With loophole, many campaign donors remain anonymous

A loophole in state campaign finance laws allowed contributors to Maryland candidates and political groups to pump $4.3 million into the 2010 election cycle while remaining anonymous — denying citizens a thorough look at the money that flows into politics.

The State Board of Elections discourages candidates from using the "lump sum" label on campaign finance reports, and Maryland Attorney General Douglas F. Gansler has taken issue with the practice. But it remains legal and has been used by Democrats and Republicans alike, enabling some local candidates to finance their races without disclosing large numbers of donors.

Critics say that grouping contributions together rather than itemizing them runs counter to the campaign finance system's intent to provide transparency.

"It's a loophole that's being abused by people," said Susan Wichmann, director of Common Cause Maryland, a good-government group that pursues campaign finance reforms. "It needs to be closed." Candidates who rely heavily upon lump sum reporting, Wichmann said, are "using it as a way to hide their donors."

But candidates who use the lump sum designation say it is a convenient way to report small donations.

A Baltimore Sun analysis of data from the State Board of Elections found that while most candidates refrain from marking any contributions as lump sums, some report large amounts of money that way. The top dozen users in the last election cycle reported a total of $318,602 in contributions without any donor information.

Among the findings:

•Republican former Gov. Robert L. Ehrlich Jr. led the pack with $71,917 in contributions from unnamed political clubs for his campaign last year against Democratic Gov. Martin O'Malley. Although O'Malley noted some small lump sums in earlier elections, he does not appear to have collected such payments during the recent cycle.

•House Appropriations Committee Chairman Norman H. Conway was another heavy user. The Eastern Shore Democrat reported $38,257 in lump sum contributions — mostly, he said, from ticket sales to a chicken-and-dumplings dinner held each January before the start of the legislative session.

•Frank Conaway, the clerk of Baltimore Circuit Court and a candidate for the Democratic nomination for mayor, reported $27,570 in lump sum contributions, nearly 40 percent of the money he raised during the cycle. A political slate he shares with three family members raised $6,250 in unitemized donations, or 86 percent of the contributions it received.

Overall, lump sums accounted for 3 percent of the campaign contributions in the January 2007 to December 2010 election cycle.

State Board of Elections officials call the lump sum designation difficult to verify and problematic for transparency.

"The preferred practice is always to disclose," said Jared DeMarinis, director of candidacy and campaign finance for the board. "You have the option to use lump sum, but if you're audited and your records don't match up, you've got a problem."

Under the law, an individual who donates less than $51 need not be issued a receipt. And any donations that do not generate receipts can be lumped together and reported as a single sum.

When a donor reaches $51 in contributions through a series of transactions over four years, the individual's identity must disclosed to the board. There's no limit on how much a candidate can report as a lump sum.

Elections officials acknowledge that the laws and policies on lump sums can seem confusing. The original intent of the designation, which has been allowed at least since 1978, was to make it easier for candidates to report nominal donations at campaign events, such as raffle tickets. Political action committees, including those for the Fraternal Order of Police, often label small fees collected regularly from members as lump sums.

But while they are not required to disclose such contributions, candidates and political organizations are supposed to collect and retain information for every donor.

Critics of lump sum reporting say that because candidates must keep the data anyway, the public should be allowed to review it.

"The whole purpose of disclosure is to make it so that a person can quickly and readily determine who is giving to whom and how much," said Gansler, who convened a group last year to study campaign finance. "There ought to be a requirement that anyone who contributes, whether it is $1 or $4,000, be identified in public reports. It goes to the heart of transparency."

Maryland is one of 49 states that allow candidates to report contributions of a certain amount without disclosing who gave the money, according to the National Institute on Money in State Politics. Only Florida requires that every dollar donated to a candidate be itemized, the group says.

On the federal level, a similar reporting designation, called "bundling," has attracted the attention of good-government groups pushing for more disclosure.

The nonpartisan watchdog Center for Public Integrity gives Maryland a "D" grade for its disclosure laws. The center ranks Maryland 22nd among the states.

Election lawyers, public officials and others who have studied the state's campaign finance laws in recent years have concluded that savvy politicians can easily circumvent the individual giving limits of $4,000 per candidate and $10,000 in total contributions per four-year cycle.

Through political slates, candidates can transfer unlimited sums to one another. And any limited liability corporation — even if several are owned by the same person — may donate up to the maximum individual limits.

The Maryland General Assembly passed a law this year requiring corporations and unions that log $10,000 or more in independent expenditures to report nearly all of their donors — a reaction to a recent Supreme Court ruling that allowed such organizations to spend unlimited amounts on political advertising.

Efforts to provide more disclosure may be on the way. An election-law study group convened by Gansler last year identified donations by slates and limited liability corporations as top issues to address. The Assembly and O'Malley are forming a commission to propose legislative changes to the campaign finance system.

