It was meant as a direct challenge to the LLC Loophole, and it ended in a bit of a stalemate, but the lawsuit settled last Thursday between the Board of Elections lawyers and a former Brooklyn Assembly candidate may still have far-reaching effects on the ability of New York State candidates to receive mega-donations for their campaigns, such as the ones received by State Senator Marty Golden from Century 21 and real estate developer Leonard Litwin.
[2018 UPDATE: no, it didn’t. The LLC Loophole is still wide open, and state politicians can accept obscene amounts of cash from single individuals or families as described below.]
What is the LLC loophole?
An LLC is a limited liability company, and according to a 1996 interpretation of election law by the BOE, LLCs are people. They can donate to political campaigns up to the limits of individual people, for instance, up to $4,400 for an Assembly election and $11,000 for a state Senate election. Neither LLCs nor people may donate more than $150,000 total to candidates in any given year.
The potential for abuse comes from the fact that there’s no limit to how many LLCs any person can create and control. LLCs can even create their own subsidiary LLCs, and for the purpose of election law, each one may donate up to the limit. It’s common for large and mid-sized companies to have multiple LLCs for operational, tax, and legal reasons. Real estate developers, in particular, often have one LLC per property… and real estate developers have a lot of money riding on the policy decided by lawmakers in Albany.
Golden’s most egregious abuse of the loophole came in 2012.
A Hey Ridge analysis of contributions to the Friends of Marty Golden campaign show that in the 2011-2012 election cycle, Golden accepted a total of $46,500 from five different real estate LLC’s located at the same Union Turnpike address in New Hyde – the same address as Glenwood Management, owned by mega-developer Leonard Litwin. Litwin was the state’s largest campaign contributor in 2014, contributing over $1.5 million to legislative candidates through Glenwood’s 26 LLCs, and even more to the Governor and Attorney General.
Golden also accepted $20,000 from two different LLC’s run by department store Century 21 in the same 2011-2012 time frame, along with an additional $5,000 total from four individual members of the department store’s owners, the Gindi family. Golden accepted $15,000 from Glenwood-controlled LLCs and $14,000 from Century 21-controlled LLCs in the 2013-2014 election period.
What changed last week?
Earlier this summer, the enforcer for the state Board of Elections brought a lawsuit against the campaign of Shirley Patterson, a failed candidate for Assembly in Crown Heights in a special election this spring. As reported by Chris Bragg of the Albany Times-Union, the suit contended that two LLCs operated by real estate developer Kevin Maloney had donated a total of $5,000, above the limit for an Assembly race. The BOE argued that while the LLCs had legitimate business purpose (both holding real estate property), they had no real separate existence apart from Maloney himself.
The lawsuit was settled out of court earlier this week, with Patterson incurring a $10,000 penalty. Her campaign also had to acknowledge that it took donations that exceeded the limits for individual donors, and that it either knew or should have known that contributions from some of the LLCs were from a “source other than the entity,” a big no-no in election law.
Can this really end mega-donations?
By settling, the BOE failed to get a court ruling on the matter of closely-linked LLCs making aggregate contributions in excess of limits that would have been instantly applicable to every legislative office in Albany. On the other hand, state lawyers did win a penalty and admission of fundraising violations, which could act as a deterrent for other candidates and donors in the future.
As of the July 2015 filing, Marty Golden has not received a contribution from either the Litwin/Glenwood LLCs or from Century 21. For its part, Glenwood has been laying low statewide this year, dramatically rolling back its donations to legislative candidates in the wake of being centrally named in both the Sheldon Silver and Dean Skelos indictments. There’s still 14 months to the next election, though, so only time will tell if Golden and other candidates will return to their Loophole-exploiting ways, or if they’re finally getting the message: abuse of election law will no longer be tolerated.
Correction: an earlier version of this article indicated that the Gindi family, the owners of the Century 21 department store, had donated an additional $10,000 for the 2012 election. This has been corrected to read $5,000 – four family members making donations of $1,250 each.