United States v. Fitzgerald, CRIMINAL ACTION NO. 1:17-cr-00506

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
Writing for the CourtTHOMAS E. JOHNSTON, CHIEF JUDGE
PartiesUNITED STATES OF AMERICA, Plaintiff, v. ISABEL FITZGERALD, et al., Defendants.
Decision Date21 January 2021
Docket NumberCRIMINAL ACTION NO. 1:17-cr-00506

UNITED STATES OF AMERICA, Plaintiff,
v.
ISABEL FITZGERALD, et al., Defendants.

CRIMINAL ACTION NO. 1:17-cr-00506

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

January 21, 2021


MEMORANDUM OPINION AND ORDER

Pending before the Court are Defendant Isabel Fitzgerald's ("Fitzgerald") Motion to Dismiss Counts I, II, and III, (ECF Nos. 55, 56); Supplemental Motion to Dismiss Counts I, II, and III, (ECF No. 113); and Motion to Dismiss Count VII, (ECF No. 114). Also pending before the Court are Defendant Steven Maudlin's ("Maudlin") Motion to Dismiss Counts I, IV, and VI, (ECF No. 59); and Supplemental Motion to Dismiss Counts I, IV, and VI, (ECF No. 119). Further pending before the Court are Defendant James Pangallo's ("Pangallo") Motion to Dismiss Counts I and IV, (ECF No. 61); and Supplemental Motion to Dismiss Count I and IV, (ECF No. 118). Next, pending before the Court are Defendant Kenneth Coffland's ("Coffland") Motion to Adopt Motions, [ECF Nos. 55, 56], by Co-Defendant Isabel Fitzgerald, (ECF No. 58); Motion to Dismiss Count VII, (ECF No. 115); Motion to Adopt Motions, [ECF No. 113], Filed by Co-Defendant Isabel Fitzgerald, (ECF No. 117). Finally, pending before the Court is Defendants Fitzgerald and Maudlin's Joint Motion to Sever Counts V and VI. (ECF No. 57.) For the reasons more fully discussed below, Defendants' motions are DENIED.

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I. BACKGROUND

This criminal action arises out of an alleged conspiracy by Defendants Fitzgerald, Maudlin, Pangallo, and Coffland (collectively "Defendants") to enrich themselves through various contracts with the state of Maryland Department of Human Resources and private entities owned by the Defendants. This criminal action was initiated when a grand jury returned a six-count indictment on September 27, 2017, charging all four named Defendants with various crimes. (ECF No. 1.) On December 27, 2018, a grand jury returned a superseding indictment that charged Defendants with seven criminal counts. (ECF No. 75-1.) Because the Defendants have challenged the legal sufficiency of the Superseding Indictment, the Court will next recount the allegations made by the grand jury. Given the nature of the alleged scheme and the approximate time periods, the Court will review the allegations in a similar format as presented in the Superseding Indictment.

A. Introduction

The following allegations are drawn from the Superseding Indictment. The Maryland Department of Human Services, formerly known as the Maryland Department of Human Resources ("DHR"), is an agency of the state of Maryland that served as the primary social service provider for each of Maryland's 24 counties. (ECF No. 75-1 at ¶ 1.) The Secretary of DHR is the head of the agency and served as a member of the Governor of Maryland's cabinet. (Id.) In every fiscal year from 2011 through 2014, DHR received in excess of $10,000 in benefits under a Federal program or programs involving a grant, contract, subsidy, loan, guarantee, insurance, or other Federal assistance. (Id.) DHR's Office of Technology for Human Services ("OTHS") was responsible for reviewing and implementing DHR's technology plans and projects, including budgets, staff, and purchasing. (Id. at ¶ 2.) OTHS had an annual budget of approximately $70 million. (Id.)

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The Maryland Department of Information Technology ("DIT") was an agency of the state of Maryland that was created to consolidate state information technology functions and policies into one department. (Id. at ¶ 3.) The Secretary of DIT, also known as the State Chief Information Officer ("CIO"), was the head of DIT and a member of the Governor's cabinet. (Id.) The CIO also oversaw and exercised supervision over the activities of the chief information officers of the various state agencies. (Id.)

From February 2007 to October 14, 2011, Fitzgerald served as the Chief Information Officer of DHR and oversaw the day-to-day operations of OTHS. (Id. at ¶ 4(a).) From November 2011 to December 2012, Fitzgerald entered the private sector and served as the Executive Consultant to the Secretary of DHR. (Id. at ¶ 4(b).) There, Fitzgerald continued to exercise authority and managerial discretion over DHR matters, including the supervision of the acting CIO for DHR, who was previously Fitzgerald's deputy. (Id.) Fitzgerald was paid through her company, Aeon Consulting and Technical Services, Inc. ("Aeon"), which she incorporated in the state of Maryland while serving as the CIO for DHR. (Id. at ¶¶ 4(b), 18.) Then, from December 5, 2012, to August 25, 2013, Fitzgerald served as the Deputy Secretary of Operations for DHR. (Id. at ¶ 4(c).) There, Fitzgerald reported directly to the Secretary of DHR and oversaw not only OTHS but numerous other offices within DHR. (Id.) Finally, from August 26, 2013, to December 31, 2014, Fitzgerald served as the Secretary of DIT, where she supervised the activities of the CIO of DHR. (Id. at ¶4(d).)

