PRIME SUSPECTS INSIDE: SPOTLIGHT ON
INSURANCE
Who’s to blame for New York’s newest scandals?
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EDITOR’S NOTE / Contents
Jon Lentz Senior Editor
Things had been looking up this year for Gov. Andrew Cuomo and New York City Mayor Bill de Blasio. Cuomo won major policy victories in the state budget, including a $15 minimum wage and a groundbreaking paid family leave law. De Blasio’s approval ratings were climbing, and he notched a victory when the New York City Council passed rezoning changes that are essential to his affordable housing goals. But all of that has been overshadowed by a spate of investigations and allegations of corruption that are suddenly reaching deep into their inner circles. Cuomo has been forced to distance himself from his longtime friend and political enforcer, Joseph Percoco, who is under scrutiny for possible financial improprieties involving the governor’s signature Buffalo Billion initiative. De Blasio, meanwhile, has been buffeted by multiple investigations involving potential conflicts of interest and misuse of funds. To be clear, neither the governor nor the mayor has been accused of any wrongdoing – at least so far. But as our cover art reflects, the public faces of these political scandals, fairly or not, are Cuomo and de Blasio.
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THE SCANDALS Preet’s got his hands full. We run down the scandals enveloping the de Blasio and Cuomo administrations.
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Bronx Borough President Rubén Díaz Jr. argues for giving tenants a fair chance in Housing Court, the Manhattan Institute’s Yevgeniy Feyman offers a way to save NYC Health + Hospitals, and more.
SPOTLIGHT: INSURANCE From lawsuit interest rates to the aftermath of the fall of Health Republic, we’ve got you covered.
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BACK & FORTH A Q&A with New York City’s first public advocate, Mark Green.
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Vol. 5 Issue 18 - May 9, 2016
On the Cover PRIME SUSPECTS INSIDE: SPOTLIGHT ON
INSURANCE
Who’s to blame for New York’s newest scandals?
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THE ILLUSTRATED CITY & STATE A month after City & State published its 2016 New York City Power 100 list, we were tipped off that all 100 power players were gathered in a small art gallery on the Lower East Side. No, Margaret Chin wasn’t throwing a party – the 100 influential New Yorkers were all together in the form of caricatures by political cartoonist Evan Forsch. Flattered by having our list enshrined in ink, City & State’s Jeff Coltin caught up with Forsch at LES Popped, his pop-up art shop on Grand Street, which has since closed.
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PHOTOS BY JEFF COLTIN
C&S: We didn’t even know you were doing this until we saw photos of the finished product. What inspired you to draw the Power 100? EF: I follow you guys on Twitter and I read some stuff. I do political cartoons for The Villager and I did them for The Lo-Down – they stopped printing so they stopped doing the cartoon, but they’re still around doing great stuff. So I’m interested in politics and I saw the Power 100 and all those faces and thought, wow, that would be a fun project to do. C&S: It’s a cartoon-like style for the faces, but you wrote the names next to them in a street art, wild style lettering. Do you do both styles? EF: I’ve never tagged any walls or even wheatpasted. I love that stuff though! I guess that’s what inspired it. I love it just as an art, but I’ve yet to hit the streets or sticker anything. But lots of cartoons. I’ve been in The New Yorker, Reader’s Digest. So for a project like this, where I’m just doing it on my own, there’s no restrictions. I can combine styles and whatever!
U.S. Rep. Peter King, No. 42 on the list
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C&S: How long does each drawing take you? EF: Normally just a few minutes. I mean if I’m doing it at a party, you’ve got to get through them pretty quick. I could take my time more, but really for the most part it took more time to track down photos that I wanted than to draw the actual picture. I can do them fairly quickly. Maybe three minutes.
Leadership Team). Apparently Bloomberg set up this thing, and we do nothing. It’s awful. I want to help my kids. I like to follow (politics). And it’s very frustrating just to follow it, as I’m sure you know. And I guess the fun part is that I do get to express my opinions in the cartoons. Some of my most recent ones were about Shelly Silver because this area is his.
I used to live in his co-op and I moved two blocks away to a different co-op recently. I have strong feelings about him and his pretending to do good while he’s really not. Very upsetting.
You can see more of Forsch’s work at Evan4sh.com. Watch out for City & State’s Albany Power 100 list, which debuts next week.
C&S: Some of these drawings – Charlie Rangel, John Catsimatidis – they have very expressive faces. Do you have a favorite one that was the most fun to draw? EF: My favorite? Almost all of them were fun to draw. Some people are just kind of generic. I messed up Schumer. I see the mistakes more than the stuff I like. I was happy to draw Preet Bharara! C&S: Are you civically engaged? Or do you just enjoy following politics as an observer? EF: My kids go to elementary school. I’m on the PTA, and all the nonsense that goes on – not with the people, just with the laws. I’m on the SLT (School
Former de Blasio aide and Hilltop Public Solutions partner Rebecca Katz, No. 43
New York City Councilman Jumaane Williams, No. 56 on the list
U.S. Rep. Nydia Velazquez, No. 74
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is for corruption? By JON LENTZ
CITY HALL
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WHAT STARTS WITH THE LETTER “C”? HOW ABOUT “CARRIAGE HORSES,” “CONDOMINIUMS” AND “CAMPAIGN CONTRIBUTIONS”? WHAT ARE SOME OTHER THINGS THAT START WITH “C”? “CONFLICT OF INTEREST” STARTS WITH “C”! SO DOES “CRIMINAL REFERRAL” – BUT WHO CARES ABOUT THESE OTHER THINGS? NOT MAYOR BILL DE BLASIO! ALTHOUGH IT MAY LOOK LIKE HE’S BEEN CAUGHT WITH HIS HAND IN THE COOKIE JAR, NOBODY AT CITY HALL HAS BEEN CHARGED WITH ANY CRIMES. BUT WITH INVESTIGATORS SNIFFING AROUND, WHERE WILL THE TRAIL OF COOKIE CRUMBS LEAD?
STATE SENATE DEMOCRATIC FUNDRAISING A criminal referral from Risa Sugarman, the state Board of Elections’ enforcement chief, reportedly describes potential campaign finance violations in the mayor’s attempts to secure a Democratic majority in the state Senate in 2014. According to reports, several de Blasio associates have been subpoenaed, but the mayor has not been accused of wrongdoing.
CENTRAL PARK CARRIAGE HORSES
The animal-rights group NYCLASS, which is opposed to carriage horses in Central Park, campaigned against Christine Quinn in the 2013 mayoral race, helping pave the way for de Blasio’s victory. Questions have been raised about donations from the group to de Blasio and his unsuccessful efforts to ban Central Park horse carriages.
THE NYPD
A probe into the NYPD led to two businessman, Jona Rechnitz and Jeremy Reichberg, who were major donors to the mayor. Questions have been raised about whether the two men received favors from the NYPD in exchange for gifts. Two people have been arrested and a number of police staff demoted. Former NYPD Chief of Department Philip Banks and correction officers union chief Norman Seabrook have also been linked to the probe.
RIVINGTON HOUSE
A New York City agency approved a deed change allowing a developer to convert a building designated for nonprofit health care use into condominiums through a sale that netted a $72 million profit. The mayor professed that he first heard about the controversial deed change in the news, although members of administration acknowledged they were aware of it.
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HOW SCANDALOUS THE TARGETS KEEP GETTING BIGGER FOR U.S. ATTORNEY PREET BHARARA. The Manhattan U.S. attorney started cleaning up New York politics by taking out crooked rankand-file lawmakers. Last year, he shook up Albany by bringing down former state Senate Majority Leader Dean Skelos and ex-Assembly Speaker Sheldon Silver. This year, he has his sights set on even bigger names: Gov. Andrew Cuomo and New York City Mayor Bill de Blasio. And Bharara has company this time around, with fellow prosecutors like Attorney General Eric Schneiderman digging into some of the alleged misbehavior, as well. With new rumors and revelations coming out almost daily, we reached out to three experts – former Assemblyman Richard Brodsky, The New School’s Jeff Smith (a former Missouri state senator who served time in federal prison for lying to the FBI about coordination between his campaign and outside groups) and Citizens Union’s Dick Dadey – to assess the severity of the allegations on a scale of 1 to 5 (with 1 the least serious and 5 the most). Of course, it’s hard to give any of the scandals anything more than an “incomplete” at this point, as Brodsky noted, but he nonetheless suggested that each one has the potential to be a 5 out of 5. Smith rated de Blasio’s questionable fundraising for state Senate Democratic candidates as the worst of the bunch (a 4) while rating the probe into the NYPD as just a 1.5. Dadey, meanwhile, thought that de Blasio’s Senate fundraising, the NYPD probe and Buffalo Billion allegations tied to the Cuomo administration warranted strong 4s, but the Rivington House scandal was likely more a case of too-lax oversight, with a humble rating of 2. And according to our experts, even Bharara’s aggressive efforts to root out corruption may not be enough. “In the end, the public and press have correctly focused on the corrosive effects of money on government, some illegal, some legal, all destructive,” Brodsky told City & State. “Short of repeal of Citizens United, and a few thoughtful state initiatives, we are left with a sense of wonderment about what these people are thinking, a need for a revival of the public spirit, and what looks like a continuing string of investigations and indictments. Woe is us.”
