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Big Money in the Running in the Race for New York Governor

Reforms spurred by Albany corruption scandals haven’t changed the basic equation: state campaign fundraising deals in big dollars and few limits. Kathy Hochul, Tish James, Bill de Blasio and other potential contenders are poised to take full advantage.

New York State Capitol Building
New York State Capitol Building
Josefa Velasquez/THE CITY

Disgraced ex-Gov. Andrew Cuomo may not run again, but he left a legacy to the 2022 election — and not just the $18 million in his political war chest that he’s free to spend as he pleases.

A panel Cuomo helped appoint and a state budget he signed made sure big-dollar campaign donations could keep coming to candidates for governor and other state offices, even after his own fundraising scandals spurred reforms.

As New York City readies to vote for mayor and other local offices Nov. 2 under strict contribution limits and a generous public matching funds program, candidates for governor are playing with much bigger dollar stakes — and potential for high-rolling donors to wield influence.

The June primary elections are expected to be crowded. Gov. Kathy Hochul has declared her candidacy for the Democratic nomination, and among those reportedly eyeing runs are state Attorney General Letitia James, city Public Advocate Jumaane Williams and Mayor Bill de Blasio. Republicans include Long Island Rep. Lee Zeldin and Andrew Giuliani, son of former mayor Rudy.

A Siena College Research Institute poll this week tested a four-way matchup among Democrats and found Hochul in the lead with 39%, James getting the support of 20% of her party’s voters, de Blasio with 10% and Williams with 8%, leaving more than a fifth of Democrats still undecided and up for grabs.

State candidates can raise and spend millions of dollars, and not just through their own campaign committees. Where individual donations are capped at $5,100 for each election year in New York City elections, $2,000 for candidates in the city public matching funds system and just $400 for lobbyists and city contractors, the overall limit for state races is roughly $69,000.

While corporate dollars are banned in city elections, they play a prominent role in state politics, even after some recent reforms. In past elections, Cuomo aides and donors, as well as legislative leaders, became embroiled in big-money transactions that led to corruption prosecutions.

Also in play are a wealth of committees that have the power to funnel money to campaigns — as allies of de Blasio did 2014 in a failed bid to turn the then-Republican controlled state Senate over to Democrats.

And that doesn’t count millions in independent expenditures funded by unions and a variety of business interests, which have no limits under the U.S. Supreme Court’s Citizens United decision.

“What we’re going to see with this competitive primary and completely dysfunctional campaign finance system statewide is going to be an orgy of pandering and it’s going to be pretty ugly,” said John Kaehny, director of the good government group Reinvent Albany.

Welcome to New York’s wild west.

Step Toward Reform

Already at the rodeo is Hochul, the former lieutenant governor who succeeded Cuomo after he resigned Aug. 24 following a report by James’ office detailing numerous sexual harassment allegations. Within weeks, Hochul declared she’s running for election to keep the seat for another four years.

Gov. Kathy Hochul gives an update in Albany on the battle against COVID, Sept. 15, 2021.
Gov. Kathy Hochul gives an update in Albany on the battle against COVID, Sept. 15, 2021.
Mike Groll/Office of Governor Kathy Hochul

Hochul reportedly aims to raise $25 million by next summer — approaching the $28 million Cuomo deployed to defeat Cynthia Nixon in 2018, who spent $2.6 million.

Albany sources say Hochul has been working the phones, courting former Cuomo donors from the real estate and business worlds in recent weeks. A poll released last week on the upcoming governor’s race spurred Hochul to ramp up her fundraising appeals, according to a person familiar with the matter.

Earlier this month, she held a fundraiser on the Upper East Side involving people in marijuana and film production, where admission ranged from $15,000 to $50,000, according to the New York Post.

A picture of state political fundraising won’t come into focus until Board of Elections disclosures come in mid-January. One major difference from past years is certain: This is the first gubernatorial election without the so-called LLC loophole, which let near-anonymous donors give substantial sums through shell companies.

Multimillion-dollar donations via the LLC loophole featured in federal corruption trials of former Assembly Speaker Sheldon Silver and ex-Senate Majority Leader Dean Skelos. One of their donors, the late high-rise apartment developer Leonard Litwin, donated some $13 million via 50 LLCs tied to his real estate holdings, according to a 2015 analysis by Common Cause.

Silver was convicted in 2018 of extorting Glenwood and another real estate firm that sought state action on their concerns, by demanding they steer business to a law firm that paid him in exchange.

