GRASONVILLE -- The lands that once belonged to Arthur Kudner Jr. spread across Queen Anne's County like a lush carpet. From the main road, the forest appears to have no end, and acres of soybean fields hug the shimmering blue of Prospect Bay.
Even on the rural Eastern Shore, this much land - more than 1,500 acres - is hard to find, and harder still to keep pristine. So when the estate went up for sale, nearly every land trust in the state took notice. But none could afford to buy it.
Then David Sutherland made a $20 million gamble.
The charming, high-energy Louisiana native had spent two decades in the nonprofit land preservation movement, protecting thousands of acres on the Eastern Shore and across the country. But this time, he was venturing out as an entrepreneur. He agreed to buy the farm for $20 million, using a loan from the estate.
His goal, he said, was to develop some of the property - but to preserve much of the rest. And to do that without losing money, he needed someone to pay him to keep the land as open space.
Sutherland's push to secure state funding for the Kudner farm prompted an outcry when it became public over the summer, particularly because of the high price he demanded for a relatively small piece of the farm. But a closer look at the deal reveals problems beyond the price.
It shows how a well-connected deal-maker seized upon a fleeting state interest in building sports complexes to persuade the government to buy his property. He persuaded county commissioners that they could put such a complex on a couple of hundred acres of land that mostly cannot be developed. And when that plan fell apart, state officials went ahead and bought the parcel anyhow.
The deal also illustrates a weakness in Maryland's Open Space program that even state officials have acknowledged: The program has mostly reacted to offers that come its way rather than seeking out the most important properties to protect.
"You want to be nimble and react to offers, but you need to have a strategic plan, too, so you can buy the most valuable properties before they're gone," said George Maurer, a veteran land-use planner for nonprofits and local governments.
In July, the state and Queen Anne's County paid Sutherland $5 million for a 271-acre piece of the farm, a price higher than either of two state appraisals. Maryland may pay him millions more to protect another 575 acres. If the state doesn't come through, Sutherland says, he'll be forced to sell the property on the open market.
All that has prompted criticism in Annapolis: Why would the Department of Natural Resources let a profit-seeker buy property that the agency knew it wanted as open space?
And Sutherland's efforts have infuriated some on the Eastern Shore, who believe he used connections made while working for a nonprofit to try to enrich himself.
"From the start, this did not smell good," said former Queen Anne's County Commissioner Michael Koval. "We knew Sutherland as being part of the Conservation Fund. What the hell is he speculating on real estate for?"
Sutherland, 44, says he only wanted to save a beautiful farm from a future of subdivisions.
"There was at the time no traditional conservation organization that could handle it, so I took it on," he said. "We took a deep breath, and we said, 'Hey, we want to make this project work.' "
The man
Sutherland's gamble in buying the Kudner farm in 2006 was built on more than hope: His past work meant he was well-known to the people who run state land programs.
Sutherland spent almost two decades with the Conservation Fund, where he helped to protect nearly 4 million acres throughout the country - about 200,000 of them in Maryland. He joined the Virginia-based nonprofit in 1988, a brash 25-year-old burned out from a brief career in the foreclosure business.
The Conservation Fund's purpose was to bridge the gap between what governments wanted to do to preserve open space and what they could afford. Sometimes, the fund helped Maryland's Department of Natural Resources find willing sellers of land that the state could buy with Open Space dollars. Other times, the fund bought properties and held them until the state or a county could take title.
Sutherland, a master at putting together deals, quickly became the go-to guy for Maryland's Open Space staff. John R. Griffin, who was state natural resources secretary from 1995 to 1999, said Sutherland helped bring in millions of dollars to close land deals the state could not have done otherwise.
In 1998, Sutherland persuaded the Richard King Mellon Foundation to kick in $3.2 million so Maryland could buy Chapman's Landing, a 2,225-acre tract in Charles County that was being prepared for subdivisions. The next year, he got the foundation to shell out $16.5 million for 29,000 acres of forest on the Eastern Shore and Southern Maryland.
"Dave's done so much good for this county and for this state," said Wesley Johnson, an assistant secretary for land preservation under the Ehrlich administration who also served as parks director for Queen Anne's County.
A political independent, Sutherland had ties to Democrats and Republicans. He remained friendly with Griffin after the natural resources secretary left Gov. Parris N. Glendening's administration. In fact, Sutherland hired Griffin as a consultant to help him on the Kudner project.
