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David KAYODE, Petitioner, v. NEW YORK CITY CAMPAIGN FINANCE BOARD, Respondent.
The petition and motion are consolidated for the purposes of a single decision and are determined as follows:
The Campaign Finance Act (Act) provides public matching campaign funds for candidates in New York City for the offices of Mayor, Comptroller, Public Advocate, Borough President and City Council (see Administrative Code of the City of New York,§§ 3–702, 3–703, 3–705), The program is administered by the Board, an independent non-partisan agency of the City of New, and it has promulgated the New York City Campaign Finance Board Rules (Board Rules) which supplement the Act.
Candidates who participate in the program are required to execute and file Certification Form with the Board, in which the candidate and his or her treasurer certify that they will comply with all program requirements and designate a principal committee to receive public matching funds disbursements (Administrative Code of the City of New York, § 3–703[c]; Board Rule 2–01). Campaigns may use public matching funds only for certain qualified expenditures made during the election year (see Administrative Code of the City of New York, § 3–704; Board Rule 1–08[g] ). All expenditures must be documented by the campaign, which is responsible for maintaining proper documentation and proving compliance with the program's requirements (see Administrative Code of the City of New York, § 3–703[d] ). If the candidate cannot provide sufficient documentation, he or she will be required to repay the funds (see Administrative Code of the City of New York, §§ 3–710[b]; 3–711 ). The Act further provides that if a candidate and his or her principal campaign committee violate any provision of the Act or the Board Rules, the candidate, the committee and the treasurer, or any other agent of the candidate, shall be subject to civil penalties in an amount not to exceed $10,000 for each violation of the Act or Board Rules (see Administrative Code of the City of New York, § 3–711). The Board is also authorized to assess penalties for any misrepresentation of a material fact in the documents submitted to the Board and to recover any public funds that had been given to the campaign.
Following an election, the Board conducts an audit of each campaign's records. The Board has broad auditing and investigatory powers to assist in discharging its responsibility to disburse public funds only to candidates who demonstrated compliance with the requirements of the Act and Board Rules, and to ensure that candidate spends public funds properly (see New York City Charter § 1502 [a]; Administrative Code of the City of New York §§ 3–705, 3–708, 3–710; Board Rule 5–01[a] ). The Board is empowered to investigate all matters relating to the performance of its functions, and “shall have the power to require the attendance and examine and take the testimony under oath of such persons as it shall deem necessary and to require the production of books, accounts, papers and other evidence relative to such investigation” (Administrative Code of the City of New York, §§ 3–708; 3–710 ).
David Kayode was a candidate in the 2013 Democratic Primary election for City Council, District 28 in Queens County. Mr. Kayode agreed to participate in the NYC Campaign Finance Program by submitting a Certification Form to the Board on June 6, 2013. Said Certification Form designated David Kayode 2013 as the campaign committee responsible for receiving public matching funds and Omolola Kayode as the campaign's treasurer. In said Certification Form, David Kayode, David Kayode 2013 and Omolola Kayoed (collectively the Campaign) expressly agreed to be bound by the terms and conditions of the Campaign Finance Act (Act) and the Board Rules applicable to the 2013 elections. They also agreed that they may be held jointly and severally liable for the repayment of public funds and/or payment of civil penalties assessed pursuant to sections 3–710 (2) and 3–711 of the Administrative Code of the City of New York. Based upon the financial disclosure statements filed by the campaign committee with the Board, David Kayode received a total of $41,622.00 in public funds.
Mr. Kayode did not win said primary. Following the elections, the Board's staff conducted a routine audit of the records and documentation that Mr. Kayode, the campaign committee and the campaign treasurer had submitted to the Board. On September 4, 2014, the Board issued a draft audit report (DAR) to the Kayoed campaign, detailing potential violations of the Act and Board Rules. The campaign requested and received extensions of time to respond to the DAR on September 16, October 22, and November 10, 2014. The campaign submitted a response to the DAR on December 2, 2014. The Board's staff review of the campaign's response, and on July 9, 2015, it sent the Kayoed campaign a Notice of Alleged Violations and Recommended Penalties (Penalty Notice), outlining the alleged violations of the Act and Rules that the campaign committed during the 2013 election cycle and the corresponding recommended penalties, calculated pursuant to the penalty guidelines, and a Notice of Recommended Public Funds Repayment (Repayment Notice) that outlined the recommended public funds repayment obligation.
