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Settlement May Strike a Blow Against New York's “LLC Loophole”

One billionaire used the LLC loophole to pour $4.3 million into campaigns in the last political cycle. Credit: Seemann/morguefile.com
One billionaire used the LLC loophole to pour $4.3 million into campaigns in the last political cycle. Credit: Seemann/morguefile.com
September 8, 2015

ALBANY, N.Y. - The settlement of a lawsuit may start to close a loophole in New York's campaign finance law. The suit was brought by the state Board of Elections' independent enforcement counsel. It challenges campaign contributions made under a 1996 Board of Elections ruling that allows limited-liability companies or LLCs to be treated as individuals.

Karen Scharff, executive director of Citizen Action of New York, says the LLC loophole has skewed the political process.

"We've seen campaigns where the amount of money coming from LLCs is millions of dollars," she says. "It allows individual, wealthy people to flood elections with their money, and drown out the voices of ordinary people."

According to Scharff, the vast majority of candidates for state office accept LLC donations, with the most cash going to the biggest campaigns. Details of the settlement were not immediately released but advocates say it could open the door to similar suits.

Citizen Action says one billionaire used the LLC loophole to pump $4.3 million into campaigns in the last political cycle. The lawsuit challenged relatively small contributions from a real estate developer to an unsuccessful candidate for the state Assembly.

Scharff calls it a good first step.

"But we really need the governor and the Legislature to take action," says Scharff. "To not only close the loophole but create an alternative system of a small donor, publicly-funded matching system."

So far, efforts to close the LLC loophole have failed along party lines, in both the Board of Elections and the Legislature.

Andrea Sears, Public News Service - NY