Mayor Eric Adams. Image Credit: Benny Polatseck/Mayoral Photography Office
On September 26, 2024, Mayor Eric Adams was indicted on five federal charges including bribery, conspiracy, and campaign finance offenses. To better understand the context of the alleged campaign finance-related crimes, New York Law School’s Center for New York City and State Law offers the following Q-and-A between Ben Max, the Center’s executive editor, and Amy Loprest, a Senior Fellow at the Center and the former longtime Executive Director of the New York City Campaign Finance Board.
According to the office of the U.S. Attorney for the Southern District of New York, Adams’ alleged campaign finance crimes include:
“ADAMS sought and accepted illegal campaign contributions in the form of “nominee” or “straw” contributions, meaning that the true contributors conveyed their money through nominal donors, who falsely certified they were contributing their own money. By smuggling their contributions to ADAMS through U.S.-based straw donors, ADAMS’s overseas contributors defeated federal laws that serve to prevent foreign influence on U.S. elections. Wealthy individuals evaded laws designed to limit their power over elected officials by restricting the amount any one person can donate to a candidate. And businesses circumvented New York City’s ban on corporate contributions by funneling their donations through multiple employees, frustrating a law which seeks to reduce corporate power in politics. ADAMS increased his fundraising by accepting these concealed, illegal donations—at the cost of giving his secret patrons the undue influence over him that the law tries to prevent.”
“ADAMS compounded his gains from the straw contributions by using them to defraud New York City and steal public funds. New York City has a matching funds program that matches small-dollar contributions from individual City residents with up to eight times their amount in public funds, to give New Yorkers a greater voice in elections. ADAMS’s campaigns applied for matching funds based on known straw donations, fraudulently obtaining as much as $2,000 in public funds for each illegal contribution. ADAMS and those working at his direction falsely certified compliance with applicable campaign finance regulations despite ADAMS’s repeated acceptance of straw donations, relying on the concealed nature of these illegal contributions to falsely portray his campaigns as law-abiding. As a result of those false certifications, ADAMS’s 2021 mayoral campaign received more than $10,000,000 in public funds.”
1. Ben Max: What are the campaign finance matters included in the federal indictment of Mayor Eric Adams?
Amy Loprest: The indictment accuses Adams of soliciting and accepting illegal campaign contributions from straw donors, including some contributions whose true source was foreign nationals or corporations, neither of which is permitted. Federal law prohibits foreign contributions to campaigns for any office in the United States. Corporate contributions are prohibited by the New York City Campaign Finance Act.
2. Max: What are straw donors and why do they matter?
Loprest: Contributions from straw donors are contributions whose true monetary source is other than the reported contributor. The indictment alleges that Adams’ 2021 and 2025 campaigns for mayor reported contributions and claimed public matching funds for straw donor contributions. The indictment alleges that the true source of these contributions were foreign nationals, corporations, or others who sought influence over the candidate.
Candidates for New York City elective office are required to report details about every contribution they receive. Under the voluntary public matching funds program, contributions up to $250 from New York City residents are eligible to be matched with public funds at an 8:1 ratio. Thus, for example, a $100 contribution from a City resident could be worth a total of $900 to a campaign. Further, mayoral candidates in the program are subject to a contribution limit which in 2021 was $2,000. All candidates are prohibited from taking contributions from corporations.
Candidates opt to participate in the voluntary matching funds program by filing a certification through which they and their campaign treasurers agree to comply with the requirements of the Campaign Finance Act, City Charter, and the New York City Campaign Finance Board Rules. (For more information on how the public matching funds works, see the NYC Campaign Finance Board website.)
The Adams campaign received over $10 million in public funds across the 2021 primary and general elections. The indictment alleges (although the total amounts were a small percentage of the 2021 campaign’s fundraising) that the campaign “falsely certified compliance with applicable campaign finance regulations despite ADAMS’s repeated acceptance of straw donations, relying on the concealed nature of these illegal contributions to falsely portray his campaigns as law-abiding. As a result of those false certifications, ADAMS’s 2021 mayoral campaign received more than $10,000,000in public funds.”
The reason these straw donors matter is that they contravene the whole purpose of the public matching funds program. New York City’s nationally recognized small dollar matching funds program aims to amplify the voice of regular New Yorkers and ensure that they, not big moneyed interests, are the focus of elected officials. The program seeks to allow candidates who do not otherwise have access to big donors to compete effectively for New York City office. By hiding the source of contributions and breaking large and/or prohibited contributions into smaller amounts, straw donor schemes circumvent these intended purposes and game the system.
