New Registration Requirement in the State of Illinois, Effective January 1, 2009

Effective January 1, 2009, the State of Illinois passed new ethics legislation involving registration of entities seeking to do business with the state and bans on political contributions from these entities to the officeholders responsible for their contracts. The registration is essentially a first step for the state to keep track of the businesses involved in state contracting so it can enforce the contribution ban.

Registration
An entity must register by February 2, 2009 with the Illinois State Board of Elections (Board) if any combination of the annual total of (a) its bids and proposals on state contracts for 2009, or (b) value of state contracts already received for 2009, exceed $50,000. If the contracts for which a company is bidding exceed $50,000, a company must register, even if it has not actually won any bids. If an entity has less than $50,000 in state bids or contracts, it does not need to register until it submits a bid or signs a no-bid contract that would cause it to exceed the $50,000 threshold, at which point the duty to register would apply.

• Calculating $50,000: In calculating the amount of state contracts pending or awarded, the relevant number is the monetary obligation to the entity from the state, not the amount of profit by the entity from the contracts. If a contract is for an indefinite or estimated amount, an entity should use the information provided during the bidding process to establish an amount to the best of its abilities.
• Registration procedure: The registration form is a two-page document that asks for basic information regarding the reporting entity and its affiliates, but requires a signature only from the reporting entity itself.
• Definition of affiliated entities: (i) any subsidiary of the entity; (ii) any member of the same unitary business group; (iii) any non-profit organization established by the company or by an affiliated entity or affiliated person; or (iv) any political committee sponsored by the entity, or by a non-profit organization established by the company, an affiliated entity, or an affiliated person. For those agencies under the governor’s control, the definition of affiliated entity extends to parent companies of the business entity. Since the state has not yet issued a definitive list of those agencies that fall under the governor’s jurisdiction (and, based on informal conversations with state legal staff, we believe further guidance is not forthcoming), we recommend registering using the broader definition of affiliate in order to ensure compliance.
• Definition of affiliated persons: (i) any natural person with an ownership interest or distributive share of the entity or an affiliated entity in excess of 7.5 percent; (ii) an executive employee of the entity or an affiliated entity; or (iii) the spouse or minor child of anyone covered by (i) or (ii). An executive employee is defined as the president, chairman, chief executive officer, or other employee with executive decision-making authority over the long-term and day-to-day affairs of the entity employing the employee, OR an employee whose compensation is determined directly, in whole or in part, by the award or payment of contracts by a state agency to the entity employing the employee.
• Duty to supplement: Once registration is complete, any changes or updates to the information provided must be reported to the Board within 10 business days for those entities with existing state contracts and two business days for those with pending bids or proposals.

Certification and Notice
Upon receipt by the Board, the front-page of the registration form will be stamped and returned to the business entity to serve as its certificate of registration. The entity must provide copies of the certificate to:

• Any affiliated entities or affiliated persons within 10 days of receipt
• The chief procurement officer or officers responsible for its contracts by March 31, 2009
• All bids and proposals submitted to the state going forward

In addition, the entity must notify any political committee to which it or its affiliates donates that it is registered with the Board at the time the donation is made.

Political Contribution Restrictions
The final piece of the legislation bars donations to state officeholders and candidates by registered entities.

• Scope of ban: Various state agencies are under the jurisdiction of each of the state’s constitutional officers (governor, lieutenant governor, attorney general, secretary of state, comptroller, and treasurer) and, for entities that contract with agencies under the jurisdiction of any officer except the governor, contributions only to that specific officer or candidate are banned. However, for those entities doing business with an agency under the governor’s jurisdiction, donations to ANY of these officers or to any member of the Illinois General Assembly are prohibited. Further, for these agencies, the ban extends to “solicitations” of donations as well as the donations themselves. A list of the agencies covered under this expanded ban is forthcoming.
• Duration of ban: For contracts actually awarded to an entity, this ban is effective for the duration of the term of office of the incumbent officeholder awarding the contracts or for two years following the expiration of the contracts, whichever is longer. For bids and proposals, the ban is effective beginning the date the invitation for bids or request for proposals is issued and ends on the day after the date the contract is awarded.

Public Affairs News Alert is part of our ongoing commitment to providing up-to-the minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this alert or would like to discuss this topic further, please contact your Foley attorney or any of the following individuals:

Alyssa S. Berman
Chicago, Illinois
312.832.5186
[email protected]

Myles D. Berman
Chicago, Illinois
312.832.4546
[email protected]