Gov. Bobby Jindal’s efforts towards privatization of state government can best be summed up in a single word: disastrous.
If a movie were to be made of the manner in which this administration has carried out its perceived mandate to privatize state prisons, education, health care, risk management and the Hazard Mitigation Grant Program, it would almost certainly feature Larry, Moe and Curly playing the parts of Jindal, Commissioner of Administration Paul Rainwater and former Superintendent of Education Paul Pastorek.
Take, for example, the $340 million, 10-year contract awarded by the Department of Health and Hospitals (DHH) to Maryland-based CNSI Corp. It’s difficult to imagine that anything could be botched any worse than the manner in which the contract winner was announced.
The awarding of the contract just happened to coincide with the confirmation hearings on DHH Secretary Bruce Greenstein. Smelling blood in the water, members of the Senate Governmental Affairs Committee asked Greenstein point-blank to name the company awarded the contract.
And with good reason, it turned out. It turned out that Greenstein had once worked for CNSI. But, he assured the committee members after finally identifying the CNSI as the winning bidder for the contract to process Medicaid claims for the state he had taken himself out of the selection process and even erected a “firewall” between him and the contract selection.
But wait. There’s more. Turns out that Greenstein did indeed have some contact with his old employer and in fact, implemented changes in the request for bids that allowed CNSI to submit a proposal. That proposal actually ranked third among four bidders on the technical merits of its proposal but won the contract based on the lowest price which is still one of the largest contracts ever awarded by the state.
While it might not be privatization in the truest sense of the word, let’s go back to the 2010 legislative session when Rep. John Schroeder introduced a slew of bills aimed at dismantling state civil service and the Civil Service Board. Had his bills been successful (they weren’t), what would Jindal have replaced civil service with, contract workers? That’s already being done to some extent as we shall see presently.
Schroeder backed off at this year’s legislative session. It is, after all, an election year. But if he and Jindal are re-elected, don’t be surprised to see the civil service bills resurface. Even if Schroeder is not re-elected, Jindal will likely find a friendly legislator to introduce some version of the bills next year.
Then there were the privatization battles fought on two fronts during the 2011 session: prisons and the Office of Group Benefits (OGB). Both were shelved at least until next year but that doesn’t mean either issue is dead. Far from it. In fact, the OGB privatization effort is still simmering and the proposed prison sales will most likely be back on the legislative agenda next year.
But neither Jindal nor Rainwater appear particularly eager to defend the OGB privatization in a public forum. Both managed to be elsewhere recently when the Baton Rouge League of Women Voters held a luncheon to discuss the OGB issue. It would have been the perfect opportunity for Jindal or Rainwater to come clean with the public and explain exactly what the administration’s intent is for the agency and its $500 million surplus. Both men were invited to take part in the forum but Jindal was at yet another Baptist church somewhere in north Louisiana and Rainwater was speaking at a Rotary meeting in Alexandria.
It was the best opportunity yet for the administration to demonstrate its openness, accountability and transparency that Jindal hypes at all his fundraising appearances—in other states, that is.
Could there be a reason for their reluctance to discuss the merits of OGB privatization openly and to accept questions about their motives?
Well, let’s just look at the sequence of events thus far.
First there was the request for proposals (RFP—a term appearing with ever-greater frequency in this administration) that Goldman Sachs was recruited to help draft and then Goldman Sachs was the lone bidder—at a cool $6 million. That was not to take over OGB; that was just to evaluate the agency’s assets and to go out into the marketplace and find a buyer.
In the interim, Jindal had contracted Chaffe and Associates of New Orleans to conduct a quickie evaluation so that he could include the sale of the agency in his proposed executive budget. Chaffe was contracted for $49,999.99—one cent below the amounted that would have required approval of the Office of Contractual Review.
But then, Jindal did not include the OGB sale proposal in his executive budget after all, leading observers to speculate that perhaps Chaffe’s report did not reflect what the governor had anticipated. Requests were made for copies of the report but the governor was not forthcoming, choosing instead to disavow his own edict of openness and accountability.
Meanwhile, word got out that the report specifically said the only advantage to selling OGB would be if the buyer got the $500 million surplus.
When legislators began clamoring for copies of the Chaffe report, it was subsequently “leaked” to the Baton Rouge Advocate. Trouble is, the part about the only advantage of selling OGB was not in that report. Nor were any of the pages of the “leaked” report date stamped. Every document received by the Division of Administration (DOA) is routinely date stamped. Finally, there was a major discrepancy in the purported date that the report was received by DOA.
DOA attorney Paul Holmes, in a May 27 email to LouisianaVoice, claimed that the Chaffe report was received at DOA on May 25 but that it was part of the “deliberative process,” and unavailable for public inspection. Rainwater likewise, on May 31, told legislators that he had received the report on May 25 but again invoked the “deliberative process” excuse for not releasing it.
But when the report was “leaked,” it was noted that Chaffe officials did not sign off on the report’s signature page until June 3.
Is it possible that there were two separate versions of the report? One which didn’t say what the governor wanted to hear that is still being withheld from the public and another, more generic version that was “leaked” to the Advocate? Perhaps we will never know.
