An agreement between leading Annapolis lobbyist Bruce C. Bereano and one of his clients, which pays him a percentage of new business he brings in for the company, apparently violates state ethics law.
The agreement is outlined in a letter to the client last fall by Bereano, who has battled his way back from a federal fraud conviction to regain his position as one of the state's highest-earning lobbyists.
The client, known as Mercer Ventures Inc. or Social Work Associates Inc., became Bereano's most lucrative employer over the past six months. The lobbyist's filing with the State Ethics Commission shows that Social Work Associates paid him $139,379 since Nov. 1, at least $50,000 more than any other client.
In addition to the apparently illegal contingency fee, the agreement calls for Bereano to be paid a monthly retainer and other expenses.
In his Sept. 1 letter to Social Work Associates owner Mike Traina, Bereano proposes to help the company "develop and obtain contracts and arrangements with various county, municipal and state government agencies" to provide privatized case management and other staffing.
Besides proposing a retainer fee of $2,000 a month plus expenses - which is common and legal - the letter says that it is "further understood" that Bereano will receive 1 percent of the company's first-year payments for business "which I was involved in securing and participated in obtaining and/or any contract and performance of services which is entered into by your company with any government entity, unit or agency in the State of Maryland."
Signed by Bereano, the letter also shows an undecipherable scrawl over a line saying it had been read and agreed to by Traina.
Suzanne S. Fox, executive director of the ethics commission, said that under Maryland law, "a lobbyist may not earn a contingency." When Fox was read this part of Bereano's letter, without being told who the lobbyist was, she said, "That's a contingency."
Fox said a lobbyist who has entered into a contingency agreement could face a "very severe sanction" under the lobbying law passed last year. Possible penalties include fines and suspension or revocation of the lobbyist's registration, which could effectively put the person out of business.
The ethics commission could also refer such a case for criminal prosecution, which could lead to up to a year in jail and a $10,000 fine, Fox said. The agency could also take the lobbyist to court and ask for fines of up to $5,000 for each day the violation existed, she said.
The ethics commission was sufficiently concerned about the contingency fee rule that it issued a bulletin to all regulated lobbyists and their employers in January restating the prohibition. Robert A. Hahn, the agency's general counsel, said no lobbyists have contacted the commission since then to say they unknowingly broke the law.
In a brief conversation Tuesday, Bereano acknowledged that he represents Mercer and Social Work Associates and knows Michael D. Traina, the companies' owner and recipient of the letter. After a copy of the letter obtained by The Sun was sent by fax to Bereano's office at his request, he did not return subsequent phone calls for comment.
A second copy of the letter was hand-delivered to Bereano's office yesterday with a written request for his comments. He did not respond.
Bereano, 62, is known as one of the state's most accomplished legislative wizards for his work to pass bills that benefit his clients and block those that hurt their interests. His agreement with Mercer Ventures/Social Work Associates appears to focus on a less-known part of his business: influencing the awarding of state contracts.
Under Maryland law, a regulated lobbyist such as Bereano may not "be engaged for lobbying purposes for compensation that is dependent in any manner on ... the outcome of any executive action relating to the solicitation or securing of a procurement contract."
Former Del. Donald B. Robertson, one of the authors of the law that created the State Ethics Commission, said the prohibition on contingency fees dates to 1979 and was expanded to include procurements in 1994.
Robertson, a former House majority leader who was chairman of a commission that proposed the most recent reforms, said the reason for the contingency fee ban boils down to a simple principle: "It provides too much of an incentive for lobbyists to win, and it was thought that incentive shouldn't be there."
Bereano has long been known as a lobbyist who plays hard to win, exercising considerable political muscle on behalf of his clients.
Through the 1980s and early 1990s, Bereano built up a lobbying practice that was unrivaled in Annapolis. By 1994, he was earning as much as $1 million a year in lobbying fees.
Late that year, however, he suffered a serious setback when a federal jury convicted him on mail fraud charges in connection with a scheme to funnel illegal campaign contributions to Maryland politicians.
After a long appeals process, a judge sentenced him to 10 months of work release and home detention in late 1998.
The sentence severely limited his ability to lobby during the 1999 legislative session, but he earned $305,000 during that six-month reporting period. In 2000, the Court of Appeals disbarred Bereano because of the federal conviction.
Bereano was able to continue lobbying because no license is needed. In 2001, the General Assembly passed a law giving the ethics commission the power to revoke a lobbyist's right to do business. Those sanctions did not apply to Bereano and his past violations.
Since 2000, Bereano has steadily built his client list. This year, he was back near the top with about $800,000 in earnings.
The money he collected from Social Work Associates apparently represents more than 10 percent of Bereano's lobbying earnings between November and April. Only $12,000 of the $139,379 was from his monthly retainer.
How Bereano earned so much from the client was not evident from the disclosure filing.
State records show that Social Work Associates received $24,715 in state payments in 2001 for technical and special services. There is no record of payments this year.
Traina, who did not return calls to his Baltimore office or Doylestown, Pa., home, is a former chief executive officer of Foster America - a company that holds a lucrative contract for foster care services from the Department of Human Resources. The executive left that company in 2000, midway through the contract, and has since been sued in Pennsylvania by Foster America.
The suit claims that Traina used his knowledge of corporate trade secrets to prepare proposals that compete with Foster America in Florida and Maryland, including a child welfare contract in Baltimore.
The suit alleges that one of the entities associated with Traina is Silver Spring-based Adoptions Together, which was recently awarded a $42 million Human Resources Department contract.
In April, the Board of Public Works postponed consideration of the contract after Foster America appealed the award of the contract to the state Board of Contract Appeals.
Janice Goldwater, executive director of Adoptions Together, said Traina and Bereano have had no role in the foster care contract or the organization's other activities. She said, however, that the group is talking with Bereano about the possibility of retaining him as a lobbyist.