The Kayode campaign requested and received three extensions to respond to said Penalty and Repayment Notices on August 10, August 31, and September 15, 2015. The campaign submitted its response on September 30 and October 13, 2015. The Board staff upon review of said response resolved one violation, reduced four recommended penalties and reduced the recommended public funds repayment amount.
On June 15, 2016, the Kayoed campaign agreed to appear before the Board at an informal hearing to be held on August 11, 2016. On June 15, 2016, the Board's staff sent the campaign a copy of the Staff Final Recommendation to the Board (Board Memo) containing the final penalty and public funds repayment recommendations. On June 26, 2016, the campaign confirmed its intention to appear at the August 11, 2016 informal hearing, and later acknowledged that the informal hearing had been rescheduled for August 9, 2016.
At the August 9, 2016 informal hearing, counsel for the agency stated that the Board's staff recommended that the Board find that Mr. Kayode and the campaign committee David Kayode 2013 had committed the following violations: “Failing to report transactions; filing a late disclosure statement; accepting contributions from corporations, limited liability companies or partnerships; failing to report and document basic campaign functions or activities; failing to document a transaction; and material misrepresentations” (Tr 27). The Board's staff recommended that the campaign must repay public funds. Counsel for the Board stated that the campaign did not contest the violation for failing to document a transaction, but that it contested the remaining violations and the recommendation to repay public funds. Mr. Kayode and the campaign treasurer, Omolola Kayode appeared and participated at said informal hearing.
At the conclusion of the Kayodes' testimony, the Board went into closed Executive Session. As regards David Kayoed, the Board recommended the following penalties: $70 for failing to report transactions; no violation and no penalty for filing a late disclosure statement; $1,275 for accepting contributions from corporations, limited liability companies or partnerships; $500 for failing to report and document basis campaign functions and activities; $100 for failing to document a transaction; $3,040 for material misrepresentation. These penalties totaled $4,985, and it was recommended that they be assessed against the candidate and campaign committee but not treasurer (Tr 41–42). The Board also recommended the repayment of public funds in the amount of $37,961.00. The Board members unanimously voted to adopt said recommendations with respect to the penalties and the repayment of public funds.
The Board, in a letter dated July 17, 2017. informed David Kayode, David Kayode 2013 and Omolola Kayode of its Final Determination, made on August 9, 2016, concerning the David Kayode 2013 Campaign. The Board stated, in pertinent part, that the candidate and the campaign committee violated the New York City Campaign Finance Act and Board Rules, and that they were jointly and severally liable for paying $4,985 in penalties as follows:
“1. A penalty of $70 for failing to report transactions. See Admin. Code §§ 3–703(1)(d) (g),(6), (11), (12), 3–708(8); Board Rules 1–09, 3–03(c),(d),(e), 4–01. The Campaign failed to report transactions totaling $879 that appear on its bank statements. It also misrepresented four advance purchases totaling $2,650. The Board assessed a penalty of 2% based upon the amount of the transactions.”
“2. A violation, no penalty, for filing a late disclosure statement. See N.Y.C Charter § 1052(a)(8); Admin. Code §§ 3–703(6), (12), 3–708(8); Board Rules 1–09, 3–02. The Campaign filed Statement 7 timely, but submitted the backup documents three days late.”
“3. A penalty of $1,275 for accepting contributions from corporations, limited liability companies, or partnerships. See N.Y.C. Charter § 1052 (a)(13); Admin. Code §§ 3–702 (8), 3–703 (1)(1); Board Rules 1–04 (c)(1),(e),(g), 1–05.”
“The Campaign accepted a $250 contribution on June 5, 2013. Although the Campaign reported the contribution as being from an individual, the documentation indicated that the contributor was P & T Contracting Corp. The Campaign refunded the contribution after the deadline set by the CFB.”
