An article yesterday incorrectly reported that the Maryland State Games Foundation Inc. had received funds from the federal Alcohol, Drug Abuse and Mental Health Administration. The foundation received funds from the Alcohol and Drug Abuse Administration, a division of the Maryland Department of Health and Mental Hygiene. (Published 12/21/90)

The head of a Maryland state-funded sports foundation being investigated for alleged misuse of funds said yesterday that the organization spent $10,000 on a country club membership and financed a $3,000 scholarship for the daughter of a foundation employee.

But James Narron, chairman of the Maryland State Games Foundation Inc., said that most of the country club membership was paid for by the employees of the foundation and that the scholarship was a reward for volunteer work.

Narron, who also is chairman of the Maryland State Games, was dismissed last week as the state health department's director of special projects after the Attorney General's Office began investigating alleged financial improprieties in the State Games program.

The foundation is alleged to have misused more than $370,000 in grant money that was to be used to develop programs to discourage young people from using illegal drugs and alcohol. An audit by the state Department of Health and Mental Hygiene found that that money could not be sufficiently accounted for or had been used for programs other than those allowed by the state.

In the past, Narron said, "No one has ever questioned how we've used our money. We have never had any secrets. There have never been any problems until now."

Narron also said the foundation had used $480,000 grants from the federal Alcohol, Drug Abuse and Mental Health Administration during the last two years for sports programs. He said the agency had not restricted how the funds were used.

Rick Sampson, director of the federal agency, could not be reached for comment yesterday.

The Maryland State Games Foundation, which was set up in 1985, marketed and raised money for the annual Maryland State Games, a competition for amateur athletes from across the state. Maryland had hoped that the foundation would help draw the U.S. Olympic Festival, considered a warm-up for Olympic hopefuls, to the state sometime after the 1992 Olympic Games.

Narron, 36, said in an interview yesterday that the foundation bought a membership to the Turf Valley Country Club in Columbia in 1988 as a way to procure corporate funds. He said that the money for the corporate membership was taken from the foundation's corporate account, and that $7,800 was contributed to that account by foundation employees.

"No state funds were used," Narron said. "We felt like it {the membership} was a great marketing tool. When corporate people came into town, we would tell them, 'Hey, let's go play golf.' "

Narron also said the foundation had financed a $3,000 scholarship to an employee's daughter attending Salisbury State University. He said that the woman, a freshman this year, had done "over 1,500 hours of volunteer work" for the foundation the previous two years.

"Is there something wrong with that?" Narron asked. "Why wouldn't we reward her for doing all that work? We figured it might be a way to get more high school students involved with us."

Narron, a former official of the Howard County Department of Recreation, also said that his brother-in-law, Christopher Hillman, who did promotion work for the foundation, was told Tuesday that his contract would not be renewed.

Narron also defended hiring relatives of current or former state officals. He said he hired Michael Sabatini, son of Deputy Health Secretary Nelson Sabatini, because of his background in special events, and said Bryant McGuirk, son of former state senator Harry McGuirk, was used as an "on loan" employee.

"I received no pressure whatsoever to put them on the staff," Narron said. "Both men were very qualified to do what they were doing."

Narron also said yesterday that most of the money given by the Alcohol, Drug Abuse and Mental Health Administration has been used to develop sports programs that would impress members of the U.S. Olympic Committee.

He cited the establishment of an Eastern Regional Training Center in Sykesville for table tennis players and an attempt to establish another such center for Olympic fencing hopefuls.