Plain Dealer - Blackwell defends way funds were raised

(Cleveland Plain Dealer)

Blackwell defends way funds were raised

Columbus - Secretary of State Ken Blackwell preaches the need for transparent fund-raising in his campaign for governor, but in his 2001 race for state treasurer, much of the money he received could not be directly traced to specific donors.

Instead, more than half the $294,175 he raised from bankers, bro kers and oth ers dependent on the state treasurer came from obscure accounts operated by county Republican parties.

The money began to flow rapidly in the spring of 2001, shortly after Blackwell announced he would seek his old job of state treasurer.

Secretaries of state don't have many contracts to award; state treasurers have them in abundance.

Brokers and others who could benefit from contracts with the treasurer's office began filling Blackwell's campaign coffers.

Some of the donations from the investment community - about $124,175 - went directly into his campaign. An additional $170,000 made brief stops along the way in county party accounts called state candidate funds.

Although the practice was legal at the time, candidates used the accounts to circumvent contribution limits. Once donors gave the maximum allowed to candidates, they still could give at higher levels to the county accounts, which then shipped the money to the candidates.

As Blackwell seeks the Republican nomination for governor, critics say his past fund-raising practices conflict with his current message that contributions should be easily traceable and candidates should avoid efforts to circumvent donation limits.

"Of all people, the secretary of state had a responsibility to stop this, not benefit from it," said Catherine Turcer, legislative director for Ohio Citizen Action.

Blackwell notes that the practice was legal at the time and the accounts were set up to help state candidates, including him.

Although his campaign helped the county parties raise the money, the decision on how it was distributed was the counties' alone, he said.

"Did my campaign go to the county parties and say, 'We would like to be the recipient of county party state candidate funds?' Well, of course we did," Blackwell said.

He ultimately abandoned plans to run for treasurer and - bowing to pressure from party leaders - sought re-election as secretary of state, Ohio's chief election officer. But during his run for treasurer, he benefited from donations from the investment community.

On one December day in 2001, the Cuyahoga County GOP state candidate fund received $65,000 from banks, brokers, investment advisers and their families. Eleven days later, the county shipped $65,000 to Blackwell.

The figure includes $20,000 from executives and family members employed by Carnegie Capital Asset Management, a Cleveland-based firm that state treasurers have hired to help administer the STAROhio Fund, an $8 billion public investment pool offered to counties, cities and school districts.

Some Carnegie executives who gave to the state candidate fund already had given Blackwell's campaign the maximum $2,500 in individual donations allowed at the time. By giving to the county fund, Carnegie officials legally circumvented the limits.

They include Chief Operating Officer Rudolph Polz and his wife, Cynthia, who each donated $2,500 to Blackwell on Dec. 12. One day later, Rudolph Polz donated $5,000 to the Cuyahoga County GOP state candidate fund. The day after that, he donated $5,000 to the same fund in Hamilton County, which donated money back to Blackwell.

Polz did not return calls seeking comment.

Mike Wise, who served as executive chairman of the Cuyahoga County GOP at the time, said he could not remember who specifically raised the Carnegie money.

Some donors, he said, "were very well versed" in the rules governing the county accounts.

"They were willing to make sizable donations to them, and as long as there was an incumbent Republican officeholder, we were willing to help. We had an idea of who was interested in what races, but I'm almost positive there wasn't a formal, 'OK, this comes in, then goes here,' " Wise said. He offered no explanation for $65,000 going into the party, then out to Blackwell's campaign.

Similar patterns emerged in Mercer, Stark and Columbiana counties.

The Mercer County GOP state candidate fund, for instance, has taken in only $10,000 since its inception in 2001. It arrived in $5,000 donations in December 2001 from two bank political action committees - Bank One Corp. and Fifth Third Bancorp.

Less than a month later, the Mercer County fund drained its account by writing a $10,000 check to the Blackwell campaign. Campaign finance reports show no contributions have since been made to the Mercer account.

Spokesmen for both bank PACs said the PACs don't know who asked them to send contributions to the Mercer account.

Although Blackwell defends the practice, even one of his top appointees questioned it - when it was employed by someone else.

Curt Mayhew, Blackwell's campaign finance administrator, said in a 2004 interview that he doubted the practice was legal when ex-House Speaker Larry Householder used it.

"I think the scheme of running money through the state candidate funds - if it's done to avoid disclosure - is illegal, but that's not a judgment I can make," Mayhew said.

Eventually, the Ohio Elections Commission disagreed with Mayhew, ruling the practice is legal.

The ruling followed news reports that Blackwell, Attorney General Jim Petro (also seeking the GOP nomination for governor), Auditor Betty Montgomery (running for attorney general) and Gov. Bob Taft (not running for anything) got over $1 million from county accounts.

Democrats used the county funds, too, but sparingly.

Amid criticism of GOP fund-raising tactics, Blackwell asked local boards of election in 2004 to send him campaign reports showing who donated to the county accounts and which candidates benefited.

Today, he said he deserves credit for forcing the county accounts into public view and for helping to change state law to restrict what the accounts can receive.

The Plain Dealer's analysis of Blackwell's use of state candidate funds follows reports that Blackwell's campaign also took contributions from vendors to whom he awarded no-bid contracts as secretary of state - even though he previously said he did not.

After making the comment at a news conference, Blackwell said his staff informed him that he had taken $38,000 from vendors who had been awarded personal-services contracts.

He noted that the money pales in comparison with the nearly $2 million that Petro has collected from lawyers and law firms that have received unbid state legal work from the attorney general.

"The main difference," Blackwell said, "is there has been not even a hint that coercion or intimidation has been used on my part or the part of my campaign."

The FBI has been interviewing lawyers who went public with their criticism of the fund-raising tactics of Petro and his campaign. Petro says the accusations have been manufactured by his political enemies.