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Adams Scandal Exposes Potential Flaws in NYC’s Campaign Finance System

The indictment has exposed cracks in New York’s largely admired way of helping fund campaigns.

Julia Rock and Mark Chiusano · October 7, 2024

NYC Mayor Eric Adams delivers remarks at a flag-raising ceremony for the Republic of Korea in Bowling Green Park, NYC. Thursday, October 3, 2024. | Ed Reed/Mayoral Photography Office

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The federal case against New York City Mayor Eric Adams has riled top advisers, aides and commissioners – and also tested the many supporters of the city’s campaign finance system.

Adams is accused of seeking and receiving tens of thousands of dollars in illegal foreign campaign contributions funneled through “straw donors” – people who make political donations with other people’s money.

Some of those donations then earned Adams’s campaign even more money through the city’s generous public financing program, which uses taxpayer funds to match eligible donations at a rate of $8-to-$1.

The scandal has exposed cracks in New York’s largely admired behemoth of a system, including loopholes that sometimes allow donors who have business with the city or middlemen who handle contributions to skirt the rules.

“The city’s program is great,” said Tom Speaker, the legislative director for Reinvent Albany, a good government group. “But there are always opportunities for improvement — and the Adams indictment highlights the areas of need.”

Experts and legislators are careful to stress that no system is airtight, and enforcement is key to deter bad actors or catch them after the fact.

But after the explosive allegations against the mayor, a number of protections and reforms are now getting a closer look.

What Does Turkey Want From Eric Adams?

Chris Bragg and Julia Rock

For all the juicy details about airline upgrades and Turkish skyscraper construction, some of the most legally straightforward sections of the Adams indictment involve his campaign’s alleged reliance on straw donors who served as pass-throughs for foreign donations.

The indictment describes text messages from an Adams staffer telling a Turkish entrepreneur, who wanted to make a donation surreptitiously, that Adams probably “wouldn’t get involved in such games.”

When the staffer checked with Adams, however, the future mayor directed the staffer to pursue the donation, according to the indictment.

Adams has pleaded not guilty to the federal charges and denied wrongdoing. His attorney did not respond to a request for comment.

The indictment outlines approximately $26,000 in allegedly illegal foreign contributions, according to analyses by both the news outlet The City and the Brennan Center for Justice, a law and policy nonprofit.

Straw donations are not uncommon around the country, said Patrick Llewellyn, state campaign finance director at the Campaign Legal Center, a watchdog group. The organization has filed multiple complaints in recent years regarding attempts to use straw donors to hide the real source of money.

The New York system alone has seen a string of high-profile cases centered on straw donors, including when two people associated with John Liu’s mayoral campaign were convicted in 2013 in connection with a money-funneling effort. The speedy convictions came before Liu, now a state senator, even faced the voters for the city’s top job.

In 2018, Long Island restaurant maven Harendra Singh testified that he used straw donors to get campaign money to former Mayor Bill de Blasio, who (like Liu) denied wrongdoing. Prosecutors investigated De Blasio’s fundraising, but he was not charged.

Adams’ indictment was not the first time his campaign had received attention around potential straw donors. Both federal and Manhattan prosecutors had already obtained guilty pleas from individuals accused of straw donor schemes to benefit the Brooklyn Democrat’s mayoral campaign. Journalists at multiple outlets had flagged eyebrow-raising contributions and record-keeping. And the city’s own Campaign Finance Board questioned hundreds of donations before Adams’s general election.

That nonpartisan agency, created in the late 1980s after an earlier round of corruption scandals, is once again in the spotlight to help prevent campaign misbehavior in the future. The board can levy fines and civil penalties for violations of campaign finance law, as well as refer them to prosecutors.

The agency oversees the city’s enormous public matching program, which multiplies each small-dollar donation from New Yorkers with public money. The 2021 election cycle saw more than $127 million in public funds paid to 308 candidates; the program played “an important role” in the election of “the most diverse and representative legislature in the city’s history,” according to a Brennan Center report.

Yet a common criticism of the agency is its slow audits. These reviews of campaign activity can result in penalties — but can drag on for years, well after candidates have already received huge amounts of matching funds. Sometimes, bad campaign behavior isn’t punished — and the money keeps flowing — until long after a candidate already won.

Lincoln Restler shows a woman some paperwork

City Councilmember Lincoln Restler has proposed a package of bills aimed at bolstering the campaign finance board’s oversight powers. | John McCarten/NYC Council Media Unit

This summer, city council member Lincoln Restler proposed a package of three bills aimed at bolstering the board’s oversight powers.

One bill would empower the board to stop matching funds for campaigns that fail to respond to board requests for information within 30 days – as the Adams campaign did in 2021, according to reporting from Gothamist.

“If this legislation had been in place for the 2021 cycle, it would have, in all likelihood, prevented the straw donor scheme that Mayor Adams and his campaign effectuated,” Restler told New York Focus.

“And if they tried to perpetuate this fraud anyway, the CFB would have not given them $10 million in matching funds,” he said, because the board could have withheld the money after Adams’ campaign failed to provide requested information about donors.

“He would have had no choice but to play by the rules,” said Restler, who is now calling on the board to halt public matching funds for the Adams campaign.

Restler’s bills would also impose more regulations on “intermediaries” – people who solicit donations for campaigns, such as by hosting fundraisers.

His legislation would require the board to make an effort to verify donations made through intermediaries by contacting the contributors. And it would limit people who work for city contractors from soliciting, or “bundling,” donations.

