Going After 'Legal Corruption'


Former New York Assembly Speaker Sheldon Silver, a longtime powerhouse of New York politics, was convicted of fraud and extortion last week.

But shortly after the jury unanimously found him guilty on all seven counts of fraud and extortion, one juror admitted she still didn't understand the law.

“It's still a gray area for me as far as what an Assemblyman is entitled or not entitled to,” she told The Wall Street Journal.

She's not alone.

When it comes to influencing politicians in New York, the line between legal and illegal activity is often blurred.

Silver's defense, in fact, was based almost entirely on the premise that the activities which brought him into court—including influencing state research grants on workplace asbestos damage to an oncologist who in turn directed patients to Silver's law firm— is just how things work in Albany, the state capital.

Even after the conviction, law experts continue to debate whether or not Silver had in fact violated the so-called “honest services” statute — and if he has a chance to win on appeal.

At the same time, editorial pages and good government groups are using his conviction to call for widespread reforms to state ethics laws and to close loopholes in state law that allow for so-called “legal corruption.”

It's easy to be confused by that phrase. Silver's conviction—and the debate surrounding it—shows that there is a substantial “gray area” in New York regarding activities that appear to stretch ethical boundaries but are still legal.

Similar problems exist in other states, as the Center for Public Integrity details every year in its “State Integrity” reports. New York received a D- for its political financing system in this year's report.

Consider the following three scenarios. One is illegal, one is legal, and the last is unclear.

Illegal: A legislator works for a law firm, or is paid fees from a law firm. He supports a bill that lowers taxes for real estate developers in return for those developers bringing business to the law firm that pays him.

Legal: A developer contributes thousands of dollars, routed through multiple limited liability companies to a legislator's campaign. That legislator supports a bill that lowers taxes for the developer.

Gray Area: A legislator is a developer. He supports a bill that will lower taxes for developers, including himself/herself.

1. Illegal

In the first scenario, that's essentially one of the two activities that Silver was convicted of on Monday. The Crime Report talked with three former federal prosecutors-turned-defense attorneys, who each said the law was pretty cut-and-dry. Silver was found to be guilty of the honest services statue, which the Supreme Court determined in 2010 to include only offenses involving bribes or kickbacks.

Silver arranged two grants (totaling $500,000) for a doctor who in turn sent cancer patients to a law firm that paid Silver fees (totaling $4 million); and Silver supported legislation that benefited two real statute developers in return for their direction of tax business to a law firm that paid Silver.

While it is true the prosecution never presented evidence showing explicit quid pro quo, “the law treats direct proof and circumstantial proof as equal,” former federal public corruption prosecutor Gordon Mehler of Mehler Law PLLC, told The Crime Report.

The case hinged on whether the jury believed Silver was using his power to make money. Eventually, they did.

But the juror who expressed concerns about the “gray area” told The Wall Street Journal she had thought Silver wasn't guilty until evidence was introduced showing Silver did not include income he received from the real estate firm on his financial disclosure forms.

Edward J. Loya, Jr., a former federal public corruption prosecutor who works as a defense attorney for Venable LLP, agreed.

“Had Silver adhered closely to the financial disclosure forms, I think it would have been a much more difficult case to prove,” he said.

2. Legal

In New York, due to a loophole in state law, contributors can exceed contribution limits by giving money to candidates through multiple Limited Liability Companies ( LLCs).

Glenwood Management Corp. is one of the developers who paid fees to a real estate firm that in turn paid Silver. That same company has donated millions to lawmakers in the last decade through dozens of individual LLCs, according to good government group Common Cause.

The difference, of course, is that the money Silver pocketed from Glenwood was deposited into his personal bank account. The campaign contributions from Glenwood that went to dozens of legislators, including more than $1 million to Cuomo in a single election cycle, went into campaign accounts.

But here's where it gets tricky.

New York has toothless campaign finance rules and the line between campaign expenditure and a personal expense is blurry. As The New York Times wrote earlier this year, the Moreland Commission —an ethics commission that existed for a brief time before Cuomo shut it down and is its own story altogether — “declared that New York's lax campaign finance rules made donations the equivalent of 'legalized bribery,' because money from wealthy donors hoping to influence legislation could go toward 'anything from clothing to cigars to stereo equipment.'”

3. The Gray

New York has no limit on the amount of outside income a legislator can make. And while the state has conflict of interest laws, they seem to be rarely enforced when it comes to legislators.

In this example, a sitting legislator who works as a developer or a landlord votes on a bill that would impact his/her income. While New York law defines that as a conflict of interest under Public Officers Law 74, it is rarely enforced.

Russ Haven of the New York Public Interest Research Group Fund, Inc. said that's because the law itself is vague.

“The way the Code is written suggests that a lot of what passes for horse trading violates the ethical duties. It should also be read to prevent voting on things where there’s a direct or substantial personal interest. On the other hand, it’s not used that way, there’s very few recusals of legislators from voting,” he wrote in an email.

Part of the problem is the only way the vague law will change is legislators themselves are the only who can change the law.

We reached out to the New York State Joint Commission on Public Ethics (JCOPE) for some clarification, and learned that the only legislator in recent years who was found to be in violation of Public Officers Law 74 was Brooklyn Assemblyman Vito Lopez.

His violation, however, wasn't related to financial gain. Lopez was fined for allegedly groping, intimidating and manipulating young female staffers.

And his $330,000 fine?

He was allowed to pay for that from his campaign account.

Adam Wisnieski, a Connecticut-based freelance reporter, is a contributing writer to The Crime Report. You can follow him on Twitter @adamthewiz or reach him at adam@thecrimereport.org. He welcomes comments from readers.

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