Maryland election officials have determined Republican candidate for governor Larry Hogan broke no laws in converting his Change Maryland advocacy organization into a campaign operation.
But in a memo released Thursday, officials pointed out that a loophole permits corporations such as Change Maryland to test the water on behalf of candidates without disclosing donors or spending, as the candidates themselves must do.
The ruling came after two of Hogan's rivals in last month's Republican primary filed complaints with the State Board of Elections in May. Jared DeMarinis, director of candidacy and campaign finance for the board, wrote in the memo that he was dropping the complaints.
The two candidates had alleged that Hogan broke election rules by turning the corporation behind his conservative advocacy operation — along with its resources — into the foundation for his campaign for governor. DeMarinis said Hogan did use the corporation for political "exploratory activities," but said that was legal. He also said the Board of Elections had no authority to regulate the corporation's political efforts.
Hogan spokesman Adam Dubitsky praised the dismissal. "We never thought it was anything more than a politically motivated complaint," he said. "It's over, which is what we expected."
Election officials said Change Maryland LLC commissioned a September 2013 poll to evaluate a potential matchup between Hogan and some Democrats in the primary race. While the poll was conducted on Hogan's behalf — four months before he declared his candidacy for governor — officials concluded it was an "exploratory activity" and not subject to regulation.
Hogan started the Change Maryland organization in 2011 and set it up as a limited liability corporation owned solely by him, election officials said. As a corporation, its donations and expenditures are exempt from public scrutiny under campaign finance laws.
Republicans David R. Craig and Ron George alleged in May that creating an LLC designed to morph into a campaign operation violated the state's disclosure laws and gave their opponent an unfair advantage. The election board staff, however, said that unlike other states, Change Maryland's activity before Hogan declared his candidacy was not regulated unless he was raising money for a campaign.
Also, election officials found that Change Maryland LLC's political work from 2011 to 2014, raising money and releasing policy papers about the O'Malley administration, was in line with its stated purpose of an advocacy group.
George said the complaint and its resolution highlighted a glaring loophole in Maryland's campaign finance laws. "The law has to be made clear, and the Board of Elections needs to have authority to fix it," George said.
Dubitsky said the Hogan campaign negotiated a $79,720 purchase price in January to buy the assets of Change Maryland, and said it was no different than a campaign buying a mailing list from a third party. As of June 30, the campaign still owed $46,166 to Hogan's LLC and was paying in installments, Dubitsky said.
Hogan's Democratic opponent in the race for governor decried the lack of transparency about who donated cash to Change Maryland while it was exempt from public disclosure.
"It's time for Larry Hogan to stop hiding his secret donors and admit who's funding his campaign, because Maryland voters deserve to know the truth," said Lt. Gov. Anthony G. Brown's campaign manager, Justin Schall. "Even his Republican opponents asked Hogan to come clean and disclose who has been funding his campaign these last three years."
Dubitsky said the complaints over Change Maryland's history as an LLC were mere political attacks, and "apparently the board agreed there was nothing to it."