Despite controversy, De Blasio’s political nonprofits faced little government scrutiny

Despite controversy, De Blasio’s political nonprofits faced little government scrutiny

Despite controversy, De Blasio’s political nonprofits faced little government scrutiny
May 9, 2016

When New York City Mayor Bill de Blasio is asked about his ties to several controversial nonprofit groups that were set up to promote his political agenda, he often points to the city’s Conflicts of Interest Board.

The obscure 22-person city agency, the mayor says, has vetted and signed off on his involvement with the groups, including the Campaign for One New York, which raised funds for his universal prekindergarten push and other initiatives, as well as two other nonprofits.

Although the three nonprofit groups have been bolstered by those who do business with the city, the mayor has also repeatedly defended himself by claiming that his administration is being fully transparent about its relationships.

“Obviously it has to be legal and appropriate in every way. What has been done here is that any involvement I’ve had has been pre-cleared with the Conflicts of Interest Board, which is the proper way to go about things. And then, I follow Conflicts of Interest Board guidelines in anything I do,” de Blasio told reporters in late February.

“What we’ve said from the beginning is anything that’s supporting this administration’s goals or anything I’m involved in must be fully disclosed,” he added. “I’ve felt like that is the crucial question in anything – is it disclosed or not?”

However, City & State found that some details of the mayor’s nonprofit groups and their interactions with de Blasio remain private or virtually inaccessible to the public. What’s more, the oversight of these political nonprofits is muddled and compliance appears to be largely voluntary.

For example, de Blasio spokeswoman Karen Hinton declined to share the COIB’s “private” written guidance on his involvement with the Campaign for One New York, which she said also established the regulations for the two other groups, The Progressive Agenda Committee and United for Affordable NYC.

The COIB memo, which was posted online by a Daily News employee, only raises additional questions. While it stipulates that the mayor must submit periodic disclosures listing nonprofits he fundraised for, there were no submissions in the first nine months of de Blasio’s term, a gap the mayor’s office did not directly address. The administration did not explain how the mayor complied with a clause saying he could not seek support from anyone with a matter before or about to be pending before his administration, nor did it say whether the COIB guidance was based on the federal Internal Revenue Service and the New York Attorney General’s Office recognizing the groups as certain classes of nonprofits.

Instead, the mayor’s office referred to a brief statement by the mayor’s counsel, Maya Wiley: “There was a process in place to insure that this guidance was scrupulously followed.”

But for government watchdogs, it’s not at all clear that de Blasio is living up to his pledges of transparency, let alone his promise of full compliance.

“It is concerning that there are legitimate questions about whether the mayor and his team followed the limitations set upon it by the COIB letter and whether it has sufficiently reported its activities as required every six months,” Citizens Union Executive Director Dick Dadey said. “We have seen the office of the mayor enter onto a new level of political terrain in using a nonprofit to advance his political agenda – with a nonprofit that also was raising money from people who do business before the city, which amounts to more or less being a political committee, and not just a nonprofit organization.” 

Photo: Michael Appleton/Mayoral Photography Office

Days before de Blasio took office, his 2013 campaign manager Bill Hyers and two others who worked on the campaign filed paperwork with the state to register the Campaign for One New York as a charitable organization, which they said would advocate for New York City by publicizing policy options.

Eight days into his term, de Blasio received the directive from COIB providing the guidelines for his involvement with the nonprofit group. The COIB is charged with interpreting and enforcing the city’s Conflict of Interest Law and does everything from scanning annual financial disclosure forms of some 8,500 city employees and others to handing out posters encouraging ethical awareness.

The COIB memo said the mayor could not target his appeals to anyone with a matter pending before – or “about to be pending before” – his administration. It also said that he had to inform anyone he approached that a decision to donate would not result in any favor or disfavor with City Hall. Additionally, it said he must note that he solicited support for the group in biannual reports, as the city’s Conflicts of Interest Board requires of all agency heads and elected officials.

However, the COIB website does not include any such filings from the mayor’s office for two disclosure periods at the beginning of de Blasio’s term: Oct. 1, 2013 through March 31, 2014, and April 1 through Sept. 30 in 2014. The mayor’s office did not respond when asked to clarify if de Blasio had failed to make a required disclosure – or if the lack of reports indicated he did not solicit any support for nonprofits during his first nine months in office. COIB General Counsel Wayne Hawley declined to comment on the mayor’s omission.

