Republicans go along with Democrats' crony capitalism

GOP should present a united front on expansion of the Maryland Small Business Development Financing Authority

February 21, 2014|By Mark Newgent

Over the years Red Maryland has chronicled how the Democratic majority in Annapolis has been in the business of picking winner and losers in Maryland’s economy. 

Whether it is bestowing lavish subsidies for film production, mandating ratepayers foot the bill for offshore wind farms, or sole bidding the state’s speed camera program to a politically connected vendor, Maryland Democrats have mastered the art of rewarding their friends. 

The ostensible purpose of the Republican minority is to oppose this.  Not that they have the numbers to stop it, but at a minimum we should expect Republicans to stand athwart crony capitalism yelling stop. 

However, there are some votes that are real head scratchers.

Case in point HB 583.  The bill modifies the Equity Participation Investment Program, which is a part of the Maryland Small Business Development Financing Authority.  The MSBDFA is a quasi-public organization that administers state funds loaned to minority owned businesses that cannot find private financing.  

According to HB 583’s policy note, it expands the types of businesses eligible for state financing to include small businesses.

The bill, sponsored by Del. Dereck Davis (D-Prince George's) passed the House Economic Matters Committee by a vote of 17-4. Three Republicans voted for it: Dels. Kelly Schulz (Frederick), Susan Aumann (Baltimore County) and Jeannie Haddaway-Riccio (Eastern Shore).

On its face, the bill sounds like something a “business friendly” Republican should support.  However, when you dig into the history of MSBDFA, and the politically connected private firm that administers it, you’ll find the worst kind of crony capitalism.

The MSBDFA is administered by Meridian Management Group, which is run by Stanley Tucker.  Meridian enjoys a unique status among state contractors, in that its contract to administer MSBDFA is enshrined in statute.  In 1994 the General Assembly authorized MSBDFA to organize itself into a private entity, and Tucker, who was executive director of the agency, formed Meridian to administer the firm.

Like Tucker, Meridian’s founding partners are all former state employees. 

They are also major donors to Maryland Democrats.  According to the state campaign finance website, Tucker, Meridian executives and subsidiaries made more than 700 donations totaling  $137,000 to state and local politicians since 2005.  All but $1,400 of that amount went to Democrats.

In 1998 state auditors raised questions about Meridian using proceeds from its state contract to make political contributions.

The Sun reported at the time:

Stanley W. Tucker, president of MSBDFA Management Group Inc., confirmed this week that state auditors have questioned the propriety of giving political candidates any of the nearly $1 million a year the company receives from the state.

Although it is not illegal for Tucker's private company to make political contributions, state officials said they are concerned about the perception that public money is being funneled into campaign coffers. They said they want to halt the practice.

Tucker said his company made about $21,000 in campaign contributions to various state and local candidates from 1995 to 1998.

Some of the money went to lawmakers who sponsored legislation last year that benefited the company by extending its contract, campaign finance records show.

In the wake of Meridian’s donations the General Assembly passed a law barring contributions from state contractors who receive a majority of their operating funds from the state.  

Since 2008 Meridian has received nearly $ 9 million from the state for MSBDFA operating funds, according to the Maryland Funding Accountability and Transparency website.

The 700-plus donations from Meridian and its managers all came after the 1999 prohibition on donations from state contractors.

Governor O’Malley has proposed over $6.2 million for MSBDFA loans for the next fiscal year, and it received $6.3 million for loans last year.  

An in-depth 2006 expose by the City Paper found that Meridian loses $750,000 in taxpayer funds each year and that at the time the company blew threw $29 million in additional taxpayer funds through a unique venture fund created by changes to state and federal law, engineered by Tucker.

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