Fair Elections Now! Push to Curb Big Real-Estate Money

Fair Elections Now!

Push to Curb Big Real-Estate Money

Published: 
March 2013

There is a serious push to curb the influence of big money in New York State elections during the current legislative session in Albany. Tenants need to be part of this campaign, as real estate throws more money at candidates for elected office than any other industry.

The sheer numbers are staggering. In 2010, candidates for state office (governor, comptroller, state Senate and Assembly) raked in $246 million in total campaign contributions. Less than 0.5 percent of New York residents made contributions, and only 7 percent of the total came from donations of $250 or less.

New York State has the second-highest contribution limits in the nation. Individuals can give up to a total of $150,000 in a calendar year. Candidates for statewide office (governor, comptroller) can accept up to $41,100 from an individual contributor. Candidates for the state Senate can accept up to $6,500 for a primary, and up to $10,300 for a general election. Assembly candidates can collect up to $4,100 for a primary, and another $4,100 for a general election.

Corporations are limited to contributing a total of $5,000 to any and all candidates in a calendar year. But donors who set up “affiliated” or “subsidiary” corporations can make multiple contributions up to the maximum—from each subsidiary.

By far the biggest loophole in our porous campaign-finance laws, though, is one pretty much unique to real estate. Election lawyers refer to this as the “LLC loophole.” A Limited Liability Company is a corporation-like entity, but is not bound by the $5,000 limit on corporate contributions. Many landlords set up an LLC for each of their separate properties. This lets them make hundreds of thousands of dollars in campaign contributions each year.

Leonard Litwin is the poster child for this abuse. His Glenwood Management Corp. has a large portfolio of luxury apartment buildings, each one legally a separate LLC. Each LLC can contribute up to $150,000 a year.

Litwin, 98 years old with an estimated net worth of roughly $1 billion, has been especially generous to New York politicians. In the 2009-2010 state election cycle, his various LLCs donated almost $1 million to candidates for statewide office, candidates for state Senate, and both the Republican and Democratic Senate campaign committees. He gave $25,000 each to four of the six candidates for Attorney General in 2010: Republican Dan Donovan, and Democrats Kathleen Rice, Richard Brodsky, and Eric Schneiderman.

A favorite Litwin politician was former state Senator Carl Kruger of Brooklyn, a landlord stooge now serving a seven-year term in federal prison for accepting bribes. On the very same day, September 27, 2010, the 1737 York Realty LLC, the 425 East 72 Street LLC, and the 56th Realty LLC each gave “Friends of Carl” a check for $9,500, the maximum a Senate candidate could accept that year. Many other Glenwood LLCs also contributed to Kruger. On June 3, 2009, five Litwin LLCs gave Friends of Carl $5,000, and a sixth LLC gave $7,500.

In the 2011-2012 state election cycle, Litwin’s LLCs almost doubled their contributions, doling out close to $2 million. Now that the Democrats had lost the Senate majority, Litwin was less inclined to hedge his bets, so he concentrated his largesse on Senate Republicans. He gave $40,000 to Eric Ulrich, who unsuccessfully challenged Democratic incumbent Joe Addabbo in Queens; $55,000 to slumlord Bob Cohen, who lost an open Westchester seat to Democrat George Latimer; and $45,000 to Republican leader Dean Skelos, who had token opposition.

Governor Andrew Cuomo has raked in the Litwin dough, as has state Senator Jeff Klein, leader of the Independent Democratic Caucus that entered into a power-sharing arrangement with Skelos after the Republicans became a numerical minority after the November 2012 election. Litwin’s LLCs have also given hundreds of thousands of dollars to the Neighborhood Preservation Political Action Fund, a front for the Rent Stabilization Association, the landlord trade group, which funneled the money to anti-tenant candidates.

Litwin was sued by state Attorney General Robert Abrams in the early 1980s for systematically charging his rent-stabilized tenants more than the legal rent, and settled the case by agreeing to repay the overcharges. His contributions to state politicians over the years have paid off handsomely. For example, following the 9/11 attacks, state authorities dispensed $238 million in Liberty Bonds to Litwin to finance luxury housing in lower Manhattan.

Where did Leonard Litwin get the money to make all these campaign contributions? From rents paid by his tenants, of course.

While Litwin is certainly the biggest abuser of the LLC loophole, many other real-estate barons also avail themselves of this mechanism to get around limits on campaign contributions.

 

Other reforms needed

Campaign-finance reform is an issue whose time seems to have come. There seems to be a real possibility for significant legislative action to make our elections less stacked in favor of incumbents and less dependent on big donors.

Governor Cuomo, who sold out last year on redistricting by allowing the Senate Republicans and Assembly Democrats to draw gerrymandered districts for the next decade, insists that he is serious about campaign-finance reform, and has stated that he intends to get a bill through before the legislative session ends in June.

While there is good reason for New Yorkers to be skeptical of Cuomo’s commitment (Leonard Litwin has given him $500,000 in the last two years), he is under pressure nationally to deliver on this issue. As he maneuvers to position himself to run for president in 2016, he needs to deliver real campaign-finance reform in order to win support from big players who are working to overturn the Citizens United decision by the U.S. Supreme Court, which allowed corporations to spend unlimited funds to influence elections.

While no one has seen an actual bill, the components a reform package needs are well known. In addition to closing the LLC loophole and lowering individual contribution limits to a reasonable amount—fair elections advocates have suggested a $2,000 annual cap—there would need to be an independent oversight and enforcement agency to replace the toothless New York State Board of Elections.

An essential component of meaningful reform is public financing of elections, similar to the New York City system. Candidates voluntarily enrolling in the city program receive a 6-to-1 public match of small contributions up to $175. If a New Yorker gives a candidate $100, the candidate receives $600 in public funds. More than 65 percent of campaign donations in New York City are $250 or less.

Cuomo has expressed support for public financing, which would require the allocation of state funds. This particular reform seems to be anathema to Dean Skelos, however. It remains to be seen if Cuomo can overcome this opposition, or if he will compromise and agree to a package that does not include public financing.

Even some Democrats do not like the idea, as they fear that it will make it easier for some community activist to mount a challenge to their re-election. Indeed, public financing will make elections more competitive, by encouraging new candidates to run. That’s called democracy.

Public financing combined with strong nonpartisan oversight, lower contribution limits, and closing the LLC loophole will put elections back in the hands of everyday New Yorkers and diminish the power of big money. With the next expiration of the state rent laws only two years away, in June 2015, and with an election the year before, this is a fight tenants should join.

 

To get involved with the campaign for fair elections, contact Jaron Benjamin at Met Council, jaron@metcouncilonhousing.org; (212)979-6238 ext. 201.