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Archive for the ‘Contract, Contracts’ Category

One might think the Jindal administration and the Office of Group Benefits (OGB) might have learned something from the Bruce Greenstein fiasco over at the Department of Health and Hospitals (DHH).

Greenstein, you will remember, was the DHH secretary when that $280 million contract was awarded by his agency to his former employer, CNSI.

That scenario could be repeated at OGB.

Even though Greenstein insisted he had established a “firewall” between himself and CNSI, it was subsequently revealed that Greenstein had hundreds of email and text message exchanges with his old bosses during the contract selection process.

That eventually led to Greenstein’s forced resignation and criminal indictment and a civil suit by CNSI the entire messy episodes are slowly making their way through the Baton Rouge District Court system.

Which brings us to OGB and its $35 million-a-year contract with Blue Cross/Blue Shield of Louisiana (BCBS) to administer OGB’s Preferred Provider Organization—a task that apparently proved somewhat daunting to BCBS during the first year of its contract, costing the contractor more than $3.1 million in performance penalties.

One of five contracts with the state totaling $1.2 billion, that three-year contract will end on Jan. 1, and OGB is currently accepting proposals for a new three-year contract.

OGB issued its request for proposals (RFP) on March 13, giving an April 20 deadline for proposals but that deadline was extended to April 30 in an addendum issued on Wednesday (April 22). OGB RFP

LouisianaVoice, however, has learned that OGB Administrator Elise Cazes has been put in charge of the evaluation committee which will make recommendations on awarding a winner of the new contract.

The problem? Cazes was appointed Group Benefits Administrator on June 23, 2014.

Cazes was previously employed by BCBS of Louisiana, raising the possibility of a conflict of interests. http://louisianavoice.com/2014/07/26/ogb-laying-of-24-more-blow-softened-when-ceo-assures-affected-employees-losing-their-jobs-not-like-losing-a-child/

She earns $106,000 per year in her current position.

Not only does she head up the evaluation committee, but she also was given the responsibility of naming other members of the committee. To date, the name of only one other evaluation committee member, OGB Interim Deputy Director Bill Guerra, has been revealed.

At the same time, LouisianaVoice has learned that BCBS in 2013 was fined more than $3.1 million for performance deficiencies in connection with its contract with OGB. BLUE CROSS PENALTIES

BCBS was paid slightly more than $32.2 million to administer the PPO plan for calendar year 2013, the first year of its current contract.

Under terms of its contract with OGB, BCBS could be fined up to $9.7 million for failure to meet a variety of standards. Those include:

  • General Standards (10 percent of total medical administrative fees): $3.52 million;
  • Data Submission Standards: $10,000 per day, or a maximum of $20,000;
  • Mental Health & Substance Abuse (MH&SA) Standards (17.5 percent of total medical administrative fees): $6.2 million.

The actual penalties imposed for 2013, according to OGB’s own report, and the breakdown included:

  • Average speed to answer phones (39 seconds against an industry standard of less than three seconds): $352,325;
  • Claims Accuracy: $352,325
  • Membership Identification Cards Timeliness: $352,325;
  • Data Submission Timeliness: $20,000 (the maximum amount allowed);
  • MH&SA Appeals: $528,487;
  • MH&SA Ambulatory Follow-Up: $528,487;
  • MH&SA Medical Integration: $528,487;
  • MH&SA Member Satisfaction Survey Score: $528,487

TOTAL: $3.19 million.

In explaining the deficiency report, OGB noted that the contract between BCBS and OGB “contains 26 performance goals (called service level agreements, or SLAs) related to customer service and claims processing. During 2013 Blue Cross experienced challenges in meeting a handful of these goals.”

The report indicated that “all issues” had been resolved and that OGB and BCBS were “fully prepared for excellent performance during the 2014 calendar year.”

But LouisianaVoice recently received the following email from a retiree which would seem to indicate otherwise:

“Here’s a laugh; Look at the insurance health cards my wife and I received thus far:

  • Received 3/6/15:  deductible—$300
  • Received 03/09/15: insured deductible—$600
  • Received (date unknown): insured deductible—$600
  • Received 03/20/15: insured deductible—$1800
  • Received 03/20/15: spouse deductible—$600
  • Received 03/27/15: spouse deductible—$600
  • Received 03/27/15: insured deductible—$1800
  • Received 04/04/15: insured deductible—$600. 