3. Max: Does this remind you of other cases or instances of alleged or confirmed city campaign finance violations? Are there other straw donor schemes that come to mind?
Loprest: There have been several high-profile criminal cases involving straw donors.
Then-City Council Member Sheldon Leffler was prosecuted and convicted in a scheme involving straw donors to his 2001 campaign for Queens Borough President. Campaign aides for then-Comptroller John Liu’s 2013 mayoral campaign were convicted for crimes involving straw donors, which cost the campaign its bid for potentially millions of dollars in public matching funds.
There have been other criminal prosecutions, including the recent indictment of the treasurer for Anthony Jones’ 2021 campaign for Brooklyn Borough President by the U.S. Attorney’s Office for the Eastern District of New York.
In addition to criminal prosecutions, the New York City Campaign Finance Board has assessed penalties against campaigns for violations relating to straw donors and required the repayment of public funds. These penalties have been assessed against campaigns who were involved in criminal prosecutions – Leffler’s campaign was assessed $89,500 in penalties and required to repay $296,04; Liu’s 2013 campaign was assessed $20,000.
There are other cases where there was no criminal prosecution where the Board has assessed penalties and required repayment or denied payment of public funds. These involved smaller amounts or lacked the level of evidence required for a criminal prosecution. For example, the CFB may notice a pattern of sequential money orders or suspicious handwriting patterns on contributions cards. After further investigation, the CFB has gathered evidence from contributors that they did not make the contributions. The CFB would not pay public funds on the suspicious contributions, or if they are a significant amount of the campaign’s funds, such as to compromise the entire fundraising, not pay any funds at all. The CFB may also assess civil penalties for reporting or documentation errors, misrepresentation or fraud. These can be assessed against the campaign because it is responsible for its fundraising and has certified the accuracy. However, there may not be sufficient evidence to hold any individual criminally liable under that higher burden of proof.
4. Max: What are the major types of campaign fundraising vetting that the CFB does during and after a campaign to ensure the integrity of the system?
Loprest: Before public matching funds are paid to campaigns, the CFB reviews contributions claimed for matching using the disclosure provided by campaigns and documentation supporting those contributions.
The documentation depends on the source of the contribution and can consist of copies of checks, copies of money orders, contribution cards attesting to the contribution signed by the contributor, or credit card processing documents.
Before the election, the CFB staff also reviews campaign disclosures and other bank records for potential violations of the Campaign Finance Act, the City Charter, and the Board’s Rules. After the election, the CFB’s audit process also ensures that public funds were spent properly and that campaigns adhered to the spending limit, among other laws and rules. (See questions 5 and 10 below for more information.)
5. Max: How does the CFB flag potential straw donors? What kind of leeway does a campaign have to address these issues since they may know nothing about an effort to falsify donations?
Loprest: The CFB looks for patterns in the reporting and documentation to flag potential straw donors. Examples of patterns can be groups of contributions on the same day from the same employer or suspicious documentation.
After each disclosure statement, the CFB sends campaigns a review of its findings which would include any flagged contributions. These findings can include individual contributions that the CFB indicates are not eligible to be matched with public money for a variety of reasons. They can also include groups of contributions that the CFB suspects have been raised and delivered to the campaign by someone who has not been reported as an intermediary (or “bundler”) as required.
Campaigns have the opportunity to respond to these findings. Responses can include further documentation, explanation, or in some cases the refunding of contributions to donors. Unresolved findings are included in the review for the next disclosure statement providing campaigns multiple opportunities to respond. This process is based on the assumption that most errors are inadvertent and is designed to ensure that campaign’s have sufficient opportunity to remedy these errors, as the vast majority of campaigns do.
6. Max: When would the CFB flag something for prosecutors?
Loprest: This is very case specific, but the CFB has a long history of both flagging issues for prosecutors and cooperating with criminal investigations that may have started with a different focus but have a campaign finance component. CFB staff have testified in criminal cases, like the Leffler and Liu staff cases, and have answered subpoenas.
7. Max: Why does it seem like this and other enforcement is at times left to the press and prosecutors to identify?
Loprest: The CFB does not publicize its ongoing reviews. It only makes public statements when public funds payment determinations are made and/or when the Board finds a violation and assesses a penalty after giving campaigns sufficient opportunity to address issues.
8. Max: There are ways in which this and other cases show that ‘the system’ (meaning CFB and beyond) is working to catch bad actors, but it seems like this is too late given the alleged impact on the 2021 election. How does that challenge get fixed or at least improved?
