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Prisons inquiry affects Smith

The gubernatorial candidate says he will return contributions from a friend whose business was raided by the FBI.

Published June 9, 2006

The widening investigation into Florida's prison system cast a shadow on the gubernatorial aspirations of an upstart Democratic state senator from Alachua on Thursday.

Rod Smith pledged to return about $2,500 in contributions to his campaign from family friend Eddie Dugger and his prison vending business, American Institutional Services Inc., which was raided by the FBI on Wednesday and banned from servicing state prisons on Thursday.

The raid is part of an ongoing FBI and FDLE investigation into the state prison system, which earlier this year spurred Gov. Jeb Bush to ask for the resignation of Corrections Secretary James Crosby. Authorities have accused prison officials of selling steroids, embezzling state money and issuing no-bid contracts.

In addition to American Institutional Services, Dugger, 59, of Gainesville, runs a variety of businesses, including a couple of liquor stores, a pawnshop and an Allstate insurance branch, one of the largest in Alachua County. Dugger has not been charged with anything and didn't return calls for comment.

Although Smith returned some campaign money associated with Dugger, his gubernatorial bid still stands to benefit from the longtime friendship between the two. American Institutional Services is the top contributor, at $30,000, to a political committee supporting Smith's campaign.

Earlier this week the group Floridians for Responsible Government conducted a poll, made automated phone calls and distributed colorful fliers touting Smith's candidacy throughout the state. According to federal records, the group raised $90,000 and spent $16,000 through March.

Smith said he has known Dugger for 30 years and doesn't believe Dugger knowingly did anything wrong.

"As a former state attorney, I know that investigations are just that, a process to gather facts, but I also recognize public perception," said Smith. "It's my sincere hope that this investigation is concluded quickly."

American Institutional Services has a vending subcontract with Keefe Commissary Network, a St. Louis company that provides vending for prisons nationwide. It runs the canteens where visiting family and friends can buy hot dogs and drinks when they visit inmates. American Institutional Services provides vending services only in the "visiting park" areas, which are open only on weekends, said Keefe spokesman Pat Farrell.

"FDLE told us our subcontractor was being banned from further operations from Florida Department of Corrections," Farrell said.

Keefe got its start in Florida prisons back in 1975. It got the contract to run all Florida prisons vending services on Oct. 9, 2003. The contract expires in October, and Corrections Secretary James McDonough has recently signaled his intention to make sure the Keefe contract is rebid, according to e-mails between McDonough and his chief of staff obtained by the Times.

The banning from state prisons came a day after FBI agents raided American Institutional Services offices in Gainesville, which was first reported by the Florida Times-Union in Jacksonville. Special Agent Jeff Westcott confirmed that the FBI took business records, but offered no other details, citing a sealed federal search warrant.

Smith's rival for the Democratic nomination for governor, U.S. Rep. Jim Davis of Tampa, pounced on the news that the office had been raided. The Davis campaign e-mailed statements calling on Smith to return the money and distance himself from the company.

Thursday afternoon, a woman who identified herself only as Shelby and said she represented a group called "Little Old Ladies in Tennis Shoes," called a reporter to express her concern about the prison investigation and about Smith. She said she was merely a concerned citizen and the Davis campaign denied knowing anything about the call, but Shelby repeated details about the Dugger and American Institutional Services contributions to Smith that hadn't yet appeared in newspapers but had been part of Davis campaign e-mails.

Davis is the only major candidate for governor who hadn't received contributions linked to Dugger. Dugger and his vice president, Joseph Deese, contributed $500 to Republican Tom Gallagher, who is the state's chief financial officer, and American Institutional Services has contributed $500 to Republican Charlie Crist, the state's attorney general. Both Gallagher and Crist said they were looking into the matter and hadn't decided whether to return campaign contributions linked to Dugger.

But Smith clearly had the strongest ties to Dugger, particularly through Floridians for Responsible Government, a so-called 527 group registered with the IRS. Unlike individual campaigns that can receive donations up to $500 per election in Florida, 527 groups can accept unlimited contributions.

Smith has said he knew about Floridians for Responsible Government and its donors but he hadn't seen the flier until it was published. On Thursday, when asked about what would happen to the $30,000 American Institutional Services had given to that group, Smith said he heard the group was either closed or was in the process of being closed.

The head of the group, Michael Spellman, a Smith supporter who owns an Orlando area golf course, confirmed late Thursday that he is shutting down the 527.

Smith's return of the money came as the Florida Chamber of Commerce released a poll of 600 likely Democratic primary voters showing Smith has statistically matched Davis, with 21.5 percent. Fifty-six percent of those polled are undecided. Schroth, Eldon and Associates of Alexandria, Va., conducted the poll.

Times staff writers Lucy Morgan and Adam Smith and Times researchers Deirdre Morrow and Cathy Wos contributed to this report.

[Last modified June 9, 2006, 05:42:45]

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