Five Years Removed from Mayoral Defeat, John Liu Looks for a Comeback in Queens

Five years ago, by the second weekend in September, John Liu was a dead man walking. Stained by two years of headlines about his mayoral campaign’s fundraising—culminating in two aides being convicted on federal charges—and denied the public matching funds that candidates thrive upon, he was an afterthought as the Democratic primary approached. When the votes were counted, he placed a distant fourth with 7 percent.

But Liu was alive and well last Friday, the final one before the September 13th Democratic party where he is challenging Sen. Tony Avella, a former member of the Independent Democratic Conference. Energetic and fit (he completed an Ironman Triathlon in 2016 at age 49), Liu stood on the causeway over the Long Island Railroad tracks at the Bayside station and greeted commuters on their way to catch the Manhattan-bound train.

The pace of the encounters moved in cycle with the arrival of the train. Once a train left, commuters sauntered on their way to the track to catch the next one. The platform grew more crowded. The pace quickened. Once the next train pulled in, there was no time for greetings — just a shout to hold the door as someone flew down the stairs to try to squeeze on.

Some of the passengers didn’t acknowledge Liu at all. Others smiled, said thank you, took his literature. A few shook hands. Occasionally someone shouted a word of encouragement or flashed a thumbs up. One gray-bearded man in a red cap said he was voting for the “real Democrat — Tony Avella!” Liu says the man and his declaration are a regular feature when he visits the Bayside station.

Neither issues nor the IDC dominate

The race for the Democratic nomination in the 11th district is not about issues, not in any direct way. By common acknowledgement, Liu and Avella agree on topics like reproductive rights, tenants rights, even the need to keep the specialized high-school test the way it is. Liu’s critique of Avella revolves around the argument that, as a member of the breakaway Independent Democratic Conference, the incumbent bolstered Republican control of the Senate and ensured that those issues were neglected. Avella argues that by joining an already controlling GOP majority in the Senate, IDC members were able to get at least some legislation passed and bring funding back to the district.

But it’s not clear the race is about the IDC, either. A Liu supporter who stops by the LIRR station to say hello has never heard of the conference. Liu never mentions it when he’s pressing the flesh on Friday—he says little about his opponent, and when he does mention him, merely quips “he’s been in too long” and “it’s time for a change.”

Instead of issues or the IDC, the race is about backstory. Liu emphasizes Avella’s longevity. A City Councilmember for two terms now in his eighth year as a state Senator—which, by Albany standards, is not an especially long stint—Avella is, in Liu’s telling, the man who ran too much. A one-time aide to mayors and legislators Avella twice ran unsuccessfully for the City Council before winning his seat there in 2001, sought but fell short of the mayoralty in 2009 and 2017, and ran for borough president in 2013 and lost.

Avella, for his part, has made ample mention of Liu’s “scandals.” When Liu’s campaign this year filed some of its first campaign finance reports late, Avella spokesman Jeff Frediani released a statement titled, “Scandal-Ridden John Liu Commits Another Board of Elections Violation,” that read: “While John Liu can claim that he is the ‘most thoroughly investigated candidate in New York City’ the fact still remains that he was fined $26,000 by the New York City Campaign Finance Board in 2017. If John Liu wants to be open and transparent and actually put past controversies behind him, it would be of great benefit to voters if he would release his campaign filings that are now days late.” (The campaign filings in question were filed.)

Later, Avella’s campaign issued a press release labeled: “Senator Tony Avella’s Campaign Blasts Scandal-Ridden John Liu for Support of Congestion Pricing,” where Frediani was quoted as saying: “Scandal-ridden John Liu should be ashamed of himself for supporting congestion pricing, which would raise fees and tolls on the residents of Northeast Queens.”

Avella’s team is not the only place where Liu’s past is cited as a negative. In endorsing Avella recently, the New York Post made reference to Liu’s earlier troubles, and the Epoch Times, a newspaper controlled by supporters of the Falun Gong movement that has long been hostile to Liu, openly refers to him a “scandal starred.”

It’s “scandals” multiple because, in addition to the campaign finance issues, Liu was for years a tabloid target for his campaign’s refusal to pay nearly $600,000 in fines from the sanitation department for illegally posting campaign material in his 2009 race for city comptroller. Liu contends the issue was sensationalized and, while he still disputes the charges, says his campaign paid what money it had left to resolve the charges years ago.

Straw donors and denied funds

The campaign finance scandal was more serious. It involved the use of “straw donors” — people who would take money from other people and present it to the campaign as straw donors’ own. Straw donors conceal the true source of campaign money. Even more problematic, under New York City’s public financing system, straw donors could allow a campaign to receive more public financing than would otherwise be possible.

For candidates who agree by spending limits and qualify for public financing, the Campaign Finance Board matches a six-to-one ratio the first $175 of any individual donations from city residents. In other words, if you send Candidate A a check for $1,750, the city will take the first $175 and multiply it by six, then send the candidate a payment of $1,050. Together, the donation generates $2,800 for that campaign. But if you instead—fraudulently—split your $1,750 among 10 friends and they each donate $175 to the candidate, the city will match each of those at 6:1, generating a total donation of $12,250.

The accusation against Liu’s 2013 campaign—first made in a 2011 New York Times article that triggered a precipitous fall in Liu’s approval ratings—was that it encouraged donors to do just that, and in May 2013 a jury found that Jenny Hou, the campaign treasurer, and Oliver Pan, a fundraiser, had used straw donors to try to defraud the city.