One thing we do know, however, is that the administration is determined to privatize OGB, even to the point of dealing with Wall Street bankers with problems of their own.
In rebidding its RFP for a broker, Morgan Keegan was named the contractor to shop around for a buyer for OGB. Morgan Keegan bid only $900,000, considerably less than Goldman Sach’s bid of $6 million on the original RFP.
It turns out, however, that Morgan Keegan has been placed on the auction block by its parent company, Regions Financial Corp., after MK agreed to pay $210 million to settle charges of fraud in the marketing of mutual funds filled with subprime mortgages that artificially inflated the funds’ prices.
Regions retained (who else?) Goldman Sachs to market MK. But Goldman Sachs was fined $587 million a year ago on charges that it misled investors in collateralized debt obligations linked to subprime mortgages.
John Maginnis, in his Louisiana Political Weekly column, more recently has called attention to the mismanagement of the $756 million program for hurricane victims to elevate their homes which was approved near the end of the Kathleen Blanco administration and reluctantly inherited by Jindal’s administration.
The program, administered under a $66 million contract with The Shaw Group has been bogged down with delays, shoddy work, payment disputes and more recently, charges of graft and corruption in the form of a whistleblower lawsuit by two employees of the program who claim that a state official accepted jewelry and meals in exchange for providing confidential information that enabled a contractor to pursue eligible homeowners.
Rainwater, embarrassed into finally acting, announced an investigation in conjunction with the federal Homeland Security inspector general and the state attorney general’s offices. The state official has been placed on leave.
Assuming “full responsibility,” Rainwater said, “I obviously wish we had acted quicker.”
Taking a break from his out-of-state fundraisers and visits to Baptist churches, Jindal paused long enough to issue an executive order to crack down on “incompetent, unscrupulous or predatory contractors and subcontractors.”
Maginnis, however, said Jindal should also be taking a “hard look” at the performance of Shaw, one of the largest of the state’s privatization contractors. He said the administration does not need to repeat its mistakes thus far with the monumental $2.2 billion Medicaid program it is contracting out to five insurance companies next year or with the ever-increasing number of charter schools.
Charter schools represent another blot on the privatization performance record. Abramson in New Orleans and Kenilworth in Baton Rouge, both run by Pelican Education Foundation, have come under intense scrutiny of late.
Operated by Cosmos Foundation out of Pennsylvania, Pelican has already had its Abramson charter revoked by the state. Its sister organization in Texas, Harmony Science academies, as well as similar Cosmos schools in other states, are subject of an FBI investigation into charges that teachers, imported from Turkey to teach, are required to kick back up to 60 percent of their salaries to Cosmos founder Fethullah Gulen.
In New Orleans, a Pelican official is alleged to have offered a state education department investigator a $20,000 bribe to “make problems go away.”
Thos problems included no supervision of students for weeks after a teacher left, sexual activity between students, teachers doing science projects for students, cheating on exams, and other deficiencies.
Perhaps someone should ask how Harmony could justify $7 million in travel expenses over a three-year period in Texas or how it could justify overall payments of nearly $250 million for 38 schools in that state.
More importantly, perhaps someone should ask why teachers are being imported from Turkey when teachers who live here are being laid off because of budgetary cutbacks–cutbacks imposed in order that charter schools might flourish.
More will be forthcoming on this issue in days ahead.
Now for the Office of Risk Management (ORM), the one agency that Jindal has successfully privatized. Or has he?
A year ago, the operations of ORM were taken over by F.A. Richard and Associates (FARA) of Mandeville under a contract that called for the state to pay FARA “not to exceed” $68.2 million to take over ORM over five years.
That was last July. Eight months later, FARA requested and received a $6.8 million amendment to its contract, which now said it would be paid “a maximum amount” of $74.9 million. In a matter of days following approval of the amendment, it was learned that FARA was sold to Avizent, a firm out of Columbus, Ohio. Avizent promptly laid off the only person working in its Baton Rouge office.
Now comes word that Avizent may be selling out to Sedgwick Claims Management Services of Memphis, which had earlier purchased Cambridge Integrated Services Group, Nationwide Better Health’s productivity solutions, Selective Settlements International, and Specialty Risk Services.
Catherine Bennett, communications manager for Sedgwick, said she had not heard reports of the Avizent acquisition and could not comment on the matter.
FARA/Avizent, meanwhile, has informed ORM that because of the backlog of documents to be scanned into its system, it would not be able to take over the Property Section of ORM by Jan. 1 as originally scheduled. That date has been pushed back to April 1.
Because of the delay, two ORM claims adjusters will be out of work as of Jan. 1. ORM has chosen to release the two employees, presently paid in the area of $25 per hour, in favor of retaining contract adjusters who are not state employees. They work for private adjusting firms and the state pays their firms $60 per hour to provide temporary adjusters for ORM.
So why would the state terminate employees making $25 per hour in favor of paying $60 per hour for contractors? Benefits. The state does not provide health coverage, retirement, sick leave, or annual leave for contract adjusters. Nor does it provide job security through civil service protection.
Can you say privatization?