ROB BENNETT/OFFICE OF MAYOR BILL DE BLASIO
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CUOMO AND THE BUFFALO BILLION Federal investigators probing the Buffalo Billion, a major economic development initiative, are reportedly looking into lobbying and conflicts of interest involving Joseph Percoco, a former top Cuomo aide. Developer Louis Ciminelli, SUNY Polytechnic Institute’s Alain Kaloyeros and Washington lobbyist Todd Howe, among others, are also under scrutiny.
RICHARD BRODSK Y Former Assemblyman Pending the outcome of investigations, and honoring the presumption of innocence, this will shed light on a governance issue. The Cuomo administration has effectively controlled all the executive branch agencies, and even supposedly independent entities like the MTA and PASNY. Eventually this will illuminate the mechanisms of centralized control, for better or worse. Pay no attention to the man behind the screen.
JEFF SMITH The New School Percoco is a longtime friend of the governor who Mario Cuomo – Percoco’s first boss – once called “my third son.” Cuomo’s counsel conceded that “questions of improper lobbying and undisclosed conflicts of interest” surrounded a former aide who “may have deceived state employees ... and defrauded the state.” This suggests Percoco is in real trouble. If Cuomo was behind Percoco’s effort to persuade Moreland Commission members to issue dubious public statements during a 2014 federal investigation, or if Percoco is aware of any other wrongdoing such as bid-rigging that benefited Cuomo allies, Cuomo will be praying that their brotherly bond holds up under Bharara’s white-hot glare. Extra danger: two leading investigators – Bharara and Schneiderman – would love to be Gov.
DICK DADE Y Citizens Union Campaign gifts from those who do business with the state are permitted as part of our state’s unseemly “pay-to-play” campaign finance system but are illegal if they are made in return for the promise of state business. At the very least, the optics are bad for the governor given how close he is to the men being investigated. Given that the governor is well-known for being involved in the minutiae of state government, the question has to be asked: What did he know? This is a cesspool of corruption that keeps getting more disgusting by the day, especially for a governor who has pledged to clean up Albany. This too-close-to-home investigation shows his cleanup job is far from done.
STATE SENATE DEMOCRATIC FUNDRAISING A criminal referral from the state Board of Elections describes potential campaign finance violations in the mayor’s attempts to secure a Democratic state Senate in 2014.
RICHARD BRODSK Y Former Assemblyman This will test the limits of the “everyone does it” defense. Everyone does do it, and it’s hard to imagine that a lot of the pros involved didn’t seek legal advice before becoming involved. Even if legal, it’s evidence of rampant money and collusion in fundraising that is far more dangerous to public morality that individual thieves. But Bill de Blasio has talked about a better sort of politics, and this is hard to defend as an improvement over the Bloomberg Billions or the Koch brothers.
JEFF SMITH The New School This email is what prosecutors call a “smoking gun,” and suggests that de Blasio’s effort to help Democrats reclaim the state Senate may have illegally funneled money into upstate races in excess of donation limits. Have Senate Republicans done this for years? Yes. Has Cuomo? Absolutely. De Blasio’s lawyer may call this “selective enforcement,” but prosecutors and judges call it the “everybody does it” defense. Ask Shelly Silver or Dean Skelos how well that worked for them.
DICK DADE Y Citizens Union That others have done it is no excuse because finally we have an enforcement counsel to pursue campaign finance violations. At the very least this is a big headache for the mayor and his team. If their efforts are shown to have been undertaken to deliberately evade candidate contribution limits as a part of a coordinated singular seamless transaction, where everyone involved knew that the political committee was acting as nothing more than simply a pass-through of a major gift to support a specific candidate, it would have been illegal and criminal charges are likely.
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CENTRAL PARK CARRIAGE HORSES An animal-rights group opposed to Central Park carriage horses helped pave the way for de Blasio’s 2013 mayoral victory. Questions have been raised about donations from the group to de Blasio and his efforts to ban the horse carriages.
RICHARD BRODSK Y Former Assemblyman Again, pending the results of investigations, this starts to merge criminal procedure with traditional American politics. People, and special interests, give campaign money to those who promise to support the positions they favor. Anti-abortion activists don’t support Hillary. Ted Cruz promised them he will take official action in banning Planned Parenthood and criminalizing abortion. They give him money because they agree. Crime?
JEFF SMITH The New School Another case of funneling massive amounts of campaign money into shadowy “independent” committees and obscuring its origins. That UNITE HERE – the union from which a massive 2013 contribution which cycled through NYCLASS and ended up in the hands of a group whose ads cut initial mayoral frontrunner Christine Quinn’s support in half – was run by de Blasio’s first cousin and close political ally John Wilhelm fuels added cynicism about the “independence” of the third party making the expenditure. And Bharara may derive special pleasure from pursuing this case, given the name of the committee that ran the negative ads that torpedoed Quinn: New York is Not For Sale.
DICK DADE Y Citizens Union The real potential scandal with NYCLASS may not be with what happened during the 2013 campaign, since much of that occurred as an independent expenditure campaign. What is problematic is that those supporters of NYCLASS also made large contributions totaling $125,000 to the mayor’s Campaign for One New York nonprofit organization, an organization that the COIB ruled no one at City Hall could raise money for. It doesn’t look good. It shows that as a seasoned political operative, the mayor intended to take full advantage of both political committees and a nonprofit to advance his policy agenda; whether he followed the laws governing both or crossed over a few lines is now up to prosecutors to decide.
RIVINGTON HOUSE A city agency allowed a developer to convert a building designated for nonprofit health care use into condominiums. The sale netted $72 million, but the mayor says he knew nothing about it.
RICHARD BRODSK Y Former Assemblyman At last a straightforward accusation of old-time, traditional wrongdoing. If money was passed, or approvals were expedited, or special favors were granted, then a legal problem truly exists. How high up the chain, if at all, is a fact issue. Patience is needed before conclusions are drawn. All mayors face episodes of wrongdoing. How de Blasio responds once the facts are out will define the impact here.
JEFF SMITH The New School From a politics/optics perspective, this may be the worst of all the swirling scandals: Megadonor makes $72 million windfall after engineering a zoning change which will cause HIV-infected seniors to be kicked out of a building that will become luxury condos. You couldn’t script it much worse. That said, despite the fact that this will have a far bigger human (and budget) impact than the various campaign finance scandals, there is no known smoking gun here, and so it is unlikely to put de Blasio or his close aides in legal jeopardy.
DICK DADE Y Citizens Union This may prove to be much ado about nothing other than pure bungling. It is quite possible that lax internal oversight and no clear decisionmaking process within the de Blasio administration may have contributed to this unfortunate decision. At the very least, it is bureaucratic incompetence or the lack of effective oversight procedures. At its worst, the health care provider took advantage of lax oversight to enrich itself in a side deal with the developer when no one was paying attention at City Hall when they should have been.
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City Carbon Reduction Goals Must Factor Costs to Building Owners and Tenants
NYPD
BY JOHN BANKS
Major de Blasio donors Jona Rechnitz and Jeremy Reichberg may have received favors from the NYPD in exchange for gifts. At least two people have been arrested and a number of officers were demoted. Former NYPD Chief of Department Philip Banks and correction officers union chief Norman Seabrook are also under scrutiny.
RICHARD BRODSK Y Former Assemblyman
JEFF SMITH The New School
Again, old-fashioned wrongdoing. But it illuminates the press reaction to the string of Spitzer/Kruger/Espada/Smith/Silver/Skelos/etc. convictions. The willingness to draw and quarter the mayor, the Legislature, the governor and the “system,” at this stage of the accusation-vetting process, is of little help. Calls for “ethics reform” are similarly thin on substance and long on outrage.
Let’s be honest: The pictures and reports so far sure make Jona Rechnitz and Jeremy Reichberg look like a sleazy pair of wheeler-dealer wannabes with creepy badge fetishes. But as bad as this one may look for the mayor (as well as current and former top cops), neither Rechnitz nor Reichberg appears to be at all close to the mayor or tied to any policy decisions. And frankly, the mayor isn’t closely associated with the NYPD in the way that, say, Giuliani was. So while certainly embarrassing, this one won’t threaten the mayor or his inner circle from a legal perspective in the way that a couple of the aforementioned issues may.