The mayor’s office did file later disclosure reports, but they contain fewer details than those submitted by some elected officials or commissioners he appointed. For instance, the October 2014-March 2015 report listed only the names of five organizations the mayor’s office said it solicited funds or in-kind contributions for, which included the Campaign for One New York. In contrast, during that same period, New York City Comptroller Scott Stringer listed the exact dates he sent letters to journals, spoke at events and sat on honorary committees on behalf of nonprofits. Similarly, New York City Department of Parks and Recreation Commissioner Mitchell Silver detailed which organizations’ gala and benefit invitations he accepted, the dates of the events he attended and whether he spoke at them.

By Jan. 24, 2014, the Campaign for One New York received its first contribution, according to its voluntary donor disclosure reports. Over the next year or so, the group supported and played a role in the creation of two other nonprofits. One, The Progressive Agenda Committee, was established in Washington, D.C., in July 2015 and aims to address income inequality by advocating for policies that strengthen the middle class. The other, United for Affordable NYC, was incorporated in New York in February 2016 with a mission of supporting public policies that will make living, attending school and working in New York City more affordable.

In February 2016, the government watchdog group Common Cause New York asked the COIB and the city’s Campaign Finance Board to investigate whether the mayor or the nonprofits had violated the city’s Conflict of Interest and Campaign Finance laws. Common Cause raised questions about conflicts posed by the Campaign for One New York employing public relations professionals who also work for groups that do business with the de Blasio administration at City Hall. Shortly afterward, de Blasio announced that the Campaign for One New York would be shutting down its operations, saying it achieved its goal of getting state funding for universal pre-K. United for Affordable NYC said it would begin disbanding in March, after the City Council voted on zoning plans the mayor viewed as integral to his affordable housing plan.

The dissolution announcements, however, did not shield the nonprofits from increasing scrutiny as news broke of several probes into figures tied to the Campaign for One New York. Authorities are reportedly examining whether donors contributed in exchange for favorable action at City Hall and whether operatives who worked toward de Blasio’s goal of flipping control of the state Senate to Democrats in 2014 intentionally evaded contribution limits. The mayor has repeatedly said his team behaved legally and appropriately, and nobody has been charged with a crime in these cases. Investigators sent subpoenas to the mayor’s office and some of its allies, including the Campaign for One New York, de Blasio aide Emma Wolfe, the nonprofit’s treasurer Ross Offinger and Berlin Rosen, a public relations firm hired by the Campaign for One New York that also worked on the mayor’s 2013 campaign, according to The Wall Street Journal.

Earlier this month, developer and potential mayoral candidate Don Peebles told DNAinfo de Blasio personally called him in March 2014 and sought a contribution to the Campaign for One New York while Peebles’ firm was seeking consent from the city to convert a building into condominiums.

If Peebles’ allegations are true, de Blasio’s actions appear to violate the COIB’s directions. In its memo, the board said the mayor could not request support from people or organizations with a matter pending or about to be pending before any executive branch office or agency through targeted solicitations, such as one-on-one phone calls, meetings and personal letters. Although it’s unclear which donors de Blasio may have personally appealed to for funding, NY1 reported that dozens of contributions to the Campaign for One New York came from those that had business before the city.

When asked for clarity on the de Blasio administration’s interpretation of when matters are “about to be” pending, de Blasio’s office did not directly respond. Instead, the administration sent a statement from Wiley asserting it had complied with the COIB letter.

“The COIB letter is clear,” Wiley wrote. “It permits solicitations of people who do business with the city. It only bars the solicitation by the mayor of someone ‘with a matter pending or about to be pending’ before the city. There was a process in place to insure that this guidance was scrupulously followed. The Conflicts of Interest Board's guidance also applies to city officials and employees. Nothing in it or the Conflicts of Interest laws restrict the Campaign for One New York or its supporters from fundraising.”

In its memo, the COIB noted that the Campaign for One New York described itself as “a charitable organization,” which is required to register and report under a state law enforced by the New York Attorney General’s Charities Bureau. The COIB memo also noted that the nonprofit expected to qualify as a tax-exempt organization under the federal Internal Revenue Code.

