Mayor Eric Adams faces the threat of significant financial penalties that could hinder his re-election efforts after a city watchdog said his 2021 campaign failed to document $2.3 million in expenses.
The New York City Campaign Finance Board’s 900-page draft audit, dated May 31 and obtained by Gothamist through a public records request, provides an unprecedented look at extensive problems with the campaign’s record-keeping. Experts say the sheer length of the report suggests careless financial management by the Adams campaign and a failure to comply with laws and rules required of candidates who take taxpayer-funded matching money.
“It is unacceptable to treat public money so casually,” said Susan Lerner, executive director of the good government group Common Cause New York. “It’s not sufficient to direct your staff to comply with the law. You have to hire people who know the law inside out and who are meticulous in keeping track of the details.”
The Campaign Finance Board flagged 22 separate categories of financial discrepancies, prohibited donations, straw donors and other issues with the Adams campaign. The Campaign Finance Board rigorously audits all city campaigns and a draft audit is a standard part of the process.
The potential for Adams’ campaign to face serious financial penalties comes as the 2025 mayoral race heats up, and questions linger about the ongoing federal investigations.
A broad number of expenses are under the campaign watchdog’s scrutiny, including payments to some of Adams’ closest advisers, money paid to a consulting firm linked to an FBI investigation, and expenses associated with a car crash.
A lawyer for Adams’ campaign did not respond to specific questions about the draft audit, but said in a statement that they would address all of the concerns raised.
“This is a draft audit seeking information from the campaign to clarify potential issues — not a binding determination by CFB,” Adams’ campaign attorney Vito Pitta said. He insisted the campaign “always followed the law to the letter.”
The board’s director of auditing, Danielle Willemin, wrote in a cover letter that the draft audit “does not include any findings related to ongoing investigations.” The letter was addressed to Sharon Adams, the mayor’s sister-in-law, who is serving as treasurer of his re-election campaign. Sharon Adams also earns a $150,000 salary as a “strategic initiative specialist” at the city Department of Education.
The Campaign Finance Board runs the city’s public matching funds program, which provides $8 for every $1 donated for the first $250 of a donation made by city residents. The generous program is intended to encourage candidates to solicit donations from more voters, rather than seeking a windfall from the city’s wealthiest residents. Candidates who accept the public funds agree to spending caps. But some experts have said the regulations governing the matching program are “full of loopholes” and difficult to interpret.
Nevertheless, experts were taken aback by the sheer number of issues with Adams’ campaign in the draft audit.
Rachael Harding, a lawyer who advises candidates and campaigns on financial compliance, said Adams was subject to the same rules regarding documentation of donations and expenses during his runs for Brooklyn borough president.
“This isn’t his first rodeo,” Harding said. “There seems to be a lot of information that was not provided to the CFB, whether intentionally or unintentionally.”
Harding, who also chairs the New York City Bar Association’s Election Law committee, described some of the issues flagged by the board as “weird,” “wild” and “rare” for a mayoral campaign.
When candidates enroll in the matching funds program, they sign what amounts to a contract pledging to follow the law, including a commitment to document all spending and fundraising activities throughout the campaign. The Adams campaign raised nearly $20 million for his 2021 mayoral campaign, including more than $10 million in public matching funds.
Gothamist previously reported that while he was running for mayor, the Adams campaign stopped responding to inquiries from the Campaign Finance Board about potential violations of the rules. Nevertheless, the board continued issuing matching funds to Adams.
Records show the board granted the campaign an extension to respond to the audit on July 1 – the day a response was due.
Experts say it’s essential for a large, citywide campaign like Adams’ to have a team dedicated to fundraising compliance, just as there are teams for political and communications strategies.
“It just goes to being a serious candidate,” said Ciara Torres-Spelliscy, a professor at Stetson University College of Law and a fellow at NYU’s Brennan Center for Justice who specializes in campaign finance. “When you agree to get public money you have to take account of every penny coming in and going out.”
Pitta, the Adams’ campaign attorney, did not respond to questions about the campaign’s fundraising compliance team or practices.
Questionable expenses
Campaign Finance Board auditors flagged more than 70 expenditures by the Adams’ campaign that lacked sufficient records. More than $2 million in spending tied to television ads lacked required information on when and where they aired, according to the audit.
“It looks like a lot of things were missed,” Harding said.
Pitta, Adams’ campaign attorney, said the Campaign Finance Board’s claim of missing documentation does not necessarily mean the records were not supplied.