Everyone should support efforts in New York City and Albany to reduce carbon emissions for the health of our environment and communities. Considering that 73% of New York City’s greenhouse gas emissions (GHG) come from buildings, the owners, managers, and developers of real estate in New York can play a big role in supporting carbon reduction policies. Building owners know they must adapt to the changing needs of our communities while also watching the financial impact, especially for electricity, and heating and cooling, which represent the largest variable costs for running our buildings. On Earth Day, Mayor de Blasio’s office published a progress report on its efforts to reduce New York City’s GHG emissions by 80 percent by the year 2050. REBNY was glad to join the de Blasio Administration’s Buildings Technical Working Group to advise the Administration on cost-effective measures that city buildings can take to support the carbon reduction goal. From the beginning, the Administration’s plan was to achieve GHG reduction through voluntary energy conservation measures, which REBNY fully supports. The progress report just released, however, now mandates measures with significant immediate or near-term costs to building owners, managers, and developers. These costs will inevitably stand in conflict with the Mayor’s own goal of maintaining the affordability of millions of older apartments. Among other initiatives, the updated One City Built to Last report calls for all three-family and above building owners to repair and improve heating distribution systems within 10 years, upgrade lighting, and seal roof vents in elevator shafts. All of these requirements have large bottom-line fiscal consequences for building owners, managers, and developers. To be clear, reducing GHG emissions is vitally important for the future of our city, and will help to reduce electricity costs for owners over the long run. Many real estate industry leaders have already taken the initiative to retrofit and build energy-efficient, low-waste buildings, but energy conservation measures must be both environmentally and economically sound. This is especially true for affordable housing, which is a very high priority to the Administration. While we should all work together to support our city and state’s ambitious goals to reduce carbon emissions, at the same time, the new costs for building owners and tenants announced by the city require greater consideration in the Administration’s policies. This goes along with the need to support clean, reliable, and affordable sources of electricity that also affect GHG levels in the city. REBNY, along with leaders of the Building Owners and Managers Association, the Federation of New York Housing Cooperatives and Condominiums, and the Rent Stabilization Association, are among those who share both our commitment and our concerns about achieving these important goals for carbon reduction through city buildings and clean energy without impacting affordable housing objectives at the same time. About the Author: John Banks is President Real Estate Board of New York (REBNY) and a member of the advisory board of the New York Affordable Reliable Electricity Alliance.
SPECIAL SPONSORED SECTION
DICK DADE Y Citizens Union
That high-ranking police officers like former Chief of Department Phil Banks are implicated in this favors-for-protection scheme is bad enough. But this NYPD probe may prove be to the dooropener scandal that exposed New Yorkers to an unseemly web of political fundraising undertaken by the mayor that may bring criminal charges beyond those expected for NYPD top brass.
The New York Affordable Reliable Electricity Alliance (New York AREA) is a diverse group of business, labor, environmental, and community leaders working together for clean, low-cost and reliable electricity solutions that foster prosperity and jobs for the Empire State.
WWW . A R E A - A L L I A N C E . O R G
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MONI TORING THE MAYOR 14
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How well are de Blasio’s political nonprofits regulated? By SARINA TRANGLE
New York City Mayor Bill de Blasio delivers his State of the City address earlier this year. The theme of the speech was “One New York: Working For Our Neighborhoods.” WHEN NEW YORK CITY Mayor Bill de Blasio is asked about his ties to several controversial nonprofit groups that were set up to promote his political agenda, he often points to the city’s Conflicts of Interest Board. The obscure 22-person city agency, the mayor says, has vetted and signed off on his involvement with the groups, including the Campaign for One New York, which raised funds for his universal prekindergarten push and other initiatives, as well as two other nonprofits. Although the three nonprofit groups have been bolstered by
those who do business with the city, the mayor has also repeatedly defended himself by claiming that his administration is being fully transparent about its relationships. “Obviously it has to be legal and appropriate in every way. What has been done here is that any involvement I’ve had has been pre-cleared with the Conflicts of Interest Board, which is the proper way to go about things. And then, I follow Conflicts of Interest Board guidelines in anything I do,” de Blasio told reporters in late February. “What we’ve said from the beginning is anything that’s
supporting this administration’s goals or anything I’m involved in must be fully disclosed,” he added. “I’ve felt like that is the crucial question in anything – is it disclosed or not?” However, City & State found that some details of the mayor’s nonprofit groups and their interactions with de Blasio remain private or virtually inaccessible to the public. What’s more, the oversight of these political nonprofits is muddled and compliance appears to be largely voluntary. For example, de Blasio spokeswoman Karen Hinton
declined to share the COIB’s “private” written guidance on his involvement with the Campaign for One New York, which she said also established the regulations for the two other groups, The Progressive Agenda Committee and United for Affordable NYC. The COIB memo, which was posted online by a Daily News employee, only raises additional questions. While it stipulates that the mayor must submit periodic disclosures listing nonprofits he fundraised for, there were no submissions in the first nine months of de Blasio’s term, a gap the mayor’s office did not directly
MICHAEL APPLETON / MAYORAL PHOTOGRAPHY OFFICE
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address. The administration did not explain how the mayor complied with a clause saying he could not seek support from anyone with a matter before or about to be pending before his administration, nor did it say whether the COIB guidance was based on the federal Internal Revenue Service and the New York Attorney General’s Office recognizing the groups as certain classes of nonprofits. Instead, the mayor’s office referred to a brief statement by the mayor’s counsel, Maya Wiley: “There was a process in place to insure that this guidance was scrupulously followed.” But for government watchdogs, it’s not at all clear that de Blasio is living up to his pledges of transparency, let alone his promise of full compliance. “It is concerning that there are legitimate questions about whether the mayor and his team followed the limitations set upon it by the COIB letter and whether it has sufficiently reported its activities as required every six months,” Citizens Union Executive Director Dick Dadey said. “We have seen the office of the mayor enter onto a new level of political terrain in using a nonprofit to advance his political agenda – with a nonprofit that also was raising money from people who do business before the city, which amounts to more or less being a political committee, and not just a nonprofit organization.” DAYS BEFORE DE BLASIO took office, his 2013 campaign manager Bill Hyers and two others who worked on the campaign filed paperwork with the state to register the Campaign for One New York as a charitable organization, which they said would advocate for New York City by publicizing policy options. Eight days into his term, de Blasio received the directive from COIB providing the guidelines for his involvement with the nonprofit group. The COIB is charged with interpreting and enforcing the city’s Conflict of Interest Law and does everything from scanning annual financial disclosure forms
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of some 8,500 city employees and others to handing out posters encouraging ethical awareness. The COIB memo said the mayor could not target his appeals to anyone with a matter pending before – or “about to be pending before” – his administration. It also said that he had to inform anyone he approached that a decision to donate would not result in any favor or disfavor with City Hall. Additionally, it said he must note that he solicited support for the group in biannual reports, as the city’s Conflicts of Interest Board requires of all agency heads and elected officials. However, the COIB website does not include any such filings from the mayor’s office for two
York City Department of Parks and Recreation Commissioner Mitchell Silver detailed which organizations’ gala and benefit invitations he accepted, the dates of the events he attended and whether he spoke at them. BY JAN. 24, 2014, the Campaign for One New York received its first contribution, according to its voluntary donor disclosure reports. Over the next year or so, the group supported and played a role in the creation of two other nonprofits. One, The Progressive Agenda Committee, was established in Washington, D.C., in July 2015 and aims to address income inequality by advocating for policies that strengthen the middle class. The
to his affordable housing plan. The dissolution announcements, however, did not shield the nonprofits from increasing scrutiny as news broke of several probes into figures tied to the Campaign for One New York. Authorities are reportedly examining whether donors contributed in exchange for favorable action at City Hall and whether operatives who worked toward de Blasio’s goal of flipping control of the state Senate to Democrats in 2014 intentionally evaded contribution limits. The mayor has repeatedly said his team behaved legally and appropriately, and nobody has been charged with a crime in these cases. Investigators sent subpoenas to the mayor’s
“I FOLLOW CONFLICTS OF INTEREST BOARD GUIDELINES IN ANY THING I DO.” - Mayor Bill de Blasio disclosure periods at the beginning of de Blasio’s term: Oct. 1, 2013 through March 31, 2014, and April 1 through Sept. 30 in 2014. The mayor’s office did not respond when asked to clarify if de Blasio had failed to make a required disclosure – or if the lack of reports indicated he did not solicit any support for nonprofits during his first nine months in office. COIB General Counsel Wayne Hawley declined to comment on the mayor’s omission. The mayor’s office did file later disclosure reports, but they contain fewer details than those submitted by some elected officials or commissioners he appointed. For instance, the October 2014-March 2015 report listed only the names of five organizations the mayor’s office said it solicited funds or in-kind contributions for, which included the Campaign for One New York. In contrast, during that same period, New York City Comptroller Scott Stringer listed the exact dates he sent letters to journals, spoke at events and sat on honorary committees on behalf of nonprofits. Similarly, New
other, United for Affordable NYC, was incorporated in New York in February 2016 with a mission of supporting public policies that will make living, attending school and working in New York City more affordable. In February 2016, the government watchdog group Common Cause New York asked the COIB and the city’s Campaign Finance Board to investigate whether the mayor or the nonprofits had violated the city’s conflict of interest and campaign finance laws. Common Cause raised questions about conflicts posed by the Campaign for One New York employing public relations professionals who also work for groups that do business with the de Blasio administration at City Hall. Shortly afterward, de Blasio announced that the Campaign for One New York would be shutting down its operations, saying it achieved its goal of getting state funding for universal pre-K. United for Affordable NYC said it would begin disbanding in March, after the City Council voted on zoning plans the mayor viewed as integral
office and some of its allies, including the Campaign for One New York, de Blasio aide Emma Wolfe, the nonprofit’s treasurer Ross Offinger and BerlinRosen, a public relations firm hired by the Campaign for One New York that also worked on the mayor’s 2013 campaign, according to The Wall Street Journal. Earlier this month, developer and potential mayoral candidate Don Peebles told DNAinfo de Blasio personally called him in March 2014 and sought a contribution to the Campaign for One New York while Peebles’ firm was seeking consent from the city to convert a building into condominiums. If Peebles’ allegations are true, de Blasio’s actions appear to violate the COIB’s directions. In its memo, the board said the mayor could not request support from people or organizations with a matter pending or about to be pending before any executive branch office or agency through targeted solicitations, such as oneon-one phone calls, meetings and personal letters. Although it’s unclear which donors de Blasio
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may have personally appealed to for funding, NY1 reported that dozens of contributions to the Campaign for One New York came from those that had business before the city. When asked for clarity on the de Blasio administration’s interpretation of when matters are “about to be” pending, de Blasio’s office did not directly respond. Instead, the administration sent a statement from Wiley asserting it had complied with the COIB letter. “The COIB letter is clear,” Wiley wrote. “It permits solicitations of people who do business with the city. It only bars the solicitation by the mayor of someone ‘with a matter pending or about to be pending’ before the city. There was a process in place to insure that this guidance was scrupulously followed. The Conflicts of Interest Board’s guidance also applies to city officials and employees. Nothing in it or the Conflicts of Interest laws restrict the Campaign for
ED REED/DEMETRIUS FREEMAN/MAYORAL PHOTOGRAPHY OFFICE
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Mayor Bill de Blasio votes in 2014. His support of Senate Democrats that year is under investigation.