Elected officials who note contributions as lump sums defended the practice as a matter of practicality.

Del. Patrick L. McDonough reported $19,932 — roughly a quarter of the money he raised during the election cycle — as lump sum contributions. The Baltimore County Republican said that his donations come from "the little guy" and that he views campaign finance reporting as a way to track "the professional contributors, the heavy hitters."

McDonough said he is keeping records on "the little guys" as required by law. He displayed a notebook with contributors listed in blue and black ink and said he also enters the names in a computer so he can track when they reach the limit that triggers required reporting.

He sees no problem with shielding small donors from public scrutiny. Individuals who make $51 or more in contributions during an election cycle must be reported to the State Board of Elections, which lists the information in a searchable database maintained by the University of Maryland's Center for American Politics and Citizenship.

Conway, the House budget chairman, has logged about $100,000 in lump sum contributions over the past 10 years. The $38,257 he reported in the last election cycle means that up to 17 percent of the donations he received were not linked to a specific contributor.

He said his longtime treasurer notes ticket sales as lump sums "out of convenience."

Lump sum contributions have been an issue in some political races.

Sen. Jennie Forehand has reported more than $36,000 in lump sums over the years. The Montgomery County Democrat did not report any such payments in the most recent election cycle — but only, she said, because she was raising larger amounts of money than usual.

The website Maryland Politics Watch wrote about Forehand's lump sum usage in November 2009. And Democratic former Del. Cheryl Kagan criticized Forehand for not disclosing her donors in a bitterly fought race that Forehand won by 356 votes

"There is such cynicism and distrust in America regarding politics," Kagan said. With campaign finance, "it's not just about compliance with the law, which is essential. But it's about sending a message that resonates with voters."

Forehand called the criticism unfair and said it is important to preserve candidates' ability to group small payments together for convenience. She said people who have given her small amounts — $5 here and there, she said, as at church — "are not politically oriented. They don't want to fill out all of those forms. They don't want to be on the Internet."

The "whole point" of the state's campaign finance reporting system, she said, "is to see who is giving the big bucks and to see a pattern of contributions."

Records show that some candidates for local offices are raising high percentages of nameless contributions.

Kenny Dement, a Republican St. Mary's County commissioner defeated in the 2010 election, reported raising a total of $44,712 during the election cycle. More than half — $29,511 — was listed among several lump sums.

Conaway, the city's Circuit Court clerk, reported a lump sum contribution of $13,785 on May 21, 2008. He noted receiving the same amount precisely one year later. Additionally, nearly all of the contributions received by The Four Bears political slate he shares with his wife and two children are marked as lump sums.

When asked about the reports, Conaway said he had no idea what a lump sum is. He said he is an almost entirely self-financed candidate and surmised that the lump sums are actually personal loans he extended to himself. Loans are required to be noted as such in campaign finance reports.

"It's an error, you can count on that," Conaway said. He said his campaign would contact the State Board of Elections about correcting the record.

Neither the State Board of Elections nor the State Prosecutor's Office, which pursues election-law violations, could recall an investigation into abuse of the lump sum designation.

Lump sum entries can be difficult to locate with the campaign finance data — and sometimes point to other flaws in the system. For example, Ehrlich's lump sum entries show up in the contributor address field, making them difficult to locate in a search of public records.

In each January of the previous four years, Ehrlich reported a lump sum contribution, ranging from $1,037 to $28,361, from "political clubs." He does not identify the clubs. According to the Board of Elections, a political club is an entity with a membership structure that raises most of its money from dues. It need not register with the elections board.

Aides to Ehrlich did not return phone calls seeking comment for this article.

Baltimore Sun reporters Patrick Maynard and Jamie Smith Hopkins contributed to this article.



Top users of lump sum reporting in 2010 election cycle

Robert L. Ehrlich Jr., Republican candidate for governor defeated in 2010: $71,917

Del. Norman H. Conway, Democrat, Eastern Shore: $38,257

Kenny Dement, Republican, former St. Mary's County commissioner defeated in 2010: $29,511

Frank Conaway, Democrat, Baltimore Circuit Court clerk, mayoral candidate: $27,570

Rex Coffey, Democrat, Charles County sheriff: $26,615

Peggy Magee, Democrat, candidate for Prince George's state's attorney defeated in 2010: $23,127

Dave Williams, Democrat, candidate for Charles County sheriff defeated in 2010: $22,265

Del. Patrick L. McDonough, Republican, Baltimore County: $19,932

Obie Patterson, Democrat, Prince George's County councilman: $19,815

Earl Piner, Democrat, Cecil County Commission candidate defeated in 2010: $16,220

Del. Elizabeth Bobo, Democrat, Howard County: $12,819

Richard Fritz, Republican, St. Mary's County state's attorney: $10,554