“Do I get to pick our deductible from these cards?  You can tell that BCBSLA and OGB are on top of this matter, right? I plan to make a personal visit to the OGB office probably next week and show them this trash and find out what our deductible(s) really are. Do you think they know? I will ask while I am (at the OGB office) for the real executive director at OGB (to) please stand up.

“Our online monthly premium is a different figure from the letter received in the mail today from OGB. I am ready for someone to figure out what’s going on, and do something logically and correctly.  Health insurance is a serious matter for people and they are playing with us. Everything needs to be corrected and cleaned up for all state employees (retirees and actives).

“OGB use to be correct on these technical matters and they had in the past straightened out BCBSLA for me several times on what was to be paid, etc. Now OGB has gone crazy too! I guess it’s from all the new executives at the top.” 

 

 

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The absentee Jindal administration, already under fire for its fiscal train wreck that has legislators scrambling in attempts to cover a projected $1.6 billion budgetary shortfall, had a grenade dropped into its lap on Wednesday in the form of a LAWSUIT against the administration and the Office of Group Benefits (OGB) over the method in which OGB attempted to implement adverse changes in benefits and premiums for 230,000 state employees, retirees and dependents.

Baton Rouge attorney J. Arthur Smith filed the petition for declaratory and injunctive relief in Baton Rouge District Court on behalf of six plaintiffs who are either current state employees or state retirees.

At issue is the way that OGB attempted to increase premiums and reduce benefits for members of OGB last August without complying with the state’s Administrative Procedures Act (APA) which requires promulgation (a formal declaration of intent and public hearings) of any rule changes.

Listed as plaintiffs are Marilee Cash and Aileen Hendricks of East Baton Rouge Parish, Nancy Dickie and Debra Thornton of Lafourche Parish, Rebecca McCarter of Ascension Parish and Dayne Sherman of Tangipahoa Parish. Named as defendants were the State of Louisiana, the Office of the Governor, the Division of Administration (DOA), and OGB.

They claim to be members of an organization called Louisiana Voices of Employees and Retirees for Insurance Truth and Equity, (LA VERITE). They say they chose the name because La verite is French for Truth.

The petition tracks the record of the Jindal administration and chronicles the manner in which the plaintiffs claim that the administration, abetted by the legislature, frittered away a surplus of nearly $2 million at the time Jindal took office, repeatedly used one-time revenue to cover recurring expenses, repealed the popular Stelly tax plan, passed numerous business tax breaks totaling some $367 million, approved $20 million in private school tuition and home schooling tax credits and scrapped the sales tax that businesses previously paid on utility bills.

The rollback of the Stelly plan took place despite warnings from the Institute on Taxation and Economic Policy (ITEP) that the move would cost the state more than $1.8 billion in lost revenue over a three-year period from fiscal year 2010 through fiscal year 2012, the petition says.

The lawsuit says that the repeal of the Stelly plan provided a “substantial tax savings for upper income Louisiana” and accounted for about 75 percent of the state’s budget shortfall during those three years. “This does not take into account the billions of dollars the State of Louisiana hands out in business tax exemptions and incentives ever year that have gone unexamined by lawmakers to determine if they serve legitimate public objectives or are simply wasteful luxuries that the state can no longer afford,” it says.

Citing further examples of what it describes as fiscal mismanagement, the petition notes that from July 1, 2009 through June 30, 2010, the administration spent $2.4 billion in private consulting contracts. The following year, it said, that amount increased to $4 billion. The suit cited the Office of Contractual Review’s annual reports for 2009-2010 and 2010-2011 as its source.

Plaintiffs, in their petition, say that the administration announced in January of 2011 its intention to explore the privatization of OGB’s Preferred Provider Organization (PPO) even though a Legislative Auditor’s report predicted that premiums would increase because of marketing costs for a private provider, the necessity of a private provider’s turning a profit, the requirement that private health insurance companies pay premium taxes and the requirement that private companies must purchase reinsurance.

