Safeguarding New York’s Election: The Unfinished Business of the Moreland Commission to Investigate Public Corruption

Universe of Non-Filers.  The effectiveness of the CEC has been questioned, particularly, with respect to enforcement against persons who failed to file disclosure reports (“non-filers”).[47]  SBOE has reported an increase in the number of non-filers since adoption of the CEC position.  In January 2019, SBOE reported the following numbers regarding non-filers:

The CEC has responded in part that the list of non-filers contains committees that should be terminated.[48]  The CEC has also focused on bringing non-filers into compliance.[49]  The following charts show the number of outstanding periodic reports for January 2017 and January 2018 at various points in time following the applicable reporting deadline.  For example, for the January 2018 periodic report, approximately 600 persons filed reports after the reporting deadline, 300 of whom filed more than five months after the deadline. 

Deficient Disclosure Reports.  The SBOE Compliance Unit refers reporting deficiencies that have not been remedied within a certain timeframe to the CEC for possible enforcement. SBOE considers a report deficient if it is missing statutorily required data or “contains other entries identified as deficiencies.”[50]  In 2016, the CEC noted that negative balances and the failure to provide loan documentation were serious violations and that she would attempt to bring committees into compliance and, if necessary, file an administrative complaint.[51]  As reported in January 2019, a total of 1,385 deficiencies referrals remain outstanding, including 438 instances of negative balances, 461 instances of reimbursement/payments to individuals without proper itemization, and 510 instances of missing data.  

V.  THE STATUTORY SCHEME CURTAILS EFFECTIVE ENFORCEMENT

The CEC has been an improvement on what came before, demonstrating greater political independence and a more nuanced approach to enforcement.  Nonetheless, as the scale of enforcement activity is small compared to the magnitude of the problems, state elections are, not surprisingly, still described as “all but lawless.”[52]  As noted above, over a four-year period, the CEC, who has oversight of more than 16,000 candidates and committees, obtained civil fines in 20 matters in total. By comparison, the New York City Campaign Finance Board assessed penalties against 51 of the 249 campaigns in the 2013 municipal election cycle for only a single category of violation, accepting over-the-limit contributions.[53]

Moreover, the significant number of non-filers, as well as persons who file months after a reporting deadline, undermines the interests advanced by disclosure, namely, providing the electorate with information about where political campaign money comes from, deterring corruption and the appearance of corruption, and gathering data to detect violations.[54]  To a certain extent, the limited enforcement activity is a product of the limited resources available to the CEC, as well as the prioritization of such resources.[55]  However, it is also undoubtedly a product of the cumbersome statutory scheme.

a. The Failure to Empower Hearing Officers to Impose Penalties and to Accord Their Findings Any Weight Renders the Process Nearly Meaningless.

Of the administrative enforcement regimes in New York, the Election Law regime is unique.  Generally agencies are empowered to adjudicate violations and impose penalties.  For example, state and local agencies are authorized to adjudicate building violations, environmental violations, health violations, insurance violations, labor violations, or traffic violations, and assess a broad range of fines.[56]  A person can challenge the agency determination to impose penalties in a judicial proceeding brought pursuant to Article 78 of the Civil Practice Law and Rules, but judicial review is deferential, typically limited to questions of law and the extent of the penalty imposed.[57]  This framework promotes efficiency and further recognizes agencies’ knowledge of and experience in the field in which they regulate.[58]

With respect to the enforcement of the Election Law, however, the Legislature took a different approach.  The law requires that an administrative hearing be held before imposing a civil penalty, but does not authorize the hearing officer to impose a penalty.  Rather, if the hearing officer finds that a violation has been established, the CEC can either enter into a settlement agreement or commence a special proceeding so that a state court can impose the fine.[59]  In the special proceeding, the court must not exercise deference with this administrative action, as it typically does for any other administrative action, but can “accept, reject or modify findings of fact and conclusions of law made by the hearing officer.”[60]  These procedures must be followed for any violation, regardless of its severity or complexity.

The inability of hearing officers to impose penalties and the lack of weight accorded their findings renders the administrative hearing a nearly empty procedural hurdle.  This is even more so because hearing officers do not even a recommend a specific penalty that could become the basis for settlement negotiations; they simply authorize the CEC to seek the highest penalty provided for by law.  Consequently, there is little reason for the subjects of the complaint to participate in the hearings, and the limited record to date bears this out.  In 14 of the 16 administrative cases that were fully decided by the end of 2018, a decision was made without an answer from any named party (in most cases, not even an appearance was recorded).

Following the hearing, the cases are typically resolved by settlement.[61]  While settlement can offer an efficient option for resolving these matters, as noted above, it has not always been the case.  Moreover, settlement does not render the statutory procedures any less cumbersome, and the lack of resources and adequate staffing and the time and expense of prosecuting violations undoubtedly place pressure on the CEC to settle (most often for a small fine).

b. A Threshold Analysis Required at Each Administrative Hearing Sweeps Too Broadly in Screening Out Minor Violations from Enforcement.

