TEXAS ETHICS COMMISSION
July 15, 2005
Application of the contingent fee prohibition in section 305.022 of the Government Code. (AOR-521)
The Ethics Commission has been asked about the application of the provision in the lobby law that prohibits agreements for compensation contingent on the outcome of a matter before a state agency. The specific question is about the application of the prohibition to an individual partner in a partnership who communicates with officers or employees of a state agency to obtain a permit for the partnership.
The prohibition in question provides as follows:
A person may not accept any employment or render any service to influence legislation or administrative action for compensation contingent on the passage or defeat of any legislation, the governor’s approval or veto of any legislation, or the outcome of any administrative action.
Gov’t Code § 305.022(b);1 see id. § 305.002(1) (“Administrative action” means any matter that may be the subject of action by a state agency.) In short, that provision would prohibit a person2 from agreeing to render services to influence a state agency to issue a permit if the person’s compensation for doing so were contingent upon whether the agency issued the permit.3
The request letter sets out the following facts about the partnership in question here:
The requestor asks whether the arrangement would violate section 305.022 of the Government Code.
An issue under section 305.022 would arise only if Individual A were receiving compensation for communications to influence legislative action and if the compensation were contingent on the outcome of the administrative action. As the requestor describes the facts, Individual A would not be receiving an interest in the partnership or anything else in exchange for his communications to the TCEQ. Because there would be no compensation at all for communications to influence, no issue under section 305.022 would arise.
In the specific circumstances described in the request letter, there would not be a contingent fee for purposes of section 305.022 of the Government Code.
This conclusion is specifically limited to the stipulated facts set out herein. Each case involving these issues must be determined on its own facts.
1The prohibition also applies to the other party to the agreement. Gov’t Code § 305.022(a).
2This prohibition applies to any person, not just to a person required to be registered as a lobbyist.
3The illegality stems from the agreement, not from the payment or provision of the contingent compensation. In other words, an agreement for contingent compensation for efforts to influence administrative action would be impermissible regardless of the outcome of the transaction.