Despite that, the lawsuit says, then-Commissioner of Administration Paul Rainwater promised that in the event of privatization, benefits would remain the same and premiums would not be increased.

Blue Cross/Blue Shield of Louisiana won the contract to administer the PPO and the new plan went into effect on Jan. 1, 2013. That same year, the administration actually reduced rates by 7.11 percent and the next year another reduction of 1.77 percent went into effect.

“While this saved money for the employees,” the plaintiffs said, “it reduced the state’s required premium (matching) payments by about twice as much, thereby reducing the state’s obligation to pay into the system even though medical expenses were increasing by about 6 percent. The rate reductions, while saving the state money it could then apply to the budgetary shortfall, it meant that OGB could no longer cover expenses from current revenue and had to dip into its reserve fund, which was about $500 million when BCBS took over operations.

OGB has been spending millions per month more than it has been taking in in premiums and the Legislative Fiscal Office has said there is a risk that the reserve fund balance could be zero by the end of the current fiscal year (June 30).

“Gov. Jindal adamantly opposed every attempt on the part of legislators to deal with the financial crisis through tax increases,” the petition says, and he “capitalized on the financial crisis of the state to advance an ideological agenda that called into question the rationale for government to perform basic services on a wide range of issues.”

In listing three causes of action, Smith said the state and OGB violated the state’s APA by attempting to make “substantial unilateral modifications to both benefits and costs under the OGB health plan.”

Some of the changes included:

  • Significantly increasing out-of-pocket maximums for all health plan options;
  • Increasing deductibles for all health plan options;
  • Increased co-pays 100 percent for plans with co-pays;
  • Increasing the out-of-pocket maximums for prescription drug benefits by $300 (from $1,200 to $1,500, a 20 percent increase);
  • Eliminating out-of-network benefits for some plan options;
  • Requiring prior authorizations for certain medical procedures;
  • Removing all vision coverage from health plan options.

The plaintiffs point out that on Sept. 30, 2014, only seven days after an attorney general’s opinion said OGB had violated the APA with its unilateral modifications of benefits, OGB issued a press release “stating its intention to publish an emergency rule reinstating the legally insufficient Aug. 1 changes.”

OGB’s emergency rule, the petition says, “was an apparent effort to retroactively ‘cure’ the illegalities found by the Attorney General in his Sept. 23 opinion. Moreover, the fact (that) the changes would not become effective until March 1, 2015, belies the claim that (there) was an ‘emergency’ which necessitated less than full compliance with the APA.”

OGB did finally comply with the APA by conducting a public hearing on Dec. 29, 2014, in the middle of the Christmas and New Year’s holiday season and after the enrollment period had already been closed, causing the plaintiffs to call the hearing a “sham.”

“With all of the proposed changes, including significant changes (made) during the enrollment period, the haste in which they were handled, and the timing of the Dec. 29, 2014, public hearing, it was very difficult for state employees and retirees to intelligently evaluate their options under these proposed plans and (to) make informed choices,” the plaintiffs said.

The petition also claims the state violated due process and contract clauses.

It claims that state agencies can only change promulgated regulations by the process of the promulgation of a new rule or regulation and that if a change is not properly promulgated in accordance with the APA, “it is not a legally effective pronouncement by the agency (not a law), and therefore, none of the abortive attempts in August, September, October and thereafter should be viewed as having changed the existing law.

“Since the contracts clauses prohibit the state from passing a ‘law’ that retroactively impairs the obligations of contract, OGB can only legally change the benefits program when it adopts through proper procedure and final rule to that effect, and that final rule cannot constitutionally be given retroactive effect.”

The petition is seeking declaratory judgments that:

  • OGB’s health care plans are in violation of the Louisiana APA;
  • Defendants have violated the Constitution of the State of Louisiana;
  • OGB has violated its fiduciary duties as prudent administrators.

It also seeks injunctive relief enjoining the applications of the OGB health care plan modifications.

The lawsuit was assigned to 19th JDC Judge Janice Clark.

