Donation limits bypassed

THE BALTIMORE SUN

Supporters of both political parties are sidestepping the contribution limits set by Maryland law through a variety of strategies that allow them to make virtually unlimited donations and pump millions of extra dollars into the state's highest-profile races.

The loophole-aided largesse has already helped Maryland's two candidates for governor raise a record amount of money - $24 million - with millions more expected before the general election Nov. 7.

"It's a joke," said Bobbie Walton, executive director of Common Cause Maryland, who has called for an overhaul of the state's campaign finance rules. "There's always one more way to take money that is under the control ... of an individual and allow them to double or exponentially increase their contributions."

Maryland campaign finance laws say donors may not give more than $4,000 to a candidate for state office and cannot donate more than $10,000 overall to state candidates during a four-year election cycle. The limits are designed to ensure that a small group of wealthy contributors do not unduly influence the outcome of a race.

But those limits, albeit legally, are being circumvented in several ways. Donors, particularly to Republican Gov. Robert L. Ehrlich Jr. and his Democratic opponent, Baltimore Mayor Martin O'Malley, are giving through multiple companies or to state and federal campaign accounts controlled by state parties that then shift the money back to candidates.

In the newest wrinkle, campaign finance records released last week show that Ehrlich received $470,000 from a federal account created by the state Republican Party, which then used the cash to purchase services for his campaign - such as salaries, office equipment and postage.

Election officials say that the practice is legal, and campaign aides say that using state party accounts is necessary to pay for the extraordinarily expensive cost of running a modern statewide election.

In one example of how donors are exceeding the $4,000 cap, R. Michael Gill, chief executive officer of Hoyt Capital Corp., a Lutherville investment company, gave $10,000 to the state Republican Party's federal account May 24. That was a week before the party held a fundraiser that featured President Bush at the BWI Airport Marriott. Party officials said the event raised a million dollars.

State records show that Gill, who could not be reached for comment, had already given checks totaling $4,000 to Ehrlich's campaign in a series of three contributions between 2003 and 2004.

In the six-week period surrounding the Bush fundraiser, the party's federal account received 81 checks for $10,000 and 34 checks for at least $5,000.

The state Democratic Party has a similar federal account but has not yet used it to help O'Malley's campaign. Records show that individual donors have written 17 checks valued at $5,000 or more since the beginning of last year that were deposited into the account, which had a balance of about $200,000 at the end of June.

George Mahoney, who owns Monumental Paving and Excavation in Baltimore, was one of 11 donors who wrote a $10,000 check to the state Democratic Party's federal account in recent years. Records show that he had previously given more than $5,000 to committees formed by O'Malley and his running mate, Del. Anthony G. Brown of Prince George's County. Mahoney also gave $2,000 to the party's state account.

Mahoney said he was not circumventing limits but using money to support a candidate he believes in.

"I'm for Martin O'Malley and the Democratic Party, and I'm not ashamed to say that," Mahoney said. "I feel that the Democratic Party ... with what's happening in the world today and what's happening in the state, is the way to go."

Monumental Paving receives contracts from Baltimore City government, but Mahoney said he does not expect special treatment because he contributes to political campaigns. He said that his contracts are awarded from a competitive-bidding process.

Even before the most recent round of financial disclosures, more than $6 million has been funneled into state campaigns since 2003 under a loophole that allows contributions to be made through multiple companies, according to a Common Cause report issued earlier this year.

The strategy is frequently used by developers, who routinely set up business entities to own and operate various real estate projects. Typically, they are organized as limited-liability companies or partnerships, which do not have to disclose their ownership. Each company can make a separate $4,000 donation to an individual candidate or a total of $10,000 in an election cycle.

In the past seven months, the two gubernatorial candidates have received at least 250 contributions from these entities, with about $252,000 of the money going to O'Malley and $141,000 to Ehrlich. Maryland is one of 30 states that permits corporate contributions.

Last year, The Sun reported that developer Edward A. St. John had used more than 50 companies to make $160,000 in contributions - including tens of thousands of dollars to Ehrlich and O'Malley - for the 2006 election. St. John, the chief executive of MIE Properties, is one the region's largest commercial real estate managers.

In a report last year, State Prosecutor Robert A. Rohrbaugh said the use of multiple companies to make donations had rendered the state's election finance law "virtually unenforceable." He recommended that the General Assembly consider a New Jersey law requiring contributions from limited-liability companies to be recorded as coming from the individual who signed the check.

"It's very difficult to trace the funds," Rohrbaugh said. "You can't tell on the face of any contribution what the ownership is."

All but five states impose contribution limits on gubernatorial candidates, according to the National Conference of State Legislatures. The nationwide limit is about $3,500 on average, according to the organization.

In Maryland, sidestepping the donation cap has become so common that candidates even spell out how to do so in their campaign literature. A flier distributed by Steve Silverman, a Democrat running for Montgomery County executive, goes so far as to explicitly list various options.

"Individuals or entities such as corporations, LLC's or partnerships may each contribute up to $4,000," the flier reads. "Spouses may each contribute under a separate $4,000 limit."

Silverman said the language is used on all of his campaign material and is simply designed to remind people how they can give to his campaign and stay within the law. He said he supports changes to tighten some of the restrictions on campaign donation. But until those changes become law, he said, he must use every avenue to raise money.

"The folks who want to take advantage of giving through multiple entities don't need anybody to tell them to do that," Silverman said. "They're all smart enough to figure it out themselves."

Del. Elizabeth Bobo, a Howard County Democrat, introduced legislation during this year's General Assembly session that was intended to close the loophole permitting multiple business entities to contribute. The measure failed.

The bill, which Bobo said she will reintroduce next year, would treat multiple companies as a single entity if the same people controlled a certain percentage of the businesses. Bobo said she was uncertain how the state would determine joint ownership, since the companies don't have to disclose who controls them.

Spokespeople for the Ehrlich and O'Malley campaigns said that taking money from multiple companies is a necessary part of running for office. Neither candidate has proposed making any changes to the state's campaign finance law if elected.

"We're working within the confines of the law to make sure our message gets out," O'Malley spokesman Hari Sevugan said. "We try to go through a pretty rigorous vetting process to the extent that we're able to do that."

Shareese N. DeLeaver, an Ehrlich campaign spokeswoman, said that the governor would not take any money from a limited-liability corporation created for the sole purpose of making a political contribution. Beyond that, she said, those companies, like other corporations, are fair game.

"This law has been the subject of extended debate and votes year after year," DeLeaver said, adding that the governor would take "a deliberative and measured approach before making a final decision" on whether to sign a bill clamping down on donations over $4,000.

State Sen. Roy P. Dyson, a St. Mary's County Democrat, is the chairman of the Senate subcommittee on ethics and election law. While campaign finance has been a controversial issue in the past, he said there has not been enough momentum in the General Assembly to change the way campaigns are financed in Maryland.

"These laws can be circumvented in a legal way," Dyson said. "It's not a very good system."

john.fritze@baltsun.com

Copyright © 2020, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
64°