“(THE COIB IS) MORE LIKE YOUR PARENTS, WHICH ARE GOING TO SAY, ‘MAYBE YOU SHOULDN’T DO THAT; THAT’S PROBABLY NOT A GOOD IDEA .’” - John Kaehny, Reinvent Albany executive director
One New York or its supporters from fundraising.” IN ITS MEMO, the COIB noted that the Campaign for One New York described itself as “a charitable organization,” which is required to register and report under a state law enforced by the New York Attorney General’s Charities Bureau. The COIB memo also noted that the nonprofit expected to qualify as a tax-exempt organization under the federal Internal Revenue Code. None of the three nonprofits, however, have received determination letters from the IRS recognizing them as tax exempt.
A representative who had worked for United for Affordable NYC said its lawyers considered varying opinions on whether the nonprofit needed to register with the New York State Attorney General’s Office. So to be safe, United for Affordable NYC began that yet-to-be-completed process in February. The mayor’s office did not directly respond to an inquiry about whether it believed the official status of the groups in the eyes of the attorney general and IRS changed any aspect of the COIB directive. When asked how the COIB viewed various nonprofit classes, the COIB’s Hawley pointed to a written
opinion on the matter that fails to distinguish between charitable and noncharitable nonprofits or how the federal and state government classifies organizations. Representatives for The Campaign for One New York and The Progressive Agenda Committee said the groups had sought determination letters from the IRS confirming that they are 501(c)4s, but have not yet received them. United for Affordable NYC declared itself to be a 501(c)4, according to a spokesman who worked for the group. Unlike traditional nonprofits, 501(c)4s, which are also known as social welfare organizations, are
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not required to apply to the IRS. Alternatively, they can notify the IRS they’re operating as 501(c)4s while filing tax paperwork, according to Rob Lyons, the tax director of exempt organizations at Marks Paneth LLP. Lyons said many 501(c)4s do submit a form to the IRS seeking a so-called determination letter verifying that the group is exempt from paying taxes because it boosts their reputations. On the state level, a spokesman for Attorney General Eric Schneiderman declined repeated requests to explain, on the record, laws and rules governing when nonprofits need to register with the attorney general’s office, which is charged with enforcing these regulations. But Lyons said any group seeking to solicit support from New Yorkers or state establishments must register with the attorney general’s office before doing so and then file annual reports. Solicitations, he said, are any verbal or written requests for support, including writing on a website that prompts New Yorkers to donate. Although some
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smaller organizations that do not anticipate fundraising substantial amounts are exempt, Lyons said if these nonprofits accrue $25,000 in solicited assets at any point during a fiscal year, they must register with the attorney general’s office within 60 days. The Campaign for One New York registered with the attorney general’s office before it reported receiving contributions. The Progressive Agenda Committee submitted paperwork to Schneiderman’s office in October 2015, but noted on its registration form that the group began soliciting New Yorkers a month and a half before that. The United for Affordable NYC representative said it began registering with the attorney general’s office in February. The Campaign for One New York gave a six-figure seed grant to United for Affordable NYC, according to a Feb. 3 article in Politico New York. However, the spokesperson said the funding stream was, in fact, an unsolicited gift with no strings attached. On Feb. 12, a few days after the Politico article was
published, United for Affordable NYC formally established itself as a nonprofit corporation in New York, according to state Department of State paperwork. The group has accumulated more than $25,000 in contributions, according to the spokesperson. At the city level, the Conflicts of Interest Board’s enforcement strategy seems to lean heavily on public scrutiny. The board views disclosure as the primary purpose of the biannual reports listing which nonprofits officials fundraised on behalf of and has never fined someone for failing to submit one, according to Hawley. Some good government groups would like the COIB to adopt a more aggressive stance when it comes to enforcement. Dadey, of Citizens Union, said perhaps it was time the city revisit the Conflicts of Interest Law to ensure it makes sense in the postCitizens United era. Others, such as Reinvent Albany Executive
Director John Kaehny, said reformers should look beyond the traditional nonprofit regulators and instead bolster enforcement of lobbying laws and rules because most concerns centered around conflicts in that industry. “(The COIB is) more like your parents, which are going to say, ‘Maybe you shouldn’t do that; that’s probably not a good idea,’ but they’re probably not going to put you in jail for doing that. So the COIB should not be looked at as an enforcement agency in the same way that the Campaign Finance Board enforces campaign finance rules,” Kaehny said. Kaehny said the attorney general’s Charities Bureau is “terrible” and that the office verges “on dysfunctional,” while IRS charity enforcement “has been obliterated by congressional budget cuts over the last four years.” “So,” he said, “there basically is no nonprofit enforcement in New York.”
LEADERSHIP
New York
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Mayor Bill de Blasio and announces initial financing for nearly 600 affordable apartments across the city under the One New York banner in March.
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N O T H G I L T O SP
INSURANCE
i s l i ke e c n a r u ing ins ical checkup v a h , e l y peop , getting a med it’s always a n a m r Fo he lawn age payment – numbingly t g n i w mo a mortg but it ’s mindg n i k a or m to d o , g n i h t good e. of the insurance y c li o p d mundan n a s c ti li o Dig into the p tory entirely. s r e th o n a ’s it d n a industry, however, l health care ra e d fe ’s a m a b O k President Barac ever since ld e fi le tt a b n a is rt pa reform has been a d the changes it ushered in an it was introduced, local levels. d n a te ta s e th t a t u continue to shake o urance came under scrutiny s Providers of flood in torm Sandy, and lawmakers rs in the wake of Supe ne to hold them o d e b to s d e e n still say more ride-sharing m o fr , ts n o fr r e th o rules and accountable. On e c n ra u s in e th , e c cti to medical malpra vernments put o g l a c lo d n a te ta s regulations that ns totaling o ti a ic if m ra l ia c n a n in place can have fi f dollars. so millions and million
CONTE N
TS
21 … B ILL TO CU T C LI T I G A IVIL TI S T U CK O N I N T E R E S T R ATE IN NEU S BY ASH T LEY HU R AL PFL 24 … L AW R E M ED M AK ER S M U LL IE C O L L A S F O R I N SU R ER S A P SE O F FT BY JON HE ALT H R EPU ER LENTZ BLI C Q U I CK TAKES … MARJO RIE CAD OGAN, DONNA KEV F AND M RESCATORE, JA IN CAHILL, ARK TR MES SE EYGER WARD
Read up on all this and more in City & State’s sp section on insurance – ecial we’ve got you covered .
IMPACT OF INSURANCE IN NEW YORK The insurance industry is a major contributor to New York State’s economy and communities—providing financial security to consumers and businesses and vital services to people in their time of need. Let’s take a look at the numbers!
$40 Billion in Economic Output
The insurance industry’s contributions to the New York State economy accounted for 3% of the state’s gross domestic product. This amount puts insurance on par with the construction industry and above a variety of other key industries including utilities and transportation.1
$23.1 Billion in Claims
Insurance provides New Yorkers with financial security and enables people to live life to the fullest. Individuals would not be able to own a home, drive a car or start a 3 business without insurance.
