Campaign Finance Reform

Senate Dems Push LLC Loophole Closure

Senate Democrats on Monday pushed for a vote in the Senate Elections Committee that would reclassify limited liability companies and limit their political giving.

Sen. Daniel Squadron, the bill’s main sponsor, used a parliamentary maneuver in order to have a measure put to a vote in a legislative committee.

The measure was approved, and is now before the Senate’s corporations committee.

At the moment, a single campaign donor can give unlimited contributions through a network of limited liability companies or LLCs.

“It seems like almost everyday new allegations of corruption and abuse of the public trust are leveled at state government,” said Senate Minority Leader Andrea Stewart-Cousins at a news conference this morning.

“What does it say when the Senate Republicans are so opposed to ethics reforms that they have to be forced to even discuss these bills in committee?”

The nudging is subtle: Senate Majority Leader Dean Skelos is under investigation by federal prosecutors, while the GOP’s deputy majority leader, Tom Libous, is under indictment for lying to the FBI.

More broadly, Democratic Assemblyman Sheldon Silver is under indictment for corruption charges and will be arraigned on a superseding indictment on Tuesday.

Good-government groups have long railed against the so-called LLC loophole, but for the moment the classification has been elusive in changing.

The state Board of Elections earlier this month had considered a change in the regulation, but the commissioners deadlocked in a vote.

Republican commissioners argued at the time it should up to the Legislature to change the regulation. The Board of Elections initially opened up the LLC giving based on a federal ruling that has since been overturned.

“The Board of Elections opened up this loophole through their own action,” Squadron said. “It was consistent At the time, the federal government quickly corrected that. The Board of Elections has failed to act. The New York State Legislature has failed to act. We’ve seen this loophole get bigger and bigger.”

Candidates on both sides of the political aisle have benefited from the arrangement, though Gov. Andrew Cuomo has raked in the lion’s share of the contributions.

Nevertheless, Cuomo himself has been pushing to have the loophole closed.

“The Governor supports and will continue to fight for closing the LLC loophole,” said spokesman Rich Azzopardi. “Today’s passage of legislation out the Senate Elections Committee that would accomplish this goal is a positive development and one that we hope ends with an actual vote and passage from the full Senate.”

Elections Board Deadlocks On LLC Reclassification

The state Board of Elections on Thursday declined to reclassify limited liability companies when it comes to the state’s campaign finance law.

The board, following a discussion about the influence of money in state politics and the merits of free speech in political donations, deadlocked its vote between the two Republican and two Democratic commissioners.

“I think it’s something we should do symbolically at least as a board in order to say, ‘Hey, we don’t think this should be happening,'” said Democratic Commissioner Andy Spano, a former Westchester County executive, who backed the reclassification.

The result was to the disappointment of the state’s good-government organizations and left-leaning advocacy groups that had sought to close what they say is a loophole in the state’s campaign finance law that allows individuals to contribute to political campaigns and candidates far beyond the legal limit through LLCs.

A coalition of groups had sought to end the practice of LLC contributions, a campaign that had grown to include Attorney General Eric Schneiderman urging the loophole be closed.

In a statement, a Schneiderman spokesman called the result a “squandered” opportunity.

“It is deeply disappointing that the Board of Elections squandered an opportunity to close the LLC loophole, which has made a mockery of New York’s campaign finance rules,” said Schneiderman spokesman Matt Mittenthal. “We will continue to fight to give New Yorkers the real, comprehensive ethics reform they demand.”

In essence, the resolution before the board would have reclassified LLCs as partnerships, which would have the impact of restricting how much money the ownership could contribute to campaigns.

Supporters had insisted the Board of Elections itself created the loophole through a 1996 determination that relied on a federal opinion that was later reversed.

“It’s obvious that we have a serious corruption problem in Albany,” said the Brennan Center’s Larry Norden. “We’ll have to explore what our next steps are.”

Added Blair Horner of NYPIRG: “It’s obviously a bogus argument to say that on the one hand they’re allowed to make an interpretation that allows the LLC loophole and now they say they don’t have the authority to close it.”

But in the end, the board’s two Republican commissioners voted against the reclassification, in part saying it was up to the Legislature to consider campaign finance regulations such as contribution limits.

“The Legislature has created this very comprehensive system of campaign contribution limits in New York state,” said Republican Co-Chairman Peter Kosinski. “I feel we have to honor that. That’s there prerogative to do so. We administer it. We make sure it’s complied with. But we don’t create it.”

Kosinski was appointed to become the new Republican chairman on the board on Wednesday, replacing James Walsh. He is a former counsel to the Senate Republicans.

