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Where the money is

To no one’s surprise, New York Senate Majority Leader Dean Skelos—along with his son, Adam—was arrested Monday on corruption charges. The arrests followed weeks of speculation that Mr. Skelos and his son were targeted in a federal investigation led by U.S. Attorney Preet Bharara.

The new charges also were telegraphed in January by Mr. Bharara when he brought fraud, extortion and conspiracy counts against former Assembly Speaker Sheldon Silver, and advised: “Stay tuned.”

And, of course, Mr. Skelos joins a long parade of Albany politicians accused of crimes. Another arrest is hardly shocking.

What truly would surprise most New Yorkers is if their elected representatives did something to attack political corruption at its roots: money.

In Albany, a major source of free-flowing money is the “LLC loophole.” Unlike corporations and partnerships, limited liability companies in New York are treated as individuals under election law and can contribute as much as $150,000 a year to candidates and political committees combined.

To make matters worse, a single contributor can set up multiple LLCs, rendering the limits almost meaningless.

The Moreland Commission’s 2013 report noted one example of an entity that had made 147 political contributions totaling more than $3.1 million through some 25 separate LLCs and subsidiary entities.

The state Board of Elections declined to end the LLC loophole last month, curiously holding that only the Legislature could reverse a decision the board itself made in 1996. So, it’s now in the lawmakers’ court.

This need not be complicated. As the Brennan Center for Justice at NYU School of Law recently suggested, New York could treat LLCs as corporations or partnerships depending on the tax status they elect. And it could make clear that no person can use multiple LLCs to get around contribution limits.

Reining in LLC contributions is not a miracle cure for all that ails Albany. But it would be a meaningful step to counteract New York’s pay-to-play culture.

5/8/15 (c) 2015 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.


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