Corruption:  Another Case of Capone on Tax Evasion?

Shockingly, yet another (in this case former) member of the New York State legislature did something that someone thinks is wrong.

Lt. Gov. Brian Benjamin has joined the ranks of New York politicians arrested for alleged corruption…Prosecutors say Benjamin, while still serving as a state senator representing Harlem, was involved in a bribery conspiracy that involved using state money to indirectly benefit his unsuccessful 2021 campaign for New York City comptroller.

“This is a simple story of corruption,” U.S. Attorney Damian Williams of the Southern District of New York, which oversees federal prosecutions in Manhattan, said at a Tuesday press conference. “Taxpayer money for campaign contributions … That’s bribery plain and simple.”

Ahh, so that’s why Benjamin is in trouble.  It isn’t because New Yorkers ended up paying more and getting less because insiders were self-dealing at their expense.  It’s because the alleged corruption was plain and simple, unlike the barely disguised and complicated corruption that is par for the course.  You’d think he’d be more skillful.

The federal charge represents a turning point for Benjamin, who has been accused of numerous ethical misdeeds over the years – none of which involved a criminal charge up to today.


I wouldn’t count on a conviction, because despite the dozens of state legislators convicted in recent years, including three former leaders of the Senate or Assembly, he could always claim selective prosecution.

Did he do something like this?

Two weeks after the state’s largest teachers union gave Senate Republicans a boost by endorsing their candidate in a critical special election race, Republican lawmakers fast-tracked a bill that would allow New York City teachers to retire with full benefits five years sooner than they can now.

The changes to the pension plan agreed to by the Legislature were a high priority for New York State United Teachers, the 585,000-member statewide labor organization that includes the United Federation of Teachers, which represents city educators.

Or this?

Last year, when New York Governor Andrew Cuomo was battling to win the Democratic primary, his campaign solicited a donation from the Greater New York Hospital Association, according to a recent report from The New York Times. The hospital lobbying group gave over $1 million to the New York State Democratic Party. And not long after, according to the Times, “the state quietly authorized an across-the-board increase in Medicaid reimbursement rates.” The increase is expected to cost taxpayers around $140 million a year.

Or perhaps this?

Although housing and zoning have been big topics in New York’s mayoral race, one little-known policy proposal from Mayor Bill de Blasio may create a challenging legacy for his replacement: the citywide hotel special permit. 

The expansion of the use of the special permit would effectively ban the construction of hotels across the five boroughs unless each proposal undergoes a lengthy public land use review. The policy is widely viewed as a political favor from de Blasio to the powerful New York Hotel and Motel Trades Council, a union that was one of the biggest donors to his mayoral and presidential campaigns. 

One of the ways major central city CBDs might recover from COVID-19, remote work, and flexible schedules is to have workers who work from or near home far away most of the time come in for meetings and collaboration for two days — with one overnight stay — every week or two or three.  While cities need fewer hotel rooms in the short run, this would require more hotel rooms in the long run.  I guess Manhattan won’t be one of those CBDs that recovers.  Either that or the union wants all the remote workers to stay at AirBNBs, for reasons I don’t quite get.  Now someone will have to spend perhaps several years in a “review process” and cut a series of political deals to open a hotel.

In the United States, and in particular New York, the veto for everybody on the inside, and everyone getting a piece even inflates the price of installing solar panels compared with, say Germany.  Just like health care.

There is “pro-business” and anti-taxpayer, environment, consumer or worker corruption, in which businesses get to pay off politicians to get taxpayer subsidy dollars, get special tax breaks, or avoid following perfectly legitimate rules at other people’s expense.  

And there is “anti-business” corruption, in which businesses have to pay off politicians just to operate their business and avoid unjustifiable, illegitimate costs and delays — often delays that are so costly that a business folds before it opens, or people don’t dare try to open it without paying an “expeditor” who knows where to pass the money on.  

While the former is more common elsewhere, New York City has traditionally had far more of the latter, with lots of obsolete rules on the books that are only enforced against those who don’t play ball.

So what did Brian Benjamin allegedly do?