$7.5 Billion
AUTO INSURANCE
$2.2 Billion
HOMEOWNERS
$3.8 Billion
WORKERS COMPENSATION
$18.4 Billion in Municipal Bonds
Insurance companies invest the premiums they collect in state and local municipal bonds, helping to fund the building of roads, schools and other public projects.5
$1.3 Billion in Taxes Premium taxes paid by insurance companies in NY totaled $1.3 billion in 2014, in addition to numerous other taxes, assessments and fees.2
$1 Billion in Charity
By donating financially to a myriad of worthy causes, NY insurance companies and agents contribute to philanthropic giving of $1 billion annually on a national level. Even more importantly, employees dedicate their time to help those in need—whether it’s Meals on Wheels, flood recovery efforts or building a playground. The industry is always looking 4 to make a difference.
196,781 Jobs NY boasts one of the largest insurance workforces in the country. The Empire State is ranked fourth in the nation.6
Employing New York Insuring New York Moving New York Forward 1. U.S. Bureau of Economic Analysis, 2013 2. U.S. Department of Commerce, 2014 3. SNL Financial, 2014 4. Insurance Industry Charitable Foundation, 2014 5. SNL Financial, 2013 6. U.S. Bureau of Labor Statistics, 2014 CS0015_FP.indd 1
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SPOTLIGHT: INSURANCE
The standoff over civil litigation interest rates in Albany By ASHLEY HUPFL
Quick Takes
MARJORIE CADOGAN EXECUTIVE DEPUTY COMMISSIONER, HUMAN RESOURCES ADMINISTRATION’S OFFICE OF CITYWIDE HEALTH INSURANCE ACCESS
ON EXPANDING HEALTH INSURANCE COVERAGE IN NEW YORK CITY ...
“The most recent Census Bureau data for 2014 reveals an uninsured rate of 11.4 percent for New York City, the lowest rate the city has seen in several years. The Human Resources Administration provides Medicaid for over 2 million New Yorkers. In addition, over 1.2 million city residents have received health insurance plus financial help through the New York State of Health as of February 2015. These milestones are shared achievements, drawing upon the allied work of HRA’s Medical Assistance Program, the Department of Health and Mental Hygiene and Health + Hospitals in their distinct efforts to reduce the number of uninsured residents. “However, these notable numbers are not the whole story. Through the citywide initiative known as NYC Health Insurance Link, HRA’s Office of Citywide Health Insurance Access has worked with many key city agencies, making insurance outreach, education and enrollment assistance available and accessible. HRA partners with health insurance assistors from community organizations and managed care plans to help uninsured New Yorkers find and enroll into coverage where they live, work and play, including all public schools, on many CUNY campuses, as they seek new employment opportunities at the city’s Workforce1 career centers, and at many other agency sites. “Leveraging this partnership network is central to HRA’s ongoing work to assist New Yorkers still uninsured – including immigrants, elderly, disabled and young adults – to find the coverage and care that they need and deserve.”
WITH INTEREST RATES hovering near zero ever since the 2008 financial crisis, one state lawmaker has been pushing to reduce the fixed level of interest on civil litigation judgements by linking it to the substantially lower nationwide rate. Instead of the current fixed rate of 9 percent, state Sen. Joe Griffo has been introducing legislation since 2011 that would tie the legal rate of judgements to the floating market interest rate. Although the legislation has drawn opposition from the state’s trial lawyers lobby, such a move would not be unprecedented. Nearly half of U.S. states use the federal interest rate as guide for determining interest on judgements, according to the New York Insurance Association, although the formulas vary from state to state. Griffo’s bill would tie the state’s civil judgement interest rate to the weekly average one-year constant maturity Treasury yield, as published by the Federal Reserve’s Board of Governors. As of April 29, the federal post-judgement interest rate was 0.58 percent. Ellen Melchionni, president of the New York Insurance Association, argued that using such a high interest rate for civil litigation judgements in New York is hurting businesses and costing
New Yorkers money. “Right now, at 9 percent, these judgements are costing consumers more as businesses are forced to raise prices on their goods and services,” she said. “It also leads to higher taxes for all New Yorkers because many of the lawsuits are against municipalities, so they recoup that money through higher taxes.” Griffo’s bill memo describes the changes to the state’s fixed 9 percent interest rate as saving about $9.5 million in the state’s civil justice system and further resulting in lower costs of doing business and living in New York. “Passage of this bill will also help reduce the burden imposed by an overly generous tort system,” the memo argues. “Many of our sister states have enacted comprehensive tort reform thereby attracting business development and New York simply cannot afford to retain rules which result in windfall recoveries in tort cases.” Griffo’s memo also claims the state would save $2.6 million, while New York City would save $1.5 million. “When interest rates were 15, 17, 19 percent long ago, 9 percent was still generous, but below what the market was bearing,” Melchionni said. “In the environment we have (now) we
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think it’s right for this issue to be addressed.” The bill has not advanced from the state Senate banking committee and has no co-sponsor in the Assembly. Melchionni claimed that the reason it has not advanced in Albany is due to the opposition of the influential New York State Trial Lawyers Association. “The trial lawyers want to keep the current system because right now it’s extremely lucrative,” Melchionni said. “We’re fighting against the trial lawyers – this is their bread and butter. They’re influential, as you know, in the Albany arena and they’re our main opposition.” The NYSTLA declined to be interviewed for this story. However, a year ago it issued a memo of opposition to Griffo’s legislation, arguing that it would discourage settlements by providing an incentive for defendants to delay the resolution of cases. “If the return on invested funds exceeds the interest rate on a judgment, a defendant’s insurance carrier would have a strong financial incentive to defend actions that would otherwise settle,” the group said in the memo. “Promoting settlements where appropriate, and not discouraging them as this bill would, should be a priority for the legislature as settlements reduce the costs of litigation and free court resources for other pressing matters.” Additionally, the group argued that Griffo’s bill would be especially damaging to people who file personal injury lawsuits. In such cases, unlike in other legal actions, interest begins to accrue only at the date of judgement rather than when the actual injury is suffered. “This is especially unfair when one considers that lost earnings, medical bills, and other losses are expenses that the victim incurs immediately,” the group’s memo said. “Reducing the rate of interest that accrues after the judgment and before its satisfaction only compounds the injury.”
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LICENSE AND REGISTRATION, PLEASE
Some New Yorkers, seeing a chance to save money, register their cars in states like North Carolina, where the average cost for auto insurance is half New York’s. This fraud takes money out of the pool and raises the Empire State’s rates even higher – but there’s no simple solution to fix it. Here’s a look at the fraud by the numbers:
$1,181.86 YEARLY COST of AUTO INSURANCE in NEW YORK IN 2013, the third-highest in the nation Average
DAYS
given to register a vehicle in New York after becoming a resident of the state
$72..7
million
10
Lost revenue from unpaid parking tickets issued to out-of-state vehicles in New York City in 2010
%
ESTIMATED PORTION OF NEW YORK CITY CARS THAT WERE REGISTERED OUT OF STATE, ACCORDING TO A 1987 CRACKDOWN BY THE CITY’S DEPARTMENT OF FINANCE
SOURCES: INSURANCE INFORMATION INSTITUTE, NEW YORK STATE DEPARTMENT OF MOTOR VEHICLES, THE INDEPENDENT DEMOCRATIC CONFERENCE, THE NEW YORK TIMES
CityAndStateNY.com
Quick Takes
KEVIN CAHILL CHAIRMAN, ASSEMBLY INSURANCE COMMITTEE
Quick Takes
MARK TREYGER CHAIRMAN, NEW YORK CITY COUNCIL RECOVERY AND RESILIENCY COMMITTEE
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ON INSURANCE ISSUES TO BE RESOLVED THIS SESSION ... “We in the Assembly continue to await action in the state Senate on our comprehensive package of bills to deal with and hopefully prevent the dislocation that might occur as a result of another natural disaster such as Superstorm Sandy. Our house has repeatedly passed a series of consumer protections only to watch them die in the state Senate. “We are also continuing to work on relief for small contractors when it comes to scaffolding liability. Our pilot project would provide insurance to qualified small contractors and make safer places for New Yorkers to work. In addition, we await Senate action on a variety of measures to improve automobile coverage in New York state. Meanwhile, we do expect to come to a satisfactory conclusion on providing insurance for transportation network companies such as Uber and Lyft, help New York-based life insurance companies further modernize and stay competitive in the increasingly world-based market, and carry on with changing health care under the Affordable Care Act and New York State of Health.”
ON HOLDING INSURANCE COMPANIES ACCOUNTABLE AFTER SUPERSTORM SANDY ... “Since 1968, the federal government has subsidized flood insurance for single-family homes through FEMA’s National Flood Insurance Program. While private insurance companies are responsible for issuing individual policies and carrying out claims evaluations, the policies are entirely underwritten by the NFIP. After Sandy, these insurance companies were not on the hook for any of the damages, and yet, in case after case, they deliberately altered assessments to decrease payouts to homeowners. Engineering reports documenting on-site inspections of structural damage were edited before being finalized. Adjustors applied ‘creative’ accounting techniques, lowballing taxes and materials costs, to produce penurious replacement estimates. In one case which came before my committee, an adjustor managed to decrease an estimated $80,000 worth of damages to a $320 repayment. “Initially, if a homeowner wished to dispute their underpayment, their only recourse was litigation. FEMA now operates a complaint phone line, and will conduct an objective review of any engineering or adjustor report under dispute. Unfortunately, the systemic issues that enabled and incentivized this injustice remain. An investigation by a U.S. Senate committee last year failed to hold the NFIP accountable for the widespread underpayment of Sandy claims. With the revised 100-year flood maps scheduled to go into effect in the fall, requiring more homeowners to purchase flood insurance, the NFIP must aggressively reform its oversight of insurance companies, or else we risk repeating the travesty that occurred after Sandy.”