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A couple of weeks ago, we received a comment from a reader identifying himself only as “The Truth Man” who proceeded to go on a 128-word tirade against another reader who called himself the “Dental Genie” and gloating over the outcome of the lawsuit of Dr. Randall Schaffer against the Louisiana State Dentistry Board.

Normally, it is the policy of LouisianaVoice to protect the identities of those commenting on our stories. We take the position that if they do not wish to divulge their real names, there must be a legitimate reason. Often, that reason is that the writer is a state employee who would fear for his job should his name be revealed.

But when the writer turns out to be the former director of the state board that was being sued by Dr. Randall Schaffer and when that writer attempts to color the results of the legal action in the board’s favor, we take the position that he is waiving his anonymity. He is, after all, a very public figure, retired or not.

Barry Ogden, former director of the Louisiana Board of Dentistry, was referring to Schaffer’s lawsuit against the board after the board turned on him for blowing the whistle on a defective joint replacement device for temporomandibular jaw (TMJ) sufferers by the head of the LSU School of Dentistry’s Oral and Maxillofacial Surgery Department in the mid-1980s. http://louisianavoice.com/2014/03/11/from-protecting-their-own-to-persecution-of-a-whistleblower-its-all-part-of-the-bureaucratic-shuffle-by-state-dental-board/

Schaffer who was a resident at LSU at the time, became aware of the negative effects to patients receiving the implants and when he was named as a witness and consultant in the class action cases that ensued, the Board of Dentistry immediately launched an investigation and ultimately revoked his license to practice dentistry.

Schaffer sued the board and moved to Iowa where he worked as a consultant and expert witness in legal matters involving dental malpractice. His case wound its way slowly through the courts, as legal cases always do, running up tremendous costs in the process. Meanwhile, Schaffer was forced to undergo bypass surgery and the combination of medical problems and legal costs left him with no choice but to allow his case to abandon.

Thus, he did not “lose” his case; it was dismissed because of the aforementioned reasons. “I simply could not afford to keep feeding the (legal) beast,” Schaffer said. “It has cost me more than $100,000 and it broke me.”

Ogden’s misleading and less than gracious rant led to several email exchanges between LouisianaVoice and Ogden. We first reminded him that the dismissal of Dr. Randall Schaffer’s case was not based on the merits of the case, but upon extenuating circumstances—money and health. We also reminded him that there are other lawsuits pending against the board and that state agencies have—and are continuing to—investigate tactics by the board and its contract investigator Camp Morrison, who inexplicably was given free office space in the Dental Board’s suite, paid for by taxpayers.

“Are you going to print my comment or not?” Ogden replied. “You obviously have made up your mind about me. Everything I said is true and public. Is your blog blocking what you don’t want to hear? I hope you will give myself and the other defendants a fair and balanced report after we prevail in court.”

We promised to publish his comment, but in context with the facts of the Schaffer case and Ogden’s 400-page deposition in another pending legal matter (Dr. Ryan Haygood). “The Schaffer case does not end the legal actions against the Louisiana Board of Dentistry,” we wrote, adding that as long as we were now communicating (we couldn’t get a comment from the board in our original story), “please explain how it is that the private investigator (Morrison) who is (or was) under contract to the board had the luxury of having an office in your office suite.”

Rather than answer that question, Ogden wrote back, “I cannot authorize you to publish my comment until I see how you plan to edit it and in what context. Are you on a witch hunt against the board or are you willing to publish non-biased comments? I do not wish for my comments to be changed. However, you may delete the final sentence admonishing you to know your subject before commenting. Further, do you require that I will only have my comments published if I allow you to controvert them with your own commentary?”

Well, yeah, when we feel it appropriate to clarify certain claims we do reserve that right.

We then asked him to please answer a few simply questions, to wit:

  • Why do you send in people posing as patients with the express purpose of setting these dentists up?
  • How is it that many of the dentists penalized with the board just happen to be in competition with board members?
  • How do you justify levying a fine of say, $2,000 and when the dentist refuses, you suddenly hand him a bill for $100,000?
  • How can you justify the board serving as accuser, prosecutor and judge? That makes it impossible for a dentist to receive a fair hearing.
  • When the U.S. Constitution says that everyone accused of wrongdoing is innocent until proven guilty, how is it that a dentist first learns of his “guilt” upon receiving notification of his fine?

