Toyota and Lobbying Disclosure

There has been a good deal of buzz regarding this Toyota internal document, which purports to show the various “wins” of the company’s Public Policy and Governmental/Regulatory Affairs office in Washington, D.C.   In particular, the media has focused the document’s claim that Toyota saved $100 million by negotiating a limited recall with respect to the sudden acceleration problem in the Toyota Camry. A different aspect of the document caught my attention, however.  Many of Toyota’s “wins,” including the recall issue and various rulemakings cited in the internal document, involve dealings with the National Highway Traffic Safety Administration (NHTSA), yet Toyota’s lobbying disclosure filings do not show any lobbying of NHTSA. This might be because Toyota’s communications with NHTSA did not involve “covered executive branch officials” under the Lobbying Disclosure Act.  Only a small number of officials at NHTSA, such as the Administrator, Deputy Administrator and other high-ranking officials, would qualify as “covered executive branch officials” under the LDA.  Communications with other NHTSA officials do not qualify as “lobbying contacts” and therefore may not trigger a reporting requirement.  To make matters more confusing, in some cases it may not be clear whether a particular official is covered or not. Even if Toyota communicated with a covered official, moreover, the communication still may not qualify as a lobbying contact.  The LDA exempts certain types of communications related to administrative proceedings from the definition of lobbying contact.  For example, communications in formal administrative hearings are exempted if they are made in accordance with written agency procedures.  In addition, written communications in public rulemaking proceedings are exempted (on the theory that these communications are available to the public anyway).  In many cases the applicability of these exceptions to particular communications may be less than clear, leaving it up to the judgment of the filer as to whether they need to be reported. Regardless of why Toyota’s filings fail to disclose its communications with NHTSA, this is another example of the disconnect between what the LDA identifies as “lobbying” and what the general public may perceive that term to mean.

Will Toyota Sue to Prevent Congress from Getting its Attorney-Client Privileged Documents?

           The National Law Journal reports that the U.S. House Committee on Oversight and Government Reform has subpoenaed a former Toyota attorney named Dimitrios Biller, seeking internal documents relating to Biller’s defense of Toyota in rollover litigation from 2003 to 2007.  Biller left the company on bad terms in 2007.  Subsequently, he accused it of concealing or destroying evidence in personal injury cases, and Toyota sued him for divulging information protected by the attorney-client privilege.  Last September a California state court judge referred Biller to the California State Bar for improperly publicizing Toyota’s privileged information.   

This raises some interesting issues about the role of the attorney-client privilege in congressional proceedings.  In a previous post, I explained that Congress has generally asserted a right to disregard the attorney-client privilege (and other common law privileges).  This claim is not one that sits well with the American Bar Association or the legal profession in general.  Nevertheless, it is extremely difficult, as a practical matter, to contest Congress’s position.  A lawyer who receives a congressional subpoena for privileged information cannot challenge it in court (because the Speech or Debate Clause precludes a suit against the congressional committee that issued the subpoena).  Thus, he or she must either comply with the subpoena or risk being held in contempt, with the possibility of facing criminal fines or prison.   

            In 1999 a legal ethics panel of the D.C. Bar ruled that a lawyer who was subpoenaed to provide privileged information to a congressional subcommittee had “a professional responsibility to seek to quash or limit the subpoena on all available legitimate grounds to protect confidential documents and client secrets.”  Once, however, the congressional subcommittee overruled these objections and threatened to hold the lawyer in contempt, there was no longer a professional obligation to resist.   The panel found that “[a] lawyer has satisfied his or her professional obligation to maintain client confidences once all objections have been made and exhausted and is not required by the Rules to stand in contempt of Congress if the subcommittee overrules the objections.”  Importantly, however, there is an exception to this rule if the client obtains a court order forbidding the lawyer from complying with the congressional subpoena. 

