Let’s just call the L.L.C loophole in the state’s campaign finance laws what it is — legal bribery. Or legal extortion. Or both.
What else would you call a system in which businesses seeking legislation worth millions of dollars to them can make unlimited campaign contributions essentially outside the public’s eye to candidates for statewide office and the state Legislature?
Gov. Cuomo recently presented — but did little to push — state legislators with eight separate options to reform the L.L.C. loophole.
The legislators chose none.
This after the recent convictions of New York’s top two legislative leaders — former Assembly Speaker Sheldon Silver (D-Manhattan) and former Senate leader Dean Skelos (R-Rockville Center.
Silver was sentenced to 12 years in prison for receiving kickbacks, honest service fraud and extortion. Skelos received five years in prison for bribery, extortion and conspiracy.
Both cases had a strong local flavor with New Hyde Park-based Glenwood Management Corporation playing a central in the prosecution of both Silver and Skelos. Glenwood’s chairman Leonard Litwin was named as an unindicted coconspirator in the Skelos case
Cuomo appeared to excuse Republican state senators, who have consistently opposed ending the L.L.C. loophole, saying that closing the loophole would be “tantamount to political suicide for the Republican Party in the state because they believe it ends corporate money,” according to the New York Times.
“Left unsaid,” the Times added “was that Democrats, including Mr. Cuomo have feasted on the L.L.C. money as well.”
State law allows an individual to give as much as $60,800 a year to a candidate for statewide office, but caps corporate contribution at $5,000.
But the state Board of Elections ruled in 1991 that L.L.C.’s, limited liability corporations, which are a hybrid between a regular corporation and a partnership, would be treated like people rather than corporations.
This allowed businesses like Glendale Management to make virtually unlimited contributions to state officials by forming as many L.L.C.s as needed.
Using dozens of limited liability companies, Litwin and Glenwood directly or indirectly made at least 1,834 contributions worth $13.2 million between 2000 and 2014, according to the Gotham Gazette.
Included was $1.1 million to the New York State Senate Republican Campaign Committee and $1 million to Cuomo’s re-election bid. Glenwood was by far the largest donor to the campaigns of Cuomo, state Attorney General Eric Schneiderman and state Comptroller Tom DiNapoli. Locally, Skelos received $110,000 and state Sen. Jack Martins received $45,000.
Why would Litwin and Glenwood contribute so much money?
Glenwood, which owns luxury residential towers mostly in Manhattan, benefitted by receiving up to $100 million in tax subsidies under a real-estate tax abatement called a 421-a. The program, as coincidence would have it, must be approved every four years in Albany.
Charles Dorego, a Glenwood executive, testified that the law’s continued renewal was an “absolute necessity” for Glenwood.
Without it, he said, the cost of city real estate taxes — the largest component of a luxury high-rise’s operating budget — would make building such towers unfeasible, in part because lenders would not finance them.
Glenwood also benefited from another state-administered program, using it to obtain more than $1 billion in low-interest, tax-exempt bond financing since 2000, to buy land and construct eight buildings it has put up since 2001, according to testimony at Mr. Silver’s trial.
Glenwood also depended on the governor and the legislative leaders to renew favorable rent regulations that determine when a developer or landlord can shift rent-stabilized apartments to market-rate rentals.
Not exactly most people’s idea of the free market system at work.
This is good for elected officials and developers, but not so good for taxpayers who have to either cover the cost of the tax breaks out of their pockets or receive less in benefits from the state.
Now multiply this by all the other developers with similar incentives as Glenwood’s.
And then add in all the other industries – financial services, health, insurance and legal to name a few – whose finances depend on the votes or rulings of state officials.
To make matter worse — hard to believe as that may be — are the restrictions placed on the use of campaign contributions by state legislators. Or lack thereof.
Skelos used $762,145 in campaign contributions to pay his lawyers in his corruption trial. Silver spent $1.4 million. And that was all legal.
We would like to think that at least most contributors expect their campaign contributions go to candidates’ political campaigns — and not their criminal defense funds.
Adding insult to injury, state law also permitted both Skelos and Silver to keep their state pensions — $95,590 a year in taxpayer dollars.
The state Legislature recently voted to strip the pensions of newly elected lawmakers convicted of corruption.
But the legislation allows Skelos and Silver get to keep their pensions.
All of which is a good argument for raising legislators’ salaries, capping their outside income, publicly financing campaigns and getting rid of the L.L.C loophole.
But guess who gets to make those decisions?
