Money For Nothing?

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Luana Malavolta, a dress shop owner and three-time candidate for public office, is tired of losing political races. When she ran for a Bronx City Council seat last year against Democratic incumbent Joel Rivera, Malavolta, who has been an active member of her community board and police precinct council in Belmont, took advantage of a publicly financed campaign matching-fund program. The matching funds are meant to help insurgents like herself be competitive against well-financed candidates.

But the public money didn’t particularly help Malavolta. In fact, she says, the matching-fund program was in many ways a burden. At one point, she decided to stop raising money because the sheer cost of complying with the rules was too high. “Getting matching funds is like running another business,” Malavolta says from her shop off Arthur Avenue. “You need to hire election lawyers, compliancy lawyers, accountants. And the deadlines? You can’t make the deadlines. It’s nearly impossible for community people to run in this town. I’m still not out of the woods.”

In 1998, the City Council voted to expand an existing matching-fund program to give insurgent candidates like Malavolta the financial firepower they need to compete against well-financed incumbents. The city’s Campaign Finance Board now offers a candidate $4 for every $1 raised privately. Its mantra: “Level the playing field.”

But after watching the program in action through two major campaign cycles, in 2001 and 2003, many officials and watchdogs are beginning to wonder if the program–which cost an estimated $5 million in 2003–is accomplishing that mission.

Even the board’s creators are incensed. Testifying at the board’s post-election hearing in December, founding member Frank Macchiarola, chair of the most recent City Charter Commission, called the program an “embarrassment of riches,” referring to reports of exploitation of the funds by candidates and the reliability with which incumbents are reelected.

Last year’s City Council race has been a particularly troublesome case study. All incumbents running to retain City Council seats were able to win their races, by margins of 77 to 93 percent. Match-ups were hardly competitive. Turnout was low, and complaints were high, particularly concerning dubious spending.

In response, the board has now offered the City Council what it calls a “sweeping” batch of legislative proposals to deal with a “wide swath” of problematic issues within the matching-fund program. Media coverage has focused on a proposed provision that would give a mayoral candidate facing a well-financed opponent an unprecedented 8-to-1 match–presumably to help a Democrat challenge Mayor Bloomberg in 2005. But other proposed revisions to the campaign finance program would also dramatically change the business of running City Council races.

To make council races more competitive, the board has proposed limiting each candidate at the beginning of an election cycle to 25 percent of the maximum public funds available. Anyone who wishes to receive more must then demonstrate that his or her opponents are spending hefty sums during the course of the campaign.

The board, which consists of three members appointed by the mayor and two by the City Council speaker, also wants self-financed candidates who don’t participate in the program to disclose their contributors on the board’s web site, just like those who participate. They want to put an end to matching funds for donations from vendors like printing shops, lawyers and consultants, who might benefit when each dollar they donate automatically results in four more for a client.

In a long shot, the Campaign Finance Board also wants to see radical action in the state legislature. Currently in New York State, self-financed candidates can receive contributions of up to $30,700 from any one individual. The board wants to decrease that to $2,750 for all candidates–the maximum amount participants in the matching funds program are currently allowed to raise from a contributor.

But the experiences of candidates like Malavolta suggest that tweaking the rules for the matching fund program won’t be enough to give challengers a break. When she testified before the board during its December hearing, Malavolta wanted to know: How could someone like her compete “on a level playing field” while her opponent Rivera and his team of lawyers were trying to knock her off the ballot? How could she run with the board freezing her payments while she was in court trying to defend her petition signatures?


At the December hearing, much of the testimony harkened back to a woollier time in city politics, complete with allegations of extortion, nepotism and fraud.

Felix Rosado, a former district leader in Harlem who ran against incumbent councilmember Phil Reed, was visibly shaken as he testified that one public official had “twisted” his arm over lunch to hire a particular consulting firm. While the Board appeared startled at this public disclosure, Rosado’s main concern was not the politics, but the money: By his account, the consultancy shop had waited until he received the second installment of his matching funds on September 5, then charged him roughly that amount.

