Does Maryland's state MBE fraud statute apply to contractors who misrepresent minority-business compliance to WSSC, or only WSSC's own rules?

Plain-English summary

The Washington Suburban Sanitary Commission (WSSC), the bicounty water and sewer utility for Montgomery and Prince George's Counties, runs its own Minority Business Enterprise (MBE) program under its own regulations, separate from the state's MBE program. WSSC's general counsel asked whether a contractor who lies about complying with minority-business participation requirements to win a WSSC contract violates the state's MBE fraud statute, and whether that kind of violation of WSSC's own rules is a crime. The Attorney General concluded that the WSSC is not covered by the State Procurement Law at all, because it is a bicounty agency whose budget is approved by county governments rather than the state, so a contractor's misrepresentation to WSSC does not violate the state MBE fraud statute. But the opinion found that violating WSSC's own MBE regulations is still a criminal misdemeanor, because a separate statute makes it a crime to violate any WSSC rule or regulation (with narrow exceptions that don't cover the MBE program), and Maryland law gives WSSC regulations the force of law.

Currency note

This opinion was issued in 1988. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

If a contractor lies about minority-business participation to win a WSSC contract, does that violate Maryland's state MBE fraud law?
No, according to this opinion. It concluded the State Procurement Law, including its MBE fraud provisions in SF §11-148(e), does not apply to the WSSC at all, because WSSC is a bicounty agency rather than a "unit" of the Executive Branch of State government, so misrepresentations made to WSSC fall outside that state statute.

Does that mean a contractor who lies to WSSC about MBE compliance faces no legal consequences?
No. The opinion concluded that the same misrepresentation, if it violates WSSC's own separately adopted MBE regulations, is still a criminal misdemeanor under Article 29, §18-104(a)(5), which makes it a crime to violate WSSC rules and regulations generally (punishable by a fine up to $1,000 or up to 30 days in jail), since the MBE regulations don't fall within that statute's narrow listed exceptions.

Why isn't WSSC treated as a state agency for procurement purposes, when courts have called it a "State agency" in other contexts?
The opinion explained that whether an entity counts as a "State agency" depends on the specific statute being applied, and while courts have found WSSC to be a state agency for purposes like sovereign immunity and the Administrative Procedure Act, a different Court of Appeals case held WSSC is not a "State agency" for a separate tax-refund statute, and the opinion found WSSC's budget structure (approved by county councils, not the state budget process) places it outside the specific definition used in the Procurement Law.

Do WSSC's regulations actually carry legal force, or are they just internal guidelines?
They carry the force of law. The opinion pointed to a Maryland statute providing that any rule or regulation adopted by the WSSC has the force and authority of law, which is part of why violating those regulations, including the MBE Program requirements, can be prosecuted as a criminal misdemeanor even though the underlying conduct falls outside the state MBE statute.

Background and statutory framework

WSSC, created in 1918 to provide water and sewer service to Montgomery and Prince George's Counties, has adopted its own Mandatory Minority Business Utilization Program by regulation, borrowing the state's own definition of "minority business enterprise" from SF §11-148 and recognizing minority firms certified through the state's certification programs. Under WSSC's program, an apparent low bidder must submit an MBE Participation Plan, can seek a good-faith waiver, and is subject to disqualification from WSSC contracting if found, after a hearing, to have violated the program's requirements.

The opinion's first question turned on whether WSSC counts as a "designated department" or "procurement agency" (later recodified as a "unit" of the Executive Branch) under the State Procurement Law, since SF §11-148's MBE fraud provisions only reach entities that fit those categories. The opinion noted that whether a given entity is a "State agency" is a recurring, fact-specific question that can come out differently depending on the statute at issue; courts have found WSSC to be a "State agency" for sovereign immunity and Administrative Procedure Act purposes, but not for a state tax-refund statute or, in this office's own prior opinion, the State Code of Ethics. Because the Procurement Law's own definition specifically excludes "bistate, multistate, bicounty, or multicounty governmental agencies," and because WSSC's budget is approved by the Montgomery and Prince George's County Councils rather than through the state budget process, the opinion concluded WSSC does not qualify as a "unit" covered by the State Procurement Law, so the state's MBE fraud statute does not reach misrepresentations made to WSSC.

