Former Playboy Playmate, Other Finance-Linked Donors, Give Big Bucks to “Sheriff of Wall Street” Eric Schneiderman

NBC News’ local station flagged how state attorney general Eric Schneiderman has received large political contributions from well-heeled donors how have benefitted from his investigations, or conversely, his failure to act on investigations that got started but did not lead to prosecutions.

The NBC News report went to great lengths to stress that there’s no evidence of impropriety. But the optics sure aren’t good. And the reason for a cause for pause is that the New York Attorney General’s Office is resource constrained. So even though the firms and individuals targeted were clearly worthy, one is left with the nagging doubt: did these cases get moved to the top of the pile because these donors had better access and were in a position to get more information before the attorney general’s staff?

The headline-grabber is the odd case of $65,000 coming this January from ex Playboy Playmate Hope Smith, once Hope Dworaczyk. The mystery is cleared up by the fact that her husband is Robert Smith, the head of private equity firm Vista Partners. Smith has also donated generously to Schneiderman, over $150,000 in recent years. But what is less pretty is that most of the money came after 2012, the year in which Schneiderman said he was looking into a tax abuse by private equity firms called management fee waivers, which we’ve written about at length. Private equity firms use it to obtain capital gains tax treatment for portion of management fees waived. Those, which are paid quarterly to private equity firms for running the fund and are normally taxed at ordinary income tax rates. Bear in mind that the private equity fund managers take no entrepreneurial risk whatsoever when they waive these fees. The IRS has announced its intention to crack down on this scheme, and tax experts say it is pretty much certain to implement its interpretation of existing rules that would invalidate the favorable treatment of management fee waivers.

Some other happy coincidences in who had donated to Schneiderman versus his investigations per the NBC story:

$177,000 in donations from short sellers David Einhorn and William Ackman. Schneiderman investigated and got fines from Barclays and Credit Suisse for their high frequency trading. Einhorn and Ackman are investors in IEX, the exchange celebrated in Michael Lewis’ Flash Boys as the virtuous alternative to HFT. IEX gained volume at the expense of Barclays and Credit Suisse after the probe was launched.

Nearly $100,000 from hotel owners, who stand to benefit from Schneiderman’s crackdown on AirBnB.

$48,000 from members of the casino industry, which could come out ahead from Schneiderman’s investigation of fantasy sports venues.

Schneiderman’s office stresses that he’s lowered the boom on some big donors, like the cable industry, which gave over $100,000 to his campaign, and that he’s a big proponent of campaign finance reform. But social psychology research shows that gifts as trivial as a can of soda will predispose a listener to a sales pitch. And let us not kid ourselves: most of these big donors value access, even if the recipient tries to conduct himself in an even-handed manner. As long as big money plays a big role in politics, virtually one is going to be exempt from questions of propriety and influence.

Print Friendly, PDF & Email


  1. ng

    nice. he’s the left alternative in new york state to the corruption enabler andrew cuomo. he’s planning to run against the gov. next time around, and if he had done ten times the amount of stuff that this article suggests (and i’m not even sure about much of the details here. everyone got off easy for a can of soda? pop sociology) i’d vote for him over mr. slime. i’ll believe something is rotten when there’s actual proof. he’s going after the egregious air b&b because of a political payoff? come on. i’ll bet cuomo’s people planted this.

    1. tegnost

      what was that task force he started that had promise but then pulled it’s punches? Calling someone “the left alternative” is an empty suit nowadays…

    2. Yves Smith Post author

      Eric Schneiderman is SOLELY responsible for the banks getting away with murder, what amounts to a second bailout on the backs of America’s homeowners. He was the key AG by virtue of having New York’s Martin Act, which allows him to do securities law prosecutions independent of the SEC. He and about a dozen other AGs were in the process of negotiating a meaningful settlement for massive mortgage chain of title/servicing liability.

      Obama flipped Schneiderman by dangling the bright shiny toy of a Federal post before him and Schneiderman jumped. He threw millions of homeowners under the bus to be one of five co-chairmen on a joint Federal-state task force that had already been in existence for years and did nothing, and after he joined it, continued to do nothing, And the Administration rubbed his nose in how they’d conned him by not even giving him a DC phone for months, much the less any new staffing.

      Schneiderman’s defection allowed the Administration to push the monster bank bailout called the National Mortgage Settlement over the line The activists who were working to stop foreclosure abuses and get mortgage modifications all felt punched in the gut by Schneiderman’s betrayal.

      Hell will freeze over before I vote for Schneiderman. And your enthusiasm shows how little you know about him. He’s also not a very good prosecutor either. While he was gutsy to take on the powers in Albany when he was in the legislature, going from that to State AG when he’d only been a practicing lawyer for a short while early in his career, and then only on civil matters, was a huge jump that he didn’t manage well. He did squat for his first years in office, and I know of viable cases that were handed to him then on very important matters (way way more important to state citizens than AirBnB, HFT, and fantasy sports) that he did not pursue.