Sometime in 2008, DHR awarded a division of ACS/Xerox1 two prime contracts: The Outsourcing of Hosting Services Contract (the "Hosting Contract") and the Application

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Maintenance/Operations and Enhancement Services Contract (the "Applications Contract"). (Id. at ¶ 5.) The Hosting Contract had a term of five years and eight months, with the possibility of a five-year extension, and a potential worth of $129 million. (Id. at ¶ 6.) The Applications Contract had a term of five years and six months, with two separate two-year extension options, and a potential worth of $229 million. (Id. at ¶ 6.) The Applications Contract was further divided into four discrete subparts: The Client Automated Resource and Eligibility System ("CARES"); the Child Support Enforcement System ("CSES"); the Maryland Children's Electronic Social Services Information Exchange ("CHESSIE"); and the DHR Cottage Applications ("Cottage Apps"). (Id. at ¶ 8.)

Defendant Coffland, a resident of Maryland and Texas, was an employee of Xerox, where he worked on the Hosting Contract and, at one point, served in the position of Hosting Director. (Id. at ¶ 9.) Then, beginning in at least 2010, Coffland and Fitzgerald "developed a close personal relationship." (Id. at ¶ 10.) In approximately September 2011, Coffland left his employment with Xerox to pursue work as an independent contractor through another company. (Id. at ¶ 11.) This other company also worked on a contract with OTHS. (Id.) In about June 2013, Coffland returned to Xerox as an independent contractor, where he held the position of Hosting Director. (Id. at ¶ 12.) He was compensated with an annual salary and bonuses, and his total compensation was more than double what he earned in the position previously. (Id.)

The Consultants Consortium, Inc. ("TCC") was a small company incorporated in Indiana in 2007. (Id. at ¶ 13.) TCC provided information technology services as a subcontractor in support of larger companies which held prime contracts. (Id.) As of September 2011, TCC employed fewer than 100 persons. (Id.) Defendant Maudlin, a resident of Indiana, owned 34% of TCC's shares—the largest single ownership—and served as its Chief Executive Officer. (Id. at 14.) Defendant

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Pangallo, also a resident of Indiana, owned 33% of TCC's shares and, at various times, served as its Chief Financial Officer. (Id. at ¶ 15.)

B. The Conspiracy and Its Objects, Purpose, Manner and Means

The Superseding Indictment alleges that Defendants knowingly conspired with each other to commit offenses against the United States. (Id. at ¶ 16.) Specifically, the Superseding Indictment alleges that Fitzgerald, as an agent of the government of the State of Maryland, corruptly solicited benefits for herself and Coffland from Maudlin and Pangallo. (Id. at ¶ 16(a).) Further, the superseding indictment alleges that Maudlin and Pangallo, with the intent to influence and reward Fitzgerald, gave both Fitzgerald and Coffland things of value. (Id. at ¶ 16(b).) The Superseding Indictment alleges that the purpose of the conspiracy was for Fitzgerald and Coffland to receive a "stream of benefits" from Maudlin, Pangallo, and TCC, in exchange for Fitzgerald's "performance of favorable official acts" for TCC's benefit. (Id. at ¶ 17.)

As a part of the conspiracy, Fitzgerald is alleged to have incorporated Aeon while she served as the CIO for DHR. (Id. at ¶ 18.) While serving as the Executive Consultant to the Secretary of DHR, TCC agreed to pay Aeon for providing and supervising work of an unnamed person (Person 1) on the Cottage Applications portion of the Applications Contract. (Id. at ¶ 19.) Person 1 was already under TCC's supervision on the Applications Contract and continued to be supervised by TCC employees. (Id.) TCC paid Aeon $20 per hour worked by Person 1. (Id.) The Superseding Indictment alleges further that, during this same period, TCC also agreed to pay Aeon for providing and supervising the work of another unnamed person ("Person 2"). (Id. at ¶ 20.) Person 2 was working under the supervision of TCC on a contract in Indiana and continued to be supervised by TCC thereafter. (Id.) TCC agreed to pay Aeon $10 per hour worked by Person 2. (Id.)

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During this same period, TCC allegedly agreed to pay Fitzgerald one-third of TCC's profits on certain subcontracts with DHR's prime contractor, Xerox, which had been obtained as a result of Fitzgerald's "influence and control" over Xerox. (Id. at ¶ 21.) To disguise these payments, they were paid to Fitzgerald pursuant to a consulting agreement between Aeon and TCC. (Id. at ¶ 22.)

The Superseding Indictment alleges next that around November 16, 2012, Defendant Coffland incorporated Blue Northern Consulting, LLC ("Blue Northern"). (Id. at ¶ 23.) Three days later, on November 19, and shortly before Fitzgerald began her position as the Deputy Secretary of Operations at DHR, she directed Defendant Maudlin to transfer the Aeon contract covering the work of Person 1 to Coffland through Blue Northern. (Id. at ¶ 24.) Then, beginning in 2012,...

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