“It could mean that information was submitted incorrectly (e.g. uploaded but associated with the wrong transaction) or with missing components (e.g. the form of an invoice from a vendor doesn’t meet CFB criteria and requires additional information from the vendor). In some cases, it can even mean that one box wasn’t checked,” Pitta said.
The board also flagged a $35,000 payment to Suggs Solutions Inc, a consulting company owned by Brianna Suggs, the campaign’s chief fundraiser whose home was raided by the FBI last year. Auditors said the payment was missing required paperwork, including a contract, a canceled check and an invoice for the transaction. The payment also did not appear in the campaign’s bank records.
The board also questioned why the Adams campaign spent taxpayer money at a Brooklyn auto dealership to repair damage from a car accident. The campaign paid for parking tickets, toll violations and a driving ticket. All told, the campaign spent $10,410 on the car-related expenses, according to the audit.
“Gas is one thing, right? Mileage is another. But parking tickets and then fixing a car for an accident, I have never seen that before,” Harding said, calling those expenses “absurd.”
Donor dilemmas
In the draft audit, the Campaign Finance Board also raised questions about Adams’ donors. Auditors flagged more than 50 donations because the contributors themselves indicated that they were making the donation on someone else’s behalf, a practice commonly referred to as a straw donation.
Laws prohibit a campaign from receiving donations made by someone other than the person who makes the payment. But in these instances, the donors wrote notes with their payment like, “my friend is donating for me,” “my fiancé is donating [o]n my behalf,” and “I use my parents credit card.”
Manhattan District Attorney Alvin Bragg has already indicted six people in connection with a straw donor scheme to the Adams campaign. So far, four donors have pleaded guilty. The campaign is not accused of wrongdoing.
Pitta, the Adams’ campaign attorney, suggested that the straw donors identified in the draft audit were likely associated with that case.
“Overall, it is critical to remember that the 2021 campaign raised more than $18 million through more than 10,000 transactions, an unprecedented volume that requires an unprecedented amount of paperwork, which we will provide as needed,” said Pitta.
In addition to the straw donors, the board also raised questions about nearly 700 refunds that the campaign issued to donors without specifying a clear reason why they were returning some or all of their money. Refunds are a normal part of any campaign. A donor may request one for any number of reasons, or the campaign may determine that it needs to return certain donations.
But Harding said campaigns must document why they are returning donations, which did not happen in these instances.
“I think it’s a mixture of sloppiness and just not providing documentation,” said Harding.
Pitta said the issues would be resolved.
“The campaign processed over 10,000 transactions — there is an expected unintentional margin of error. And we will address all as needed,” he said.
Potential penalties
It is unclear when the Adams’ campaign plans to respond to the draft audit. The new deadline after the Campaign Finance Board granted the extension is approximately Aug. 30, 2024.
A spokesperson for the Campaign Finance Board, Timothy Hunter, declined to address specific questions about the draft audit.
“We take seriously the responsibility of protecting the public interest and ensuring taxpayer money is being used responsibly by candidates,” Hunter said in a statement.
The language in the document itself is more pointed.
“Failure to report or properly disclose transactions may result in penalties,” the document states in bold font.
At a minimum, the draft audit states the Adams’ campaign will likely need to repay the $509,844.50 that remained in its 2021 bank account after the election, according to the auditors. Any campaign that accepted matching funds must return the balance of their campaign account to the Campaign Finance Board after the election.
But the campaign may face additional penalties for failing to provide timely explanation and documentation of money the campaign raised, as well as the outstanding $2.3 million in expenses.
Altogether, that could amount to a nearly $3 million penalty if the campaign does not provide a sufficient response. That’s about the same amount that Adams’ currently has on hand for his 2025 mayoral bid, before any additional matching funds. The first payment of public matching funds will go out to qualifying candidates for the 2025 mayor’s race in December.
The campaign would be severely hobbled if the board opted not to allow the Adams campaign to receive any additional matching funds. While such a ruling is rare, it has happened before.
The board opted to withhold matching funds from former city Comptroller John Liu for his 2013 mayoral campaign after two of his campaign associates were prosecuted in connection with a straw donor scheme, delivering a death blow to his campaign.
“These are very difficult decisions,” said Art Chang, a former mayoral candidate who served on the Campaign Finance Board during the Liu scandal. “Certainly it’s very unfortunate that these decisions sometimes get made close to an election.”