            In most cases the lawyer and the client have aligned interests, and a judge might be reluctant to intervene in a congressional matter simply because client files a collusive lawsuit against the lawyer.  In the current situation, however, there is a genuine adversarial relationship between Toyota and Biller, and Toyota can plausibly argue that Biller cannot be expected to make all reasonable efforts to limit the disclosure of its privileged information.  Therefore, if Toyota were to file a lawsuit seeking an injuction or declaratory judgment to prevent Biller from complying with the congressional subpoena, it would be in an unusually strong position to convince a court to reach the merits of the case.  Then the judge would have to decide whether the attorney-client privilege is fully applicable in congressional proceedings, a question which, as the D.C. Bar panel noted, has never been definitively resolved by the courts.

Recall of U.S. Senators

           At the Volokh Conspiracy, Eugene Volokh has an interesting post about an effort in New Jersey to recall Senator Robert Menendez.  Apparently the New Jersey Constitution expressly allows recalls of federal legislators, but the N.J. Secretary of State is refusing to allow a petition for such a recall on the grounds that the U.S. Constitution does not permit them.  The question is now set for a hearing before a New Jersey state court. 

            As suggested by Professor Volokh, this CRS report, and a separate post by Todd Zwicki, it seems fairly clear that the Constitution, in contrast to the Articles of Confederation, did not authorize state legislatures to recall their state’s representatives, although the state legislatures did issue “instructions” to their Senators.  Nothing in the Seventeenth Amendment expressly authorizes such recalls, and it is hard to think of a reason to read the amendment as implicitly authorizing voters to recall their Senators.   

            Nevertheless, there are a couple of interesting questions presented by this case.  First, who should make the decision as to whether the recall is unconstitutional?  The Constitution makes each House the judge of the elections, qualifications and returns of its Members.  Therefore, it would be up to the Senate, at least in the first instance, to determine the effect of any recall vote by New Jersey.  One might argue, therefore, that the petition drive should be allowed to go forward, on the theory that it is not up to state officials or state courts to determine the effect of the vote. 

            The counterargument would be that state officials and state courts are bound by oath or affirmation to support the Constitution (under Article VI) and cannot authorize actions that violate it.  This is presumably true if holding the recall vote would itself violate the Constitution.  But Volokh suggests that an advisory recall vote (i.e., essentially a request by the voters that the Senator resign) would be constitutional.  Therefore, New Jersey could, and arguably should, allow the recall vote to go forward on the grounds that, assuming it is constitutionally ineffective as a mandatory recall, it is constitutionally valid as an advisory recall. 

            I don’t think that the constitutionality of a hypothetical advisory recall is quite the issue, though.  The key point is that holding the recall vote, even though it purports to be mandatory, doesn’t actually do anything.  It is only if the result of a successful recall vote is presented to the Senate that the constitutional question arises.  If the Senate judges that the recalled Senator is still entitled to his seat (as it almost certainly would), it cannot be said that the recall vote has violated the Constitution.  Put another way, the Constitution does not prohibit recall votes; it simply doesn’t give them any legal effect.  

            I am persuaded by this analysis that state officials are not constitutionally obligated to block the recall vote simply because they believe that it will have no constitutional effect.  But this doesn’t necessarily mean that they are obligated to let the vote go forward, either.  Ultimately, the question of whether the recall vote should go forward would seem to be one of state, not federal, law.

Mark Patterson’s Executive Decision

It’s worth taking a closer look at the “issue areas” that Mark Patterson, the former Goldman Sachs lobbyist now serving as the chief of staff to Treasury Secretary Geithner, is restricted from participating in, and asking how these prohibitions might be interpreted and enforced. Today let’s look at the issue of executive compensation.

Under the terms of Treasury’s February 4, 2009 recusal memorandum, Patterson is prohibited from involvement in “shareholder votes on executive compensation.” This prohibition evidently stems from Patterson’s 2007 lobbying against H.R. 1257, a bill supported by then-Senator Obama, which would have authorized shareholders to vote on executive compensation packages. As this article notes, Goldman Sachs CEO Lloyd Blankfein, who received compensation of about $70 million in 2007 (though a mere $9 million for 2009), was not a fan of this proposal, and Patterson was one of the lobbyists who (successfully) tried to kill it. Thus, “a Washington influence-peddler who worked against Obama’s effort to limit excessive corporate pay is now a key member of the Obama administration team that is supposed to contain excessive compensation in the AIG case and in general.”

