Gov. William Donald Schaefer conceded that the Maryland International Division had made mistakes in the way it spent money, but told a legislative subcommittee that the state must not give up its efforts to promote international trade.
"I'm telling you our country and our state can ill afford to stop international trade and international friendship," Schaefer told members of the Senate subcommittee reviewing a state audit report of the division yesterday. "If you tell me to stop it. OK, fine. But we'd be making the worst mistake we could make."
Schaefer has made international trade one of the priorities of his governorship, and yesterday he went before the committee to defend the division that he created to consolidate the state's trade activities.
Schaefer said he was outraged that the audit report had been given to the press before he had seen it. "I'm very embarrassed with this," the governor said. He complained that the auditors should have gone to him and told him about the division's problems rather than giving the documents to the media.
Thomas J. Barnickel, the audit manager who oversaw the investigation into the Maryland International Division, told the subcommittee that the 4-year-old division exaggerated its effectiveness, kept poor financial records and in some cases wasted money.
For example, the audit found that the division reported the creation of approximately 800 new jobs and $140 million as the result of six foreign trade missions. But in a sampling of five companies, the audit found that 256 of 336 potential jobs and $13.2 million of $31 million in capital investment which the division claimed to have achieved have not been realized.
The auditors also found that trade missions were poorly planned and participants often wasted their time. In one instance, more of the itinerary was devoted to sight seeing than business, the auditors said.
The division also failed to comply with state travel regulations. In some cases, employees were reimbursed for the personal use of their cars when state cars were available. In other instances, employees charged the state for alcoholic beverages, although that is a violation of the state guidelines. One employee was reimbursed $91 for a dinner, which exceeded the applicable allowance by $71.
At times, the division simply wasted money, Barnickel said. Twice a division employee was reimbursed for overnight stays in a downtown Baltimore hotel in order to prepare for a breakfast meeting at the World Trade Center even though the worker lived fewer than 15 miles from the center. The same employee twice took overnight trips to Ocean City to buy gifts for trade missions at an art gallery there.
Subcommittee members seemed particularly concerned about revelations that the division had spent more than $42,000 hosting business representatives at the Preakness.
"You're throwing money away on glitz," said Sen. Julian Lapides, D-City, who demanded that division employees pay back the state for the money they overcharged for meals and vehicles. "They had their hands in the cookie jar and we want our cookies back," he said.
Mark L. Wasserman, secretary of the Department of Economic and Employment Development, which oversees the international division, didn't argue. "We need to tighten up our ship," he said.
In a prepared response to the audit, DEED officials agreed with nearly every one of the auditors' findings and promised to look more closely at its expenditures and keep better records.
Wasserman said he is searching for a new director of the division to replace Eric Feldmann, who resigned several weeks ago. He said he is reviewing the division's approach to international trade.
"It's a new and evolving part of state government. It will need some tinkering as we go," Wasserman said.
Although international trade efforts, such as foreign missions,
might not always show tangible results, the state must continue to develop trade ties, he said.
Committee members said they recognized the importance of trade, but admonished Wasserman to get the division in order.
"We want you to succeed," said Sen. Ida Ruben, D-Montgomery. "We want you to have credibility. This type of activity [misspending money] does not lend itself to credibility."