One of Maryland's most powerful political financiers personally intervened in the award of a construction contract that has become part of the state's largest federal corruption investigation in many years, according to the person who oversaw the project and later testified about the contract to a grand jury.
John Paterakis, whose fortune has allowed him to exert tremendous influence in state politics, insisted that a subcontract for a hotel he was building on the Baltimore harbor be given not to the lowest bidder but to the firm Poole and Kent, project manager Ronald James said in recent interviews.
Although Paterakis has not been accused of wrongdoing, James's account of the contract award, and of his grand jury testimony, thrusts Paterakis for the first time into the massive investigation that has led to the indictment of former state senator Thomas L. Bromwell (D). Bromwell has been charged with using his influence to benefit Poole and Kent in exchange for concealed payments and other favors.
Paterakis has served for many years as a financial backer and personal adviser to some of the state's top leaders. During weekly dinners with former governor William Donald Schaefer and other insiders at Da Mimmo in Baltimore's Little Italy on Monday nights, he weighs in on such matters as political appointments and deliberations over who should run for which office.
James said he testified that Paterakis made the hotel contract demand in 1999, over breakfast with Bromwell and another person now indicted in the probe: W. David Stoffregen, who until March was the president and chief executive of Poole and Kent. Never before, James said, had he been asked to take a subcontract from a firm that already had been selected and to give it instead to a competitor whose final bid was higher by more than $500,000.
"I must admit," James said, recalling the unusual meeting, "I don't know why the senator was sitting there. It's not like I contributed to his campaign."
James's account provides the most complete picture to date of a meeting that is mentioned briefly in the racketeering indictment returned last month. The indictment does not mention Paterakis or suggest he was involved in the decision.
Meanwhile, Baltimore County building records show that, less than a year after Poole and Kent won the $9.7 million subcontract, the company, which specializes in large commercial and industrial projects, installed the plumbing at a house being built by Michael S. Beatty, a senior executive with the development arm of Paterakis's business empire. The documents do not indicate the cost of the work on the house.
Beatty has not returned messages left in recent days at his home and office, at H&S Properties Development Corp.
The racketeering indictment accuses Bromwell, who left the state Senate in 2002 to head a state agency, of using his influence to help Poole and Kent win a hospital contract with the University of Maryland Medical System, to speed payments and to settle contractual disputes in the company's favor. In exchange, it alleges, he received concealed payments of more than $190,000, free or discounted construction services at his Baltimore home and other favors.
The hotel subcontract is not among the benefits Bromwell is accused of improperly delivering to Poole and Kent. The meeting is described in the indictment as evidence of the close relationship between him and Stoffregen.
The 30-count indictment, outlining allegations of political corruption and minority contracting fraud, alleges a six-year conspiracy ending in 2004. Stoffregen and Bromwell have pleaded not guilty, as has the wife of the former lawmaker, Mary Pat, who was charged in some of the counts. Four others have pleaded guilty in the case and have agreed to cooperate with investigators.
James said that, during his grand jury testimony about two years ago, he answered pointed questions about Paterakis and about subcontractors on the hotel project who, like Poole and Kent, performed work at Beatty's residence in Baltimore County.
Paterakis has not responded in recent weeks to requests for interviews about his relationship with Bromwell or about Poole and Kent's work at the Baltimore Marriott Waterfront Hotel. A spokeswoman for Maryland U.S. Attorney Rod J. Rosenstein declined to comment.
A Man of 'Big Influence'
Paterakis, 76, remains a force in state government. Schaefer, who described the weekly dinners attended by former health secretary Nelson Sabatini and others who were top aides to former governor Marvin Mandel, paused when asked if Paterakis was a political kingmaker, saying he did not think that would look good in print.
"But I'll say this," Schaefer said. "He is very, very influential. He's a big leader. Let's not kid ourselves. He has a lot of influence on people. Big influence. But good influence."
Paterakis's H&S Bakery, it is often said, once supplied all the buns for McDonald's restaurants on the East Coast. But prolific campaign donations, more than the bakery business, account for his nickname among political insiders: "the bread man."
Paterakis's donations, which are made through an array of corporate entities, can be difficult to track. The Washington Post identified $24,000 in contributions since 2003 to politicians of both parties, including Gov. Robert L. Ehrlich Jr. (R), from the bakery, the development company, the hotel and various relatives.
