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Group tries new tactic to close LLC loophole

Karen Dewitt
WRVO News (file photo)


A reform group is taking a new approach to trying to close a loophole in the state’s campaign finance laws, as years long attempts to crack down on what’s known as “dark money” donations have failed.

For years, reformers and many politicians, including Gov. Andrew Cuomo, as well as former Gov. Eliot Spitzer, have said they want to close a loophole in state law that allows donors to skirt the $5,000 limit for corporate donations.

They do so by creating multiple Limited Liability Corporations, or LLCs, which are cheap to set up, costing only a few hundred dollars in filing fees. Donors can have as many LLCs as they want and give up to $150,000 each. Attempts over the years to get the legislature to change the law to limit the LLC contributions have failed, as top ranking politicians, like the governor, the legislative leaders, and legislative campaign committees have continued to collect millions of dollars from LLCs.

A leading advocate in the legislature of closing the LLC loophole, state Sen. Michael Gianaris, a Democrat, from Queens, says the lack of action has been disappointing.

“How can anyone rationally say that that’s something that should continue to exist?” Gianaris asked.  

So reform groups, along with the state’s attorney general, have tried another route, and are asking the state Board of Elections to act, saying the board has the power to change it’s own practices and curb the LLC donations.

Blair Horner, with the New York Public Interest Research Group, says under state law, the LLCs are required to reveal the true identity of the donor, but he says the entities go to great lengths to obscure the money trail.

He says they often just provide an address that is a post office box, without disclosing any of the managers or principals of the company, making it impossible to follow the money trail. In other instances, the LLC address is listed as in care of another company, further obscuring connections with any existing companies that may have already maxed out their donations under the campaign finance laws.

“We think that may violate the true identity provision under the law,” Horner said. “ We want the Board of Elections to look into it.”

In some cases the LLC's are easier to trace. In the case of a cable company and a real estate developer, the LLCs  all have different names, but are listed at  the same address as that of a major parent company.  

The LLCs are treated by the state Board of Elections as though they are individuals, not corporations. That’s why they can give up to $150,000 in additional campaign donations, instead of being restricted to the corporate limit of $5,000.

Horner says it doesn’t make any legal sense to treat what is so obviously a business enterprise as a person. He says the LLCs themselves claim that they are either partnerships or corporations when they file taxes with the federal and state governments.

“We think that they’ve opened up a Pandora’s box of problems,” he said.

The LLC donations are already causing legal problems for some lawmakers. Campaign contributions from a real estate company, Glenwood Development, owned by billionaire Leonard Litwin have figured in the federal cases against former Assembly Speaker Sheldon Silver and former Senate Leader Dean Skelos, though neither the developer nor his company have been charged with any wrong doing in the cases.

The Board of Elections had no immediate comment. The last time the four commissioners tried to rule on tightening up LLC donation rules, the board deadlocked, and took no action.

Karen DeWitt is Capitol Bureau Chief for New York State Public Radio, a network of 10 public radio stations in New York State. She has covered state government and politics for the network since 1990.