Kosinski also pointed to free speech concerns raised by reclassifying LLCs in order to limit campaign donations.

“These are constitutional issues,” he said. “To have a state agency affecting peoples’ first amendment rights I think is very troubling.”

The state Business Council, too, had made the argument the Legislature should be tasked with any campaign finance changes and not the appointed commissioners at the Board of Elections.

Up until now, the state Legislature has shown little willingness to change the law and restrict LLC giving.

Politicians in both parties have benefited from LLC contributions, including Gov. Andrew Cuomo, who received more than $1 million in contributions from a single donor last cycle, developer Leonard Litwin.

Democratic Co-Chairman Douglas Kellner, who had the LLC change added to the agenda this week, urged the board’s recently appointed enforcement counsel Risa Sugarman to probe political donations through LLCs.

In particular, Kellner urged her to review contributions from entities that do not have any other apparent business purpose and mass donations from LLCs.

“I would certainly urge the independent enforcement counsel to take a look at two classes of suspicious LLC contributions,” he said.

Biz Council To BoE: Don’t Touch LLC Classification

The state Business Council on Wednesday urged the Board of Elections in a letter to not end what in effect has been a regulation allowing unlimited campaign contributions through LLCs.

In the letter, Business Council President Heather Briccetti writes any changes to LLC classifications should be taken up only by the state Legislature.

“The Board has acted within its administrative role and has refused outside calls for it to exceed its legislative mandate,” Briccetti wrote in the letter. “The Legislature was clear in its treatment of LLCs under the law. Any action taken by the Board to further limit LLC contributions, outside of an act of the Legislature, would be ultra vires and thus invalid.”

The letter comes as elections commissioners on Thursday are due to considering the so-called loophole in the campaign finance law that has allowed individual donors to contribute well above the legal maximum to candidates and political offices through a web of LLCs.

Advocates for ending that practice have said the Board of Elections can rewrite the regulation, given it was a board ruling in 1996 that created the loophole in the first place.

Briccetti Board of Elections Letter 4-15-15 by Nick Reisman

Coalition Pushes For LLC Loophole Closure

A coalition of groups on Monday urged the state Board of Elections to prohibit the practice of allowing individual donors to give unlimited campaign contributions through a network of limited liability corporations.

The coalition — composed of Citizen Action, the Working Families, Common Cause of New York and Every Voice, is asking the Board of Elections commissioners to re-write the regulation that created the so-called “LLC loophole” in the state’s campaign finance regulations.

“If we’re ever going to end Albany’s culture of corruption, we need to stop letting billionaires secretly dump millions into campaigns,” said Karen Scharff, Executive Director of Citizen Action of New York. “The Board of Elections must rein in this flood of cash now as a first step toward returning New York State government to voters.”

The call comes after the Brennan Center for Justice released a letter last week urging the Board of Elections to do the same.

The groups are renewing their emphasis on the LLC loophole after a budget agreement last month included new restrictions on the use of campaign funds as well as new reporting requirements for independent expenditure groups.

But the LLC loophole — long a source of derision for critics of the state’s campaign laws — was not addressed.

The groups pushing today for the closure of the loophole have also been full-throated in their support for the public financing of political campaigns. Last year, a year-long public financing program for the state comptroller’s race was created in the budget.

This year, with Senate Republicans fully in control of the chamber, a public financing system was barely discussed in the campaign finance reform debate.

Public Financing Lobby On The Sidelines For Now

From the Morning Memo:

The Public Campaign Action Fund, a deep-pocketed organization that backs the public financing of political campaigns, has yet to jump in the lobbying fray this legislative session.

“We are definitely monitoring closely what’s going on in Albany, but we haven’t made any plans to lobby,” said Adam Smith, a spokesman for the group.

At the moment, neither Public Campaign Action Fund or a related organization, Friends of Democracy, has filed an intent to lobby letter with the Joint Commission on Public Ethics – a documented required when the cost of seeking to influence state government is expected to be more than $5,000 for any given entity.

The decision to remain on the sidelines for now comes after pro-public financing organizations spent heavily through independent expenditure committees in the state Senate elections over the past two cycles.

The campaign money was spent to little avail: Republicans swept three upstate Democratic incumbents from the chamber and held on to all of their seats on Long Island, securing a full majority in the chamber this past November.

At the same time, GOP candidates and their allies made a point of campaigning against creating a public financing system.

With Republicans fully in control of the Senate, the prospects of a broad public financing program passing this year appear dim.

The lobbying in favor of getting big money out of politics – be it in the form of personal meetings with decision makers or through well-financed TV ad and mail campaigns – has, ironically, been a costly one in recent years.

