Did you say "slush fund"?

City Council member Larry Seabrook was indicted earlier this week for money laundering, extortion, and fraud, and the indictment revealed that he got a subcontract for Yankee Stadium awarded to a Bronx boiler manufacturer not on the original bidder list. (The New York Times called the manufacturer a "close associate" of his). Under pressure to work with local businesses, the manufacturer was awarded the job even though its bid was $13,000 higher than the low bid. Allegedly, Seabrook then got the manufacturer to pay him $50,000--with most of the payments going to shady community organizations that he controlled. Seabrook, who never disclosed his relationship to those community groups, also used them to funnel hundreds of thousands of dollars in City Council discretionary funds to himself and his family.

City Comptroller John Liu is now pressing for changes to the development approval process. Liu called the New York City CBAs an "embarrassment," and said that standards need to be created to regulate these deals:

From Atlantic Yards to Yankee Stadium to the Columbia University expansion, the public has seen a string of broken promises to communities and questionable involvement by some government officials. Furthermore, an additional layer of unpredictability confronts developers when they engage in private negotiations over benefits associated with their projects. In fact, studies have singled out New York City's community benefit agreements as examples of what not to do.

He's setting up a task force to propose best practices, and he's also going to look at the standards for Industrial Development Agencies, which, in New York, exist mainly to channel subsidies to developers. As Liu explains, individual projects are often worthwhile and deserving of public funds, but a clear process is needed to define priorities for the distribution of scarce subsidies.

The Atlantic Yards Report points out the Seabrook scandal raises questions about the Atlantic Yards CBA:

Most of the signatories of the AY Community Benefits Agreement did not exist before the project arose, and all are funded by the developer, Forest City Ratner's MaryAnne Gilmartin finally acknowledged last July. . . .

One of the CBA signatories, ACORN, got a $1.5 million loan/bailout from the developer. Another, the "dubious nonprofit" Brooklyn Endeavor Experience, has spent most of its funding on pest management at its building, First Atlantic Terminal, even though "such tasks are not really part of BEE's mandate". Meanwhile, Darryl Greene, the subject of an intense controversy regarding a deal for a video casino, also has ties to the CBA. "An RFP for an Independent Compliance Monitor was issued by Greene's Darman Group in March 2007, nearly three years ago, but no such position was ever announced."

New York City has had trouble with development amenities for a long time, so the problems with the Atlantic Yards, Yankee Stadium, and Columbia CBAs are in some ways unsurprising. A 1988 report from the Association of the Bar of the City of New York recommended doing away with CBA-type deals:

While at first blush it appears useful to require developers to meet community needs by providing amenities of various sorts in return for project approvals, in a city chronically short of funds for public purposes, the practice of requiring them to build amenities unrelated to needs created by their project has undesirable consequences for government and should be discontinued.

Requirements to provide amenities unrelated to project needs at bottom constitute taxes, which are not levied evenhandedly on the basis of neutral principles but are required from developers on a case by case basis. These ad hoc requirements cast government in an unjust and therefor untenable role.

Such a practice also tends to undercut the decision making process. Government decision makers can be induced to approve projects in order to obtain amenities unrelated to the project's needs, rather than from an examination of projects solely on their merits. The use of such amenities thus tends to have a distorting effect of decision making.

They also distort the city's priorities and capital planning. While such amenities unrelated to project needs seem attractive to meet such needs are those for senior citizen housing, parks and libraries in some communities, these may or may not be the city's greatest priorities. Priorities should be worked out carefully on a city-wide basis, not ad hoc on a community basis. Capital planning should also not be ad hoc.

Short term considerations should not overwhelm sound principles, particularly in New York City, which has spent years since the fiscal crisis in eliminating past practices that represented an accumulation of such gimmicks.

The requirement of building unrelated amenities also can make the city less attractive for developers. They thus can interfere with long term objectives of promoting rational development in the city.

While developers perhaps can adjust, the practice threatens to corrode the integrity of city government and its zoning and land use laws. That price is too high for any of the advantages claimed.

Good luck Mr. Liu.

City of Chicago hires Washington DC Solo Lawyer to Argue Second Amendment Case

Chicago's deputy corporation counsel in charge of appeals, Benna Solomon, has a schedule that is crowded with U.S. Supreme Court arguments.  So much so, she recently went beyond the city's law department to hire Washington DC solo appeals specialist James A. Feldman; a rare engagement, she says.

