03/13/02

Stephen Ohlemacher

and Julie Carr SmythPlain Dealer Bureau Columbus- Pressure mounted at the Statehouse yesterday to change campaign-finance laws and brokerage-industry regulations called into question because of the Frank Gruttadauria scandal.

Two House members, a Democrat and a Republican, introduced legislation that would close a loophole in Ohio political reporting laws that allowed a $50,000 donation that Gruttadauria made to the Hamilton County Republican Party to go unreported.

State Sen. Dan Brady, Democrat of Cleveland, introduced a similar bill in the Senate. But the future of both bills is uncertain, with Senate President Richard Finan against it and House Speaker Larry Householder noncommittal.

Both bills would make public contributions to state and county political parties' operating accounts of the type where Gruttadauria's check landed. Parties can currently accept unlimited contributions into the accounts and need not disclose donors.

The accounts are supposed to be used to maintain parties' buildings and ongoing operations. They cannot be used to contribute directly to candidates, but they can free up other party money for candidate contributions.

"It's important for the survival of democracy . . . that people know where the money is coming from and where it is going," said Rep. Timothy Grendell, Republican of Chester Township.

Grendell co-sponsored the bill with Rep. Joseph Sulzer, Democrat of Chillicothe.

Householder, Republican of Perry County, promised committee hearings on the bill, but nothing else. "We'll have some hearings on it and see how it turns out," he said.

The $50,000 Gruttadauria donation, uncovered in a Plain Dealer investigation, arrived by personal check just weeks before the Lehman Brothers Inc. broker-dealer disappeared Jan. 11.

The donation came after Gruttadauria had landed coveted state work for Lehman and his previous employer, SG Cowen Corp., from State Treasurer Joseph Deters' office. Deters' campaign received more than $200,000 from public election funds of the Hamilton County party. A Republican fund-raiser whom Deters and the party shared solicited the donation from Gruttadauria, but both Deters and the solicitor, Eric Sagun, said Deters had no involvement in approaching Gruttadauria for the contribution.

At special hearings convened yesterday to probe the Gruttadauria affair, legislators wanted to know why regulators had not caught on to a scheme that appears to have left Gruttadauria's clients out nearly $300 million.

Ohio Division of Securities Commissioner Deborah Dye Joyce told members of the House Commerce & Labor Committee that - short of evaluating the individual transactions of Ohio's 135,000 licensed securities dealers, stockbrokers, investment advisers and agents - regulators have little hope of catching such fraud before it occurs.

Contact Julie Carr Smyth at:jsmyth@plaind.com, 800-228-8272