New York City Mayor Bill de Blasio, now in his final year in office, still owes more than $300,000 in legal fees to Kramer Levin. (AP Photo/John Minchillo)
If Kramer Levin Naftalis & Frankel LLP allows de Blasio to wait until he leaves office to pay up or raise the funds, the mayor would be off the hook from having to set up a trust under those guidelines. It's a possibility that sparked ethics concerns from the law's sponsor in speaking with Law360 Pulse. Without a legal defense trust, the public may not know what happened to de Blasio's debt and how exactly it was settled.
As it stands, de Blasio is navigating his final months at City Hall indebted to a firm making hundreds of thousands lobbying his administration on behalf of dozens of real estate clients and other special interests during a pandemic reshaping New York's approach to development and land use. Last year, Kramer Levin made $1.36 million lobbying the de Blasio administration and other city officials on zoning and real estate matters.
De Blasio's office didn't answer Law360 Pulse's question about whether the mayor intends to set up a legal defense trust before his term is up in December.
But last year, de Blasio said he was planning to use such a fund to pay back Kramer Levin.
"There are still questions about how to do that appropriately we're working through," de Blasio said in February 2020. "But as soon as we get that resolved, we will, and we'll start the fundraising."
The mayor's six-figure liability stems from ethics investigations that concluded nearly four years ago, when Kramer Levin represented de Blasio during federal and state probes into his political fundraising practices during his first term.
Firm partner Barry Berke — now on leave to serve as lead counsel for the Democrats during former President Donald Trump's second impeachment trial — was de Blasio's attorney during wide-ranging investigations into whether the mayor and his administration acted on behalf of donors or if they violated state contribution limits in efforts to flip the state Senate.
Federal and state prosecutors ultimately announced in March 2017 that they wouldn't charge de Blasio or his aides.
But, citing the high burden of proof, then-acting U.S. Attorney Joon Kim still concluded de Blasio and those acting on his behalf "solicited donations from individuals who sought official favors from the city, after which the mayor made or directed inquiries to relevant city agencies on behalf of those donors." And Manhattan District Attorney Cyrus Vance said de Blasio's fundraising tactics to help Democrats regain the state Senate in 2014 appeared "contrary to the intent and spirit of the law."
Kramer Levin's tab for successfully representing de Blasio during the investigations came out to roughly $3 million. But the prosecutors' rebuke of de Blasio's fundraising methods would cast a shadow over any attempt to solicit money to pay the firm back.
De Blasio initially promised he wouldn't use public money to cover the cost and intended to use a legal defense fund to raise money from private donors. But the city's Conflicts of Interest Board ruled in March 2017 that donations to legal defense funds are considered gifts to public officials and would be capped at $50 in most cases, making any fundraising attempts for such a large amount futile.
Then, in June 2017, de Blasio said taxpayers would cover some $2.63 million he owed Kramer Levin for representation directly related to his "public service and decision-making in government." He said private donors would pay for the remaining $300,000 to $400,000 "related to some nongovernmental work reviewed during the investigation" through a legal defense fund.
The mayor explained at the time that the city "lacks any realistic legal or regulatory framework allowing for the operation of such funds," a clear reference to the $50 donation limit.
So, with de Blasio's support, the City Council passed a law in January 2019 outlining the operation of such legal defense trusts for public officials and capping contributions at $5,000 per donor.
Despite his pledges to do so, de Blasio still hasn't set up a trust more than two years later, according to records with the Conflicts of Interest Board. No other elected official has either.
"No legal defense trusts have been set up yet," COIB assistant counsel Chad Gholizadeh confirmed to Law360 Pulse this week.
Under the 2019 law, all donations to the trusts must be publicly reported to the board and posted online. The law also bans anonymous contributions and donations from corporations, LLCs, lobbyists and others doing business with the city, either through lobbying or contracts. For instance, principals at Kramer Levin cannot contribute to any city official's legal defense trust under this law because of the firm's lobbying work and municipal contracts.
