Campaign Finance Farce: Part Two

The other day we commented on the farcical campaign finance reform analysis of the NY Times-an evaluation that totally ignored the growing influence and questionable practices of the Working Families Party. It has been left up to City Hall News to do the kind of in-depth review of the WFP that we should have expected from the paper of record.

And City Hall doesn't disappoint-highlighting how the WFP's methods have elevated the party, and its labor affiliates, into major players in NYC and NYS politics; you'd think the Times would have been a bit more prescient. The work of City Hall was instrumental in prompting external as well as internal investigations into Data Field Services, WFP's campaign arm.

As the newspaper points out: "In August, City Hall published an investigative report explaining the operations of the Working Families Party’s for-profit company, Data & Field Services. In early September, after conducting its own review, the New York City Campaign Finance Board officially declared that “DFS exists as an arm of the Working Families Party.” Over the last three months, City Hall has continued the investigation, relying on dozens of interviews with people within and outside the organization, in addition to a review of tax, lobbying and campaign finance records, as well as confidential internal documents."

And what CH also found was that WFP is more than just two arms, but also has-to mix metaphors-a Hydra-like structure with four separate extremities acting in concert to collate resources and maximize political power: "What follows are the findings of City Hall’s investigation into what few seem to realize: the political party and Data & Field Services are not the only two arms of the Working Families. There are, in fact, four arms: a political party, a for-profit and two different kinds of non-profits, each of which is separate and distinct under the law.
This five-part examination by City Hall into the Working Families Party’s accounting methods and finances has shown that together through these four arms, the Working Families has the benefits of a political party (legitimacy in voters’ minds, ballot line), a non-profit (tax-exemptions, uncapped donation limits and tax deductions) and a for-profit (no disclosure requirements, ability to collect fees backed by taxpayer-supported matching funds from candidates)."

Talk about an adroit gaming of the system! How did the Times miss this? And let's not forget that under current city campaign finance law-the one that the Times called, "one of the best and fairest," labor is basically elevated as a non-special interest, exempt from the limitations that those other tawdry interests are shackled with. In essence, with this kind of unlevel playing field, labor gets to play a kind of five on one full court political game.

And the big loser is the mother of all special interests-New York's tax payers and small businesses. These shlubs are unable to organize in similar fashion and are closely scrutinized if they do. The Times would devote a five part series to this untoward phenomenon.

And, of course, the results speak for themselves-with John Liu and Bill Deblasio wiping out the field in the last city election cycle, and the WFP becoming the tail that wags the Democratic dog on the state level: "Over the last decade, the Working Families Party has become a dominating force in New York politics by using the state’s fusion voting law (one of only a few in the nation) to give candidates a second line to run on and, more importantly, by throwing its weight behind candidates in Democratic primaries all over the state at a time when the state Democratic Party has been suffering. And never was the Party stronger than in this year’s elections: come inauguration day on Jan. 1, New York City will have a public advocate, city comptroller and almost a fifth of the City Council who owe their seats and their control over city finances and legislation in large part to its efforts."

Quite a record. How did the Times miss this? Oh, right, they were focused on the nefarious fundraising ability of State Senator Carl Kruger. Which brings to mind our favorite aphorism: "The law in all of its majesty, punishes the thief who steals the goose from off of the commons, but lets the greater felon loose, who steals the common from the goose."

But the point we made the other day is worth re-emphasizing. New York Sate is a fiscal mess-and we're hemorrhaging tax payers every day; folks fleeing for tax relief from this high tax heaven. In the midst of the budget meltdown, the WFP made the clarion call for-budget cuts and less government? No, for more taxes on the so-called wealthy.

And the WFP has positioned itself as a good government group-all the while finding loopholes in the lobbying and campaign finance laws: "While standing for ethics in government and campaign finance reform, Working Families has non-profits groups and a for-profit entity that lack donation caps, disclosure requirements (in terms of frequency and detail) and other regulations that political parties face."

All of which raises questions about the not-for-profit status of the WFP's charitable arms: "Allen Bromberger, a New York City attorney at Perlman Perlman who has spent 20 years specializing in “hybrid” legal structures that incorporate non-profits with other entities, was struck by the details of the Working Families structure. “I’ve never seen this kind of a set-up before,” he said. “In order to pass muster at IRS, as far as I’m concerned, all the accounting and the bookkeeping and the allocation of costs would have to be done in a very diligent manner. Even then I think it could still be problematic,” he added. “It may be okay—they may have designed it carefully and put enough safeguards in place—but the primary purpose of the 501(c)4 cannot be to engage in political activities. So if they’re not able to show some substantial non-political activity by the 501(c)4, I think they’ve got a pretty significant problem.”

And we thought that Claire Shulman's LDC had an IRS problem! The interlocking nature of the WFP's various organizations enable it to make an end run of the campaign rules: "Were the Working Families just a political party, it would only be able to receive a maximum of $94,200 from each donor under state law. But records show the lobbying entity, the Working Families Organization, gets much more than that each year from a small group of supportive unions, including a $1 million lump sum payment from the United Federation of Teachers in 2008."

How could the NY Times fail to see this? And the limits that are placed on candidate donations to a political party? No problem: "The Campaign Finance Board restricts candidates’ donations to political parties ($10,000 for citywide candidates, less for borough-wide and Council candidates) before leveling penalties on the matching funds that are distributed, to make sure city candidates only receive the taxpayer-funded money they need to run. But state and city campaign finance records show that the for-profit entity, Data & Field Services, was able to collect a combined $750,000 from the very candidates the Party endorsed in 2009 alone, the overwhelming majority of it from candidates in the city’s matching funds program."

As one good government observer told CH: "Money is not supposed to work like this in politics,” said Tom Halper, chair of the Baruch College political science department, when briefed on the Working Families arrangement." Which leads us to conclude that the NY Times is simply in the tank on this because it is sympathetic to the WFP's agenda-as it was in the tank for Mike Bloomberg during the past election cycle even though he defecated on its signature campaign finance issue.

What this means, is that Carl Kruger is a Times scapegoat-someone who can be conveniently targeted so that the dwindling cohort of the paper's readers can be hoodwinked about the real campaign finance culprits. Will New York's tax payers wake up? It might take some real follow-up reporting; and a movement of restless tax payers unwilling to foot the bill for the WFP's excessive influence.