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November 28, 2022

Hochul Campaign Donors Blow Past Corporate Contribution Limits

On Oct. 30, the campaign fund for Gov. Kathy Hochul received $25,000 in donations tied to a single company — even though state law bars companies from contributing more than $5,000 total in a year.

Hochul received five $5,000 donations, each from a different limited liability company with nondescript names such as “13855 Cornhusker Partners, LLC” and “Fort Worth Property Partners, LLC.”

All five limited liability companies, or LLCs, made their donations from the same address in Miami, Fla., identical to the one listed for Southern Glazer’s Wine and Spirits, one of the largest wine distributors in the nation.

Public records show that all five LLCs are governed by members of the Chaplin, Becker and Glazer families, the owners of Southern Glazer’s. The company does big business in New York, estimating revenues of $2.1 billion in the state last year.

The $25,000 it gave to Hochul’s campaign is a small fraction of the money it spends on influencing New York politics: in 2019 and 2020, Southern Glazer’s spent over half a million dollars to hire four lobbying firms to lean on state officials.

The contributions showcase the limits of reforms intended to rein in corporate influence in New York politics. Restricting LLC contributions to a strict $5,000 a year across all candidates was the centerpiece of a 2019 law signed by ex-Gov. Andrew Cuomo to close the so-called LLC loophole.

Until then, under an oddity of New York campaign finance law, LLCs were treated individuals instead of corporations. This meant that those firms could contribute as much as $60,000 a year to favored candidates, even as other non-LLC companies were limited to $5,000 a year.

Wealthy donors routinely used LLCs to funnel massive amounts of anonymous money to the coffers of their chosen candidates — donations implicated in multiple corruption scandals.

Southern Glazer’s is far from alone. Data provided to New York Focus and THE CITY by the nonprofit government watchdog Public Accountability initiative shows that numerous companies are using multiple LLCs under their control to skirt the $5,000 cap and donate amounts that amount to hundreds of thousands of dollars to favored candidates and parties.

Campaign finance records also reveal that last year, numerous LLCs each gave more than the $5,000 total limit yet have faced no consequences.

The vast majority of these LLCs also did not comply with a requirement in the 2019 law that mandates that LLCs that make political contributions submit a form to the Board of Elections detailing their owners. Armed with this information, campaigns are meant to attribute the LLCs’ contributions to those owners in proportion to how much of the LLC each one owns.

Nine out of 10 LLCs that made political contributions in 2021 did not submit these forms, New York Focus reported last month.

Politicians whose campaigns benefited from multi-LLC donations tied to a single source include Buffalo Mayor Byron Brown, Attorney General Letitia James, and gubernatorial candidates Rob Astorino and Rep. Tom Suozzi (D-L.I.).

The biggest beneficiary of all, however, was Hochul, according to data provided to New York Focus and THE CITY by the nonprofit government watchdog Public Accountability initiative.

“Consistent with Governor Hochul’s commitment to maintaining high ethical standards, the campaign continues to follow all transparency guidelines regarding campaign finance laws,” said James Martin, press secretary for Hochul’s campaign.

Of the other campaigns, Suozzi’s campaign declined to comment on donations to his campaign, while the others did not respond to requests for comment.

A lead sponsor behind the reforms expressed disappointment at donors’ workarounds to the LLC donation caps. Limiting LLC contributions to $5,000 a year was “the whole point of them being considered a corporation,” Assemblymember Jo Anne Simon (D-Brooklyn), told New York Focus and THE CITY.

Meanwhile, advocates for reducing the role of money in politics say lawmakers should have taken greater care to head off new loopholes.

“If the law is written so that corporations can use LLC subsidiaries to pump potentially unlimited money into elections, the 2019 reform clearly didn’t go far enough,” said Rob Galbraith, a senior research analyst at the Public Accountability Initiative, which provided the data to New York Focus and THE CITY.

Dozens of LLCs

Companies within New York State have also made donations in patterns similar to Southern Glazer’s.

On Dec. 14, five LLCs registered to the same address in Oyster Bay, L.I., each donated $5,000 to Hochul. Three are linked by public records to Steel Equities, a Long Island-based real estate company owned by Glenn and Joe Lostritto. All five contain “steel” in their names and are registered at an address associated with Steel Equities.

And on Oct. 1,  four LLCs linked by public records to luxury real estate developer Two Trees Management Co. each donated $5,000 to Hochul. Like Southern Glazer’s, Two Trees spends big to buy influence in Albany, expending over $600,000 on lobbyists in 2019 and 2020.

Southern Glazer’s and Steel Equities did not respond to requests for comment. Two Trees declined to comment.

In total, Hochul collected just short of $150,000 from 30 LLCs tied to nine corporations — with each one’s collective contribution well in excess of the $5,000 corporate contribution cap.

Brown and Suozzi each received $20,000 worth of contributions from two companies. Both campaigns got$10,000 contributed through multiple LLCs.

Astorino and James each received $10,000, each from a different company that made two $5,000 contributions.

Simon said that Hochul’s haul “seems like an overcontribution that the campaign needs to straighten out.” The Hochul campaign did not respond to a question about whether it would return the donations.

Blowing Past Limits

The 2019 law did succeed in limiting the amount of LLC money in New York’s elections. LLCs contributed nearly $4.2 million to candidates in New York in 2021 — far less than the $54 million of contributions they made between 2011 and 2014.

But other important aspects of the law continue to be largely ignored, campaign finance filings suggest.

In 2021, dozens of LLCs made more than $5,000 in total contributions each in a single calendar year, above the state’s annual total limit. Many limited their contributions to any one single campaign at $5,000, but made contributions to multiple campaigns that in sum exceeded the $5,000 cap.

