Cuomo Claims to Support Elimination of LLC Loophole He Benefits From

Governor Andrew Cuomo, who accepted more than $3 million in contributions to his re-election campaign last year under the controversial “LLC loophole,” has stated—not for the first time—that he supports eliminating it. 

The LLC loophole allows wealthy real-estate owners to evade limits on campaign contributions by forming multiple “limited liability companies,” each of which is allowed to make the maximum individual contribution. Its best-known abuser is Leonard Litwin of the luxury developer Glenwood Management, who has given more than $1 million to Cuomo, contributed substantially to state Senate Republicans, and was listed as “Developer No. 1” in the federal indictment of former Assembly Speaker Sheldon Silver. 

On April 27, in somewhat of a surprise, the Senate Elections Committee approved a measure cosponsored by Democrats Liz Krueger and Daniel Squadron to close the LLC loophole. The vote came just one hour after a press conference in which Senate Minority Leader Andrea Stewart-Cousins slammed Republicans for maintaining the loophole. She was joined by good-government groups that included the Brennan Center for Justice, the League of Women Voters, Reinvent Albany, Common Cause, the New York Public Interest Research Group, and Citizens Union.

“The governor supports and will continue to fight for closing the LLC loophole,” Cuomo spokesman Rich Azzopardi said after the vote, adding that he hoped the full Senate would pass the bill.

However, the bill was referred to the Corporations Committee, which under Senate rules must act on it within its next two meetings or it will die. “Get ready to go down a really deep rabbit hole,” said Squadron, one of two Democrats on the seven-member panel. The committee’s chair is Michael Ranzenhofer, a lawyer from the Buffalo suburb of Williamsville whose firm’s Web site lists its specialty as “corporate representation.” With Majority Leader Dean Skelos indicted on corruption charges, however, it is possible that whatever Republican leadership emerges will see a need to address LLC abuse. 

Assemblymember Brian Kavanagh has introduced two bills to close the LLC loophole, and says he is confident the lower house will pass them this year.


Passing the buck

Cuomo’s claim to support elimination of the LLC loophole must be taken with a rather large sack of salt. He has spoken out of both sides of his mouth on the issue, as he has on related questions such as campaign-finance reform, open government, nonpartisan redistricting, and ending Republican control of the Senate, and time after time his actions have supported the status quo. The budget agreement he made with legislative leaders on March 29 did not include anything to end the loophole.

When Cuomo ran for governor in 2010, he proposed that donations from LLCs should be counted towards their parent company’s contribution limit, to make that limit “meaningful.” In June 2013, he proposed lowering the contribution limit to $1,000 and applying it to LLCs as well. But in July 2013 he defended his continued exploitation of the LLC loophole, saying, “Those aren’t loopholes. Those are the laws that are written.”

In fact, New York’s LLC loophole is not based on any provision in state election laws, but on a 1996 state Board of Elections opinion that relied on a dubious interpretation by the Federal Elections Commission that was quickly reversed. On April 23, the board deadlocked 2-2 and failed to close the loophole. The two Republican appointees said it was a matter for legislative action.


Quid pro Cuomo

Last year, while Cuomo was accepting more money from Litwin, his administration approved a $260 million loan to Hawthorn Park, a luxury apartment building Litwin is constructing near Lincoln Center. And it was widely reported that the reason Cuomo shut down the Moreland Commission on Ethics last year is that it refused to back off on its investigation of Litwin, including his ties to the governor.