Political analysts disagree over whether a federal contracting fraud lawsuit against her husband's company — where Republican lieutenant governor candidate Mary D. Kane was a director for six years — will have much impact on this year's governor's race.

Anthony Head, a former employee of Kane Co., filed a complaint in 2005 under the False Claims Act, alleging that the Elkridge company paid workers less than what was federally required under certain contracts, submitted false documents saying it was in compliance and double-billed the government for some work. The Justice Department joined the lawsuit last year, giving it more weight.

Kane Co. officials say the allegations are without merit. John M. Kane of Potomac, husband of Mary Kane and a former chairman of the Maryland Republican Party, is president and CEO of the Kane Co.

The Kane legal situation could hurt the Republican ticket because former Gov. Robert L. Ehrlich Jr., one of two GOP candidates for governor, is running as a strong pro-business candidate against Gov. Martin O'Malley (D), who also faces a primary challenge, said Paul S. Herrnson, a government and politics professor and director of the Center for American Politics and Citizenship at the University of Maryland, College Park. The issue provides an opportunity for Democrats to try to link Ehrlich and Kane to corruption in big business, he said.

"The press will continue to cover it," Herrnson said. "It will be an issue that will be pursued."

But Thomas F. Schaller, a political science professor with the University of Maryland, Baltimore County, said the lawsuit will be a factor only for the handful of voters directly involved with the legal action.

"This race will be 99 percent about Governor O'Malley and former Governor Ehrlich," Schaller wrote in an e-mail. "Of course, these episodes do make for good media coverage."

On Wednesday, U.S. District Judge Gladys Kessler denied Head's request for a temporary restraining order to keep Kane Co. executives from making public statements that he claims disparage him.

Attorneys for Head, who worked for the Kane Co. from 1997 until he was fired for what company executives called "poor performance" in 2005, referred in court documents to a news release the company issued July 2 that called Head a "disgruntled former employee who had been terminated for unsatisfactory performance," along with media reports quoting statements in the release. The attorneys charged in their motion that the release and "attacking" of Head were "an attempt to protect Mrs. Kane's candidacy for political office."

John Kane referred questions to Ronald Meliker, chief operating officer and executive vice president of the company, whose services include commercial and government office moving, office furniture installation, warehousing, printing, document shredding and electronic equipment recycling.

Meliker wrote in an e-mail Tuesday that the company put out the release to respond directly to the lawsuit and allegations, and he denied it was done to help Mary Kane's campaign.

Mary Kane was an unpaid company director from 1997 until 2003, when she became Maryland deputy secretary of state, according to her state biography. John Kane still has 100 percent ownership of the business, company executives said.

"We believe that all of the allegations by one individual will be determined not to be accurate, and we will prevail on the lawsuit," Meliker said. "This case is about the Kane Company, and it has nothing to do with Mrs. Kane, who has never held a day-to-day role within our company. We do not believe that it will have any impact on the governor's race."

Head, who could not be reached for comment, said in a sworn affidavit this week that he was "completely surprised, distraught, and disappointed that the separation agreement I signed with the company was being willfully violated in such a blatant way."

Head's positions at Kane Co. included vice president for government sales and vice president for moving services.

In his roles, Head had firsthand knowledge of the company's contracts with federal agencies such as the departments of Defense and Health and Human Services, according to his attorney's court filings. From 1998 to 2004, he spoke with several company executives, including John Kane, about whether proper wages were being paid on the federal contracts. The practices were not corrected, with one executive telling Head that the government environment was "lax" and he should not worry about it, according to the filings.

John Kane told a Gazette reporter last year that any underpayments were "unintentional" and the result of wage rates that often changed on federal contracts. In a company audit conducted about six years ago, errors in "administrative payroll" on "three, four, five cases" were discovered, Kane said.

Many of the federal contracts the company works under have wage determination schedules, but in some cases the government does not put those schedules in the orders, Kane executives said in the recent news release. In these cases, the company "followed our normal pay procedures," executives said. In the company's 41-year history, this was the first complaint of its kind against it, they said.

The Kane Co. has "cooperated fully" in the case, executives said.

Under the separation agreement signed in 2005, Head and Kane executives agreed they would not "make any oral or written statement or take any other action which disparages or criticizes the other party," according to his attorneys' filings. In his second amended complaint filed in February, Head sought $1 million each for nine counts in compensatory and punitive damages, along with attorneys' fees and other expenses.

In counterclaims filed in July 2009, the Kane Co. alleged that Head made "false statements" about the business that violated the separation agreement, among other claims, and sought $5 million in damages, attorneys' fees and other expenses. An amended response by the Kane Co. in December did not specify a damages amount.

The privately held company has annual revenues of $50 million to $85 million, Meliker said. Besides Elkridge, it has offices in Rockville, Lanham, Frederick and Baltimore, along with Washington, D.C., Virginia and Delaware.

Democrats jump on case

The Maryland Democratic Party has seized on the case, questioning Ehrlich's judgment in naming Mary Kane as his lieutenant governor choice.

"Having a running mate who sat on the board of a company that is being sued by the federal government for contracting fraud raises questions about [Ehrlich's] judgment," said Isaac Salazar, a spokesman for the Maryland Democratic Party.

Kane has tried to distance herself from the company, but she was a director when many misdeeds are alleged to have occurred, Salazar noted. Kane also indicated on a financial disclosure statement recently filed with the State Ethics Commission that she had a 50 percent "joint interest" in the Kane Co., he said.

Mary Kane said in an interview Thursday that her participation in the Kane Co. amounted to sitting in on "strategic steering meetings." She said she does not own stock in the company, is not an officer and has never been an employee. The disclosure form relates to "what percentage could be appropriated to you," Kane said.

If John Kane were to die, she said, she would take full ownership of the company. If the couple divorced, she said, she would get 50 percent of the company.

"But I don't own anything," Mary Kane said. "My husband owns the company. He owns all the stock in the company."

With more than 1,000 employees, including some who have been with the company for 25 years, the Kanes felt it was prudent for her family's and the company's future for her to understand the company's direction "in case something, God forbid, happened to John," she said.

John Kane's mother died at age 52, she said.

"So when that happens to you, you become very sensitive to what can happen to a family business if a person leaves," Kane said. "We both felt it would be very responsible on my part to sit in on some strategic meetings to understand what the direction of the company was."

Democrats also have said that the Kane Co. benefited by receiving state contracts when she was secretary of state and deputy secretary of state. But Mary Kane said there was "nothing untoward" about that situation.

"Kane Co. had been doing work for many administrations over the past 40 years, putting in competitive bids," she said. "I, as secretary of state, was not involved in any of those contracts and would never have been."

Kane said her husband has written to Attorney General Douglas F. Gansler (D) to say that, should Ehrlich and Kane win the election, "Kane Co. will no longer bid on any state government contracts."

Democrats are trying to divert attention from their own poor performance on the campaign's main issue, the economy, Republicans have said.

"I don't think the lawsuit will have any impact on the governor's race," said Ryan Mahoney, political director for the Maryland Republican Party. "Democrats jumped on it because they are trying to change the subject. The economy is the No. 1 issue on people's minds. The record of Martin O'Malley and the Democratic leadership in the legislature is very poor on the economy. They know they don't have a record to run on."

But it was Ehrlich who "squandered good times" and increased spending when he was governor, Salazar countered.

"Governor O'Malley has cut spending and been fiscally responsible in tough economic times," he said.

The economy is usually the biggest issue in campaigns, and Republicans do have an opening to attack the O'Malley administration on that issue, Herrnson said.

Staff Writer Sean R. Sedam

contributed to this report.