Feeds:
Posts
Comments

Archive for the ‘State Agencies’ Category

Editor’s note: State Rep. John Bel Edwards (D-Amite) sparred verbally with Commissioner of Administration Kristy Nichols and Office of Group Benefits (OGB) CEO Susan West at the Sept. 25 hearing by the House Appropriations Committee on proposed coverage plans for OGB members. Edwards, the minority leader of the House and Chairman of the House Democratic Caucus, is an announced candidate for governor in 2015.  He wrote the following piece in an effort to display his frustration over his inability to obtain definitive answers or public documents and records from the administration—and to explain how the administration, as a matter of routine, conceals information from legislators.

By State Rep. John Bel Edwards

At a committee meeting convened last month to address the fiscal “emergency,” at the Office of Group Benefits, Commissioner of Administration Kristy Nichols testified that the premium reductions in 2013 and 2014 that drained OGB’s $500 million fund balance were fiscally sound.

At that hearing, I repeatedly asked if OGB’s actuary – Buck Consultants – had recommended those premium reductions and if they recommended reducing the fund balance. Nichols and an OGB CEO Susan West repeatedly refused to answer. I, along with other legislators at the hearing, asked for copies of Buck Consultants’ recommendations.

Weeks later and I’m still waiting for those reports.

What I do have is an email from Buck Consultants to the OGB CEO that clearly states: “We did not recommend a decrease of 7% effective August 1, 2012, or an additional decrease of 1.77% effective August 1, 2013. Further, we were not asked to provide any recommended rate adjustments for any fiscal years beyond what we provided for Fiscal Year 2012/2013.”

Of course the actuary did not recommend cutting premiums by almost 9 % while health care costs are rising by 6% a year. The consultants knew that would be irresponsible and cause claims payments to greatly exceed premium revenue and drain OGB’s fund balance.

Clearly, the OGB premium reductions that ran the fund balance into the ditch were not actuarially driven. Those premium reductions were driven by the Jindal administration’s desire to spend OGB’s fund balance elsewhere in the budget. When OGB reduced premiums, 75% of the savings went to the state and the Jindal administration was able to spend that money wherever they wanted.

Now that the fund balance is drained and still hemorrhaging at the rate of $16 million a month, the Jindal administration called this self-inflicted wound an “emergency” and proposed raising costs to OGB members – those working and those retired – by $189 million. These higher out-of-pocket expenses will not be shared by the state.

Our state workers, school teachers, support workers, and university staff and faculty and retirees cannot afford this. They do not deserve this. About 25,000 of our retired OGB members are not eligible for Medicare, and many active OGB members bring home as little as $700 per month.

I asked the Attorney General’s Office for an opinion about the legality of Jindal’s effort to unilaterally impose new plans with the exorbitant out of pocket cost increases on workers and retirees. The attorney general’s opinion shows Jindal failed to comply with the Administrative Procedure Act.

This entire debacle has thankfully been slowed down to ensure public notice, public input and legislative oversight as legally required. It is critically important that the administration act in good faith and genuinely consider the testimony and the plight of affected OGB members as well as its own culpability in needlessly causing the “emergency.”

The Jindal administration must honestly answer subsequent inquiries from the public and from legislators and seek ways to lessen the impact to OGB members. The administration must ditch the ill-conceived plan changes and start from scratch with a willingness to increase premiums reasonably and share in the costs of restoring the soundness of OGB.

The recently discovered $178.5M surplus provides the means to both shore up the fund balance and reduce the cost increases on OGB members. The illegal cost increase forced on OGB members in August must be refunded without forcing members to formally request or sue for the refund.

The legislature must finally assert itself as an independent and equal branch of government to provide exactly the kind of check and balance on the Jindal administration provided by the Louisiana Constitution and demanded by the people of Louisiana. We now have this opportunity as there will be legislative oversight hearings on both the emergency and ordinary rules. We must rise to the occasion.

Read Full Post »

When Jeff Skilling took over as President and Chief Operating Officer of Enron in June of 1990, he did so only after insisting that the company convert from conventional accounting principles to a method preferred by his former employer, McKinsey & Co.

In 2001, hedge fund manager Richard Grubman said to Skilling, “You are the only financial institution that can’t produce a balance sheet or cash flow statement with their earnings.” By October of that same year, Enron had begun its death spiral in a historic collapse that would pull the giant accounting firm Arthur Andersen down with it.

The key to Enron’s failure was the mark-to-market accounting method, where anticipated revenues and profits are entered into the company’s books before they are ever received. The system allowed Enron to conceal losses and to inflate profits for nearly 11 years before its house of cards came crashing down.