Before the CEC position was created, SBOE could initiate a proceeding to seek penalties for Election Law violations, and a court would assess penalties by considering the following non-exhaustive list of factors: the severity of the violation, whether the subject of the violation made a good faith effort to correct the violation, and whether the subject of the violation has a history of similar violations.[62]  With the enactment of the CEC position, these factors for assessing penalties remain.  As shown below, however, they are also incorporated into the administrative hearing process.  Thus, any civil enforcement action is subject to a similar analysis at both the beginning and end of the process, which is unique to the Election Law.

At the penalty phase, these factors serve to guide a court in fashioning a penalty.  As a threshold matter, however, the factors serve to slow or stop enforcement activity.  Previously, a minor violation could be subject to penalty, whereas now, it would likely be dismissed.  Additionally, the threshold factors require the CEC to undertake a more labor intensive review of a person’s history to bring any type of case.  According to Ms. Sugarman, “[e]nforcement cases involve a review of all statutory filing requirements for hearing officer and court proceedings, evaluating a person’s legal filing obligations over multiple accounts including years of possible violations and making the decisions about which cases are legally sufficient to proceed.”[63]  

The threshold factors have also undermined statutory prima face evidence of willful violations.  The Election Law has long provided that SBOE notify a non-filer no later than ten days after a reporting deadline of its reporting obligations and that a failure to file within five days of receipt of such notice is “prima facie evidence of a willful failure to file.”[64]  Yet, under the current framework, before enforcement action against non-filers arguably becomes conceivable, committees are not only notified on multiple occasions to file a report even after the deadline,[65] but also afforded multiple opportunities to disregard filing obligations altogether.[66]

c. The civil penalty structure is limited in scope and does not encompass all the violations that the CEC was explicitly authorized to address.

The effectiveness of civil enforcement is curtailed not only by cumbersome procedural hurdles, but also by the lack of penalties.  The civil penalties set forth in the Election Law cover a limited number of violations, consisting of penalties of up to $1,000 for failing to file a single report and up to $10,000 for failing to file three or more reports in an election cycle, as well as penalties for persons who accept an overcontribution and for independent spenders.[67]

There are, however, no defined penalties for filing a late report, even though, as noted above, hundreds of reports are regularly filed months after reporting deadlines.  While there may be mitigating circumstances that cut against penalizing a late filer, as it stands now, there is simply no consequence for late filing, which renders reporting deadlines nearly meaningless.  By contrast, the Federal Election Commission (“FEC”) enforces rules that distinguish between late reports and unfiled reports.  Generally, a federal report will be considered late if it is filed not later than 30 days after the due date and will be considered not filed if the report is filed more than 30 days after the due date.[68]  Similarly, the New York City Campaign Finance Board (“CFB”) can impose a late filing fine on a person who files a report after the reporting deadline but before the next reporting deadline; anyone who files a report after the next reporting deadline is considered a non-filer and is subject to fines for failing to file a report.[69]

There are also no defined civil penalties for disclosure reports that are inaccurate, incomplete, or untruthful, conduct which the CEC was explicitly authorized to pursue.[70]  The Election Law provision relating to the judicial proceeding for enforcing violations distinguishes between a person who “fails to file a statement” and a person who files one that does not conform to the statutory requirements “in respect to its truth, sufficiency in detail and otherwise.”[71]  Yet civil penalties are only available against the non-filer.[72]  With deficient or false filings, the judicial proceeding is available simply to compel correction of the filing.[73]

Finally, the Election Law has long prohibited the conversion of campaign contributions to a personal use “unrelated to a political campaign or the holding of a public office.”[74]  Nonetheless, the Moreland Commission found that elected officials were using their campaign accounts as personal “piggy banks” and thus recommended that the law be amended to provide more detail as to what constitutes an unlawful conversion of campaign funds to personal use.[75]  In 2015, the state Legislature drew on the federal rules in a misguided attempt to do just that.[76]  The Legislature adopted language that could be read to permit more personal use of campaign contributions.[77]  Additionally, although acknowledging the role the CEC could play in enforcing this prohibition, the Legislature failed to provide any civil penalties for the CEC to adequately fulfill such role.[78]  While federal election law sets forth catch-all civil penalties that could encompass this and other unlawful conduct, the New York Election Law is notably silent.[79]

VI.  RECOMMENDATIONS

The effectiveness of election law enforcement depends on a range of tools and the ability to increase financial costs when the regulated party refuses to cooperate.[80]  Here, the CEC can employ a range of tools but the CEC’s ability to impose any financial costs for violations is limited and overly cumbersome.  We recommend the following:

