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Posted at 7:40 PM ET, 02/15/2011

O'Malley moves against 'LLC loophole' that benefited his campaigns

By Aaron C. Davis

Maryland Gov. Martin O'Malley (D) for the first time on Tuesday backed legislation to close a campaign finance loophole that boosted fundraising totals for his campaigns during more than two decades of successful elections in the state.

O'Malley, who is term-limited out, said he supports efforts to prohibit the so-called "LLC loophole." The practice lets individuals and businesses contribute in excess of state limits by donating through multiple business interests, most often limited-liability corporations.

A Washington Post analysis of campaign contributions to O'Malley and his Republican challenger, former Gov. Robert L. Ehrlich Jr., found flagrant abuse of the loophole during the 2010 gubernatorial contest.

In several instances, members of the same family or business in Maryland contributed through dozens of LLCs and other limited partnerships, far exceeding the state's contribution cap for businesses of $4,000 for a single political campaign and $10,000 in a four-year election cycle.

Last month, a campaign finance commission seated by Maryland Attorney General Douglas F. Gansler (D) weighed in, arguing that the gap in election law undermined the "core principle of campaign finance laws, that every person should be subject to the same contribution limits."

It urged the General Assembly to pass legislation making clear that the creation or use of an LLC solely for the purpose of making a campaign contribution constitutes a violation of election law.

O'Malley on Tuesday threw his support behind one of three bills in circulation intended to close the loophole -- but not the one that most closely mirrors the recommendations of the Attorney General's commission, nor the one that the head of the Senate's Judicial Proceedings Committee has sought to pass for the past several years. A spokeswoman for Gansler said the attorney general was considering writing a letter in support of SB663, the one authored by Sen. Allan Kittleman (R-Howard), a member of his commission.

A letter from O'Malley to House Ways and Means Committee chairwoman Sheila E. Hixson (D-Montgomery) in favor of HB322 offered little of O'Malley's usual explanation of his support.

But in an e-mail, O'Malley spokesman Shaun Adamec said "the evolution of campaign finance and the extent to which entities will circumvent the restrictions that are already in place have really brought us to this point," Adamec said. "It is really a matter of maintaining transparency and accountability."

Developers give big

Maryland-based LLCs gave roughly $1.6 million in the 2006 gubernatorial campaign and $1.5 million in the 2010 cycle, records show. During the 2006 campaign they were split evenly, but in 2010, they overwhelmingly favored O'Malley.

The figures don't represent the full extent of LLCs' giving in Maryland because they account for only contributions directly from the corporation, not executives or employees who may have given separately, and because contributors might not have listed their firm's complete legal name.

Real estate LLCs made up a bulk of the money donated in the past eight years, giving more than $655,000.

In a hearing on Tuesday, The League of Women Voters of Maryland, Common Cause and the Sierra Club testified in support of closing the loophole. The Maryland State Builders Association, which represents 2,300 developers and other firms, argued that lawmakers should reject the measure because it would "prohibit developers from becoming politically active in the jurisdictions in which they have projects."

The legislation also would affect campaign contributions in Baltimore and in countywide contests. It would not affect federal election law.

Laws limit info donors must give

Last fall, the Washington suburbs for the first time eclipsed the Baltimore area as Maryland's fundraising capital, The Post found, but the shift did little to shed light on the industry and business interests working most intently to influence state politics.

In fact, good-government advocates said, it only highlighted how -- because of weak state laws -- much less is known about the way money influences politics in Maryland than in national elections.

For its progressive reputation in many other areas, Maryland has the 44th-worst-ranked set of campaign-finance disclosure laws in the country, according to a UCLA study. Donors are shielded from having to disclose the names of their employers, what industries they work in and other basic data commonly required to contribute to federal campaigns.

No legislation has been introduced in Annapolis to bring Maryland requirements in line with federal disclosure laws.

Washington Post Staff Writer Luke Rosiak contributed to this post.

By Aaron C. Davis  | February 15, 2011; 7:40 PM ET
Categories:  Aaron C. Davis, Governor  
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Wonder where his support would have gone if he was allowed to run again? I can only guess.

Posted by: BEEPEE | February 16, 2011 12:15 AM | Report abuse

Governor, give back the money and resign then we'll take you seriously.

Posted by: Nemo24601 | February 16, 2011 7:37 AM | Report abuse

Who could possibly be so cruel as to punish those poor, starving developers; first they get hit with a housing bubble, then you burden them with slot machines and now you want to close their LLC loophole?

I wonder what the school children will say to their schools getting worse instead of better?

Shame, shame shame !!!!

Posted by: polecatx1 | February 16, 2011 9:26 AM | Report abuse

An LLC stands for "limited liability company" not corporation. The whole point of creating the LLC structure is to avoid some of the tax and regulatory problems with the corporate structure.

Posted by: buffysummers | February 16, 2011 9:58 AM | Report abuse

This guy's narcissistic political calculus never ceases to amaze me.

"O'Malley, who is term-limited out, said he supports efforts to prohibit the so-called "LLC loophole..."

...because he is no longer seeking office in the state. It's no longer is of benefit personally, so let's make it look like I'm a magnaimous reformer.

To the contraty.

O'Malley is a fraud.

Posted by: tcs1999 | February 16, 2011 12:36 PM | Report abuse

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