On Thursday (Oct. 8), nearly seven years into his administration, Gov. Bobby Jindal (R-Iowa, R-New Hampshire, R-Anywhere but Louisiana) rolled out a new accounting formula with an alarmingly familiar ring to it.

Jindal, like Skilling, is a McKinsey alumnus.

Commissioner of Administration/Surrogate Gov. Kristy Kreme Nichols announced that the state, instead of having a deficit of $141 million as claimed by State Treasurer John Kennedy, will suddenly have a surplus of $178.5 million, a gaping difference of $319.5 million.

Nichols did not reveal how the $178.5 million was arrived at but Kennedy said the administration is switching to a cash balance form of accounting instead of the modified accrual basis employed by state governments. “If we use the methodology we have always used,” he said, “we don’t have a surplus. We have a $141 million deficit.

“The commissioner says the calculation has been inaccurate for years and it needs to be changed,” he said. “They have to explain why we have been doing it wrong all these years and why the Revenue Estimating Conference is doing it wrong.”

Nichols, an appointed state employee, was less than deferential to Kennedy, a statewide elected official when she sniped back at Kennedy, saying, “I’m surprised the treasurer is not reporting this.” She added that Kennedy is obligated to report available revenue. “He should probably do a review of the accounts to ensure there are no more outstanding revenues he is not reporting.”

Kennedy and Jindal have been at odds for years over fiscal policy, so it was no surprise to see Kristy Kreme, with her super-sized ego, get a little mouthy with the state treasurer. After all, she bolted from a House Appropriations Committee hearing on the Office of Group Benefits on Sept. 25 to take her daughter to a One Direction boy band concert at the New Orleans Smoothie King Arena where she watched from the comfort of Jindal’s executive suite.

Just as Enron misrepresented its finances for years, it now appears that the Jindal administration may be attempting the same tactic, prompting one political observer to say, “If cooking the books isn’t malfeasance, what is? The bond rating agencies and others rely on the CAFR (Comprehensive Annual Financial Report), where the year-end position is officially reported in decision making and they are not going to like this.”

Another Jindal critic asked rhetorically, “What happens when a state ends a fiscal year with a deficit of $141 million but the administration of the day pretends that there is actually a surplus of $178 million? I don’t think there is any precedent for such a thing ever happening anywhere. This is starting to sound like Enron!”

Odd as it may seem to make that comparison, the similarities between Jindal and Enron run much deeper than the latest developments surrounding the new accounting methods. Here are some points about Enron lifted from The Smartest Guys in the Room: the Amazing Rise and Scandalous Fall of Enron (Penguin Books, 2003), a probing book by Bethany McLean and Peter Elkind about the failed energy company: http://www.goodreads.com/book/show/113576.The_Smartest_Guys_in_the_Room

