House Speaker Michael E. Busch called on Gov. Robert L. Ehrlich Jr.'s longtime finance chairman yesterday to give up his seat on the state university system's Board of Regents or quit raising money for a group that plans to lobby for slot machines at Maryland racetracks.
Busch, the General Assembly's chief critic of Ehrlich's slots proposal, said Richard E. Hug's dual role is a clear conflict of interest.
"This could probably rise to the highest level of impropriety I've seen since I've been in the General Assembly," said Busch, a legislator since 1987.
Hug, who led Ehrlich's record-breaking fund-raising effort for the 2002 election, rejected Busch's assertion that his fund raising for a newly formed, pro-slots nonprofit group is incompatible with his university role.
"That's his opinion," Hug said. "He can have his opinion. This has nothing to do with the Board of Regents. But it has everything to do with the good of Maryland, and the good that will result if slots legislation will pass."
Ehrlich said he has never spoken to Hug about the proposed campaign and did not learn about it until yesterday afternoon. The outrage of Busch and other Democrats "appears to be made up," he said.
"Anything to stop the momentum for slots," said the governor, who is promoting slots as a way to raise money to help the racing industry and increase education spending.
Busch's comments came after The Washington Post reported that Hug was soliciting contributions from racing interests to a group that plans to mount a broadcast campaign pressing lawmakers to approve slots.
While Busch and other Democratic lawmakers criticized Hug's role in the group, called Citizens for Maryland's Future, there appears to be no state law prohibiting his actions.
However, a Republican congressman from Virginia urged the Internal Revenue Service to investigate whether Citizens for Maryland's Future would be eligible for tax-free status if it lobbies on behalf of slots.
"I am curious as to how this newly formed group can operate under tax-exempt rules that were set up for organizations to 'promote social welfare' while promoting an activity which is now illegal in Maryland," wrote Rep. Frank. R. Wolf, a leading critic of the gambling industry.
The organization is registered under a provision of the tax code that designates it a "civic league or social welfare organization."
Among those informed about the campaign was William J. Rickman Jr., who owns the Ocean Downs harness track and plans to build a racetrack casino in Allegany County. Rickman said he decided not to contribute but would not disclose who told him about the effort.
"I didn't want to give any money because I didn't want to be in the newspaper," Rickman said.
He noted the extensive coverage of racing executive Joseph A. De Francis' gift of more than $200,000 to a national Democratic campaign committee chaired by Senate President Thomas V. Mike Miller - a matter that has touched off an FBI preliminary inquiry.
Busch, an Anne Arundel County Democrat, said Hug must fully disclose details of his fund-raising activities because of his powerful role in the Ehrlich administration.
"He's as much a private citizen as I am the next Cy Young winner for the Baltimore Orioles," the speaker said.
While Busch questioned whether Hug's actions violate state ethics laws, the Ehrlich ally appears to be on solid ground in state law.
Nothing in Maryland law appears to bar Hug from raising funds for a political candidate or a lobbying campaign while serving on the Board of Regents, according to Kathy Rowe, an assistant attorney general. Nor does seeking donations for a lobbying campaign require the fund-raiser to register as a lobbyist.
That could change when the campaign starts, however. Maryland's ethics law says that once a grass-roots lobbying effort spends $2,000 to influence legislative action, an "entity" - which can be a person or a group - is required to register within five days.
Hug said he did not intend to register as a lobbyist and saw no need to. "You guys don't seem to get it," he said. "I am doing some fund raising."
State ethics panel
A final determination would likely be up to the State Ethics Commission.
W. Minor Carter, the lobbyist for an anti-slots coalition, said yesterday that he will recommend that a complaint be filed with the ethics commission seeking such a ruling.
Rejecting Busch's call for disclosure, Hug said he could provide no documents regarding the committee because he did not form it and was only raising money for it. He refused to say who formed it, or who was participating in the effort.
"I know who's chairing it. I'm not telling," he said. "It's an independent expenditure. You guys are tilting at windmills."
Busch said that if Hug's actions are legal under Maryland's ethics law, the General Assembly might have to consider passing new legislation to deal with the issue.
Whether legal or not, gambling foes said Hug's fund raising brings up ethical issues.
Six delegates - all Democrats - delivered a letter to Ehrlich calling on the governor to seek Hug's resignation as a regent.
"It really damaged the reputation of the Board of Regents," Del. Peter Franchot, a Montgomery County Democrat, said at a news conference.
James Browning, executive director of Common Cause/Maryland, said it's difficult to believe the pro-slots advertising effort is independent of the Ehrlich campaign.
"It's a frightening development because it means there are no limits as to how much money Ehrlich's allies can pour into the fight," Browning said.
Paul E. Schurick, one of the governor's key negotiators on slots, said Hug and the group are not coordinating their efforts with Ehrlich. Such cooperation would be a violation of federal law.
Schurick said he first heard of the effort about two weeks ago, but would not reveal who told him. He said he did not speak to Hug directly, and that he saw no ethical problem with the campaign.
"To me, this is nothing more than a coalition, much like the anti-slots coalition," Schurick said.
A supporter of expanded gambling called the campaign a "great idea."
Gerard E. Evans, a lobbyist for the Maryland Thoroughbred Horsemen's Association, said he would encourage members to give to the fund.
"This is a major public initiative," he said. "It takes a lot of money to move public opinion, and why shouldn't the governor have an effort to pass the bill?"