On the second question, the opinion found a separate basis for criminal liability: Article 29, §18-104(a) makes it a misdemeanor, punishable by a fine of up to $1,000 or up to 30 days imprisonment, to violate "WSSC rules and regulations," except for two specific subsections not at issue here. Because WSSC's MBE Program regulations carry the force of law under a separate provision of Article 29, and because they don't fall within §18-104's narrow listed exceptions, the opinion concluded that documented fraud or misrepresentation in violation of WSSC's own MBE regulations can be prosecuted as a criminal misdemeanor under that statute, even though the state's own MBE fraud statute does not independently apply.

Citations and references

Statutes:

• Article 29, §§3-102(d)(2) and 9-101
• Article 29, §9-101(c)
• Article 29, §18-104(a)(5)
• Article 29, §18-104
• Article 29, §18-104(a)
• Article 29, §1-204
• SF §11-148
• SF §11-148(e)
• SF §11-148(a)(3)
• SF §11-148(a)(4)
• SF §11-148(a)(2)
• SF §11-148(b)
• SF §11-101(aa)
• SF §11-101(jj)
• SF §11-101(v)
• Chapter 48, Laws of Maryland 1988
• SF Title 14, Subtitle 3
• Article 81, §215
• former Article 19A
• Chapter 122, Laws of Maryland 1918

Cases:

• Clauss v. Board of Education, 181 Md. 513, 520, 30 A.2d 779 (1943)
• Katz v. WSSC, 284 Md. 503, 397 A.2d 1027 (1979)
• Donocam Assocs. v. WSSC, 302 Md. 501, 510, 489 A.2d 26 (1985)
• Prince George's Co. v. Blumberg, 288 Md. 275, 294-95, 418 A.2d 1155 (1980)
• Barranca v. Prince George's County, 264 Md. 562, 287 A.2d 286 (1972)
• WSSC v. C.I. Mitchell and Best Co., 303 Md. 544, 495 A.2d 30 (1985)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1988/Volume73_1988.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

WASHINGTON SUBURBAN SANITARY COMMISSION

Procurement—Minority Business Enterprise Program—Criminal Sanctions for Intentional Misrepresentations.

September 19, 1988

Nathan J. Greenbaum, Esquire
General Counsel
Washington Suburban Sanitary Commission

You have requested our opinion as to whether an intentional misrepresentation about compliance with minority business participation requirements made by a contractor to secure a contract from the Washington Suburban Sanitary Commission ("WSSC") constitutes a violation of §11-148(e) of the State Finance and Procurement Article ("SF" Article). You also asked whether this kind of violation of WSSC procedural regulations is a misdemeanor under Article 29, §18-104(a)(5) of the Maryland Code.
For the reasons given below, we conclude that the WSSC is not subject to the provisions of the State Procurement Law. Therefore, misrepresentations made by prime contractors and minority firms would not constitute violations of SF §11-148. However, misrepresentations by the contractors in violation of the WSSC's regulations are criminal misdemeanors under Article 29, §18-104(a)(5).

                                     I
                              Background

Chapter 122 of the Laws of Maryland 1918 established the WSSC within Prince George's and Montgomery Counties. This bicounty agency provides residents of the two counties with water and sewer service.
Pursuant to Article 29, §§3-102(d)(2) and 9-101, the WSSC by resolution and by implementing regulations has established a Mandatory Minority Business Utilization Program ("MBE Program").1 The MBE program is intended to facilitate the participation of certified minority business enterprises in competitively bid construction contracts and negotiated contracts for architectural and engineering consultant services. Standard Operating Procedure E-86-04, at ¶¶ I and II.2
In accordance with Article 29, §3-102(d)(2), the WSSC regulations adopt the definition of "minority business enterprise" in SF §11-148.3 The WSSC also recognizes any minority firm certified by the Maryland Department of Transportation's Minority Business Certification Board or under any other substantially identical certification program of the State or a county.
An apparent low bidder is required to submit an MBE Participation Plan after bid opening, within the time specified in the Invitation for Bids. Failure to submit the MBE Plan within the specified time is cause for notifying the bidder that the WSSC will proceed with awarding the contract to the next low bidder. An apparent low bidder is also allowed to seek a waiver of the MBE requirements based upon its good faith efforts to subcontract with certified MBE's.
The WSSC's Internal Audit Unit performs random audits of contracts to determine MBE Program compliance. The results are then forwarded to the contracting officer. The WSSC makes a final determination that a contractor has not complied with its MBE Execution Certification or that a MBE subcontractor has participated in a fraud or impropriety only after providing the contractor or subcontractor with an opportunity for a hearing before the contracting officer. A contractor found to have violated the regulations governing the MBE Program is subject to disqualification from participating in WSSC contracting activities.