When Republican Gov. Robert L. Ehrlich Jr. took over in 2003, Sutherland's environmental credentials won him a spot as chairman of a forestry commission.
Despite turnover at Ehrlich's Department of Natural Resources, many longtime workers stayed in the land preservation office - where staff eventually worked with Sutherland on a plan for the state to buy the Kudner land. The deal was still being negotiated when Ehrlich lost to Democrat Martin O'Malley last year.
Griffin - now part of the O'Malley team - asked Sutherland to serve on the new governor's transition committee for the environment. A few months later, Griffin became secretary of natural resources again, with authority over the Open Space program.
The land
The crown jewel of the Kudner property is a 603-acre tract known as Talisman Farm, which includes a tree-lined manor house, several smaller buildings, and considerable waterfront.
But that parcel was protected from development long before Sutherland bought it. Kudner had donated easements on the property to the Eastern Shore Land Conservancy before he died in 2002.
Most of the rest of the land wasn't at much risk for development either, at least not in the near future. It isn't served by public water and sewer, and tests found only a few possible lots that could handle septic systems. The main reason to use government money to protect this land was to make sure that future county commissioners didn't open it up for development by extending water and sewer service.
In fact, out of the more than 1,500 acres, the Kudner property had only one clearly developable piece - 98 acres of prime property facing Greenwood Creek that could be divided into four lots, each suitable for a septic system.
Though this land was the most likely to be built on, it would not be protected. Even as he was completing his purchase of the Kudner property, Sutherland arranged to sell those lots to an Annapolis developer for about $2.3 million. That lowered his $20 million debt to about $17.7 million.
The developer, Walter Petrie, says he bought the parcel only because Sutherland and one of his consultants - former state Natural Resources Secretary Torrey Brown - begged him to do so.
"Dave and Torrey came to me and said, 'Look, we're having a hard time putting this deal together,'" Petrie said. "I did it really to facilitate them closing on the property; they needed to raise some cash."
Sutherland says he sold the lots to Petrie only after state officials said they weren't interested.
"We knew that Walt had the money," Sutherland said. "We did it to help the project move forward."
Petrie now has the four home sites up for sale.
The sports complex
When Sutherland formed his company, the U.S. Land Alliance, he said he wanted to join a new breed of conservationists. His goal was to buy land, figure out how to build on part of it, preserve the rest through government programs - and make a profit.
So after selling the lots to Petrie in 2005, Sutherland's next task was to get government to buy at least some of the remaining 1,400 acres.
State natural resources officials wanted the property to become part of a larger greenbelt of more than 3,000 acres of undeveloped land on the Shore. The other properties for the belt were already protected; so were the 603 acres of Kudner land that the Eastern Shore Land Conservancy controlled.
That left about 800 unprotected acres still in Sutherland's hands. And he was hoping to persuade the state to buy at least some of it.
The problem was that Maryland's Program Open Space had little money at that time, in part because Ehrlich had taken from the fund to balance the state budget. But the Department of Natural Resources was looking to spend the program's limited money on county sports complexes - a favorite cause of then-Lt. Gov. Michael Steele.
"We went to the counties and told them to let us know if they wanted a sports complex," said Open Space Director Chip Price.
Queen Anne's officials had long wanted to build a sports complex in their fast-growing county, but questioned where it would go and how to pay for it. In late 2005, Sutherland began talking to them about putting one on a 271-acre piece of the Kudner land. Shortly after talks began, Sutherland hired John Griffin, then working at the engineering consulting firm Buchart-Horn Inc., to help figure out what the complex should look like.
Sensing momentum, the county commissioners wrote the state Open Space program asking for money to buy the tract for a sports complex. But neither they nor Sutherland had done any studies to determine whether the site was suitable.
"All they had was a dream," said Rich Altman, executive director of the Queen Anne's Conservation Association. "They had absolutely no concept of what they were going to build or how much it was going to cost."
Steve Davis, the county's parks director, acknowledged that the Kudner deal didn't follow the normal order of things. But the county had to rush, he said, or it would lose its "free" state money.
"Under normal circumstances you'd look into the feasibility," Davis said. "But the window of opportunity to get the money was quickly ebbing. ... State officials had advised us that they had a pot of money. ... They told us, 'Get your request in.'"
