(Bloomberg) -- When New York Mayor Eric Adams was indicted on federal corruption charges in September, it thrust the city’s generous campaign matching-funds program into the spotlight.
Under the system, New York matches every $1 raised from a city resident by a candidate for citywide office with $8 of taxpayer-funded money, with certain limitations. While individual donors are allowed to contribute up to $2,100, the match applies only to the first $250 of any donation, meaning it tops out at $2,000.
The program is designed to encourage public participation in the election process and make candidates less dependent on big donors. But critics say it is ripe for abuse. In recent years, it’s been tied to several criminal cases and allegations of fraud.
In the Adams indictment, authorities allege that his mayoral campaign received public matching funds based in part on straw donations, meaning someone who gave money was later reimbursed. Federal prosecutors say the Adams mayoral campaign received a little more than $10 million in public money overall.
Here’s what to know about the program:
What are the origins of the program?
The New York City Campaign Finance Board was founded in 1988 to limit the influence of private money in the political process following a series of corruption scandals. It started out by matching contributions from residents at a rate of $1 to $1, up to the first $1,000 of a donation. In the years that followed, the ratio was raised periodically until 2018, when New York City voters approved the current 8-to-1 rate. The 2021 election was the first in which New York City limited individual donations in the mayoral race to a maximum of $2,100 (and just $400 for those with business before the city), while still matching funds for donations by residents of up to $250 at the 8-to-1 rate.
What are the rules?
The matching-funds program is available for any candidate running for municipal office, including mayor, comptroller and City Council member. All they have to do is collect a minimum number of contributions above $10 from the area they seek to represent and raise a certain amount of money. Mayoral candidates, for example, must raise at least $250,000 from 1,000 contributors or more. Then the candidate must agree to, and comply with, the board’s rules, be on the ballot with at least one opponent, and file a personal financial disclosure with the city’s Conflicts of Interest Board.
What are the arguments for the program?
The public funds program is supposed to empower candidates who wouldn’t otherwise be able to afford to run for office or don’t have access to wealthy contributors.
And it’s meant to benefit New York residents by encouraging candidates to engage with them and listen to their concerns instead of focusing on raising money from deep-pocketed donors from outside their district. When candidates have to interact with as many people as possible, they tend to visit “more diverse neighborhoods, places that they may not have gone before,” says Brendan Glavin, deputy research director of OpenSecrets, a nonprofit that studies the role of money in politics.
What are the arguments against the program?
For one thing, it’s expensive for taxpayers. The New York’s Independent Budget Office reported that the city spent $127 million in public matching funds in the 2021 election cycle, roughly four times as much as the average amount disbursed in each of the previous five election cycles. Mayoral candidates got more than a third of the year’s public campaign funds.
Another complaint is that it opens the door to fraud — for example, claims of contributions from people who don’t exist or straw donations. “The opportunity to take advantage of and cheat the system is there,” Glavin said.
How did the Adams campaign allegedly break the rules?
The mayor is accused of accepting improper benefits in the course of his career and of taking straw donations for his 2021 campaign. Some of the contributions he received were matched by the maximum $2,000 in public funds, including some that came from foreign officials, according to the indictment.
In one instance, federal investigators allege, a businessman who operated a city construction company instructed four of his employees to donate $2,000 each to Adams’ 2021 campaign and reimbursed them later. Adams requested — and was granted — matches for those donations, the indictment says. As mayor, Adams allegedly helped the businessman resolve some issues with the city’s Buildings Department.
A different businessman, a prominent member of the Turkish community, allegedly gave 10 employees $1,250 each for Adams’ campaign after the mayor explained the matching-funds program to him over dinner. The campaign then requested matches for eight of the contributions, according to the indictment.
In the course of the 2021 campaign cycle, Adams raised more than $19 million for his campaign, about $10 million of which was from public matching funds, the US claims.
Adams’ attorney Alex Spiro said the 2021 campaign “requested funds on only $24,000 of alleged ‘straw contributions’ and received matching funds on only $18,000 worth of contributions.” He accused the prosecution of intentional misdirection in a presentation Sept. 30.
What are the possible consequences?
Some are already calling for Adams to be disqualified from the matching program before the June 2025 Democratic mayoral primary. City Council Member Lincoln Restler sent the Campaign Finance Board a letter asking that it stop providing the mayor public funds and that it claw back some of the public funds he received. While the city’s campaign-finance program requires that all candidates undergo post-election audits, those can be lengthy. The board still hasn’t finalized its audit of Adams’ 2021 campaign. “It is critical that the campaign of Eric Adams is held publicly accountable under our campaign finance law,” Restler wrote in the letter.
If the city’s public funding program is abused, the Campaign Finance Board has the power to stop matching donations for some candidates. Circumstances where they may halt funding include if a candidate has committed fraud while participating in the program or if there is reason to believe that the candidate broke the law.
The board said it will review relevant information, including Adams’ indictment, “in order to uphold our city’s campaign finance rules and protect taxpayer dollars.” It hasn’t announced whether it will keep matching donations for the mayor’s campaign for reelection in 2025.
Has the system been abused before?
Yes, according to state and federal authorities. Last year, six people were indicted by the Manhattan District Attorney’s Office for conspiring in an alleged fraud scheme tied to Adams’ 2021 campaign. They were charged with illegally structuring contributions to maximize the amount of additional money gained through the program.
Dwayne Montgomery and Shamsuddin Riza, who owned companies that were hoping to do business with the city, allegedly organized fundraisers for Adams and recruited straw donors, reimbursing them after they made contributions, according to the indictment.
In 2022, New York’s then-Lieutenant Governor Brian Benjamin resigned after he was indicted by federal prosecutors in an alleged straw-donor scheme to benefit a previous campaign for city comptroller. A federal judge dismissed the case in December of that year, but the dismissal was reversed by an appeals court in March of this year.
Earlier this year, Hui Qin, a Chinese billionaire, pleaded guilty to attempting to funnel straw donations to multiple political candidates, including Adams, according to the Eastern District US Attorney’s office.
On Oct. 2, the campaign treasurer for a 2021 candidate for Brooklyn borough president was charged with wire fraud in connection with her alleged attempt to illegally obtain funds from the city’s Campaign Finance Board. Erlene King allegedly tried to get $400,000 in matching funds after receiving money from straw donors who either didn’t personally fund the contributions or were later reimbursed, according to the Eastern District US Attorney’s office. The board ultimately determined that the campaign submitted fake records and didn’t pay out any matching funds. While her court documents don’t name what candidate she raised funds for, records show that King worked for Anthony Jones, who didn’t win the election.
--With assistance from Laura Nahmias.
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