“The Campaign provided documentation from American Technology Consulting, a corporation that cited a “listing handling and editing” charge of $25 followed by a credit of $25. This indicated that this service was provided free of charge, and therefore an in-kind contribution.”
“The Campaign accepted contributions totaling $500 from Brooklyn Printers, a corporation, on June 4, 2013. The Campaign provided an invoice from Brooklyn Printers totaling $1,000, of which $500 was reported as paid, $200 was reported as forgiven, and $300 remains unpaid. Regarding the $200 reported forgiven liability, the Campaign did not provide any explanation or documentation from the vendor showing the amount forgiven, why it was forgiven, or how the amount was calculated. The remaining $300 appears to be an additional discount.”
“The Board assessed penalties of $250 for P & T Contracting Corp., $275 ($250 plus the amount of the contribution) for American Technology Consulting, and $750 ($250 plus the amount of the contributions) for Brooklyn Printers.”
“4. A penalty of $500 for failing to report and document basic campaign functions/activities. See Admin. Code §§ 3–702(8), 3–703(1)(d), (g), (6), (11), (12); Board Rules 1–02, 1–04(g), 1–08(a),(b),(c),(h), 1–09,3–02, 3–03(e),4–01. The Campaign occupied an office, but did not report or document expenditures for rent. The Campaign provided documentation from the landlord stating that it did not pay rent, but did not report an in-kind contribution or document the value of the space.”
“5. A penalty of $100 for failing to document a transaction. See Admin. Code §§ 3–703(1)(d),(g), (11),(12), 3–715; Board Rules 1–09, 4–01(a),(c),(g),(k), 4–03. The Candidate used his own funds to pay for campaign literature, which constitutes an in-kind contribution to the Campaign. The Campaign did not document the contribution.”
“6. A penalty of $3,040 for material misrepresentation. See Admin. Code § 3–711(3); Board Rule 4–01(a). The Campaign made payments totaling $30,400 to eight vendors, for which it provided consulting agreements that were falsely presented as contemporaneous. The Board assessed a penalty of 10% of the amount of the expenditure.”
“The Board determined that the Committee named above will be responsible for repaying $37,961 in public funds, representing its Qualified Expenditure Deficit, and the Candidate named above will be jointly and severally liable for repaying $25,668.”
“The Board determined that the amount due is $42,946 (4,985 in penalties and $37,961 in public funds).”
Petitioner David Kayode commenced the within Article 78 proceeding on September 28, 2017, and seeks to reverse the Board's determination of July 17, 2017 on the following grounds : “(1) No due process by the defendant (sic) (2) the defendant (sic) had meeting on 8/9/2016 but did not noticfied (sic) plaintiff until letter dated July 17, 2017. Defendant refuses to review documents that Plaintiff submittet (sic). The final determination by the Defendant was arbitrary and capricious a clear error of judgement (sic) was made by defendant not based upon consideration of relevant factors and so, is arbitrary, capricious and abuse of discretion or otherwise not in accordance as it was taken whitout (sic) procedure required by law 5 USC, 706 (2) (A) (1988). The Defendant alocated (sic) $41,402 to the Plaintiff in matching fund (sic). The Plaintiff was fined $42,946.00 which $544.00 in exess (sic) of what Plaintiff received. This amount (sic) to charging fees to Plaintiff for participation in public matching fund program. The defendant prohibited plaintiff from participation in future matching fund program (sic).” Petitioner further seeks to “fine” the respondent “$50,000.00 in damages, plus legal fees and cost. Trial before Judge”.
Respondent Board served an answer and interposed as an affirmative defense the failure to state a cause of action and a counterclaim for an order directing petitioner to pay the civil penalties totaling $30, 653.00, together with interest, in accordance with the Board's Final Determination of July 17, 2017. In opposition to the petition, respondent asserts that petitioner's allegations are without a basis in fact and fail to state a cause of action. It is further asserted that the Board's Final Determination was neither arbitrary nor capricious, nor an abuse of discretion, and has a rational basis in the record and the law. It is asserted that the Board reached its determination after careful consideration of the evidence pertaining to Mr. Kayode's campaign, including Mr. Kayode's written submissions to and statements before the Board; that the Board provided Kayode with multiple opportunities to remedy the violations during the enforcement process and that it eliminated certain violations upon review of his statements and submissions; that Kayode was provided with ample notice of the August 9, 2017 informal hearing, which he attended in person; and that the Board adhered to its stated guidelines when it calculated and assessed each of the penalties. It is further asserted that petitioner's claim for damages should be dismissed as it is not incidental to the relief sought and fails to state a claim upon which relief can be granted.
