Maryland House Speaker R. Clayton Mitchell Jr. helped to save a tax break for a racetrack owned by developer Mark Vogel at the same time that Mitchell and his son were brokering a Vogel real estate transaction that brought them a $100,000 commission.
State records show that Mitchell (D-Kent), who has been speaker since 1987, voted two times in favor of a bill that included the tax break late in the 1989 legislative session.
Mitchell also contacted the chairman of the Senate Finance Committee in late March 1989 to urge passage of the legislation, which involved extending the $68,000 tax break to the Vogel-owned Delmarva Downs harness track near Ocean City, Md. The Senate panel already had rejected the bill once.
At the time, Mitchell, a part-time real estate agent, and his son were negotiating with Vogel on a $1.7 million land sale in the Eastern Shore town of Crisfield. Discussions about the transaction began in late 1988, and it was completed on April 27, 1989.
According to legislative records, Mitchell did not formally disclose his business dealings with Vogel to legislative ethics officials. He had promised in a letter to the Joint Committee on Legislative Ethics in early 1989 to divulge any real estate transactions that could pose potential conflicts of interest.
State ethics rules require members either to disqualify themselves or to publicly disavow a conflict of interest if they intend to vote on or lobby for legislation involving people with whom they have a "close economic association."
Mitchell, 54, could not be reached for comment yesterday, and his attorney declined to comment. The speaker did not attend meetings yesterday on the state's budget troubles and told one colleague he would not be available until next week.
In a previous interview, Mitchell denied any wrongdoing in his relationship with Vogel, whom he and his son recruited as a prospective buyer for the Eastern Shore property soon after they were hired as listing agents. Mitchell called it a "straightforward" transaction in which he served as a broker for a group of Crisfield businessmen who owned the property.
Mitchell also denied ever improperly using his legislative influence for Vogel's benefit. Both Mitchell and Vogel describe the real estate sale as an arm's-length transaction because Mitchell's commission was paid by the property's sellers.
The Vogel transaction has come under the scrutiny of both state and federal prosecutors. State Prosecutor Stephen Montanarelli is investigating allegations that Mitchell may have received improper financial benefits while holding public office. Mitchell, who said he has been under investigation for at least nine months, has turned over banking records, checkbooks and accounts of his Kennedyville real estate company, Mitchell Realty Inc., to Montanarelli's office.
Federal investigators, who are involved in a broad probe of Vogel's business dealings, also are investigating his relationship with the influential lawmaker and are sharing information gathered by Montanarelli's office, including records of the land sale to Vogel.
Vogel, a Bowie-based developer who built a $1 billion real estate empire in less than a decade, became a well-known figure in Annapolis as he diversified his holdings. His December 1987 purchase of Rosecroft Raceway in Oxon Hill and Delmarva Downs made him subject to state regulation and brought him in more frequent contact with the legislature.
Vogel said yesterday that he rarely followed the progress of specific legislation and left lobbying to his lawyers and lobbyist Bruce Bereano. But both Vogel and Mitchell say they occasionally had general discussions about pending legislation affecting the horse racing industry.
Legislative records show that Mitchell took an active role in racing legislation in the spring of 1989, a critical time for Vogel. Several pending bills had important consequences for the track owner, including bills authorizing off-track betting, increasing the powers of the State Racing Commission and continuing the Delmarva Downs tax break.
The Delmarva Downs bill extended until 1992 Vogel's exemption from the nominal tax other tracks pay on their betting proceeds. The exemption originally was granted several years before Vogel purchased the track because legislators felt the facility had fallen into disrepair. The money saved was supposed to be invested in improvements.
A Senate version of the bill hit a snag in the Senate Finance Committee in late March 1989 and was defeated by a 6 to 5 vote, with the committee chairman, Sen. Catherine I. Riley (D-Harford), casting a "no" vote to break the tie.
Members say some senators were concerned about Vogel's management of the track and were reluctant to approve the bill, believing he would drain track proceeds for his other real estate ventures. "There were a lot of concerns voiced that this was some fly-by-night developer who was getting in over his head and possibly jeopardizing a great portion of Maryland's racing industry," said Sen. George W. Della Jr. (D-Baltimore).
Riley said she voted against the bill after unsuccessfully trying to amend it. She said she was later contacted by Mitchell, who along with other Eastern Shore lawmakers was seeking support for a version of the tax break already approved by the House.
"I don't remember exactly what he said, and there was no pressure involved. Clayton did nothing wrong, nothing out of line," she said.
Riley said Vogel's name did not come up during the conversation. She also said she was unaware that Mitchell and Vogel were engaged in a business transaction at the time the bill was under consideration.
A week after defeating the Senate version, the Finance Committee reversed itself and approved the House version of the Delmarva tax break. Riley voted for the measure, which passed by an 8 to 3 vote.
The measure encountered further opposition on the Senate floor. Sen. Julian L. Lapides (D-Baltimore) offered an amendment that effectively killed the bill. "I remember the outrage on the Finance Committee when it had so clearly voted against the issue. This was so obviously a windfall for one person," he said.
The House resurrected the tax break the next day, adding it to a Senate-passed bill expanding the powers of the racing commission. Mitchell voted twice for that bill, on April 7 and 9. Mitchell had not voted on the issue when it had come before the House of Delegates several weeks earlier.
Vogel said yesterday that he saw no connection between the real estate transaction and issues pending before the General Assembly. "I didn't have to impress the speaker because I already knew he was pro-racing. He told me racing was very beneficial to his district and to the Eastern Shore," Vogel said.
Vogel said that after the Crisfield sale was completed, Mitchell helped him arrange a five-minute meeting with Gov. William Donald Schaefer to discuss a racing issue.
In an earlier interview, Mitchell acknowledged arranging the meeting but said he could remember no details.