In January 2021, the City reported on a number of irregularities in contributions to Benjamin’s campaign for comptroller, among them a number of $250 wire-transfer contributions from people who, when contacted, said they had no idea who Benjamin even was. One transfer was made in the name of Migdol’s 2-year-old grandson. All came through an intermediary, Michael Murphy, who works at one of Migdol’s nonprofits, Friends of Public School Harlem. Prosecutors later alleged that Migdol either paid for or refunded contributions from many others. The illegal contributions also would have — under New York City’s generous campaign-financing program, in which the first $100 of each donation is potentially eligible for $800 in matching public dollars — been a way to steal taxpayer money. “Campaign finance-board records show Benjamin’s campaign identified 21 of the contributions Murphy steered to Benjamin as match-eligible — adding up to $16,800 in possible public dollars,” according to the City.

“The Migdol family has given a total of $106,000 since 2006 in New York elections. The largest single donation came in November 2020, when Gerald Migdol donated $15,000 to the campaign arm of the state Senate Democrats,” the Times Union also reported.

Midgol is a local real estate investor.  What did he get in return?

The indictment, which does not name the developer, alleges that Benjamin used his influence as a state senator to funnel a $50,000 state grant to a nonprofit controlled by the developer that donated supplies to Harlem schools. It also accuses him of covering up the scheme with lies and deceptions, including on the vetting forms he filled out prior to his selection in August as Hochul’s lieutenant governor.

That doesn’t seem like much of a return.  Although public money for non-profits owned and operated by state legislators and their associates is a common ploy here. Which is why so many of them are in fact non-profiteers.

Prosecutors also charged that Benjamin promised to help the developer secure a zoning variance in Harlem in exchange for a $15,000 campaign contribution. Benjamin was a past chairman of the community board that would issue a recommendation on the variance. The developer made the contribution, but the matter never came before the board.

That’s more like it.  Thanks to real estate donation-receiving Bill DeBlasio and the City Council, in the future the equivalent will be required to open a hotel anywhere in New York City.  Just as it was until recently necessary to get a special permit to open a health club anywhere in New York City.

And, if Gail Brewer has her way, it will be necessary to cut political deals to open any business that isn’t on the list of permitted businesses now in the zoning resolution that hasn’t been updated since the mid-1960s.  Even though the Department of City Planning is well aware of this.

Tens of thousands of businesses could be shut down tomorrow, if they didn’t play along with the right people.  

Given what goes on in New York, Benjamin’s offenses seem like small beer.  I have to wonder if this is yet another case of Capone on Tax Evasion — busting someone for a small amount of “plain and simple” corruption because the large amount of complex and sophisticated corruption is too difficult to prove — or a can of worms no one wants to open.  Whatever is causing NYC home health care employment to explode compared with other places and relative to the number of seniors, for example.   

Perhaps Benjamin has been involved with the theft of $hundreds of thousands, or even $millions.  But he and his colleagues hold office only due to deals they have cut to make New York’s serfs worse off by many $billions every year, in the nation’s highest tax burdens, unmet needs, debts and deferred costs that will make both worse in the future than today.  If the state government wasn’t run to benefit those working it at the expense of New York’s serfs and later-born generations, how much lower would the cost of that $220 billion state budget that just passed be?  Or how much more could it buy?  What about the New York City budget?  Every year tax revenues are up deals pass to increase the cost of what we are already getting.  And when tax revenues go down, in the Russian proverb, the shortage is distributed among the peasants.  Once they get used to it, another round of tax increases and service cuts begins.

What could an extra $30, $40 or $50 billion per year buy?  Less of an excess tax burden compared with other places, but also things we aren’t getting now.

What does all this remind me of?  The private sector equivalent, made possible by federal campaign contributions.  Back in the first robber baron era, before the real progressive movement, financial wheelers dealers would enrich themselves at the expense of other investors and the broader economy by gaining control of a board and granting themselves stock, diluting other investors.   This “plain and simple” corruption was made illegal more than a century ago.  But the same thing still happens, with 20 steps in between.

So, if you want to engage in corruption, best that it not be “plain and simple.”  In fact, in the name of full disclosure perhaps it should be admitted that corruption is legal in New York as long as it isn’t plain and simple.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.