William E. Carlson, the top lawyer for Baltimore's multimillion-dollar federal empowerment zone, has been soliciting private legal work from companies in the zone for his politically well-connected law firm, Shapiro and Olander.
Mr. Carlson, who stands to be paid at least $118,510 from empowerment zone coffers, mailed about 50 letters to companies eligible for empowerment zone benefits.
He asked executives of those firms to consider contacting Shapiro and Olander for help in applying for the "exciting array" of tax credits and other initiatives offered by the federal redevelopment effort.
Shapiro and Olander, an influential law firm that does considerable legal work for the city and for local governmental agencies, is the law firm of Mayor Kurt L. Schmoke's two highest-ranking political aides. Ronald M. Shapiro, one of the name partners, is Mr. Schmoke's campaign treasurer. The mayor's campaign chairman, Larry S. Gibson, is "of counsel" to the firm.
The solicitations by Mr. Carlson -- appointed by the mayor in January to be general counsel to the quasi-public corporation overseeing the $100 million revitalization effort -- raise serious questions about potential conflicts of interest, some experts in legal ethics say.
One legal scholar said Mr. Carlson's conduct was "an impermissible conflict."
Mr. Carlson defended his solicitations yesterday, saying he thought the chances of possible conflict would be "very low" and promising to "disassociate" himself from representing a business one arose.
Included in the Shapiro and Olander mailings are copies of materials prepared by the city's empowerment zone staff and bearing the logo of the Empowerment Baltimore Management Corp., also known as EMPOWER BALTIMORE!
The empowerment zone initiative seeks to revive dilapidated sections of East, West and South Baltimore. It includes $100 million in federal grants, as well as tax breaks to businesses in the zone that could be worth $225 million.
Mr. Carlson is receiving $15,702 a month from empowerment zone funds from January through the end of this month, and another $10,000 a month from June through September. His total budgeted payment of $118,510 was questioned last week by a member of the board, who asked why the board was paying Shapiro and Olander when another prominent city law firm had offered to do the legal work for free.
As general counsel to EMPOWER BALTIMORE!, Mr. Carlson serves as secretary to the corporation, attending all board meetings. His duties include drawing up all the corporation's legal documents and handling the negotiations with federal agencies overseeing the disbursement of funds.
He has also appeared at public forums with executives of EMPOWER BALTIMORE! to discuss the available tax breaks.
In March, Mr. Carlson said he sent letters to about 50 of the largest companies in the zone, "trying to get business" for his firm. The letter, signed by Mr. Carlson, asked the business executives to call him or three other lawyers at his firm. His was one of a number of similar letters that zone businesses say they have received from law and accounting firms.
William I. Weston, professor of legal ethics at the University of Baltimore School of Law and a senior fellow at the school's Hoffberger Center for Ethics, said yesterday that Mr. Carlson's role as general counsel and his solicitations of business create "an impermissible conflict" of interest.
"He's soliciting the very people who are part of the process," he said.
Mr. Weston questioned what Mr. Carlson would do if the interests of a business he represented went against those of the empowerment zone.
"How does he give advice or maintain confidentiality?" Mr. Weston asked.
Another University of Baltimore law professor, Mortimer Sellers, said: "I would say he's probably doing something a prudent lawyer would avoid. . . . This doesn't sound like a particularly good idea."
Mr. Sellers, also a senior fellow at the school's Hoffberger Center for Ethics, said Mr. Carlson's letter itself did not directly violate Maryland's rules of professional conduct for lawyers, which says a lawyer shouldn't take on a new client if the representation of that client would adversely affect his relationship with another client.
"While not obviously a violation of Maryland's rules, it's the sort of initiative a lawyer might hesitate to make on the basis of possible conflicts of interest," Mr. Sellers said.
Mathias J. DeVito, chairman of the empowerment zone board, said he was unaware that Mr. Carlson had sent out solicitations ** until he was contacted yesterday by The Sun.
Mr. DeVito, chairman of the Rouse Co. and a lawyer himself, immediately called Mr. Carlson about the letter.
