Friday, June 11, 2010

EDC, Criminal Enterprise?

We have been inveighing against the illegal lobbying activity done by the Claire Shulman-led local development corporation on behalf of the Willets Point project. As we have pointed out: "We have been arguing-one could say vociferously-that the political activities of the Flushing/Willets Point/Corona LDC were in fact a blatant violation of its not for profit status. We are only belaboring the point because it feels as if the authorities charged with investigating the charge-the NYS AG, and the IRS-are dragging their feet. But we could be wrong, and there may be ongoing investigations that are being done in a time consuming but judicious manner."

Well, it's been close to a year now, and still no word from the attorney general. But the law is clear-as we have also highlighted: "But we have been giving this question some thought-and really examining the relevant IRS statute even further. Here's what it says:

From Instructions to Form 1023 (the application for 501c3 status):

"You are attempting to 'influence legislation' if you directly contact or urge the public to contact members of a legislative body for the purpose of proposing, supporting or opposing legislation. You are also attempting to influence legislation if you advocate the adoption or rejection of legislation...

Organizations described in section 501(c)(3) are prohibited from engaging in a substantial amount of legislative activities. Whether you are engaged in substantial legislative activities depends on all of the facts and circumstances"

And the evidence couldn't be clearer (so why the delay?): "Well the facts and circumstances here leave little wiggle room-especially since LDC head Shulman herself has helpfully explicated her role and that of her group. As the NY Times pointed out: "In late 2006, as the Bloomberg administration girded for what promised to be a bruising rezoning fight over the Willets Point section of Queens, it enlisted the help of Claire Shulman, the former Queens borough president. At a meeting in City Hall that December, Ms. Shulman and Daniel L. Doctoroff, then a deputy mayor, agreed to form a nonprofit group with city and private money. Its primary purpose, Ms. Shulman said, would be to lobby on behalf of the mayor’s plan to turn the long-neglected area near the New York Mets stadium into a thriving hub of shops, hotels, condominiums and a convention center."  

But in all of this controversy, one thing has been left unsaid. The NYC EDC, just like the FWPCLDC, is in fact incorporated under Section 1411 of the NY State Not for Profit law-and it too is prohibited from lobbying under the IRS statute cited above. But its even more serious than that because Section 1411, unlike the federal code, actually leaves an LDC no wiggle room-lobbying is totally banned. And it describes the duties permitted and proscribed: "to enter into covenants and agreements and to comply with all the terms, conditions and provisions thereof, and otherwise to carry out its corporate purposes and to foster and encourage the location or expansion of industrial or manufacturing plants in the territory in which the operations of such corporation are principally to be conducted, provided, however, that no such corporation shall attempt to influence legislation by propaganda or otherwise, or participate or intervene, directly or indirectly, in any political campaign on behalf of or in opposition to any candidate for public office."

So in the case of Claire's illegal lobbying activities, EDC is just as culpable for violating the law since it funded the group to lobby on its behalf. Just as it is with the Coney Island LDC that is also supposedly under investigation. But we don't have to focus on this proxy activity to determine that EDC has consistently violated the law by illegally attempting, "to influence legislation by propaganda or otherwise..."

It had no proxy when it lobbied directly on behalf of the Related Gateway Mall project in the Bronx-or on the Kingsbridge Armory as well. In fact, if an investigation was done of its activities over the past eight years under this mayor, we would probably be able to say that EDC is operating in many ways as a criminal enterprise-constantly breaking the LDC law with impunity. So if the AG is really looking at the smaller LDCs, he should expand the scope of the investigation to include the parent whose own illegal activities dwarf those of its smaller progeny.