At stake is the oral argument scheduled before the high court on March 2 in the Second Amendment case of McDonald v City of Chicago.  The case, a subject of a prior Lawblogger post, tests a strict Chicago handgun ordinance in the context of the Second Amendment's applicability to the states via the Due Process clause.

The McDonald case has received much attention.  The Supreme Court's decision will be greatly anticipated by both opponents and proponents of the right to bear arms set forth in the Second Amendment to the United States Constitution.

The reason Chicago's Ms Solomon opted out of arguing the case herself is because she will be appearing in the Supreme Court the week before, to argue another case on behalf of the city.  She therefore looked to Feldman, who had done previous work with the city, and who's reputation as an experienced oral advocate at the highest level apparently preceded him.

Both Solomon and Feldman clerked at the high court for Supreme Court justices; Solomon with Justice Byron White, Feldman with Justice William J. Brennan, Jr.  Feldman also argued cases before the Court during his long tenure with the United States Solicitor General; the litigator for the United States Government.

Arguing on the other side will be Alan Gura, also of Washington DC, who won the District of Columbia vs Heller case on behalf of gun advocates.  Because it arose in the District, Heller involved federal gun laws and the decision striking down the gun ordinance therefore does not apply to the 50-states.  Gura will be sharing the podium, and his precious oral argument time with former U.S. Solicitor General Paul Clement, who will be arguing on behalf of the NRA.

Stay tuned for the decision on this one as it will affect how states can regulate our right to bear arms.

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"Hillary Movie" the Vehicle for Unbound Corporate Political Ads

Last September, this blog noted that the 9 justices of the U.S. Supreme Court returned from their summer recess early to hear a rare re-argument in Citizens United vs Federal Election Commission; a case involving the limits of corporate spending on political campaigns.

In a 5-4 decision issued on January 21st, the high court ruled that corporations, unions and think tanks can spend as much money as they desire on political advertisements.  The majority in the case have interpreted the First Amendment's "free speech" clause broadly, perhaps dampening the Congressional trend over the past several decades in restricting corporate political donations.

Two days after the Court issued its opinion, President Obama, in his first State-of-the-Union address, blasted the High Court, claiming its Citizens decision would, "open the floodgates...[for corporations] to interfere with elections by running advertisements for or against candidates." The apparent fear is that such [now] unlimited corporate donations will drown out the voice of the common man in most elections.

The case involved federal regulation of the political documentary titled, "Hillary, The Movie", which took a critical look at the character and career of Ms Clinton back in her pre-presidential candidate days. The documentary was produced by a conservative advocacy group; Citizens United. The issue in the case arose when the group was denied permission from the FEC to distribute the short film via "on-demand" cable services.

The chief issue in the case concerned application of the McCain-Feingold law which bans the use of corporate money in elections. Some argue this restriction puts a stake in the heart of free speech; others assert that the ban is necessary to avoid a flood of corporate election funding which would corrupt and pollute our democratic process. The FEC banned the Clinton documentary on the basis it was produced, in part, with corporate profits. Direct corporate-funding of political campaigns has been banned for more than 100-years in America (Tillman Act 1907).

The Court's decision may not be as momentous as the President and other critics fear. First, direct contributions from a corporation to a political campaign are still restricted; complicated administrative regulations turn away some of the corporate ad men. Second, the decision opens the door for Congress to ban foreign firms from making contributions. The Supreme Court's decision also practically invites Congress to toughen rules on full-disclosure for corporate donations.

No doubt, Congress will take the bait, and no doubt, some corporations will eschew such disclosures and refrain from large disclosure-triggering contributions.

The Citizens United case has a Michigan connection in that it overturned a 1990 decision of the High Court, Austin vs Michigan Chamber of Commerce, which upheld restrictions on corporate spending in election campaigns.  Last month's Citizens decision will no doubt play a major role in the upcoming mid-term elections this summer and fall.

Here's an example, from California, of what such advertisments may look like.  I can hardly wait to see a billion dollars worth of political advertisements on my flatscreen, can you?

Update:  In reviewing my blog roll, I recently came across an excellent summary by blogger David Lat of a scholarly conference conducted at the Yale Law School that seemed to conclude that the effect of Citizens United will not be as profound as some, like President Obama, think...