Power in money: How big bucks fuel policy in N.Y.

ALBANY – When Rochester-area mall magnate Thomas Wilmot needed a lawyer for his $425 million casino in Seneca County, he didn't have to look far for local expertise.

HarrisBeach attorney Shawn Griffin had worked with Wilmot since the early 1990s, and he and the firm have been counsel for the Seneca County Industrial Development Agency for decades.

Griffin represented the Lago casino, and the agency hired another lawyer — a former Harris Beach attorney — to help handle a deal that led to a $45.3 million payment in lieu of taxes from the Tyre project last month. There's another connection: the local state senator, Michael Nozzolio, is of counsel at the Rochester-area law firm, which paid him between $150,000 and $250,000 in 2013.

The IDA, Griffin, Nozzolio and Wilmot said there was no conflict of interest, despite criticism from local foes.

"By law and in fact, I had no involvement in the casino selection process or any casino project," Nozzolio, R-Fayette, Seneca County, who sits on the Senate's Racing and Wagering Committee, said in a statement. "Moreover, as a private attorney, I have never had any involvement with respect to any casino project or law firm casino client."

The outside income of state lawmakers had drawn increased scrutiny after the arrest Jan. 22 of then-Assembly Speaker Sheldon Silver, a Manhattan Democrat who is accused of pocketing $4 million in kickbacks from two law firms. Oversight of outside income is a key sticking point in budget talksthis month.

The private salaries go to a larger issue at New York's Capitol, watchdog groups said: Big-money interests can wield extraordinary influence over a system with lax oversight.

"The influence-peddling coin now drives policy," said Blair Horner, legislative director for the New York Public Interest Research Group. "If you can't participate by either hiring a hot-wired lobbyist or plucking down the campaign contributions, it's almost impossible to get your voice heard."

Indeed, the explosion of money in Albany is unprecedented, a review by Gannett's Albany Bureau found:

-- Lobbying spending has nearly doubled over the past decade: from $120 million in 2003 to $210 million in 2013.

--Last year, Gov. Andrew Cuomo raised more than $20 million for his re-election bid and about $46 million over four years, a record in New York and among the most of any governor in the country.

-- Powerful business interests can skirt campaign-finance laws by opening up limited liability companies. More than $25 million was contributed through LLCs to state candidates over the past two years, far surpassing the $3 million spent by LLCs over the prior 12 years.

Powerful interests

The intersection of money and power at the Capitol is seen through the ornate halls as high-priced lobbyists flank almost every special-interest group. And the booming business is tied to just about every major issue: education, the minimum wage, business tax breaks and health-care reform.

As Congress is stuck in gridlock, state legislatures are a battleground for power brokers who want to press for new laws or block bills, experts said.

"This is simply implementing a business plan," said Edwin Bender, executive director of National Institute on Money in State Politics, based in Montana. Special interests "develop their agenda: They get their electoral campaign strategy, and then they get their legislative strategy."

Charter-school supporters pumped $4 million into state Senate races to help Republicans win a majority last year. Teachers' unions spent a similar amount on Democratic campaigns. And it came mainly through shadowy independent expenditures, which allows groups to spend unlimited cash on races.

Now the sides are in a pitched battle over education reform for the fiscal year that starts April 1. A union-backed group called Hedge Clippers is criticizing Cuomo, claiming he's collected nearly $5 million from hedge-fund managers to back more charter schools.

Even small groups — as well as local governments themselves — hire lobbyists to wade through the Albany bureaucracy.

The Campground Owners of New York, based outside Rochester, spends $7,000 a year on a lobbyist to stay informed about issues related to tourism and land rights, said the group's executive director, Donald Bennett Jr.

"There's a lot of issues that are in Albany," Bennett said.

To get an issue advanced at the Capitol, a lobbyist can be necessary, said James Featherstonaugh, who runs one of the most prominent lobbying firms in Albany: "You either need to retain a lobbyist or you need to be here yourself full time if you want to promote anything."

But he doesn't believe the business shuts out the public, saying popular issues still get advanced by lawmakers and the governor.

Loopholes in law

Without tighter controls, the confluence of loose campaign-finance laws, a part-time Legislature and one of the largest lobbying industries in the nation has fueled the myriad scandals at the Capitol.

Nearly 40 state lawmakers have faced ethical woes since 2000, a Gannett tally found, and U.S. Attorney Preet Bharara has condemned the system as he investigates the Legislature and Cuomo's office.

Bharara is investigating perhaps a dozen cases of lawmakers' potential misuse of campaign cash and outside income, as well as Cuomo's decision a year ago to shutter the corruption-busting Moreland Commission that was looking into it all.

