An inside look at political corruption in New York

The recent convictions of Assembly Speaker Sheldon Silver and Senate Majority Leader Dean Skelos provide a great inside view of how campaign cash and political corruption meet. A key player in both trials was a 101 year old billionaire named Leonard Litwin who owns and builds high end apartment buildings in New York City through a firm named Glenwood Management. Litwin owns 26 buildings in Manhattan with 8,700 luxury apartments.

Weak campaign finance laws

In New York State individuals can contribute up to $150,000 total per year to political candidates and committees, with a limit of $65,000 per year for state wide candidates. Corporations are limited to $5,000 in contributions per year. New York’s limits are very high compared to many states and the federal government. For example the most that can be contributed to state wide candidates in Florida is $3,000. Individuals are limited to no more than $2,700 for federal candidates.

Even New York’s high donation limits are routinely exceeded through creative ways by wealthy individuals and corporations looking to buy access to law makers.

New York’s biggest campaign contributor

From 2005 to 2014, Leonard Litwin through Glenwood Management and other companies donated $12.8 million to politicians making him New York State’s biggest campaign contributor. Litwin’s political contributions were entered into evidence at the corruption trial of New York Senate Majority Leader Dean Skelos. The documented Litwin contributions totaled 54 pages funneled through 26 different limited liability companies.

r2The contributions according to trial testimony provided by Charles Dorego, Glenwood’s senior vice president and general counsel were used to ensure that Litwin would continue to benefit from tax breaks, government financing and favorable rent laws.

Litwin donated $1.2 million to Governor Andrew Cuomo, making him Cuomo’s largest donor. He was also the largest donor to Attorney General Eric Schneiderman ($240,000) and Comptroller Tom DiNapoli ($180,000).

The limited liability company loophole

Litwin’s contributions were made through dozens of individual Limited Liability Companies (LLCs) that are registered in either Glenwood Managements name or at Glenwood’s New Hyde Park address.

The New York State Board of Elections in an opinion rendered nearly twenty years ago determined that Limited Liability Companies could be treated like individuals and not corporations as far as political contribution limits. Limited Liability Companies are very easy to form (a simple 2 page form), which does not require the identity of the owners or corporate officers to be disclosed. With each Limited Liability Company having a total yearly limit of $150,000 instead of $5,000, wealthy individuals seeking to buy influence can contribute large sums of money to politicians through dozens of real or paper only Limited Liability Companies.

The Moreland Commission formed by Governor Cuomo to investigate political corruption and make recommendations for changes advocated in their preliminary report for closing the LLC loophole. The Moreland Commission was abruptly disbanded by Cuomo and the LLC loophole, which Cuomo has raised millions of dollars through continues today.

Silver & Skelos shake the money tree

At Sheldon Silver’s corruption trial it was revealed that Silver obtained $4 million in legal referral fees from the law firm of Golberg & Iryami. Silver suggested that Litwin’s company Glenwood Management take their legal business to Goldberg & Iryami, who provided a 25 percent kickback to Silver for all legal fees earned.

At the trial of Senate Majority Leader Dean Skelos it was revealed that Charles Dorego the senior vice president and general counsel of Glenwood arranged for Skelos son Adam to receive a $20,000 commission from a title company for work he did not perform. Dorego additionally created a consulting job for Adam Skelos at an environmental firm, the firm paid Adam Skelos a total of $200,000.

Mr. Dorego in his trial testimony recalled a 2012 exchange with majority leader Skelos, where Skelos warned another real estate company about what would happen if they didn’t contribute more to the State Senate Republican Campaign Committee.

r3“If they didn’t pony up and step up to the plate he was going to F them,” Mr. Dorego said. “He was visibly angry.” To back up Mr. Dorego’s account, the prosecution in the Skelos trial revealed many emails, one—from Glenwood’s top lobbyist Richard Runes to Mr. Dorego—simply reading “Skelos needs money.”

Dean Skelos and his son Adam were constantly contacting Mr. Dorego about possibly getting Glenwood to buy title insurance or natural gas through the Republican leader’s then-30 year-old son. The Senate Majority Leader frequently asked Mr. Dorego to help his son by stating “Can we do something for Adam? He needs some help,’” Dorego testified “I just felt like we were being badgered at this point.” I was feeling an awful lot of pressure to make something happen for him. It made me very uncomfortable.”

What did Litwin get for his campaign contributions?

Someone who has a net worth of a billion dollars clearly understands how to make and invest money. According to Charles Dorego the vice president and general counsel of Litwin’s company, one real estate tax abatement program called 421-a, saved the company an estimated $50 million to $100 million in one year. The New York State legislature controlled by Silver, Skelos and Cuomo must renew the 421-a law periodically.

Nearly 3,000 apartments owned by Litwin’s company received 421-a tax breaks worth more than $700 million over 20 years. Not a bad return for $12.8 million in campaign contributions over ten years. Given the amount of tax benefits coming Litwin’s way, buying politicians was relatively cheap.

Each time 421-a was renewed, Glenwood sent more of its buildings to the Silver recommended law firm of Goldberg & Iryami, which meant more referral fees for Silver. “This is not a coincidence, ladies and gentlemen,” the government prosecutor said in its closing arguments. “Glenwood is rewarding Silver each time they get what they want.”

Glenwood also benefited from another state-administered program, which allowed it to obtain more than $1 billion in low-interest, tax-exempt bond financing since 2000, to buy land and construct eight buildings since 2001, according to testimony at Mr. Silver’s trial. Rent regulation laws which also have to be renewed periodically were also very important to Litwin as a portion of the apartments he owned were subject to rent regulations.

The whole system is corrupted

Money is truly the root of corruption in our state government. Politicians desperately need campaign cash and those that provide such cash obtain access and influence. In exchange for campaign cash, politicians dole out tax abatements, government funding for projects and patronage jobs. The corruption trials of Sheldon Silver and Dean Skelos revealed the access and influence New York’s largest campaign donor Leonard Litwin obtained and the personal benefits Silver and Skelos received. The government benefits provided to Litwin are just one example of how politicians leverage government resources and actions in exchange for campaign cash and their own personal benefit. The same activity takes place for other political donors as well. The whole system is corrupted and needs reform. The following steps should be taken:

■ Eliminate the Limited Liability Loophole by treating such companies as corporations with a $5,000 limit instead of the $150,000 limit that individuals have.

■ Lower New York’s outrageously high contribution limits for individuals.

■ Implement public financing of elections by matching small individual donations with tax payer funds. Such programs make small contributors important and lessen the influence of wealthy special interests.

Paul Wolf is a local attorney and the founder of the Center for Reinventing Government, www.reinventinggov.org.

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