Election closes, campaign finance talk opens

On a single day in January, a local developer used several corporations he controlled to contribute seven times the individual campaign donation limit to the eventual winner of the race for Baltimore County executive.

As Election Day four years ago drew near, a prominent Washington attorney loaned half a million dollars to the candidate who would become governor.

A decade ago, a candidate for mayor of Baltimore spent more than $4,000 in campaign funds on suits.

Such moves might have raised eyebrows, but each was legal — revealing persistent loopholes in Maryland campaign finance law that have been exploited by candidates of both parties and all levels.

As the dust settles from the 2010 elections — and the four-year fundraising cycle that preceded them — a bipartisan committee of lawmakers, state elections officials and lawyers formed by Attorney General Douglas F. Gansler is studying the rules with the goal of proposing new ones when the General Assembly convenes in January.

Among the topics under review are contribution limits, the functioning of multi-candidate groups known as slates, the role of limited liability corporations, loans to candidates, proper uses of donor money, disclosure requirements and new media.

"It's not so much a complete overhaul as it is a tuneup," said Sen. Jamie Raskin, a Montgomery County Democrat and constitutional law professor. "There are certain explosive issues that divide us along party lines, but underneath that, there are many issues where we can find common ground and make moderate, common-sense improvements."

Fellow committee member Del. Ron George, an Anne Arundel County Republican, agreed that the work is mainly "updating."

Critics of the state's campaign financing system say change is overdue. The nonpartisan watchdog Center for Public Integrity gives Maryland a "D" grade for its disclosure laws and ranks it 22nd among the states.

Good-government advocates say loopholes such as slates, which enable candidates to transfer unlimited amounts of money among members, and legal language that allows individuals to circumvent giving limits simply by creating LLCs, render campaign finance restrictions meaningless.

"It really makes a mockery of the system," said James Browning, Mid-Atlantic director for Common Cause. Browning, who headed the watchdog group's Maryland chapter for five years, says the rules allow politicians to control huge sums of money with which to reward or punish candidates and causes.

Jared DeMarinis, candidacy and campaign finance director for the Maryland Board of Elections, said that while some may see the laws as imperfect, "it's almost like a self-regulating business. Everyone is watching everyone." DeMarinis is on Gansler's 10-member committee.

Political slates, Browning said, are an "incumbent protection system." He identifies Senate President Thomas V. Mike Miller as a master of the system: an effective fundraiser who has used slates to legally funnel hundreds of thousands of dollars to allies over the years.

Another slate veteran is Baltimore County Executive James T. Smith Jr., who in 2006 gave $585,000 to the Baltimore County Victory Slate of Democrats — which, in turn, gave state's attorney hopeful Scott D. Shellenberger $435,000 as he successfully fought off a Republican challenger.

Further weakening the campaign finance system, Browning said, is the limited-liability workaround — a system his organization described in a 2006 report as a "Six Million Dollar Loophole."

"The big issues over the last 10 years — gambling, the Inter-County Connector, development — have all been shaped and warped by the loophole," Browning said.

Contributions by two or more corporations owned by the same stockholders are considered to have been made by one contributor, but the rule does not apply to limited-liability corporations. Generous developers are some of the most avid donors through LLCs.

On Jan. 13, Catonsville developer Steve Whalen used nine LLCs to give $28,000 — seven times the $4,000 limit on individuals or corporations during a four-year period — to Baltimore County Councilman Kevin Kamenetz, then seeking the Democratic nomination for county executive. Kamenetz won the primary and the general election.

Steve Lebowitz, a Democratic activist and Daily Kos blogger, says that his research shows that Alan Fabian used the LLC loophole to give more than $250,000 to campaign committees benefiting Republican Gov. Robert L. Ehrlich Jr. during his four-year administration from 2003 to 2007.

Fabian, a state contractor under Ehrlich, was subsequently convicted on federal charges of fraud for operating a Ponzi scheme.

The regulators are regulated

Gansler said the Supreme Court decision this year in Citizens United v. Federal Election Commission helped spur his interest in forming a committee to study campaign finance in Maryland. Though the ruling, which expanded the ability of corporations and unions to give in elections, applies only to federal campaigns, some believe it paves the way for business interests to become more active in state politics.

"We regulate campaign finance activities," said Raskin, the Montgomery County Democrat, but "all of these other groups operate in a completely unregulated way."

Raskin said it would be perfectly legal to ask such givers to register with the state Board of Elections. "The new watchword for campaign finance laws has got to be sunlight," he said. "Everyone needs to know what kind of money is coming into the system and who is buying the speech that we're hearing."

Committee members hope the legislative tweaks will make it into law next year. It's an especially good time, they said, because the next gubernatorial election is nearly four years away.

"If we're going to do something, it's better to do it this year, when people feel we're not trying to affect an outcome in any way," said George, the Anne Arundel Republican.

Yet all campaign finance legislation faces high hurdles in Annapolis.

