Donors to Gregory R. Ball’s successful campaigns for the New York state Legislature might have been surprised by where he spent their money.
He financed excursions to Cancún and Acapulco, and a leisurely road trip on his way back. He sprang for thousands of dollars in bar and restaurant bills in Texas — and entry fees for an extreme obstacle-course race called Tough Mudder.
The freewheeling spending by Ball, a Republican senator from New York City’s northern suburbs, was only a sliver of the questionable conduct turned up by investigators for the Moreland Commission, a powerful anti-corruption panel that Gov. Andrew M. Cuomo created last year to clean up Albany.
AP Photo/Mike Groll“Those aren’t loopholes. Those are the laws that are written,” said Gov. Andrew M. Cuomo (left), defending his continued exploitation of the so-called LLC loophole.
But Cuomo, a Democrat, abruptly shut the commission down as part of a budget deal with the state Legislature in March. Government watchdog groups were outraged. Federal prosecutors began a criminal inquiry.
Their work has entailed examining the commission’s shutdown while also picking up where the commission had left off, including looking at Ball’s spending, which he maintains was legitimate, some of it a repayment of personal loans he had made to his campaign.
So far, people with knowledge of the matter say, prosecutors have found that Sheldon Silver, the powerful Democratic speaker of the State Assembly, failed to disclose some of the income he earned in the private sector. While he has disclosed earnings from a major personal-injury law firm for years, prosecutors found other law-firm income that he did not detail as required. A spokesman for Silver said that he had disclosed all of his law-practice income, but declined to answer questions about its source.
A pay raise would never be contemplated without the inclusion of significant reforms
Much of what the Moreland Commission uncovered, however troubling, will never wind up in a courtroom.
In Albany, some of the most questionable conduct by elected officials has long been perfectly legal, safeguarded by the only people who can outlaw it: the lawmakers themselves.
Before it was disbanded, the Moreland Commission had urged elected officials to close loopholes, to toughen criminal statutes, to increase disclosure requirements and to restrict how campaign funds could be spent — so that beachfront vacations in Mexico, among other things, would be off limits.
Now, eight months after its work was cut short, little in Albany has changed.
- Powerful politicians — including the governor himself — continue to exploit a loophole in state law that allows corporations to funnel huge donations to them in smaller gifts that disguise the true sources of the money.
Lax personal financial disclosure laws, critics say, give corrupt legislators a way to mask political payoffs under the guise of part-time jobs. A 2011 reform presented as requiring disclosure of some clients was so narrowly drawn as to be meaningless, and another enacted this year allowed enough wiggle room that lawmakers could well continue to avoid scrutiny.
The line between political donations and outright bribery remains murky. Some politicians used their campaign treasuries as piggy banks for personal expenses, the commission’s investigators found, and bank records showed that lawmakers had failed to report some donations and expenditures altogether. A new, beefed-up Board of Elections enforcement unit has yet to show its strength.
Daniel Barry/Getty Images filesA subtle change in the annual disclosure of Sheldon Silver, the Democratic speaker of the State Assembly, suggests he may have failed to disclose a source of outside income from a law firm.
Lawmakers are negotiating with the governor to return to the state capital for a special session in the coming days — to give themselves a pay raise. In return, Cuomo, bruised by the fallout from his closing of the commission, wants improvements to ethics laws. A spokeswoman for the governor, Dani Lever, said, “A pay raise would never be contemplated without the inclusion of significant reforms.”
But any deal appears unlikely to include the kind of strictures that good-government groups in New York have long sought.
Had it survived, the Moreland Commission — named for a 1907 law and stocked with current and former prosecutors — appeared bent on pushing for those kinds of reforms.
The commission’s unfinished business, a New York Times examination found, centred largely on how politicians were taking advantage of gaps in the law, and exploiting weaknesses in its enforcement, to raise money for campaigns as well as to enrich themselves personally.
And those gaps and weaknesses remain.
