Maryland Attorney General Stephen H. Sachs, a candidate for the Democratic nomination for governor, has ordered his staff to return $11,000 in campaign contributions raised by Michael H. Clott, principal owner of First American Mortgage Co., which collapsed last week. Sachs also said his office will begin investigating Clott.
Sachs acted Tuesday after a federal judge in Baltimore issued a restraining order freezing the assets of First American, a nationwide issuer of second mortgages.
The court action came after a division of the E.F. Hutton & Co. brokerage firm filed a multimillion-dollar lawsuit against First American, alleging that it defrauded Hutton of millions in interest and principal on mortgages that a Hutton subsidiary had purchased from First American. The suit also alleged that First American sold to other customers mortgages it had already sold to Hutton and withheld information that many mortgages it sold were delinquent.
Clott could not be reached for comment yesterday on Sachs' action. Clott filed court documents this week denying the allegations in the Hutton suit.
Sachs said he decided to return the funds when he learned of the suit and realized his office could be involved in investigating Clott.
Sachs ordered the return of $1,000 contributions made by Clott, his wife Lisa and nine others solicited by Clott.
It was the third time Sachs has ordered campaign funds returned because contributors were being investigated by his office or the funds were solicited by those under investigation. In February 1984, he returned $1,600 contributed or solicited by Thomas Edward Joy, a Frederick County liquor inspector later convicted of attempting to bribe a tavern owner. Last March, Sachs returned about $12,000 contributed or solicited by vending machine owners who had been raided by state police.
Sachs, who is likely to face Baltimore Mayor William Donald Schaefer in the Democratic primary for governor, has made an issue of Schaefer's continued ties to former governor Marvin Mandel and Mandel's associate, Irvin Kovens, who served prison terms on political corruption convictions and who helped raise money for a Schaefer fund-raiser in September.