Federal investigators will call witnesses to a grand jury today to describe how Lalit H. Gadhia -- a Baltimore lawyer and longtime Democratic Party fund-raiser -- allegedly steered thousands of dollars in illegal contributions to an obscure New Mexico political fund.
Six witnesses confirmed this week that they were subpoenaed to testify after telling the FBI that they were approached by Mr. Gadhia or his nephew in October and asked to contribute up to $1,000 each with the understanding they would be reimbursed. Proxy donations circumvent federal election laws that limit contributions to political action committees.
Mr. Gadhia, 56, and his 37-year-old nephew, Uday Gadhia, have denied the charges and declined to discuss the allegations until the case is resolved.
"We will have no comment," said Mr. Gadhia's attorney, Daniel F. Goldstein, a former federal prosecutor.
FBI officials refused yesterday to discuss the grand jury probe, citing secrecy rules. "We can't really confirm or deny the existence of an investigation," said FBI spokesman Larry Faust.
Signaling a widening probe into the case, the FBI is examining a political club founded in 1988 by Mr. Gadhia, according to grand jury subpoenas obtained by The Sun. Those subpoenaes require witnesses to turn over "any and all records" relating to the Gadhias, the club or the political action committee to the U.S. District Court grand jury in Baltimore by 10 a.m. today.
Known as STEP IN, the club collects thousands of dollars in contributions every year from members of the Indian-American community and passes them along to Maryland Democrats and other politicians with favorable voting records on India, according to Mr. Gadhia and club members.
Like Mr. Gadhia, most of the political club's members are immigrants from India who settled in Baltimore. But the guest lists at its frequent fund-raising dinners sometimes read like a Who's Who of Indian-American professionals from Maryland, Virginia and Washington, D.C.
STEP IN beneficiaries
Beneficiaries of the group -- which has been headed by Mr. Gadhia since its inception -- include U.S. Sens. Paul S. Sarbanes and Barbara A. Mikulski, Gov. Parris N. Glendening and Mayor Kurt L. Schmoke, campaign records show.
Mr. Schmoke also received an all-expenses-paid trip to India from STEP IN in 1992, traveling with Mr. Gadhia and other prominent Indian business executives from Baltimore. Mr. Schmoke said yesterday that the $15,000 trip was designed primarily as a "trade mission" to promote Baltimore as a favorable business location.
Mr. Gadhia continues to serve on the mayor's campaign finance committee, although he is "currently inactive," Mr. Schmoke said. Last month, Mr. Gadhia resigned under pressure as Mr. Glendening's campaign treasurer and took an unpaid leave from his $80,000-a-year job as the governor's deputy secretary for international economic affairs.
In recent weeks, the list of witnesses in the case has grown as FBI agents -- armed with canceled checks and other bank records -- have confronted PAC contributors, asking them about the source of the money, contributors said.
In all, 38 people from the Baltimore area contributed money to the Albuquerque-based PAC known as the Indian-American Leadership Investment Fund. It was started by a group of young Indian-American professionals to support their peers who ran for political office.
Last year, Mr. Gadhia appealed to the PAC's treasurer, Subodh Chandra, to expand the PAC's mission to include politicians who weren't of Indian descent but who had favorable voting records on India, according to letters, memos and interviews.
Mr. Chandra said he ultimately agreed to broaden the list of candidates to include Senator Sarbanes, Rep. Kweisi Mfume and 10 key Democratic representatives and senators who oversaw foreign aid, trade and immigration matters involving India.
Within weeks, records show, the PAC received $34,900 in
checks under a cover letter from STEP IN -- Mr. Gadhia's political club.
In an interview last month, Mr. Gadhia said he never handled the contributions or mailed them to the PAC because he was too busy serving as Mr. Glendening's campaign treasurer.
He said his secretary, Rose Osborne, handled the money and all correspondence with the PAC.
Memo hints at concerns
But STEP IN letters from Mr. Gadhia's office to Mr. Chandra -- obtained by The Sun and now in possession of the FBI -- were all signed in Mr. Gadhia's name. And in one memo to Mr. Gadhia in December, Mr. Chandra hinted at his deepening concerns over the source of the money.
According to the Dec. 5 memo, Mr. Gadhia failed to provide the PAC with information required by the Federal Election Commission about the identity, addresses and occupations of many contributors. Some names were spelled differently in various correspondence. One man was listed with three occupations.
"Please clear up this confusion," Mr. Chandra wrote in the memo.
Five months later, The Sun found some of the addresses provided by Mr. Gadhia's office did not exist. Occupations were misstated. And some donors turned out to be people of modest means who had never made a political contribution before, campaign finance records show.
Among the donors were four members of the Gadhia family and Mr. Gadhia's secretary, Mrs. Osborne, who quit last month after questions about the contributions surfaced. She is now cooperating with the FBI, sources said, and declined to comment.
According to interviews with contributors and sources, at least half of the people on the list did not legitimately donate money to the PAC. Some said they were reimbursed. Others said contributions were made in their name without their knowledge.
'I never gave any money'
"I have no idea what any of this is about," said Tanzania Cooper, a student at the Johns Hopkins University and a cook at P. J.'s Pub on Charles Street who is listed as a $1,000 donor.
"I'm telling you I never gave any money to anybody," she said. "If somebody gave money in my name, I'd love to know who it is."
Election records show that Ms. Cooper's boss at the pub, George R. Paniker, also contributed $1,000 to the PAC. Yesterday, Mr. Paniker said he, too, had been subpoenaed to appear before the grand jury this morning.
"I'm going to tell the grand jury the truth. If I tell the truth, I won't be in any trouble," said Mr. Paniker, who declined to elaborate.
Nephew's co-worker subpoenaed
Tejpal Rehncy, who worked with Mr. Gadhia's nephew at a small Baltimore electronics firm, said he also received a subpoena. He said Uday Gadhia approached him and at least one other company employee and asked them to write checks to the PAC in exchange for cash.
"He told me that whatever I gave would be returned, backed up," said Mr. Rehncy, who wrote a $1,000 check.
After the alleged proxy donations became public last month, Mr. Rehncy said he spoke to Uday Gadhia and asked him whether anyone had stepped over the line.
"He said: 'Yeah, there could be some trouble,' " Mr. Rehncy recalled. "He was real worried."