Owner of tracks the focus of inquiry

Prosecutor begins probe of Ehrlich-Steele donations from firm favoring slots

October 09, 2003|By Michael Dresser and Greg Garland | Michael Dresser and Greg Garland,SUN STAFF

Maryland state prosecutor Stephen Montanarelli said yesterday that he is making an "inquiry" into thousands of dollars in contributions made to last year's Ehrlich-Steele campaign by affiliates of the company that owns Pimlico and Laurel racetracks.

Montanarelli emphasized that inquiry is not a criminal investigation of Magna Entertainment Corp., a company that had a large stake in this year's debate over slot machines at Maryland racetracks.

At issue are at least $28,000 in contributions from Magna-related entities that poured into the campaign committees of Robert L. Ehrlich Jr. and Michael S. Steele during the last month of the campaign.

Maryland law limits the amount any single donor can give to one recipient to $4,000 over each four-year election cycle. The law also limits total gifts to all campaigns covered by state law to $10,000.

Montanarelli said the legality of the Magna gifts will hinge on whether the four Magna-related entities that donated had different ownership structures.

"We'll have to find out exactly what the corporate interests are," Montanarelli said.

Advocates of campaign finance reform have criticized the ownership provision as one of the biggest loopholes in Maryland election law.

Ehrlich's campaign committee received three $4,000 contributions last October from Magna Entertainment and two affiliates, MEC Lone Star L.P. and Bay Meadows Operating.

Steele received $4,000 donations from the same three entities along with two $2,000 gifts from MEC Racing Management -- Pennsylvania.

Maryland law allows gubernatorial candidates to double the $4,000 limit that applies to other races by separately accounting for donations made to the lieutenant governor candidate.

Montanarelli said that even if it were determined that the Magna affiliates had the same ownership, prosecution is unlikely. The policy of his office is to allow first-time violators of campaign finance limits to avoid charges by seeking refunds to bring them into compliance.

John Reith, finance director of the Bob Ehrlich for Maryland Committee, said no one has raised the issue with the campaign organization.

Reith said the Ehrlich campaign was careful to monitor campaign contributions to make sure donors were in compliance with the letter of the law.

"We did a pretty significant vetting process," Reith said.

The Ehrlich aide said Magna officials were also careful to observe the law.

"They knew the subsidiary rules in terms of contributions," Reith said.

Sue Floyd, a spokeswoman for Magna, said the company carefully reviews any proposed political contributions with lawyers.

She declined to say whether the company had been contacted by Montanarelli's office or if the review of the contributions was done in response to the inquiry by the state prosecutor's office.

Under a plan supported by Ehrlich during this year's General Assembly session, Magna-owned tracks would have received permission to operate 7,000 slot machines at its two Maryland tracks. The bill passed the Senate but died in the House.

The ownership provision in Maryland law has enabled some business interests - especially developers - to give tens of thousands of dollars to their preferred candidates by giving through limited partnerships they control. As long as there are slight variations in the ownership structure, the gifts from each are legal up to the $4,000 and $10,000 limits.

The Ehrlich campaign used the loophole during the last campaign - collecting as much as $40,000 each from developers such as Kingdon Gould Jr. and Francis Day. Campaign officials defended the practice, saying they complied fully with the law.

The provision has also been used by such political players as Orioles owner Peter G. Angelos, who routinely contributes through a network of businesses he controls.

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