, and decorations are not to be considered directly and personally received." Regulations of Conn. State Agencies 1-92-54(b).

In applying these statutory and regulatory provisions, the Commission has interpreted "rental fees" to include the ordinary and customary fee charged to rent a hall or erect a tent. In the ESPN matter, however, the restaurant assessed a $10,000 "room rental" charge on its bill in addition to the cost of the food, beverage, tax, and gratuity. Given that ESPN had apparently relied on this billing to exclude the $10,000 from its calculation of the total cost of the event ($30,000), the Commission did not factor the $10,000 into its per person cost of $97.00.

In the future, however, the Commission will not allow the exclusion of such amounts. Simply stated, the charge in question, equal to one-third of the restaurant's total bill, is not an ordinary and customary room rental. In fact, a survey of several Connecticut restaurants and banquet facilities revealed that such establishments do not, in general, charge any room rental to customers contracting to hold an event which includes the purchase of food and drink from the facility. (In fact, only one of the ten entities surveyed charged a room rental fee, which it described as "minimal.")

In essence, the restaurant in Philadelphia which staged the ESPN event took advantage of the timing (i.e., the week of the Republican National Convention) to assess a premium equal to fifty percent of the actual cost of the food and drink ($20,000). As a matter of policy, the Commission cannot, in the future, allow the routine deduction of such amounts as overhead. In fact, to do so would create an enormous loophole in the Code's gift restrictions, allowing lobbyists to host inappropriately expensive events by arbitrarily attributing a substantial portion of the cost to "room rental."

In making these two rulings, the Commission wishes to emphasize that it is not inflexible in its application of the Lobbyist Code's gift restrictions and reporting requirements. Lobbyists with specific questions or concerns regarding these interpretations must, however, seek Commission guidance as to permissible expenditures and proper valuation before hosting an event benefiting one or more public officials.

By order of the Commission,

Rosemary Giuliano

Content Last Modified on 9/7/2005 8:03:54 AM