None of the three nonprofits, however, have received determination letters from the IRS recognizing them as tax exempt. A representative who had worked for United for Affordable NYC said its lawyers considered varying opinions on whether the nonprofit needed to register with the New York State Attorney General’s Office. So to be safe, United for Affordable NYC began that yet-to-be-completed process in February. The mayor’s office did not directly respond to an inquiry about whether it believed the official status of the groups in the eyes of the attorney general and IRS changed any aspect of the COIB directive. When asked how the COIB viewed various nonprofit classes, the COIB’s Hawley pointed to a written opinion on the matter that fails to distinguish between charitable and noncharitable nonprofits or how the federal and state government classifies organizations.

Representatives for The Campaign for One New York and The Progressive Agenda Committee said the groups had sought determination letters from the IRS confirming that they are 501(c)4s, but have not yet received them. United for Affordable NYC declared itself to be a 501(c)4, according to a spokesman who worked for the group.

Unlike traditional nonprofits, 501(c)4s, which are also known as social welfare organizations, are not required to apply to the IRS. Alternatively, they can notify the IRS they’re operating as 501(c)4s while filing tax paperwork, according to Rob Lyons, the tax director of exempt organizations at Marks Paneth LLP. Lyons said many 501(c)4s do submit a form to the IRS seeking a so-called determination letter verifying that the group is exempt from paying taxes because it boosts their reputations.

On the state level, a spokesman for Attorney General Eric Schneiderman declined repeated requests to explain, on the record, laws and rules governing when nonprofits need to register with the attorney general’s office, which is charged with enforcing these regulations. But Lyons said any group seeking to solicit support from New Yorkers or state establishments must register with the attorney general’s office before doing so and then file annual reports. Solicitations, he said, are any verbal or written requests for support, including writing on a website that prompts New Yorkers to donate. Although some smaller organizations that do not anticipate fundraising substantial amounts are exempt, Lyons said if these nonprofits accrue $25,000 in solicited assets at any point during a fiscal year, they must register with the attorney general’s office within 60 days.

The Campaign for One New York registered with the attorney general’s office before it reported receiving contributions. The Progressive Agenda Committee submitted paperwork to Schneiderman’s office in October 2015, but noted on its registration form that the group began soliciting New Yorkers a month and a half before that.

The United for Affordable NYC representative said it began registering with the attorney general’s office in February. The Campaign for One New York gave a six-figure seed grant to United for Affordable NYC, according to a Feb. 8 article in Politico New York. However, the spokesperson said the funding stream was, in fact, an unsolicited gift with no strings attached. On Feb. 12, a few days after the Politico article was published, United for Affordable NYC formally established itself as a nonprofit corporation in New York, according to state Department of State paperwork. The group has accumulated more than $25,000 in contributions, according to the spokesperson.

At the city level, the Conflicts of Interest Board’s enforcement strategy seems to lean heavily on public scrutiny. The board views disclosure as the primary purpose of the biannual reports listing which nonprofits officials fundraised on behalf of and has never fined someone for failing to submit one, according to Hawley.

Some good government groups would like the COIB to adopt a more aggressive stance when it comes to enforcement. Dadey, of Citizens Union, said perhaps it was time the city revisit the Conflicts of Interest Law to ensure it makes sense in the post-Citizens United era. Others, such as Reinvent Albany Executive Director John Kaehny, said reformers should look beyond the traditional nonprofit regulators and instead bolster enforcement of lobbying laws and rules because most concerns centered around conflicts in that industry.

“(The COIB is) more like your parents, which are going to say, ‘Maybe you shouldn’t do that; that’s probably not a good idea,’ but they’re probably not going to put you in jail for doing that. So the COIB should not be looked at as an enforcement agency in the same way that the Campaign Finance Board enforces campaign finance rules,” Kaehny said.

Kaehny said the attorney general’s Charities Bureau is “terrible” and that the office verges “on dysfunctional,” while IRS charity enforcement “has been obliterated by congressional budget cuts over the last four years.”

“So,” he said, “there basically is no nonprofit enforcement in New York.”

COIB Letter on Campaign for One NY by Michael Gareth Johnson

Mayor's Report To COIB April 1, 2015 to Sept. 30, 2015 by Michael Gareth Johnson

Mayor's COIB Report 2 by Michael Gareth Johnson

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