State Investigating Caves Valley Campaign Contributions
Posted by Ann Costantino on 16th October 2017

For the first time since the passage of a 2012 law prohibiting campaign contributions by those with casino ties, the State Board of Elections said Monday it has referred a case to Maryland’s State Prosecutor.

State Board of Elections Director, Jared DeMaranis, sent a letter to the prosecutor’s office saying that “a complaint” involving  Caves Valley Partners, a prominent Baltimore County development company, warranted “an investigation and possible enforcement action.”

The actions by the State Board of Elections was prompted by a report by The Baltimore Post last month that uncovered scores of political contributions by people and companies connected to four different casinos that donated over $1 million to 148 different political campaigns.

DeMaranis alluded to two possible issues. The first was that, although the law limits the amount any person can donate, Caves Valley may have exceeded those limits.

The Baltimore Post found that the developer and its affiliates donated nearly $450,000, through 45 companies, to 91 candidates.

The second issue stated that “a holder of a video lottery operation license – or a person who owns an interest in the operation of the video lottery facility in the state – may also not make a contribution.” The Baltimore Post found the names of four Caves Valley partners were listed as principals on the gaming license for the Horseshoe Casino and that Caves Valley, itself, owns a stake in the casino.

The Baltimore Post investigation also found that the State Board of Elections, which is supposed to enforce the campaign finance ban, had difficulty explaining the agency’s oversight. In fact, DeMaranis told a reporter that not a single violation had been flagged over the five year period since the enactment of the law.

Attorney David Plymyer, a former assistant state’s attorney, said, “This is certainly a step in the right direction, and I’m certainly glad to see that the State Board of Elections has taken the action that it has. I certainly believe that the State Board of Elections did the correct thing.”

In 2012, then Governor Martin O’Malley signed the casino law, barring anyone who had either applied for, or held a casino license, from making campaign donations to state and local politicians.

But the law contains a loophole that makes it possible for the casino industry to skirt the campaign finance ban.

The loophole allows for individuals with less than a 5% stake in a casino to contribute to political campaigns.  Because there is no publicly available list which shows the ownership stake of people who have invested in casinos, it is difficult to determine who can or cannot contribute.

Another Maryland law contains a second loophole that involves “limited liability companies” or LLCs. Up until 2015, it was possible for someone owning a company, like a casino, to create and make donations through an LLC.  Regardless of who owned the LLC, principals were permitted to donate to anyone they pleased. The Baltimore Post, for example, found that Caves Valley Partners made donations through 45 different LLCs since the law’s passage.

In 2015, the legislature tried to close that loophole by saying that a company could not use an LLC for making additional donations to a candidate if principals at that company held a share of 80% or more in the LLC. But like the 5% rule, there is no publicly available list of who owns what percentage of an LLC.

The director’s letter cited law stating that any affiliated corporations owned by the same stockholders “shall be considered as being made by one contributor.”

A Baltimore Post investigation last month found the names of four Caves Valley partners listed as principals on the gaming license for the Horseshoe Casino. The partners were Steven Sibel, Craig Colton, Steven Fader and Arthur Adler.

Yet, Adler told The Post that “neither Mr. Sibel, Mr. Colton, Mr. Fader nor Mr. Adler owns 5% or more in CBAC Gaming, LLC or CBAC Borrower, LLC,” the entities through which Caves Valley owns a stake in the casino.

Adler went on to say that “Mr. Sibel, Mr. Colton, Mr. Fader nor Mr. Adler own directly or indirectly in excess of 5% of the applicant or holder of the license.”

Presumably, the State Prosecutor could ferret out ownership information of an LLC or which casino investors owns more than a 5% share. However, the State Prosecutor relies on the State Board of Elections (SBE) to monitor campaign finances and report any questionable donations.

But DeMaranis acknowledged that his agency’s enforcement is “complaint driven.” He said two auditors on staff are tasked with investigating campaign contributions. The agency also makes use of a software program that flags contributions over a specific dollar amount. But DeMarinis admitted in an interview last month that the department relies on the public and media to bring possible infractions to the SBE’s attention.

Not surprisingly, the SBE’s complaint driven program did not drive any complaints. DeMaranis said that until The Baltimore Post investigation, not a single complaint had been forwarded through the SBE to the State Prosecutor.

The Baltimore Post, using the campaign contributions and the state’s corporations’ databases, was able to determine 148 different political campaigns received donations from people and companies linked to Maryland Live, The Horseshoe Casino, Rocky Gap Casino, and Ocean Downs.

Those with connections to Rocky Gap gave $112,000 to 14 politicians (42 contributions); Maryland Live Casino principals gave $79,000 to 28 politicians (46 contributions).  Those with ties to Ocean Downs donated $370,000 to 64 candidates (177 contributions); and Caves Valley Partners contributed nearly $450,000 which it funneled through 45 entities to 91 political campaigns, statewide.

In all, 47 Maryland legislators, who also voted in favor of the casino law, accepted $266,090 in campaign donations by those with casino ties, after the law was passed.  Among them, the lawmakers who sponsored the bill: Maryland Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch, who collected a total of $41,500 in donations tied to casinos.

Both men declined to comment.

Deputy State Prosecutor Mike McDonough told The Post on Monday that while the agency does not confirm nor deny cases, the job of prosecutors investigating possible election violations is to “enforce the election laws and prosecute violations.”  The deputy prosecutor also noted that a $5,000 fine is assessed per violation and that there can be multiple violations found in a single campaign violation case.

Such was the case in over-contributions found by Maryland State prosecutors in a 2016 investigation involving a Montgomery County company, Retail Services and Systems, Inc. (RSSI).  RSSI and its wholly-owned subsidiaries donated to several campaigns during the 2010 to 2014 election cycle. Investigation by the prosecutor into its contributions resulted in the issuance of twelve citations totaling $60,000 in fines.  The company also made a $90,000 charitable contribution to the Maryland Fair Campaign Financing Fund.

Maryland State Prosecutor Emmet Davitt said of that case that “contributions of hundreds of thousands of dollars, given at the direction and under the control of a single entity, could result in the appearance of undue influence on the part of the contributors”.  The prosecutor went on to say that in that case, the State did not “have any evidence that the over-contributions were made knowing that the act was unlawful.”  But he said that his office would “continue to vigorously pursue these types of violations.”

Deputy Prosecutor McDonough told The Post that there is no specific timeline in which these types of investigations occur and that a press release is usually issued once prosecutors determine a violation is found.

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