October 27, 1998

Many Donors to Pataki Do State Business

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    In his quest for another term, Gov. George E. Pataki and his fellow Republicans have mounted the most successful fund-raising operation in New York history, drawing support from thousands of donors, many of whom share a common trait: they do business with the state.

    Pataki and the Republican State Committee have collected more than $33 million since 1995, helping him ward off some formidable would-be challengers and allowing him to spend well over $1 million a week in the final stretch of the campaign.

    Millions of dollars came from donors with specific interests in action by the sprawling state government, from regulatory changes on issues like rent laws and utility rates, to consulting contracts and construction projects worth as much as tens of millions of dollars each.

    In many cases, the Pataki campaign or the party solicited donations around the same time that contributors had matters before the Pataki administration, according to interviews and records.

    While some of these companies and individuals have done business with the state for years and have contributed to whoever is in power, Pataki has attracted more money from a wider spectrum of businesses, according to an analysis of campaign finance records. And many began giving large amounts only when the state was making decisions important to their bottom lines.

    Bell Atlantic contributed $45,000 just as it sought approval to expand. Developers gave more than $400,000 while they were competing to buy the site of the New York Coliseum in Manhattan. And a consulting firm that won a $15 million state contract sent three donations totaling $50,000.

    One example is a Long Island insurance conglomerate called the Robert Plan, which in July 1997 became one of the biggest backers of the Republican State Committee in recent years, giving $100,900.

    Less then two months later, the State Insurance Department agreed to transfer control of most of the assets of two nearly bankrupt insurance companies in Binghamton, N.Y., to the Robert Plan, giving it 23,000 new policies and an outpost in upstate New York. The department and the conglomerate said the contributions -- the first and only ones it has made to the campaign or party in Pataki's term -- had nothing to do with the arrangement.

    But that set of transactions, and others like it, shows how the Pataki campaign and the Republican fund-raising apparatus have benefited both from the powers of incumbency and the state's relatively weak campaign finance laws.

    Compared with many other states, New York has high contribution limits and no constraints on who can give to candidates. The disclosure rules are lax -- the Pataki campaign has often released lists of contributors in tiny type and alphabetized by first name, making analyzing the records difficult -- and the loopholes are easily exploited. There is little enforcement of the laws.

    Earlier this month, Pataki described the state's campaign finance system as "dreadful," but he did not offer any proposal to change it.

    He and his campaign aides declined to be interviewed for this article. In response to questions, a spokesman for the campaign, Michael Marr, read a one-sentence statement: "These reckless insinuations are the product of an overactive imagination."

    Pataki's aides have previously defended his fund-raising, saying no one contributes because they are pressured or receive favors. The aides say donors are motivated by their support for his policies on issues like crime, welfare and the economy. They also point out that people with no interests before the state have given millions of dollars.

    In the 1994 election campaign, the most expensive in the state's history, Pataki raised nearly $15 million, about $3 million more than the Democratic incumbent, Gov. Mario M. Cuomo. Pataki has collected more than $20 million for his current campaign. His Democratic opponent, Peter F. Vallone, the New York City Council Speaker, has taken in less than $6 million, most of which he spent in the primary campaign.

    Pataki's only rival in campaign spending is the Independence Party candidate, B. Thomas Golisano, a businessman from Rochester who has vowed to pour $20 million of his own money into the race.

    It is legal for Pataki and other candidates to accept money from these donors as long as there is not a specific trading of government actions for contributions. But the practice, while widespread, has stirred criticism in recent years from advocacy groups, which say the timing of these donations is often questionable.

    In the case of the Robert Plan, the party received a $69,900 donation from the conglomerate's president, Robert Wallach, on July 3, 1997, the same day it got $31,000 from the Robert Plan. Two months later, after long negotiations, Pataki announced the transfer of business to the Robert Plan.

    The State Insurance Superintendent, Neil D. Levin, said in an interview that the department did not know about the contributions. "That in no way was discussed or factored in," he said. He said an outside consultant helped to manage the deal, which was approved by a state judge. He said no one else expressed interest in the two companies.

    Under the deal, the Robert Plan assumed most of the policies held by two nearly bankrupt companies, Home Mutual and New York Merchant Bakers, after the state determined that their collapse would harm policyholders and took control of the companies.

    In return for getting the new policies, the Robert Plan, based in Bethpage, N.Y., promised to pay some of the companies' debts and keep most premiums level for a year.