                                         II
                                     Analysis

A. Applicability of SF §11-148 to the WSSC
The requirements of the State Minority Business Enterprise law are set out in SF §11-148.4 The statute requires participation by minority business enterprises, as follows:

      Each designated department, except the Department of Transportation as to construction contracts, shall structure its procedures for procuring supplies, services, construction, construction related services, architectural services, and engineering services to attempt to achieve, consistent with the purposes of this section, the result that a minimum of 10 percent of the total dollar value of such procurements are made directly or indirectly from certified minority business enterprise.
      Each procurement agency shall structure its procedures for procuring supplies, services, construction, construction related services, architectural services, and engineering services to encourage participation in the process by certified minority business enterprise and to attempt to provide to certified minority enterprise a fair share of State contracts.

SF §11-148(b). By its terms, SF §11-148 applies to "designated departments" and "procurement agencies." "Designated departments" are defined in SF §11-148(a)(2) to include:

the University of Maryland, the Departments of General Services and Transportation, the Maryland Food Authority, the Maryland Stadium Authority, or the Interagency Committee on Public School Construction, or, for procurements specified in Title 3, Subtitle 4 of this article, the Department of Budget and Fiscal Planning.

The WSSC does not fall within the definition of a "designated department." Therefore, the applicability of the provisions of SF §11-148 turns on whether the WSSC is a "procurement agency" within the meaning of SF §11-148. A "procurement agency" is defined as "a State agency that is authorized by law or regulations to procure or contract." SF §11-101(aa).
The question of whether a particular entity is a "State agency" is a difficult and recurring issue. See 60 Opinions of the Attorney General 813, 814 (1975). The test to be applied is not fixed, and a particular agency may be determined to be a "State agency" for purposes of one statute but not necessarily for purposes of another. Clauss v. Board of Education, 181 Md. 513, 520, 30 A.2d 779 (1943); 60 Opinions of the Attorney General at 815.
In Katz v. WSSC, 284 Md. 503, 397 A.2d 1027 (1979), the Court of Appeals held that the WSSC is a "State agency" for purposes of sovereign immunity. The Court of Appeals has also held that WSSC is a "State agency" for purposes of the Administrative Procedure Act. See Donocam Assocs. v. WSSC, 302 Md. 501, 510, 489 A.2d 26 (1985); Prince George's Co. v. Blumberg, 288 Md. 275, 294-95, 418 A.2d 1155 (1980). In an earlier decision, Barranca v. Prince George's County, 264 Md. 562, 287 A.2d 286 (1972), the Court of Appeals, in an opinion resolving issues about the removal of members of the WSSC, approved in dictum a trial judge's conclusion that the WSSC's "members are State, rather than County, officers and therefore the manner of appointment and removal of its membership was governed by State law." 264 Md. at 567.
On the other hand, the Court of Appeals held in WSSC v. C.I. Mitchell and Best Co., 303 Md. 544, 495 A.2d 30 (1985), that the WSSC is not a "State agency" within the meaning of Article 81, §215, which permits claims for refunds of overpayments to certain authorized state agencies. In addition, this office concluded that the WSSC is not a "State agency" for purposes of former Article 19A, the State Code of Ethics. 60 Opinions of the Attorney General 813 (1975). That opinion pointed out that the "dictum of the Court of Appeals in Barranca ... that the members of the WSSC are State officers [was] not persuasive authority and does not compel a conclusion that the Commission members are subject to Article 19A." 60 Opinions of the Attorney General at 821.
For procurement purposes, SF §11-101(jj) provides the following definition of "State agency":

  (1) [A]n agency, association, board, bureau, college, commission, committee, council, foundation, fund, department, institute, institution, public corporation, service, trust university, or other unit of the Executive Branch of State government.