The Times‘ examination included a review of hundreds of pages of internal documents, emails and subpoenas; campaign-finance records; and interviews with commissioners and staff members, other state officials, defence lawyers and law enforcement officials.
For Cuomo, the commission has been a source of considerable controversy and the subject of damaging reports by news organizations including The Times. He set it up with public promises that it would be independent. But as The Times reported in July, Cuomo repeatedly meddled in the commission’s work when it sought to scrutinize groups with ties to him.
In March, when Cuomo disbanded the commission in exchange for new ethics laws, those statutes failed to address the fund-raising practices that most troubled the panel’s members and seemed unlikely to make a dent in what they called Albany’s “pay-to-play political culture driven by large checks.”
Cuomo easily won a second term in November. To pave the way for that victory, he raised about $47 million — much of it through the same kinds of enormous donations that the commission was building a case to outlaw.
For powerful politicians and the big businesses they court, getting around New York’s campaign donation limits is easy.
Emails that investigators unearthed between a fundraiser for Cuomo and an executive at Glenwood Management, a developer of Manhattan rental apartments, show how it is done.
Corporations like Glenwood are permitted to make a total of no more than $5,000 a year in political donations. But New York’s “LLC loophole” treats limited-liability companies as people, not corporations, allowing them to donate up to $60,800 per election cycle. So when Cuomo’s campaign wanted to nail down what became a $1 million multiyear commitment — and suggested “breaking it down into biannual instalments” — the company complied by dividing each payment into permissible amounts and contributing those through some of the many opaquely named limited-liability companies it controlled, like Tribeca North End LLC.
The Cuomo campaign reminded the firm later of 10 Glenwood-controlled LLCs that had already made donations.
A lawyer for Glenwood, Alan Levine, declined to comment. Lever, the governor’s spokeswoman, said his campaign “operates within the bounds of the current campaign-finance system.”
The torrent of money that flows into New York politics was a central concern for the Moreland Commission, and the LLC loophole was one of the most glaring weaknesses it saw in the campaign-finance system. Investigators subpoenaed several companies known to exploit it, including Glenwood and the Durst Organization, another real estate powerhouse.
Documents the investigators obtained provided unusual insight into what watchdog groups had long asserted: Corporations were strategically dividing up huge contributions to maximize their giving — and their influence. The use of limited-liability companies concealed the magnitude of their gifts from public view.
In one instance in 2012, the Real Estate Board of New York solicited donations for Lewis A. Fidler, a Brooklyn Democrat who at the time was running for a state Senate seat (whose previous occupant had pleaded guilty to accepting bribes).
James Whelan, a senior vice president for the board, a major lobbying force, emailed a Durst executive, Jordan Barowitz: “If you could find one of your more obscure LLCs, that would be grand.”
Whelan, through a spokesman, declined to comment. Barowitz said the requested donation was never made.
The Moreland Commission wanted to press to close the LLC loophole, which one member, Richard Briffault, a Columbia Law School professor, recently said “makes the greatest mockery of the idea that New York has campaign finance limits.” He also said that of the system’s many flaws, the loophole was “the easiest to fix.”
When the commission was closed down in March, the loophole remained wide open.
Since then, Cuomo has collected more than $2 million in donations from limited-liability companies, according to campaign finance records. In all, the governor received more than $9 million from LLCs over his entire first term — roughly 20 per cent of the $47 million he raised.
That is a wholly unworkable route if one wants to stay in public service, because then you would lose, and you would get nothing done’
When Cuomo ran for governor in 2010, he characterized large LLC contributions as one of the campaign finance system’s “loopholes,” proposing that such donations be counted against the parent company’s $5,000 contribution limit, to make that limit “meaningful.” In June 2013, he proposed lowering that limit to $1,000 and applying it to limited-liability companies as well.
But Cuomo has also defended his continued exploitation of the LLC loophole — even if it meant contradicting himself. “Those aren’t loopholes,” he said in July 2013. “Those are the laws that are written.”