Increasing Health Care Costs
12.2% Rx costs 4.1% Hospital costs 4.6% Doctor costs Growth in health care spending is accelerating at an unsustainable rate. Seventy-five percent of plans on the NY State of Health exchange reported operating losses in 2014. Losses for the individual market alone totaled more than $160 million, according to Standard and Poor’s. Despite continuing increases in costs and mounting plan losses, New York’s Department of Financial Services has cut heath plan premium requests. The past two years, DFS artificially suppressed premium increases, touting it was keeping growth “below the average increase in health care costs.” This practice threatens plans’ financial stability and, by extension, consumers’ access to care. That’s exactly what happened with Health Republic, which state and federal regulators closed suddenly last fall — disrupting coverage for 215,000 New York families and small businesses. New York consumers need and deserve objective and transparent rate setting. The federal ACA says plans can spend no more than 18 cents of every premium dollar on “administrative” costs—including taxes and plan profits. Plans that exceed that cap must pay refunds to their members. That is an objective method for setting rates. New York should repeal prior approval and adopt file and use for rate setting.
By the #s HPA’s Health Plans are responsible for: 10.9 Million Lives Covered 70+ Offices/Locations 52,000+ Employees 224,403+ Physician/Provider Contracts 1,003+ Hospital Contracts $4.4 Billion Health Care Taxes 90 State St., Suite 825 | Albany, NY 12207 | www.nyhpa.org
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SPOTLIGHT: INSURANCE
Lawmakers considering various remedies after the collapse of Health Republic By JON LENTZ
“THE COLLAPSE OF HEALTH REPUBLIC BEGGED THE QUESTION OF WHETHER WE NEEDED TO CONSIDER A TOTAL REPEAL OF THE PRIOR APPROVAL SYSTEM.” —STATE SEN. JAMES SEWARD
HEALTH REPUBLIC, the nonprofit health insurance company set up in New York to offer low-cost coverage under the Affordable Care Act, suffered a premature death last fall. Now, while regulators conduct an autopsy of the company, state lawmakers are exploring how to prevent other health insurers from suffering the same fate – or at least to ease the financial pain that comes with such a collapse. One major proposal the state Legislature is considering is a new
fund that would cover customers and medical providers for any unreimbursed costs if another health insurance company goes under. A number of lawmakers in both houses, most of them Democrats, have signed onto legislation that would create a socalled guaranty fund, which would be paid for with a one-time tax assessed on other health insurers in the market. The other key change that lawmakers are considering is an overhaul of the way health
insurance rates are set. Since 2010 New York has had in place a prior approval process in which state regulators review and sign off on rates charged to customers. Some lawmakers have called for more transparency in how rates are set. Other lawmakers have gone further, calling for doing away with the prior approval process entirely. The proposals, which were introduced earlier this year, are likely to be further debated before the end of this year’s legislative session in mid-June. However, they still have serious obstacles to overcome before becoming law. Prior approval has long been a source of concern in the industry. A year before the process was established in New York, the Business Council of New York State warned in a memo that “reintroducing price controls could financially weaken some insurers to the point of impairment or insolvency.” Supporters counter that a review process is essential to protect customers from exorbitant rate hikes, citing double-digit increases before prior approval was implemented. But industry insiders argue that the process has become politicized – and they say that the case of Health Republic proves it.
Under current law the state Department of Financial Services, which oversees New York’s health insurance industry, reviews proposed rate hikes each year, which it can adjust before granting final approval. After Health Republic set surprisingly low initial rates in 2013, it tried to raise them the following year. But DFS rejected Health Republic’s request for a 15 percent hike, allowing a 13 percent increase instead. Although the state regulator has the power to raise or lower rates, it reduced every single request that year. “We closely scrutinized the proposed rate increases insurers requested and reduced them significantly where appropriate,” Ben Lawsky, then the superintendent of DFS, said at the time. But Paul Macielak, the president and CEO of the New York Health Plan Association, a trade group for insurers, issued a statement the same day calling all of the approved rates “inadequate.” “The bottom line is inadequate rates will result in reducing product choice or otherwise destabilizing the market, which is ultimately harmful to the health care system as a whole and to the consumers who rely on it,” Macielak said.
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So when it became clear late last year that Health Republic was struggling to balance its books, and when it was eventually shut down, critics blamed DFS for its failure to identify and adequately address the brewing financial problems. DFS has focused instead on the business problems within Health Republic. In November, the regulator announced that it was investigating “representations to the state about the company’s financial condition” after finding that its “finances were substantially worse than the company previously reported to the state.” Last month DFS began the official process of liquidating Health Republic. State Sen. James Seward, the chairman of the Senate Insurance Committee, told City & State that he already had concerns about the prior approval process before Health Republic was forced to shut down. He sponsored legislation to make the prior approval process more transparent, and it passed unanimously in the Senate last session but did not advance out of committee in the Assembly. “The collapse of Health Republic begged the question of whether we needed to consider a total repeal of the prior approval system,” Seward told City & State via email this month. The other proposal, a guaranty fund, has also garnered mixed reviews. Supporters point to the fate of Health Republic as evidence of the need for such a fund. The insurance company, which first began providing coverage in 2014, attracted more than 200,000 customers, far more than anticipated, but its low rates contributed to the financial problems that ultimately shut it down. Now, over a quarter of a billion dollars has been asserted as being owed to doctors, practices and hospitals, Assemblyman Kevin Cahill, chairman of the Assembly Insurance Committee, told City & State. “Over and above that, a small army of other claimants have come forward seeking recompense
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for their losses in dealing with Health Republic,” Cahill said in an email. “To add insult to injury, the federal government appears poised to assert a right to reimbursement of the fractional portion of the funds they provided when the promise of a federal ‘backstop’ was reversed by Congress in one of their many attempts to ‘kill Obamacare.’” Supporters have noted that New York is the only U.S. state that does not have such a fund. But opponents remain unconvinced. Some worry about the burden on other health insurance companies. Seward said insurers in New York are already subject to the state’s Health Care Reform Act, which governs hospital reimbursements and assesses fees. “While New York is the only state without a health insurance guaranty fund, New York is also the only state with HCRA assessments and surcharges,” Seward said. “These taxes already total upwards of $5 billion. A guaranty fund would serve as another tax on health insurers and would ultimately be passed on to consumers through higher premiums and increased health care costs.” While lawmakers haven’t come to an agreement on how to address the potential for the collapse of a health insurance company in the future, they have tried to address the immediate crisis. In this year’s state budget, they approved a fund to bail out hospitals and medical staff for their losses. However, even that initial step is incomplete. The state Senate called for using funds from the state’s financial services bank settlements to pay off Health Republic’s debt, but Cahill told City & State that the Legislature has yet to actually allocate any money for the fund. “It is important to note, however, that no appropriation was made, nor was any provision for making one to pay even a penny of those claims,” Cahill said. “Indeed, the wording of the budget language requires further direct legislative action before the fund can be activated.”
Quick Takes
JAMES SEWARD CHAIRMAN, STATE SENATE INSURANCE COMMITTEE
Quick Takes
DONNA FRESCATORE CHAIRMAN, NEW YORK STATE OF HEALTH
ON INSTABILITY IN THE MEDICAL MALPRACTICE MARKET ... “A significant portion of instability in the medical malpractice market in New York is because a majority of the business is concentrated within a small number of insurers. Moreover, the finances of some of these insurers is troublesome. Another contributing factor is the recent increase of risk retention groups (RRGs) – out-of-state insurers not subject to New York’s rules and regulations. “In an effort to address the instability, I have introduced S.7339, which removes the requirement that excess line brokers must obtain a declination from the Medical Malpractice Insurance Pool before the broker can place primary malpractice insurance in the excess line market. Because the MMIP does not decline such risks, except in the rarest of circumstances, this effectively bars the excess line market from this type of business in New York. By repealing the declination requirement, doctors, dentists and general hospitals will be offered a broader array of choices, products, terms and conditions to better suit a professional’s particular insurance needs. All insurers will be permitted to continue to offer their current malpractice insurance products, but the addition of excess line insurers will increase available options. “Overall, my legislation will bolster the marketplace, provide medical professionals with more secure coverage options, and benefit consumers who need support in the event of an unfortunate medical situation.”
