In a recent decision, the Appellate Division of the New Jersey Superior Court affirmed agency decisions rescinding approximately $7 million in state contracts to a local paving company. As a result of the $500 political donation, the company was also disqualified from any state contract through the remainder of Gov. Chris Christie's second term. The decision in Della Pello Paving, Inc. v. State of New Jersey highlights that a relatively minor pay-to-play violation can be devastating for New Jersey businesses that rely on public contracts.
New Jersey’s Pay-to-Play Law
The 2005 amendment to the Campaign Contributions and Expenditure Reporting Act, L. 2005, c. 51 (Chapter 51), prohibits any state agency from awarding a contract over $17,500 to a business entity that has contributed more than $300 during the preceding eighteen months to the Governor, a candidate for Governor or any State or county political party committee. The intent of the pay-to-play law is to "safeguard the integrity of State government procurement by imposing restrictions on State agencies and independent authorities to insulate the negotiation and award of State contracts from political contributions that pose the risk of improper influence, purchase of access, or the appearance thereof."
The statute provides a safe harbor provision for "inadvertent" contributions. However, it only applies if the contributor both requests and receives full reimbursement for the contribution within 30 days after the date on which the contribution was made.
Facts of the Case
Della Pello Paving, Inc. challenged final agency decisions by the Department of Transportation and the Department of Treasury rescinding two State contract awards to the company and disqualifying it from receipt of any State contract for the remainder of Governor Christie's term. The agencies alleged that Della Pello violated the 2005 amendment to the Campaign Contributions and Expenditure Reporting Act, commonly referred to as the "pay-to-play" law.
According to court documents, Della Pello’s paving business is “almost entirely dependent on [S]tate contracts." In April 2014, Al Gaburo, Chairman of the Somerset County Republican Organization, and the Somerset County Republican Executive Committee sent Della Pello an invitation to a cocktail party for which tickets were offered at $500 per person. The enclosed reply card instructed that checks were to be made payable to either the Somerset County Republican Organization or the Committee to Elect Palmer and Zaborowski.
Della Pello's office manager filled out the reply card stating that its president, Val Della Pello, Jr., would attend, underlined the option of the Somerset County Republican Organization and enclosed a $500 check from Della Pello Paving, Inc. dated April 9, 2014, and made out to "Somerset County Republican Org to Elect Provenzano."
After being awarded a $2,954,176.01 paving contract in May 2015, Della Pello submitted the required "Two-year Chapter 51/Executive Order 117 Vendor Certification and Disclosure of Political Contributions" form disclosing the contribution. The Department of Transportation submitted the form to the Chapter 51 Review Unit in Treasury's Division of Purchase and Property, which requested a copy of the check. The back of the check revealed it was endorsed by the sponsor of the cocktail party, the Somerset County Republican Executive Committee and deposited into its bank account.
Based upon its review of the check, the Treasury determined Della Pello was ineligible for a contract award based on its reportable contribution to a county political committee. The Department of Transportation subsequently rescinded a second contract award to Della Pello based on the violation. In appealing the determinations, Pella Dello maintained it had not intended to contribute to the county political committee, as evidenced by the payment line of the contribution check which reads: "Somerset County Republican Org to Elect Provenzano." It also argued that the county committee erroneously depositing the check into its account should not disqualify the company. The Treasury rejected the arguments.
The Appellate Division affirmed. “We are satisfied that all of Della Pello's arguments have been thoroughly considered and appropriately rejected based on the documents in the record, specifically the invitation and response card, the contribution check, Della Pello's Chapter 51 certification and the ELEC records,” the court held.
The Appellate Division agreed with the Treasurer that even if Della Pello did not "intend" to make the contribution to the County Committee, the company failed to request and receive full reimbursement within thirty days of the contribution. Accordingly, Chapter 51 provides no remedy.
With regard to the length of the disqualification, the court noted that it is dependent on the recipient of the contribution and when it was made. “Della Pello's contribution was to a county political party committee. The contribution was made in 2014, during the Governor's second term,” the court noted. “It is undisputed that the Somerset county committee…nominated the Governor in the 2013 gubernatorial election preceding that term. Accordingly, N.J.S.A. 19:44A-20.14(ii) applies, mandating Della Pello's ineligibility for any State contract through the end of the Governor's term in January 2018,” it concluded.
For more information about the decision in Della Pello Paving, Inc. v. State of New Jersey or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group.