The expense nearly cleaned out his primary campaign war chest, he complained to the board. “Oh, no,” responded board member Alfred Cerullo, while chairman Frederick A.O. Schwartz, Jr., worried aloud that the matching fund system could have inadvertently created an industry of reckless entrepreneurs. (The consultant Rosado used, Hank Sheinkopf, denies overcharging his client and claims he in fact gave Rosado some wiggle room on the payments because Sheinkopf didn’t want to jeopardize his race. “I can certainly understand if [Rosado] is frustrated,” Sheinkopf says. “But we need to get paid, too. We put out top product for him. He just didn’t raise enough money to compete.”)

Laura Altschuler, co-chair of the League of Women Voters, attested to her dismay about another phenomenon: family members getting paid high fees for campaign work. In Brooklyn’s race for slain councilmember James Davis’ seat, Conservative Party candidate Abraham Wasserman managed to muster just over 360 votes, and qualified for $62,700 in public payments in the process. But Wasserman, a Democrat who ran on the Conservative Party line, spent more than half his net expenditures ($25,033) on family members ($13,000).

“Everyone was involved,” Wasserman told City Limits. “It was a 24-hour operation.” The family members also donated $250 apiece to the campaign, as did consultants Mendel Mockin and Gary Tilzer, who received a combined $11,000 in fees.

While employing campaign contributors is not illegal nor in violation of any board regulation, it does raise the question of whether family members, confidants, consultants or vendors could donate $250 (the maximum donation the Board matches) and receive back $1,250–a lucrative, easy investment.

It’s not just longshots who are raising eyebrows with their spending. In her cakewalk race against attorney Michael Cohen on the Upper East Side, Councilmember Eva Moskowitz received $120,000 in matching funds. She proceeded to run costly television advertisements on NY1, a strategy many observers felt was used to boost her name recognition should she run for borough president in 2005. Moskowitz, who declined to comment on her campaign spending, also spent $14,627 to hire her husband, attorney Eric Grannis, as a campaign consultant and bookkeeper.

In the Bronx, meanwhile, records show Councilmember Larry Seabrook, who received $102,120 in matching funds, paid his brother Oliver $38,513 in consultancy fees. (Seabrook did not return calls for comment.)

But placing more stringent restrictions on candidates’ spending habits is not a panacea, says Gene Russianoff, senior attorney at the New York Public Interest Research Group. While the public may have an interest in placing more limits on spending, he says, the board must be careful not to discourage candidates from participating. And while payments to family members may seem outrageous, he says, a candidate’s campaign spending–especially in the matching fund program–should be an issue of “political domain,” something voters ought to issue a verdict on through their power to pull the lever.

But those voters generally have no way of knowing about suspicious spending, notes Michael Cohen’s campaign manager, Jerry O’Brien. By the time the Cohen campaign discovered the payments to Grannis, the election was only a few days away. Unless the race is unusually competitive, he says, or carries some intrigue like a murdered councilman, few media outlets are willing to pay attention.


In at least one way, existing limits on spending are already hobbling candidates. Malavolta’s problem–one echoed by many insurgents around the city–is that she couldn’t even access the matching-fund money when she needed it most, in the months leading up to the election.

Malavolta ran on the Conservative and Independence lines and received a match of more than $30,000, based on $8,000 in small donations. But she also went through the standard hazing rite of New York City politicians: Her opponent, Joel Rivera, took her to court to challenge her ballot-petition signatures. The Campaign Finance Board does not release funds if a candidate is tied up in court. As a result, Malavolta received the bulk of her money during the short space between the September primaries and November general election.

For his part, Rivera, the council’s 25-year-old majority leader, could not qualify for any matching funds this year because he still owes the board $56,245 in matching funds he received in 2001 and has not since accounted for. Chalking up the trouble to “inexperience,” Rivera simply says that “mistakes happen.”

The Campaign Finance Board contends that the blocking of matching funds during petition challenges would be less of a problem if New York City primaries were scheduled in June instead of September. Complaints like Malavolta’s are common, says Molly Watkins, press secretary for the board, but despite some lobbying efforts by Attorney General Eliot Spitzer and local civic groups to change primary day in Albany, the board and other reformers have been unsuccessful.

Because of the delays, in the end Malavolta couldn’t even spend a sizable chunk of the money she raised. After finally clearing her ballot signatures, Malavolta had just about a month to promote her campaign. She still has $5,000 left over–money she must return to the board. What does she have to show for it? A paltry 401 votes, compared to Rivera’s 5,585.

She won’t run again for office in the Bronx. “This is a game you can’t win,” she says. “It’s rigged.”

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