  • The Deutsche Bank once described Enron as “the industry standard for excellence.” Jindal boasted of instituting the “gold standard for ethics” in Louisiana.
  • When the chief accounting officer of Enron Wholesale expressed concern about wholesale electricity sales, she was reassigned. When another employee questioned Skilling on his claim that Enron was going to make $500 million, she was laid off that same day. When state employees or legislators complain or do not vote with the administration, they are teagued.
  • Pollster Frank Luntz said instability and chaos were defining features at Enron and the six company reorganizations in just 18 months were a “running joke” and that Enron’s lack of discipline was “destructive and demoralizing.” Jindal’s penchant for reorganization and reform has created a similar atmosphere within state government.
  • Enron sold assets and booked the one-time proceeds as recurring earnings. Nearly 40 percent of Enron’s 1998 and 1999 earnings came from sales of assets rather than from ongoing operations. Jindal over the past several years has sold state property, buildings, and entire agencies and turned state hospitals over to private entities.
  • Both Skilling and Jindal are alumni of the blue-chip consulting firm, McKinsey & Co., which wrote the Enron business plan and as far back as 1986, advised AT&T there was no future in the market for cell phones. McKinsey also was an advocate of mark-to-market accounting practices.
  • Both Skilling and Jindal thought—and think—like a consultant. Skilling felt that a business should be able to declare profits at the moment of the signing of an agreement that would earn those profits. But just because traders were reporting earnings under mark-to-market accounting, it did not necessarily follow that the money was in hand. See this link: http://theadvocate.com/news/10494146-123/jindal-budget-surplus-questioned
  • A Wall Street banker said of Skilling: “He’s either compulsively lying or he’s refusing to recognize the truth.” Another banker worried that Enron executives were not carrying out their fiduciary duties and questioned “sweetheart deals” negotiated by them.
  • Skilling believed that social policies designed to temper the markets were “wrongheaded” and counterproductive. “Wrongheaded” has been a favorite term invoked by Jindal whenever he has suffered setbacks at the hands of the courts on issues ranging from education reform to a revamp of state retirement plans.
  • When asked a question he didn’t like, Skilling, in a tactic learned from his days at McKinsey, responded by dumping “a ton of data on you.” Jindal’s one outstanding skill is to spew statistics and factoids in rapid-fire fashion that can overwhelm and confuse challengers.
  • Skilling, like Jindal, was considered brilliant and extremely articulate. He, like Jindal, always seemed to have the right answer and whenever he was asked about problems it was always someone else’s fault.
  • Skilling displayed no remorse for his own actions, nor did he have any sense that he hired the wrong people or emphasized the wrong values. (See above.)
  • Enron founder Ken Lay saw himself as a business visionary, much as Jindal portrays himself as a policy guru. Lay traveled the world to offer his wisdom on everything from energy deregulation to corporate ethics to the future of business. (Ditto)
  • At the end, Enron employees’ accounts were frozen even as top executives were walking away with fortunes.
  • Efforts by Enron and Arthur Andersen to avoid reporting $500 million in losses “only pushed the problem further off and added another tangle to the fragile web of accounting deceptions.” Do we really need to elaborate here?
  • Enron executives accepted the argument that wealth and power demanded no sense of broader responsibility which in turn led them to embrace the notion that ethical behavior requires nothing more than avoiding the explicitly illegal, that refusing to see the bad things happening in front of you makes you innocent and that telling the truth is the same thing as making sure no one can prove you lied.
  • Enron’s mission was nothing more than a cover story for massive fraud, much as Jindal’s administration is being exposed almost daily as a sham. The story of Enron, like that of Jindal, was a story of human weakness, of hubris and greed and rampant self-delusion, of ambition run amok, of a business model that didn’t work and of smart people who believed their next gamble would cover their last disaster—and most of all, of people who couldn’t—or wouldn’t—admit they were wrong.
  • Enron once aspired to be “the world’s greatest company” but rather became a symbol for all that was wrong with corporate America, exposing Lay’s flaws as a businessman that could no longer be hidden behind Enron’s impressive but misleading façade and Skilling’s glib rhetoric.
  • Despite Enron’s efforts to camouflage the truth, there was more than enough in the public record to raise the hackles of any self-respecting analyst (read: reporter). Analysts (read: reporters) are supposed to dive into a company’s financial records, examine footnotes and even elbow their way past accounting obfuscations. Their job, in short, is to analyze (re: report).

In the end, of course, Enron crumpled under the weight of its own corruption and mismanagement, destroying thousands of lives and even taking down one of the big five accounting firms in the process.

The Jindal administration with each passing day, with every revelation of some new scandal (the Edmonson Amendment, CNSI, the Murphy Painter fiasco, et al) and with each new flawed policy (the Office of Group Benefits debacle), is looking more and more like a train wreck that will adversely affect Louisiana citizens for years to come.

Just call it Enron East.

Read Full Post »

A survey to gauge state employee job satisfaction in the Division of Administration (DOA) should be an eye opener for Commissioner of Administration Kristy Kreme Nichols and agency heads throughout DOA—but it probably won’t be.

Meanwhile, LouisianaVoice has learned that Gov. Bobby Jindal (R-Iowa, R-New Hampshire, R-Anywhere but Louisiana) received some exciting news this week when a new poll revealed that no one was more popular than Jindal among Republican contenders for the GOP presidential nomination.

The excitement was short-lived, however, when the actual meaning of the numbers was revealed.

It turns out that in a CNN poll of New Hampshire voters, Jindal tied with Rick Santorum with 3 percent, while “No one” polled 4 percent, prompting Comedy Central’s Stephen Colbert to joke that Jindal should adopt the slogan “Jindal 2016: No one is more popular.”

Adding insult to injury, a Public Policy Poll also showed that in a head-to-head showdown with former Gov. Edwin Edwards for governor, Edwards would win with 47 percent of the vote to Jindal’s 43 percent, with 10 percent undecided.

Not the numbers on which to base an ambitious run for the White House.

