Bill S2968-2013

Treats parent corporations and their 50% or more owned subsidiaries as one entity for purposes of the applicability of certain campaign contribution limits

Treats parent corporations and their 50% or more owned subsidiaries as one entity for purposes of the applicability of the $5,000 campaign contribution limit; applies additional disclosure requirements to certain corporations including the names and addresses of parent corporations and individuals who own or control shares of either the parent or subsidiary corporation.

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  • Jan 8, 2014: REFERRED TO ELECTIONS
  • Jan 28, 2013: REFERRED TO ELECTIONS

Memo

BILL NUMBER:S2968

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: 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-I00 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.

LEGISLATIVE HISTORY:

FISCAL IMPLICATIONS: None.

LOCAL FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: This act shall take effect immediately.


Text

STATE OF NEW YORK ________________________________________________________________________ 2968 2013-2014 Regular Sessions IN SENATE January 28, 2013 ___________
Introduced by Sen. GIPSON -- read twice and ordered printed, and when printed to be committed to the Committee on Elections AN ACT to amend the election law, in relation to the treatment of corpo- rate subsidiaries for purposes of the application of contribution limits and reporting requirements THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 14-102 of the election law is amended by adding a new subdivision 6 to read as follows: 6. AS TO RECEIPTS FROM CORPORATIONS, THE STATEMENTS SHALL INCLUDE THE NAME AND ADDRESS OF (A) EACH CORPORATION FROM WHICH IT HAS RECEIVED ANYTHING OF VALUE, (B) THE NAME OF EACH CORPORATION THAT OWNS OR CONTROLS FIFTY PERCENT OR MORE OF THE SHARES OF THAT CORPORATION, (C) THE NAMES AND ADDRESSES OF EACH INDIVIDUAL WHO IS PART OF A GROUP OF INDIVIDUALS THAT OWNS OR CONTROLS FIFTY PERCENT OR MORE OF THE SHARES OF EITHER CORPORATION. S 2. Section 14-116 of the election law is amended by adding a new subdivision 3 to read as follows: 3. FOR PURPOSES OF THIS SECTION, THE TERM "CORPORATION" MEANS A PARENT CORPORATION AND ALL OF ITS SUBSIDIARIES OF WHICH THE PARENT CORPORATION OWNS FIFTY PERCENT OR MORE OF THE OUTSTANDING SHARES AND ANY OTHER CORPORATION OF WHICH A COMBINATION OF INDIVIDUALS THAT OWNS OR CONTROLS FIFTY PERCENT OR MORE OF THE OUTSTANDING SHARES OF THE PARENT CORPO- RATION ALSO OWNS OR CONTROLS FIFTY PERCENT OR MORE OF THE OUTSTANDING SHARES. S 3. This act shall take effect immediately.

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