We wrote that we had other questions, but unless he could address those satisfactorily, we could see no reason for further discussion. “You answer these and we can talk further,” we said.

“All I was attempting to do in my first comment,” he replied, “was to set the record straight, as I have been fed up with the  lies being said about the board and, in fact, all the horse manure thrown at us by you which you believed from the start… Now you wish me fill in the blanks in your next story which you have probably already written. I see no use in further communication, especially on matters in litigation. You are attempting to take advantage of me knowing I cannot answer your questions.

“Therefore, please do not print any of my comments, and let’s call it a day.”

Sorry, Mr. Ogden. That’s just not the way it works. You opened this dialog with your April 3 email to us in which you taunted us about the dismissal of Dr. Schaffer’s case—without revealing the real reasons for the dismissal—and advising us to keep our mouths shut. You offered your remarks as a comment to our story and even asked if we intended to print it before apparently having a change of heart and asking that it not be printed.

Sorry again, but when you want something to be off the record, you preface it that way—up front. You don’t come back after the fact and ask that your ill-advised remarks not be printed.

Accordingly, here is the original comment by Barry Ogden, retired director of the Louisiana State Board of Dentistry (verbatim, as he requested):

  • For all of you who believe the fairy tale told by the dental genie, please be advised that ALL lawsuits filed on Dr. Shaffer’s behalf have been DISMISSED. I guess now you have to complain that both state and federal judges are as corrupted as the dental board. Further, how can anyone make a legitimate comment without looking at both sides? You can obtain a copy of the decision revoking Dr. Shaffer’s license from the dental board. It’s a public record. You may also look up all the lawsuits he has filed in state court and federal court in New Orleans to get the true picture. You know the old saying it is better to keep your mouth shut if you don’t know what you are talking about.

Next, we will examine how the board attempted to revoke the medical license of a New Orleans surgeon who has never even practiced dentistry using highly questionable investigative methods and employing tactics can only be described as extortion.

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By Robert Burns (Special to LouisianaVoice)

LouisianaVoice readers may recall a December 15, 2014 post outlining state defense attorneys desperately fighting to block a deposition of Stephen Russo,  Secretary of the State Department of Health and Hospitals (DHH), to be conducted by Lewis Unglesby, lead plaintiff attorney in the Client Network Services Inc. (CNSI) civil lawsuit against the state.  CNSI alleges that Gov. Jindal’s office, in “consultation” with AG Caldwell’s Office, unjustly cancelled its contract to provide Medicaid processing services to DHH after news of a federal grand jury having convened to consider potential improprieties in the awarding of the contract broke.  The federal grand jury probe went nowhere, but Caldwell nevertheless continued a probe with a state grand jury.  Ultimately, that state grand jury indicted former DHH Secretary Bruce Greenstein for nine counts of alleged perjury entailing testimony to that grand jury or statements made at his senate confirmation hearing.

At that December hearing, Judge Kelley ruled that Russo could be deposed and that any attorney-client privilege had clearly been waived.  The AG’s Office filed an immediate appeal writ with the First Circuit (notwithstanding the fact Judge Kelley stated, “There’s nothing to appeal because this matter is clear,”).  The First Circuit upheld Judge Kelley’s ruling and denied the appeal.  During that December hearing, Unglesby stated AG Caldwell’s Office had “quite likely acted illegally” in publicly releasing Greenstein’s grand jury testimony.  A hearing to quash that testimony transpired in Greenstein’s criminal trial on March 20, 2015.

