Senate Bill S3731

                                BILL NUMBER:S3731

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.

JUSTIFICATION:
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.

STATE AND LOCAL FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
This act shall take effect immediately.