ANNAPOLIS, MD—In a letter to General Assembly leaders today, Governor Larry Hogan called for bipartisan systemic reforms to the governance structure, oversight, and management of the Maryland Environmental Service (MES). Recent developments have brought to light serious issues with regards to the lack of financial oversight and controls in place at the corporation, including concerns with how MES handles expense reimbursements, salaries, and bonuses, and their longstanding practice of paying generous severance packages to departing executive directors.

The governor also announced that retired Federal Judge Frederic N. Smalkin has been named to the MES board as board secretary. Judge Smalkin served as Chief Judge of the United States District Court for the District of Maryland.

Judge Smalkin’s appointment is the latest in a series of immediate actions that have been taken to address problems at MES, including a top-to-bottom review of MES operations and the removal of board members and executive staff.

“Our bipartisan focus must be on addressing the systemic problems at the Maryland Environmental Service that require substantial legislative changes to its governance structure, oversight, and management,” said Governor Hogan. “To begin providing immediate accountability, retired Federal Judge Frederic Smalkin has been named to the corporation’s Board of Directors. Judge Smalkin is a highly respected jurist with a long record of integrity, and I want to thank him for agreeing to serve on the board at this critical time.”
Proposed Systemic Reforms

Governor Hogan proposed the following potential reforms to legislative leaders today:

  1. Substantial changes to governing structure and oversight capability. The structure established by the General Assembly makes the executive director the chair of the board, and gives the chair the ability to appoint the vice chair, treasurer, and secretary. The executive director, the deputy director, and other staff should not serve on the oversight board, and the executive director should not be able to handpick board members. The board should also operate under strict ethics rules and requirements similar to agencies in state government. Personnel policies and protocols for senior staff, including for compensation and bonuses, should be brought into line with those in place at state agencies. State budget officials should be empowered to conduct regular audits. The state treasurer and budget secretary could potentially be added to the board to provide an additional layer of state oversight.
  2. Restore MES as a state agency. MES began as a part of the Maryland Department of Natural Resources. When the General Assembly recreated MES as a quasi-public corporation in 1993, it gave MES broad flexibility, including exemptions from key provisions of state personnel, ethics and procurement laws. If MES cannot be reformed under its existing structure to ensure it will use these privileges responsibly, it could be pulled back into state government as a principal department of the Executive Branch, or returned to be a division within DNR.
  3. Move to sell MES to the private sector.  One of the principles that apparently drove the General Assembly’s decision to make MES a quasi-public entity was a belief that MES needed the flexibility of a private-sector entity to effectively perform its mission. It currently functions as a private entity, but it is a corporation that serves as an instrument of the state. Instead, MES could be spun off to the private sector. Such a transaction would allow the State to monetize the economic value that has been created in MES, and allow MES to fully function with the flexibility of a private sector entity.

Biography of the Honorable Frederic N. Smalkin:

District Judge Frederic N. Smalkin was born in Baltimore, Maryland, on May 21, 1946. Judge Smalkin attended the McDonogh School from 1952 to 1964. He attended Johns Hopkins University, receiving his B.A. degree from that institution, Phi Beta Kappa and Distinguished Military Graduate, in 1968. He attended law school at the University of Maryland, obtaining his law degree in 1971. On graduation from the University of Maryland Law School, Judge Smalkin was made a member of the Order of the Coif.

Judge Smalkin was commissioned as a second lieutenant, Regular Army, Ordnance Corps, in 1968, and was discharged in 1976 as a captain. After various military assignments, he acted as Assistant to the General Counsel of the Army and Recorder of the Army Contract Adjustment Board in the Pentagon from 1974-76. Judge Smalkin received several decorations while in the Army, including the Meritorious Service Medal with one oak leaf cluster. Judge Smalkin now serves in the U.S. Air Force Auxiliary Civil Air Patrol (CAP) as a lieutenant colonel, where he has held a number of command and staff positions. His CAP decorations include the Distinguished Service Medal.
Turning to Judge Smalkin’s legal career, he was a law clerk to the Honorable Edward S. Northrop, then Chief Judge of the United States District Court for the District of Maryland, from 1971-72. After leaving the military in 1976, Judge Smalkin entered private practice for a short time, before being appointed as a United States Magistrate (now Magistrate Judge) for the District of Maryland, concentrating on expanding the role of Magistrates in civil litigation. He served as Magistrate from 1976 to 1986, when he was nominated by President Reagan, on August 15, 1986, to serve as United States District Judge in the District of Maryland. Confirmed by the Senate on September 25, 1986, Judge Smalkin was commissioned on September 26, 1986, taking office on December 1, 1986. Judge Smalkin served as Chief Judge of the United States District Court for the District of Maryland from October 20, 2001 to January 5, 2003, assuming senior status on January 8, 2003. Judge Smalkin retired from the U.S. District Court for the District of Maryland on September 1, 2011.
Admitted to the Maryland Bar in 1972, Judge Smalkin is also a member of the Federal Bar Association and the bars of the U.S. District Court for Maryland, U.S. Court of Appeals for the Fourth Circuit, U.S. Supreme Court, and the Court of Military Appeals. Other memberships include the 14 West Hamilton Street Club. Judge Smalkin is a former faculty member of the Maryland Institute for the Continuing Professional Education of Lawyers. He has also taught at the Trial Advocacy Institute at the University of Virginia. Currently, he is a lecturer at the University of Maryland School of Law, where he has been teaching commercial law since 1978.

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