Campaign finance loophole may be plugged

Under Maryland law, there's a limit to how much money a citizen can donate to state political campaigns — $4,000 to a single candidate, $10,000 in total donations during a four-year election cycle.

But some Marylanders are less limited than others. Take, for instance, the developer Edward St. John. Through dozens of corporations he owns that operate out of the headquarters of St. John Properties in Baltimore County, he's funneled more than $250,000 to Maryland politicians of both parties over the past two years.


St. John's generosity — and there are still two years to go in the election cycle — doesn't violate the law. And he's not the only wealthy business owner to sidestep the state caps by using limited liability corporations to boost his giving power into six figures.

Some lawmakers, acting on the recommendation of a commission set up by the General Assembly, hope to introduce a bill Friday that would close the loophole and make other sweeping changes to the laws governing money and elections. House and Senate sponsors were seeking to work out differences Thursday so they could adopt a common approach.


"In terms of good government, it is important for people to know ... who is giving money and how much to candidates," said Del. Jon Cardin, a Baltimore County Democrat who served on the commission.

The provisions proposed by the panel include new requirements for disclosure prior to Election Day of large contributions and expenditures, new enforcement powers for the State Board of Elections and an extension of the statute of limitations for election law violations.

As a trade-off, the sponsors plan to propose an increase in the current spending limits — unchanged for two decades — to account for inflation. The commission suggested $6,000 for each campaign and $25,000 overall, but sponsors might propose a lower cumulative limit.

Senior Vice President Gerard Wit said St. John Properties would not oppose such changes. He said that when the company donates, it is invariably at a candidate's request. Politicians, he said, are well aware that developers have multiple LLCs that can write checks.

"No developer I ever knew ever calls a politician and says, 'Can I give you some money?' It just doesn't happen," Wit said. "Will it change what we do? It'll save us a fair amount of money."

Advocates of election reform hope the legislature will finally approve changes they've been seeking for decades. Assembly leaders appear more open to campaign finance reform than in the past, when bills to close the LLC loophole were routinely blocked in committee.

House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller say they expect the Assembly to pass legislation adopting at least some of the commission's recommendations.

"There's tremendous momentum behind it this year," said Jennifer Bevan-Dangel, executive director of Common Cause Maryland. "People are outraged about Citizens United and the amount that was spent nationally in the 2012 election."


The Citizens United decision, in which the Supreme Court in 2010 opened the door to unlimited outside spending on political campaigns, could constrain what Maryland lawmakers can do to curb the role of money in politics. But a commission that has worked the past two years to study the system has proposed a package of changes that it believes will withstand any court challenges.

While Common Cause has expressed misgivings about the higher contribution limits, Cardin said it's reasonable to increase them.

"Everybody realizes the direct contribution limit has been stagnant for nearly 20 years," he said.

Perhaps the most intricate and challenging provision is a proposal to close the so-called LLC loophole. Limited liability corporations are the most common corporate entities used to get around contribution limits.

Reform advocates say the use of multiple LLCs owned by the same person makes a mockery of the state's efforts to prevent a concentration of political power in a few hands.

"Developers and casino interests have a lot of opportunity to use that loophole, and it gives them enormous power," Bevan-Dangel said.


One such developer is William Rickman Jr., owner of the casino at Ocean Downs outside Ocean City. Over the past eight years, Rickman and a web of LLCs and other entities operating out of the headquarters of the William M. Rickman Construction Co. in Rockville have spent more than $300,000 on Maryland politicians and parties. As an individual, Rickman would have been limited to giving $30,000 over that period, which spans three election cycles.

One of the biggest beneficiaries of Rickman's generosity, which has flowed to both parties, has been Gov. Martin O'Malley. Over the eight years, the Democrat has received $68,750 from Rickman-connected businesses, mostly LLCs, and $5,000 from Rickman as an individual.

(If political spending not covered by the limits is included, Rickman-connected businesses have poured almost $1 million into Maryland election and referendum campaigns over that time, including the 2008 vote that approved slot machines and opened the door for Rickman to receive a Maryland casino license. State law sets no limit on spending to influence the outcome of a referendum campaign.)

Over those eight years, Rickman has enjoyed considerable success in the General Assembly, winning a slots license after the legislature approved the machines in 2007, special aid for Ocean Downs during last year's regular legislative session and benefits from the casino expansion measure approved by voters in November.

Rickman did not return phone calls seeking comment.

Other well-known Marylanders who have made use of multiple corporate entities to extend their giving power include Orioles owner and downtown property owner Peter Angelos, Harbor East developer John Paterakis and Maryland Live Casino owner David Cordish.


Sen. Bill Ferguson, a Baltimore Democrat who will be a lead Senate sponsor, said the legislation will treat multiple corporate entities as one for the purpose of campaign donations if they are 80 percent owned by the same person or persons.

"It empowers the state to ensure that the LLCs are not a means for gaming the campaign finance system," said Ferguson, who served on the commission. "This is not a perfect solution, but it creates a bright line to ensure that violators can be prosecuted."

The legislation would not create a statewide system of public financing — the Holy Grail for election reform advocates but an idea the commission rejected, mostly because of concerns about how to pay for it. Neither is the measure likely to outlaw the use of statewide slates, a system that has been criticized for allowing large sums to be moved from politicians with "safe" seats to closely contested races with few restrictions.

Ferguson said the proposal strives to achieve what is possible.

"It hits the most-critical and most-fixable loopholes or problems in the law," he said. "It doesn't close every loophole."