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Cuomo proposes closing ‘LLC loophole,’ Senate GOP balks

New York Gov. Andrew Cuomo talks to media

New York Gov. Andrew Cuomo talks to media members outside his office at the state Capitol on Tuesday, May 24, 2016, in Albany. Credit: AP

ALBANY — Gov. Andrew M. Cuomo once again has proposed closing a campaign-finance loophole that allows companies to skirt donation limits, a practice through which he has raised millions of dollars for his gubernatorial campaigns.

Senate Republicans immediately rejected the proposal as a “red herring.” Good-government groups appreciated the thrust of the proposal but questioned its chances, given that the governor unveiled it with just 10 working days left in the 2016 legislative session. They also noted Cuomo’s similar proposals in previous years weren’t accompanied by a big effort to win legislative passage.

Currently, state campaign finance law allows companies to exceed their $5,000 corporate limit by creating an unending number of limited liability companies to funnel donations. Through the LLCs, often with names that mask the parent company’s identity, corporations and their executives can cumulatively contribute unlimited sums to campaigns. For example, Long Island-based Glenwood Management and the holdings of Leonard Litwin have contributed at least $13.4 million to New York candidates since 1999.

Cuomo proposed treating LLCs as “traditional corporations” — capping contributions at $5,000 annually.

“The people of New York are demanding change and it’s time we took action to restore the public trust by closing the LLC loophole and bringing fairness to the campaign system,” Cuomo said in a statement. His proposal would give the State Legislature eight options for closing the loophole, including closing it solely for the governor’s race.

Doing so, critics pointed out, would handcuff future candidates while allowing Cuomo to keep the millions of dollars he’s raised through LLCs. (Various reports have estimated the governor raised anywhere from $4 million to $6 million from LLCs in his 2014 re-election campaign.)

Senate Majority Leader John Flanagan (R-East Northport) called the proposal a “red herring.” Flanagan and Republicans have said the focus on companies ignores the fact that unions donate through local and national offices, allowing them to skirt contribution limits. Flanagan also criticized the formation of nonprofit groups to support a candidate’s agenda. Both Cuomo (Committee to Save New York) and New York Mayor Bill de Blasio (Campaign for One New York) have benefited from nonprofits formed to back their policies.

“A proposal to close the LLC loophole is a red herring that fails to fundamentally address the root cause of the problems that exist within our campaign finance system, most notably a lack of enforcement, a lack of transparency, and a lack of full and honest disclosure,” Flanagan said.

Good-government groups applauded Cuomo’s proposal but noted the calendar — the legislature is set to adjourn June 16 — and wondered if there is time to win any significant changes.

“Am I disappointed the governor didn’t do anything for two months to galvanize public support for reforms?” said Blair Horner of the New York Public Interest Research Group. “Yes, but that’s water under the bridge and I hope this is a first step in a broader package of ethics reforms that New York desperately needs.”

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