Audit finds ethics violations and contracting problems at highway agency

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By Megan Poinski

State Highway Administration logoSome State Highway Administration employees violated ethics rules, failed to fully review contract bids and shifted government funds among contracts without authorization, according to an investigation by legislative auditors released Friday. Contractors also hired state employees shortly after they had approved contracts for the companies.

The investigation was the result of two anonymous tips left with the office’s fraud investigators, said Legislative Auditor Bruce Myers. The findings of the audit have been turned over to the Attorney General’s Office for possible prosecution.

Both of the tips were about former senior staff members in the State Highway Administration’s Office of Construction, whom the auditors did not name. The audit found skipped checks and balances in the contracting process.

“These processes and ethics laws are in place to be more accountable to the taxpayers,” Myers said.

David Paulson, a spokesman for Attorney General Doug Gansler, said the audit will be carefully reviewed.

Sporting sponsorship

In one of the complaints, a management employee solicited money from firms working with his or her division to sponsor a charity sporting event, violating ethics policies.

This SHA employee also had an out-of-state business interest, and seven out of the eight companies that sponsored a 2009 charity sporting event organized by the employee’s company worked with the employee’s division.

Five of those companies had ongoing contracts with SHA, two of the contracts worth $16 million. According to state ethics law, employees cannot accept anything of value from entities that are doing business with their business units.

The employee had also not consistently disclosed involvement with the outside business on annual financial disclosure forms filed with the State Ethics Office, the audit states.

Maryland Transportation Secretary Beverley Swaim-Staley said this employee resigned on May 2. Because it is a personnel matter, she could not say if it was related to the audit.

Revolving door

Another former SHA senior employee worked on awarding a $16 million contract for construction management and inspection. After the procurement process was finished, he or she retired from SHA. Within 12 days, the retired employee was hired as an executive by the company that got the $16 million contract.

According to state ethics law, someone who worked on a contract should not benefit from it.  Additionally, government employees should not work for private businesses that work with the state for a year after they leave public service.

Auditors asked this company for a list of its employees, and counted 34 other former SHA staff members. As a state employee, one of them had evaluated a contract awarded to the company for SHA. This employee started working for the company nine months after leaving state service.

Due diligence?

Auditors also looked at both $16 million contracts through SHA. They found several problems in the vetting of all of the bids. These include:

·      Only four of 14 categories were considered in order to award the contract.
·      Wide disparities in rankings were not explained.
·      Rankings were not properly signed off on.
·      Employees who served on the selection committee came from the department that was going to use the contract.

Also, the audit states that funds were diverted from contracts to be used on other over-budget projects, or for expenses that were not included in the scope of work that had been approved by the Board of Public Works. According to state law, the board must approve changes or fund shifts over $50,000.

Happened before at SHA

Myers said that while contract fraud like this is rare, it has happened at SHA. In fiscal 2005, he said, anonymous tips to his office led to another contracting investigation at that agency.

Myers said that the Transportation Department, which oversees the SHA, has been cooperating with the investigation.

Swaim-Staley said that she was shocked to find out what was going on in the agency. To try to prevent any further contract problems, she said, there are some new checks and balances going into effect. All consulting firms will have to submit lists of their employees on a quarterly basis, and those with employees who had recently left state service could find their contracts terminated.

“This will not be tolerated,” Swaim-Staley said. “We have rules for a reason.”

About The Author

Len Lazarick

Len Lazarick was the founding editor and publisher of and is currently the president of its nonprofit corporation and chairman of its board He was formerly the State House bureau chief of the daily Baltimore Examiner from its start in April 2006 to its demise in February 2009. He was a copy editor on the national desk of the Washington Post for eight years before that, and has spent decades covering Maryland politics and government.

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