Among the many charges of corruption outlined in the Federal Complaint against Senate Majority Leader Dean Skelos (R) is the allegation that he “has directed CW-1 [cooperating witness-1] to make hundreds of thousands of dollars in campaign contributions through various limited liability companies, or ‘LLCs’ controlled by Developer-1.” It’s no coincidence that at the end of last month, Senator Dan Squadron (D) forced a vote in the Elections Committee on his legislation (S.60) to close what is known as the LLC loophole, which feeds this kind of corruption by allowing the same individual to make unlimited political contributions by routing them through many separate LLCs. The complaint against Skelos clearly demonstrates how important this legislation is.
In New York elections, LLCs are currently not treated as corporations, but as people, with the ability to donate up to $60,800 to a statewide candidate per election cycle. LLC ownership is not disclosed under the current system, making it nearly impossible to track down contributions to the source of their funding. Thus, an individual can contribute unlimited sums to the political system through multiple LLCs without transparency or accountability. Of all the money raised by state-level candidates and party committees in New York, 14% is given by LLCs, three times the amount given by small-level individual donors. Between 2005 and 2013, LLCs contributed over $40 million to New York State candidates, parties and political action committees.
In April, the Board of Elections’ voted to keep the LLC loophole open. The board had a chance to close the loophole, advocated by two of the Commissioners, by rescinding their 1996 opinion treating LLCs as individuals and instead ruling that LLCs should be treated as corporations or partnerships, and by clarifying that a person may not use multiple LLCs to evade contribution limits. The measure failed. The two Democratic Commissioners voted to close the loophole, but the two Republicans voted to keep it open, insisting it should be handled in the Legislature, even though it was the board’s 1996 decision that created it in the first place.
The good news is that the Senate Elections committee did agree to move Senator Squadron’s bill, with all the Democrats voting yes and the Republicans voting “aye without recommendation,” a procedural move that counts as a yes vote in terms of moving the legislation. The bad news is that rather than moving to the Senate Calendar for consideration by the full Senate, S.60 was referred to the Corporations Committee. There is no way to force a vote on the bill in that committee, leading suspicious minds to wonder if this was just a way for the Republican members of the Elections Committee to kill the bill without actually voting against it.
We can only hope that recent developments will increase pressure on the Republican majority to bring legislation closing the LLC loophole before the full Senate for and up-or-down vote.
NYC Wins When Everyone Can Vote! Michael H. Drucker
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