OCEAN CITY -- Three entrepreneurs lost one of this resort town's most lucrative contracts yesterday -- the right to sell 2-inch souvenir photograph telescopes that have captured memories for beach-goers for decades.
Town council members said they had little choice in revoking the franchises of Gregory Ferrante, his wife, Kathleen, and her brother, Patrick O'Malley, who owe more than $384,000 in fees that were due Jan. 1.
"This is the highest-profile franchise the city grants, the highest single franchise payment the city gets," said Mayor James N. Mathias Jr. "We're responsible to 27,000 business owners in this town, and I don't see how we could continue under the circumstances. They don't have the money, and, given their legal situation, there's doubt that they will."
O'Malley told council members that the three have been unable to make the required payments -- which represent 80 percent of the annual franchise fee -- because they are embroiled in civil lawsuits filed by competitors and are under the scrutiny of a grand jury.
"These difficulties have caused serious financial issues," O'Malley said. "I'm struggling day to day to fulfill my obligations."
According to Ocean City officials, payments have been made on time only once since the four-year contract was awarded in 1996.
In a lawsuit filed last month in Baltimore, Richard E. Wallace of North Potomac accused O'Malley and Gregory and Kathleen Ferrante of rigging the bids that won the four-year contracts. Wallace said he took the action after learning that Gregory Ferrante's brother, Todd, had filed similar charges two years ago.
In his lawsuit, Wallace accused O'Malley and Gregory and Kathleen Ferrante of submitting excessive bids, planning to pay the fees by upping prices for telescope viewers that are sold by seasonal workers who prowl the resort beaches taking snapshots of tourists.
Last summer, U.S. District Judge Marvin S. Garbis issued an order staying Todd Ferrante's case after a grand jury subpoenaed records in the case. "It appears that the parties to this case will be involved in related proceedings which will affect, and may resolve, the issues here presented," the judge wrote.
The Ferrante family has been in the souvenir photograph business since 1984. In his lawsuit, Todd Ferrante charges that his brother, Gregory, pushed him out and replaced him with O'Malley in 1996.
Ocean City officials say they have been suspicious of the Ferrantes' control of the popular telescope photography operation. But the town twice failed to prove any wrongdoing in lawsuits filed against the family, Mayor Mathias said.
In 1984, when officials tried to block the family from getting the franchises, Gregory Ferrante won a court fight to remain in business.
"There's always been a swirl about conspiracy, innuendo about the bidding," said Mathias. "But our major concern was the fact that the city was on the line for nearly $385,000."
Before voting to revoke the franchises, council members said they found the process distasteful, particularly since they had been doing business with the family for years.
Council President Richard W. Meehan, the only member who voted against canceling the contracts, urged his colleagues to consider a payment plan for the final year of the four-year contract.
"This could happen to any one of us, particularly a small business," Meehan said.
Pub Date: 2/10/99