City Comptroller John Liu continues to run for mayor as if confident he can overcome the embarrassment of a campaign finance scandal that could send one of his top former aides and a contributor to prison for decades.
How much impact the case will have is an open question. But according to two political science experts in Queens, the Liu campaign faces multiple challenges arising from the convictions last week of Jia “Jenny” Hou, his former treasurer, and Xing Wu “Oliver” Pan, a fundraising “bundler,” who secured donations from other parties that then went to the campaign.
The two were convicted of operating a straw donor scheme that saw single donors’ contributions split up among multiple people to evade the law and rip off the taxpayers by increasing the amount of public matching funds the campaign would get.
Hou, 26, who lives in Queens, was found guilty of one count each of attempted wire fraud, obstruction of justice and making false statements to the Federal Bureau of Investigation. The attempted fraud and lying charges each carry maximum sentences of 20 years in prison, while obstruction of justice can result in another five years. Attempted wire fraud also brings a fine of up to $250,000 or twice the gain or loss from the offense.
Pan, 47, of Hudson County in New Jersey, was found guilty of one count each of conspiracy to commit wire fraud and attempted wire fraud, and could be sentenced to up to 20 years in prison for each. Both charges also carry fines of up to $250,000 or twice the gain or loss from the offense.
The defendants were found guilty after a three-week trial and are expected to be sentenced Sept. 20.
“I think the biggest issue for Liu is the impact it could potentially have on his ability to get matching funds from the New York City Campaign Finance Board,” said St. John’s University Professor Brian Browne, the school’s assistant vice president of governmental relations. “The board has fairly wide latitude in deciding whether to give matching funds. I think that’s the next big obstacle he has to overcome.”
Liu could get up to $3 million in public campaign money based on his fundraising if the CFB does determine he is eligible, Browne said.
He added that the government’s case has been known to the public for a long time, and that for Liu’s core supporters, especially in the outer boroughs, “It may or may not be a deal-breaker, but the ability to get $3 million for your campaign, that’s important.”
Campaigns receive $6 in taxpayer matching funds for every $1 they raise in eligible contributions.
Professor Michael Krasner, co-director of the Taft Institute for Government at Queens College, also noted that the case had been an element in the mayoral race long before last week’s jury decision.
“I think the implications were pretty clear even before the convictions,” Krasner said. “Liu’s campaign was having a hard time getting any traction going, despite his position ... His numbers weren’t moving at all. I think this just reinforces what was the pattern —that his campaign isn’t going anywhere.”
According to the government, an undercover FBI agent provided Pan with $16,000 in cash that the two agreed would go to the campaign under the names of various straw donors, since the maximum legal contribution from an individual is $4,950. Pan dispersed the funds to the fake contributors. Meanwhile Hou taught a campaign volunteer how to imitate the handwriting of donors on contribution forms required by the city Campaign Finance Board, discussed how to conceal information from the agency, withheld records in defiance of a subpoena and lied to investigators.
“As the jury found, Jia Hou and Oliver Pan stuck a knife into the heart of New York City’s campaign finance law by violating the prohibition against illegal campaign contributions, all to corruptly advantage the campaign of a candidate for city-wide office” prosecutor Preet Bharara, the U.S. attorney for the Southern District of New York, said in a prepared statement announcing the convictions.
Liu, a former city councilman from Flushing, had insisted his campaign did nothing wrong and has not been charged with any illegalities. He issued a statement after the convictions that said, “I am deeply saddened by the verdict. I continue to believe in Jenny being a good person and exceptional individual. I look forward to this year’s mayoral election and will continue to ask the voters for their support.”
Krasner said Liu must bear some responsibility, however.
“I think in some sense, whether by commission or omission, he is in some sense responsible for what’s happened in the campaign,” he said, adding, “I think it’s kind of a shame that the corruption has overshadowed the substance of his policy positions.”
He and Browne agreed that the race for the Democratic mayoral nomination — in which Liu faces City Council Speaker Christine Quinn (D-Manhattan), Public Advocate Bill de Blasio, former Comptroller Bill Thompson and former Councilman Sal Albanese — is likely to go to a runoff. City law forces a second vote if no one wins 40 percent of ballots on Primary Day.
Browne said a lot also depends on how Liu’s opponents use the case against him, something he expects them to do.
“All’s fair in a primary with so many people running,” he said. “I think everything’s on the table.”
Hou, as the campaign’s treasurer, was responsible for all its financial disclosures, as well as accounting for the contributions it received and making sure they were legal. She was also responsible for providing the CFB with the names of all fundraising intermediaries, known as bundlers, who take contributions from other people on the campaign’s behalf. But although Liu had been fundraising for his mayoral run since at least December 2009 — a month after he won the election for comptroller — the campaign did not disclose the names of any bundlers until after it was subpoenaed in December 2011, according to the prosecution. And even when it did provide a list, it left out the names of multiple bundlers.
The government said straw donors were reimbursed for contributions that actually came from other people who were donating over the legal limit on multiple occasions, including the time the undercover FBI agent gave Pan $16,000. The straw donors then filled out contribution forms with their names, addresses and other information, after which they were paid back. The forms included statements saying that the donors were contributing their own money and were not being reimbursed.
“Hou worked closely with individuals who served as intermediaries in connection with multiple events where straw donors were reimbursed for their contributions, and nevertheless failed to disclose to the NYC CFB the involvement of these intermediaries in the campaign,” the U.S. Attorney’s Office said in its announcement of the convictions. In one case, Hou “explicitly offered” to pay back a friend for making a contribution, the office said.
She then obstructed the investigation by withholding emails and electronic “chats” regarding the scheme after the subpoena was issued, according to the authorities. When FBI agents questioned her about her role in the plot and her compliance with the government’s subpoena, she “made multiple false statements” to them, the government said.