Board members of a quasi-state agency said Tuesday that they were probably misled by their former chief executive into believing that Maryland Gov. Larry Hogan wanted them to approve a large severance package for him as he departed to become the governor’s chief of staff.

Several members of the Maryland Environmental Service board of directors told a special legislative committee that Roy McGrath assured them, days before he assumed his new position, that Hogan was aware of the payout.

Hogan (R) has denied knowledge of the severance or any other payment made to McGrath.

“Had he not assured us that [Hogan’s office] had approved this, we would not have made the severance payment,” said Joseph F. Snee Jr., who chairs the human resources committee for the board of the Maryland Environmental Service. “We took Mr. McGrath at his word, and that’s the reason why we acted the way we did.”

Snee spoke during a hearing of the Joint Committee on Fair Practices and State Personnel Oversight that focused on a nearly quarter-million-dollar payout that was given to McGrath this spring.

McGrath — who resigned as Hogan’s chief of staff last week — was invited but did not appear before the legislative panel Tuesday. He did not respond to a request for comment Tuesday.

“There are outstanding questions for Mr. McGrath,” said Sen. Clarence K. Lam (D-Howard), a co-chairman of the committee. “It is concerning that the options are that Mr. McGrath either misled the entire board or the statement by the governor was inaccurate. It is the intention of the committee to get to the bottom of this.”

Hogan has also launched an inquiry. Earlier Tuesday, the governor announced that he was ordering an audit of the Maryland Environmental Service and would work with the legislature to increase oversight and tighten the rules governing the agency.

“It has recently come to light that the Maryland Environmental Service has a long-standing practice of paying large bonuses, expense reimbursements, and severance packages to its top executives,” the governor said. “This is something no normal state-operated agency should or would ever grant.”

Hogan said Charlie Glass, the acting chief executive of the Maryland Environmental Service, “has committed to conducting a top-to-bottom review of this entity’s operations, and has already taken steps to begin to address many of these structural problems.”

“To be clear, I did not approve, recommend, or have any involvement whatsoever in any of these decisions made by the board of directors of MES with respect to the former director Roy McGrath or any other individual,” Hogan’s statement said.

Lawmakers raised a number of pointed questions about $50,000 in expenses paid to McGrath, including for trips to Naples, Miami, Israel and Las Vegas.

At least one board member said he had reservations about the severance payout but felt pressure to approve it. “We were caught between a rock and hard place,” said William Addison, who serves on the board. “It seemed as though we had no choice.”

Addison told lawmakers that the board members acted in what they thought was the best interest of the agency. “You’ve got somebody who is going to a position that is working for the governor, who will control a lot of what the state does,” he said. “It’s a powerful position that will have impact on MES.”

In an email Monday, McGrath said it was “customary for departing CEOs” to receive severance payment equivalent to about one year’s salary.

On Tuesday, board members said severance packages have been given to past executives who were dismissed from the agency or retiring after a long tenure. They had no recollection of a payment given to an executive who was making a lateral move to another government entity.

Del. Erek L. Barron (D-Prince George’s), a co-chairman of the committee, said the three-hour hearing proved that “this is not normal . . . there is nothing customary about it.”

Emails from within the agency that were obtained by The Washington Post showed that McGrath received employee incentive payments of $117,932 between September 2017 and September 2019. Other top executives received similar incentive payments, including Beth Wojton, who received about $206,000 from 2011 to 2018, and Jim Harkins, who got nearly $147,000 between 2011 and 2015.

Documents also show that McGrath purchased a $50,935 Chevrolet Suburban for himself, including a $3,000 “luxury package.” He spent $29,000 remodeling the agency’s break room and executive board room, work that included custom quartz countertops, $4,000 in furniture for the “executive waiting area” and $30,000 to remodel the agency’s fitness center.

McGrath served as chief executive and chairman of the agency’s board of directors from December 2016 until May, when he was appointed as Hogan’s chief of staff. He resigned from that post Aug. 17, a few days after the presiding officers of the General Assembly called for a special hearing to look into the severance payment.

Hogan said in a statement last week that he accepted McGrath’s resignation “with regret.”

“I recognize that this was a difficult decision for Roy, but I understand and respect his reasons for making this decision,” the governor said. “I have always known Roy to be someone of the highest character, and I wish him well in his future endeavors.”

The Maryland Environmental Service is a nonprofit business unit of the state that was established in 1970. It handles environmental and public-works projects, including dredging operations and building, designing and operating landfills.

State lawmakers have noted that the bulk of the agency’s contracts are with state and local governments, which means it is largely publicly funded. The agency also is subject to state audits by the Department of Legislative Services and has an assistant attorney general that serves as its counsel. Several members of the board, along with the executive director, are appointed by the governor and confirmed by the Senate.

McGrath maintains that the company — a nonprofit, public corporation — is separate from the state. He said it operates not much differently from a private-sector business.

Glass told the panel Tuesday that he is a state employee and does not view the agency as a private-sector company.

McGrath has maintained that there was nothing wrong with the financial package, which included a $5,250 tuition reimbursement. He said the entire package, which he called a “well-earned award,” totaled $238,250.

Erin Cox contributed to this report.