BATON ROUGE (CNS)—Paul Rainwater is welshing on a promise, Scott Kipper is out as the CEO of the Office of Group Benefits (OGB), Goldman Sachs is back in the mix, the Chaffe report on the privatization of OGB doesn’t say what the administration wanted to hear, and OGB employees have been placed under a gag order.
LouisianaVoice learned that, in a nutshell, is what has transpired only days after Rainwater promised the Senate and Governmental Affairs Committee on Tuesday that committee member Sen. Karen Carter Peterson (D-New Orleans) would be provided a copy of a report done by Chaffe & Associates of New Orleans.
The most bizarre of a series of bizarre developments in the ongoing saga of Jindal’s efforts to privatize the agency that provides health coverage for more than 250,000 state employees, retirees and dependents is the apparent decision to take Kipper out of the decision-making loop until after adjournment of the current legislative session whereupon he will resign.
Deputy Commissioner of Administration Mark Brady and Kipper became involved in a standoff on Thursday after Kipper defied instructions to go back on Rainwater’s promise to make the Chaffe report available to legislators, according to sources.
The latest developments have prompted immediate reaction from State Sen. D.A. “Butch” Gautreaux (D-Morgan City), chairman of the Senate Retirement Committee.
“I intend to submit a joint resolution in the Senate on Monday or Tuesday urging Gov. Jindal not to privatize the Office of Group Benefits,” Gautreaux said Sunday. He said if the Senate approves his resolution it would go to the House for concurrence.
A resolution, as opposed to an actual bill, has no effect of law. Instead, its purpose would be to display a united front on a particular issue. But Gautreaux said he is also working on other action that might be legally binding.
He said the Senate legal staff is looking into a possible course of legislative action to block efforts by Jindal to sale or privatize OGB. He did not specify what type of action he is planning to block the administration.
Chaffe was awarded a $49,999.99 contract to do its report, apparently in an effort to develop figures in time for Jindal’s proposed state budget that was submitted on March 19. The contract amount was one penny less than the amount that would have required approval by the Office of Contractual Review, giving the appearance that Jindal was attempting to circumvent contract regulations.
Rainwater also assured the committee that the Chaffe report merely “validated” information that the Division of Administration (DOA) already had, thanks to Goldman Sachs, the Wall Street banking firm that assisted in the drafting of the original Request for Proposals (RFP) for a financial analyst to conduct a financial assessment of OGB and to help market the agency to potential buyers.
Rainwater may have fudged a bit in telling the committee during that same hearing that the report contained no significant information. It was learned Friday that the Chaffe report indicated the only advantage to privatizing OGB would be if the buyer retained the entire agency surplus of $500 million.
Some might consider that significant, especially in light that Rainwater first said the surplus would be attractive to a buyer but then denied the agency was for sale. Instead, he said the administration was simply seeking a third party administrator for the agency’s Preferred Provider Operation. He later added that the agency’s HMO, presently administered by Blue Cross/Blue Shield, might be included in the RFP.
Sen. Ed Murray (D-New Orleans) had posed the very scenario contained in the report last Tuesday when he asked why Kipper had not been provided a copy of the report. “What if that report says privatizing Group Benefits is not a good idea?” he asked. Kipper was provided a copy of the report following the hearing.
Rainwater, through Deputy Commissioner of Administration Mark Brady, instructed Kipper two days after Tuesday’s committee meeting to give the Chaffe report to no one, “not even legislators,” according to DOA sources.
Rainwater may have had his change of heart as a result of persistence on the part of LouisianaVoice, which had been refused access to the report on four separate occasions prior to Tuesday. The first three times, Rainwater’s office simply said there was no report. When it became known that DOA received the report on May 25, DOA attorney Paul Holmes responded to a fourth request that the report was exempt from the public records law.
When Rainwater promised the report would be made available to Peterson, however, LouisianaVoice immediately fired off a fifth request for the report under the state’s Public Records Statute.
When Brady instructed Kipper to hold the report back, Kipper balked, saying that Rainwater had made a promise in an open committee meeting. Kipper even offered to resign.
