When does lobbying become outright bribery? A recent enforcement action provides a good case study for chief ethics and compliance officers and in-house counsel as they seek an answer to this question. 

Commonwealth Edison (ComEd), a subsidiary of electric utility company Exelon, will pay a $200 million fine as part of a deferred prosecution agreement (DPA) with the Department of Justice to resolve a criminal investigation into a years-long bribery scheme concerning historical lobbying practices in Illinois. On Friday, the U.S. Attorney’s Office for the Northern District of Illinois charged ComEd with bribery.

Under the DPA, ComEd admitted to arranging jobs, vendor subcontracts, and monetary payments associated with those jobs and subcontracts for various associates of an unnamed elected official for the State of Illinois (identified as Illinois House Speaker Michael Madigan), “even in instances where those people performed little or no work that they were purportedly hired by ComEd to perform,” the Department of Justice said. The purpose of these bribes, which occurred between 2011 through 2019, was to influence and reward the official’s efforts to assist ComEd with respect to legislation concerning ComEd and its business.

According to the Justice Department, the Illinois General Assembly considered bills and passed legislation that had a “substantial impact on ComEd’s operations and profitability, including legislation that affected the regulatory process used to determine the electricity rates ComEd charged its customers.” The unnamed elected official in this case controlled what measures were called for a vote in the Illinois House of Representatives and exerted “substantial influence over fellow lawmakers concerning legislation affecting ComEd.”

In addition to the jobs and contracts, ComEd further admitted it undertook other efforts to influence and reward the public official, including by appointing upon request an individual to ComEd’s board of directors; retaining a particular law firm, also at the request of the public official; and accepting into the company’s internship program a certain amount of students who resided in the Chicago ward where the public official was associated.

Compliance enhancements

Under the DPA, the government will defer prosecution on the bribery charge for three years, at which time it will seek to dismiss it, provided ComEd abides by all terms of the agreement. In addition to the monetary penalty, ComEd’s obligations under the DPA include enhancing its compliance program and providing annual reports to the government regarding remediation and implementation of its compliance measures.

As part of its remediation, Exelon implemented four new mandatory policies that apply to employees who interact with public officials. These policies lay out specific rules, procedures, and tracking mechanisms governing interactions with public officials; vetting and monitoring of lobbyists and political consultants; employment referrals or requests from public officials; and vendor referrals or requests from public officials.

The policies further prohibit the subcontracting of third-party lobbyists and political consultants. Additionally, the hiring of such firms is being overseen by the ethics and compliance team, led by David Glockner, Exelon’s executive vice president of compliance and audit. Glockner was appointed to his role in March after having previously served as a senior Securities and Exchange Commission official and chief of the Criminal Division in the U.S. Attorney’s Office for the Northern District of Illinois, among other roles.

In addition, the company said it is conducting training on the new policies for employees as well as lobbying and political consulting partners. While the misconduct was limited to ComEd, the policies apply across all Exelon subsidiaries in Illinois and all other jurisdictions where Exelon operates.

Exelon responds

In a statement, Exelon said it has “fully and substantially cooperated with the U.S. Attorney’s Office from the beginning of the investigation, and since that time, has taken extensive remedial measures.” Such remediation and cooperation efforts were acknowledged by the government in the resolution agreement.

“We are committed to maintaining the highest standards of integrity and ethical behavior,” Exelon CEO Christopher Crane said. “In the past, some of ComEd’s lobbying practices and interactions with public officials did not live up to that commitment.”

“When we learned about the inappropriate conduct, we acted swiftly to investigate,” Crane added. “We concluded from the investigation that a small number of senior ComEd employees and outside contractors orchestrated this misconduct, and they no longer work for the company.”

“Since then,” Crane said, “we have taken robust action to aggressively identify and address deficiencies, including enhancing our compliance governance and our lobbying policies to prevent this type of conduct. We apologize for the past conduct that didn’t live up to our own values, and we will ensure this cannot happen again.”

The DPA is still subject to approval by the U.S. District Court. A court date for the approval hearing has not yet been scheduled.

The conduct at issue in the agreement relates only to ComEd. The agreement does not contain any allegation of misconduct by Exelon or Exelon Generation. A related SEC investigation and civil lawsuits remain pending.