"New York is home to the safest, largest city in America," Bharara, who is prosecuting Silver and Sen. Thomas Libous, R-Binghamton, said in a speech Jan. 23. "It should not harbor one of the most corrupt governments in the nation."

Efforts to toughen ethics agencies have fallen flat under Cuomo and his predecessors. Even as new laws require lawmakers to make public the ranges they earn in outside income, they still don't have to list their clients or say what they do for the money.

That would change under a framework deal reached between Cuomo and Assembly Democrats on Wednesday, but the Republican-led Senate hasn't agreed to the proposal and good-government groups said the reforms aren't strong enough. Lawmakers could still collect unlimited outside income, but would have to disclose more details.

"If the problem is lawmakers using their public office for private gain, merely requiring disclosure is not good enough," Horner said.

Harris Beach has long contended that Nozzolio's role is kept separate from his public duties. Griffin and Seneca IDA director Robert Aronson said the sides were upfront that Harris Beach was representing Wilmot in the Lago deal and that the board would hire outside counsel, Robert Halpin, a former Harris Beach attorney who has his own Ithaca-area practice. And Wilmorite, Wilmot's company, sent its own in-house counsel to the IDA meeting when the deal was approved Feb. 12.

"As a practical matter, we are very respectful of both actual conflicts and perceived conflicts. So that's why from day one we put this issue on the table," Griffin said.

But James Dawley, a leader of Casino Free Tyre, questioned the relationship: "It certainly raises a flag in my opinion. How fair are we being represented here?"

Reforms urged

The LLC loophole continues to be a glaring one. While corporations can give only $5,000, LLCs are considered the same as individuals and can give $150,000 total to candidates. Individuals can open multiple LLCs to flout the limit.

Of the $20 million Cuomo raised last year, 20 percent came from LLCs, or about $4 million, the most of any New York candidate, Gannett's review of data showed. About $1 million came from the holdings of Manhattan real-estate developer Leonard Litwin, NYPIRG said last fall.

"There's no reform more important than closing the LLC loophole, which allows unlimited sums of anonymous dollars to pervert the entire process, from elections to legislation," Sen. Daniel Squadron, D-Brooklyn, said.

Assemblywoman Barbara Lifton, D-Ithaca, said she stays clear of big-money donors, except for groups that support her agenda, like the teachers' union.

"If I wanted to be a bigger power player, I'd have to play a different game," Lifton said.

Cuomo said he wouldn't approve a budget deal without ethics reform. His deal with Assembly Democrats would also seek to end lawmakers' abuse of the per diem system, in which they can get $172 a day for food and lodging, but are currently not required to file receipts. He also proposed to close the LLC loophole.

"We can't have the government that the people of this state deserve until they trust the government, and I think that it is essential that in this budget, the Legislature recognizes the need for real ethics reform," Cuomo said in a speech March 11 in Rochester.

Citizens Union recommended last week that lawmakers' outside income be capped at no more than 25 percent of their public salary, which is currently $79,500 plus stipends for committee posts. In exchange, lawmakers' public pay should be increased, the group said.

In a speech Monday, Attorney General Eric Schneiderman said all outside income should be banned. "It is impossible to avoid conflicts or the appearance of conflicts if legislators have outside employment," Schneiderman said.

Sen. John Bonacic, R-Mount Hope, Orange County, said ethics come down to the person, not new laws: "It always goes to the integrity and the honesty of whom the voter elects."

Indeed, some lawmakers said that cases of corruption shouldn't cloud the work of the 213-seat Legislature.

"I think you could look at every profession and find that there is bad apples in every profession," Assembly Speaker Carl Heastie, D-Bronx, said in a recent radio interview. "But I think the overwhelmingly majority of people who go to Albany go there with an honest mindset to represent their constituents."

About this series

"Power in Money" will be an ongoing series this year by Gannett's Albany Bureau that investigates and explores the intersection of money and public policy in New York government. Future installments will look at the influence put on education reforms and business incentives, as well as ways to better control the spending.

Findings

-- New York's lobbying industry has nearly doubled over the past decade: from $120 million in 2003 to $210 million in 2013.

-- Gov. Andrew Cuomo raised about $46 million over four years, a state record and among the most of any governor in the country.

-- More than $25 million was contributed through the LLC loopholes to state candidates over the past two years, far surpassing the $3 million spent by LLC over the prior 12 years.

Troubled NY lawmakers

For a database of lawmakers in New York state who have faced legal or ethical charges since 2000, visit: http://rochester.nydatabases.com/database/troubled-ny-lawmakers

JSPECTOR@Gannett.com

Twitter: @gannettalbany

Includes reporting by Democrat and Chronicle reporter Sean Lahman.