After talking with Mr. Carlson, Mr. DeVito said that he thought it was "OK" for his general counsel to send letters to prospective clients, but that, "In terms of representing anybody in negotiations with the city or the Empowerment Zone Management Corp., that's something he can't do. He does not intend to."
"In an ideal world, I would prefer he didn't do this," Mr. DeVito added.
Mr. DeVito also said he would have preferred that Mr. Carlson had told him about the mailings before they were sent.
"He recognizes it probably would have been the right thing to discuss it with me beforehand," Mr. DeVito said. Mayor Schmoke said through a spokesman that he, too, was unaware of the letters before yesterday and that they should not have been sent.
"I don't see it as a serious problem, but clearly it shouldn't have happened," the mayor said through spokesman Clinton R. Coleman.
"In my view it would have been preferable for that type of information to go out on EMPOWER BALTIMORE! stationery that listed Mr. Carlson as counsel," the mayor said. "That stationery did not exist then, it doesn't now, but soon will."
Mr. Carlson acknowledged yesterday that he should have told Mr. DeVito about his solicitations.
"I did not think to do that. . . . I should have discussed it with him earlier," he said.
But one reason he did not, he said, was that he saw no problem soliciting business clients in the zone.
"I'm real comfortable with the whole situation," Mr. Carlson said.
Saying "I am a business lawyer, that's what I do for a living," Mr. Carlson defended his mailings by noting that other firms have sent out similar letters.
"The empowerment zone is an opportunity for lawyers," he added.
Mr. Carlson said he has gotten about 20 to 25 preliminary telephone inquiries based on his mailings but has not signed up any clients from them.
He said he would not "represent anybody against Baltimore City and EMPOWER BALTIMORE!" and would refuse to represent a client seeking money from loan funds financed with empowerment zone money.
"If I see a conflict coming down the road, I get out. Or I don't get in," he said.
Mr. Carlson said he would see no conflict if a business client wanted to relocate outside the city from the empowerment zone -- even though the central purpose of EMPOWER BALTIMORE! is to create and retain jobs.
"I'm hired to give [legal] advice. I'm not hired to be a marketer," he said of his role with EMPOWER BALTIMORE!
Several zone businesses said they were put off by the queries they have received from Shapiro and Olander and several other firms.
"I think they're just trying to take advantage of this," said Pete Markey, plant manager of Vista Chemical in Fairfield. "I just throw them away when I get them."
"It's going to cost you money to find out if you're eligible for [credits]?" asked Adrian Berger, vice president of Seaboard Asphalt Products Co., a manufacturer of driveway sealers and roof coaters in Fairfield and one of the firms that received a letter from Mr. Carlson.
TEXT OF LETTER
The following is the text of a letter that William E. Carlson, a partner at Shapiro and Olander and general counsel for Baltimore's federal empowerment zone, sent to about 50 companies eligible for empowerment zone benefits:
As a business located within Baltimore's Empowerment Zone, your company is entitled to an exciting array of Federal and State tax incentives and Empowerment Zone programs.
To help address questions that you may have and to inform you about available incentives and programs, Shapiro and Olander has developed a package of information for you explaining the Empowerment Zone and how it works. The enclosed materials are:
(1) Baltimore Empowerment: Strategic Plan. Excerpts from Baltimore's Empowerment Zone application to the Federal government, including a discussion of the strategic plan developed by community residents, businesses, and institutions.
(2) Information For Businesses About Empowerment Zone Federal Tax Incentives, including an Empowerment Zone Employment Credit form for filing with the Internal Revenue Service.
(3) Maps of the Baltimore Empowerment Zone.
(4) A Shapiro and Olander Newsletter featuring an article by me entitled "Empowerment Zone Federal Tax Initiatives."
We hope you find these materials informative. If you have questions concerning your business and how the Empowerment Zone affects it, please contact me, Lonnie Ritzer, Lee Riley, or Lisa Harris at our office at 385-0202 and we will be glad to assist you.
Very truly yours,
William E. Carlson