Michigan economic development chief 'retired' with hefty severance pay

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Craig Mauger, The Detroit News
·9 min read
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Mar. 9—LANSING — Gov. Gretchen Whitmer's office described Jeff Mason's departure as CEO of the Michigan Economic Development Corp. last year as a retirement, but newly released state records also show he left with $128,500 in severance pay.

The "mutual retirement agreement" between the economic development organization and Mason, its leader, is the latest in a string of previously undisclosed separation deals revealed by a Detroit News investigation involving high-ranking state officials and confidentiality provisions that have already spurred calls for reform and investigation by lawmakers.

Mason's agreement is among eight deals involving former MEDC employees worth a total of $308,623 in the last four years. They feature non-disparagement clauses that limit the ex-employees from doing anything that diminishes the "good reputation" of the MEDC.

The MEDC describes itself as a "unique, autonomous, yet quasi-governmental agency within the Department of Labor and Economic Opportunity." The group's executive committee is appointed by the governor and it works with the Michigan Strategic Fund, which receives money through the Legislature.

Spokespeople for the Michigan Economic Development Corp. said the funding for the separation agreements with Mason and seven other former MEDC employees since the start of 2017 came from sources other than taxpayer dollars. Generally, the money for the deals was revenue allocated to the organization through tribal gaming compacts, the agency's representatives said.

But taxpayers are ultimately funding such payouts directly or indirectly, since state officials could direct the tribal gaming money elsewhere, said Michael LaFaive, senior director of the Morey Fiscal Policy Initiative for the Mackinac Center for Public Policy in Midland.

"I think they want to give the impression that they are more private than not," said LaFaive, whose organization has been a watchdog of the MEDC. "But the bottom line is the majority of their money comes from taxpayers."

The MEDC had about $323 million in revenue in fiscal year 2020, according to a financial report published online. Of the total, $137 million were listed payments from the state of Michigan, and $114 million were listed as "federal revenues."

Over the last week, The Detroit News has asked 20 state government agencies to disclose any separation agreements with confidentiality requirements they've reached since the start of Gov. Gretchen Whitmer's term in office, Jan. 1, 2019.

Whitmer's executive office, which is not subject to the Freedom of Information Act, and the Department of Military and Veterans Affairs were the only two of 18 executive branch agencies that hadn't definitively answered questions as of Monday afternoon. Likewise, the state House and Senate, which are also exempt from the Freedom of Information Act, hadn't responded to requests for any separation agreements they had reached over the last five years.

Last week, The News reported that at least three state officials who worked for state departments quietly signed separation deals under the Whitmer administration that included financial payouts ranging from $11,000 to $155,000. Two of the agreements, one with former health director Robert Gordon and the other with former Unemployment Insurance Agency Director Steve Gray, included confidentiality provisions that barred them from discussing their departures.

The governor has contended that such agreements are used often in the public and private sectors when someone leaves a leadership position. However, legal experts say that's not actually the case among government entities.

On Friday, Tricia Foster, Whitmer's chief operating officer, sent an email to state department leaders, saying they will receive guidance in the coming weeks "related to handling separation agreements with state employees going forward."

"This guidance will not replace any rules or regulations provided by the Michigan Civil Service Commission, but will instead serve as an opportunity for us to review our practices and procedures in support of our dedicated state employees and the work they do each day on behalf of the state of Michigan," Foster wrote.

MEDC releases 8 deals

Through an open records request, the MEDC released eight separation agreements with former employees, including Mason, that have occurred since the beginning of 2017.

Three of the deals were brokered during the final two years of Republican former Gov. Rick Snyder's administration, and five were done during the first two years of Whitmer's Democratic administration. The severance pay ranged from $3,548 to $128,500.

"Without diminishing the parties' rights under the law or this agreement, the parties agree that they will not do or say anything that a reasonable person would expect to diminish or constrain the good will and good reputation of the other party," the March 4, 2020, agreement with Mason said.

Snyder recommended Mason for the MEDC CEO job in June 2017. Under his separation arrangement, Mason received $128,500 — 26 weeks worth of pay — in a "paid severance" and accrued vacation time payable in a lump sum.

Mason agreed to release any potential legal claims against the organization as well as keep the terms and conditions of the agreement confidential, according to the deal obtained by The Detroit News. In the pact, the MEDC and Mason also agreed that "employee's departure will be announced as a retirement."

The former CEO didn't respond Monday to a request for comment.

Severance pay is only available to MEDC corporate employees — not traditional state employees — who have completed a year or more of service, organization spokeswoman Kathleen Achtenberg said.

Such agreements are infrequent, and each circumstance is considered individually, looking at factors including tenure, seniority and the reason for departure, she said.

