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State Board of Elections Begins Enforcing Campaign Finance Disclosure Laws

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This story originally appeared in <a href="https://nysfocus.com/2022/03/11/state-board-of-elections-meeting-llc-disclosure-enforcement">New York Focus</a>, a nonprofit news publication investigating power in New York. <a href="https://nysfocus.com/newsletter?utm_source=partner&utm_medium=website" target="_blank">Sign up for their newsletter here</a>.<hr>ELECTIONS · March 11, 2022
<h1>State Board of Elections Begins Enforcing Campaign Finance Disclosure Laws</h1>
<h2>The move comes after New York Focus reported on widespread violations of campaign finance law and the Board's lack of enforcement.</h2>
<h3>By <a class="yellow-underline" href="https://nysfocus.com/author/sam-mellins">Sam Mellins</a> , New York Focus</h3><figure><img src="https://imgproxy.gridwork.co/fDcb2dqoRgLm1V8bvhxB7_wW0--dsBtb1P6gAivcauY/w:820/h:532/rt:fill/g:fp:0.5:0.5/q:90/el:1/aHR0cHM6Ly9zMy51cy1lYXN0LTIuYW1hem9uYXdzLmNvbS9ueXNmb2N1cy9pbWFnZS0yLnBuZw.png" alt="" /><figcaption>Enforcement Counsel Michael Johnson (bottom-right) speaks during the March 4 meeting of the New York State Board of Elections. / New York State Board of Elections</figcaption></figure><div>Following a series of reports by New York Focus into the state Board of Elections’s failure to enforce a <a href="https://legislation.nysenate.gov/pdf/bills/2019/A776">2019 reform law</a> meant to limit corporate dark money in New York’s elections, the Board’s top enforcement official said last week that it has begun to enforce the law by notifying thousands of corporate donors that they are violating it.  
The 2019 reforms were passed to eliminate a quirk of New York campaign finance law that allowed a particular type of corporation — the limited liability corporation, or LLC — to <a href="https://citylimits.org/2018/09/07/coming-to-grips-with-the-two-decade-deluge-of-llc-money-into-new-yorks-democracy/">anonymously funnel millions of dollars</a> into the campaign coffers of elected state officials.  
For three years, though, key provisions of the law went unenforced, and LLCs continued to make anonymous donations to the campaigns of prominent elected officials—<a href="https://nysfocus.com/2022/02/09/hochul-corporate-donations-board-of-elections-enforcement/">including nearly $400,000 in anonymous contributions to Governor Kathy Hochul</a> last year. 
Now, that may finally be changing. 
“We’ve actually started what someone in the unit has called ‘our LLC project,’” Board of Elections Enforcement Counsel Michael Johnson said <a href="https://www.youtube.com/watch?v=vvI9cG-DAaY">during a March 4 meeting of the Board</a>.  
As part of this project, Johnson’s office identified about 3,400 LLCs that had donated to political campaigns but failed to file a “statement of interest” form listing their owners and how much of the company each one owns, as required by the 2019 law. 
“They all just got letters saying, ‘you need to file a statement of interest with the Board of Elections,’” Johnson said. 
Robert Galbraith, a researcher at the government watchdog group Public Accountability Initiative who has investigated the role of LLC money in New York politics, said he was relieved that the Board is “finally seeking compliance” with the 2019 law—but questioned why it took so long. 
“It raises serious questions about the oversight of New York elections that there has been no attempt to enforce this until now,” Galbraith said. 
Notifying LLCs is just the first step towards full enforcement. Actually imposing consequences on campaigns and donors would be more difficult, as Board commissioners acknowledged during the March 4 meeting. Current law—which the Board has asked the legislature to update—does not allow the Board to bring penalties against LLCs that violate the law.  
To force LLCs to follow the law, the board must bring a suit, and get a court to order an LLC to file its disclosure—a process too cumbersome to be used against thousands of noncompliant LLCs. 
New York Focus reported earlier this month that dozens of LLCs also <a href="https://nysfocus.com/2022/03/02/llc-corporate-donation-limits-kathy-hochul-jo-anne-simon-brian-kavanagh/">violated annual donation limits</a>, donating as much as eight times the $5,000 cap. Johnson said that after the letters, the next step in enforcement will be to investigate those violations. 
<h4>Closing the LLC Loophole</h4> 
Before the 2019 reforms were enacted, New York campaign finance law treated LLCs as individuals rather than corporations — which meant they were allowed to contribute up to $60,000 per candidate each year, while other corporations were limited to just $5,000 across all candidates. 
The 2019 law, sponsored by Assemblymember Jo Anne Simon (D-Brooklyn) and Brian Kavanagh (D-Manhattan/Brooklyn), aimed to change this. It capped LLC contributions at $5,000 total in a calendar year, and required all LLC donors to submit a form to the Board at the end of each year listing their owners and how much of the company each one owns. 