ON HOW NEW YORK STATE OF HEALTH PLANS TO MEET ITS GOAL OF ENROLLING AN ADDITIONAL 470,000 PEOPLE IN 2016 ... “NY State of Health has enrolled over 2.8 million New Yorkers in comprehensive health insurance coverage. The state’s uninsured rate is the lowest it has been in decades, and since 2013 over 850,000 previously uninsured New Yorkers have gained access to coverage. Further reducing the number of uninsured New Yorkers will require that we focus on three primary areas. First, we will need to continue to design and tailor the insurance products offered on the marketplace to the needs of New Yorkers. The new Essential Plan, available through the marketplace starting in 2016 for qualifying adults, is a great example. With comprehensive coverage, low outof-pocket costs and premiums of less than a dollar a day, it’s no surprise that the Essential Plan has been met with enthusiasm throughout the state. “Second, we will need to continue to provide consumers with an online shopping experience and the high-quality customer service that they have come to expect in today’s world. Continuous quality improvement is central to the marketplace’s ongoing success. “Finally, our experience tells us that in order to reach those New Yorkers who have yet to sign up for coverage, we will need to continue and expand our partnerships with organizations that serve a diverse array of communities throughout the state to spread the word and educate people about the importance of having coverage and access to care.”
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A fresh perspective on opinions / Edited by NICK POWELL
MAYORAL CONTROL ‘DEBATE’ DOUBLES AS GRANDSTANDING OPPORTUNITY
By NICK POWELL
ABSURDLY OBSEQUIOUS THAN THE MAYOR OF THE NATION’S L A R G E S T CIT Y
traveling three hours north to beg a bunch of legislators from small upstate locales for permission to run his school system. But there was Bill de Blasio last week in the state Capitol, straining to be polite in making the case to the state Senate Education Committee for why mayoral control of public schools should be extended another seven years. Of course, in the wake of the corruption investigations swirling around de Blasio, the highly public setting of this hearing doubled as a perfect opportunity for political grandstanding. Cue Terrence Murphy, a Republican representing parts of Westchester County, who drew the
Justin Wagner, was one of the Democratic Senate candidates who benefited from the contributions that de Blasio’s team funneled through the Putnam, Monroe and Ulster County Democratic committees. Sen. Murphy was also a steadfast ally of the recently convicted ex-Senate Majority Leader Dean Skelos, calling him a “true gentleman” after he was indicted on corruption charges.
If Senate Republicans were really concerned with the pay-for-play allegations that seem to permeate City Hall,
C E R TA I N LY DIDN’T VOICE THE SAME CONCERNS W H E N M IC H A E L BLOOMBERG WAS M AYO R a n d a l l o w e d they
charter schools to proliferate throughout
DEMETRIUS FREEMAN / MAYORAL PHOTOGRAPHY OFFICE
THERE ARE FEW political acts in New York more
extraordinary conclusion that because the mayor allegedly violated state campaign finance laws, he was somehow ill-equipped to run a school system. “Convince me. Convince me why I should vote for mayoral control with all the allegations that are going on in your office,” Murphy said. Murphy has an obvious axe to grind with de Blasio. After all, Murphy’s 2014 opponent,
Mayor Bill de Blasio testifies at a state Senate hearing to urge an extension of mayoral control.
NYSlant.com
New York City, largely unregulated. If Senate Republicans want to have an honest debate about mayoral control, they should ask de Blasio about instituting checks and balances into the oversight of public schools, or the Department
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of Education’s contract procurement process (especially as it relates to parochial schools and Yeshivas getting universal pre-K contracts), or examine the approval power over co-location. De Blasio is an easy target, and the legal
process may indeed find his campaign finance actions to be illegal. But using a hearing
WITH IMPORTANT I M P L IC AT IO N S F O R M IL L IO N S OF STUDENTS as a
political points is a waste of taxpayer dollars. Convinced?
NICK POWELL is editor of New York Slant.
vehicle to score cheap
DE BLASIO’S HOSPITAL REORGANIZATION PLAN SHOULD INCLUDE CLOSING HOSPITALS
JIM.HENDERSON
By YEVGENIY FEYMAN
Bronx North Central Hospital has seen its number of patients dwindle by over 30 percent since 2012.
NEW YORK CITY’S public hospitals, under the NYC Health + Hospitals umbrella (previously known as the Health and Hospitals Corporation), have long provided care for the indigent and the uninsured. Yet a slew of factors – some unique to the system, others less so – are squeezing the system’s budget. Mayor Bill de Blasio’s plan for a reorganization of the hospitals is laudable, and includes important proposals, but it should go even further. T h e m a y o r ’ s reorganization plan raises the city’s subsidy to the system from $1.3 billion to $2 billion by 2020. But even with this infusion, the hospital system will still be insolvent; by 2020, this would still leave Health + Hospitals with a $1.1 billion deficit. Inpatient admissions declined by about 5 percent at Health + Hospitals facilities between 2012 and 2014, according to state data. Not only does this make outpatient revenue more important, it also reduces the need for expensive large hospital infrastructure. One of the biggest factors is the Affordable Care Act’s reduction in federal subsidies to
hospitals with large shares of Medicaid and uninsured patients (“Disproportionate Share Hospitals,” or DSH funding), under the theory that with more insured patients this supplemental funding will be less important as these new payments help replace the previous subsidies. Health + Hospitals is in a particularly difficult position, however, given that some 80 percent of its patients are either uninsured or covered through Medicaid. While these cuts have been delayed until 2018, DSH funding to the system is expected to fall from $1.3 billion in 2016 to less than $1 billion by 2020, two years after the cuts kick in. Of course, these cuts are happening while Medicaid receipts to system hospitals are projected to remain mostly flat. The reorganization plan suggests that New York can make changes to its own DSH distribution formula, but that is unlikely to entirely offset these reductions. Nevertheless, that doesn’t mean that the city is simply left to subsidize HHC’s constant losses. For instance, the system is participating in the state’s Medicaid
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reform efforts (the Delivery System Reform Incentive Payment program, or DSRIP). If Health + Hospitals meets all performance metrics appropriately, it stands to gain $1.2 billion over the five year program – most of this funding, however, is accounted for in the budget. But participating in the payment program should also lead to broader, system-wide changes that put greater emphasis on value-based care and disease prevention. If this generates savings elsewhere – for instance, by reducing readmissions (and getting dinged with fewer penalties by Medicare) or earning quality-based payments
for keeping patients healthy – a leaner system with lower costs could potentially emerge. Yet, even with the additional incentive payment funding, Health + Hospitals will likely need significant reorganization, as de Blasio has noted in his executive budget. While the mayor has dismissed the idea of shutting down facilities, there may be little choice – in fact, it may be beneficial. By 2014, for instance, two Health + Hospitals facilities were failing to improve in Medicare’s readmission reduction program, losing more money since the program had started. One of these facilities, Bronx
North Central Hospital, has seen its number of patients dwindle by over 30 percent since 2012; in 2014, it saw 42 percent of its beds go unused. The solution may very well be shutting down such hospitals (or at least reducing bed capacity). The reorganization plan does make important proposals, including those addressing social determinants of health like supportive housing. But it also relies on reducing the pain of less DSH funding, which may not be a realistic option. Similarly, as the Obama administration has discovered, reaching out to and enrolling those who are still uninsured (and thus increasing
revenues) is a difficult task. While these efforts should certainly be included, there is simply little reason why lowvolume hospitals that deliver average or belowaverage care need to remain open. Rather than avoiding what might happen anyway, Health + Hospitals should consider the significant cost savings that might accrue from shutting down these facilities that are a burden on the system.
Yevgeniy Feyman is deputy director of health policy at the Manhattan Institute.
GIVE LOW-INCOME TENANTS A FAIR CHANCE IN HOUSING COURT By RUBEN DIAZ JR.
blueprint for providing attorneys to tenants facing eviction, ejectment and foreclosure proceedings. The bill would provide improved access to justice for individuals earning up to 200 percent of the federal poverty level. It is imperative that we take an expansive approach to solving this problem.
THERE IS AN undeniable homelessness crisis in this city, one that underscores the importance of increased representation of lowincome tenants in eviction proceedings. Anyone doubting the relationship between homelessness and the evictions and possessions of the dwellings of low-income tenants need only look at available data, which show that thousands of families entering the shelter system have just faced eviction. New Yorkers need a City Council hearing on Intro 214-A, the bill introduced by Councilman Mark Levine which would create a
B UIL DIN G N E W AFFORDABLE HOUSING IS NOT THE ONLY ANSWER.
I support a hearing on Intro 214-A because it promotes justice and because of its potential fiscal merits. Litigants in housing court should play on a fair field, not one where one party has legal expertise and where the other does not know their rights or have access to the same procedural strategies. Homelessness is all too often the unnecessary and unfair result of this inequity – and with great human cost. The deck remains
stacked against low-income tenants, most of whom do not have attorneys, because most landlords have representation in housing court. The financial merits of the legislation should also be explored in a hearing. An analysis of the financial benefits of the legislation must account for the fiscal cost of supporting the homeless and of replacing lost rent-regulated apartments with other affordable housing. A recent study released by the New York City Bar Association found that Intro 214-A would save the city $320 million annually, after accounting for the need to replace rent-regulated apartments with other affordable housing and for the state and federal funding that would be saved on shelter costs and other preventative services. Additionally, Intro 214-A would increase access to justice in foreclosure proceedings, which have wreaked havoc on this country over the past decade.
