Political donations slipping through a legal loophole


June 08, 2008|By LARRY CARSON

Political campaign giving is an area fraught with ethical and legal complications, even when the gifts are perfectly legal.

For example, under state law, a corporation or person can't give more than $4,000 in each election cycle to one candidate. Yet that rule is commonly and easily evaded by donors to candidates from both political parties. The same people simply create more than one legal business entity and have each one make separate contributions.

It is a loophole that Montgomery County State Sen. Brian Frosh has sponsored legislation to close year after year, to no avail. A 2006 study by Common Cause, Maryland, a nonpartisan watchdog group, estimated that $6 million was funneled to candidates via the loophole in the previous three years. Some development firms create a new company for each project and then donate the maximum, giving far beyond the intended limit.

The $7,500 in donations made to Howard County Executive Ken Ulman by the Annapolis developers of a proposed mixed-use project at the Savage MARC train station are a good example. Ulman, a Democrat, received the money in 2007, starting two months after his November 2006 election victory.

The firm, Petrie Ross Ventures, headed by Phillip L. Ross and Walter Petrie, used two separate limited liability companies with slightly different names to make the donations. One gift of $1,000 was returned to one of the firms that gave a combined $5,000, exceeding Maryland's limit.

"This is a common practice, and it's really an egregious loophole that needs immediate closing," said Ryan O'Donnell, executive director of Common Cause, Maryland.

"It may not violate the letter, but it violates the spirit of the law," he said. "It's clearly an attempt to say, 'These rules don't apply to me.' "

Ulman said all the gifts from donors are disclosed publicly and that they do not influence his decisions.

"I just follow the rules as they're written," Ulman said.

The Savage project, announced at the station in 2006 by then-Gov. Robert L. Ehrlich Jr., a Republican, is eagerly anticipated by state and county officials of both political parties who feel it is just the thing to boost mass transit use, help the U.S. 1 corridor redevelop and serve the new federal employees coming to the area as part of the Base Realignment and Closing process.

Ehrlich also has close ties to Petrie Ross Ventures, the firm planning the Savage project.

Three of the firm's top four officials made donations to Ehrlich's campaign during his time in office, to the tune of a combined $9,050 during the 2002 campaign and the 2006 election.

After Ehrlich left office, his former chief of staff, James C. "Chip" DiPaula Jr., became chief executive officer, a partner and a senior vice president of the firm.

Ulman said the Savage project is important for the county.

"This is something I am personally incredibly interested in because it would be our first transit-oriented development" under a new zoning designation the county created for just such projects.

The firm wants to build more than 400 apartments, 120 hotel rooms and lots of office space and some retail stores at the station, as well as a parking garage.

The campaign gifts appear legal, yet raise questions of perception, especially because Petrie Ross, the developers, need the county's help in two different ways to make the project work.

First, county officials are hard at work trying to craft a special taxing district to help finance the high-rise parking garage the project needs.

The state Board of Public Works in December approved giving Petrie Ross 11 acres at the train station, excluding the lot for the garage. The county would use Tax Incremental Financing bonds to finance the garage. That means property taxes generated by the development would pay off the garage bonds. The garage must come first because the buildings would use the station's parking lots.

Second, Ulman introduced legislation before the County Council to increase the number of new housing units allowed each year along the U.S. 1 corridor, partly to help the Savage project.

Petrie Ross Ventures gave Ulman's campaign $2,500 in two separate gifts, both on Dec. 27, 2007, while Petrie Ventures, a separately chartered limited liability company at the same address, gave $4,000 on Jan. 15, and another $1,000 on April 2. The Ulman campaign returned $1,000 to the second firm on Oct. 9.

No one at Petrie Ross Ventures returned a reporter's inquiries about the Ulman donations.


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