“Pay-to-Play” Laws Create Possible Pitfalls for New Jersey Businesses

cube-game-cube-instantaneous-speed-568192Government contracts are a major source of revenue for many businesses, both large and small. In order to prevent corruption, and to avoid the appearance of corruption, Congress, state legislatures, and city councils have enacted laws addressing the overlap of government contracts and political contributions, often known as “pay-to-play” (PTP) laws. Businesses and business owners who rely on government contracts for some or all of their revenue must be careful to avoid even unintentional violations of these laws. A recent decision by the New Jersey Appellate Division, in which a single political contribution cost a business eligibility for government contracts, illustrates this concern. Della Pello Paving, Inc. v. N.J. Dept. of Treasury, et al, Nos. A-3774-15T3, A-3784-15T3, slip op. (N.J. App., Feb. 9, 2017).

Business activities covered by government contracts range from advertising campaigns in local markets to massive engineering operations. The associated fees can go from a few thousand to hundreds of millions of dollars. Any type of contract, and the processes of bidding and procurement, are covered by PTP and other anti-corruption laws. New Jersey’s PTP law was enacted in 2005 as an amendment to the Campaign Contributions and Expenditure Reporting Act. It seeks to address the “widespread cynicism” among the public caused by “[t]he growing infusion of funds donated by business entities into the political process at all levels of government.” N.J. Rev. Stat. § 19:44A-20.13.

The New Jersey PTP law bars anyone from eligibility for a contract worth more than $17,500 if they made political contributions in a state election within the previous eighteen months. It also bars eligibility for contracts of that size during the current or upcoming term of a governor or lieutenant governor for anyone who contributed to that person’s campaign or their party. Id. at § 19:44A-20.14. Business entities may avoid adverse consequences under this law by requesting “a full reimbursement” of any political contribution that would make them ineligible for a contract, provided they do so within thirty days of making the contribution. Id. at § 19:44A-20.20.

The appellant in Della Pello Paving sought review of a decision by the State Treasurer and the Department of Transportation finding them ineligible for contracts under the PTP law. According to the court’s decision, the business had accepted an invitation to a cocktail party hosted by a county executive committee for a major political party in April 2014, and had submitted a check for $500 for a ticket to the event. The committee endorsed and deposited the check.

In May 2015, the appellant was awarded a state contract worth about $2.9 million. It disclosed the $500 contribution, resulting in the state’s determination of ineligibility. The appellant immediately requested reimbursement of the contribution, but this did not change the state’s decision. Since the contribution was made to a political committee involved in nominating the current governor, and the company had not requested reimbursement within thirty days, the state found that it was ineligible for the remainder of the governor’s term. The Appellate Division affirmed this finding.

Business lawyer Samuel C. Berger represents entrepreneurs, business owners, and businesses in the New York City and Northern New Jersey region. Our packages of fixed-fee legal services cover a broad range of issues, allowing us to meet our clients’ specific legal needs. To schedule a confidential consultation with an experienced and skilled business advocate, please contact us today online, at (201) 587-1500, or at (212) 380-8117.

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