District Court Urged to Uphold SEC’s Pay-to-Play Rules Covering State Investment Funds

Democracy 21 joined the Campaign Legal Center in filing an amici brief in New York Republican State Committee v. Securities and Exchange Commission (SEC) urging the U.S. District Court for the District of Columbia to deny a preliminary injunction and dismiss the latest challenge to pay-to-play laws.

The state Republican parties of New York and Tennessee are challenging an SEC rule barring investment firms from managing state assets for two years after a firm or its associates make more than de minimis contributions to officeholders or candidates who have or would have power to award investment contracts.

The rule was implemented after SEC and state investigations uncovered extensive evidence of fraud in the award of state investment contracts.  One such scheme involved former New York State Comptroller Alan Hevesi, who was ultimately convicted of steering $250 million in pension funds to an investment firm in exchange for gifts and more than $500,000 in contributions.

“Pay-to-play laws have long existed to prevent conflicts of interest and corruption in awarding government contracts,” according to Democracy 21 President Fred Wertheimer. “The SEC has joined a number of states in adopting pay-to-play rules to protect taxpayers against dishonest groups ripping off their tax dollars by improperly buying government contracts. The New York Republican State Committee has no direct interest in these rules as they do not apply to the Committee. Instead, the New York Republican State Committee is doing the bidding of influence-seeking donors who want the freedom to use their money to improperly influence decisions about government contracts. The courts have recognized in the past the importance of pay-to-play rules and the federal district court should reject this lawsuit by promptly dismissing the case.”