Just before his re-election this year, Cuomo renewed his call to shut off the spigot of LLC contributions, again using the word loophole. But he rejected any suggestion that he model good behaviour by voluntarily declining contributions that exploited it.
To do so, the governor explained, would be like unilaterally disarming.
“That is a wholly unworkable route if one wants to stay in public service,” he said, “because then you would lose, and you would get nothing done.”
Following the Money
With so much money pouring into campaign coffers, investigators worried about how it was being spent — and what prevented politicians from turning donated cash into their own private slush funds.
They concluded that little did — and that the state’s Board of Elections was decidedly not up to the task.
State law was surprisingly minimalist on the subject. One sentence in the law forbids the use of donations for personal purposes “unrelated to a political campaign or the holding of a public office or party position.” The provision provides no further guidance.
Emboldened by the lack of clarity in the law, some legislators took an expansive approach, buying everything from cat food to a swimming-pool cover.
The Moreland Commission turned Albany upside down searching for such abuses. It obtained the bank records of more than two dozen legislators’ campaigns to see whether their filings matched up to reality. Armed with subpoenas, investigators followed the money to an auto-body shop in the Bronx, a chocolatier and a winery near Niagara Falls.
Their findings bore out their suspicions: Personal, nonpolitical expenditures were routinely made using the credit or debit cards tied to lawmakers’ campaign accounts.
Investigators also found many expenses in bank records that had never been reported to the Board of Elections at all — flouting state election law.
Sen. George D. Maziarz, a Republican whose district stretches along Lake Ontario in western New York, stood out.
Investigators scrutinizing his campaign spending from 2007 through 2013 found more than $28,000 at stores like Pier 1 and Michaels; $7,500 at Shutterfly, the photo-printing site; and $7,850 for reading material, including a stop at a Borders store at Kennedy Airport.
The Moreland Commission fired off subpoenas to see what books and photos Maziarz’s campaign had bought.
Investigators also learned that Maziarz’s campaign had failed to disclose $147,000 in contributions and $325,000 in spending.
His campaign had written more than 300 checks to cash, totalling $137,000; about one-fifth of the checks were never reported to the Board of Elections.
A lawyer for Maziarz, Joseph M. LaTona, declined to comment. Maziarz, whose spending is now the subject of a federal investigation, did not seek re-election this year.
The commissioners also focused on Ball, the Republican state senator, whose campaign had managed to spend money in 17 other states, investigators found.
It was his foreign spending that was most eye-catching, however. In 2010, when Ball was an assemblyman, he picked up a $700 bill at a hotel in Cancún, and withdrew $500 from ATMs there. The commission’s scrutiny of Ball and Maziarz, as well as some details of their spending, were reported this year by City & State, a website and magazine, and The Times Union of Albany.
Ball returned to Cancún after his election to the Senate that November, investigators found. He soon made his way to Acapulco before embarking upon a road trip back home from Texas, with more campaign-funded purchases in Arkansas, Tennessee and Virginia.
He also traveled repeatedly to Austin, Texas, where he paid $4,000 in bar and restaurant bills — along with a $160 charge at Brooks Bros. Those trips were, in a way, less surprising: Ball, who did not seek re-election this year, is fond of Texas, and recently announced that he would move there after leaving office.
It is not best practices, but it is not a violation of any of the campaign finance laws. I don’t think there is a rule or regulation out there that says you can’t do this
Among the unusual outlets for spending from his campaign accounts was Tough Mudder, the organizer of extreme obstacle-course races. (Ball posted Facebook photos showing him crawling through the mud in a Tough Mudder race in 2012, and said at the time that he was trying to raise money for charity.)
Joseph Tacopina, a lawyer for Ball, acknowledged his client’s accounting left much to be desired, but that the senator had done nothing wrong and that he was confident Ball would not be charged with a crime. Tacopina said some of the spending was for bona fide political purposes but that he also was owed money by his campaign, and sometimes used the campaign account for personal items to run down that debt.