At that, Brady made a brief telephone call, and then informed Kipper that his nomination for confirmation as OGB CEO would be withdrawn and that Kipper would remain on the job until June 24, the day after the current legislative session adjourns at which time he would tender his resignation.
Kipper was appointed to the OGB position on April 15, the same day his predecessor, Tommy Teague, was fired for a “lack of leadership,” according to Rainwater. Teague, in five years at the helm of OGB, had taken the agency from a $60 million deficit to a $500 million surplus.
Rainwater now apparently has found Kipper lacking in leadership, or more accurately perhaps, followship. Kipper previously had worked for the Louisiana Department of Insurance and prior to that, worked for insurance regulatory agencies in several other states.
Kipper will be out of the office Wednesday, Thursday, and Friday on vacation, a fact that further irritated Gautreaux, who said he does not like the timing of Kipper’s trip. “I am concerned and upset about the lack of answers from the administration and I particularly don’t like the idea of Mr. Kipper leaving the state at such a critical time,” he said. The deadline for proposals from financial advisors to conduct a financial assessment of OGB is Monday with selection of the contractor scheduled for June 15.
“I will instruct my staff to attempt to contact Mr. Kipper and have him call me. I want him to answer questions and I will keep attempting to reach him every day,” Gautreaux said.
LouisianaVoice also has learned that Goldman Sachs is back in the picture and is one of four companies which have indicated an interest in submitting proposals on the financial assessment project. The deadline for proposals is Monday with selection and notification of a contract award scheduled for June 15.
When Goldman Sachs, which assisted in drafting the original RFP was subsequently the only one to submit a proposal, Goldman Sachs withdrew after an impasse was reached over the company’s insistence on indemnification against any future litigation.
The proposed privatization has met with opposition from several different fronts. The most significant objection came from the Louisiana District Judges Association which adopted a unanimous resolution in opposition to the privatization at its annual spring judges’ conference in Lafayette on April 7.
Legislators also have received hundreds of phone calls, emails and letters as well, virtually all in opposition to the OGB privatization.
All this comes at a time when the Senate and Governmental Affairs Committee still must make its recommendation on confirmation of Rainwater, Brady, and ostensibly, Kipper to the full Senate. The Senate would then have to approve each of the Jindal appointees by simple majority votes.
Anyone who watched the debacle unfold at the Senate and Governmental Affairs Committee confirmation hearings On May 31 saw the callous manner in which Rainwater allowed Kipper to be hammered by committee members for his evasive answers, most likely at the behest of Rainwater himself. Friday’s action by Rainwater was merely the crowning display of arrogance that seems to have permeated the Jindal administration from the top down.
As bad as that performance was, the beginning of the end for Kipper most probably occurred on May 10. Kipper, testifying before the Senate Insurance Committee, was asked by Sen. Eric LaFleur (D-Ville Platte) how many OGB employees he would cut if OGB was not privatized.
“Let’s assume this RFP doesn’t go anywhere and we’re right back where we are right now, who…how many people would you cut from OGB.”
“If we continue to operate as we do now, there would be no significant cuts,” Kipper responded, visibly upsetting Rainwater seated next to him. “There’s not a lot of excess now,” Kipper said. Rainwater has insisted that the agency needs to cut at least 149 positions.
Now the question must be whether or not Kipper will have the courage to step up to the plate on behalf of his OGB employees, half of whom could lose their jobs if the agency is privatized, and make the contents of the Chaffe report public.
Or will he choose instead to protect his career and sacrifice his integrity by going quietly into the night?
He could refuse to resign and force the administration’s hand. In that event, whatever course of action Rainwater would take almost certainly would prove embarrassing and leave Jindal with egg on his face. In the event Rainwater and Brady end up firing Kipper, what would that say about the administration’s vetting of its choices to run OGB?
Firing two CEOs of OGB within six weeks, all in the middle of attempts to privatize such a large agency would not look good under any circumstances.
It’s a call only Kipper can make.