Purchases by Public Safety investigated

Supplier known to sell goods at inflated prices

December 18, 2004|By Michael Dresser | Michael Dresser,SUN STAFF

A fourth Maryland agency has become entangled in a criminal investigation of government procurement practices involving the purchase of merchandise at exorbitant prices.

The Department of Public Safety and Correctional Services, which operates Maryland's prison and parole and probation system, disclosed the "open and active" investigation by the state attorney general's office yesterday in response to a public information request from The Sun.

Department spokesman Mark Vernarelli said the attorney general is looking into the department's purchases of at least $17,000 in goods from a company known for selling products at inflated prices. Stone Cold Chemicals is the firm that is involved in a procurement scandal that led to the firing of five employees at the State Highway Administration. The attorney general took steps this week to bar the company from doing further business with Maryland state government.

Three units of state government were already known to have come under criminal investigation as a result of a legislative audit that uncovered purchases of merchandise at prices as high as 28 times the retail cost. The others are the SHA, Morgan State University and Springfield Hospital Center.

Stone Cold's top executives have pleaded guilty in Florida to racketeering charges as part of a scheme in which they bribed public officials to buy their products at grossly inflated prices.

Vernarelli said that in July 2003, the department's Internal Investigative Unit received a tip that an employee at a prerelease facility in Baltimore may have made "unauthorized and improper" purchases that violated state procurement rules.

The spokesman said that as a result of the investigation, the employee was fired July 15, 2003. He said he could not identify the former employee under state personnel law.

Vernarelli said the department turned over its information to the attorney general's office that fall. He said the purchases took place between the fall of 2002 and the spring of 2003 and involved purchases totaling about $17,000 from Stone Cold.

There is no indication that anyone else in the department was involved, Vernarelli said.

Public Safety Secretary Mary Ann Saar said in a statement: "This swift action speaks to the excellent work of the IIU, the Division of Correction, and the Procurement Office. All worked quickly and thoroughly to stay on top of this serious situation."

The quick firing by the Public Safety Department contrasts with the handling of similar allegations at SHA, where officials kept employees suspected of making improper purchases on the job until this week.

SHA Administrator Neil J. Pedersen fired five employees Thursday in connection with the purchases, and the agency was considering yesterday what to do about four others who were stripped of their state credit cards this week.

Transportation Secretary Robert L. Flanagan said the department waited to take action because information about the SHA employees' actions was not released to the agency by the attorney general's office until Wednesday.

Jamie St. Onge, a spokeswoman for the attorney general's office, would neither confirm nor deny that an investigation is taking place at the Public Safety Department. St. Onge did disclose that the attorney general filed a complaint with the Board of Public Works on Tuesday seeking to bar Stone Cold and four of its board members from doing business with the state.

In the debarment petition, the attorney general says Stone Cold's business plan was to cultivate personal relationships with local procurement officers in order to sell industrial chemicals and cleaners at inflated prices.

According to the attorney general, Stone Cold salespeople would offer the purchasing officials gift cards from such chains as Home Depot, Outback Steak House and Red Lobster in amounts of $30 to $100.

The complaint says that once government workers accepted such gifts, Stone Cold sales representatives would pressure them to buy overpriced goods by threatening to tell their supervisors and law enforcement officials.

The petition notes that the four Stone Cold board members have each pleaded guilty to multiple counts in a Florida racketeering indictment. According to the complaint, Maryland highway workers bought about $400,000 in merchandise from the company from 1997 to 2003.

Involved company officials included Lloyd G. Barnard, the company's chief financial officer, who agreed to a two-year sentence and a $20,000 fine. Chief Executive Officer Marilyn Meek, Barnard's wife, agreed to 10 years of supervised probation and a $20,000 fine. Board members Thomas Stone and Pamela McDaniel face sentencing after a court hearing.

Stone Cold has already been barred from doing business with the state governments of Georgia and Florida.

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