Isolated Scheme or Commonplace Corruption?

Yesterday, a felony complaint was issued against William Rapfogel, the CEO of the Metropolitan Council on Jewish Poverty, a large nonprofit social service agency that received millions of dollars in grants and contracts from New York City, New York state, and the federal government. One of the charges is that the nonprofit made large campaign contributions to city and state candidates through its insurance company (and the company's officers and employees), using money from overcharges on insurance policies (part of this money also went, as kickbacks, to Rapfogel and others).

In New York State, nonprofits are not permitted to make campaign contributions. Nor is it legal for an individual or corporation to make campaign contributions through someone else (known as a "straw donor").

An article in today's New York Times notes that "None of the politicians have been accused of any impropriety." But are they guilty of any impropriety? Think how this scheme must work. The nonprofit is seeking to either influence officials to give it contracts and grants, or to meet officials' demands for contributions (pay to play). Either way, there is no point in making the contributions if the officials do not know where they are coming from.

The charge is that the checks were given to Rapfogel by the insurance company, and then passed on to the campaigns. Thus, Rapfogel acted as the bundler of his nonprofit's own contributions. Therefore, the campaigns, and presumably the candidates, knew the origin of the contributions. And they knew that they were being given contributions by a nonprofit that could not legally make such contributions, and that a straw donor was being illegally employed.

While Rapfogel was the one indicted, and was the center of this scheme (although it appears to have existed before he was hired by the Council), it is the officials whose campaigns bought into the scheme who are most at fault. If they had refused the contributions and reported them to the authorities, as was their duty, this scheme would have been over decades ago. In other words, they were complicit in the scheme.

But this is not the most serious implication of what occurred here. If this were the only such scheme, the only instance of nonprofits trying to get around the prohibition on making contributions and the only use of straw donors, is it likely that officials would have gone along with it? In fact, is it likely that the conspirators would have had any reason to expect them to go along with it?

Or is this scheme just one instance of a kind of institutional corruption that is considered — by elected officials, nonprofits, and others — commonplace in New York state? And perhaps elsewhere? This is something that should be investigated by the Moreland Commission to Investigate Public Corruption, a special commission recently created by the governor to investigate misconduct among legislators.

Robert Wechsler
Director of Research-Retired, City Ethics

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