Why Is Hank Morris Working For Hevesi at Bargain Rates?

Hank Morris, the chief political advisor to City Comptroller Alan Hevesi, has told associates that he will not bill Mr. Hevesi’s Mayoral campaign for a commission on television commercials purchased on his candidate’s behalf–a decision that could give his client a substantial financial advantage over his Democratic rivals.

Consultants like Mr. Morris generally take 10 to 15 percent of a candidate’s spending on TV ads. In a television-heavy campaign like the New York Mayoral race, a consultant can make hundreds of thousands of dollars in commissions. If Mr. Morris ends up not taking the customary fee, Mr. Hevesi’s campaign would have that much more money to spend.

Two prominent businessmen, who asked that their names not be disclosed, told The Observer of private discussions with Mr. Morris in which he told them that he would not accept the standard commission. Mr. Morris did not return detailed phone messages requesting comment.

One good-government advocate, Gene Russianoff, a senior attorney at the New York Public Interest Research Group, denounced the apparent arrangement as counter to the spirit of the city’s campaign-finance law.

“If Morris foregoes a standard fee that media consultants get, that raises questions about whether Hevesi effectively has more dough to spend,” Mr. Russianoff said. “The whole point of the campaign-finance law is to insure that we move away from the days when candidates outspent each other and money was the decisive factor in elections.”

The city’s campaign-finance law, passed in 1988, limits expenditures for citywide candidates at $5.2 million for party primaries. In return for adhering to the voluntary limits, candidates receive $4 in public funds for every $1 they raise from private sources. Candidates are not required to participate in the program, but Mr. Hevesi and his major Democratic rivals all have opted in.

It is entirely possible that Mr. Morris has changed his mind about giving up his commission fees since discussing the strategy with the businessmen who spoke to The Observer. Still, it is worth noting that Mr. Morris incorporated the promise of a waived commission–and more money for ads–into his behind-the-scenes pitch to the city’s power brokers.

At issue is whether or not Mr. Morris intends to charge fair-market value for the service he is rendering–placing TV ads–for Mr. Hevesi. Campaign-finance law requires that a candidate pay fair-market value for services and goods–anything from public-relations advice to cell phones to the organizing of an event.

According to Molly Watkins, a spokesman for the city’s Campaign Finance Board, if a candidate accepts a service without paying fair-market value for it and fails to disclose that fact, the campaign will have violated campaign-finance rules.

“A deviation from these rules could result in a fine or the withholding of public matching funds,” Ms. Watkins said.

Hank and Al

The apparent arrangement raises new questions about the financial relationship between Mr. Hevesi and Mr. Morris, his longtime friend and trusted adviser. Mr. Hevesi’s rivals already have questioned whether Mr. Morris, who has long functioned as a kind of one-man campaign for Mr. Hevesi, is skirting city campaign-finance rules by under-reporting his campaign expenses, which are far lower than those of his opponents.

In mid-April, Mr. Morris defended his campaign as efficient and frugal, saying that campaign costs such as phone bills, rent and staff were all covered by his monthly charge of $5,000. That number is dwarfed by the spending of his opponents. Council Speaker Peter Vallone’s Mayoral campaign costs approximately $25,000 a month; the operation of Public Advocate Mark Green costs around $70,000 a month. The discrepancy has led Mr. Vallone to charge that Mr. Morris is, in effect, subsidizing Mr. Hevesi’s campaign.

In response to the complaints, the Campaign Finance Board has said that it will be auditing all the campaigns, but that it would be taking a special look at the Hevesi campaign.

The voluntary spending limits placed on candidates are designed to level the playing field as much as possible. All four major Democratic candidates are expected to spend the maximum allowed by the law, $5.2 million, meaning that no one candidate will be able to outspend the others. But if Mr. Hevesi is spending only $5,000 a month for his consultant and ends up not having to pay him the commissions that other consultants charge, he will have more cash for TV ads and mass mailings in the home stretch of what is expected to be an extremely close race.

The two businessmen who spoke to The Observer told of conversations several months ago with Mr. Morris in which the consultant tried to persuade them that his candidate would be the next Mayor. Mr. Morris told them to ignore the polls showing that Mr. Hevesi’s campaign is struggling, arguing that another of his clients, Senator Charles Schumer, was in similar trouble before staging a dramatic victory over his rivals in the 1998 Democratic Senate primary.

One of the businessmen raised an objection: Hadn’t Mr. Schumer’s victory been made possible by the substantial financial advantage he enjoyed over his rivals, allowing him to saturate the airwaves with ads for months? How could Mr. Hevesi duplicate that performance, given that the city’s campaign-finance program puts all the candidates on an equal financial footing?

Mr. Morris’ answer, according to both men, was that Mr. Hevesi would in fact enjoy a financial advantage because he would be not charging his client a commission, which would have to be paid from finite campaign funds. Instead, that cash could be put toward more TV commercials.

“The issue was, if everyone is going to spend the same money, then how can Alan benefit?” one of the men recalled in an interview with The Observer . “Hank said, ‘We’re going to be able to do more commercials because I’m a close friend of Alan and I’m not going to charge him my fees.'”

“He said he wasn’t going to charge Hevesi any commission or fees for any television ad for the whole campaign,” the other businessman added.

Mr. Hevesi is expected to spend well over $3 million on ads; by not charging a commission, Mr. Morris would in effect be giving up at least $300,000.

The additional funds could be crucial to Mr. Hevesi’s chances. Unlike the other candidates, Mr. Hevesi has already spent $1.4 million on TV ads, leaving him with less money for the campaign’s home stretch. Recent polls have shown that Mr. Hevesi isn’t well-known to voters, a problem that is best solved by sustained television advertising.

Campaign cash also becomes increasingly crucial in a race’s closing days, because candidates need money to counterpunch against negative ads that could drive their numbers down shortly before Primary Day.