Paul S. Herrnson, who directs the Center for American Politics and Citizenship at the University of Maryland, College Park, found in studies of earlier Maryland election cycles that the system gives incumbents — the people who make the rules — significant advantages.

"It's the reformers regulating themselves, and they're not always that excited about it," Herrnson said.

The committee could have an extra challenge: It is already irritating leaders of the House of Delegates and the Senate. Gansler appointed the group, which includes four lawmakers, without consulting legislative leaders. He also passed over public policy groups such as Common Cause Maryland and the State Prosecutor's Office, which handles most election law violations.

Both Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch have told reporters that Gansler should have consulted them first. "As a courtesy, I would always suggest it's a good idea to inform the presiding officers before utilizing members of the body," Busch said, adding that he might one day assemble a committee of assistant attorneys general without first consulting Gansler.

Gansler, a Democrat who ran unopposed in the primary and general election this year, might be sitting on the biggest campaign account in Maryland: $2.5 million as of late October. He is often mentioned as a possible gubernatorial contender in 2014, when Gov. Martin O'Malley reaches his two-term limit.

"I really wanted to get some smart people together and just fix this," Gansler said. "I'm the chief legal officer. We're the lawyers for the state Board of Elections. I know there are areas that need to be clarified. I'm trying to do the right thing for the right reasons."

Maryland law limits the amount of money any individual or business can give to a candidate to $4,000 per four-year election cycle. Each donor can contribute no more than $10,000 total in that time. Candidates may transfer up to $6,000 per cycle to other candidates. Those limits have been in place for two decades.

Miller has long advocated raising the limits. Toward that end, he formed an unusual alliance two years ago with Sen. Paul G. Pinsky, a Prince George's County Democrat who supports public financing for campaigns.

Their bill, which would have raised the limits by a few hundred dollars and created a small, pilot public financing program, failed — a testament to how hard it is to pass any campaign finance reforms.

New rules for new media

Members of Gansler's committee describe their study as a process of modernizing 20-year-old rules. They are wary of the possibility of new loopholes opening as a result of rapidly changing technology.

Social media websites such as Facebook, which have broadened the ability of campaigns to raise money, were not anticipated in the laws now on the books. "We have to change to fit new media," George said.

Other rules seem woefully out of date. Committee colleagues DeMarinis and Ross Goldstein, the state's deputy elections administrator, point to one of the most befuddling regulations for candidates: the requirement that every payment be made by check. This means, for example, that to purchase anything online, a campaign worker must use a personal credit or debit card and be reimbursed by campaign check.

Raskin highlighted loans as a particular area of interest for the committee: "They can be given in unlimited amounts, so there's concern that it's essentially a way to circumvent contribution limits."

In the 2006 election cycle, 144 contributors loaned $2.26 million to candidates for state and county offices, according to state Board of Elections records.

The highest-profile loan was from Democratic fundraiser and Washington attorney John P. Coale to O'Malley in the closing days of the 2006 battle for the governor's office. Current law gives candidates who accepted loans a full four-year cycle to repay them, something lawmakers have tried to change.

Campaign spending is also up for review. The issue surfaced in 2007, when the father of Baltimore mayoral candidate Keiffer J. Mitchell Jr. came under criticism for spending $14,000 in campaign funds on a hotel. Dr. Keiffer J. Mitchell Sr. said the expense was appropriate because the room was used for fundraising.

Looking further back into the city's mayoral history, in 1999, then-City Council President Lawrence A. Bell III spent $4,323 in campaign contributions on his wardrobe.

State elections officials say they apply the "but-for" test to assess whether spending was proper. That is, if the expense would not have been made but for the person's run for office, it is generally considered legal.

Baltimore Sun reporter Arthur Hirsch contributed to this article.

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Reviewing campaign finance

Attorney General Douglas F. Gansler's panel to review Maryland's campaign finance laws: Sen. Allan H. Kittleman (R- Howard County); Sen. Jamie Raskin (D-Montgomery); Del. Ron George, (R-Anne Arundel); Del. Jay Walker (D-Prince George's); Carville Collins, counsel for the Republican State Central Committee; Bruce Marcus, counsel for the Maryland Democratic State Central Committee; Ross Goldstein, deputy administrator, Maryland Board of Elections; Jared DeMarinis, director of candidacy and campaign finance, Maryland Board of Elections; Katherine Winfree, chief deputy attorney general; John B. Howard Jr., deputy attorney general.

Among the topics the panel will study:

•Clarification of the definition and operation of multi-candidate slates.

•Disclosure requirements, including identification of entities subject to disclosure requirements, in light of the Citizens United decision.

•Revision of aggregate contribution limits.

•Permissibility and regulation of contributions made through electronic means.

•Regulation of use of new media in campaigns.

•Treatment of party administrative expenses.

•Role of limited liability companies in campaign finance.

•Distinguishing permissible uses of campaign funds from prohibited uses.

•Loans to campaigns by candidates and third parties.

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