"We believe the limited cases where we follow these practices serve the best interest of departing employees and the organization," Achtenberg added. "Ultimately the MEDC executive committee has authority over corporate employee compensation policies, but we do not anticipate making any changes at this time."

The other largest severance agreements at the MEDC over the last four years were Katharine Merritt with $71,348 — 22 weeks of paid severance — in September 2019, and Antonio Vernaci, who received $41,825 — 69 business days of base salary — in May 2017. Merritt was senior vice president of community development, and Vernaci was vice president of global business development.

No response

Thirteen of 18 executive branch agencies told The News they hadn't used separation agreements with confidentiality provisions since Whitmer took office.

The MEDC released its eight agreements. Two departments — Health and Human Services as well as Labor and Economic Opportunity — said their only agreements were the ones previously made public with Gordon and Gray.

The Department of Military and Veterans Affairs and Whitmer's executive office were the only two that hadn't provided definitive answers by 6 p.m. Monday.

A spokesman for Whitmer's office didn't respond to a question about why the governor's office hadn't provided any information.

On March 1, The News obtained through open records requests the separation agreement between Gordon and Mark Totten, Whitmer's chief legal counsel. Under the deal, Gordon received $155,506 and both sides have to maintain confidentiality about the circumstances that led to his abrupt departure.

Last Tuesday, the Department of Labor and Economic Opportunity released through a records request a similar deal between the department and Gray, the former director of the Unemployment Insurance Agency. Gray received $85,872, and both sides agreed to confidentiality about the details of his state employment and departure.

Unlike the MEDC, the health department and the labor department, Whitmer's executive office is not subject to the Freedom of Information Act. Michigan is one of two states that exempt the governor's office and Legislature from the law.

The state agencies that said they had no separation agreements with confidentiality restrictions since Jan. 1, 2019, were the departments of Agriculture & Rural Development; Civil Rights; Corrections; Environment, Great Lakes and Energy; Insurance and Financial Services; Licensing and Regulatory Affairs; Natural Resources; Technology, Management and Budget; Transportation; Treasury; and the Michigan State Police.

Spokespeople for the Attorney General's Office and Secretary of State's Office said their agencies had not entered into any separation agreements requiring confidentiality since Attorney General Dana Nessel and Secretary of State Jocelyn Benson took office.

Are they constitutional?

Tyler Valeska, a fellow at Cornell Law School, has analyzed much-criticized non-disclosure agreements used by former President Donald Trump's White House. Valeska said the deals conflict with the goals of the First Amendment: the free flow of information and an informed public.

"That is deeply offensive to the First Amendment's underlying values," Valeska said of government-instituted requirements that limit officials' ability to speak publicly.

In the Whitmer administration's agreement with Gordon, he noted, the two sides pledged not to discuss the details of the resignation "in the interest of protecting deliberations among government officials." Valeska said he doesn't believe the Whitmer administration would be able to "hide behind this deliberative process rationale to keep information related to a personnel dispute under wraps."

The complicating factor is one of the two sides would still have to want to break the confidentiality pledge to call its constitutionality into question, he said. There's no indication that Gordon or Whitmer is interested in that.

The Michigan Republican Party has blasted Whitmer's agreements with Gordon and Gray, whose tenure was marred by delayed jobless payments and shortcut practices that exposed the system to fraud amounting to "hundreds of millions" of dollars. State GOP spokesman Ted Goodman said the Democratic governor "appears to be buying the silence of high-level government employees in the midst of the greatest public health crisis of our time."

"If there's nothing to hide, the governor and these former employees should provide details surrounding these payoffs and confidentiality agreements," Goodman said. "Michiganders deserve to know."

At a Thursday Michigan Senate hearing, Senate Minority Leader Jim Ananich of Flint, the chamber's top Democrat, pressed Elizabeth Hertel, the new director of the Department of Health and Human Services, about the deals with Gordon and Sarah Esty, who served as his deputy director.

Hertel said she wasn't involved in Gordon's termination, adding it's "possible" Gordon had a difference of opinion with Whitmer over how quickly to reopen the state's economy amid the COVID-19 pandemic.

Gordon resigned on Jan. 22, less than eight hours after he signed an epidemic order that allowed restaurants to begin offering indoor dining. He didn't appear at the press conference where Whitmer announced the upcoming change.

Ananich said if there were disagreements between Whitmer and Gordon over the rate of reopening the economy, it would be a legitimate reason for them to part ways.

"There's been a lot of talk about hush money," Ananich said. "Maybe, there's a legitimate policy reason."

Separation agreements are commonplace in the private sector, but in the public sector, there's greater scrutiny over how public dollars are used, the Democratic senator said.

cmauger@detroitnews.com