The state's top economic development official yesterday backed off a request that legislative leaders approve a $1.5 million taxpayer-funded bailout of a company owned by a political supporter of Gov. Parris N. Glendening.
In a letter dated Friday, James T. Brady had asked legislative leaders to approve the proposed state grant for Stephens Engineering Co. of Lanham in Prince George's County.
"The Department of Economic and Employment Development hereby requests that $1,500,000 be made available . . . for Stephens Engineering," Mr. Brady's letter said.
But yesterday, Mr. Brady, the Cabinet secretary who heads the department, said he had not intended to take a position on the proposal.
"This has not been recommended," Mr. Brady said in an interview. "If the words were unclear or misleading, then I'd like to correct that."
He said he and his agency are merely furnishing legislators with information so that they can make the decision.
The shift in Mr. Brady's position comes amid criticism by some Republican legislators, who have called the proposed bailout of the software and networking services company a "terrible policy" and a conflict of interest.
Although the state often helps businesses financially through its so-called "Sunny Day Fund," the money traditionally has gone to attract firms to Maryland, to keep them here or help them expand. It has not generally been used to bail out failing ones, legislators said.
Wallace O. Stephens is a longtime political supporter of Mr. Glendening. His company contributed $3,500 to Mr. Glendening during the race for governor last year, and Mr. Stephens personally contributed another $700.
"During his campaign, Glendening criticized other candidates for conflicts of interest," Maryland GOP Chairwoman Joyce Lyons Terhes said yesterday. "Once the title 'Governor' was put before his name, Glendening has not stopped demonstrating the very things he had been against."
Mr. Stephens, a prominent black businessman in Maryland's Washington suburbs, has requested the money so he can pay expenses at his struggling company. He has attributed the firm's problems primarily to the loss of federal contracts, according to Mr. Glendening.
Mr. Stephens was said to be out of town yesterday. Other company officials did not return phone calls seeking their comment.
Mr. Glendening has defended the proposed grant as a means of helping an important Maryland business survive. But he, too, said he is taking no position on the matter and will leave the decision to legislators.
While Mr. Brady's letter Friday requested approval of the $1.5 million grant, it also indicated that his department had turned down an earlier request by the company for a $500,000 loan.
The letter said the officials declined to grant the loan in part because Stephens Engineering is in default on another loan, owing more than $900,000 to one of its lenders.
In his letter, Mr. Brady also described Stephens Engineering's "important financial contribution" to the state. As recently as 1994, the letter said, the company employed 113 people and had gross sales estimated at $25 million.
In that respect, Stephens Engineering is not unique.
In 1990, the most recent year for which figures are available, Maryland had nearly 2,300 firms employing between 100 and 499 people, according to the federal Small Business Administration.
And at least 1,000 Maryland firms gross $25 million or more annually, according to the National Federation of Independent Business, a small-business advocacy group.
State officials acknowledge that in the past year, about 25 Maryland firms made similar requests for bailouts but were rejected.
Asked what distinguishes Stephens Engineering's plight from the other business failures that occur annually in Maryland, Mr. Brady said, "That is exactly the question we are trying to come to grips with."
He said he could not say why officials in the Schaefer administration had declined to support other bailout requests last year.
While Republicans have assailed the proposed grant for the Stephens company, some Democratic leaders in the legislature have remained silent, waiting for further analysis from the state Department of Fiscal Services.
One Prince George's Democrat, state Sen. Decatur W. Trotter, said he thought the grant might be appropriate.
"People ask for money every day," Mr. Trotter said.
"Why should this be a big to-do? The only reason I can think why this has drawn attention is because this is a minority vendor."
