BILL NUMBER: S3980
TITLE OF BILL :
An act to amend the election law, in relation to the treatment of
corporate subsidiaries for purposes of the application of contribution
limits and reporting requirements
PURPOSE OR GENERAL IDEA OF BILL :
To include corporations owned or controlled by a parent corporation or
the individuals who own or control the parent corporation within the
same $5,000 limit on the amount of the parent corporation's
contributions to political party committees and political candidates.
To require disclosure of the names and addresses of parent
corporations and individuals who own or control related corporations.
SUMMARY OF PROVISIONS :
The bill amends section 14-116 of the election law to add a new
subdivision defining "corporation" to include its subsidiaries and
corporations owned and controlled by the same individual or group of
individuals that own or control the parent corporation. It also amends
section 14-102 to require campaign reports to include the names and
addresses of parent corporations and individuals who own or control
shares of either the parent or subsidiary corporation.
EXISTING LAW :
Corporations are subject to a $5,000 limitation on contributions to
political party committees and candidates. However, subsidiary
corporations and corporations owned and controlled by the same
principals are subject to a separate $5,000 limitation. There is no
requirement that campaign reports contain information about corporate
subsidiaries or individuals who control them.
Senator Leichter exposed a scheme under which more than a dozen
corporations disguised campaign donations to the State GOP by using
shell corporations and obscure subsidiaries to make contributions,
thereby facilitating hundreds of thousands of dollars worth of
campaign contributions to be made by corporations that do not appear
to exist at the addresses listed on campaign reports filed with the
State Board of Elections.
The State's current system for reporting campaign contributions, which
makes it easy for corporations to get around the $5,000 donation limit
and allows donors to hide the true source of the contribution, reveals
how warped the State's campaign finance laws are and how pointless
having public disclosure is when corporations can disguise
contributions by having shell corporations or little-known
subsidiaries do their donating for them. Currently, the State election
law does not require corporate contributors to disclose the name of
their parent companies. And while corporations are prohibited from
donating more than $5,000 (except to housekeeping accounts, which have
no limits), the law does nothing to prevent everyone of the firm's
subsidiaries from also giving $5,000.
One of the largest contributors to political committees of either
party in 1996 was Rivkalex Corp., which contributed $103,300 to the
Republican State Committee's (RSC) housekeeping account. Upon closer
examination, it was learned that Rivkalex is an inactive shell
corporation set up by D.H. Blair Corp. to make campaign contributions.
Rivkalex Corp. listed its business address as 44 Wall Street on the
RSC's campaign reports, but phone records and a listing of the
building's tenants showed that no company by this name exists in New
York City. In fact, a library search of business documents and other
records showed that the only mention of Rivkalex Corp. was on an
Internet listing of the top-100 soft-money contributors to national
political parties. While Rivkalex Corp. is not one of the listed
tenants at 44 Wall Street, D.H. Blair Corp. is one of the building's
tenants. In addition, a check of files at the New York State
Department of State's Division of Corporations revealed that one D.H.
Blair subsidiary changed its name to Rivkalex Corp. in 1979.
Incidentally, D.H. Blair made a $25,000 contribution under its own
name to the RSC housekeeping account.
In another example, two companies that have no known business presence
in New York City, but which made at least $325,000 in campaign
contributions in 1996 from the same New York City address, appeared to
be controlled by billionaire Ronald Perelman. Both companies--AGI
Management and Auto Holdings--listed their address as 35 East 62nd
Street. However, records showed no trace of either company in New
York City. One of the building's two actual tenants was MacAndrews
Forbes, a holding company owned by Perelman. In addition, Perelman
showed up on both companies' disclosure statements with the Department
of State. AGI Management contributed $25,000 to the RSC housekeeping
account and $250,000 to the New York Salute Committee, which is
controlled by Senator Al D'Amato, while Auto Holdings donated $50,000
to the RSC housekeeping account.
While it is bad enough that the current filing system allows
corporations to disguise contributions and exceed donation limits by
giving money through subsidiaries, it is even worse that the law
permits donations from shell corporations, which seem to have no
activity whatsoever other than to make political contributions. It
leaves the public and State auditors in a blind guessing game as to
who is the true source of campaign contributions. Further evidence
that some corporations clearly evaded the $5,000 limit on
contributions by giving monies through little-known subsidiaries
included: Van Dorn Realty Corp., a real estate company owned by the
Durst family, contributed $5,000 to the Senate Republican Campaign
Committee (SRCC) in October 1966, the maximum permitted under the law.
Although that Durst company could not legally contribute any more
money, four other real estate companies owned by the Durst family and
listed at the same address. all contributed $5,000 to the SRCC on the
same day. While the Leichter study was able to link many of the
corporate contributors to parent corporations after extensive
research, there were numerous corporate donors to the RSC housekeeping
account for which no known information was available. Under the
current filing system, corporations need only to put down an address
(even if they do not have an office there) and are not required to
identify whether they are part of a corporate family or who solicited
the contribution. For example, Ocean Consulting Service, which made
$13,300 in contributions to the RSC housekeeping account in 1996, but
the Department of State has no records of any company operating under
that name in New York. And, while Ocean Consulting Co. listed 99
Madison Avenue as its address, the company was not listed in New York
City telephone directories, and a list of the building's tenants
showed no firm by that name.
Many of the corporations that have disguised their campaign
contributions may be trying to hide from the public that they are
seeking favors from State officials. Meanwhile, candidates can avoid
revealing to the public that they accepted contributions from certain
corporations, especially if the firms have business pending before the
STATE AND LOCAL FISCAL IMPLICATIONS :
EFFECTIVE DATE :
This act shall take effect immediately.
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