Paterakis, Holton are indicted

John Paterakis, owner of H&S Bakery.
John Paterakis, owner of H&S Bakery. (Baltimore Sun photo by Lloyd Fox)
John Paterakis Sr., the self-made baking magnate and developer of the Harbor East complex, was indicted Tuesday on two counts of campaign finance violations accusing him of contributing $6,000 to help pay for a city councilwoman's political poll.

The councilwoman, Helen L. Holton, also was indicted for alleged campaign violations, after winning a dismissal two months ago of bribery charges in connection with the political survey.

The new charges were handed up by a Baltimore grand jury at the request of State Prosecutor Robert A. Rohrbaugh, whose three-year investigation of alleged corruption at City Hall has reached the highest rungs of the city's business community.

In January, Rohrbaugh indicted Mayor Sheila Dixon on charges that she stole gift cards donated to her office by developers who believed that she would distribute the cards to needy families. She is scheduled to go on trial in September.

"All we are doing is following the evidence, wherever the evidence takes us," Rohrbaugh said Tuesday.

Charles P. Scheeler, an attorney for Paterakis, did not return phone calls seeking comment.

Joshua Treem, an attorney for Holton, 48, called Tuesday's charges a "desperate attempt" by prosecutors to "salvage something from its relentless effort" to convict the councilwoman.

A January indictment accused her of accepting a bribe from Ronald H. Lipscomb, a developer who was a partner with Paterakis in Harbor East projects and who contributed $6,000 toward the political poll commissioned for her 2007 re-election campaign. Those charges were dismissed in May, when Circuit Judge Dennis M. Sweeney ruled that her shepherding of tax breaks for the Harbor East projects could not be used as evidence in a bribery case.

Prosecutors are appealing Sweeney's ruling.

City Council President Stephanie C. Rawlings-Blake, as she had done in January after Holton was first indicted, stripped the councilwoman Tuesday of her position as chairwoman of the council's powerful Taxation, Finance and Economic Development Committee. Holton had regained the chair after the bribery charges were dismissed.

Holton offered to reliquish the committee chair, Rawlings-Blake said Wednesday morning after the Board of Estimates meeting. She added that she is not concerned about any instability on the committee, which now will be chaired on an acting basis by Councilman William H. Cole as he did after Holton's initial indictment. "As evidenced by what happened in the past, the city council moved forward on every piece of legislation before the committee," Rawlings-Blake said.

Coincidentally, the Board of Estimates Wednesday morning approved about $500,000 in bonds for streetscaping for one of Paterakis' Harbor East buildings. Dixon, one of five members on the board that considers city expenditures, refrained from voting.

New legislation that would provide a multimillion-dollar tax incentive for Paterakis' planned Harbor Point project, a mix of hotel, office, retail and residential space, is expected to be introduced shortly and would likely be referred to Holton's committee.

That the City Hall corruption investigation led to the indictment of one of Baltimore's most powerful figures was a surprise to many. Paterakis, 80, whose family bakery supplies the McDonald's chain and whose Harbor East development has expanded downtown's borders, is a major political contributor and mainstay of the business community.

"You've got to be kidding," said Donald Norris, chairman of the Department of Public Policy for the University of Maryland, Baltimore County, upon hearing the news. "He is well known; he is highly regarded, and for him to be charged with something like this is quite frankly shocking."

"He is a patriarch of the Greek community in Baltimore," said Byron Warnken, a University of Baltimore law professor. "He is one the major players."

At City Hall, Rawlings-Blake also expressed surprise that Paterakis was indicted. "He's certainly well respected," she said Wednesday adding that she hopes "the issue will be resolved in court and not in public."

Paterakis' name surfaced as a possible target in the City Hall investigation in late June when Lipscomb, who faced bribery charges for paying for the Holton poll, pleaded guilty to a lesser campaign finance charge. In exchange for prosecutors dropping the bribery charges, Lipscomb agreed to participate in the state prosecutor's investigation.

As part of the plea agreement, Lipscomb pleaded guilty to conspiring with Paterakis and Holton to violate campaign rules, including exceeding limits on how much can be contributed and not channeling funds through the councilwoman's official campaign treasury.

Prosecutors produced a copy of a check signed by Paterakis that was made out to Lipscomb's development company for $6,000 and said those funds were used to pay for a portion of the opinion poll, fueling speculation that the H&S Bakery owner would be charged.

Maryland campaign finance rules limit individuals from giving more than $4,000 per candidate per four-year election cycle.

All of the charges filed Tuesday are misdemeanors. If convicted, Holton and Paterakis each could be sentenced to a year in jail and a $25,000 fine.

Warnken called the new charges "pretty small." But for state prosecutors who saw the dismissal of an earlier case against Holton along with five of the 12 original charges against Dixon, the fresh indictments "give the prosecutors some mileage," the law professor said.

"They indicted John Paterakis," Warnken said.

Warnken said Paterakis probably will be "embarrassed" and "inconvenienced" by the charges, but he said it is unlikely that he would see any jail time.

The charges faced by Paterakis, Lipscomb and Holton stem from a $12,500 poll conducted for the councilwoman's 2007 re-election campaign.

She told her campaign treasurer that she would "find a way to get the money" to fund it, according to court papers.

In January, when she and Lipscomb were charged with bribery, prosecutors alleged that Lipscomb paid for the entire poll in exchange for her help in getting tax credits for Harbor East through the taxation committee that she chaired.

Sweeney ruled that Holton's legislative acts - her votes on tax credits and the bills she introduces - are protected and cannot be used against her, and the judge dismissed the case.

He cited legislative immunity in dropping perjury charges against Dixon for failing to report on ethics forms gifts she had received from Lipscomb.

Prosecutors struck a deal with Lipscomb on the eve of his trial, and on June 23 dropped the bribery charges against him and allowed him to plead guilty to a lesser campaign finance violation.

In the June 23 court hearing, prosecutors revealed that Lipscomb paid for only half of that poll. They said Holton met with Lipscomb and Paterakis and asked both for money, according to a statement of facts that Lipscomb and prosecutors signed.

It is not Lipscomb's first brush with campaign finance laws - he has paid fines in the past for previous violations.

Paterakis is also a longtime campaign contributor, having donated tens of thousands of dollars, mostly to Maryland politicians, in the past decade alone. Holton is a certified public accountant.

Paterakis made his fortune by transforming his family's small bakery on Ashland Avenue near Johns Hopkins Hospital into a multibillion-dollar operation that churns out buns for McDonald's and breads and rolls for major grocery chains.

In 2000, H&S was the largest privately owned bakery in the country, according to a profile of Paterakis published at the time in The Baltimore Sun.

Paterakis purchased the land for Harbor East in 1985 for $11 million at the request of then-Mayor William Donald Schaefer, who hoped the area would be redeveloped.

"The city found a sucker who was willing to do all this," Paterakis told The Sun in 2000.

At that point, some questions were being raised about Paterakis' ties to politicians, with citizens groups suing to challenge tax breaks he received for the Harbor East project. He and his companies donated about $10,000 to Mayor Kurt L. Schmoke from 1994 to 1996.

Paterakis has donated money to every mayor since then.

Recommended on Baltimore Sun