The organization spent more than $1.3 million lobbying state government on the issue of public financing last year.

Between January and February alone, the Public Campaign Action Fund spent $450,000 on a television ad buy. An additional $884,279 was spent between March and April (most likely mostly March) on ads, direct mail and phone banking.

The effort had only a half-result: Gov. Andrew Cuomo and state lawmakers agreed to create the first statewide public financing program which applied only to the state comptroller’s race.

That pilot program didn’t work out too well. It’s lone participate – Onondaga County Coptroller Bob Antonacci, the GOP opponent to Democratic state Comptroller Tom DiNapoli – failed to meet the fundraising threshold to qualify for public matching funds.

Cuomo this year included a full public financing system in his $142 billion budget proposal.

This month, Cuomo has repeatedly called for new ethics legislation tied to the passage of the state budget, but he has been focused on achieving new disclosure laws when it comes to legislators’ outside income in the wake of former Assembly Speaker Sheldon Silver’s arrest on corruption charges.

The pro-public financing banner is still be carried in Albany in the form of the labor-aligned Working Families Party and its community-organizing partner, Citizen Action of NY.

Friends Of Democracy Reports $650K Effort

From the Morning Memo:

The pro-public financing group Friends of Democracy this month spent virtually all of its $650,000 budget, according to a filing with the state Board of Elections.

The majority of the group’s money was contributed by Jonathan Soros, the son of wealthy financier George Soros, who donated $600,000 to the effort.

The filing shows Friends of Democracy has spent $637,125 this month, almost entirely on TV ad purchases.

The group has been active in at least two state Senate races: the 40th Senate district race between Democrat Justin Wagner and Republican Terrence Murphy, along with the 46th Senate district, which is a rematch between Democratic incumbent Cecilia Tkaczyk and Republican George Amedore.

Hayworth Targeted By Campaign Finance Super PAC

A super PAC pushing an overhaul of federal campaign finance laws last week sent two mailers in the 18th congressional district, targeting Republican former Rep. Nan Hayworth.

The group, Every Voice Action, is tied to Jonathan Soros, the son of liberal financier George Soros, who is also funding Friends of Democracy, which has been active in several state legislative races.

Every Voice Action has also received funding from the Mayday PAC, a super PAC put together by legal theorist (and Zephyr Teachout booster) Lawrence Lessig.

The two mail pieces knock Hayworth for past votes on health-care related issues, which the group links back to her campaign contributions.

The mailers were sent last week to around 22,000 households in NY-18.

Hayworth is running for the seat in the Hudson Valley that she held until 2012, when she was defeated for re-election by Democratic Rep. Sean Patrick Maloney.

The Soros-backed Friends of Democracy is active again on the state-level this year, too, most notably funding a television ad knocking Republican state Senate hopeful George Amedore, a former assemblyman who is in a re-match himself against Democratic incumbent Sen. Cecilia Tkaczyk.

EveryVoiceNY18 Puzzle by Nick Reisman

EveryVoiceNY18-Dancing.pdf by Nick Reisman

Paladino Calls Maziarz ‘Poster Child For Term Limits’

Several Western New York Republicans have come to the defense of retiring New York State Senator George Maziarz in recent days; former GOP Gubernatorial Candidate Carl Paladino is not one of them.

“I think George is probably a poster child for term limits,” Paladino said. 

Maziarz has served in the Niagara County based 62nd state senate seat for two decades.  It’s a tenure Paladino believes was too long.

“After a while they start to feel like a king, you know King George,” said Paladino. 

It’s a characterization the Buffalo businessman has repeated over the years, and one that now appears to be gaining traction.  At about the same time Maziarz announced his retirement, reports surfaced the U.S. Attorney’s Office was looking into his campaign spending.

What started as a Moreland Commission report that showed $140,000 in unspecified campaign expenditures continues to expand.  The Albany Times Union reported Friday Federal investigators are now examining unitemized checks that were made out to cash, but never reported to the state board of elections.

The latest questions center on funds from the Maziarz campaign account that were reportedly given to a youth softball team and thousands of dollars in purchases from a WNY business.  Maziarz Campaign Treasurer, Laureen Jacobs, has been asked to turn over documents but her attorney wouldn’t provide any further details.

And although charges have not been filed, Paladino isn’t giving Maziarz the benefit of the doubt. 

“In my book, he was the guy that held Niagara County down,” Paladino said. 

Paladino believes the investigation into Maziarz campaign spending is nothing compared to what he didn’t do.  That criticism has to do with what Paladino describes as more than $1 Billion from the New York State Power Authority’s budget. 

