by Paul Bowers
Are you a multimillionaire with a keen interest in city politics? Want to buy the next mayor of Charleston? Here's how you do it.
As you're probably already aware, the limit on individual campaign contributions to a candidate in a local election is a paltry $1,000. But there's a simple way to get around that limit and give a candidate, say, a cool $1 million. Are you ready for it? Here it is: Limited liability companies.
You see, under South Carolina law, an LLC is considered an "individual," so each LLC you create can give $1,000 to the candidate of your choice — even if you're the only person in that LLC.
The filing fee to create an LLC is $110. You fill out a two-page Articles of Organization form and send it in to the S.C. Secretary of State's office. We called the Secretary of State's Business Filings Division and were told that these forms usually only take "a couple of business days" to process. We asked if there was a limit on the number of LLCs that can be registered at a single address, and they informed us that there was no limit.
Now, to give a million dollars to a candidate, you'll need to create 999 LLCs, each of which will pitch in $1,000 (in addition to $1,000 from you, the individual donor). It'll cost you $109,890 in filing fees — a small price to pay to thwart the democratic process by sheer force of wealth. So the total tab comes out to $1,109,890.
You might think that such a bold act of money-slinging would cause a public outcry, which would in turn lead the state legislature to close up the LLC loophole. And that's where you'd be wrong.
A New York real estate developer named Howard Rich has been using LLCs to legally launder campaign contributions since at least 2006, when PBS reported that organizations associated with Rich funneled $7 million into supporting state limited-government initiatives in 12 states. That same year, Rich-affiliated companies (including the similarly named but totally unrelated 4220 Broadway Inc. and 4220 Broadway LLC) reportedly gave a combined $24,500 to Gov. Mark Sanford's re-election campaign, despite a donation limit of $3,500 for statewide candidates.
Surely, you're thinking, somebody must have raised a stink about Howard "Richie" Rich's riches flowing into campaign coffers. Well, there were a few strongly worded letters to the editor from cranky public watchdogs, but nine years later, the loophole remains open. Texas real estate investor Chowdary "Charlie" Yalamanchili used the same handy work-around in 2014 to pump $72,000 into Gov. Nikki Haley's re-election campaign.
In the run-up to this year's big ethics-overhaul debate in the Statehouse, House Speaker Jay Lucas explained to The State why no one had pre-filed a bill addressing the LLC loophole:
"There's no question that it's an issue we've looked very hard at. But what we've found — from a constitutional standpoint — is that there are no easy answers. So, at least at this point in the bill, that is not addressed."
One last objection you might be raising in your head: Surely no candidate would be unscrupulous enough to take money from a donor who is clearly defying the spirit of campaign contribution limits. Once again, rest your anxious heart, dear Mr. (or Mrs.) Moneybags. Already in the mayoral election, candidate Leon Stavrinakis has taken $56,000 — nearly one-fifth of his total campaign contributions — from donors who listed just 12 addresses. One man, Bennett Hospitality founder Michael Bennett, is the registered agent of 11 companies at the same address that each gave the Stavrinakis campaign $1,000 on the same day. Now, to be fair, these were pre-existing LLCs, but there's nothing stopping him from creating a few hundred more.
Not sure what to name your 999 LLCs? We'd like to suggest the names Loophole I LLC - Loophole CMXCIX LLC (We checked, and apparently the name Loophole LLC is already taken by an attorney on Hilton Head Island). Happy mayor shopping.