§ 3-1102. Establishment and management of legal defense trusts.
a. Requirements for establishment. A legal defense trust may be established pursuant to this section only if the following conditions are met:
(1) (a) Each beneficiary has received a statement in writing from the corporation counsel stating that the corporation counsel has not represented and will not be representing such beneficiary in any applicable governmental, administrative, criminal or civil investigation, audit or action, or portion thereof, pursuant to section 50-k of the general municipal law or section 7-109;
(b) Where a legal defense trust has been established, if thereafter the essential nature of an investigation, audit or action changes so significantly that it can be deemed a new or different investigation, audit or action, the beneficiary of such trust shall obtain a new written statement from the corporation counsel asserting that the conditions set forth in subparagraph (a) of this paragraph have been met.
(2) At least one beneficiary is or was an elected official or public servant, as such term "beneficiary" is defined in section 3-1101 of this chapter, who incurs expenses in relation to the governmental, administrative, criminal or civil investigations, audits or actions for which a statement was received pursuant to paragraph (1) of this subdivision.
b. Statement of organization. The trustee of a legal defense trust shall file a statement of organization with the conflicts of interest board, in such form as specified by the board by rule, within 10 days after the earlier of the date the trust first receives a donation or first makes an expenditure. A statement of organization required by this subdivision shall include the following information and documentation:
(1) The name, street address, and telephone number of the legal defense trust and its trustee(s). The name of such trust shall include the words "legal defense trust".
(2) The full name of, and position held, if any, by each beneficiary of the legal defense trust.
(3) The name and address of the financial institution in which the funds of the legal defense trust are, or are intended to be, deposited.
(4) A description of the governmental, administrative, criminal or civil investigations, audits or actions in connection with which the legal defense trust was established and the purpose for which such trust was created.
(5) The statement described in subparagraph (a) of paragraph (1) of subdivision a of this section for each beneficiary of the legal defense trust.
(6) A copy of the executed trust agreement establishing the legal defense trust.
(7) A sworn statement by each beneficiary of the legal defense trust that he or she will comply with the provisions of this chapter and that the trustee is responsible for the proper administration of the trust.
c. Within 10 days of any material change in the information and documentation submitted in accordance with paragraphs (1) through (7) of this subdivision, the trustee shall submit a revised report to the conflicts of interest board identifying such changes. If the purpose for which the trust was created, as required to be identified by paragraph (4) of this section, is materially changed, the trustee shall submit such information to the board; provided, however, that any such changed purpose must be consistent with the requirements of this chapter.
d. Trustee.
(1) There shall be one or more trustees, who shall not be a city elected official or public servant, a beneficiary, or a subordinate of or person associated with a beneficiary. The trustee(s) shall be responsible for authorizing expenditures and disbursements from the trust, the filing of quarterly reports required by section 3-1103, and the performance of tasks incidental to the administration of the trust.
(2) The trustee(s) shall be responsible for a legal defense trust's financial administration as required by this chapter. Such trustee(s) shall establish an account, separate from any other bank account held by the trustee or any beneficiary of the trust, at a bank or other financial institution with an office or branch in the city of New York, for the deposit and expenditure of the trust's moneys.
(3) Where there is more than one beneficiary of a legal defense trust, the trustee(s) may, in their discretion, allocate donations and expenditures attributable to trust administration in accordance with their fiduciary duties to the trust.
(4) Trustee(s) appointed pursuant to this section may be suspended or removed in accordance with the provisions of section 7-2.6 of the estates, powers and trusts law.
e. Donations.
(1) A legal defense trust shall not accept a donation, and a city elected official or public servant may not raise funds for a legal defense trust, in an amount greater than $5,000 per donor.
(2) A legal defense trust shall not accept a donation, and a city elected official or public servant may not solicit a donation, of any amount from (a) any person who is a subordinate of such city elected official or public servant, or any person who is a subordinate of the city elected official or public servant for whose benefit the trust was established; (b) any person such trust knows or should know is a person with business dealings with the city as of the date of such donation or solicitation; (c) any person who as of the date of such donation or solicitation is appearing before or otherwise has a non-ministerial matter pending with the city; (d) a corporation, limited liability company, limited liability partnership or partnership; (e) any anonymous source; or (f) any source that fails to submit the disclosure document required pursuant to paragraph (3) of this subdivision.
(3) Whenever a donation is made to a legal defense trust, the donor shall submit a signed disclosure document to such trust, in such form as specified by the conflicts of interest board by rule, stating that such donor (a) is not a subordinate of the city elected official or public servant for whose benefit the trust was established, nor is a subordinate of the city elected official or public servant who solicited such donation, if applicable; (b) is not a person currently having business dealings with the city of New York; (c) is not appearing before the city; (d) has no non-ministerial matter with the city; and (e) has acknowledged that such donation will not affect any future business dealings with or the disposition of other matters with the city.
(4) For purposes of this subdivision, a solicitation for, or a donation to, a legal defense trust permitted by this subdivision shall be presumed not to be made because of a solicitor's or beneficiary's city position.
(5) No public servant shall solicit a donation to a legal defense trust (a) in his or her official capacity or (b) in an amount or from a source that is not permitted by this subdivision.
(6) No public servant, other than an elected official, who is a deputy mayor, or head of an agency or who is charged with substantial policy discretion as defined by rule of the conflicts of interest board, shall directly or indirectly request any person to make a donation to a legal defense trust, except for a legal defense trust of which such public servant is a beneficiary; provided that nothing contained in this paragraph shall be construed to prohibit such public servant from speaking on behalf of any beneficiary of a legal defense trust at an occasion where a solicitation for a donation to a legal defense trust may be made by others.
(7) No public servant shall, directly or indirectly (a) compel, induce or request any person to make a donation to a legal defense trust, under threat of prejudice to or promise of or to secure advantage in rank, compensation or other job-related status or function; or (b) make or promise to make a donation to a legal defense trust in consideration of having been or being nominated, elected or employed as such public servant or to secure advantage in rank, compensation or other job-related status or function.
f. Expenditures.
(1) The funds of a legal defense trust may be used only to defray (a) legal expenses in connection with a governmental, administrative, criminal or civil investigation, audit or action described in a statement of organization filed pursuant to section 3-1102 that is related to (i) a political campaign; (ii) issue advocacy; or (iii) the holding of a civil office or appointment, public office or political party position, and (b) costs reasonably incurred in administering the trust, including but not limited to costs incident to the solicitation of donations, the hiring of service professionals, bank fees, and the creation and operation of the trust.
(2) The funds of a legal defense trust shall not be used for advertising expenses, political consultants, the payment of criminal fines or penalties imposed upon an individual beneficiary, or communications involving election or campaign activities.
(3) The funds of a legal defense trust shall not be used for the personal use of the trustee or beneficiary unrelated to the purposes of the trust.
(4) The funds of a legal defense trust shall not be used to defray legal expenses that have been paid for by the city. If the city pays any part of the legal expenses of a beneficiary after such beneficiary has received from the corporation counsel the letter required by subparagraph (a) of paragraph (1) of subdivision a of section 3-1102, such funds must be returned to the trust.
g. Nothing in this chapter shall be construed to prohibit or limit expenditures by a political committee related to a campaign audit from being considered expenditures in furtherance of a political campaign for elective office pursuant to chapter 7 of title 3 of this code.
(L.L. 2019/048, 2/24/2019, eff. 2/24/2019)
Editor's note: For related unconsolidated provisions, see Appendix A at L.L. 2019/048.