      And many of the sexy-looking cases he filed (like the one against the BofA mortgage settlement) he didn’t even try to pursue. Look at his record, as a prosecutor with the bloody Martin Act, versus what Benjamin Lawsky did as a mere state banking/insurance regulator, normally a toothless post.

      Oh, and the power of even small gifts in influencing decisions is extremely well documented. Plenty of studies on that. That’s why drug detailmen are now prohibited by law from giving trikets like notepad and mugs to doctors.

      1. ng

        okay, i see it now. i remember the task force and then lost sight of it. (i try to keep up but obviously i don’t follow politics/economics the way you do.
        so schneiderman is a sellout too.
        then if he runs against cuomo, as i suspect he will, what do you advise?

        1. bob

          He’s gonna run against Cuomo? Nope. He’s right where Cuomo and Schumer, and the people that pay them, Wall st, want him.

      2. oh

        He and Kamala Harris both pulled their punches as regards to the prosecution of the banks for title fraud.

      3. lightningclap

        Long-time readers learned all that here, as it happened. I remember there were a few weeks when commenters were placing some hope in him. It didn’t take long for the most cynical skeptics to be proven right. He had a chance to do the right thing but went for the AG’s Settlement, which is pure empty PR (seem familiar)?

    3. bob

      King is the proper term for Mr. Cuomo. The three men in a room were an attempt at democracy. It didn’t work out. Cuomo is the only one left standing. Winner takes all. And keeps on taking, and taking, and taking.

  2. Fool

    I would have bet anything that the gaming industry would be behind Schneiderman given his dubious campaign against daily fantasy (which to those unfamiliar is on the poker side of the gambling spectrum).

    1. bob

      They are. Best buddies, trump included. I keep hearing rumors about how marijuana might be legalized in NY.

      Have you met the alcohol industry in NY? Not if you’re still alive and above ground.

    2. bob

      I just looked for it, but google is now completely useless for searches.

      The biggest “gift” to gaming was the “settlement” with the native american tribes. The state was broken up into districts, with each district being promised exclusive gambling rights.

      This was a HUGE settlement. There’s a ton of history, too much to get into, but the picture that got me was of King Cuomo and the Akwesasne (mohawk) chief grinning ear to ear.

      King Cuomo’s father was in a literal shooting war with the same tribe. The State police had a helicopter shot down. Money really does bring people together.

      If you can find the map of the NY gaming districts, you’ll see that there is a very narrow strip of what is called the “southern tier” area that runs directly north to catch some of the thruway east of Rochester.

      Thomas Wilmot.

      Not an indian, or even a native american. Just a very well connected former spook.

      As my old friend who was with the NYSP said- how can we go after gambling when NYS is the biggest bookie on the east coast?

      This was before the “settlements” that allowed gambling, provided they paid the King his tribute– not a tax, they were very specific on this point. It had to NOT be called a tax, and had to be “voluntary”. It had to be voluntary because the King has no authority to do any deals with native american reservations, anymore than he can do a deal with Canada.

      This was the root of the “claim”. The feds are the only ones who have any sort of jurisdiction. Keeping the claim alive and well, kicking the can down the road and sucking BILLIONS out of NYS.

  3. vidimi

    this is yet another example of bill black’s Gresham dynamic at play. you simply can’t be a decent public servant in a world where everyone is corrupt. it’s get corrupted or get out.

    1. jd

      Nowadays it seems money often comes secretly through Dem/Rep party organized networks and the public never really learns where it comes from and/or how much goes towards getting a candidate elected. Understanding this, I wonder whether direct donations might actually be a positive thing, thereby freeing up a candidate (ever so slightly) from being enslaved to a party platform. As we know, the biggest threat these days to most any politician is through a primary challenge (often orchestrated by big money that we never see).

  4. Deloss Brown

    Since I live in NY and get Schneiderman’s publicity emails every Sunday, this was a useful and very enlightening counterpoint. Thank you.

    1. jd

      I can say that the feds definitely do not like Schneiderman — not sure how to read it, but he is not popular in Washington.

    2. bob

      I wrote him on an issue and got on that mail list too. Almost impossible to get off. Every sunday at 8AM, I get a reminder that our state AG is completely and absolutely captured. But, he did find a supermarket that had a scanner that didn’t always work properly.

      What about Wall St? Yanno, the place where we could use an AG?

      And by the way, what happened to Preet going after others in NY? There was a lot of bluster, and then nothing. Sheldon Silver is still listed as a superdelagate in NY.

      Question for the AG- How is this legal? Silver was convicted of a few felonies, presumably, he doesn’t have the right to vote anymore, like all convicted felons. But, he does have the right to co-opt a presidential election? I wonder who he favors….

      1. Vatch

        I just checked the Wikipedia list of 2016 Democratic super delegates, and I couldn’t find Silver’s name. Is there another source that show’s he’s still a super delegate? Maybe he’s been quietly removed as a super delegate (we hope)?

  5. Ed Walker

    Zephyr Teachout explained corruption in her recent book. Corruption is the use of political position for personal gain.

Comments are closed.