The New York Law Journal by Daniel Wise - May 5, 2009
No matter how Manhattan Surrogate-elect Nora S. Anderson and her financial backer Seth Rubenstein try to frame their efforts to pump $250,000 into a hard-fought three-way race for the Democratic nomination last year, their conduct was illegal, the Manhattan District Attorney's Office contends in a 75-page brief opposing the defendants' motion to dismiss the 10-count indictment against them. Ms. Anderson and Mr. Rubenstein "evaded" campaign contribution limits by "illegally obtaining massive amounts of funds" at a critical juncture in the 2008 primary and then "lying about it" in required financial disclosure reports, Assistant District Attorney Daniel G. Cort wrote in the brief. Ms. Anderson, 56, who had been chief clerk of the Manhattan Surrogate's Court for three years, worked in Mr. Rubenstein's Brooklyn-based law office for nine years before she mounted the campaign for the $136,700 a year surrogate's post. Mr. Rubenstein, 81, has been one of the stalwarts of the city's trust and estates bar. After the filing of the indictment, the Court of Appeals suspended Ms. Anderson with pay before she was slated to take office on Jan. 1. Some key facts in the case are not in dispute. In the month before the Sept. 9 primary Mr. Rubenstein twice transferred funds into Ms. Anderson's personal accounts - $100,000 on Aug. 12 and $150,000 on Aug. 26. Ms. Anderson in turn donated $100,000 to her campaign on Aug. 19 and loaned her campaign $150,000 on Aug. 26, the same day she received the funds.
Both sides agree that Mr. Rubenstein, when questioned by investigators, responded that he had transferred the disputed funds to Ms. Anderson because he could not contribute the money to her "directly." From those facts, the two sides drew opposite conclusions, with the defendants contending that their conduct was legal and the prosecution that it was not. The defense characterizes the transfers to Ms. Anderson as gifts while the prosecution categorizes them as campaign contributions. Under state Election Law, candidates are allowed to contribute unlimited amounts to their campaigns. The maximum that a supporter like Mr. Rubenstein can contribute to a county-wide primary in Manhattan is approximately $33,000. Earlier in the campaign, Mr. Rubenstein had contributed $25,000. Any amount loaned to the campaign by Mr. Rubenstein would be counted toward his contribution limit if the loan was not paid before the primary. The defendants, who adopted each others' arguments, contended there is no requirement in New York state law that candidates for office disclose the source of campaign contribution made through intermediaries. The two defendants' briefs totaled 65 pages.
The defendants analogize their fundraising tactics to a device that has long been used in New York to allow individuals who have contributed the maximum allowed by law to continue to make contributions by funneling funds through limited liability corporations. Not only has the LLC device long been long used in New York, but the Legislature has repeatedly "refused to outlaw" it even when LLCs are set up with no "purpose" other than as a conduit for campaign funds, the defendants contended (NYLJ, April 1).
Under state law, the defendants pointed out in their briefs, there is no limit to the number of LLCs a campaign donor may set up, and donors may contribute as much as $5,000 to each LLC they establish. The prosecution, however, disputed the analogy and the contention that state law does not require the identification of the true source of campaign contributions. Election Law §14-120(1) makes it a misdemeanor to fail to disclose "the true name" of a contributor, Mr. Cort wrote. Similarly, he added, Election Law §14-126(3) makes the acceptance of contributions in excess of statutory limits a misdemeanor. Under the defendants' interpretation, Mr. Cort contended, those two sections of the law would be "eviscerated." It is not "reasonable," he added, to interpret the Election Law as allowing "one fabulously wealthy person" to use others as "conduits to funnel money" to a preferred candidate. That would permit the wealthy to conceal their identities and "the deliberately and willfully circuitous and deceptive course the money took," he wrote.
Effect of 1977 Case Disputed
The prosecution also took aim at the defendants' argument that a 1977 precedent from the Court of Appeals, involving former Assembly Speaker and Brooklyn Democratic leader Stanley Steingut, requires dismissal of all but two counts of the indictment. For a district attorney to have jurisdiction to bring charges where no acts related to a crime occurred within the county where the prosecutor was elected, the prosecution must demonstrate that the crime had "a particular effect" within the county, Criminal Procedure Law §20.40(1)(a) and (b). Two of the 10 counts in the indictment stemmed from the defendants' filing of required disclosure statements with the New York City Board of Elections, which is based in Manhattan, and as to those counts jurisdiction was not challenged.
As for the other eight counts, the defense contended they must be dismissed under the authority of Steingut v. Gold, 42 NY2d 311. Mr. Steingut was prosecuted in Brooklyn because he allegedly had offered, during a meeting in Manhattan, to appoint a businessman to a public office if the businessman would arrange a fundraiser for Mr. Steingut's son, who was running for an at-large council seat from Brooklyn. The Court found that all the acts by Mr. Steingut that related to the alleged crime had occurred in Manhattan, and they had no "particular effect" in Brooklyn. Ms. Anderson and Mr. Rubenstein contend that the facts of Steingut are a mirror image of their own, in that the relevant acts occurred in Brooklyn, where Ms. Anderson's campaign headquarters were located in Mr. Rubenstein's office, and the alleged effect was in Manhattan. In opposition, the prosecution argued, Steingut is inapplicable. There was "no corruption" of an election in Brooklyn, Mr. Cort wrote, because the holding of a fundraising dinner at issue in Steingut "is not improper and would not taint an election." Also, the prosecution argued that, unlike a Manhattan surrogate, a city councilman has powers that apply to all five boroughs. By contrast a surrogate in Manhattan is empowered to deal only with the affairs of those who either die in Manhattan or leave property there.
The harm to the administration of justice in a specific county's court is the type of "concrete and identifiable injury" the "particular effect" doctrine was designed to allow a county to redress, the prosecution wrote, despite the lack of a criminal action within its borders. "Ironically," Mr. Cort wrote, the defendants' position would "strip the only county" that their conduct harmed "simply because they stayed on the other side of the river when they committed their crimes." The dismissal motion is expected to be argued on May 22, the next time the parties are due in court before Acting Supreme Court Justice Michael J. Obus, who is presiding over the case. Justice Obus is also the administrative judge in Manhattan for the Supreme Court's Criminal Term. Ms. Anderson won the 2008 primary by taking 48 percent of the 55,000 votes cast. Her two rivals were Manhattan Supreme Court Justice Milton A. Tingling and John J. Reddy, counsel to the public administrator in Manhattan. Both Ms. Anderson and Mr. Rubenstein face a maximum of 1 1/3 to four years in prison if convicted on any of the top six counts of the indictment, all Class E felonies. The remaining four counts are misdemeanors.