Lobbyists' Role in Council Slush Fund Scandal Probed

City investigators probing the City Council slush fund scandal are examining the relationship between lobbyists, council members, and nonprofit organizations seeking public funding from the city, a source said.

Bringing lobbyists into the picture would be a logical extension of the city's Department of Investigation probe of the council's finances and distribution of public funds, which has led to the indictment of two council aides for allegedly embezzling $145,000 from a city-funded organization. The U.S. attorney's office also is investigating the City Council.

Many organizations seeking funding from the city hire lobbyists to represent them at City Hall and help compete for public dollars.

There has been a renewed focus on the intersection of lobbying and public officials in New York after FBI agents last week raided the Albany offices of the lobbying and consulting firm of a former head of the state Republican Party. Investigators were trying to determine whether a former member of Congress, John Sweeney, was collecting money outside of campaign contributions in return for steering business to the firm, sources said.

A lawyer for Mr. Sweeney, E. Stewart Jones Jr., told the New York Times the raid was "an unnecessary exercise."

"There is absolutely no evidence to justify any conclusion of wrongdoing ... not by John Sweeney, not by his wife," he said.

The city's lobbying industry has ballooned in recent years. In 2006, the most recent year that data from the City Clerk's office was available, lobbyists collected more than $44 million in revenue. In 2001, the lobbying industry in the city earned less than $20.5 million.

Some city lobbyists also work as political consultants to council members, a dual role that has drawn criticism from some government observers who say the practice could lead to abuse or expose lobbyists to unnecessary conflicts of interest. The practice is legal.

"One would expect that if the U.S. attorney is looking at the council and the slush fund and the council's relationship to nonprofits, it's almost inevitable that they would begin examining lobbyists because they are often the intermediaries between council members and organizations," a professor of political science at Baruch College, Douglas Muzzio, said, noting that some lobbyists are partly responsible for helping get the officials for which they are lobbying elected to public office. "Lobbyists/consultants play a pivotal role in the process."

A spokeswoman for the Department of Investigation declined to comment.

The council slush fund scandal began in April, when it was disclosed that the council had been stashing millions of dollars behind fictitious groups in the budget, creating a fund the council speaker could dip into during the year to reward favored colleagues or organizations. Since 2001, more than $17 million was hidden in the budget, with $4.7 million set aside under the current council speaker, Christine Quinn.

Some of the money ultimately ended up going to an organization known as the Donna Reid Memorial Education Fund. The two indicted aides, who worked for Council Member Kendall Stewart of Brooklyn, allegedly stole from the organization.

The council's system of distributing money to local organizations at the request of individual council members is undergoing changes in the aftermath of the scandal, with nonprofits seeking funding now required to show they have the ability and experience to deliver the services they say they will deliver.

A former director of the New York Civil Liberties Union, Norman Siegel, who filed a motion requesting a judicial inquiry into the council's appropriation of city funds to fake groups, said he is seeking a hearing that would require witnesses to testify under oath "because the public needs to know how the process of budgeting is occurring in the 21st century with the City Council."

"All of these sources and leaks don't really put the picture together properly," he said.