  (3) "State Agency" does not include bistate, multistate, bicounty, or multicounty governmental agencies or political subdivisions of the State; including counties, municipalities, special tax districts, sanitary districts, soil conservation districts and water supply districts.

In the most recent revision of the Procurement Law, Chapter 48 of the Laws of Maryland 1988, the General Assembly substituted the term "unit" for the former terms "procurement agency" and "State agency" in SF §11-101, to conform to language used in comparable sections of other revised articles. The Revisor's Note states that the new language was "derived without substantive change from former SF §11-101(aa) and (jj)(1)." The revised language, to be codified as SF §11-101(v), reads as follows:

  (1) "Unit" means an officer or entity that is in the Executive Branch of the State government and is authorized by law to enter into a procurement contract.
  (2) "Unit" does not include:
    (i) A bistate, multistate, bicounty or multicounty governmental agency; or
      (ii) A special tax district, sanitary district, drainage district, soil conservation district, water supply district, or other political subdivision of the State.

In our view, the WSSC is properly characterized as either a "bicounty governmental agency," "water supply district," or "sanitary district." The capital and operating budgets of the WSSC are not included in the State budget submitted by the Governor and approved by the General Assembly. WSSC's budget is approved by the county councils of Montgomery and Prince George's Counties. Article 29, §1-204. Therefore, the WSSC does not fall within the definition of a "unit" of the Executive Branch of State Government, and accordingly, the provisions of State Procurement Law are not applicable. We understand that this conclusion is consistent with your prior interpretation that other WSSC procurement-related matters are exempt from the State Procurement Law.

B. Criminal Misdemeanors — Article 29, §18-104
Article 29, §18-104(a) specifically provides that:

   A person who violates any of the following provisions is guilty of a misdemeanor and on conviction is subject to a fine not exceeding $1,000 or imprisonment not exceeding 30 days or both:

   (5) WSSC rules and regulations (except for those specified in subsections (f) and (g) of this section).

WSSC regulations pertaining to its MBE Program do not fall within the specified exceptions in §18-104(f) and (g). Therefore, we conclude that documented cases of fraud and misrepresentations may be prosecuted as misdemeanors under Article 29, §18-104(a)(5).

                             III
                         Conclusion

In summary, it is our opinion that the MBE fraud provisions outlined in the State Procurement Law, SF §11-148(e), are not applicable to the WSSC. However, the violations of the WSSC's MBE regulations are misdemeanors under Article 29, §18-104(a)(5).

        J. Joseph Curran, Jr., Attorney General
        Ben C. Clyburn, Assistant Attorney General

Jack Schwartz
Chief Counsel
Opinions & Advice

1
Article 29, §9-101(c) provides that "any rule or regulation adopted by the WSSC ... has the force and authority of law."
2
Our summary of the provisions of the MBE Program is drawn from Standard Operating Procedure E-86-04.
3
SF §11-148(a)(3) defines "minority business enterprise," in pertinent part, as "any legal entity, other than a joint venture, organized to engage in commercial transactions which is at least 51 percent owned and controlled by one or more minority individuals. ...." The term "minority individual" is defined in SF §11-148(a)(4). When Chapter 48 of the Laws of Maryland 1988 takes effect on October 1, 1988, SF §11-148 will be recodified in several sections of SF Title 14, Subtitle 3.
4
The substantive fraud provisions for MBE violations outlined in SF §11-148 apply to "any minority enterprise matter administered pursuant to [that] subtitle." SF §11-148(e) provides that it is a violation to:

      "(i) fraudulently obtain, retain, attempt to obtain or retain, or aid another in fraudulently obtaining or retaining or attempting to obtain or retain certification as a minority business enterprise for the purposes of this section;
      (ii) in any minority business enterprise matter administered pursuant to this subtitle willfully falsify, conceal or cover up by any trick, scheme or device a material fact, or make any false, fictitious or fraudulent statements or representations, or make use of any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry.
      (iii) willfully obstruct, impede, or attempt to obstruct or impede any State official or employee who is investigating the qualifications of a business entity which has request certification as a minority enterprise, or
     (iv) fraudulently obtain, attempt to obtain, or aid another person fraudulently obtaining or attempting to obtain, public moneys to which the person is not entitled under this subtitle."