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Pugh's campaign finances: Doing 'everything by the book' doesn't make it right

Reporter Luke Broadwater talks about the Maryland State Prosecutor accusing a political slate of making an "unlawful" $100,000 loan to Catherine Pugh's campaign. (Baltimore Sun video)

In her first City Hall news conference after the state prosecutor's office made a second allegation of illegal activity related to her campaign account, Mayor Catherine Pugh insisted that "we did everything by the book" and otherwise brushed off questions, saying, "I don't talk about campaigns here." Fair enough. If she is establishing a clear policy of separating the business of running for office from that of running the city, we're all for it.

But her response still raises the question: Where will she talk about it? A mayor who won office largely because of the past ethical lapses of her chief competitor needs to express at least a little concern about alleged improprieties in how her campaign was financed, rather than dismissing the issue as insignificant — suggesting that the $18,000 an aide is accused of illegally funneling to the campaign was a pittance compared to the more than $2 million she raised — or pointing to a cryptic statement from her campaign that called an allegedly improper loan "a clear and obvious misunderstanding" without elaborating on who misunderstood what.

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To be clear, Ms. Pugh is right that her aide, Gary Brown Jr., is "innocent until proven otherwise." We have not seen the state prosecutor's evidence, and while big questions about the case remain — most notably, where the $18,000 came from in the first place — nothing revealed yet suggests Ms. Pugh was involved in or knew of the alleged scheme before prosecutors filed charges. As for the loan, prosecutors allege a violation of campaign finance law on the grounds that Ms. Pugh was not a member of the slate at the time it was made. She now is and has paid the money back. But even if the issue amounts to a technicality, it does raise other questions about state laws governing loans and slates.

The Baltimore County Victory Slate was founded in 2006 by former Baltimore County Executive James T. Smith Jr., who now works in a top position in the Pugh administration. Slates are vehicles for allied candidates to pool resources at election time, and Baltimore County Victory boasts a long list of members — including a few, like Ms. Pugh, who do not represent Baltimore County. But this particular slate isn't so much a pooling of resources as a vehicle for spreading around the prodigious amounts Mr. Smith once raised. Of the $1,376,585.56 in contributions to the slate since 2006 (not counting Ms. Pugh's repayment), $1,241,880.56 came from the Friends of Jim Smith account.

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State lawmakers had this slate in mind when they enacted a piece of campaign finance reform in 2013 limiting slate activity. Mr. Smith raised eyebrows in 2006 by transferring $435,000 to Scott Shellenberger, who was then running his first campaign for Baltimore County state's attorney, and he did so again during the 2014 election cycle by continuing to support a variety of candidates even though he was not on the ballot.

The new rules, which went into effect in 2015, specify that slate members must be on the ballot or incumbent officeholders if the deadline to file for the office they hold has not yet passed. That means Mr. Smith, who hasn't been on the ballot in a decade, can't transfer money to the slate or receive transfers from it into his personal account. He is officially listed as an "inactive" member. But what happens to the nearly $400,000 left in its coffers? Who decides to add or delete members, and who decides who should get the money?

The new law also sets a limit of $24,000 for the cumulative amount of transfers from the slate to any individual member during a four-year election cycle. But Baltimore County Victory got around that limit with what may be the most glaring loophole in Maryland campaign finance law: the loan. There are virtually no limits or restrictions on outside loans to candidates, provided they pay the money back within one election cycle. Once Ms. Pugh won the Democratic primary, that was no problem. But does that make her any less indebted to the lender than she would be if the loan were a contribution? The money was given in the final hours of a contest in which the outcome was far from certain. If you give a bottle of water to a dying man in a desert, and he gives you a bottle of water back a month later, is the debt truly repaid?

There's no obvious motivation for Mr. Smith to have wanted to curry influence with Ms. Pugh. He got a job for which he is highly qualified at a generous salary ($175,000 a year) that he, as a recipient of multiple public pensions, doesn't really need. But the labor union that lent former Lt. Gov. Anthony G. Brown $500,000 in the waning days of his failed gubernatorial campaign? That's a different story. So too with various other individuals and entities that have given loans to candidates for office across the state.

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Even if Ms. Pugh did "everything by the book," the book is full of holes. Gov. Larry Hogan recently introduced a raft of good government reforms. Perhaps he could add a few more to the list.

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