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Politics and Government

Civil lawsuit against little-known failed candidate could change LLC rules in New York state

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A New York State Board of Elections investigator appointed by Gov. Andrew Cuomo may have found a back door way into breaking some of the secrecy surrounding a major campaign contribution loophole in New York.

The Board of Elections chief investigator has filed a civil lawsuit against an obscure insurgent candidate in a special election last spring for an Assembly seat in Brooklyn. The lawsuit charges that the candidate, Shirley Patterson, failed to provide the “true name of contributing parties” in donations made by a limited liability corporation, in order for the board to determine whether the campaign donations were legal under the present contribution limits. It also charges that one donor, Kevin Maloney, is behind three separate LLCs that gave money to the campaign and boosted his donations well beyond the $41,000 limit. The lawsuit was first reported in the Albany Times Union.

Limited liability corporations, or LLCs, have been used as a means to circumvent the state’s contribution limits. They are easy and relatively inexpensive to set up, and can be used to bundle money from donors who otherwise might have maxed out their legally allowed donation to candidates.

The use of LLCs by a real estate company Glenwood Management, and it’s billionaire CEO Leonard Litwin, has factored in to high-profile federal corruption cases against the two former leaders of the legislature. No one associated with Glenwood has been charged with wrong doing.

Blair Horner, with the New York Public Interest Research Group, says while the lawsuit , if successful, would not end the practice of using the LLCs to get around contribution limits, it would force them to be more transparent about who is really behind them.

“She wants the court to pierce the veil of secrecy,” said Horner, to disclose details of what he calls “ghost” LLCs.

Investigators at the Board of Elections are not talking about the case, so deciphering the logic behind the lawsuit is a bit like reading tea leaves. Horner says the candidate, who ultimately lost the race, falls into the “small fish category," but he says it’s possible that she’s trying to use a win as precedent to build a bigger case.

If the current lawsuit is successful, it would likely impact the man who appointed Sugarman as an investigator -- Cuomo. Cuomo has received substantial amounts of money from LLCs over the years, including ones associated with billionaire real estate developer Litwin and Glenwood management.

“It could have an impact on anyone who is receiving  LLC contributions,” Horner said. “But it would have the biggest impact on who gets the most.”

Cuomo has tried unsuccessfully, to close the LLC loophole. A bill to end the practice stalled in the state Senate earlier this year.

The Board of Elections itself has the power to change the rule that treats LLCs as individuals, not corporations when donating campaign monies. That would subject the LLCs to stricter limitations.

The board held a vote to make the revisions, but it deadlocked 2 to 2, with the Republican members voting against it.

The Brennan Center at New York University, which often advocates for reform, filed a lawsuit earlier this summer  to try to force the change.