Today, the New York Daily News and other outlets including the New York Timesreported that a bipartisan group of current and former lawmakers, including Senator Krueger, joined the Brennan Center in filing suit against the State Board of Elections to close the infamous LLC Loophole. Since the Loophole was created by the BOE in 1996, contributors donating through LLCs have circumvented contribution limits and disclosure requirements that the Legislature created to protect the integrity of New York’s democratic process — and injected millions of secret dollars into state elections. In April the BOE, in a 2-2 vote, refused to rescind its earlier decision and thereby attempts at regulatory reform. This lawsuit presents a promising opportunity to close the Loophole once and for all.
By Kenneth Lovett
A government reform organization and a bipartisan group of current and former state lawmakers are suing the New York state Board of Elections in hopes of closing a legal loophole that allows businesses to give virtually unlimited amounts of campaign donations.
The lawsuit, filed Tuesday in state Supreme Court in Albany, takes aim at limited liability corporations, which under the current system have donation limits 30 times higher than the $5,000 annual maximum imposed on regular corporations. Because LLCs are treated as separate entities, corporations can give basically unlimited amounts to state candidates by creating as many LLCs as they want.
The Brennan Center of Justice and others called on the Board of Elections to close the loophole that was created by the board in 1996. But the effort failed when the board was deadlocked 2-2.
“By treating LLCs as individuals rather than artificial business entities like corporations or partnerships, the Board of Elections created a gaping hole at the heart of our state’s legislatively enacted campaign finance system,” said Lawrence Norden, deputy director of the Brennan Center’s Democracy Program. “It defies common sense and state law.”
Elizabeth Taylor, whose law firm Emery Celli Brinckerhoff & Abady helped bring the lawsuit, argues that the loophole undermines the Legislature’s intent of limiting campaign giving by corporations.
“At a time when New York government is in crisis thanks to a series of high-profile corruption scandals, the Board has opted to perpetuate its deeply flawed rule that enables frequent and harmful circumvention of the law,” Taylor said.
Among those who brought the lawsuit are Assemblyman Brian Kavanagh (D-Manhattan), Sen. Liz Krueger (D-Manhattan), Sen. Daniel Squadron (D-Brooklyn), and Maureen Koetz, a Republican who in 2014 challenged Assemblyman Sheldon Silver, who was speaker at the time.
SUNY New Paltz Professor Gerald Benjamin, a Republican, and former state Sen. John Dunne, a former deputy GOP majority leader, are also listed as plaintiffs.
A Board of Elections spokesman was not immediately available for comment.
The LLC loophole has been controversial, but beneficial for elected officials in both parties — including Gov. Cuomo. Cuomo had proposed addressing the issue in a campaign finance reform plan that did not pass the Legislature. Critics say Cuomo and others who benefit had no real interest in pushing the measure through.