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Report urges legal action against indicted former MES director McGrath

Roy C. McGrath, former chief of staff to Gov. Larry Hogan and executive director of the Maryland Environmental Service, has been indicted on federal fraud charges. (The Daily Record/File Photo)

A joint legislative panel called on Maryland Environmental Service to take civil legal action against its indicted former director and his top aide for money paid to them during their tenure at the quasi-state agency.

The 82-page report, which includes more than 1,600 pages of supporting records, documents the investigation of former director Roy McGrath and Matthew Sherring. That report highlights a pattern of alleged self-dealing, questionable expenses and potentially illegal actions that resulted in McGrath being forced out of his position as Gov. Larry Hogan’s senior aide and, subsequently, his federal indictment.

McGrath, who did not respond to a request for comment, has repeatedly asserted his innocence.

Senate President Bill Ferguson called the report’s findings “deeply troubling on all levels.”

“Mr. McGrath’s conduct and flouting of long-established rules and policies to enrich himself and loyal friends is beyond the pale of what we expect of our public servants,” said Ferguson. “Mismanaging taxpayer dollars dissolves the public’s trust in our entire system of government and can never be tolerated.

Sharon Merkel, a spokeswoman for the Maryland Environmental Service, said the agency so far has not initiated any civil actions against McGrath or others. She declined further comment citing pending criminal charges against the former agency leader.

“We appreciate the committee’s work and its acknowledgement of our responsiveness,” said Michael Ricci, a Hogan spokesman. “The report speaks to the need for something the governor has been pushing for, which is more transparency and accountability in the way that these ‘quasi-governmental agencies’ operate. The governor’s bipartisan STAR commission submitted a final report last year containing more than 30 recommendations in this area.” 

“On the causes of action, we won’t comment on MES internal matters, but it would have been good to see the panel call for more forward-looking actions on quasi-governmental organizations,” Ricci said.

The report presents a damning image of McGrath as a manager who was described as hands off and “toxic.” McGrath would be absent from the office for extended periods of time without informing staff. Direct access to him was limited to text messages and less than half of all staff meetings during his tenure. Some employees told the legislative panel that when they traveled in vehicles with McGrath, the director would often not speak to other passengers.

Instead, McGrath seemed “overly focused” on branding, including changing his director title to CEO and chairman. He issued a directive via text message directing staff to use director on government communications. The new title was reserved for communications with the business community. A hybrid reference was to be used when the communication went to both government and corporate audiences.

He also hired a public relations firm to increase the agency’s “positive impression to the state.” Red White and Blue LLC was hired at a cost of $10,000 per month for work that included “challenge coins,” writing remarks for senior staff including McGrath, note cards and installation of new artwork in conference rooms.

The firm is owned by Ryan Nawrocki, who is a Republican candidate for the House of Delegates on a ticket with incumbent Del. Kathy Szeliga. In addition to the fees paid to the firm, MES paid Nawrocki an additional $18,094 for “program services” related to a leadership conference sponsored by MES.

The report highlights a pattern of what the committee considers abuses of power, including McGrath’s hiring of individuals who previously worked for him at the National Association of Chain Drug Stores.

In those cases, the positions were never publicly posted. McGrath was the only one to interview or hire the hand-picked candidates. McGrath also set their salaries.

In two cases, McGrath created a new position for Sherring and for Michael Harris. The pair stepped into roles as the director of operations and managing director of finance, respectively. Sherring also became a frequent travel partner of McGrath’s, at agency expense.

Sherring, Michael Harris, and Vishal Bhatia were granted greater direct access to McGrath. They also dined with him and were included in travel to destinations including New York and Las Vegas. Dr. Charles Glass, current MES director, told the committee that McGrath told him the hires were “untouchable” — a statement McGrath told the panel he did not remember making.

And, the report noted, while none of them were residents of Maryland, McGrath pushed them to “make sizable contributions” to Hogan’s campaign.

Sherring donated $3,500 in total to Hogan’s campaign. Harris gave the campaign $1,250. Bhatia gave $1,000 to Hogan’s inaugural committee. McGrath himself donated more than $5,200 for Hogan’s re-election. The state caps individual donors at $6,000.

Hogan, who ran a publicly financed campaign in 2014, was limited in the donations he could accept. McGrath, 48 days before the election, gave $4,000 to the state Republican Party.

McGrath became the center of a political firestorm after the disclosure of his severance, which included a package equal to his annual salary and other perks, became public.

McGrath led the quasi-public agency from December 2016 until May 31, 2020, when he resigned to become Hogan’s chief of staff. McGrath took over as Hogan’s top adviser the next day, earning a salary of more than $233,000.

McGrath’s expenses are also called into question by the report from the joint legislative panel, for both the amount as well as the benefit they provided to the agency.

In just three years at the helm of MES, McGrath was reimbursed for nearly $170,000 in expenses. His two immediate predecessors claimed nearly $16,000 and nearly 18,000, respectively. Both led the agency for more than decade each.

McGrath resigned on Aug. 17 after his severance package from MES became public.

McGrath has frequently maintained that Hogan knew of and approved of McGrath’s parting compensation package. Hogan has categorically denied McGrath’s claims.

The report alleges that McGrath asked for the severance package but misled the board, saying he was taking a pay cut to become Hogan’s chief of staff. McGrath did not tell the MES board that he had negotiated a salary with Hogan that was equal to his compensation at MES, according to the report.

Following the MES board’s approval, the report said, McGrath and Sherring attempted to alter the official minutes of the board meeting. A draft of minutes that would be made public as well as those of a closed session “made no reference to the governor’s approval.”

The board ultimately rejected those changes. Sherring was fired once the board learned of his attempt to redact those actions from the public record.

McGrath then found himself at the center of state and federal investigations as well as the joint legislative committee.

He was indicted in October on federal charges of fraudulently obtaining more than $275,000 from the Maryland Environmental Service.

The federal indictment accompanied related state charges in which McGrath is accused of misconduct by a public official, misappropriation and violating the Maryland Wiretap Statute by recording private conversations with state officials without their consent.

Both trials are pending.

The report issued by the joint committee on Thursday is based in part on testimony from months of hearings held last year. The report closely tracks the charges in the indictment, though the committee notes it did not have access to some documents obtained by prosecutors.

Both McGrath and Sherring appeared before the joint legislative committee after being subpoenaed.

Sherring invoked his Fifth Amendment right against self-incrimination almost 100 times during a nearly three-hour appearance. Similarly McGrath invoked his Fifth Amendment rights during his testimony before the legislative panel.

In an interview with the Washington Post, McGrath produced a number of documents he said proved Hogan knew of and approved the severance package.

One of those documents was a memo which McGrath said Hogan approved of the package by checking a box. A Hogan spokesman at the time called the document ” a complete fabrication.”

In its report, the committee noted that McGrath has so far refused to respond to follow up requests that he be interviewed about the statements made in the newspaper article as well as turn over documents he gave to reporters.