That money, according to Paladino, was generated through the sale of unused allocated power.  Money that Paladino insists should have been spent on development in Western New York.

“George turned the other way as Cuomo was sweeping the account for the last four years.  He never ensured that that money would stay here for Western New York’s benefit.  That’s the kind of stuff that bothered me about George.”

It may take some time before Maziarz’s legacy is clear.  While the jury is still out in the court of public opinion, Paladino made up his mind long ago.  

“George is going to walk away with a million, one hundred thousand dollars in his campaign account and Western New York is no further ahead today than it was when George originally took office,” Paladino added.

 

Gallivan Reacts To Maziarz Retirement; Downplays Questions Over Campaign Funds

Although he was surprised by it, State Senator Pat Gallivan said the public shouldn’t read into the timing of the retirement of fellow Western New York Republican George Maziarz.

“Senator Maziarz has expressed publically his reasons for retiring that he had been thinking of it for a while, that it was in the best interest of his family and his future and I think unless we see otherwise we have to take that at face value,” Gallivan said.

A report by an anti-corruption panel released in May that showed Maziarz had $140,000 in unspecified campaign expenditures, followed by the revelation his former chief of staff was issued a Federal subpoena has sparked a new conversation over how this money can and should be spent.

“It wasn’t talking about taxpayer dollars. It was talking about voluntary campaign contributions and of course the expenditures of campaign contributions are guided by the Executive Law,” said Gallivan.

Gallivan’s name also appeared on the now defunct Moreland Commission Report.  It showed he had $80,000 in unspecified campaign expenditures dating back more than five years.

“When that happened I directed my campaign staff to look at our filings. We’ve always tried to endeavor to comply with the law but I asked them to look at our filings to ensure that we are in full compliance with the law,” Gallivan said.

Democratic Erie County Board of Elections Commissioner Dennis Ward said there’s a lot of gray area when it comes to campaign finance law in New York State.  He said expenditures from private campaign donations, under $100 don’t have to be itemized.

“That doesn’t mean that you don’t have to keep the records so that if you are audited, at a point down the road, that you have to still have the records for such expenditures,” Ward said.

Ward said the Moreland Commission; even if it was still active, had no power to prosecute.  There are also questions as to whether or not a commission appointed by the executive branch even had the authority to investigate the legislative branch of state government.

“Is it sufficiently clear? No. Our law should be strengthened and it should be tightened up to define a lot more of these expenses that would appear to people to be personal expenditures,” Ward added.

Gallivan hopes the public will keep a few things in mind before passing judgment solely on the findings of the Moreland Commission.

“My understanding is that they looked at the campaign filings of every member of the the legislature so in some way shape or form everybody was looked at, some questions were raised and that’s ok that some questions were raised because that gives you a chance to make sure you’re doing things the right way and again I’m confident that our filing, after review, are fully up to snuff and are in full compliance with the law,” Gallivan added.

NYPIRG Troubled By End Of Aggregate Contribution Cap

An 11-page policy paper released by the New York Public Interest Research Group on Friday takes issue with the state Board of Elections to suspend the aggregate political contribution limits in the wake of the Supreme Court decision, McCutcheon v. Federal Election Commission.

Broadly, NYPIRG notes the impact of the decision to suspend the state’s $150,000 aggregate limit for contributions in an election cycle will have little impact, considering donors can skirt that through donations from a web of limited liability corporations.

But the group takes issue with the decision by the board to suspend the cap without public hearings.

“However, the Board’s hasty decision highlights an ongoing weakness: namely that it has been too quick to act – and often with negative consequences – without publicly soliciting outside comments,” the paper states. “Additionally, and perhaps most significantly, this decision by the board establishes a precedent that will leave New York’s campaign finance system in worse shape.”

NYPIRG stresses the McCutcheon decision more readily impacted federal election law, not state-based contribution laws and regulations.

Nevertheless, the conservative Center for Competitive Politics earlier this year wrote to Gov. Andrew Cuomo urging the state to repeal the limits or face a lawsuit.

“If New York fails to either amend or repeal this statute to conform to the Court’s ruling, it risks a lawsuit,” wrote the group’s president, David Keating. “CCP has provided pro bono representation in similar situations, and would strongly consider doing so here as well. Such legal action would cost the state money defending the case, and would distract the Attorney General’s office from other important legal work. Additionally, if the state chooses to defend the law in court, it is probable that the state will have to pay substantial legal fees to successful plaintiffs.”

The McCutcheon decision could usher in a new era of super PAC spending the state level, with one group already created to work on behalf of Senate Republicans as well as GOP attorney general candidate John Cahill.

NYPIRG Response to BOE June 2014 by Nick Reisman