For the past two weeks, a former top aide to governor Cuomo has been on trial for corruption. According to federal prosecutors, he was a key figure in a widespread bribery scheme that included shaking down those seeking government contracts for special treatment in exchange for campaign contributions and money for him and his associates. The trial continues and the individual is presumed innocent. But this trial – combined with others in recent years – offers unique insights into what ails Albany. There are four overarching problems that emerge when reviewing the totality of the corruption cases brought in New York.
Problem #1: New York’s Limited Liability Company campaign finance loophole raises the risk of corruption. The “LLC Loophole,” which treats each Limited Liability Company as an individual person for purposes of how much may be donated, has allowed some donors to give well over a million dollars. And those donors almost always have business before government.
For example, in the trial against former Senate Majority Leader Skelos, one real estate developer spent more than $10 million in campaign donations since 2005 alone, funneled through 26 different limited liability companies – LLCs he controlled. In return, that developer received tens of millions of dollars in tax benefits from the state.
What should be done? LLCs should be treated like any other business entity and be subject to a $5,000 campaign contribution limit. All business entities should be required to disclose their controlling interests and all subsidiaries’ contributions should be aggregated into one overall limit.
Problem #2: Allowing outside income for elected officials raises the risk of corruption. In many of the corruption cases, the opportunity to use one’s public office for private gain – “cashing in” – emerged as a serious problem. In the case of former Assembly Speaker Silver, it was well-documented that he was able to use his power to amass millions of dollars in outside fees, for little work – other than applying his power as Speaker.
Unfortunately, the former Speaker’s case is not unique. The recent convictions of elected officials underscore how lucrative it can be for lawmakers to inappropriately use the powers of their public office for private gain.
What should done? After the Watergate scandal, Congress reformed its system and placed limits on outside income for lawmakers. In a report, it concluded, “. . . substantial outside income creates at least the appearance of impropriety and thereby undermines public confidence in the integrity of government officials.” New York State should follow suit. All public officials, including those in the executive branch, must have strict limits on outside income.
Problem #3: There is too great a risk of corruption in how New York awards government contracts. The investigation by the U.S. Attorney’s office into allegations that state contracts were rigged to benefit campaign contributors to the governor underscores the need for action in this area. For example, it’s been alleged that Buffalo’s largest construction company simultaneously paid a private lobbyist close to the governor $100,000 annually and kicked in $250,000 to Governor Cuomo’s re-election campaign in 2014. The result, according to the U.S. Attorney, was that a huge Buffalo Billion project was steered to that company.
In addition to that case, Governor Cuomo’s former Executive Deputy Secretary is alleged to have solicited money from “companies with business before the State.” In return, it is alleged, the former aide took official actions that would benefit these companies.
What should be done? The first step would be to limit campaign contributions from those seeking government contracts. Under New Jersey’s pay-to-play law, businesses that “have or are seeking” government contracts are prohibited from making campaign contributions prior to receiving contracts.
Second, the New York Constitution established a separately-elected State Comptroller who is charged with monitoring the state finances. Unfortunately, in recent years the governor and the Legislature have approved laws that have cut back the Comptroller’s oversight functions, coinciding with the period in which pay-to-play activities and bid-rigging were allegedly occurring. Those powers should be restored.
Problem #4: Lack of independent oversight of ethics raises the risk of corruption. Why is it that public officials think they can get away with these, and other, corrupt actions? Because they believe that they would not get caught. And if it weren’t for federal investigators, they would have – in some cases did – get away with it for years. Ethics watchdogs must be independent – not political creatures.
Yet in New York, the ethics watchdogs are direct political appointees and are not structured to be independent. In a 2015 comparison of state ethics laws, New York’s ethics enforcement received a grade of “F.”
What should done? The state’s current ethics agencies should be abolished and replaced with a truly independent one.
Each of the first seven months of this year will see the beginning of trials for new, high profile, corruption cases. Hopefully, New Yorkers will also see action from the governor and state lawmakers to respond to this corruption crisis.
Blair Horner is executive director of the New York Public Interest Research Group.
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