1. Revise the administrative hearing process. In lieu of the two-step process for imposing civil penalties (administrative hearing, followed by court proceeding), the Legislature should empower a hearing officer or, upon the hearing officer’s recommendation, SBOE, to make a final determination as to the violation and proper penalty, subject to CPLR Article 78 review.  This approach is not only consistent with other agency adjudications in New York, including by the New York City Campaign Finance Board, but also provides a fair and efficient process to all parties.  Additionally, the three-part threshold analysis for screening out violations is overly broad and blunt and should be narrowed by, for example, requiring only a de minimis analysis.  Alternatively, the three-part analysis could be replaced by a bright-line rule, whereby the hearing officer is directed not to impose fines if the fines for such violations fall below a threshold dollar amount.[81]  At a minimum, SBOE should explicitly require by rule that the hearing officer recommend a specific penalty to facilitate a more expeditious settlement.
2. Establish streamlined procedures for enforcing routine violations.  The Legislature should adopt a streamlined process for enforcing more routine violations, similar to FEC’s Administrative Fines Program.[82]  Under the program, if the FEC has reason to believe a person committed a violation, it will notify the subject of its finding and the amount of a proposed civil penalty.  The subject may either pay the civil penalty or submit a written response.  Upon payment, the FEC issues a final determination that the violation has been committed and the case is ended.  If the subject submits a written response, it is reviewed by a reviewing officer who makes a recommendation to the FEC with notice to and opportunity to be heard by the subject.  The FEC then issues a final determination, which the subject can challenge in court.  As noted by the Brennan Center, this process helps ensure that “violations carry predictable and relatively swift consequences without consuming a disproportionate amount of [] time and resources.”[83]
3. Establish comprehensive civil penalties.  The Legislature should expand on the limited number of civil penalties provided for in the Election Law, or where possible or subject to additional authorization, SBOE should fill in the interstices, so that there are meaningful consequences for unlawful activity.[84]
4. Require more transparency of enforcement activities.  SBOE should publicly report candidate and committee violations of the Election Law.  Regular reporting of election enforcement activity is common at the local,[85] state,[86] and federal level.[87]  The reporting requirements that SBOE adopted are a good start, but more specific reporting of candidate and committee violations should be required, not simply as a check on the CEC’s exercise of enforcement authority but also as an additional tool to deter unlawful activity.  The efficacy of monetary penalties, alone, to deter campaign finance violations has been questioned, as fines can simply be “internalized [by campaigns] as the ‘cost of doing business.’”[88]  Thus, reporting of violations may play an important role in bringing about compliance.[89]

VII.  PUBLIC FINANCING AND ENFORCEMENT

In April 2019, the State established a commission to recommend how to implement a public campaign financing system for state legislative and statewide public offices.[90]  The commission must issue a report by December 1, 2019, and the report will have the full effect of law unless modified or abrogated by statute prior to December 22, 2019.[91]  The commission is required to determine, among other things, “an appropriate state agency to oversee administration and enforcement of the program” or if appropriate, to “recommend[] a new agency.”[92] 

This development necessitates reconsideration of the Moreland Commission’s recommendation that the State create a “structurally independent enforcement agency.”  The New York City Bar Association has advocated for non-partisan administration of elections,[93] as well as for the creation of a single ethics body that would oversee campaign finance regulation.[94]  We would thus support a recommendation by the Public Campaign Financing Commission for a new non-partisan agency, one that would ultimately regulate all aspects of campaign finance, not simply the public financing system.  With respect to enforcement, specifically, the financing commission may be able to adopt the above-recommended reforms as “reasonably related to the administration of a public campaign finance program”[95] and so improve enforcement measures against not only participating state candidates, but also independent spenders, political parties, and local candidates.  However, to the extent it cannot, the commission must devise procedures for more robust enforcement than what currently exists.  Yet absent a recommendation by the commission for a new agency, the state Legislature can simply sit idle while the commission’s recommendation for placing administration of the public financing system in an existing agency, likely SBOE, becomes law, and a two-tiered enforcement system inexplicably takes hold.  The establishment of a new non-partisan agency, we hope, would not only best safeguard taxpayer dollars, but also encourage development of a more coherent and consistent enforcement of the campaign finance rules against all regulated parties. 

VIII.  CONCLUSION

At a time when democratic elections are being undermined by threats near and far, from dark money to foreign influence campaigns, more robust and transparent enforcement of the state Election Law than what currently exists is a necessity.  Under the current statutory scheme, with its many holes and hurdles, such enforcement is simply not feasible.  Thus, we encourage broad review of the statutory scheme and specifically the adoption of comprehensive civil penalties and streamlined enforcement procedures, as well as more reporting of enforcement activity. We also recommend the creation of a single non-partisan agency to regulate all aspects of campaign finance.  These reforms, and others recommended herein, when paired with adequate resources and a bulwark against political meddling, can bring a greater measure of integrity and public trust to the electoral process.

Election Law Committee
Martin E. Connor, Chair

Government Ethics & State Affairs Committee
Jennifer Rodgers, Chair
Edward L. Murray, Subcommittee Chair

August 2019

[72] Id. § 14-126(1)(a) (“Any person who fails to file a statement  required  to  be  filed by this article shall be subject to a civil penalty, not in excess of one thousand dollars…”) (emphasis added).