Gov. Robert L. Ehrlich Jr. has returned a half-million dollars in political contributions that were funneled through a federal account after the Maryland State Board of Elections said the money shifting violated state law, according to campaign officials and documents released yesterday.
Use of the federal account to pay for the governor's re-election effort, which was first revealed in The Sun in August, allowed Ehrlich to receive large sums of in-kind contributions from the Maryland Republican Party and increase the campaign's resources by bypassing a $4,000 donation cap set by state law.
Details of last-minute fundraising and spending by Ehrlich and his Democratic opponent, Baltimore Mayor Martin O'Malley, began to emerge this week after both filed the final campaign finance statement they will submit before Tuesday's election. Those reports show that Ehrlich has a significant financial advantage.
Even when the money returned to the party is considered, the Ehrlich campaign reported having more than $2 million in the bank as of Oct. 22, compared with the O'Malley campaign, which had just shy of $600,000. Having money to buy costly television advertisements in the final days of the election could become a critical factor in the race.
As part of the effort to boost its bottom line, the Ehrlich campaign tapped into the federal account, which can accept $10,000 contributions compared to the $4,000 limit that applies to state accounts.
Though Republicans have denied the connection, the federal account, controlled by the state Republican Party, received hundreds of thousands of dollars in contributions in the days leading up to a $1 million fundraising event in May featuring President Bush.
The state party spent money from the account on behalf of its candidates, Ehrlich and U.S. Senate candidate Lt. Gov. Michael S. Steele, for salaries, cell phones, mailings, postage and other services, state election records show. The in-kind contributions allowed the Ehrlich campaign to direct its own vast resources elsewhere, such as toward television advertising.
But in a State Board of Elections letter obtained by The Sun that was sent to the Republican Party, election officials said that using the federal account violates state law because it allows an entity to contribute in excess of state contribution caps. The letter is dated Sept. 1 and was obtained yesterday through a Public Information Act request.
"The state Board of Elections believes that these in-kind contributions are not permissible under the Maryland Election Law Article," the letter reads. "Accordingly, the Republican State Central Committee must be reimbursed the full amount of the in-kind contributions made on the behalf of Bob Ehrlich for Maryland."
Maryland law allows individuals and companies to give a maximum of $4,000 to a state candidate and a total of $10,000 to all candidates in a four-year election cycle. State parties are allowed to make in-kind contributions in excess of that amount, but only from accounts that are regulated by the state Board of Elections.
By contrast, federal accounts are regulated by the U.S. Federal Election Commission.
Ehrlich spokeswoman Shareese N. DeLeaver said the campaign returned the money after receiving the letter. State campaign finance records released Monday indicate the campaign transferred more than $540,000 to the party over several weeks from the end of September through mid-October.
"Upon receipt of the letter, we immediately began to address the concerns of the state Board of Elections as reflected in our most recent campaign finance report to the satisfaction of the state board," DeLeaver said.
State law is clear on campaign finance limits, but the rules become more murky when federal campaign finance law is considered. In some cases, federal law requires the party to pay for certain political services with federal funds, especially when an expenditure benefits both state and federal candidates - such as signs that carry the names of both Steele and Ehrlich.
Dirk Haire, a lawyer for the state Republican Party, said he believes federal and state law conflict. Haire said the campaign returned the money to avoid a legal fight before the election. However, both Haire and state election officials said they will seek an FEC opinion about the funds later this year.
"I don't want to give that issue up for whoever is the next gubernatorial candidate," Haire said. "Maryland campaign finance law needs to catch up with federal law."
Maryland's online campaign finance database, meanwhile, shows that nearly four dozen contributors gave more than the $4,000 cap to O'Malley's campaign, but many of those donations appear to be the result of a computer glitch that counted some contributions twice. In one case, the database shows that Owing Mills developer Michael Klein gave O'Malley $9,000 on the same September day.
Despite the glitch, the O'Malley campaign confirmed that at least nine donors exceeded the cap. A spokesman, Hari Sevugan, said the campaign would reimburse donors nearly $9,000. One contributor, David Costello, exceeded the limit by more than $2,000. Another, Jay French, was over by $1,686.
"While we have processed over 27,000 contributions totaling $14 million, we want to ensure that we are in full compliance," Sevugan said in an e-mail statement. "We will be returning the handful of contributions that exceeded the limit."