At that hearing, Greenstein criminal defense attorney, John McLindon, argued for protection of the grand jury “body” not only for the Greenstein case but for all future criminal trials.  He stated that denying his motion to quash the grand jury testimony would send a horrible signal that grand jury secrecy was a “sham” in Louisiana.  He also stated that AG Caldwell’s Office essentially engaged in an ex-parte maneuver in that the AG’s motion to file the grand jury transcript into the public record was “buried” at the end of the order.  McLindon also argued that David Caldwell had been deceptive in describing the motion in court on the day it was presented as a “routine procedure” to enable McLindon to obtain a copy of the testimony, which McLindon indicated he was entitled to anyway.  Judge Daniel ruled that the AG’s office acted properly in filing the transcript into the public record, but McLindon indicated he may likely appeal Judge Daniel’s ruling.

Louisiana Voice has now reviewed extensive court filings in the civil case in which CNSI attorneys lodge even more allegations of serious wrongdoing on the part of Caldwell’s Office.  Those allegations entail the testimony of CNSI whistleblower Stephen Smith.

Smith is the CNSI employee who sent an anonymous email to Jeffrey Branch with the Center for Medicare/Medicaid Services (CMS) under the alias of “Kunego.”  The email was sent sometime after a meeting which Smith had with Norm Nichols, President of Molina Medicaid Services, and the company which has managed Louisiana’s Medicaid processing for decades and which filed a protest after CNSI won the contract.  Smith testified that Nichols indicated that, although Molina lost the protest, “there were still things in the process that were questionable.”    Smith has moved on to Orlando, Florida where he serves as Vice President for Sellers Dorsey, LLC, which is a health policy consulting company.

On May 1, 2014, CNSI attorneys conducted a video deposition of Smith in Orlando.  During the deposition, Unglesby presented Smith with a copy of what the AG had supplied as the “Kunego report.”  That report, which was filed under seal soon after CNSI’s lawsuit was initiated, contained notations of AG investigator Scott Bailey’s interview of Smith (but identified as “Kunego”) on May 10th and May 11th of 2012.  Unglesby then asked Smith to take a pen and underline those portions of the interview notes for which he wished to claim were his words and recollections of the interview and to refrain from underlining those items for which he did not wish to assess as having originated from him.  As readers can readily tell from reading the 7-page report, Smith was only willing to claim responsibility for between 50-60% of it as evidenced by what is underlined.  Nevertheless, the report contains some rather intriguing allegations, not the least of which is contained on page five.  On that page, the report states:  “Bobby Jindal has what Kunego calls an India to India ancestor driven background and network of connections that brought CNSI and Jindal together.”

The deposition continued for an extended period, so the parties agreed to recess and reconvene on a later date, which turned out to be July 8, 2014.  Upon reconvening the deposition, Unglesby made an inquiry of Smith regarding whether he’d had any communication with anyone from the AG’s Office.  Smith responded that Scott Bailey, the AG investigator who had interviewed him for the Kunego report, had telephoned him twice and had flown to Orlando to meet with him on June 28, 2014.  Smith indicated that Bailey stated that he needed to clarify the timeframe of the meeting with Nichols and also to inform him that the AG’s office had provided CNSI attorneys with the “wrong version” of the Kunego report.  Smith testified that Bailey informed him that, on May 1, 2014, he’d been provided with the “unedited” Kunego report when he should have been provided with the “edited” report, which is the report the AG’s Office intended to supply to CNSI attorneys.

Smith then explained that the unedited report, which CNSI attorneys provided at the May 1, 2014 deposition, was what had confused him so much because it had statements in the report which he knew he hadn’t made and therefore caused confusion as to how such statements were in a report of an interview of him.  When Unglesby pressed Smith on whether he asked Bailey how such allegations, including that of Jindal’s “India to India ancestor driven background” and that being responsible for bringing CNSI and Jindal together, got in his interview report, Smith indicated that he did not press Bailey for any explanation.

CNSI attorneys, upon learning of these phone conversations between Bailey and Smith, the in-person meeting between the two on June 28, 2014, and the fact that two reports of Smith’s interview responses even exist, prompted strong accusations of witness tampering on the part of AG Caldwell’s Office.  CNSI attorney Michael McKay of the law firm Stone Pigman, in a Motion to Conduct Discovery Regarding Certain Activities of the AG’s Investigator, accuses AG investigator Scott Bailey of “outrageous witness tampering,” and seeks to depose Bailey about his conduct and actions and also have the AG surrender documents, including the “edited” Kunego report, which were shared between Bailey and Smith, along with documents and dates of correspondence between Smith and Nichols.