The largest LLC donor in 2021 was Two Trees KG LLC, which is registered at the address of the headquarters of Two Trees Management Co.

The LLC donated a total of $39,500 to its chosen candidates and parties last year, including $5,000 each to Cuomo, Hochul, James, Brooklyn District Attorney Eric Gonzalez and Queens District Attorney Melinda Katz.

Collectively, LLCs contributed over $350,0000 in excess of their individual limits in 2021, providing an illegal windfall to the campaigns of politicians from across the state, including Suffolk County Executive Steve Bellone, Rochester Mayor Malik Evans, and Westchester County Executive George Latimer.

The Bellone, Evans, and Latimer campaigns did not respond to requests for comment.

Hochul’s campaign received nearly $50,000 contributed by LLCs in excess of their $5,000 limit. No other candidate for governor received contributions from LLCs that violated the $5,000 limit in 2021.

After Hochul, the runners-up in collecting donations made by LLCs that violated the $5,000 limit were heavily concentrated on Long Island. Numerous Republican and Democrat candidates and county parties in Nassau and Suffolk Counties received amounts ranging from $24,000 to $30,000 in excess of the limit.

Accepting such donations likely does not constitute a violation of campaign finance law on the part of the campaigns that accepted them, say campaign finance experts. The legal responsibility to observe the $5,000 limit falls on the LLCs, unless the campaigns knew that the donors were violating the law’s contribution limit when the donation was made, said Carol Laham, a partner at the law firm Wiley Rein.

Simon said that campaigns returning money to LLCs that violated the $5,000 limit “certainly seems like a possible response,” but said that it “really goes back to the Board of Elections, or to the Secretary of State, who’s gathering that information, to enforce it.”

She added: “I don’t know that campaigns are watching other people’s campaigns to see if they got money from the same people.”

John Kaehny, executive director of the good government group Reinvent Albany, said that these trends showed the need for New York State to ban candidates from accepting direct contributions from corporations, as 22 states, the federal government, and New York City already do.

“Because Albany is mired in a pay-to-play mindset that no amount of scandal seems to change, this does not seem likely anytime soon,” Kaehny acknowledged.

Unveiling Secret Entities

The secrecy of LLCs has posed challenges to everyone from tenants seeking to identify their landlord to law enforcers tracking assets purchased by Russian oligarchs.

Seeking to pierce the veil, on Tuesday, state Senator Brad Hoylman (D-Manhattan) and Assemblymember Emily Gallagher (D-Brooklyn) introduced a bill that would require LLCs to disclose their owners to the New York Department of State and on their tax returns, and create a public database showing which LLCs have common ownership.

The law that closed the LLC loophole also included a transparency measure, tied to enforcing a provision that tracks the LLC donations toward contribution limits for individual donors associated with those companies.

The 2019 law required LLCs that make political contributions to submit forms to the state Board of Elections listing their individual owners and how much of the company each one owns. Campaigns that accept LLC money are also required to list the same information on their financial disclosure forms.

Both of these requirements are being widely flouted, New York Focus reported last month, including by Hochul and other candidates for governor. Only 10% of LLCs that made contributions in 2021 complied with the disclosure requirements.

Hochul suggested that responsibility for disclosing LLCs’ owners rests ultimately with the LLCs, and not with the campaigns that take money from them.

“We are focusing on trying to get all that data collected from the LLCs. They need to provide this information to us,” she said last month when asked about New York Focus’ investigation by City & State reporter Zach Williams.

Even the law’s lead Senate sponsor recently failed to comply with the disclosure requirements.

The January 2022 campaign finance report filed by state Sen. Brian Kavanagh (D-Brooklyn/Manhattan) did not include information on the individual owners of Omni New York LLC, which donated $5,000 to his campaign on Jan. 10.

Kavanagh’s office did not return multiple requests for comment.

“We should follow the laws we pass,” said Yuh-Line Niou (D-Manhattan), an Assembly member who is challenging Kavanagh for his Senate seat in the June Democratic primary. Niou’s campaign did not receive any LLC contributions in 2021.

No Enforcement

Ultimately, responsibility for enforcing the law lies with the state Board of Elections.

The law ordered the Board of Elections to enact regulations that would ensure compliance with the part of the law requiring candidates to attribute LLC contributions to the individuals behind them.

But the board has exploited a loophole in the law’s text to avoid doing so.

In an email to New York Focus, a spokesperson said that while the Board of Elections recognizes that the law mandates that they issue regulations, “there is no mandatory time frame” determining when those regulations must be issued.

“The legislature left the timing up to the Board,” said Board of Elections Director of Public Information John Conklin.

He added that the board has “complied with all aspects of the law.” When campaigns fail to disclose the individuals behind contributions from LLCs, the Board tells the campaigns to try to obtain that information “to the best of their abilities,” Conklin said.

Since taking office in July 2021, Michael Johnson, the chief official in charge of enforcing election law in New York, has not taken any action against 3,451 campaigns that filed deficient financial disclosure reports, or failed to file reports at all, New York Focus reported last week.

“If the law is hamstrung by a Board of Elections that doesn’t bother enforcing it, we’re back where we were before the 2019 reform,” Galbraith of the Public Accountability Initiative said.

Simon said that the board’s interpretation was a “creative reading” of the law.

“I would hope that everybody would perform their obligations,” she said. “Whether that is happening to the best of their ability, I have no evidence.”

This article was originally posted on Hochul Campaign Donors Blow Past Corporate Contribution Limits