Tuesday, July 6, 2010

New York City Struggles to Recover Unused Campaign Funds by Alison Leigh Cowan - NYTimes.com

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Few cities are as generous as New York when it comes to matching political contributions raised by candidates for public office.

June M. Eisland, spent years fighting the city’s attempts to recover money left over from her campaign.

In big election years, the city has given anywhere from $4 million to $42 million to candidates in an effort to limit the influence of special interests and level the playing field for candidates of modest means.

There were, though, supposed to be limits to the city’s generosity. Candidates who accepted taxpayer money and did not empty their campaign accounts in the course of their election fights were obliged by law to return all surplus money to the city.

But the city, while handing out a total of roughly $120 million to candidates over the years, has been unable to recover much of the money it is owed.

Tens of thousands of dollars that candidates initially reported as surpluses appear to have dribbled away as the city took years auditing campaigns to determine how much might be owed. There are also candidates who have seemed to be in no hurry to settle up. Today, for instance, two dozen candidates owe a total of $800,000 from publicly subsidized races in 2001, 2003 and 2005.

Though it has sought to clarify its rules, the city has also struggled to stay a step ahead of candidates who avoid meaningful repayment by using surplus campaign funds to hire lawyers during the audits to challenge the city’s calculation of what they owe, or by paying penalties with surplus funds they would otherwise owe the city.

And to this day the city cannot keep publicly financed candidates from using legal loopholes to funnel leftover money to political or charitable causes of their choosing. Quirks in the rules governing runoff elections, for instance, have allowed two former City Council speakers, Peter F. Vallone Sr. and A. Gifford Miller, to shift six-figure surpluses of campaign money into political action committees they controlled.

For their part, some candidates correctly point out that the city’s Campaign Finance Board, which is responsible for protecting tax dollars and the public interest, is not always careful to make sure that what it publishes about candidates’ finances on its Web site is accurate and up-to-date.

Responding to that criticism, Eric Friedman, the board’s spokesman, said: “There are 1.2 million transactions in the database available for public view, and 1,700 campaigns over the course of the program. Anybody in a government agency or any long-running concern that deals with this kind of volume will have challenges assuring everything is accurate.”

Given that, it is nearly impossible to say how much money the city has missed out on over the years in repayments from candidates it helped underwrite. What seems clear is that the city is in no position to lose track of even small sums when it is cutting library hours and closing senior centers to balance its budget.
June M. Eisland, an unsuccessful candidate for Bronx borough president in 2001, spent years in court fighting the city’s attempts to recover some of the $300,000 it had given her campaign. Helping her do battle were two of the city’s pre-eminent election lawyers, Henry T. Berger and Laurence D. Laufer, a former general counsel of the Campaign Finance Board who now advises campaigns.

Ms. Eisland and her lawyers succeeded in carving out $130,000 she had raised in prior races, depriving the city of much of what it thought it was due.

Under New York law, the Campaign Finance Board approves all public matching contributions, under formulas that have become sweeter over time. Currently, the city gives candidates $6 for every $1 in qualifying gifts raised from private donors. In certain circumstances, candidates can receive as much as $8.57 for every $1 raised on their own. “It is an extremely generous match,” said Mr. Laufer, the lawyer.

The board monitors the use of the public money — demanding and examining candidates’ detailed expenditure reports — and is the ultimate bill collector when it finds that campaigns have unspent funds or other debts to the city. But less than $10 million of the $120 million that the board has handed out since its inception in 1988 has come back to taxpayers, judging from campaign reports and other statistics posted on the board’s Web site.

To be sure, a lot of the money is properly spent on campaigns, and board officials argue that the benefits of publicly financed elections far outweigh what they contend are the smaller amounts that may get lost in the process.

“At the end of the day, New Yorkers can have confidence that their politics are cleaner and freer from influence, and that’s what their investment gets them,” said Mr. Friedman, the spokesman for the board.

“There will always be challenges in collecting money from people who do not want to pay,” he acknowledged. But he said, “We’re here to watch that investment pretty closely.”

He and his colleagues also reject the idea that they take any of the shenanigans lying down.

They point to more than 40 cases they have litigated in court, and more if small-claims court is counted. Eight staff members, they said, are dedicated to collecting surplus money, and Thacher Associates, an investigative firm, is on call for occasional help.

One oft-used weapon for trying to recover money is publishing the names of those who resist the board’s demands for repayment or remittance of penalties. As of last month, a couple dozen individuals who ran for city offices from 2001 to 2005 were listed as owing a combined $797,293 in “outstanding repayments of public funds,” reflecting unspent funds and other overdue obligations.

Michael Roth was one. He garnered a mere 3 percent of the vote when he ran for City Council in 2005 but has hardly faded from view.

The board initially ordered him to repay all $20,392 of the public funds he got, once auditors found scads of expenses he had charged to the campaign, including dog food and liquor bought during the race, and sushi dinners and airline tickets bought months after the election.

According to Mr. Friedman, Mr. Roth paid the last of what he owed on June 23, nearly five years after his race.

Some candidates seem to be less receptive than others to the public shaming or to the board’s ability to withhold future financing.

Miguel Martinez is listed on the board’s Web site as owing $128,786 from the 2001 race that put him on the City Council. Currently serving five years in federal prison for misusing money intended for nonprofit organizations in his district, he may not be concerned about repaying the city for its help in getting him elected.

There are also 13 instances in which the board has granted extensions to candidates who “are engaged in efforts” to resolve debts or other obligations totaling $594,000. Lawyers familiar with the deferred payment plans say the recipients pay no interest and sometimes have as long as 10 years to settle up.

The Rev. Edward J. Norman, a 2001 contender for the City Council, was the beneficiary of one such deal. Troubled by sloppiness in his campaign spending reports, the board initially dunned him the entire $65,496 that he had received in public matches. But the board reduced what he owed to $39,179 once he had better documented his spending, and gave him until last year — eight years after his race — to pay off the last of it.

“If they added interest, I’d still be paying back,” said Mr. Norman, the pastor of the Union United Methodist Church in Brooklyn. He chalked up his errors to the inexperience of a first-time candidate, unsupported by party operatives or professional advisers.

In more than a few cases, candidates argue that the board’s assessment of their financial performance is flawed or mistaken. And sometimes those candidates are right.

Just the other day, the board confirmed that information on its Web site concerning Norman Siegel’s 2001 race for public advocate and William C. Thompson’s 2001 race for city comptroller was incorrect. Double-counting by its computer program had made it inaccurately look as if both campaigns had hung on to huge six-figure surpluses.

“The numbers in 2001 are just wrong,” Mr. Siegel said in an interview.
He later said the board had acknowledged its error and was correcting the data. Proud he had run clean campaigns and was on good terms with the board, he said, “I’ll have to re-evaluate them now in light of this.”

The board’s next challenge will involve trying to collect some $9 million in potentially recoverable funds from the $27 million it gave campaigns in 2009. But it looks as though it will be years before it is clear how much the watchdogs actually win back.