CNSI attorneys allege that the AG’s Office filed the “unedited” version of the “Kunego report” under seal with the full knowledge that it contained material not attributable to Smith as a means to “influence the public” and to justify a six-month stay being sought by the AG’s Office for all proceedings.  Although the motion to stay was denied (and the First Circuit upheld the denial on June 7, 2013), the AG’s Office filed a motion to limit discovery and a motion for Judge Kelley to recuse himself on the basis Unglesby had previously represented him.  Judge Caldwell denied the recusal motion on July 1, 2013; however, Judge Kelley granted a motion to stay all proceedings on July 30, 2013.  CNSI attorneys asserted that Kelley’s decision was based largely on the “unedited” Kunego report which they contended the AG’s Office knew full well contained material not supplied by Smith and for which the foundation is unknown.  CNSI attorneys also expressed frustration that, as of the date of their filing, August 22, 2014, they still had not been provided with the “edited” Kunego report.

The hearing on CNSI’s motion to depose Bailey was argued before Judge Kelley on October 7, 2014, and he granted the motion.  At a bare minimum, CNSI attorneys have already exposed a high level of ineptitude on the part of AG Caldwell’s Office in that it provided the wrong “version” of the Kunego report given how critical that report is to both the civil and criminal trials.  It is mind boggling that a document that critical wouldn’t be triple checked as being the one the AG’s Office wanted to ensure CNSI attorneys received.  The mere fact they would later have to admit to Smith that “we gave the CNSI attorneys the wrong version” speaks volumes as to the AG Office’s ineptitude.  Of course, as CNSI attorneys argued in their support memorandum, it begs the question as to why two versions of the report even exist at all.

It remains to be seen how successful CNSI’s attorneys may be in exploiting their allegation of witness tampering by the AG’s Office.  Obviously, their ultimate goal is to have Smith’s testimony at trial declared inadmissible based on inconsistency and the actions of AG Caldwell’s Office.  If they succeed, a huge defense to CNSI’s alleged wrongful contract termination may go by the wayside and expose Louisiana taxpayers to a substantial monetary award.  Further, if Smith’s testimony is ruled inadmissible, a spillover benefit to Greenstein’s criminal trial may also arise.

When combined with the recent scathing WWL investigative report on AG Caldwell, one can only question if the biggest beneficiary of all of the extensive focus of the ineptitude and controversies of Gov. Jindal has been AG Caldwell himself.  It certainly appears that for an extended period, he was able to fly below radar on his office’s ineptitude and potential serious wrongdoing.  Perhaps recent revelations of his actions may provide an excellent source of campaign fodder for the October election for Louisiana’s next attorney general.

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There is more damage control awaiting the most ethical administration in Louisiana history and just as with the Bruce Greenstein saga, the Department of Health and Hospitals (DHH) is front and center.

The Louisiana Board of Ethics last Thursday (Feb. 19) voted to file ethics charges against Galen Schum, DHH Secretary Kathy Kliebert’s brother-in-law, because of his failure to comply with state law requiring him to report income he received from a company under contract to DHH. ETHICS CHARGES

On Nov. 17, 2011, while Schum was serving as Director of Regional Operations for the Office of Behavioral Health (OBH), Magellan Health Services signed a two-year contract with OBH to administer behavioral health managed care services for children and adults.

That contract, approved on Jan. 23, 2012, and which went into effect on Mar. 1, 2012, was originally in the amount of $354 million for two years, but was amended to a three-year contract for $547.78 million and is scheduled to expire on Saturday.

On Feb. 13, 2012, just three weeks after the contract was approved and just over two weeks before it went into effect, Schum submitted a job application to Magellan and was hired on Feb. 27, only two days before the contract took effect.

He resigned from Magellan on Jan. 31, 2014 but during the time he was employed there, he earned more than $146,000 in salary, according to documents obtained by LouisianaVoice.