Now, following a 2019 reform, limited liability companies can give only up to $5,000 to any one candidate or committee. What’s more, at the end of each year, the LLCs must disclose all direct and indirect owners who have membership interest in the LLC to the state Board of Election.

The reforms have cooled LLC donations.

In 2017, as he was gearing up to run for governor the following year, Cuomo’s campaign received roughly $1.9 million in donations from LLCs, according to THE CITY’s review of state campaign finance records. This year, the former governor has reported some $325,000 from donors listed as limited liability companies.

The LLC loophole is now (mostly) closed. But one other reform that followed a long string of Albany scandals has yet to take effect.

New York is due to launch a voluntary public matching funds program, created under the state budget approved by Cuomo and legislative leaders in April 2020, though it won’t begin until after the November 2022 election.

Doing Business and Donations

Zephyr Teachout, who ran a primary against Cuomo in 2014 and ran for attorney general in 2018, sees lessons for the state to be had in the diverse contenders running for City Council who have a background in organizing and community work.

Law professor Zephyr Teachout during her 2016 run for Congress.
Zephyr Teachout during her 2016 run for Congress.
Zephyr Teachout for Congress

That’s an indicator the city’s public matching program is opening up political offices to candidates who don’t play the big-money game, said Teachout, a Fordham Law School professor who wrote a book about political corruption.

She views the protective hand of the Albany status quo in the delay of the state matching funds program — and notes that if Cuomo had run as he intended, he would have retained his giant fundraising edge against opponents.

“It’s clear that the state and the public has been chomping at the bit to change the system for a while and Cuomo was always the block,” said Teachout, who is mulling another run for attorney general if James vies for governor. “And when reform finally did pass, it was done in a way so it wouldn’t touch his own then upcoming gubernatorial election.”

The city’s campaign finance system also limits how much an individual who has business dealings before the city can donate to just $400, a prohibition that doesn’t exist on the state level.

By contrast, nearly 350 state vendors contributed $6.2 million to Cuomo’s campaign coffers between 2014 and 2019, Forbes reported last year. Those vendors received $7 billion in state payments.

And after developers and lobbyists got convicted of corruption tied to state economic revitalization projects, including one known as Buffalo Billion, Cuomo relinquished $534,000 in related campaign donations.

‘Clear and Present Threat’

State elections also have no ceiling on campaign spending — whether that’s by the campaigns themselves or committees that political parties are free to set up for themselves.

Those include “housekeeping” committees, which are barred from spending on candidates or races but can spend funds on nebulous “party building” and to pay staff and can receive unlimited contributions from deep-pocketed donors, often from groups with business before the state.

But county-level committees set up by the parties are free to funnel money to individual campaigns, legally — and can receive more than $100,000 from any given donor.

De Blasio and allies took full advantage in 2014, in an attempt to help upstate Democratic unseat sitting Republicans in the Senate, which was then GOP controlled. The mayor, then in his first year in office, called major donors, obtaining contributions of as much as $102,300 each, a state Board of Elections investigation found.

Mayor Bill de Blasio attends the State of the State address in Albany, Jan. 8, 2020.
Mayor Bill de Blasio attends the State of the State address in Albany, Jan. 8, 2020.
Michael Appleton/Mayoral Photography Office

In all, donors gave nearly $1 million to sleepy Democratic county committees not subject to the same donation restrictions as candidate committees. The committees transferred the funds to the targeted candidates, whose campaigns were free to accept unlimited amounts of money from the county committees.

The fundraising tactic sparked an investigation by the Manhattan District Attorney’s office and the U.S. Attorney for the Southern District to determine whether de Blasio and his aides illegally circumvented campaign contribution limits.

Ultimately the U.S. Attorney and DA declined to press charges, with the feds citing the “difficulty in proving criminal intent in corruption schemes where there is no evidence of personal profit.” But Manhattan District Attorney Cy Vance released a statement calling the Senate effort “contrary to the intent and spirit of the law.”

The ability to move funds between committees and the absence of spending caps keep Cuomo an imposing figure even after his August resignation following the bombshell report finding he sexually harassed several women.

Cuomo could choose to direct his millions raised before his resignation to influence the upcoming governor’s race, notes Kaehny.

“The most clear and present threat to a fair election, to making every vote count equally, is the fact that Andrew Cuomo has $18 million and could put all of that money into independent expenditures and basically destroy candidates for office,” Kaehny said.

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