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Editorial: LLC loophole, in tainted action

It might be trite but appropriate to the moment, nevertheless: “Power tends to corrupt and absolute power corrupts absolutely.”

The LLC loophole may not confer absolute power, but its corrupting influence is on display in a Manhattan courtroom, where Joseph Percoco is on trial for accepting bribes. He was for years the political right-hand man to Gov. Andrew M. Cuomo and as close to a brother as any non-relative can get.

Chief government witness Todd Howe also referred to Percoco as a brother – one who he is helping prosecutors paint as a greedy criminal who gamed the system. Howe, a longtime Cuomo associate-turned lobbyist, is spilling all of the grisly details in what can be described as a murder of ethics.

To that point, jurors in U.S. District Judge Valerie E. Caproni’s court received a practical lesson last week in the egregious nature of the LLC loophole, which legally allows wealthy donors to give unlimited contributions to any state candidate. The candidate of choice in this case was Cuomo, whose administration had committed to improving the upstate economy. That required the use of private developers such as COR Development, two of whose top executives are also on trial, though not for these legal, if nonetheless corrupt, donations.

A little history: The state Board of Elections invented the LLC loophole in 1996 by ruling – ludicrously – that limited liability corporations are not corporations at all but, in fact, are individuals. And while corporations are limited to making $5,000 in campaign contributions in any year, individuals – including LLCs – can donate up to $60,800 to candidates in statewide races. What is more, corporations can create as many LLCs as they want.

It’s an invitation to corruption. As the News reported in 2015, LLCs have become the conduits for developers, pro-gambling forces and the telecommunications industry, among others, to funnel money to favored politicians, giving nearly $5 million to legislative candidates in a single election cycle and almost $10 million to those running for governor.

The LLC loophole should have been closed long ago. It hasn’t been because elected officials who could eliminate it are keenly aware of the golden opportunity it creates for donors wanting to influence government policy and spending.

Howe testified that in 2011, when the governor began his first term, he told his clients at a Syracuse development firm that they needed to be more “strategic” about “who you reward” with campaign donations. Executives with COR Development in Syracuse understood. They funneled a good deal of money to Cuomo’s campaign, not only in the “strategic” manner Howe advised, but through several LLCs.

Howe made the connection between the governor and COR co-founder Steven F. Aiello. The lobbyist told Cuomo at a 2011 event for the governor that Aiello could help in the effort to rebuild the economy of Central New York.

It was in June 2013, when Cuomo was getting ready for a re-election run, that he went to Syracuse for another gathering of COR executives. This time it was a fundraiser and the money came rolling in: Cuomo left with five checks totaling $125,000.

It was easy. According to Howe, COR was associated with 35 separate limited liability companies. The company chose five of them to give $25,000 apiece to Cuomo. Does anyone think it was merely coincidental that COR was chosen as a "preferred developer" for a Syracuse project?

It is long past time for the LLC loophole to close. If Howe’s testimony does not accomplish that goal, it’s hard to imagine what will.

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