Loprest: One important aspect of the Campaign Finance Act is the requirement that the CFB review the work of the preceding election and make recommendations for changes to the law. The CFB has worked cooperatively with the City Council and other elected officials to make numerous improvements in the law over the years.
For example, the CFB recommended significantly lowering the contribution limits and increasing the matching funds available to candidates to ensure that small dollars and public funds comprise the majority of campaign funding. These recommendations were adopted by the 2018 Charter Revision Commission and later the City Council to create the program that exists today. These post-election reports are available on the CFB’s website.
9. Max: How are the CFB post-election audits conducted?
Loprest: The post-election audit starts with a request for documents from the campaign. Once a campaign responds, the CFB staff conducts an audit in accordance with generally accepted government auditing standards.
The CFB sends a draft audit report with findings and recommendations for corrective actions to the campaign. The campaign is given an opportunity to respond. The CFB reviews the response. If there are potential findings of violation and recommended penalties, the CFB staff sends the campaign a notice with the recommended violations and penalties. The recommended penalties are derived from publicly available penalty guidelines.
Campaigns, at this point, can choose to pursue a full administrative hearing under the City’s Administrative Procedure Act conducted by the Office of Administrative Trials and Hearings (OATH) or appear before the Campaign Finance Board. If a campaign chooses the latter, the CFB staff reviews the campaign’s response to the penalty notice and makes its recommendations to the Board, which are available to campaigns. Campaigns are invited to attend a public hearing after which the Board deliberates and finds violations and assesses penalties, if any.
This process is repeated for each campaign. It is a lengthy and rigorous process intended to protect taxpayers’ investment in the program. The CFB has taken steps over the years to streamline and improve the process. The audits for past elections are being conducted at the same time pre-election reviews are conducted for the upcoming elections.
10. Max: What has the CFB done to beef up its oversight?
Loprest: The CFB is continually engaged in improving the methods it uses to audit campaigns. While I was Executive Director, the CFB began a rebuilding of its legacy computer systems, increasing staffing levels, and reorganizing the way audits are performed.
11. Max: Are there parts of the city’s campaign finance laws that need to be rethought given this alleged abuse and other abuses?
Loprest: The provisions relating to fundraising disclosure are somewhat out of date with the way fundraising is conducted now. Before the rise of internet fundraising, people who bundled contributions and delivered them to campaigns (“intermediaries”) were critical sources of funds. Now a link can be created for any event and funds given directly to the campaign. It is less clear who is asking people to donate.
The Act’s disclosure provisions were created so not only could the public see who was directly contributing to a campaign but also those who helped solicit contributions – both groups perhaps seeking influence. The Act’s definitions of intermediaries and the disclosure requirements surrounding fundraising could be updated to better reflect the realities of modern fundraising so that the public continues to see who is seeking to influence candidates.
12. Max: What will the process be like for the CFB to decide if Adams’ 2021 campaign must pay back certain public matching money?
Loprest: The Adams 2021 campaign will follow the post-election audit process outlined above. The campaign was sent a draft audit report at the end of May which did not include any findings relating to the on-going investigation. (See Gothamist, July 31, 2024). The campaign has an opportunity to respond.
The Campaign Finance Act allows the Board to assess up to $10,000 per violation of the Act, although most penalties for routine violations are much lower. The CFB publishes penalty guidelines for each election upon which the CFB staff makes recommendations to the Board. The penalties are all based on the assumption that most violations of the Act and Board Rules are unintentional. You can see the CFB Staff’s Penalty Guidelines for the 2021 election here. In the most serious cases, the Board may find that a campaign has breached its certification and must repay all of the public funds received.
Given the timing, it is unlikely that any enforcement decision for the 2021 Adams campaign will be made before the decision about whether the 2025 Adams campaign has qualified for public matching funds.
13. Max: What will the process be like for the CFB to determine if Adams’ 2025 campaign will be punished in some way or its potential public matching funds withheld?
Loprest: The first public funds payment for the 2025 election is scheduled for December 15, 2024. Campaigns that have reached the threshold for public funds by the October 11, 2024 disclosure deadline and are otherwise in compliance with the law are eligible to receive public funds on that date. Frederick Schaffer, Chair of the Campaign Finance Board, said that the CFB will “review all relevant information, including but not limited to the indictment, in order to uphold our city’s campaign finance rules and protect taxpayer dollars.”
By: Ben Max (Ben is the Executive Editor and Program Director of the Center for New York City and State Law at New York Law School.)