The employee survey, conducted by IBM/Kenexa to rate overall job satisfaction revealed DOA employees scattered throughout 22 state agencies grouped within DOA were generally less content, scoring well below the national norm in the areas of:

  • Trust (47.8 percent);
  • Employee recognition (39.2 percent);
  • Senior leadership values (55 percent);
  • Communication from management (42.8 percent);
  • Senior leadership vision (33.2 percent;
  • Opportunity for employee advancement (28.2 percent), and
  • Employee involvement in decision making (57.8 percent).

Moreover, only 28.3 percent of respondents believed that positive change will occur as a result of the survey, compared to 31.6 percent who felt the survey would produce change and 40.2 percent who were unsure.

There were no records available to indicate how much the survey cost but The Department of Economic Development contracted with Kenexa Technology in 2011 to conduct a similar survey. The contract cost for that survey of a single agency was $19,900.

Not only did state employees throughout the 22 agencies in DOA reflect an overall pessimistic outlook, the 52.7 percent response rate (553 employees responded) was well below the IBM/Kenexa benchmark of 80 percent which served as a barometer of the general skepticism of state employees in general under the Jindal administration.

That’s certainly not difficult to understand, given the manner in which Jindal has gone about gutting agencies by laying off employees in wholesale numbers, privatizing agencies, attempting first (unsuccessfully) to slash state retirements and most recently going after medical benefits by manufacturing a crisis at the Office of Group Benefits (OGB) in order to declare an emergency to increase deductibles and co-pays which he hopes will drive retirees out of OGB

Meanwhile, Kristy addresses the morale problem by insisting that agency directors strong arm employees to participate in the Louisiana Marathon so she can win her participation bet with Department of Health and Hospitals Secretary Kathy Kliebert.

As an added incentive, she announced on Thursday that her participating employees would be treated to a barbeque cookout Saturday on the grounds of the governor’s mansion.

And who wouldn’t want one of those TeamKristy T-shirts with the nifty slogan “We Run Louisiana,” coined by Texter-in-Chief Liz Murrill?

There was no immediate word on whether or not Jindal would take time out of his doomed quest for the Republican presidential nomination to attend.

Capture

Forgive the misspelling of dimwits and asinine in the photo. We’ll explain how to use Spellcheck to our computer graphics techie over at GOHSEP. (He doesn’t care; he’s leaving.)

Read Full Post »

The state continues to face a severe budgetary crisis, the Center for Medicare & Medicaid Services has yet to approve the controversial state hospital privatization plan submitted by Gov. Bobby Jindal (R-Iowa, R-New Hampshire, R-Everywhere but Louisiana) and the proposed changes to plans offered by the Office of Group Benefits have state employees and retirees understandably concerned, afraid and boiling mad.

But you have to hand it to Commissioner of Administration Kristy Kreme Nichols: she has her priorities. She knows what’s important and she’s not about to deviate from the course she has set.

Kristy is nothing if not competitive and she is determined to be a winner—even to the point of strong arming agency directors.

The Louisiana Marathon is scheduled for Jan. 16-18, 2015, and Kristy has a bet with Department of Health and Hospitals Secretary Kathy Kliebert (who also is facing the same problem with fed approval of the infamous hospital deal) and Kristy is determined to win.

On Sept. 12, as the OGB open enrollment controversy was brewing, she sent out an email blast to “Team DOA-OTS (Division of Administration-Office of Technology Services) in which she said:

“Wondering how Team DOA compares to Team DHH? Well we’ve got a website for that! Indeed she does: http://www.thelouisianamarathon.com/doa/

(No word what the cost was of setting up the web page in terms of time and salaries to IT personnel.)

“The figures will be updated daily,” she continued. “As of now, we’re beating DHH at nearly a five to one ratio of runners!”

“Let’s keep up the momentum and reach our goal of 200! So recruit! Recruit! Recruit! And beat DHH!

“Remember! Our next big challenge is being worked up now and the reward will be well worth the wait, a BBQ with a surprise location! All participants who are registered by Oct. 15 will be eligible to attend.”

Capture

 (TO ENLARGE TEXT, LEFT CLICK ON IMAGE)

The day before that motivational message went out to all DOA employees, another email blast went out informing anxious DOA employees that the DOA team recruited “upwards of 70 DOA employees” for the first Marathon Health and Wellness Luncheon and Competition. “We also set a goal of recruiting 200 people to represent the Division for the big race,” she said.

“Today’s winners were based on percentage and total recruits,” she continued. “First, I think it should be made known that my office (emphasis Kristy’s) won both categories with a 55 percent participation rate and a total of 18 recruits. However, we will concede our casual dress days to Human Resources and OTS. HR reached a participation rate of 23 percent and OTS wins the overall recruitment with 11 runners.”