The law imposed a parallel requirement that political campaigns that accept LLC contributions also disclose the owners of contributing LLCs. 
But New York Focus found that both the letter and the spirit of the law have been routinely flouted: <a href="https://nysfocus.com/2022/02/09/hochul-corporate-donations-board-of-elections-enforcement/">Gov. Hochul’s campaign had accepted over $400,000 in donations</a> from anonymous LLC donors; corporations have exploited a loophole in the law by using multiple LLCs they own to donate <a href="https://nysfocus.com/2022/03/02/llc-corporate-donation-limits-kathy-hochul-jo-anne-simon-brian-kavanagh/">more than $5,000 to individual candidates</a>; and <a href="https://nysfocus.com/2022/02/25/campaign-finance-violations-state-elections-lack-enforcement/">the Board of Elections has failed to take enforcement actions</a> against any of the campaigns or LLCs that violated the law. 
During a press conference in February, Hochul was asked about the anonymous donations to her campaign. 
“We are focusing on trying to get all that data collected from the LLCs. They need to provide this information to us,” she <a href="https://twitter.com/SamMellins/status/1493983695350468610">said</a>, arguing that her campaign was unable to disclose the owners of the LLCs unless the LLCs first shared that information with the campaign. 
Data from the Public Accountability Initiative shows that only ten percent of LLCs that made political contributions in 2021 have filed required disclosure forms with the Board of Elections. 
Simon told New York Focus that the board’s failure to enforce the law was not entirely surprising. “They enforce in a kind of ad-hoc manner. They’ll enforce certain things but leave all of these glaring violations and failures to file without any follow up,” she said. 
<h4>Potential Fixes</h4> 
Even with its newfound ambition, the Board’s powers to compel LLCs to follow the law are limited. While the Board can penalize campaigns that don’t comply with the law, it has no method for punishing LLCs. 
“The fact that LLCs have no penalty attached to failure to file is unbelievable to me,” Board of Elections Co-Chair Peter Kosinski said at the meeting. Kosinski called the absence of a penalty a “huge failing on the statutory part.” 
Johnson suggested that the legislature pass a law allowing the board to fine LLCs that flout the law, and Douglas Kellner, the Board’s co-chair, floated the idea of a law barring campaigns from accepting contributions from LLCs that haven’t disclosed their owners’ identities.  
Assembly Elections Committee Chair Latrice Walker (D-Brooklyn) said in a statement to New York Focus that she would “look at each proposal with a critical eye,” but did not say whether she supports any of the proposals made by the Board’s staff. 
Senate Elections Committee Chair Zellnor Myrie (D-Brooklyn) did not respond to a request for comment. 
One obstacle to campaigns publishing the names of the individuals behind the LLCs that give them donations is that candidates are required to file financial disclosures several times throughout the year, while LLCs are only required to submit information on their owners by the end of the year. This means that when LLCs submit that information—if they do at all—it can easily be months after the candidates were supposed to disclose it. 
Last year, the Board suggested that the legislature pass a law requiring LLCs to submit their required information within a week of making their first contribution of the year. That proposal has not yet been taken up by the legislature. 
Beyond issues related to LLCs, many campaigns have failed to submit legally mandated filings detailing their campaign contributors. Enforcement against these campaigns has long been spotty, too. 
Until recently, Johnson had not taken action against any campaigns that had failed to file their disclosures since assuming the post of enforcement counsel last July, despite over 3,400 campaigns being in violation of the law as of October 2021, New York Focus <a href="https://nysfocus.com/2022/02/25/campaign-finance-violations-state-elections-lack-enforcement/">reported last month</a>. 
In recent weeks, the enforcement counsel’s office has begun a course of action, sending letters and emails to thousands of offending campaigns, Johnson said. The number of campaigns in violation of the law for failure to file fell from over 4,200 to less than 2,400 over the course of February, said Board co-counsel Brian Quail. 
<h4>Public Shaming</h4> 
Given the difficulty of official enforcement action, the Board has also considered a more informal penalty for campaigns that violate the disclosure requirements: public shaming. 
During the March 4 meeting, the BOE commissioners discussed the possibility of creating a publicly-available list of delinquent campaigns. 
“You hear a consensus from the commissioners that there should be a public report,” Kellner said, noting that providing a public list of campaigns in violation of the law could help encourage greater compliance.  
If the Board’s actions don’t encourage greater compliance, campaigns and concerned citizens could take matters into their own hands, noted David Imamura, an attorney and expert in New York campaign finance law: A little-used <a href="https://codes.findlaw.com/ny/election-law/eln-sect-16-114.html">provision</a> of New York campaign finance law allows candidates or groups of five individuals to sue campaigns that fail to file their financial disclosures, and seek court orders forcing them to file.</div>	 
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