Ad watch: 20th Congressional District

March 3, 2009

Two recent radio ads produced by national political committees are offering support for candidates in the special election in the 20th Congressional District, Democrat Scott Murphy and Republican Jim Tedisco:

Sponsor: The National Republican Congressional Committee

From the script: “Scott Murphy approved huge bonuses for a handful of top executives, while his company recorded massive losses. Millionaire Scott Murphy was caught not paying taxes on his own business — said it wasn’t his responsibility, but state records prove that it was.”

Analysis: The NRCC’s recent radio ad refers to Murphy’s position on the board of directors of Synacor Inc., a Buffalo-based Internet company that’s been in operation since 1998. In a subsequent news release, the NRCC notes that Synacor in 2007 sustained a net loss of $1.6 million while still paying incentives and bonuses to its top four executives.

The ad’s use of “massive” and “huge” to describe Synacor’s finances is overstated on both counts: Synacor’s top four executives’ total compensation packages add up to just over $1.2 million — just $400,000 shy of the company’s loss for that year. According to a April 2008 filing with the SEC, Synacor’s 2007 net sales were $39 million, almost three times its net sales in 2005 — hardly the profile of a Wall Street husk such as Lehman Brothers.

Charles Elson, director of the Center for Corporate Governance at the University of Delaware, said Synacor likely made a good business decision when it came to deciding on its executive compensation. In the technology sector, he noted, companies tend to run in the red for years before making a profit. (Elson, it should be noted, disagrees with Murphy and Tedisco on the efficacy of salary caps.)

The NRCC’s ad also repeats their earlier contention that Murphy is a tax cheat, an inaccurate claim that was based on three tax warrants issued against his company Small World Software, which merged into another corporation, iXL-New York, Inc., in January 1998. Two of those warrants (totalling $21,252) were on taxes due months after the merger — when all tax liability had passed from Murphy to the new company. The third warrant was related to withholding taxes due before the merger; Murphy’s company paid taxes 13 days late and incurred $446.85 in penalties and interest.

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