He also has altered the city's skyline, adding development and real estate to his business portfolio as he reshaped the area known as Inner Harbor East. By 1998, Paterakis was pushing ahead with the hotel project in that once-blighted area.
James's employer, Armada Hoffler, served as the general contractor. Late that year, it advertised for bids for the mechanical subcontract on the project -- essentially the plumbing.
According to the indictment, Poole and Kent's final bid was about $500,000 higher than a bid from J&A Mechanical of Tennessee. In late January of 1999, it says, Armada Hoffler selected the Tennessee firm, and J&A Mechanical's subcontractors began work at the site. The indictment alleges the decision was reversed during the Feb. 5, 1999, meeting.
James told The Post he was summoned to the Pier 5 Hotel, where he had breakfast with Paterakis, Beatty, Bromwell, Stoffregen and others. Bromwell said nothing about the hotel, he said.
"Really the only thing the senator said was, 'I just want to make clear, I'm just friends with everybody and I'm not here for any reason at all,' " James said.
But Paterakis, James said he testified, soon expressed his preference for Poole and Kent. No problem, James recalled thinking, except for the price difference. "John, I can't afford to absorb that," James said he told Paterakis.
James said Poole and Kent lowered its price but remained high by a couple of hundred thousand dollars. He still was not sold.
"At that time, John [Paterakis] spoke up and said, 'Ronnie, you don't understand; we want these guys to do the job,' " James said he testified.
With that, the job went to Poole and Kent. According to the indictment, the company eventually collected more than $13.3 million for the work.
Mixing Business and Politics
For Paterakis, business and politics often have gone hand in glove. The hotel for which Poole and Kent eventually did the work, for instance, was built on property Paterakis bought from the city at Schaefer's urging.
Paterakis's political ties stretch back five decades, to a time when it was tough to conduct business in Baltimore without such connections. In 1996, Paterakis told the Baltimore Sun: "You try to be good to the political people. They make the laws."
Edgar Silver, a Baltimore lobbyist and retired judge who served 10 years in the House of Delegates, said Paterakis reached out to him soon after his election in 1955. "I think Paterakis found that government meshes with private industry so often he would be foolish not to get into it," Silver said.
On one occasion, those ties got too close. In 1964, Paterakis pleaded no contest to bribing a commissary officer for display space at Fort Meade. Paterakis told the Sun in 1996 that he paid a $2,282 fine and had learned his lesson.
The businessman's ties to Bromwell date to 1979, when the young tavern owner from working class Baltimore suburbs was elected to the legislature. Seven current and former lawmakers, all of whom have served in leadership roles, agreed to discuss Bromwell's connections to Paterakis on the condition they not be named, saying they did not want to be drawn into a conflict involving entities as powerful as Paterakis and the U.S. attorney's office.
Many said they believe Bromwell, who raised campaign money prodigiously, was attracted to Paterakis because of his immense personal wealth and power.
"To say Tommy admired Paterakis is really understating it," said one ranking lawmaker. "I remember one time there was a dispute between Paterakis and [Baltimore Orioles owner Peter] Angelos, and Tommy put his arm on my shoulder and said, 'You know, when two eagles soar, the rest of us small birds have to get out of the way.' "
Loyalists of longtime Senate President Thomas V. Mike Miller Jr. (D-Calvert) say they believe Paterakis and others from the Monday night dining group secretly supported Bromwell's attempt, late in 2000, to oust Miller. The effort failed, but Bromwell retained his Finance Committee chairmanship until he left the Senate to head the Injured Workers' Insurance Fund.
With financial interests as vast and varied as his are, Paterakis is affected in countless ways by changes to state law.
In 1999, lawmakers considered legislation that would have enabled the Baltimore Marriott Waterfront Hotel to benefit from property tax breaks potentially worth more than $30 million over 25 years. That legislation ran into trouble in the waning days of the General Assembly session, prompting Paterakis to make a rare visit to Annapolis to personally lobby legislators.
One former lawmaker who has been questioned by the FBI said agents asked specifically about the tax legislation. The former lawmaker said the legislation did not have Bromwell's "fingerprints" on it.
But a former legislative staffer recalled Bromwell's panicked reaction when amendments to the bill remained unresolved during the session's final hours, putting its passage in serious jeopardy. The staffer recalled him intervening personally to get the bill to the floor.
Shortly before the midnight deadline, the bill passed the Senate by a vote of 46 to 1.
Staff researcher Bobbye Pratt contributed to this report.