Friday, April 24, 2015

NY LLC Campaign Finance Loophole Update



The New York LLC Loophole allows the use of LLC's to bypass campaign donation limits.  For example, a landlord with many buildings designates each building as a LLC.  The landlord can now donates for each building and multiply his donations.

The New York Board of Elections Commissioners failed to pass any type of fix on a 2 Democrats for and 2 Republicans against.  The Republicans indicated any fix was a State Legislature fix.

The State Senate Elections Committee is expected to vote Monday, April 27 2015, whether to advance a bill that would close the controversial loophole in state election law that allows wealthy donors to pour unlimited cash into campaign coffers through the use of multiple limited liability corporations, or LLCs.

Sen. Daniel Squadron, a New York City Democrat and the bill's sponsor, has maneuvered the bill to a committee vote despite major opposition from the Republican majority conference.  Monday's vote will come after reform groups and some legislators failed in an attempt to get the State Board of Elections to reverse its 1996 interpretation of state law that created the loophole.

"As the focus continues on this critical ethics reform, it will be disappointing if Monday's Elections Committee vote breaks down along the same partisan lines that the recent budget and Board of Elections votes did," said Squadron.  "In light of the BOE's professed arguments, I'm hopeful that the Elections Committee will take a serious look at this issue to prevent unlimited sums of anonymous dollars from perverting our state government and the entire political process."

Assembly Member Brian Kavanagh, also a New York City Democrat, sponsors the same bill in the Assembly.  Kavanagh believes his conference is also ready to move on the bill and that he thinks Senate Republicans should be too.  "The Republican BOE chair said that he thought the Legislature was the appropriate place to address this.  And I know he isn't the only one who believes that."

The LLC loophole has become a major flashpoint in the battle for campaign finance reform because other efforts at reform failed in this year's budget negotiations and a pilot public financing program for last year's comptroller race never got off the ground.

Advocates acknowledge that while having a committee vote on the issue is a victory in itself it isn't exactly likely that the bill passes the Senate given that Republicans currently enjoy a narrow majority that could fall apart at any time due to indictment, illness, or retirement.  Their candidates are often bolstered by large donations from single individuals or industries that use the LLC loophole to their advantage.

Advocates admit that the vote may be the last gasp for campaign finance efforts this year.  "I think the real chance for reform this year is on the LLC loophole because there is more clear agreement on that," said Rachael Fauss of good government group Citizens Union.  "I think we will have to wait for another major push until the budget next year."

Kavanagh said he expects the LLC loophole to remain a major focus for the rest of the year with perhaps some room between the Senate Republicans and Assembly Democrats to negotiate further contribution disclosure rules, including, perhaps, requiring donors to list their employers.  Conversation and movement during this year's budget negotiations mostly revolved around legislators' outside income.

Republican Senators do tend to benefit more from the largesse of the real estate industry and corporations that use the LLC loophole to subvert the state's donation limits.  Republicans counter that Democrats benefit from massive union donations.

Advocates don't put responsibility entirely on Senate Republicans.  They look at the governor, saying Cuomo has failed to capitalize on major public outcry over scandal and not used his bully pulpit to push reform.  They point to budget negotiations last year when most thought Cuomo was in a position thanks to Moreland Commission and continuing pressure from the US Attorney to truly campaign for public financing of elections.

Instead Cuomo abruptly shuttered Moreland for what advocates call "meager" ethics tweaks and minimal campaign finance measures.  The two measures, a pilot program for public financing exclusively in the 2014 comptroller's race and a new enforcement office in the BOE, have not delivered.











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