Kliebert was serving as Deputy Secretary of DHH when the Magellan contract was approved on Nov. 17, 2011, and remained in that capacity until April 1, 2013, when she was elevated to her current position of Secretary.

State law (R.S. 42:1114) provides with respect to the filing of financial disclosure statements, “…that each public servant and each member of his immediate family who derives anything of economic value, directly, through any transaction involving the agency of such public servant or who derives anything of economic value of which he may be reasonably expected to know through a person which (1) is regulated by the agency of such public servant, or (2) has bid on or entered into or is in any way financially interested in any contract, subcontract, or any transaction under the supervision or jurisdiction of the agency of such public servant shall disclose the following:

  • The amount of income or value of any thing of economic value derived;
  • The nature of the business activity;
  • Name and address, and relationship to the public servant, if applicable, and
  • The name and business address of the legal entity, if applicable.

The disclosure statement is required to be filed each year by May 1 and shall include such information for the previous calendar year.

R.S. 42:1102 defines “immediate family” as the children of the public servant, spouses of his children, his siblings and their spouses, his parents, spouse and the spouse’s parents.

“Galen Schum violated …the Code of Governmental Ethics by failing to file a financial disclosure statement on or before May 1, 2013, disclosing income received during 2012 from Magellan Health Services, Inc., and on or before May 1, 2014…at a time when Magellan Health Services, Inc. had a contract with the Louisiana Department of Health and Hospitals—Office of Behavioral Health and while his sister-in-law, Kathy Kliebert, served as the Deputy Secretary and Secretary of the Department of Health and Hospitals,” the Board of Ethics document says.

The board issued a formal request that the Ethics Adjudicatory Board:

  • Conduct a hearing on the foregoing charges;
  • Determine that Galen Schum has violated (state law) with respect to the foregoing counts, and
  • Assess an appropriate penalty in accordance with the recommendation of the Louisiana Board of Ethics to be submitted at the hearing.

Other documents obtained by LouisianaVoice indicate that Schum, on Jan. 18, 2011, in his capacity as Director of Regional Operations for OBH, presented a report to the Louisiana Commission on Addictive Disorders on the status of OBH’s ongoing privatization efforts—efforts which led directly to the awarding of the Magellan contract.

It was at that same Jan. 18 meeting that Kliebert announced to the commission that she had been selected as the new DHH Deputy Secretary and would be leaving her position at OBH.

Schum also participated in a commission meeting on Oct. 11, 2011, at which time he gave the commission “a brief update on the Louisiana Behavioral Health Partnership,” according to commission minutes of that meeting.

Schum said that the selection of the Statewide Management Organization (SMO) had been completed and that Magellan Health Services “was the vendor selected to be the Louisiana SMO, and that the Office of Behavioral Health was currently involved in the contract negotiation process with Magellan.”

Finally, the minutes of a Magellan Governance Board meeting of June 20, 2012, indicate that Schum was employed as a Reporting Analyst for the company.

Magellan had come under sharp criticism from the Legislative Auditor’s office in August of 2013 in a report that said the administration’s privatization of mental health and addictive disorder treatment programs had created confusion and added costs for local human services district that provide the care. http://www.nola.com/politics/index.ssf/2013/08/audit_shows_privatization_of_m.html

That audit report, which examined privatization results at human services districts in Baton Rouge, Houma, New Orleans and Amite, said privatization had caused problems with claims payments which increased costs for the districts and made it more difficult for the districts to receive reimbursement for services. The report also said the districts lost money under a requirement that they use Magellan’s electronic health records system.

The Capital Area Human Services District in Baton Rouge, for example, told auditors that its administrative costs for billing claims had increased $270,000 a year since the privatization took effect. That cost was attributed to problems with claims reconciliation and collection, the audit said.

Meanwhile, the report said, DHH failed to ensure that Magellan processed claims in a timely manner, often taking weeks or months to process claims. The report also said DHH failed to penalize the company when it did not meet planning and technical benchmarks. “No sanctions have been imposed on Magellan for not meeting all required contract provisions,” it said.

Just another Jindaled state agency headed for yet another privatized train wreck.

But don’t say we never warned you.

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