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Charges could wreck family demolition firm

THE BALTIMORE SUN

After years of working with the government on demolition projects ranging from public housing high-rises to the haunting remains of the Oklahoma City federal building, Mark and Doug Loizeaux have suddenly found themselves on the other side.

The brothers went on trial last week in U.S. District Court, accused by the government in a campaign finance case that could effectively wreck their three-generation family business, Controlled Demolition Inc.

Federal prosecutors say the brothers and the company steered $4,000 in illegal donations to Rep. Elijah E. Cummings' first race for Congress - a charge defense attorneys have said doesn't even belong in court.

But they acknowledge that the stakes are high. If the government wins convictions, CDI could be barred from government contracts that account for much of its multimillion-dollar business and could lose its federal explosives license, which allows the firm to operate.

It would be a staggering setback for the tiny Baltimore County company that operates with 18 employees out of a house in Phoenix but is considered a world leader in toppling buildings.

Some of the worst public housing projects in the country were brought down by CDI, including Baltimore's Murphy Homes, Lafayette Courts, Lexington Terrace and Broadway Towers. So were such once-glamorous spots as the Sands Hotel and Casino in Las Vegas, the King Cotton Hotel in Memphis and the Hudson Department Store in Detroit, which at 2.2 million square feet is the largest building ever demolished by explosion.

As they have crossed the globe, razing more than 7,000 buildings, the Loizeauxs have dazzled crowds and won warm reviews. For a Harper's Magazine article in July 1997, David Samuels spent weeks with the brothers and wrote: "The Loizeaux family story can be read both as the heartwarming tale of an ordinary family that does extraordinary things and as a history in reverse of the United States, written in dynamite and detonating cord."

In Baltimore's federal courthouse last week, prosecutors offered a far different picture. Government attorneys described the Loizeaux brothers as calculating businessmen who illegally funneled corporate money to Cummings' 1996 campaign in the belief that his support for tearing down aging housing projects would be good for their business.

Prosecutors allege Mark and Doug Loizeaux, the firm's president, directed four CDI employees to write $1,000 checks to Cummings' campaign committee in early 1996, then reimbursed those workers with company money - a violation of federal campaign rules prohibiting corporate donations.

But the brothers aren't charged with violations of campaign-finance laws, which are misdemeanor offenses. Instead, prosecutors charged the Loizeaux brothers and CDI with causing false statements to be made to the federal government, a felony.

Prosecutors allege that the Loizeaux brothers knew that their employees were "straw donors," and the real source of the $4,000 in contributions was their company. By disguising that information, government attorneys argue, the Loizeaux brothers caused Cummings' campaign treasurer to falsely report to the Federal Election Commission the source of the contributions.

It is a complex legal argument, and defense attorneys last week began trying to deflate it by suggesting that the brothers did nothing wrong when they asked top-level employees to support Cummings, who once did legal work for CDI. And their attorneys say the brothers certainly didn't have anything to do with his campaign treasurer's reports.

"In 1996, they were total novices when it came to politics and making political contributions," defense attorney Gregg L. Bernstein said in court.

Defense attorneys and the brothers declined to comment on the case outside court. The trial resumes today and is expected to last through the week.

Assistant U.S. Attorneys Kathleen O. Gavin and Michael Cunningham have presented evidence showing that each of the four employees who made contributions received $1,000 checks from CDI - sometimes on the same day they made their donation.

Defense attorneys have argued that the $1,000 company checks were bonuses that the employees could spend as they chose.

One CDI employee, Raymond D. Zukowski, testified last week that he didn't mind making the contribution when asked. But Zukowski said that when he told his bosses he didn't have enough money in his checking account to cover a $1,000 contribution, he was told that he would receive a $1,000 advance on a future bonus.

"It was a wash, wasn't it?" Gavin asked.

"You could look at it that way," Zukowski answered.

Prosecutors face a difficult task, in part because they must build their case mainly using witnesses loyal to CDI and to the Loizeaux brothers. But the false-reports argument has been used successfully by federal prosecutors in one notable case. Maria Hsia, the Democratic Party backer who helped arrange Vice President Al Gore's Buddhist temple visit, was convicted on identical charges this year in federal court in Washington. She is awaiting sentencing.

Two similar cases were filed in Baltimore's federal courthouse this year, both involving contributions to Cummings' 1996 campaign. Demolition expert Pless B. Jones was charged and has pleaded not guilty. Randallstown businessman Walter Wallace E. Hill pleaded guilty in June and is awaiting sentencing.

Cummings has not been charged. Federal authorities have said that he was not a target of the investigation; they have not explained why it focused on his campaign. The third-term Democratic congressman could be called as a witness in the Loizeaux case, although his spokesman, Michael Christianson, said Friday that he knew of no subpoenas.

Prosecutors have not argued that the Loizeaux brothers received any government work - or were promised any - in return for their contributions. Defense attorneys say the brothers never expected any.

By 1996, the Loizeaux brothers hardly needed to go looking for business. The company started by their father, John D. "Jack" Loizeaux, in the 1940s to blow up tree stumps, had long since moved on to bridges and old factories and urban renewal efforts, ranging from President Johnson's "Great Society" efforts to President Clinton's attempts to tear down and replace the nation's decrepit public housing. A third generation had joined the work, Mark's daughter, Stacey Loizeaux.

The Harper's article reported that CDI's gross revenue in 1996 was roughly $12.5 million. In Baltimore, each of the 15 public housing high-rises demolished by CDI since the mid-1990s involved a contract worth about $600,000, said John M. Wesley, a spokesman for the Housing Authority of Baltimore City.

Already, the federal charges have cost CDI. After the Loizeaux brothers were indicted in February, they were temporarily suspended from demolition contracts with the U.S. Department of Housing and Urban Development, which has funded the Baltimore housing demolitions, according to trial testimony.

Another company performed the explosives work on the demolition of Baltimore's Hollander Ridge housing project.

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