The law was meant to increase transparency and accountability when it comes to city officials' attempts to cover their legal fees, as well as regulate the process. But the new rules governing legal defense trusts only apply to current elected officials and public servants.
"This means that if a public servant leaves city service and, only after leaving, starts fundraising for their legal defense costs, this law would not apply," Gholizadeh said. "However, if a public servant violates the law, by for example improperly soliciting funds, and then leaves city service, that public servant can still be charged for the violations committed while a public servant."
Brooklyn Councilman Stephen Levin, a Democrat who sponsored the legislation creating the law, said the bill wasn't specifically designed for de Blasio but drafted to address an issue raised by the mayor's situation. Levin said he "had just imagined the mayor would set one up."
"I didn't really think through that," Levin told Law360 Pulse. "The idea of the forbearance of legal debt until someone's out of office, I don't know if that ever occurred to us."
Levin admitted the delay of payment to a law firm with business before the city raised red flags.
"There's the issue of your creditor, there's also the issue of your donors ... that's a concern," he said. "A counterpoint would be, if he's out of office, there's not a concern about the appearance of influence."
Whether de Blasio intends to begin his fundraising when his term is up is unclear, as is whether Kramer Levin has approved any delays in payment of his debt to the firm.
Kramer Levin spokesperson Jennifer Manton said the firm "cannot comment on our clients' legal bills."
While there's no direct suggestion de Blasio has intervened on behalf of Kramer Levin clients, his office has attempted to avoid the appearance of conflict given his checkered history with fundraising.
"Outside lawyers and lobbyists have never and will never dictate how this administration makes decisions," de Blasio spokesperson Avery Cohen said.
De Blasio may be in his final months in office, but his decisions, and in particular his administration's approach to the ongoing coronavirus pandemic and recovery from the crisis, still have a big impact on real estate, the industry most of Kramer Levin's recent lobbying clients in the city are part of.
The mayor recently released his final plan for creating "fair housing" in the five boroughs. The city said in a statement in October that the plan was "updated to reflect the disproportionate impact the COVID-19 pandemic has had on low-income communities of color" and "includes enhanced metrics, strategies, policy proposals, and new priorities to address a legacy of housing segregation and build a more inclusive city."
At the start of the pandemic in mid-March, de Blasio suspended the city's official public review process, the Uniform Land Use Review Procedure. Before the City Planning Commission started holding remote hearings in August, development projects were delayed for months awaiting required reviews. And the ULURP "clock" — the official timeline every project needing public approval must follow — didn't restart until September.
Kramer Levin had three dozen lobbying clients in the city in 2020, according to public records through the end of December, the most recent available. All 36 entities retained the firm for help with real estate, city planning, permits, zoning issues and land use approvals in 2020.
Just 29 of them ultimately paid Kramer Levin for lobbying work, netting the firm roughly $1,363,403 overall, records show.
The largest check was cut by developer Young Nian Group LLC, which paid Kramer Levin $168,199 in 2020 to help get city officials to approve a series of zoning changes called the Special Flushing Waterfront District.
The $2 billion project — developed by Young Nian, United Construction & Development Group and F&T Group — on Flushing's waterfront was approved by the City Planning Commission in November and backed by the City Council in December. Approval of the 13-building project came amid fears over gentrification and after months of pushback from the community and officials who wanted developers to hire union workers and increase the amount of affordable housing in the plans.
When asked about the project in December, before the council's OK, de Blasio acknowledged he was concerned about the potential for job loss if the zoning changes didn't go through but stressed the future of development "has to be about the public good," particularly in light of the pandemic.
"We've tried really hard to drive a very hard bargain for the public, and we don't have to approve a project unless it's going to provide sufficient public good," de Blasio said on NY1's "Inside City Hall" on Dec. 7.
"This is not the status quo of the past. We've been through a horrible moment in our history, tons of disparities uncovered, a lot of change we need," de Blasio continued. "That includes in the development process. If developers are not giving a good enough deal to communities, don't expect those plans to be approved."
--Editing by Aaron Pelc and Alyssa Miller.
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