TOO M ANY FAMILIES BECOME H O M E L E S S BECAUSE T HE Y DON’T HAVE AN A D V O C AT E IN COURT or someone to get
them connected with housing financial assistance, like the Family Eviction Prevention Subsidy program, that would allow them to keep their homes Justice requires protecting our most vulnerable from unnecessary eviction and the resulting plight of homelessness. We can do more to both promote fairness in these proceedings and provide representation for the underserved. We can give Intro 214-A the fair hearing it deserves. Ruben Diaz Jr. is the Bronx borough president.
NYSlant.com
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A MIXED BUDGET MESSAGE fiscal year 2017 will be $2.5 billion greater in than fiscal year 2016 (not including $1.5 billion in reserves). Some of this increase had already been planned, but the executive budget adds $1.2 billion to agency appropriations in fiscal year 2017, including $339 million more for a newly integrated Department of Homeless Services and Human Resources Administration reporting to a single commissioner of social services; $217 million more for the Department of Education; and $160 million more for New York Health + Hospitals. The city will also forgive Health + Hospitals’ debt service payments, worth $180 million in fiscal year 2017, and more in later years. In most cases the new funds support important administration goals to improve social services and education, but the additions also include efforts to support City Council priorities such as $17 million more for parks staffing. The added spending creates problems beginning in fiscal year 2018, when
DEMETRIUS FREEMAN / MAYORAL PHOTOGRAPHY OFFICE
MAYOR BILL DE BLASIO’S executive budget and accompanying four-year financial plan send a mixed message about New York City’s fiscal outlook. For the short term, economic performance and local revenues are exceeding expectations this year. As a result, a surplus of nearly $3.4 billion can be “rolled” into next year to create a reserve and support increased spending that accommodates a variety of campaign commitments and new priorities. For the longer term, it warns of more difficult times with less revenue growth and the need for more efforts at savings through efficiencies. The mayor’s plan is that the increased spending next year will be sustained in a less prosperous future through implementation of an enhanced Citywide Savings Program and other gapclosing measures; but the potential danger is that many of the anticipated savings are uncertain, putting future budget gaps at risk of mushrooming. City-funded spending in
By CHARLES BRECHER
the $3.4 billion “surplus roll” from good times is exhausted and revenue growth slows. Recognizing signs of a slowing national economy, the financial plan cautiously relies on conservative revenue projections. Tax revenue growth is projected to slow from 4.7 percent in fiscal year 2018 to 4 percent in fiscal year 2020 compared with growth averaging 6.5 percent from fiscal year 2009 to 2016. The mayor plans to cope with the squeeze by including a $1 billion reserve in each year and by nearly tripling the scale of the recently initiated Citywide Savings Program’s goals for future years. That plan is expected to reduce spending in fiscal year 2020 by nearly $1 billion, a big jump from the $279 million anticipated in January. However, even with the more ambitious savings plan, the city faces budget gaps ranging from $2.2 billion to nearly $3.0 billion after fiscal year 2017. Two major risks that could cause the gaps to mushroom are a failure to achieve all the savings
in the Citywide Savings Program and an inability to implement a viable financial plan for Health + Hospitals. The former risk is serious because a significant portion of the new elements in the Citywide Savings Program is speculative. Notably, $300 million in annual savings depend on the city convincing the state to share Medicaid savings derived from provisions of the federal Affordable Care Act that increase federal funding for some Medicaid enrollees. However, an agreement about this initiative with the state – which controls the Medicaid program – has not been reached. The mayor’s plan also counts on identifying and implementing a solution to Health + Hospitals’ current fiscal crisis. This fiscal year the mayor has bailed out the hospital system with $497 million in emergency support, and the plan commits $180 million annually in future years. But the agency faces projected deficits growing to $1.8 billion in 2020, and its previous plan to close that gap has not been working. A plan developed with the aid of consultants was released along with the mayor’s budget, but the document identifies general strategies rather than specific savings initiatives. A newly appointed commission is being asked to fill in the blanks to create a viable plan; failure to follow up effectively and move quickly to stop the bleeding of cash at Health + Hospitals will impede the mayor in his efforts to keep the city’s budget balanced in the potentially difficult years ahead. Charles Brecher is the director of research at the Citizens Budget Commission
Mayor Bill de Blasio presents the fiscal year 2017 executive budget.
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CityAndStateNY.com
TRACKING PROGRESS A Q&A WITH MARK GREEN
Mark Green, New York City’s first public advocate, served eight years during the Giuliani administration, though he always aspired for higher office. Having run and lost in campaigns for Congress, U.S. Senate – twice – New York City mayor, attorney general and public advocate, New York voters are used to seeing his name on the ballot. Now his name is on a book, “Bright, Infinite Future: A Generational Memoir on the Progressive Rise.” Green spoke to City & State’s Jeff Coltin about his toughest opponent, being a progressive and getting Preet Bharara into politics.
C&S: You’ve been a far-left Democrat for decades – MG: Far-left, did you say? I never use the phrase far-left. It doesn’t exist anymore, and I’m not it! I support Hillary over Bernie. Far-left, I don’t know what that means. But progressive, yes. C&S: Well, progressive. In recent years, there’s been many more high-profile officials calling themselves progressives: Clinton, Sanders, de Blasio, Cuomo. Are you surprised by the Democratic Party’s adoption of that term? MG: Rather than being surprised, I wonder why it took so long. When I was growing up programmatically and politically in the ’60s and the ’70s, I thought of myself as a Louis Brandeis, Ralph Nader progressive Democrat – meaning that “laissez” wasn’t always “faire,” and that citizens, through their democracy, should regulate the excesses of capitalism. I’ve been living and watching the lurching evolution of a progressive majority from the ’60s to ’16. This vindication does not embarrass me. C&S: You have lost races to Schumer, Bloomberg, Cuomo and de Blasio. Who was the most
difficult opponent, strategy-wise? Who scared you the most? MG: Looking back on losing to a political murderer’s row of Bloomberg, Cuomo, Schumer and de Blasio, I began to think that a person couldn’t ascend to New York politics unless they got by me first. Two of those four proved especially difficult by the end. First was Bloomberg, since I had no good strategic answer to his $100-a-vote campaign of 2001 – other than trying to steal his bank account, which I was told was illegal. Second was Schumer, because he had two assets that have distinguished him as the most consequential New York politician of the last half-century: lawfully raised money combined with an unmatchable work ethic. Plus, proven legislative talent. C&S: Throughout your career, you’ve rallied against money in politics. You campaigned against the quid-pro-quo system, but now we’re seeing de Blasio’s team under multiple investigations, the Cuomo administration under an investigation for the Buffalo Billion – are you shocked that this is still happening in New York politics? MG: Dismayed, not shocked. The current rules stink, and will be changed at some point in the near
future when Tea Party and Occupy Wall Street patriots agree that the pay-to-play system corrupts even good people. And the alternative of self-financing multibillionaires is worse for different reasons. If there’s one issue that has animated my public life, from Nader through elected politics to “Bright, Infinite Future,” it’s the dilemma of elections for sale and purchased politicians. That’s why the culminating chapter in this memoir is a manifesto pushing Clinton 45 to create a “democracy czar” in the White House so we have less money and more voters in the political process. C&S: You were New York City’s first public advocate. What are the biggest issues the public needs an advocate on today? MG: I’m not currently in city government, so allow me to be modest about what a public advocate could do. First there’s the necessary but boring stuff on being a watchdog over commissioners and agencies which are dragging their heels in some way – water meter bills, class size, civilian policing complaints. Second would be larger policy initiatives that a mayor and City Council could then consider and adopt as we did back in the ’90s when it came to racial
profiling, marketplace discrimination against women, tobacco and health, and indeed the 311 system itself. C&S: “Bright, Infinite Future.” Where’s the title come from? MG: The book pivots on two contrasting observations about liberals and conservatives: Leonard Bernstein in 1953 said, “A liberal is a person who believes in a bright infinite future”; William F. Buckley Jr. in 1955 said, “A conservative is a person who stands athwart history yelling, Stop!” That contrast was and is still telling. C&S: One of my favorite anecdotes from the book: Preet Bharara actually drove for you? MG: (laughs) Yes, well people laugh at that. I didn’t know what he would become in 1993, but he was asked, “What was your earliest role in politics?” He said, volunteer driver for Mark Green in his ’93 public advocate race. I’d like to hope that he picked up some tips while driving, but that would probably be inaccurate. For the full interview, including Green’s thoughts on the future of American politics and how he thinks Letitia James and Bill Bratton are doing, visit cityandstateny.com.
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New York’s Hospitals and Doctors Have the Nation’s Highest Medical Malpractice Costs—That Makes No Sense Despite fewer adverse events and scoring high on numerous quality measures, New York’s world-class hospitals and doctors spend billions annually on medical malpractice costs—by far the nation’s highest. It’s stark proof of a deeply flawed system. Let’s not make things even worse. We urge the NYS Legislature to reject any bills that would increase medical malpractice costs and weaken the ability of doctors and hospitals to deliver high-quality care.
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