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Pandemic spending oversight panel frustrated by lack of answers

Comptroller Peter Franchot expressed frustration about the lack of answers from the Department of Labor after a meeting of a state panel overseeing pandemic spending. (The Daily Record / Bryan P. Sears)

A state panel is looking for answers about unemployment and pandemic aid programs administered by the Maryland Department of Labor.

Comptroller Peter Franchot began the meeting vowing to get answers from the Department regarding the unemployment program. The truth, and the data, may be out there but it was not in a conference room inside the state Treasury building Thursday.

“To those guys, no news is good news,” said Franchot following the meeting. “To us, it implies a cover-up. We intend to go after this thing vigorously. The facts are going to come out.”

Top of mind for Franchot’s panel is determining how much of the roughly $13 billion in unemployment payments were made on fraudulent claims.

“What we have here is the greatest highway robbery in the (state) treasury’s history, the U.S. Treasury and the state’s history because we’re estimating conservatively that $2 billion of the $13 billion went to fraudsters,” said Franchot. “It may be higher than that.”

The comptroller said the agency is basing estimates on what they are seeing in other states as well as the amount of fraud attempts that his agency sees with fraudulent tax filings.

“No politician likes bad news. Defrauding the state treasury is bad news. Particularly when it’s record amounts,” said Franchot, when asked why he described the responses from the department as “a cover-up.”

The fraudulent payments, he said, will never be recovered.

Deputy Labor Secretary David McGlone,  told Franchot the Department of Labor has thwarted more than 92% of fraudulent claims — a statement Gov Larry Hogan routinely repeats in discussing the issue.

Andrew Schaufele, director of the Bureau of Revenue Estimates and a member of the panel, said the department may be only testing a small number of claims.

“We know that’s a phony figure because you have a 92% fraud detection rate on 1.5 million returns, you’re not testing the entire universe,” said Franchot. “That we know from our own experience because we’re the number one fraud detection agency in the country and we have only a 50% success rate.”

“We know there’s a dead body lying there,” he said.

The comptroller’s office tests a wider sample.

McGlone did not dispute the estimate offered by Franchot.

“We did not have any rebuttal on the $2 billion figure because it’s accurate,” said Franchot. “If anything, it’s too conservative.”

The meeting with McGlone, which lasted more than an hour, broke very little new ground.

The legislature earlier this year ordered the Office of the Comptroller to hold these oversight hearings.

Franchot began the meeting saying that he believed his panel would get answers to their questions. McGlone provided a 15-minute overview of how the department has handled the pandemic payments but responded to questions frequently by saying either that he did not know the answer to a question or could get the answer.

“Having the department come before us, having had the questions for two weeks we know they know what the answers are but they’re not giving them to us. The truth is going to come out. There’s no way we’re going to let them go down into a fox hole and stay there and say ‘Oh no, everything is just fine.’ Everything is not just fine,” Franchot said.

Following the meeting, Franchot said he believed the panel had the tools needed to do the job. Later, however, he acknowledged that he did not have subpoena power.

“Obviously, we could use some legislative support,” he said adding that what the panel is doing is not an audit.

“The audits should start now rather than later,” he said.

Still, the comptroller vowed that his panel would get answers.

Asked how, based on the exchange with McGlone and a lack of subpoena power, Franchot responded “stay tuned.”