IN THE COURTS: Transparency/Lobbying Law Compliance

CASE TITLE
North Carolina Institute for Constitutional Law 
v. 
State of North Carolina; North Carolina Department of the Secretary of State; and Elaine F. Marshall, North Carolina Secretary of State, in her official capacity

OVERVIEW 
In May 2008, Governor Easley announced a commitment by Spirit AeroSystems to locate a manufacturing plant at the Global TransPark in Kinston in return for receiving economic development incentives, which may total as much as $180 million. Opening in 2010, Spirit AeroSystem’s plant is expected to create 1,031 jobs in the next six years.

This deal has been called “the most important economic-development deal in Tar Heel history.” The site consultant who represented Spirit AeroSystems stated, “The fact that it didn’t leak was one of the greatest coups of the century.” According to the News & Observer, the North Carolina Institute for Constitutional Law (NCICL) “had every reason to believe that a consultant for Spirit Aero[Systems] prevailed upon the administration of former Gov. Mike Easley to feather the company’s nest if it came to the TransPark.”

No lobbyist for Spirit AeroSystems ever registered with the NC Secretary of State’s Office (NCSOS), the agency charged with oversight of lobbying activities, but a December 2008article in Business North Carolina magazine details how Mike Mullis had lobbied Governor Easley, Secretary of Commerce Jim Fain, and others in the administration for economic development incentives for Spirit AeroSystems. 

In May 2009, the NCICL made a document request to the NCSOS for all documents relating to lobbyist activity on behalf of Spirit AeroSystems in connection with soliciting and negotiating economic development incentives with state officials. On June 1, 2009, the NCICL resubmitted its request to the NCSOS and received a response the following day that the NCSOS had no lobbying filings related to Spirit AeroSystems. On June 3, 2009, the NCICL confirmed with the NCSOS that they had no lobbying filings related to Spirit AeroSystems and asked if the NCSOS’s Lobbying Compliance Division takes action if a principal or lobbyist fails to register. The NCICL received a response on June 9, 2009 that the Lobbying Compliance Division opens an investigation when a complaint has been made. The NCICL filed a formal complaint on July 16, 2009 with the NCSOS.

After months without a response, the NCICL made a status report request regarding its complaint. In late November 2009, the NCSOS refused to provide any information on the status or resulting action, citing the confidential nature of the records.

In March 2010, the NCICL renewed its original request for documents on Spirit AeroSystem’s lobbying activities and also requested any documents relating to any actions taken in response to NCICL’s complaint. On March 24, 2010, the NCSOS reiterated they had no lobbying filings and would not release any documents pertaining to the complaint or any investigation. 

On June 21, 2010, the NCICL filed a lawsuit in Wake County Superior Court against the NCSOS. The NCICL alleges violations of 1) NC’s Public Records Act when the NCSOS refused to release lobbying information on Spirit AeroSystems, 2) freedom of press as guaranteed in the state constitution, and 3) a constitutional mandate to open courts. The lawsuit petitions the Court to compel the NCSOS to make the records available.

THE DEBATE 
N.C. Gen. Stat. 120C (commonly referred to as the “Lobbying Law”) regulates lobbying activities within the state. The law requires lobbyists and principals (those employing lobbyists) to register with the NC Secretary of State (NCSOS), which then makes those registrations public. Furthermore, the law requires the NCSOS to investigate complaints of lobbying law violations (such as an unregistered lobbyist) and report apparent violations to the District Attorney. 

Another relevant body of law – the Public Records Law - requires disclosure of all public records, with certain exceptions. Despite the expenditure of taxpayer dollars on “incentives”, one exception protects economic development deal-making in its early stages. However, after the state or the recipient business has announced a commitment to locate within NC, the public records may no longer be withheld (as long as not elsewhere classified as confidential) and should be disclosed within 25 business days. 

On June 16, 2009, the North Carolina Department of Justice issued an advisory opinion to the NCSOS stating that documents involving an investigation from a complaint are confidential and should only be released by court order, relying on N.C. Gen. Stat. 120C-600(c). 

NCICL believes that the NCSOS has misinterpreted N.C. Gen. Stat. 120C-601(c) and that under the Public Records Law, just because confidential information is commingled with non-confidential information is not a sufficient ground to deny the request altogether. 

The NCICL also alleges the open court mandate is denied by the refusal of the NCSOS to disclose whether they referred the matter to the Wake County District Attorney and/or imposed any fines.

SUPPORTERS of economic development deal-making exemptions under lobbying or public records laws say that companies who are considering developing or relocating in North Carolina worry that compliance with lobbying or public records laws may result in the revelation of “trade secrets” to their competitors. They believe that the disclosures required by compliance with these laws may jeopardize the success of their negotiations. Supporters argue that without the exemptions that have been enacted on their behalf, some companies may not be willing to bargain with the state of North Carolina, and could choose instead to work with other states that are more willing to protect them.

SUPPORTERS include:
State of North Carolina (and its agencies)
North Carolina Economic Developers Association
NC League of Municipalities
NC County Commissioners

OPPONENTS of exemptions to lobbying or public records laws by economic dealmakers believe that transparency is critical to maintaining integrity in government. They argue that like other budget items, taxpayers have a right to know about economic development spending, since taxpayers are required to pay for any subsidies that are given to targeted companies. They say that if companies want to keep their relocation or development plans secret, they shouldn’t ask the taxpayers for subsidies. Opponents argue that many special interests would like to keep their lobbying efforts and spending private – even those who are not asking the taxpayers for money – but they are not exempted from disclosure laws. They believe that companies seeking public funding have even more of an obligation to disclose spending related to their lobbying efforts. 

OPPONENTS include:
NC Institute for Constitutional Law
NC Coalition for Lobbying & Government Reform 

WHAT’S NEXT?
In the lawsuit, the next step is for the defendants to file their answer to NCICL’s complaint, which will contain their defenses, or move for the lawsuit to be dismissed. 

SUMMARY
NCICL v STATE of NC et al. has the potential for a very broad impact, affecting the press, the public, any person lobbying the government for economic incentive packages, the companies themselves, legislators and state agencies. Both the Charlotte Observer and theNews & Observer have opined that more transparency is needed and the records should be produced.

Officials in the NCSOS have asked lawmakers to relax the law, but have not offered specific solutions.

FOR MORE ON THIS ISSUE 
NCICL Complaint filed June 21, 2010
North Carolina Public Records Law
North Carolina Lobbying Act
News & Observer article, June 22, 2010 
Governor Mike Easley’s announcement on Spirit’s decision to locate in Kinston, May 14, 2008

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