The authors were told by Treasury that Patterson “recused himself from discussions on this and all other issues he worked on during his time in the private sector.” They then ask “Does this mean that Geithner’s chief of staff cannot be involved in conversations and decisions regarding corporate compensation issues, including the AIG bonuses? If so, wouldn’t that place Geithner at a disadvantage as he tries to handle such matters?”

But Patterson’s recusal memorandum doesn’t prohibit him from involvement in all corporate compensation issues, only “shareholder votes on corporate compensation.” Does Treasury interpret this to allow Patterson to be involved in all executive compensation issues so long as shareholder voting isn’t involved? And if shareholder voting is involved, is Patterson excluded from the entire issue, or can he simply decline to “participate” (leave the meeting, cover his ears?) when shareholder voting comes up?

Judging by Treasury’s response to my FOIA request, there is no documentation as to how the recusal memorandum has been implemented, nor any documentation of Patterson actually being recused from any particular meeting, appointment or matter. It would appear, therefore, that the Treasury General Counsel is not making case-by-case rulings on the memorandum, or at least not issuing formal instructions to Treasury officials with respect to its requirements. Instead, it would seem that it is up to Patterson, consulting the GC’s office as he deems fit, to interpret and apply the memorandum’s prohibitions.

It is hard to say for sure how Patterson has handled the executive compensation issue. His calendars, however, suggest that he has participated in matters relating to executive compensation. For example, Patterson was intimately involved in preparing Treasury Secretary Geithner for meetings, testimony, speeches and press interviews in March 2009, when the issue of AIG bonus payments was the hot topic of every event. It seems virtually certain that Patterson participated in the AIG bonus issue, and indeed a March 28, 2009 calendar entry shows he participated in a conference call “follow up on AIG discussion.”

Did the recusal memorandum have any practical effect on Patterson’s ability to participate in executive compensation issues or to influence executive compensation decisions in a manner that might benefit Goldman Sachs? Did the interpretation and application of this memorandum fall entirely on Patterson, operating on the honor system? These might be interesting questions for some congressional investigation.

Treasury’s Lobbying Loopholes

About a year ago I noted that it was difficult to see how Mark Patterson, the former Goldman Sachs lobbyist who now serves as chief of staff to Treasury Secretary Tim Geithner, could join the administration without a waiver of the Obama Executive Order regarding former lobbyists.  It subsequently appeared that Patterson would be appointed without a waiver, and that his recusal would not be based on Goldman Sachs’s public lobbying filings, but on a secret list of issues that Patterson and the Treasury General Counsel had developed. 

This February 4, 2009 memorandum from the Treasury General Counsel’s office, which I obtained through a FOIA request, confirms that this is indeed how Patterson was appointed.  The Treasury Department is not prohibiting Patterson from participating in many of the specific issue areas listed in Goldman’s 2008 and 2007 lobbying reports.  Instead, the General Counsel’s office came up with a smaller and narrower (although still substantial) list of issues from which Patterson must be recused. 

            It is not clear exactly how Treasury came up with this list, but here are a few possibilities.  First, some of the issues on the Goldman report are so general (e.g., “general economic conditions” and “investment banking issues”) that they may not be thought to qualify as “specific issues” at all, although this term is not defined either in the LDA or the E.O.  Second, the Treasury memorandum emphasizes that the issue must involve a “particular matter,” which means the matter must be focused “on the interests of specific persons, or a discrete and identifiable class of persons.”  Thus, one might suspect that Treasury excluded some issues on the grounds that they did not involve a particular matter at all.  This, however, seems less likely when one considers that all of the issues listed by Treasury involve general public policy questions, and it is difficult to see how these issues would be any more focused on Goldman Sach’s interests than most of the issues it chose not to list.  