Respondent's motion to change venue
Respondent served a demand to change venue dated October 24, 2017, and petitioner served a response on November 6, 2017, in which he asserted that venue should remain in Queens County, as it is where he lives, conducted his campaign, and maintained his campaign bank account. Respondent thereafter served its motion to change venue on November 9, 2017.
Pursuant to CPLR 510(1), which permits a change of venue based on an assertion that the county designated is improper, the court must first determine what venue provision applies and what constitutes proper venue. Thereafter, it is respondents' burden to “establish that, given the type of action, the venue chosen was improper” (Tarpey v. Port Authority of New York and New Jersey, 7 Misc 3d 1006[A][Sup Ct, Bronx County, 2005]; Dry Harbor Nursing Home v. Zucker, 2016 NY Slip Op. 30396 [U], 2016 NY Misc. LEXIS 762 [Sup Ct, Queens County, 2016] ).
CPLR 7804 (b) provides that “a [p]roceeding under this article shall be brought in the supreme court in the county specified in subdivision (b) of section 506 except as that subdivision otherwise provides.” CPLR 506 (b) states, in pertinent part, that “[a] proceeding against a body or officer shall be commenced in any county within the judicial district where the respondent made the determination complained of or refused to perform the duty specifically enjoined upon him by law, or where the proceedings were brought or taken in the course of which the matter sought to be restrained originated, or where the material events otherwise took place, or where the principal office of the respondent is located ․”
In the context of CPLR § 506(b), the phrase “where the material events otherwise took place” is construed to mean “the county wherein occurred the underlying events which gave rise to the official action complained of” (Daley v. the Board of Estimate of the City of New York, 258 AD 165, 166 [2nd Dept 1939]; Matter of Brothers of Mercy Nursing and Rehabilitation Center v. De Buono, 237 AD2d 907, 907–908 [4th Dept 1997] ).
Respondent asserts that its final determination took place in New York County; that the Board's audit and the proceedings against Mr. Kayode and his campaign all took place in New York County; and that the Board's principal and only office is located in New York County. Respondent states that although petitioner asserts that venue should remain in Queens because it is where he lives, conducted his campaign, and maintained his campaign bank account, these factors are irrelevant, as the petition only concerns the Board's Final Determination and that no material events involving said determination occurred in Queens County.
Respondent has failed to demonstrate that petitioner improperly placed venue in Queens County, as the underlying material events giving rise to the Board's Final Determination are related to the activities of David Kayode and David Kayode Campaign 2013 and respondent has not established that the majority of said activities occurred in New York County.
Accordingly, respondent's motion for a change of venue is denied.
Petitioner's request for judicial review
In a proceeding in which the petitioner challenges an agency determination that was not made after a quasi-judicial hearing, the court must consider whether the determination was made in violation of lawful procedure, was affected by an error of law, or was arbitrary and capricious or an abuse of discretion (see CPLR 7803; see also Pell v. Board of Educ. of Union School District No.1 of the Towns of Scarsdale and Mamaroneck, Westchester County, 34 NY2d 222, 230–231 ). In such a proceeding, courts “examine whether the action taken by the agency has a rational basis,” and will overturn that action only “ where it is taken without sound basis in reason ‘or regard to the facts’ ” (Matter of Wooley v. New York State Dept. of Correctional Servs., 15 NY3d 275, 280 , quoting Matter of Peckham v. Calogero, 12 NY3d 424, 431  ), or where it is “arbitrary and capricious” (Matter of Deerpark Farms, LLC v. Agricultural & Farmland Protection Bd. of Orange County, 70 AD3d 1037, 1038 [2d Dept 2010] ). “In applying the ‘arbitrary and capricious’ standard, a court inquires whether the determination under review had a rational basis.” (Halperin v. City of New Rochelle, 24 AD3d 768, 770 [2d Dept 2005]; see Pell v. Board, of Educ. of Union Free School Dist., 34 NY2d at 231).
