ANNAPOLIS – Legislative auditors have referred a 2008 land-acquisition deal by St. Mary’s College of Maryland to the criminal division of the attorney general’s office.
The college won state approval to purchase the land for $800,000 after neglecting to tell the Board of Public Works the actual sales price was more than twice that, with the seller — a member of the school’s board of trustees — donating $825,300 of the $1,625,300 value his appraiser put on the property.
The school’s alleged failure to disclose the donation could cost the state money if the seller declares the $825,000 as a charitable deduction on a tax return, the Office of Legislative Audits stated in its report. OLA is a division of the Department of Legislative Services that serves as an investigative arm of the General Assembly.
Raquel Guillory, chief spokeswoman for Attorney General Douglas F. Gansler, declined to comment, citing the office’s policy of not discussing matters before the criminal division.
The college submitted two appraisals to the Board of Public Works that put the value of the land at between $860,000 and $1.1 million, OLA said in the audit findings made public Tuesday.
But the state liberal arts college in St. Mary’s City never submitted the seller’s appraisal of $1,625,300, OLA said. That figure reflected the actual sales price based on the money the school paid and the donated amount, added OLA.
Tom Botzman, the school’s vice president for business and finance, objected to OLA’s finding that the school had acted in an untoward fashion.
The college had in fact consulted the attorney general’s office and the Maryland State Ethics Commission in purchasing the 34.48 acres from board member Michael O’Brien, Botzman said.
“The college’s representatives have acted … ethically and lawfully throughout the entire process,’ he added.
In a responsive statement included in OLA’s report, the college said it “strenuously objects” to the auditors’ conclusion of potential wrongdoing and its referral of the matter to the attorney general’s office. The school added that it was represented by the educational affairs division of the attorney general’s office as it negotiated an “arm’s length deal” with O’Brien’s representative.
The college added that it contacted the Maryland State Ethics Commission for an opinion to ensure no conflict of interest existed in the then-pending sale.
“As always, the college will cooperate with the office of the Attorney General and take recommended actions, noting that this transaction was negotiated at arm’s length through the Office of the Attorney General,” the school stated.
O’Brien said the transaction was aboveboard and under the watchful eye of the attorney general’s office. He added that he found it odd that the OLA had now referred the case to the office.
“You’re asking the attorney general to investigate the attorney general, so good luck with that,” said O’Brien, who owns Solomons-based O’Brien Realty.
(O’Brien said he is not related to Jane Margaret “Maggie” O’Brien, who stepped down as college president last year and will be replaced by Joseph R. Urgo on July 1.)
On April 30, 2008, the Board of Public Works approved the purchase of the adjacent land for $800,000. One week later an $800,000 deed for the property was conveyed to the college. The school subsequently added the property to its land records, listing the acquisition price, including settlement costs, as $804,762, according to the OLA report.
In addition to referring the matter to the attorney general’s office, the OLA recommended that the school “retroactively report” the charitable donation to the Board of Public Works and consult with the Maryland comptroller about the tax consequences of the donation.
OLA’s criticism of how the land purchase was handled was part of a larger audit of the college’s accounting practices between July 1, 2006, and April 12, 2009.
OLA faulted the school for poor practices. For example, the auditors found that in nine instances, totaling $650,000, the school had not prepared written purchase orders until after it had received invoices, instead of the usual practice of the purchase order preceding the invoice.
Auditors also said the school lacked a process for ensuring the accuracy of invoiced charges from its food-service contractor.
The college agreed with all the findings, except one.
“Throughout this extensive audit process which spanned months, the college has made every effort to respond promptly, thoroughly and completely to every request by the legislative auditors,” the school stated in its responsive letter. “The college takes these findings very seriously and, with the exception to Finding One [concerning the land purchase], has concurred with the auditors’ recommendations and has provided specific timelines and methods to be used by the college to address the issues raised by the auditors in these findings.”