            Third, Treasury may have determined that Patterson did not in fact lobby or work on some of the issues that are listed in the Goldman reports.  Since the reports only identify the lobbyists who engaged in lobbying activities with respect to each general issue area, it is possible that Patterson did not work on some of the specific issue areas listed in the reports.  Moreover, the Treasury General Counsel’s office apparently decided that Patterson did not need to recuse himself from “auction rate securities” matters because he merely “facilitated” briefings of congressional staff by his Goldman Sachs colleagues.  In the (debatable) judgment of the G.C.’s office, this activity did not constitute “lobbying” within the meaning of the Executive Order.   

Finally, Treasury may have decided to more narrowly define some of the issues that Goldman listed on its report.  For example, Goldman listed “over-the-counter derivatives” as one of the specific issues on which it had lobbied.  Treasury, however, precludes Patterson from participating only in “energy derivatives.”  

            I have previously suggested some of the deficiencies in Treasury’s approach to this issue: 

What are the problems with this approach?  First, it seems inconsistent with the E.O.’s purpose in basing its restrictions on the LDA.  Presumably, the reason for using the LDA is that it provides an objective and publicly available record of who is a lobbyist, who was lobbied and what subjects were lobbied on.  Allowing individual appointees and their agencies to deviate from the public record based on arbitrary and undisclosed criteria hardly seems designed to enhance public confidence in the process.  

Second, there are bound to be questions raised with regard to discrepancies between LDA forms and the recusal decisions of particular agencies.  How does the administration know that Goldman’s LDA form does not accurately identify the issues Patterson worked on?  Is it making its determinations solely on Patterson’s current recollection?  Has it looked at the records underlying the LDA filing? 


Some of these deficiencies are illustrated by the follow-up Treasury memo of March 19, 2009, which expands the restricted issue list to include “alternative energy investment tax credits,” based on the fact that Patterson “recently recalled” working on this issue during his employment at Goldman.

Perhaps an even more serious question is raised with respect to Treasury’s approach to section 3(c) of the E.O., which bars a former lobbyist from appointment “with any executive agency that [he or she] lobbied within the [prior two years].” Goldman’s reports indicate that Patterson lobbied the Treasury Department with respect to financial issues in 2007, which would have barred him from his current position. The Treasury General Counsel, however, “determined after careful consideration that the informational briefing that you provided at the request of a Treasury official in July 2007 did not constitute lobbying.”

This determination, which is not further explained in the memorandum, seems very questionable. Even if the briefing was given at the request of a Treasury official, this would not exempt it from the definition of “lobbying contact” under the LDA (see Section 3(8)(B)(viii) of the LDA). Moreover, even if the briefing were not a “lobbying contact” (if, for example, no covered executive officials were present), it still seems very likely that it would constitute “lobbying activity” (ie, activity in support of lobbying contacts) under the LDA.

Whether or not Treasury’s determination is defensible under the literal terms of the E.O., one should step back and consider the situation in terms of the administration’s supposed aversion to employing lobbyists. Patterson’s calendars for the first half of 2009 reveal, as one would expect, that he has been involved in the major issues facing the department, including matters such as the auto bailout, TALF/TARP, the stimulus, housing, regulatory reform, stress tests, “munis” (perhaps referring to issues concerns the safety of municipal bonds), and the Public Private Investment Program for buying up toxic assets.

Many of these issues clearly have a major impact on Patterson’s former employer. Goldman Sachs, for example, was a TARP recipient which announced in early 2009 that it wished to exit the TARP program as soon as possible, which it did in June 2009. Patterson participated in various meetings regarding TARP, including a June 4, 2009 meeting regarding “TARP repayment.” If one believes (as the Obama administration presumably does) that lobbyists are predisposed to favor the interests of their former employers, why wouldn’t one be just as concerned about Patterson’s involvement in these issues as in the issues listed in Treasury’s memorandum? And if, on the other hand, one believes that Patterson can be trusted to put the public interest over that of Goldman Sachs, what is the point of requiring Treasury to find loopholes in the E.O. in order to hire him?