Is there a conflict of interest that might disqualify mayoral candidate David Warnock?

Mayoral Candidate David Warnock is justifiably proud of his accomplishments in business. He should be. Starting with very little, he’s made a great deal of money – millions of which he has used through his Warnock Foundation and other means to help people in the city of Baltimore. It’s a great story and he deserves our respect for his accomplishments – and for his willingness to walk away from what he has built for a second, much more demanding and less lucrative career in public service.

It’s not clear why Mr. Warnock’s company, Camden Partners, has no Black employees at any level, from clerks to senior management. He’s recently added two well-known Black men – Wes Moore and William Jews – to his Advisory Board, but these men are not his employees. His lack of Black staff makes you wonder if his interest in Baltimore’s Black families who are struggling is more a matter of charity than a solid belief that there is no job that comparably educated and trained Black men and women can’t do as well as their White counterparts. If he doesn’t have any Black employees, in his own company, voters need to ask him, “Why not?”

No doubt about it, over his years in business, Mr. Warnock has acquired valuable management skills that may be very helpful should he be elected Mayor. Unfortunately, the nature of his venture capital business could be a problem.

Putting his interests in Camden Partners into a blind trust will significantly reduce, if not entirely eliminate the potential for ordinary conflicts of interest. The problem for Mr. Warnock – and for the city and people of Baltimore – is that he may not be able or want to put his holdings into a blind trust. He can’t just take an extended, indefinite leave of absence from his company until he’s no longer Mayor.  It’s not that simple.  

Why not? For two reasons:

1. Mr. Warnock solicits capital (money) from qualified, high net worth individuals and corporate investors. It’s money that he, in turn, uses to purchase interests in companies, the development and continued ownership or eventual sale of which will be profitable. That’s his business.

Camden Partners is a relatively small firm.  It may have invested millions and millions of dollars recently and over the years, but compared to the multibillion dollar investment banks and hedge funds, it’s a minor operation.  The smaller the business, the more reliant its investors on the owner, the principal of that company, to protect their money and deliver the returns they are expecting.  In this case, that’s David Warnock.  As a condition for giving Mr. Warnock their money, it is entirely reasonable to assume that his investment partners have required that he, personally, be contractually obligated to manage the money they have entrusted to him. Assuming that’s true, he can’t just turnover management of those funds to other people – not without the express permission of his investors, investors who have given him and/or pledged millions of dollars.

If he’s elected Mayor, which is obviously a very full-time job, Mr. Warnock won’t have the time to supervise his existing investment partnerships – even if he wanted to honor the commitments he has executed with his “limited partners.” Nor will he have the time to lead his company’s ongoing acquisition of new capital for additional investments that Camden Partners might make. He won’t, in other words, be able to assure his current and future investors that he, personally, will watch over their money. He can still be Mayor, of course – It’s a free country. – but he will do so at the risk of trashing the very lucrative business he has spent the better part of his lifetime building. Not only might his investors have the right to suspend their financial commitments to Camden Partners, Mr. Warnock, as a sitting Mayor, has the potential of being sued if any of the investments he promised to supervise, but now can’t because he’s Mayor, under-performs or loses money.

At the very least, before taking office, he’ll have to convince his investors to allow others to supervise their investments and to agree not to sue him in the event there are any losses of potential profits and, heaven forbid, principal as a result of his departure. Maybe his investors will help him out, maybe they won’t, but it’s certainly a process that needs to be resolved to everyone’s satisfaction prior to April’s primary.

2. When a venture capitalist purchases an interest in a company, he exposes his company and sometimes himself to law suits that may be brought by the stockholders and others associated with the company that he’s taking over. It’s part and parcel of being in the business of taking over companies, even though he may not be buying those companies outright, but just some of their stock, enough to have significant influence over their behavior. Law suits related to such major investments in a company are not uncommon and, in fact, Camden Partners and Mr. Warnock himself have been the targets of such legal actions.

Needless to say, just being sued should not and cannot be construed as proof that Mr. Warnock or his company have acted improperly. Of course not. We live a litigious society. People and companies are suing other people and companies all the time. Unfortunately, justified or not, litigation is a time consuming process for those being sued and could be a major distraction for a sitting Mayor. Being Mayor, in fact, might even encourage such legal action given Mr. Warnock’s celebrity and demands upon his time. People considering suing him might actually think they have an advantage given his high profile and other responsibilities to the city.

In any case, there is no way, no blind trust or other legal trick that can protect Mr. Warnock from these occasional suits as they pertain to investments his company made on his watch.

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Of the six leading candidates for Mayor, David Warnock is the only one with legal constraints and concerns of this type. Catherine Pugh is a State Senator. Sheila Dixon is a consultant. Elizabeth Embry is an attorney who works for the Maryland Attorney General and both Carl Stokes and Nick Mosby are sitting Members of the City Council. Only David Warnock has an ongoing, continuing contractual responsibility for millions and millions of investor dollars. Only Mr. Warnock can be the target of significant, business-related legal actions even after he leaves Camden Partners – assuming his investors will let him or that the costs of his departure are not prohibitively high for even the best and most successful men and women to overlook.

Voters should ask for Mr. Warnock’s assurances – before they vote for him – that these business entanglements have been resolved in the city’s favor and that, should he be elected, they will not distract him from his responsibilities as their Mayor.

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