“It is not best practices, but it is not a violation of any of the campaign finance laws,” Tacopina said. “I don’t think there is a rule or regulation out there that says you can’t do this.”
The Moreland Commission saved even harsher criticism for the sleepy Board of Elections. In a preliminary report released in December 2013, the commission wrote that the board had “largely abdicated its duty to enforce our election and campaign finance laws.”
In fact, the board sometimes seemed to be avoiding investigations altogether.
Its policy dictated that anonymous complaints never be investigated, regardless of the information they contained.
A former Board of Elections investigator told the Moreland Commission that his superiors gave him so few cases to work on, he spent his days playing computer solitaire and studying Bible verses.
The commission recommended that the Legislature create an “entirely new, structurally independent election and campaign finance law enforcement agency,” similar to the well-regarded Campaign Finance Board in New York City.
It also recommended rewriting the law to impose tight restrictions on how campaign money could be spent, something Cuomo had also proposed.
Lawmakers did no such thing.
Instead, as part of the new ethics laws enacted in the deal that shut down the Moreland Commission, the governor and the Legislature established a new enforcement unit at the Board of Elections.
To lead it, Cuomo selected Risa Sugarman, who oversaw criminal investigations for the state tax department and had worked for Cuomo when he was state attorney general.
Sugarman started work in September. She said the enforcement unit had begun reviewing more than 100 potential cases, but provided no details.
Second Paychecks and Subpoenas
Speaker of the state Assembly would seem to be a demanding job.
But Sheldon Silver, the Manhattan Democrat who has held that post since 1994, managed to earn upward of $650,000 last year from outside legal work.
Yet Silver, like the many other lawmakers who hold outside jobs, is not required to reveal much more than the source of his extracurricular income.
The Moreland Commission wanted to find out what legislators like Silver did to earn such second paycheques — or if they were merely cashing in on their political influence.
Investigators subpoenaed a host of law firms and a mixed bag of other businesses, among them a Rochester coffee shop and a Long Island concrete company.
But the law firms drew the most attention.
Silver works at a large personal-injury firm, and many other legislators also work at law firms, including his counterparts in the state Senate leadership: Dean G. Skelos, a Long Island Republican, and Jeffrey D. Klein, a Bronx Democrat.
I’m surprised these guys weren’t fired
Lawmakers are paid a base salary of $79,500 a year, but they are allowed to hold outside jobs. The approximate amount that they earn from outside employment was long redacted from public view, but was made visible under an ethics law that Cuomo negotiated in 2011.
That ethics law was also intended to force legislators to disclose some of their clients. But it was so narrowly written that almost none have been revealed.
There is also reason to doubt the accuracy of the information that lawmakers do disclose: Legislators have been advised to hand-deliver their paperwork each year, to avoid the possibility of federal fraud charges if they lied on the forms and then submitted them through the mail.
Suspicious that some lawyer-legislators were holding no-show jobs, Moreland Commission investigators subpoenaed their law firms for building access-card data and sign-in sheets, invoices, expense reports and records detailing their clients.
Lawmakers became infuriated over the scrutiny, calling it a witch hunt into the legislative branch. Law firms went to court to block the subpoenas, as did the Senate and Assembly.
Silver’s law firm, Weitz & Luxenberg, argued that it was irrelevant “what time Sheldon Silver enters and exits” its office building each day.
The litigation was unresolved when the Moreland Commission shut down.
The speaker has — as required by law — disclosed all income he has received, including from the practice of law
Yet Cuomo marvelled at how much the subpoenas sent to outside law firms — including Skelos’ employer, Ruskin Moscou Faltischek — had discomfited lawmakers. “I’m surprised these guys weren’t fired,” Cuomo told members of good-government groups last spring. The U.S. attorney in Manhattan, Preet Bharara, whose office took control of the Moreland Commission’s files around that time, revived some of its investigations, including several involving lawmakers’ outside income.
Silver quickly became a focus of prosecutors’ interest.