    John Reiersen, president of Eagle Insurance, the subsidiary of the Robert Plan that absorbed the other companies, said the contributions did not play a role. "There was not any particular quid pro quo here," he said.

    For companies that are heavily regulated, gaining a favorable ruling from the state administration can have a sharp effect on revenues.

    Last year, two of the region's largest communications companies, Bell Atlantic and Cablevision Systems, asked the State Public Service Commission to approve important expansion plans. In both instances, the companies applied around the time that they or their executives donated large amounts for the first time to the Pataki campaign or the party, according to records.

    One plan involved the sale of cable systems. On June 9, 1997, Cablevision announced that it was acquiring several cable systems in New York from Tele-Communications Inc., which in turn received 33 percent of Cablevision. Some consumer advocates charged that TCI and Cablevision were forming an illegal alliance. Nine days later, the state party received a total of $45,000 from three members of the Dolan family, which controls Cablevision. The plan was approved in November 1997.

    The Dolans had not donated before during Pataki's term and Cablevision previously had given a total of $2,600 to his campaign and the party. Charles Schueler, a spokesman for Cablevision, said the Dolans had contributed at a long-scheduled fund-raising event. "Their participation was not related to any business matter, but an expression of support for Governor Pataki and his economic policies," he said.

    In a statement, David Flanagan, a spokesman for the Public Service Commission, said approval of the Cablevision plan was routine. "The application was subject to full public scrutiny before it reached the commission for a decision," he said.

    Bell Atlantic went to the state seeking permission to offer long-distance service in New York, a move that it said would offer consumers more choices. Long-distance companies objected.

    A few weeks after Bell Atlantic filed with the commission in November, the Pataki campaign, while not mentioning the pending state decision, asked for a donation, said Paul A. Crotty, a group president at Bell Atlantic. On Dec. 12, 1997, the campaign received $25,000 from the company and $20,000 from Ivan G. Seidenberg, its chief executive.

    "We didn't do it before because we hadn't been asked before," Crotty said. He denied a link between the donations and the commission, saying "Governor Pataki has been pretty good to any company that is like Bell Atlantic."

    Flanagan emphasized that the commission set rigorous conditions for Bell Atlantic to offer long-distance service, which the company is now trying to meet.

    Developers have been another major source of contributions, as they have been for politicians of both major parties.

    One of the largest development projects handled by Pataki administration was the sale of the New York Coliseum, perhaps the most coveted development site in Manhattan.

    By the time the state awarded the project this summer to a partnership of the Related Companies and Time Warner, the nine development teams that had bid, as well as their principals, had contributed a total of more than $400,000 to the Pataki campaign and the party, records show.

    An executive on one of the losing development teams said officials of the Pataki campaign and the party often solicited all nine teams, particularly the five finalists. The Coliseum was not mentioned in these requests for money, but the context was understood, the executive said.

    "There was such a huge amount of pressure on all of these guys," said the executive, speaking on the condition of anonymity. "The unsaid dictum was that if you do business with the government, you had better support your government."

    The state picked the Related Companies and Time Warner in July 1998. On May 18, the Republican State Committee received $10,000 from Related. On June 9, it received $50,000 from the Time Warner parent corporation, the first time it had given to either the Governor or the state party.

    Edward Adler, a spokesman for Time Warner, said, "The notion that we gave the money in exchange for anything to do with the Coliseum project is ridiculous." State officials denied that there was any link.

    But the Coliseum bidders were not the biggest supporters in the real estate industry. Landlords lobbying to end rent regulations were.

    Since 1995, the Rent Stabilization Association, the landlords' group, and its officers have given a total of nearly $1 million. Pataki has been more open to changing the rent rules than his predecessors, though he fell short of fulfilling the hopes of landlord groups last year when he brokered a compromise with the Democrats that left the system of rent regulations largely in place.

    The pattern of state action and political contributions is highlighted in a consulting contract awarded to the firm of Deloitte & Touche.

    In 1996 and 1997, Deloitte & Touche was one of three consulting firms seeking a $15 million contract to improve a state health care and nutrition program. During the bidding, it donated $25,000 to the party. In the two months after the firm won in February 1998, it contributed $15,000 more to the party and $10,000 to the Pataki campaign. Before the bidding, the firm had given a total of $4,000. The two other firms made no contributions, records show.

    Robert Hinckley, a spokesman for the State Health Department, said Deloitte & Touche received the project because it had the lowest bid and the best application. Deloitte & Touche said its donations were "unrelated to the work."

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