Maryland lawmakers and child advocates called Monday for an investigation into regulators' oversight of a troubled group home operator, asking why the state continued to give the company millions in taxpayer dollars despite long-standing financial and regulatory problems.
State Sen. Joan Carter Conway, chairman of a committee that oversees group homes, said she would call a hearing this month to determine why state officials continued to award contracts to LifeLine even after it had filed for bankruptcy reorganization and a state audit found it insolvent.
The company has faced years of problems, including many that state regulators were unaware of, a two-month investigation by The Baltimore Sun showed. This month, a 10-year-old boy died at an apartment that was part of the company's Laurel-area group[ home, even as the state was moving to take children from its care.
"Why would [the Department of Human Resources] award a contract to a company they knew was fiscally insolvent?" Conway, a Baltimore Democrat asked. "We want to see where the policy failed and what happened to the oversight."
Del. Samuel I. Rosenberg, a Baltimore Democrat, said he will propose legislation requiring state auditors to alert the Board of Public Works — a panel that includes the governor and approves all major contracts — when contractors are deemed "fiscally insolvent." The measure, he said, would also require police and fire officials, rather than contractors, to report allegations of abuse to state agencies.
"You shouldn't rely on the alleged violator to tell its fiscal lifeline [the state] that it has been accused of violating the law," Rosenberg said.
The Sun's investigation revealed that state officials were unaware Anne Arundel County police and fire officials had visited LifeLine's apartments numerous times over the past two years for allegations of abuse and injuries; regulators said they should have been notified by the company about the incidents. LifeLine also failed to notify the state that it was seeking to restructure its debt in federal bankruptcy court.
Even before the Baltimore boy's death July 2, LifeLine had struggled for years to provide around-the-clock care for its residents — adults and foster children often confined to a bed or wheelchair by paralysis, cerebral palsy and other disabilities. Founder Randall Martin Jr. is imprisoned for felony arson, the state revoked the company's license for adult care after the death of three residents at its Owings Mills home, and it is burdened by tax liens and other debts.
The state has awarded LifeLine $18 million in contracts since 2010 — when Martin was charged with arson — to care for children, despite reports that warned of financial difficulties and inspections that highlighted shortcomings in care. It wasn't until July 3 — a day after the Damaud Martin died — that all of the children were removed from LifeLine's residences.
"It's so appalling that this occurred," said Joan Little, chief of Maryland Legal Aid's Baltimore City Child Advocacy Unit. "It's almost hard to figure out how you can avoid this from happening when there were so many red flags along the way that should have created a stop, something that would have stopped the state to stop giving contracts to them."
LifeLine officials did not respond to requests for comment.
None of the members of the Board of Public Works — Gov. Martin O'Malley, Comptroller Peter Franchot and Treasurer Nancy K. Kopp — would comment on the LifeLine contracts they approved. Spokespeople for Kopp and Franchot said they are still reviewing LifeLine's situation.
Nina Smith, a spokesman for O'Malley, wrote in an email: "Any loss of life is a tragedy, especially a child. Our paramount concern is the safety of those in our care and the care of regulated facilities. That is why we automatically initiate reviews in a case like this. Once the reviews are complete, we will better understand what happened, and will determine whether ¿there is anything we can do to improve service, delivery and oversight."
State regulators are investigating the circumstances of Damaud's death. The probe will consider whether LifeLine's care was inadequate, but officials have cautioned that it is too early to draw conclusions.
Meanwhile, lawmakers and child advocates are questioning why the state would continue to work with a company known to be in financial trouble since late 2012, when it filed for the Chapter 11 bankruptcy reorganization. The company did not notify state officials of the filing, as required by its contract. When state officials found out, they commissioned an audit.
The audit was delivered to Department of Human Resources secretary Ted Dallas on March 1, 2013, according to documents obtained by the Sun in a public records request. It found that the company was "fiscally insolvent," according to a joint statement from Dallas and Dr. Joshua M. Sharfstein, secretary of the Department of Health and Mental Hygiene.
"Due to LifeLine's financial condition, there is considerable concern that [it] will be able to continue as a going-concern and provide services to children without securing addditional funding," the audit stated.
Still, on March 6, 2013, the Board of Public Works — at the recommendation of Dallas' agency — awarded LifeLine a six-month contract extension. Dallas said at the time that the contract award was part of a process ensuring foster children "are served only by the best providers."
The extension covered ongoing care of children residing at LifeLine while the Department of Human Resources, which oversees foster children, prepared to solicit bids for a longer contract, agency spokesman Brian Schleter wrote in an email. "In the interim, DHR was working with Lifeline on an acceptable plan of correction which they ultimately did deliver and comply with. At the time, there was no indication the company's financial difficulties were compromising resident care."
The company was placed on the state's "Hot List" at the end of March, which meant it could not take on any new children. LifeLine remained on the list until July, after the state had accepted the company's "plan of correction," which included lowering expenses.
But the state was unaware that the Internal Revenue Service had hit the company with a $1.2 million tax lien in June.
In September, the state awarded LifeLine a $4.9 million, nearly three-year contract. LifeLine and three other contractors were invited to apply after no other companies properly bid on the work.