Two people with knowledge of the matter said prosecutors have issued federal grand jury subpoenas to some of the same law firms that resisted the commission’s subpoenas, including Weitz & Luxenberg and Ruskin Moscou Faltischek. (A spokesman for the former firm declined to comment; the latter did not respond to messages.)
But prosecutors and FBI agents have also been able to determine that for some time, Silver had failed to disclose income from another law firm besides Weitz & Luxenberg, the people said. (Spokesmen for the FBI and the U.S. attorney’s office declined to comment.)
It is not known what Silver did to earn this income. Both people characterized the discovery as potentially significant, but emphasized that no evidence had yet been uncovered to suggest that he had committed a crime.
Michael Whyland, a spokesman for Silver, said it would be inappropriate to comment on any continuing federal investigations.
“That said, the speaker has — as required by law — disclosed all income he has received, including from the practice of law,” Whyland said. A review of Silver’s annual financial disclosure forms shows a subtle but perhaps significant change in 2009. Over the previous six years, he had listed his law-firm income as deriving from “Weitz & Luxenberg, of Counsel — Fees” or “Weitz & Luxenberg — Fees.”
But starting with 2009, Silver began using a different construction that suggests his income from practicing law extended beyond what he received from Weitz & Luxenberg. That year, he listed “Law Practice — Fees (including Weitz & Luxenberg).” In each of the four succeeding years, he listed some version of “Law Practice — Including of Counsel to W&L.”
Whyland would not say why the language had changed.
Critics have long drawn a connection between Silver’s employment by Weitz & Luxenberg and his steadfast opposition to tort-reform legislation.
One founding partner of the firm, Perry Weitz, is a director of the New York State Trial Lawyers Association, a heavy lobbying presence in Albany. The other, Arthur Luxenberg, is listed as treasurer of Lawpac, the trial lawyers’ political action committee, in state records.
Little is known about Silver’s work at Weitz & Luxenberg. He has said that he represents “plain, ordinary simple people,” often in federal court; aides have said he represents neither lobbyists nor clients with business before the state.
No system is completely reformed in a single session, or even a single term
But when asked to point to a specific court proceeding Silver had been involved in, Whyland did not respond.
Lawmakers have shown little inclination to force one another to reveal exactly how and from whom they make money outside public service.
In January, Cuomo proposed stricter disclosure requirements, including that legislators provide more details about how they earned outside income and disclose any clients of their firms with business before the state.
But in the deal that shuttered the Moreland Commission, they agreed to require only the disclosure of clients referred to legislators by lobbyists.
Yet that requirement can be set aside, among other reasons, if disclosing a client’s identity “would cause embarrassment for the client.”
Cleanup Effort Cut Short
When Cuomo kicked off his 2010 campaign for governor, he stood outside the Tweed Courthouse in Lower Manhattan, named for the famously corrupt leader of the Tammany Hall political organization.
“Albany’s antics today could make Boss Tweed blush,” he said.
Cleaning up the capital was such a priority for Cuomo that he released a 115-page book outlining his proposals on ethics.
But when Cuomo closed down the Moreland Commission, his cleanup effort came to a halt.
The Legislature agreed to a new enforcement unit at the Board of Elections, and to tougher criminal statutes on bribery and corruption, which Cuomo said would help local prosecutors.
But what the commission’s members saw as most corrosive to state government — donation loopholes, lax campaign-spending rules and opportunities for murky but lucrative outside employment — so far remain unaffected.
Lever, the governor’s spokeswoman, said the ethics laws passed in March would “help clean up Albany more than any other passed in decades,” and faulted the Legislature for blocking other improvements Cuomo has sought.
“No system is completely reformed in a single session, or even a single term,” she added.
But Cuomo, at times, has suggested there is not all that much more to do. “I got 85 per cent of what I wanted,” he said in October, justifying the Moreland Commission’s disbandment.
On his last weekend of campaigning, he was asked to explain how he arrived at that 85 per cent figure.
“It’s metaphoric,” he said.