The board is currently in the public comment period for new rules, which include firmer language about denying candidates public funds if they fail to file certain disclosures or to respond to the board’s requests for information. A Brennan Center explainer published Thursday called the updates an “important step forward.”

Other possible avenues of reform include clearer guidance on some of the bizarre ethical gray areas outlined in Adams’s indictment — like allegedly accepting flight upgrades.

“I think it’s likely we’re going to confront the question of how to strengthen our ethics and conflict of interest laws here in the city to better attend to how public servants deal with the matters of gifts, trips and expenses,” said City Councilman Keith Powers, who is running for Manhattan Borough President.

A man at a white voting booth with an american flag and a New York City insignia on it.

State Campaigns Are About to Rake in Public Dollars — and Spend All the Private Money They Want

Alyssa Katz

The federal charges against Adams focus on foreign influence, but he also allegedly engaged in improper fundraising from key local actors: city contractors and bundlers who fundraise for candidates.

The restrictions on contractors and bundlers are “full of giant loopholes and inconsistencies that undermine confidence in the fairness of the system,” said Speaker, of Reinvent Albany, to the City Council in June. Campaign finance lawyers say those inconsistencies allow campaigns to avoid disclosure, as the Adams campaign allegedly did on numerous occasions.

Certain employees of major city contractors are barred from donating more than $400 to mayoral political campaigns — a rule that donors to Adams’ campaign violated hundreds of times, according to reporting from The City.

Adams raised money from executives at school bus companies, real estate developers, and lobbyists on the city’s “Doing Business List,” which names people and entities covered by the city contractor rule.

His campaigns returned more than a quarter-million dollars in improper contributions, but watchdogs say that loopholes in the law gave city contractors other ways of donating to Adams’s campaign, such as through Political Action Committees or bundlers.

For example, James Dolan, the CEO of Madison Square Garden Sports and Madison Square Garden Entertainment, was on the Doing Business List because his arena was seeking a renewal of its permit. But Dolan was able to get around the contribution limit by donating to a PAC that then donated $2,000 to Adams.

The law is also narrow in terms of who it covers.

“There are a lot of people who should be on the Doing Business List, like clients of lobbyists, and people who pay lobbyists, and board members of organizations,” said Speaker, but they aren’t covered by the law in most cases. “So they can bundle all they want.”

“The system works because we actually are finding the people who are breaking the law.”

—New York State Senator Andrew Gounardes

Campaign finance experts have also called for stricter disclosure rules that would ensure speedy and comprehensive reporting of intermediaries, whom the Adams campaign repeatedly declined regulators’ requests to disclose.

Reinvent Albany has encouraged the city to require all hosts of fundraisers to be disclosed as intermediaries — as opposed to under current law, under which only one host must be listed.

However the law may be changed, “there are always bad actors, and you can never be perfectly sure that all the loopholes are covered or that people won’t interfere with the system,” said Nicole Gordon, the Campaign Finance Board’s founding executive director.

“That’s why the audit function is so important – and has actually uncovered problems that have nothing to do with campaign finance,” she said. “If you don’t preserve that, then you are at serious risk.”

The state debuted its own public matching system this cycle. It’s modeled on the city’s program — but with weaker safeguards against fraud.

The state audits only one in three legislative campaigns (except when campaigns receive more than a half-million dollars in public funds), whereas the city audits every campaign that receives matching funds. There are no “doing business” rules at the state level that limit entities seeking government contracts from donating to candidates. And the contribution limits are higher, potentially enabling donors to exert more influence.

After the November election, the state Board of Elections will publish an analysis evaluating the program’s first round and offering recommendations for it to be improved.

Public matching funds could open state elections to more scrutiny: Federal prosecutors now have jurisdiction to enforce state campaign finance law, because the state election system receives federal funds.

“Before, this was an area that was totally closed to federal prosecutors, because there was no way for them to prosecute state campaign finance violations,” said Jarrod Schaeffer, an attorney with Abell Eskew Landau LLP who previously served as a prosecutor in the Public Corruption Unit in the U.S. Attorney’s Office for the Southern District of New York.

“This is a tool that I absolutely would have loved to have” as a prosecutor, he said.

Despite the reform attempts, multiple New York lawmakers and advocates told New York Focus that the Adams indictment reflected the strength of the campaign finance system.

“Someone tried to break the law and was caught,” said Ben Weinberg, the director of public policy at the good government group Citizens Union.

New York State Senator Andrew Gounardes, a Brooklyn Democrat and longtime supporter of public financing, agreed.

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“The system works because we actually are finding the people who are breaking the law,” Gounardes said.

Critics of the system had a different take. City Councilmember Joe Borelli of Staten Island, who leads the body’s Republican caucus, argued in a recent New York Post article that public funds provide too enticing of a “return on investment” for politicians.

“And in this table game, not only does the player make out, but so do the dealers — the consultants, fundraisers and bundlers,” Borelli wrote.

Some elected officials are also uneasy about the opportunity the campaign finance system offers to challengers looking to unseat them, as well as its paperwork requirements and the threat of legal action for mistakes.

This dynamic was front and center in the bitter fight to create the state’s public matching campaign finance system.

State Democratic Party Chair Jay Jacobs characterized the new program as a “compromise between groups that really wanted a full-fledged campaign finance system and those that didn’t want any campaign finance system.”

On the city level, “many of us are proud of our first-class public financing system,” said Powers, the councilman.

“But it’s always a balancing act between making sure that we have a system that incentivizes people to run for office using the matching fund system” while also protecting against “the people who would attempt to abuse that because of its generosity,” he said.

Sam Mellins contributed reporting.