But while the Times reporting on Liu and a later investigation by the CFB hinted at a wider problem, the federal case was fairly narrow. Launched in 2008 or 2009, the federal probe targeted Liu with wiretaps and surveillance, according to court documents. When those tactics failed to produce actionable evidence, an undercover operative was sent in to discuss an illegal scheme with Pan, whom the government later admitted offered at least some resistance to the idea of participating. Pan did participate, however. Hou also used straw donors.

According to the prosecutors, the straw donations that evidence linked to Hou and Pan totaled 49 contributions of a combined $29,200 in value, which might have triggered $15,000 to $40,000 in city matching funds. Liu’s 2013 campaign raised more than $3.5 million. Prosecution filings in the case allege that other Liu staffers also engaged in the scheme, but no further charges were brought.

Liu himself was never charged with wrongdoing. According to defense papers submitted at the trial, FBI agents tried for two months in 2011 to get Pan to inform on Liu, but he refused. Pan did cooperate in other ways but was unable to gather evidence of wrongdoing by other figures in Liu’s campaign, according to those documents.

The sentences imposed on Liu’s staffers suggest a crime of modest severity. Federal guidelines sentencing guidelines indicated a sentence of 18 to 24 months for Hou, the government asked for 24 to 30 months and the judge imposed 10 months. For Pan, the guides recommended four to 10 months, prosecutors asked for 10 to 14 months and Pan got four months. Both were sentenced to three years probation after release.

With the federal convictions in the air as it neared its decision over public financing in the 2013 race, the CFB hired a private investigation firm to check Liu out. It identified 85 potentially problematic contributions, reported interviews from 22 of the donors and found three cases of people who said they had been reimbursed for their donation to Liu. The report, by Thacher Associates, found incorrect address information for some of the other donors, and said it thought some of the small number of contributions it had examined appeared suspicious. Given that Liu’s 2013 campaign took in more than 9,000 individual donations, the scope of the Thacher investigation—which was operating on a tight timetable—was limited.

Citing the convictions, the Thatcher report and the continued involvement in his campaign of other aides allegedly linked to the straw donor scheme, the CFB voted in August 2013 to deny any matching funds to Liu, effectively ending his campaign by stripping away the key financial weapon that all candidates deploy over a campaign’s final days. By comparison, Liu’s primary rivals Bill Thompson ($1.9 million) and Anthony Weiner ($1.5 million) cashed in on matching funds.

Founded in the wake of a massive 1980s corruption scandal and charged with protecting the public dime, the CFB tends to err on the side of caution. In 2005, the board seriously impeded Gifford Miller’s mayoral campaign with a last-minute ruling on petitioning expenses.

In the end, Liu’s 2013 campaign was fined $26,059 by the CFB, including a $20,000 fine for the violations exposed by the federal case against Hou and Pan. That fine was more than what the campaigns of Joe Lhota ($2,846), John Catsimatidis ($10,818) or Christine Quinn ($13,611) had to pay but significantly short of what the campaign levied against fellow ’13 mayoral candidates Bill Thompson ($85,350), Anthony Weiner ($64,956) or Bill de Blasio ($47,778). Because some of those candidates received public matching funds or ran through the general election, they had more exposure than Liu to potential penalties. The CFB also found Liu in breach of certification—a finding that, while not attached to a specific monetary fine, is considered most serious.

Liu sued the CFB in 2014 over its impact on his mayoral run and the structure of its rules, which he argued were too broad and vague. The case was thrown out of court—in part because the CFB altered one of those very rules. Hou and Pan appealed their verdicts but lost. Liu says he has no contact with Pan but sees Hou regularly; he served as a ceremonial officiant at her wedding last year, he says.

The former comptroller depicts the federal investigation as a witch hunt that failed to detect criminality but managed to torpedo his mayoral hopes.”I am scandal-scarred,” he says — meaning he has been harmed by years of assertions that he says have no facts behind them.

“Years of headlines saying that I accepted illegal contributions. The problem is, it was kind of true. I did accept illegal contributions because this undercover sting operation successfully convinced my campaign that those contributions were legitimate,” Liu says. He acknowledges that some of the donations cited in the federal case were not from the undercover. But he asks, “Why would I do anything like that when the fundraising is not a hard thing for me?”

Indeed, despite a late start, Liu has raised $255,000 for his Senate run in 2018.

A rematch

Liu argues that Avella has a campaign finance problem of his own: The many thousands of dollars Avella accepted from the Senate Independent Campaign Committee, which a state judge ruled was illegally constituted as an appendage of the IDC.

Avella’s claim to fame on the Council was that he refused to accept the salary supplement, or “lulu,” given to committee chairs. As a Councilmember, he battled overdevelopment and stood with homeless advocates pressing for the city to take bolder steps to get property owners to turn vacant land into housing. In Albany, Avella has been a trusted ally of homeowners and small businesses, sometimes to the detriment of larger progressive causes: He has opposed a bike lane, congestion pricing and the plastic-bag tax and resisted efforts by the city to install bioswales that capture stormwater because they could damage sidewalks.

Liu and Avella faced off in a 2014 primary that Avella won 53 percent to 47 percent. That was when the CFB scandal was fresh in people’s minds. Five years later, Liu says he rarely is asked about the ’13 race when going door to door or pressing flesh at a train station—although, given the succession of other and newer scandals coming out of Albany, he says he does encounter “a fair amount of cynicism.”