Schmoke vows to disclose legal fees

July 07, 1995|By Eric Siegel and JoAnna Daemmrich | Eric Siegel and JoAnna Daemmrich,Sun Staff Writers

Moving to quell the controversy about the money paid to the politically connected law firm of Shapiro and Olander, Baltimore Mayor Kurt L. Schmoke vowed yesterday to provide "the most extensive disclosure of law fees that this city has ever seen."

But the mayor made clear that he intended to continue to keep secret the fees law firms collect from the clients of the city's quasi-public agencies for preparing loan documents and helping with other business matters.

Mr. Schmoke said his administration would prepare a report detailing the amount of money paid in his second term to each law firm representing the city and its quasi-public agencies. The report will include a breakdown on the number of hours billed and the nature of the work, he said.

"Every lawyer that got a dime of public money, we'll have that on the public record. Even if it's just a dime," he said.

His promise comes just days after Mr. Schmoke said he would not provide all the legal fees paid by the quasi-public agencies, which operate separately but are substantially financed with taxpayer dollars.

Initially, Mr. Schmoke said he was acting to protect the groups' independence and offered to provide only those fees paid directly by the city government. His refusal to disclose all the payments drew criticism from Maryland's attorney general and an array of elected officials.

On Sunday, The Sun reported that Shapiro and Olander has been paid at least $1.4 million for city-related work during Mr. Schmoke's second term, double the payments reported during the mayor's first four years in office. The figure, based on interviews and documents, included money directly from the city and some of the quasi-public groups and their clients.

Shapiro and Olander, which did little city work before Mr. Schmoke became mayor in 1987, has a close relationship with his administration. Ronald M. Shapiro, a founder of the firm who is now on a five-year contract, is the mayor's chief fund-raiser, while Larry S. Gibson, who is "of counsel" to the firm, runs Mr. Schmoke's campaigns.

City Solicitor Neal M. Janey said yesterday that the city's 1991 accounting of fees paid to Shapiro and Olander and other law firms included an unspecified "partial disclosure" of payments from quasi-public agencies.

As part of the mayor's mandate, Mr. Janey said, he was now giving the quasi-public agencies "clear direction on what to disclose," to guarantee a more complete accounting. He said he hoped to have a report finished by Aug. 15.

At his weekly news briefing yesterday, Mr. Schmoke said that he was ordering the "fullest, most complete disclosure of public moneys going for legal fees" to emphasize the point that Shapiro and Olander is but one of several law firms receiving city work.

The mayor promised to provide an accounting of the money spent on legal fees by the Baltimore Development Corp., the Community Development Financing Corp., the Baltimore Public Markets Corp. and other quasi-public groups he has established. The governing boards are appointed by the mayor, and their executives serve at his behest.

Two days ago, Attorney General J. Joseph Curran Jr. said he believed payments from any agency created or controlled by the mayor should come under state public disclosure laws. The BDC and CDFC repeatedly have turned down The Sun's requests for an accounting of legal fees over the past two years, contending they are "not subject to public information requirements."

Yesterday, Mr. Schmoke signaled a new attitude. "My commitment now -- and I'm trying to make it as clear as possible -- is that any public dollars we control, whether it is city general funds, state grants, federal dollars . . . will be disclosed."

What the mayor won't disclose are fees paid by clients of the BDC, the city's economic development branch, and the CDFC, a revolving loan fund for housing revitalization. Those clients include businesses and nonprofit housing groups.

As the lending counsel for both agencies, Shapiro and Olander collects fees on loans as well as some other business transactions. In Sunday's report, The Sun documented $251,773 worth of payments to the firm from a sampling of clients.

On top of the fees passed on to the clients, Shapiro and Olander earned $299,800 for bond work and corporate legal advice for the CDFC in fiscal 1994, the only budget year for which city housing officials could immediately provide information. Mr. Schmoke promised to provide the legal fees for the other years. Shapiro and Olander does the bulk of the CDFC work.

The mayor conceded that his decision to continue to keep secret fees paid by clients could create "somewhat of a dispute."

"Our view is that they don't involve public dollars," he said of the fees. "I'm sure others will take the position that transaction fees ought to be disclosed, too."

Indeed, yesterday Mr. Curran said that he didn't understand the distinction.

"I can see why you wouldn't want to have how much a private individual paid," he said. "But if [the loan] came from public funds, it should be disclosed."

Nevertheless, Mr. Curran applauded the mayor's posture on disclosure of fees.

"I'm glad the mayor's doing it," he said.

City Council President Mary Pat Clarke, who is running against the mayor in the Sept. 12 Democratic primary, said Mr. Schmoke was taking "a step in the right direction."

"I believe that public money and its expenditure must be fully disclosed, and it should be done on an annual basis, not just during the campaign," she said.

The two leading Democrat candidates for comptroller -- Julian L. Lapides and Joan M. Pratt -- said they were pleased by Mr. Schmoke's statements.

But they reiterated their pledges to audit the quasi-public agencies if elected.

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