It is well settled that the court may not substitute its judgment for that of the agency (see Matter of Kayfield Construction Corp. v. Morris, 15AD2d 373, 378 [1st Dept 1962] ). Moreover, an agency's interpretation of the statutes and regulations that it administers is entitled to deference, and must be upheld if reasonable (see Excelsus Health Plan, Inc. v. Serio, 2 NY3d 166, 171 ; Tommy and Tina, Inc. v. Department of Consumer Affairs of the City of New York, 95 AD2d 724 [1st Dept 1983], affirmed 62 NY2d 671 ; Raritan Development Corp. v. Silva, 91 NY2d 98  ).
Here, petitioner has failed to demonstrate that the Board's determination is arbitrary and capricious or an abuse of discretion, or that he was denied due process. Notably the petition is devoid of any factual allegations in support of these claims. Contrary to petitioner's bare assertions, the Board notified petitioner of the alleged violations and provided him with ample opportunities to submit written responses. Petitioner was also provided with ample notice of the August 9, 2016 hearing and he appeared at said hearing. The Board in its July 17, 2017 determination provided Mr. Kayode and the Campaign with a detailed written determination of the violations, the penalties imposed for said violations, and the amount of public funds that they are required to repay. The gap in time between the conclusion of the informal hearing on August 9, 2016 and the issuance of the Board's Final Determination on July 17, 2017, does not constitute a denial of due process.
Petitioner has failed to identity the documents he claims respondent failed to review. The evidence presented establishes that the Board considered both the documentary evidence presented by petitioner as well as the statements made by Mr. Kayode and Ms. Kayode at the informal hearing. Despite numerous opportunities to satisfy his burden during the post-election process, Mr. Kayode's campaign failed to demonstrate that the public funds received were spent only on qualified campaign expenditures, and that proper records and documentation of expenditures had been maintained. Contrary to petitioner's assertion, he has not been charged a “fee” to participate in the public matching funds program. Rather, the respondent properly assessed penalties for the various violations cited above, as well as required petitioner to repay public funds. The Board's determination that David Kayode 2013 is responsible for repaying $37, 961 in public funds, and that Mr. Kayode is jointly and severally liable for repaying $25,668.00 of said amount of public funds, and that Mr. Kayode and David Kayode 2013 are jointly and severally liable for the payment of $4,985.00 in penalties, is neither arbitrary nor capricious, nor an abuse of discretion and has a reasonable basis in the law and the record.
Respondent's counterclaim for a money judgment
Respondent Board, in its answer, has asserted a counterclaim for a money judgment in the amount of $30,653.00, which reflects the amount of the penalties and repayment of public funds that were imposed by the Board, together with interest from August 16, 2017. In view of the fact that the penalties totaling $4,985.00 were properly imposed and as David Kayode is required to return public funds totaling $25,668.00, the counterclaim is granted.
It is hereby ORDERED that Respondent's separate motion for a change of venue is denied.
It is hereby ORDERED and ADJUDGED that petitioner's request to reverse the respondent's determination of July 17, 2017 is denied, and the petition is dismissed.
It is hereby ORDERED and ADJUDGED that Respondent's counterclaim is granted, and the Board shall have judgment against petitioner David Kayode in the amount of $30,653.00, plus interest from August 16, 2017, as calculated by the Clerk of the Court, together with costs and disbursements, as taxed by the Clerk of the Court.
This constitutes the ORDER and JUDGMENT of the court. The Clerk of the Court shall enter JUDGMENT in accordance with this ORDER and JUDGMENT, upon the service of the same, together with notice of entry, upon the Clerk of the Court.
Allan B. Weiss, J.
Response sent, thank you
Docket No: 9768/17
Decided: March 27, 2018
Court: Supreme Court, Queens County, New York.
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