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Schneiderman Announces Subpoenas, But on Campaign Finance

Good news, New York Attorney General Eric Schneiderman issued a wide-ranging subpoena yesterday. Only it had nothing to do with the financial fraud task force he’s co-chairing. Instead, this was a subpoena about campaign contributions to tax-exempt groups:

Attorney General Eric T. Schneiderman of New York has begun investigating contributions to tax-exempt groups that are heavily involved in political campaigns, focusing on a case involving the U.S. Chamber of Commerce, which has been one of the largest outside groups seeking to influence recent elections but is not required to disclose its donors.

Mr. Schneiderman issued a wide-ranging subpoena on Tuesday to executives at a foundation affiliated with the chamber, seeking e-mails, bank records and other documents to determine whether the foundation illegally funneled $18 million to the chamber for political and lobbying activities, according to people with knowledge of the investigation.

The investigation is also looking at connections between the chamber’s foundation, the National Chamber Foundation, and another philanthropy, the Starr Foundation, which made large grants to the chamber foundation in 2003 and 2004. During the same period, the National Chamber Foundation lent the chamber $18 million, most of it for what was described as a capital campaign.

OK. I’m not going to argue with the notion that the Chamber of Commerce and other groups on the right are abusing their tax-exempt status to ensure the secrecy of their donor networks. The FEC and the IRS have not moved the ball, so a state Attorney General taking this up makes some sense, particularly one in New York state. The Starr Foundation is based in New York, for example, and New York law mandates that tax-exempt groups file tax returns and auditor reports through the AG office.

And yet. Attacking the campaign finance system is a very acceptable thing to do on the Democratic side; this has been the rallying cry post-Citizens United for the last couple years. You hear it from the President and all national leaders. You hear less about, you know, the systematic destruction of the housing market through outright fraud. And that was designed to be Schneiderman’s role, designed by him and his staff, actually. I’m wondering how this new initiative helps one citizen struggling with foreclosure in New York State, rather than helping to further a national political fight over transparency. I’m all for having that fight, but my understanding was that Schneiderman had a lot on his plate, what with co-chairing a task force looking into the greatest consumer and investor fraud in history and all.

Schneiderman did recently introduce a foreclosure fraud prevention bill in the New York state legislature, which criminalizes robo-signing and false preparation of foreclosure documents, and imposes penalties including jail time for perpetrators and managers who “knowingly tolerate fraudulent foreclosure practices committed by their employees and agents.” It has so far passed the Assembly but has not yet come up in the state Senate. Schneiderman also recently announced a $60 million program for housing counseling and legal services, out of the hard dollars from the foreclosure fraud settlement. So there’s been some activity, though it remains to be seen whether it will bear full fruit.

And again, I’m happy to see anyone bust the Starr Foundation, which is run by former AIG chairman Hank Greenberg. Surely Schneiderman should be able to walk and chew gum at the same time. But I’m waiting on subsequent announcements on the chewing gum – the task force – part of this scenario. And time is running out.

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David Dayen

David Dayen