The Maryland Environmental Service — whose former director is under scrutiny for a six-figure payout as he left to head Gov. Larry Hogan’s staff — has a history of paying large severances and bonuses to executives.
Former director Roy McGrath received an amount equal to his annual salary of about $233,000 and other perks when he left this summer. But he also regularly received tens of thousands of dollars in bonuses at the agency, which is funded by public money from sources such as contracts with local governments and federal grants.
McGrath told The Baltimore Sun on Friday that he received a 15% bonus last year and expected his next bonus to be 20%. A 15% bonus is more than $35,000 and a 20% bonus would have been nearly $47,000.
State legislators have raised questions about whether McGrath’s departing payout was appropriate for a public servant, particularly during an economic crisis, and House Speaker Adrienne A. Jones has said he ought to return it.
But McGrath said again that he sees the agency as functioning like a business and the rewards as routine. The bonuses, he said, “were usual and customary, based on performance.” Other MES executives received them, as well, he said.
Lawmakers investigating the payment and McGrath’s leadership say such statements only raise more questions.
But McGrath wrote a letter Thursday to The Sun to defend his leadership and the payout, and he answered some follow-up questions via email Friday.
The Maryland Environmental Service is an independent state agency created by the General Assembly that carries out environmental and public works projects. It does not receive funding directly from the state budget. But its customers primarily include local governments and the state government, which combined account for 95% of the service’s revenues.
McGrath wrote in the letter that because MES is structured differently than other state agencies, that allows for practices such as severance pay for executives.
“MES, as it is constructed today, is essentially a business,” McGrath wrote.
McGrath also wrote that the severance payout was designed, in part, to make up for the fact that he would have missed out on the possibility of significant bonuses had he stayed at the environmental service.
“In my CEO capacity, leaving MES to work for the state meant I would lose approximately $120,000 in anticipated, future, bonus earnings at MES,” McGrath wrote. “The severance helped to offset this expected loss and provided an additional, well-earned performance award.”
According to McGrath and MES officials, several executives received varying levels of severance when retiring over the last 15 years. McGrath is the only one during that time who received a severance when resigning to take another state-level public service job.
McGrath’s predecessor, John O’Neill, who was acting director in 2016 and 2017, received a payment covering his final bonus and unused leave time when he retired, according to MES spokesman Dan Faoro.
Jim Harkins, who retired in 2016 after more than a decade leading the agency, received severance of $256,746, representing one year’s salary, Faoro said.
John Sparkman, who led the agency for two years before retiring in 2005, also was paid a severance of a year’s salary, Faoro said.
Beth Wojton, who retired this summer as deputy director after 32 years at MES, was granted a severance of $1,000 for each year she worked there. She also was paid her annual bonus and unused leave and allowed to keep a work-issued cellphone and laptop, according to Faoro and board minutes.
“In other words, this was a standard business practice for certain executives who had earned it, typically through performance,” McGrath wrote.
In addition to the severances paid to departing executives, MES has a policy of paying bonuses to executives that dates to 1999.
Each year, the board sets goals for the agency and sets aside a pool of money for bonuses. If goals are met, the top executives can receive bonuses, typically up to 15% of their pay. Occasionally, the board has approved 20% bonuses, Faoro said. The executive bonuses are typically paid on Nov. 30.
All bonuses and severances are approved by the MES board of directors. Six of the board members, including the MES director as its chair, are nominated by the governor, appointments that are subject to the approval of the state Senate. The MES director appoints the other three members.
Joseph F. Snee Jr., a Hogan appointee who chairs the board’s human resources committee, has not responded to requests for comment. He made the proposal to give McGrath a severance payment, according to board minutes for May 28. McGrath was not present for the discussion or the vote.
McGrath said in his letter that the decision to grant him severance might be a different one now.
“The fiscal circumstances in mid-May were certainly not the same as today. It was shortly into the pandemic, and the full impact was only beginning to unfold,” he wrote. “If the same decision were being made today, with the knowledge we now have, it may have been handled differently.”
Maryland’s unemployment rate for May was 10%. The state had been under a stay-at-home order from March 30 to May 15, with stores, restaurants and churches closed and most manufacturing shut down. The measures taken to restrict the spread of the disease severely depressed the state’s economy.
Barron, the state delegate, said that no matter how many MES executives have received severance payments, it’s worth investigating.
“I do keep hearing that other people have done this or gotten payments, and whether this is wrong or not,” Barron said. “Just because everyone’s doing it, doesn’t make it right.”
Sen. Clarence Lam, a Democrat representing Howard and Baltimore counties, will co-chair Tuesday’s hearing.
McGrath has been invited to appear to answer questions; he did not respond to a question Friday about whether he would.
“If Mr. McGrath can send a letter to The Baltimore Sun, I hope he can show up to our committee hearing,” Lam said.
In his letter, McGrath also pointed to bonuses paid to workers at MES. Through a program called BEST — Building Excellence and Success Together — each of the agency’s more than 800 employees was given a $3,000 bonus in March, at a total cost of more than $2 million.
At the time, the agency touted that it was giving out the bonuses earlier than usual in light of the pandemic. The payments are typically made in the fall.
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“We are taking this proactive, unprecedented step to help provide some added peace of mind for our teammates,” McGrath said in a news release at the time.
Maryland agencies funded directly by the state budget must follow personnel law that limits incentive payments to workers to $300 in payment or gifts, or up to three extra days of leave.
As part of McGrath’s departure, he also left a seat on the University of Maryland Medical System’s board of directors. The seat represents the governor on the board; it will be filled by Hogan’s acting chief of staff, Keiffer Mitchell.
In his letter to The Sun, McGrath wrote he was not asked to leave his job as Hogan’s chief of staff.
“To the contrary,” he wrote, “I had the full support of the team to remain.”