HomePublicationsNewsletter ArchiveNewslettersVolume 18Issue 19Summer Compliance Series: Political Contribution Restrictions

In addition to its traditional coverage of developments in the state’s gaming industry, The Michigan Gaming Newsletter is proud to announce its first annual Summer Compliance Series. From June until the end of August, The Michigan Gaming Newsletter will be publishing a regular column in order to provide readers with a basic understanding of Michigan gaming regulatory structures and considerations. The following is a general discussion of the state’s compliance requirements and should not be considered legal advice.

This November, in addition to the presidential and congressional elections, Michigan voters will have the opportunity to vote on a number of state and local political offices, including state representatives, university trustees, state judges, and various local positions. As political groups are increasing fund raising activities in advance of the election, it is important for those holding a license issued by the Michigan Gaming Control Board (“MGCB”) to review and observe the state’s political contribution restrictions.

Though the state has maintained restrictions on political donations since the inception of the Michigan Gaming Control and Revenue Act (“Act”), these provisions have evolved over time.

History

As originally drafted, the political contribution restrictions in Section 7b of the Act contained broad language that applied the restrictions on political donations to state, state legislative, and local elective offices to all licensees, key persons, interest holders in licensees, including the spouses and close family members of these individuals. In addition, the Act prohibited contributions made for a period of one year prior to an individual applying for any MGCB operator or supplier licensee.

However, on December 17, 1998, then Michigan attorney general Frank Kelley issued Attorney General Opinion No. 7002, which concluded that certain sections of the original political contributions restrictions were unconstitutional. Specifically, the order opined that the restrictions placed on political contributions made by spouses and close family members, as well as the restrictions on contributions made one-year prior to applying for a license as applied to supplier licensees were unconstitutional (the opinion, however, concluded the one-year retroactive restrictions as applied to casino operator licensees constitutional).  In addition to the 1998 Opinion, two additional Attorney General Opinions ( #7086 August 10, 2001 and  #7099 January 9, 2002) have been issued which further clarify the application of Section 7b.

Current Restrictions

The current law prohibits casino and supplier licensees from making political contributions to any state or local political candidates or any “holder of any state, legislative, or local elective office.” MCL §432.207b(a)(ii). In addition, the restrictions apply to those political action, candidate, or independent committees that donate to candidates for state or local offices.

Therefore, as a general rule, if a donation has the possibility of funding a state or local candidate, even if it is through a political action or similar committee, then the Act prohibits the contribution. These restrictions, however, do not apply to candidates for federal elective office.  Notably, the restrictions also do not apply to ballot question committees.

The parties covered by Section 7b of the Act are those entities or individuals who hold a casino or supplier license issued by the MGCB. This includes individuals holding a 1% or greater ownership interest in a licensee, officers or managerial employees of a licensee, and officers or managerial employees of entities that hold a 1% or greater interest in a casino or supplier licensee.

Political contribution restrictions apply as long as the casino or supplier is licensed by the MGCB and for a period of three years following the expiration or termination of the license. In addition, the restrictions apply to any contributions made one-year prior to an individual or entity that is applying for a casino operator license.

Violations of Section 7b can result in a felony punishable by imprisonment for not more than ten years or a fine not more than $100,000 or both and/or immediate licensing action by the MGCB, including revocation of a license (Section 18(1)(f)). The MGCB has and continues to strictly enforce these provisions, so it is important for those covered by Section 7b to closely monitor any political contributions to ensure that they are in compliance with section 7b of the Act.

Casino Interest Registration Act

In connection with the Act, the Michigan legislature passed the Casino Interest Registration Act (“CIRA”) in order to assist the state attorney general, MGCB, and other interested parties in monitoring compliance with the Act’s political contribution restrictions. In accordance with CIRA, all entities or individuals who hold a 1% or greater interest in a casino operator licensee and have not been otherwise exempted from compliance with CIRA must complete a short, one-page registration form and submit the same to the Michigan Bureau of Elections.

The Michigan Bureau of Elections maintains a list of all registrants under CIRA and publishes this list bi-annually. The list contains the names of those entities or individuals who have registered and is used, in part, to cross-check political donor lists for prohibited contributions.

Registration with the bureau must occur within five days of the MGCB granting the entity or individual’s license application, including those applications for a transfer of interest in a casino licensee that results in the entity or individual acquiring more than 1% ownership interest in the casino licensee. Those who fail to register face civil fines and/or misdemeanor criminal penalties.

Those interested in furthering their understanding of the MGCB’s political campaign restrictions, including CIRA’s registration requirements, can refer to the agency’s summary of the applicable laws and regulations located at the following link: http://www.michigan.gov/mgcb/0,1607,7-120-57144_57145-245363--,00.html

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The Michigan Gaming Newsletter would like to thank Scott Nuyttens and Peter Stern for their contributions to this issue.

 

 

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