Maryland Gov. Larry Hogan said Thursday that he was “concerned” when he first learned that his new top aide had accepted a six-figure severance from his last job in public service.
Hogan said he talked three weeks ago with his chief of staff, Roy McGrath, and McGrath told him the details of the $238,000 payout from the Maryland Environmental Service as he left the agency. But Hogan took no public action until four days after The Baltimore Sun made the severance public Aug. 13.
In response to questions at a State House news conference in Annapolis, the Republican governor said he talked with McGrath after his top lawyer told him there was “concerning news” about the terms of McGrath’s departure from the environmental service.
McGrath negotiated the severance in May, when he left the environmental service after 3½ years to lead Hogan’s team.
State lawmakers are investigating the practices of severance and bonuses at MES, an independent state agency that carries out environmental and public works projects.
The service’s customers are almost entirely local governments and state agencies that need help with tasks such as operating sewage plants and landfills, dredging waterways and monitoring the environment for contaminants. Local and state government agencies provide 95% of the service’s revenue.
The MES board of directors approved McGrath’s severance, but lawmakers have questioned whether it was appropriate to reward to a public servant voluntarily leaving for another job in state service in the midst of the coronavirus pandemic and an economic downturn.
Four days after The Sun first reported on McGrath’s severance, he resigned from the governor’s office. Lawmakers have launched an investigation and Hogan ordered his budget office to conduct an audit.
During a legislative oversight hearing Tuesday, three members of the MES board testified they had reservations about McGrath’s requested severance package. But they said they signed off on it after McGrath assured them Hogan supported the payout.
McGrath has defended the severance and bonuses as customary and well-earned at an agency that he described as operating much like a private business.
Asked Thursday by email for comment, McGrath responded: “I stand 100% by all statements I have made on this matter.”
The day of the hearing, Hogan issued a statement saying he’d ordered the audit and had no role in McGrath’s payout. He reiterated Thursday that he didn’t sign off on a deal.
Back when Hogan offered McGrath the chief of staff job in May, McGrath told the governor the move would be “a big cut in pay,” Hogan said at the news conference.
McGrath’s salary at the environmental service for the fiscal year that ended June 30 was $233,647. His predecessor as Hogan’s chief of staff, Matthew A. Clark, made $205,000 annually, according to state records.
Hogan said McGrath told him when he offered him the job that he had to “figure out” his expected bonus and other issues with MES before accepting the position.
“I knew nothing about the details of what his discussions were with his current employer or the board members of MES,” Hogan said. “I mean, I didn’t discuss it or approve it or know anything about the amounts of it or anything.”
Hogan referred to MES as an agency not under his control.
“It’s not really under our purview,” he said. “I don’t know much of what goes on over there.”
However, the governor appoints the MES director and five members of the nine-person board of directors. The director serves as chair of the board and appoints three other members.
Hogan’s attempt to distance himself from MES concerned Del. Erek Barron, who co-chairs the General Assembly committee investigating the matter.
“Given the governor’s control of MES and the board’s reliance on his opinion, it certainly is a state agency one would think he’d be more familiar with,” said Barron, a Prince George’s County Democrat.
The governor also said Thursday that McGrath had been his chief of staff for about 60 days. McGrath’s tenure actually ran 11 weeks.
The governor said his chief counsel, Michael Pedone, made him aware of “questions” about McGrath’s severance roughly three weeks ago, which would be one week before The Sun’s report.
“I called Mr. McGrath in and said, ’What’s this all about?’” Hogan said.
McGrath responded that it was a “normal practice” for departing MES directors to receive severance, the governor recalled.
Hogan said he was surprised to learn about the practice and the amount of the payout, using the word, “Wow.” He also said: “I was concerned when I heard some of it.”
“As soon as we heard some of the details, we addressed it with him,” Hogan said.
The governor’s office and MES declined to comment for The Sun’s initial report. But McGrath posted the first of two statements the next night on social media, seeking to defend himself and MES. Three days after that, the governor’s office announced McGrath’s resignation.
“As soon as further concerning things came out, he resigned immediately,” Hogan said Thursday.
The Sun then reported that McGrath and other top officials at MES earned bonuses worth up to 20% of their salary. The bonuses were approved by the board of directors.
The newspaper also reported that after departing MES, McGrath was paid more than $55,000 in expense reimbursements, including extensive travel and hotel stays, some of them dating back to January 2019.
Lawmakers remain unsatisfied with the answers they’ve gotten. The Joint Committee on Fair Practices and State Personnel Oversight, chaired by Barron and Democratic Sen. Clarence Lam of Howard County, has scheduled a second hearing on the matter for next week.
Lam said he found the governor’s remarks this week in conflict with one another. Hogan’s Tuesday statement said he “did not approve, recommend, or have any involvement whatsoever” in the severance decision.
Now, Lam said, the governor has acknowledged he was aware, at least broadly, of a payment coming to McGrath, Lam said.
“I’m not understanding why the governor can’t get his story straight,” Lam said. “It’s a straightforward question: Was the governor aware of a severance package for Mr. McGrath or not?”
Given the public health and economic stressors on the state in May, Lam contends Hogan should have seen a “red flag” when McGrath started talking about bonuses and finances, and investigated further.