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Office of the City Clerk v. McGinn Smith Licensing, LLC

OATH Index No. 158/09 (July 16, 2008)

Lobbyist’s client failed to timely file an annual report with the City Clerk. Respondent has never previously registered or filed, and is therefore liable for a $10 per day late fee. ALJ recommends that respondent be assessed $1,310 in late fees and a $2,000 civil penalty.

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NEW YORK CITY OFFICE OF

ADMINISTRATIVE TRIALS AND HEARINGS

In the Matter of

OFFICE OF THE CITY CLERK

Petitioner

- against -

McGINN SMITH LICENSING, LLC

Respondent

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REPORT AND RECOMMENDATION

INGRID M. ADDISON, Administrative Law Judge

Petitioner, the Office of the City Clerk, brought this civil penalty proceeding under chapter 2, title 3 of the New York City Administrative Code (“Lobbying Law”) and chapter 1, title 51 of the Rules of the City of New York (“RCNY”). Petitioner alleged that respondent, McGinn Smith Licensing, LLC, a “client” as defined in subsection 3-211(b) of the Lobbying Law, failed to timely file a 2007 client annual report due on February 15, 2008, in violation of subsection 3-217(b) of the Lobbying Law.

Petitioner commenced this proceeding by serving respondent with a petition on June 9, 2008. Respondent failed to answer the petition or appear for the hearing conducted on July 10, 2008. Upon respondent’s failure to appear, petitioner submitted proof of service of the petition and notice of the hearing by regular and certified mail on the respondent at its last known address, including a signed domestic return receipt card (Pet. Ex. 1). This established the jurisdictional prerequisite for finding respondent in default and an inquest hearing was held in respondent’s absence.

For the following reasons, I find that respondent failed to file its annual report by February 15, 2008, and should be assessed late fees in the amount of $1,310 and an additional civil penalty in the amount of $2,000.

ANALYSIS

In 2006, New York City’s Lobbying Law was amended to require, inter alia, any individual or organizational client who retains, employs, or designates a lobbyist during a year in which that client expends, receives, or incurs an amount in excess of $2,000 of combined reportable compensation or expenses for the purpose of lobbying, to electronically file an annual report with the City Clerk’s Office. Admin. Code § 3-217(a)(2). The annual report must be filed with the City Clerk by January 15 following the year for which the report is made, and must include the client’s name, address, and telephone number, as well as the names, addresses, and telephone numbers of all retained lobbyists, a description of the subject matter on which such lobbyists were retained, the persons or agencies before which the lobbyists lobbied, and a summary of the compensation paid or owed to each lobbyist. Admin. Code § 3-217(c); 51 RCNY § 1-03(b)(1)(iv)(D). The statutory filing deadline for the 2007 reporting requirement was extended by the City Clerk’s office to February 15, 2008.

Petitioner alleges that, as of the date of the petition, respondent had not filed its 2007 annual report. Pursuant to the City Clerk’s rules, respondent’s failure to answer the petition is deemed an admission of all allegations in the petition and the City Clerk is only required to submit an offer of proof establishing the factual basis for the determination. 51 RCNY § 1-06(h)(3). Here, the petitioner submitted a computerized printout of a lobbyist registration in the name of J. Adams Consulting, filed on July 11, 2007, listing respondent as one of its clients (Pet. Ex. 2). Missing from that submission was the monetary value of the retainer agreement between the lobbyist and respondent. After the hearing, I reopened the record and requested that petitioner provide proof by July 15 that the value of the lobbyist/client relationship exceeded $2,000. On July 15, petitioner submitted a revised petition along with a computerized printout of the respondent’s annual report for 2007, which was filed subsequent to the initiation of this proceeding. The report, which showed the date of filing as June 25, 2008, also reflected the monetary value of the relationship between the lobbyist and respondent. I find petitioner’s proof sufficient to establish that respondent (1) is a client as defined under subsection 3-211(b) of the Lobbying Law; (2) was required to file an annual report by the extended deadline of February 15, 2008; and (3) failed to do so, in violation of subsection 3-217(b) of the Administrative Code.

Under the Lobbying Law, a client who fails to file its annual report in a timely manner is subject to late filing fees. If the client has never previously registered or filed any other required filing under the Lobbying Law, the City Clerk’s rules provide for a late filing fee of $10 per day for each late filing. 51 RCNY § 1-03(b)(1)(iv)(A). A client who has previously made a filing or registered pursuant to the Lobbying Law is subject to a late filing fee of $25 per day for each late filing. 51 RCNY § 1-03(b)(1)(iv)(B).

Here, petitioner did not submit any documentation to establish respondent’s filing status. Rather, it represented to this tribunal that respondent never previously registered or filed a required statement or report under the Lobbying Law and requested that the $10 per day late filing fee be imposed. The late filing fees are automatic and start accumulating once a client misses the deadline. Respondent’s filing on June 25 was 131 days beyond the extended deadline of February 15. Respondent is therefore subject to late filing fees totaling $1,310.

