Shapiro and Olander, whose lucrative city work has been a source of controversy because of the law firm's close ties to Mayor Kurt L. Schmoke, is out as the principal counsel to Baltimore's economic development agency and empowerment zone.
The city Law Department will handle most of the work for the Baltimore Development Corp. previously done by Shapiro and Olander, and the Empowerment Zone Management Corp. will seek to get legal work done for free, the mayor and other officials said yesterday.
In the 4 1/2 years from 1991 through July of this year, Shapiro and Olander received $144,352 from BDC -- 70 percent of the money the agency paid to private legal firms during that time. The firm also was paid $231,279 in fees and expenses by borrowers in BDC deals.
In the year since the city was designated as a federal empowerment zone, Shapiro and Olander has received $103,000 in legal fees for work on the multimillion-dollar effort to revitalize poor neighborhoods.
Both changes come after Mr. Schmoke and Shapiro and Olander disclosed under public pressure that the firm had been paid $2.43 million in city-related work during those 4 1/2 years, a greater sum than all but one other law firm.
Roger C. Lipitz, the chairman of BDC's newly revamped board, called it "good, common-sense policy" to use the city's own legal staff as general counsel instead of paying a private firm. "If we have an opportunity to use the Law Department free of charge, we ought to," Mr. Lipitz said yesterday.
It had been the custom of the city's previous economic development agencies to mainly use the Law Department, which now has a staff of 78 and a budget of $10 million. But when the mayor created BDC in 1991, Shapiro and Olander became the principal counsel and handled many complex business deals, such as the lease with the Columbus Center.
Last spring, several civic and business leaders complained to a mayoral commission that the agency's reliance on Shapiro and Olander was hurting its credibility and perception of independence. And an empowerment zone board member questioned the amount of money going to the firm.
Shapiro and Olander's managing partner said that the firm never likes to lose work but that its business overall is doing well.
"If we lose any work from any client, it bothers me," said Christopher D. Olander, head of the 33-member downtown firm.
But, he added, "The city of Baltimore and its agencies represented a small part of our business. The city portion of our business has diminished. The rest of our business is growing."
The firm -- whose lawyers include Ronald M. Shapiro, the mayor's campaign treasurer, and Larry S. Gibson, the mayor's chief political strategist -- had played an increasingly significant role in some of the Schmoke administration's most important initiatives.
The millions in taxpayer money spent on outside legal work, especially for the politically connected Shapiro and Olander, became an issue in the hard-fought Democratic mayoral primary. After repeatedly defending the practice of awarding legal work to private firms, Mr. Schmoke said upon his victory to a third term that he wanted to limit the practice.
Yesterday, the mayor said that decisions on how much and what work to turn over to the Law Department would be made on "an agency-by-agency basis."
Mr. Lipitz made clear that he wanted to use the Law Department as principal counsel when the mayor appointed him to overhaul the city's beleaguered economic development agency this fall. However, the agency still will hire outside firms, including Shapiro and Olander, with expertise for specialized work.
Diane Bell, acting chief executive officer of the Empowerment Zone Management Corp., said the quasi-public board overseeing $100 million in federal revitalization funds wanted to get as much legal work as possible done for free.
"We're exploring ways to get pro-bono legal assistance," she said, including services from Shapiro and Olander, which has donated some of its work.
But she, too, did not rule out the possibility of hiring the firm for specific issues.
Shapiro and Olander did little city work before Mr. Schmoke became mayor in 1987. But by the end of his second term, Baltimore had become by far the firm's biggest public client in Maryland.
Handled much work
The firm has handled a wide array of city-related work, from bonds to business deals. It also acted as top counsel for many of the city's quasi-public agencies, which are substantially financed with taxpayer money. One of them, the Community Development Financing Corp., a lending bank, is keeping the firm as general counsel.
Although its city work is diminishing, Shapiro and Olander has developed a more lucrative relationship with Prince George's County, where it now is county bond counsel.
Mr. Gibson was the senior campaign adviser to Wayne K. Curry during his successful run for county executive in 1994.
Mr. Lipitz said he might ask the Law Department to hire another attorney to specialize in economic affairs. But City Solicitor Neal M. Janey said no decision has been made.