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New York Attorney General Investigates “Pay-to-Play” Donations by Charities

New York State Attorney General Andrew M. Cuomo has ordered dozens of charities to take back illegal political contributions, or risk losing their tax-exempt status, [the New York Post has reported].

Cuomo has uncovered improper campaign contributions by not-for-profit organizations to New York State lawmakers and New York City council members. Federal and state laws prohibit certain not-for-profit organizations from engaging in political activity, including making campaign contributions. Violation of these laws can jeopardize an organization’s tax-exempt status.

It has been reported that Cuomo’s investigation of campaign contributions is a by-product of an ongoing probe launched two years ago into pork-barrel spending — also known as “member items” — by New York State lawmakers. It is being reported that some illegal contributions have been made after an organization received a member item from state lawmakers.

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New York Attorney General Investigates “Pay-to-Play” Donations by Charities

New Mexico Chief Investment Officer Resigns after Investigation

The pay-to-play probe related to U.S. public pension systems led by New York Attorney General Andrew Cuomo, the U.S. Securities and Exchange Commission and the Justice Department has claimed another victim. Bloomberg reports today that New Mexico’s chief investment officer has resigned after being drawn into the nationwide investigation.

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New Mexico Chief Investment Officer Resigns after Investigation

Guilty Pleas Announced in Pay-to-Play Cases

New York Attorney General Andrew M. Cuomo has announced guilty pleas by Raymond Harding, former Chair of the New York State Liberal Party, and Saul Meyer, a founding partner of Aldus Equity, with respect to pay-to-play schemes involving the New York State Common Retirement Fund (“CRF”).

Harding admitted to participating in a scheme to corrupt the process of selecting investments at the CRF to favor political allies and friends, and faces up to four years in prison. Meyer plead guilty to a felony Martin Act charge involving the payment of illegal kickbacks in exchange for business with the CRF, and also faces up to four years in prison on the charge.

The guilty pleas arise out of a two-year, ongoing investigation by the Attorney General into corruption involving the CRF and the State Comptrollers Office. The New York State Comptroller is the sole trustee of the CRF, which is the largest pool of money in New York State and the third largest pension fund in the country.

Contributed by Kelly Lamendola, Esq.
Albany, NY
McKenna Long & Aldridge LLP

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Guilty Pleas Announced in Pay-to-Play Cases

Undercover Criminal Investigations Lead to Legislative Changes

The contentious upcoming criminal trial of former New York City Police Commissioner Bernard Kerik represents an increasingly common willingness among federal and state prosecutors to use criminal “honest services” and corruption statutes to address alleged “pay to play” violations. This case, and others like it, represent the culmination of a conscious decision among the prosecutors and agents of the Department of Justice Public Integrity Section to use undercover investigations to investigate and prosecute pay to play violations actively. From the looks of things, these criminal probes are having an impact.

In a June 23, 2009 press release announcing the sentencing of former DC Department of Consumer and Regulatory Affairs Contact Representative Ikela M. Dean, the Department of Justice reaffirmed its commitment that alleged violations of public trust will be punished and that “The Department of Justice is committed to aggressively ferreting out this type of corruption and holding those accountable for their actions.” Recent undercover investigations by the Federal Bureau of Investigations have highlighted the seriousness with which the Department takes this mission statement.

The pervasive use of federal undercover operations to ferret out and prosecute pay to play violations can be gleaned from recent indictments and Justice Department press announcements. The indictment against Mr. Kerik reveals a complex and ongoing undercover investigation to support allegations that he requested and received benefits from a series of unnamed construction and waste management companies while simultaneously assisting the companies to receive municipal permits and business.

Trial in the (first of three) Kerik matters is currently scheduled to commence October 13. That trial, along with the upcoming corruption trials of Bergen County, New Jersey Democratic Chairman Joseph Ferriero and the ubiquitous former Illinois Governor Rod Blagojevich, promise to highlight the aggression with which these cases are investigated and prosecuted. Other, similar, investigations and indictments have recently been announced in East St. Louis, Miami, and the District of Columbia.

Clearly, increased criminal prosecution – and resulting public outrage – are having a legislative effect. On September 9, 2009, after a very high profile federal raid resulted in 44 arrests in New Jersey, the Jersey City Council suddenly reversed past opposition to pay to play legislation to pass an ordinance restricting developers from making political contributions in exchange for city redevelopment approvals. Ironically, among those voting for the new ordinance was City Council president Mariano Vega who was among those arrested and charged with taking cash from a developer seeking to do business in Jersey City.

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Undercover Criminal Investigations Lead to Legislative Changes