MES officials say they felt pressured to approve McGrath severance

Roy McGrath solicited a six-figure severance payment from the Maryland Environmental Service in May as he was preparing to become Gov. Larry Hogan’s chief of staff, according to board members who said they felt pressured to comply.

Members of the General Assembly’s Joint Committee on Fair Practices and Personnel Oversight took more than three hours of testimony as it wrestled with conflicting statements from McGrath — who did not respond to a request to appear before the panel — and Hogan about the governor’s foreknowledge of a severance payment.

Testimony by current and former board members of the quasi-government agency and its new acting director painted McGrath as misusing the power of the agency and of his new role as Hogan’s “right-hand man.” Those members said McGrath both initiated the request for his own severance payment and later, as a chief of staff under fire in the media, ordered the Maryland Environmental Service to produce a press release to offer a defense of the payout.

Those same current and former board members told a legislative oversight committee that they were uncomfortable with the payout McGrath requested and wanted to ensure that such a payment was approved by the governor. No one on the board, however, spoke to anyone on Hogan’s staff to ensure that the governor knew and approved of the payment. 

Richard Snee, a Harford County land-use attorney who has served on the board dating back to former Gov William Donald Schaefer, and others said they wanted assurances that the governor was OK with the payment. Those assurances came from McGrath himself, according to testimony and emails turned over to the committee.

“We relied on a representation by the former director (McGrath), and it was only upon his representation did we act,” said Snee. “Had he not assured us that the second floor had approved of this, we would not have made the severance payment.”

The “second floor” is an oft-used reference to the governor’s office. 

Snee said he personally did not believe Hogan was aware of the payment as McGrath has said.

McGrath was named chief of staff on May 26 by Hogan. He replaced Matt Clark, who left after a second stint in the administration.

Just two days after being named Hogan’s chief of staff, McGrath recused himself from a meeting of the board of the Maryland Environmental Service.

Board members said they had concerns about the payment because McGrath was moving laterally from running the agency to becoming Hogan’s chief of staff.

The agency has no formal policy on such payouts but has awarded severance to others, including McGrath’s predecessor Jim Harkins, who retired.

McGrath was not retiring. Instead, he was taking a position described by board members as Hogan’s top adviser.

“The financial package was not something the board initiated, said William “Billy” Addison, a member of the board who previously served as the longtime secretary of the Maryland Senate. “When Mr. McGrath asked for this, quite frankly, we were caught between a rock and a hard place. It seemed as though we had no choice as he was transferring to a very powerful position that could have a future impact on MES.”

Addison said McGrath “put this board in a horrible position with no good outcome.”

Del. Jeff Ghrist, R-Upper Shore, rejected claims that the board was under pressure to comply with McGrath’s requests.

“Given that there’s no documentation and nobody has said anything about threats that were given to you guys or MES, but you still authorized this severance, it seems to me that fear is more self-inflicted than anything else and irrational,” said Ghrist. 

No one from the Maryland Environmental Service checked with Hogan or his staff about the veracity of McGrath’s statements, according to board members who testified Tuesday.

Snee, Addison and others said they believe the board ultimately acted appropriately, upholding its fiduciary responsibilities and “acting in the best interest of MES at the time.”

“We take full responsibility for what happened,” said Snee. We are not washing out hands of our responsibilities. We share your concerns.’

Hogan, in a statement, denied knowledge of the payout.

“It has recently come to light that the Maryland Environmental Service has a longstanding practice of paying large bonuses, expense reimbursements, and severance packages to its top executives. This is something no normal state-operated agency should or would ever grant,” Hogan said in a statement issued two hours before the committee hearing. “To be clear, I did not approve, recommend, or have any involvement whatsoever in any of these decisions made by the board of directors of MES with respect to the former director Roy McGrath or any other individual.”

A spokesman for Hogan referred a reporter back to that statement when asked if McGrath had misled the agency if he in fact told the board that the governor was onboard with the severance package.

“The governor’s press release today versus Mr. McGrath’s statements and representations publicly and to the board — both can’t be true,” said Del. Erek Barron, D-Prince George’s and House co-chair of the joint committee.

Both Barron and Sen. Clarence Lam, D-Howard and Baltimore counties and Senate co-chair of the committee, said the panel was continuing a review of the payments including sifting through hundreds of pages of documents. They hinted at future hearings.

The MES board voted in late May to pay McGrath severance of $233,647 — the equivalent of one year’s salary — as well as $5,250 in tuition reimbursement. McGrath was also allowed to keep a cellphone and laptop given to him by the organization. 

McGrath also received more than $125,000 in reimbursements for expenses dating back nearly two years for travel around the country and to Italy and Israel and for meals and gifts to board members.

Additionally, he continued to use a car purchased for him by the Maryland Environmental Service after he left the agency. McGrath attempted to continue to use the car and have it transferred to the governor’s office, according to a June 1 email between McGrath and Beth Wojton, the deputy director of the agency.

The car was ultimately not transferred to the state and  was returned to the agency last week following McGrath’s resignation – more than two months after McGrath stopped working for the Maryland Environmental Service.

A spokesman for the governor confirmed that McGrath had made a request to transfer the vehicle to the state. That request was still under review.

“Whether he was actively using the vehicle, I cannot speak to,” said Michael Ricci, a Hogan spokesman

McGrath resigned his position as chief of staff to Hogan on Aug. 17, days after reports surfaced that he received a severance package of nearly $233,000 — the equivalent of one year’s salary at the agency — along with a cellphone and laptop bought for him by the Maryland Environmental Service.

McGrath had defended the separation package as typical for what executives in the private sector would receive and as consistent with the agency’s previous practices.

Maryland Environmental Services Acting Director Charles Glass said in that press release that the organization “grew consistently” under McGrath, including $178.7 million  in revenue in fiscal year 2020, a record for the nonprofit. That year included a “record bonus payout” to employees through an annual incentive program. The payout was made at the request of McGrath.

In that statement, Glass defended the severance package, including the one given to McGrath, calling it customary and a “long-established practice.”

Harkins, who held the position before McGrath, was paid $256,746 in severance when he retired in 2016.

The agency, however, has no written policy for such severance packages. Harkins received his upon retirement, Glass said Tuesday in his testimony. Other board members said payouts such as received by McGrath, who was not retiring or being fired, were not typical.

Glass, speaking Tuesday, told lawmakers that the news release was issued at the request of McGrath, producing text messages showing McGrath suggested the release on the evening of Aug. 14. The release was worked on by members of the agency along with Nevins and Associates, an outside public relations firm.

Glass said he had reason to believe McGrath was aware of and possibly approved of the contents of the statement before it was released publicly.

Glass said he had no intention of issuing a statement before McGrath requested one. 

“He was the chief of staff,” said Glass. “This was a request that came from Roy McGrath, chief of staff to the governor.”

A number of audits are now underway to determine the scope and appropriateness of the payouts.

An independent internal audit is being conducted by a firm hired by the Maryland Environmental Service.

Hogan announced Tuesday has ordered that he ordered the Department of Budget and Management to conduct an internal audit of the independent agency that generates revenues from contracts with state and local governments.

Hogan, in his statement, said  “Glass, who has been leading MES since June, has committed to conducting a top-to-bottom review of this entity’s operations, and has already taken steps to begin to address many of these structural problems.”