Subsection 3-223(c) of the Lobbying Law permits the City Clerk to pursue civil penalties in addition to late fees. The City Clerk must first notify the client, by certified mail, of the nature of its noncompliance and advise it that compliance must be made within 14 business days of the mailing of the notice. Admin. Code § 3-223(c); 51 RCNY § 1-03(a)(5). A client’s failure to comply with its filing obligations within this cure period constitutes a class A misdemeanor and, in addition, subjects the client to a civil penalty of up to $20,000. Admin. Code § 3-223(c); 51 RCNY § 1-03(b)(1)(iii). It should be emphasized that the 14 business days grace period begins to run from the date of the City Clerk’s mailing of the notice to cure and not from the extended filing deadline of February 15. In this case, petitioner submitted proof that on April 3, 2008, it forwarded to respondent by certified mail at the address listed on J. Adams Consulting’s registration, a notice to cure (Pet. Ex. 3). Respondent therefore became subject to additional civil and criminal penalties after April 23. According to petitioner, respondent filed its annual report two months and one day after the latest cure date of April 23. Accordingly, I find that a civil penalty is appropriate.

A client’s failure to file its annual report undermines the important policy goals served by the Lobbying Law, namely reducing the impact of lobbying culture and special interests at City Hall and strengthening the integrity, transparency, and accessibility of city government for its citizens. Robert Newman, NY City Council Committee on Governmental Operations, Report of the Governmental Affairs Division, Proposed Int. Nos. 190-A, 191-A & 192-A (May 24, 2006). The filing requirement imposed upon clients serves to ensure transparency and accuracy in that a client’s annual report may reveal lobbyists who failed to file reports. Moreover, because the lobbyist and client reports should mirror each other, the filing requirements make possible errors or misrepresentations in lobbyists’ reporting easily detectable. Thus, the filing requirement is essential as an enforcement tool. It also serves a significant public interest in that it is a way of apprising the public of the lobbying activities of public servants and entities.

Respondent filed its annual report 131 days late, and only after the petitioner initiated this enforcement proceeding. Subsection 1-03(b)(2) of the City Clerk’s rules provides that “the frequency and extent of a . . . client’s record of violations,” as well as any “[m]itigating or aggravating factors may be considered” in assessing a penalty. Because respondent failed to appear at the hearing, it did not present any mitigating circumstances that might have excused or explained its failure to timely file its annual report. Even though respondent eventually satisfied its obligation, this came only after commencement of this enforcement proceeding. Such tardiness demonstrates respondent’s flagrant disregard for the policies embodied in the Lobbying Law. I find such disregard to be an aggravating factor for the purpose of assessing a penalty. The relationship between a lobbyist and its client is a reciprocal one in which both parties reap the benefits of lobbying activities. While professional lobbyists derive their livelihood from knowing and using the intricacies of the lobbying process, a client wishing to avail itself of the many benefits that can result from lobbying is equally obligated under the law and must comply with all restrictions and rules imposed by the legislature. See N.Y.S. Council of Mechanical Trades Contractors v. Lifset, 118 A.D.2d 1012, 500 N.Y.S.2d 383 (3d Dep’t 1986) (affirming Temporary State Commission on Lobbying’s determination that lobbyist and his clients were delinquent in filing required periodic reports, and its assessment of $4,500 in civil penalties on each association).

Petitioner requested a civil penalty of $500. Given respondent’s disregard for the Lobbying Law, demonstrated by the time that elapsed between petitioner’s notice to cure and respondent’s filing only after it received the petition, this request appears inappropriate and unlikely to act as a deterrent against future late filings. Under these circumstances, I recommend that a fine of $2,000 be imposed. This is consistent with prior recommendations from this tribunal and serves to reinforce the principle that clients cannot reap the benefits of lobbying yet ignore their responsibilities under the Lobbying Law. See Office of the City Clerk v. Coney Island Land Owners Assoc., OATH Index No. 493/08 (Nov. 27, 2007) (assessing a civil penalty of $5,000 against client who was 302 days late filing its annual report); Office of the City Clerk v. One York Street Assoc., LLC, OATH Index No. 419/08 (October 30, 2007) (assessing a civil penalty of $2,500 against client who was 105 days late filing its annual report); Office of the City Clerk v. New York Outdoor Operators, LLC, OATH Index No. 504/08 (Oct. 29, 2007) (assessing civil penalty of $4,500 against client who was 255 days late filing its annual report).

FINDINGS AND CONCLUSIONS

  1. Respondent was properly served with the petition and notice of hearing.
  1. Petitioner established that respondent, a “client” as that term is defined in subsection 3-211(b) of the Lobbying Law, filed its 2007 annual report 131 days after the extended deadline for filing on February 15, 2008.
  1. Respondent, a first time filer, may be assessed a late fee of $10.00 per day for each day it failed to file after the deadline.
  1. Petitioner established that it is entitled to assess a civil penalty against respondent, because respondent failed to file its annual report within 14 business days of the mailing of notice of its opportunity to cure.

RECOMMENDATION

Accordingly, I recommend that respondent be assessed late fees in the amount of $1,310 for failing to file its 2007 annual report by February 15, 2008, and an additional civil penalty in the amount of $2,000.

Ingrid M. Addison

Administrative Law Judge

July 16, 2008

SUBMITTED TO:

HECTOR DIAZ

City Clerk

APPEARANCES:

ARNIE WOLSKY, ESQ.

Attorney for Petitioner

No appearance for or by respondent.