State officials commissioned two appraisals, which valued the 271 acres at $3.6 million and $4.6 million - prices likely inflated by the commissioners' discussion of extending water and sewer service to the tract for the sports complex, according to Bill Beach, head of land acquisitions for the state Department of General Services.
With state and county officials on board, the sports complex deal appeared sealed. But then last November, four of the five county commissioners lost the election. Suddenly, supporters of the deal were headed out of office.
In January, the county's parks department prepared a report calling the plan to put a sports complex on the Kudner land "a scheme" that was ill-conceived and poorly executed. By March, the county released studies showing that the land wasn't suitable for the complex because it had poor road access and soil.
The commissioners decided not to proceed with the Kudner site.
"I thought we were going to lose everything," Sutherland said recently. "We were literally dead in the water."
There was a new administration in Annapolis, too. But though Ehrlich had lost to O'Malley, the land preservation staff at the Department of Natural Resources remained intact. And they still wanted to finish the Kudner deal.
"We thought the whole thing was done," said Queen Anne's County Commissioner Gene Ransom. "But then DNR came back to us and said, 'Do you still want to preserve the land?'"
Price said his Open Space office didn't want to pass up a chance to create the greenbelt. "We were still interested in the property as a whole," he said. And by preserving the land, the county could use it not for a sports complex but as a "passive recreation area" for hiking and camping, he said.
So the state and county completed the deal - though Sutherland was a tough negotiator. He demanded $5 million, forcing the county to pay $400,000 on top of the state's offer of $4.6 million.
Other ideas
Throughout those negotiations, Sutherland was exploring other options for the land - or, in the eyes of critics, improving his bargaining position with the state.
Shortly after he signed the agreement to buy the estate in 2005, he asked the county to extend water and sewer service to the 271-acre piece. He said in a letter that he wanted to "concentrate residential development" there while trying to preserve other parts of the Kudner land.
Sutherland also talked about timbering the forested area of his land, according to Meredith Lathbury of the Eastern Shore Land Conservancy. She said it was upsetting to hear him talk of cutting trees on such a beautiful site.
"The forest industry is very important to Maryland, and there are places where [timbering] is a good idea, but this isn't one of them," she said.
Sutherland said he does not recall the timbering discussions. But he acknowledges talking to Lathbury about possibly building homes in the forest if it got water and sewer service, in order to fund preservation of other land.
Some environmentalists were infuriated that Sutherland would consider building homes on the land. They questioned his preservation bona fides, especially because he first looked into buying the Kudner estate while working for a nonprofit but had switched hats by the time he bought it.
But whether Sutherland can make a profit from his gamble remains to be seen.
The state Board of Public Works approved the purchase of the 271-acre parcel last summer - despite concerns from Comptroller Peter Franchot that the price was too high. Franchot pointed out that Sutherland bought the entire Kudner farm for about $11,968 per acre in a transaction that settled in 2006. After less than a year, he sold the much smaller parcel to the state and county for $18,518 per acre.
"I'm just wondering if that's a good deal for the state," said Franchot, who nonetheless voted to support the purchase.
Franchot and state Treasurer Nancy K. Kopp also criticized the state's procedures for selecting and purchasing land to protect. They wanted to know why the Department of Natural Resources would allow a seller to take the lead in the process.
Griffin has since promised that his department will be more aggressive in seeking out land.
The state and county purchase of the 271 acres was completed in July. His agency is still negotiating with Sutherland over buying an easement to protect 575 acres of forested land that would complete the greenbelt. The state had wanted to complete those talks at the same time an agreement was reached for the smaller parcel, but Sutherland insisted on separating the two transactions.
State officials will say little about the negotiations. But Sutherland says the talks have stalled, leaving him with few options. He has to make quarterly mortgage payments on a multimillion-dollar debt, he said, and he needs to generate some revenue.
"Every decision we're making is based on a responsible, conservation-minded approach," Sutherland said, "but like everyone else, the finances at the end of the day dictate what we do."
In July, he put what's left of the Kudner farm on the market - the 575 acres he's discussing with the state, as well as the 603 acres the land conservancy oversees. Though the latter parcel can't be developed, it can be sold. Sutherland hopes someone wealthy will buy it for a family retreat.
He says he doesn't know what a private buyer might do with the other piece of land. It's the last unprotected piece of the greenbelt Open Space officials want to preserve. If the state doesn't pay to protect it, someone could put at least a few houses there.
Sutherland's asking price for the two parcels: $19 million.
rona.kobell@baltsun.com