While she complimented OTS on one hand, she also said, “It should be mentioned that while OTS wins with 11 runners, there are 780 employees in the section. Come on OTS!”

Our sources on the seventh floor of the Claiborne Building tell us that Kristy Kreme has taken steps to ensure her legacy as DOA Commissioner by ratcheting up the pressure on agency directors. That pressure, which borders on a mandate, requires directors to “encourage” employees to participate in this critical competition that is all but certain to eclipse the Saints’ 2010 Super Bowl championship or LSU’s national championships of 2003 and 2007.

That would certainly offset the lack of pay increases over the past five years and improve employee morale.

And to think, all this time we believed Kristy Kreme was devoid of compassion.

Read Full Post »

A directive to craft a request for proposals (RFP) in such a way as to favor a specific vendor during a meeting of top administrative officials in 2010 may have violated the state’s bid laws and opened the door to charges of bid-rigging, according to a former State Senator who spoke with LouisianaVoice on Wednesday.

That meeting may also have been instrumental in the decision by then-Commissioner of Administration Angéle Davis to resign her position in early August of 2010.

Former State Sen. Butch Gautreaux (D-Morgan City), who was the State Senate’s representative on the Office of Group Benefits (OGB) Board of Directors, told LouisianaVoice that the meeting was held to discuss an RFP from vendors to provide health care coverage to state workers in northeast Louisiana.

Gautreaux said he was told by then-OGB Executive Director Tommy Teague that he (Teague) was directed by Timmy Teepell to “write a tightly-written RFP” so that only one company could meet the bidding criteria.

Teepell was Gov. Bobby Jindal’s Chief of Staff at the time of that meeting. Besides Teague and Teepell, also in attendance at that meeting were Jindal’s Executive Counsel Steve Waguespack who would succeed Teepell as Chief of Staff, and Davis.

Teague, contacted Wednesday by LouisianaVoice, confirmed the substance of Gautreaux’s story, though he said he was by now somewhat vague as to who was in attendance. “That happened so long ago,” he said, “but the gist of what he says is correct.”

Davis announced her resignation on June 24, 2010, though she stayed on until Aug. 8 when she was succeeded by Paul Rainwater. Teepell resigned in October of 2011.

The vendor that Teepell was most likely referring to was Vantage Health Plan of Monroe which currently holds two separate contracts with OGM worth a combined $53 million.

One of those contracts, for $45 million, is a one-year contract to provide a health maintenance organization (HMO) and hospitalization provider network plan and runs from Jan. 1, 2013 through Dec. 31 of this year. The second, for the same time period, is for $8 million to provide a Medicare Advantage plan for eligible OGB retirees. That plan, similar to ones offered by Peoples Health and Humana in South Louisiana, would be available only to those retirees eligible for Medicare. Retirees hired prior to 1986 and who have never worked in the private sector long enough to qualify for Social Security would not be eligible for the latter plan.

Vantage Health Plan has held 11 state contracts in all, totaling nearly $325 million at least as far back as former Gov. Mike Foster’s second term. The first, for $6.7 million, was for three years, from July 1, 2000, to June 30, 2003, to provide medical services for active and retired plan members.

Under Foster and into former Gov. Kathleen Blanco’s term, Vantage held two contracts: one for $46 million that ran three years, from July 1, 2003, to June 30, 2006 to provide an HMO program, physician and hospital provider network, and a one-year contract, from July 1, 2006 to June 30, 2007, was for $30 million to provide HMO services for state employees.

In Jindal’s first year in office, 2008, OGB issued a $9.925 million contract that ran for 30 months, from July 1, 2008, through Dec. 31, 2010, for Vantage to provide a Medicare Advantage plan for eligible retirees.

The following year, a $20 million contract for only 10 months—from Sept. 1, 2009, to June 30, 2010—was awarded to Vantage to provide an HMO plan to OGB members.

In 2010, Vantage received its biggest contract for $70 million for only 22 months, to run from July 1, 2010 to Aug. 31, 2012 for an HMO plan. That contract was one of four contracts with Vantage totaling $161 million that overlapped between July 1, 2010 and June 30, 2013.

Other contracts included:

  • One running from Jan. 1, 2011 to Dec. 31, 2012 for $14 million for Medicare Advantage plan for eligible retirees;
  • One for $10 million for only three months, from Sept. 1, 2012 to Dec. 31, 2012 for a medical home HMO plan for members;
  • One for $65 million for two years, from July 1, 2011 to June 30, 2013 for an HMO plan.

The obvious question is: Why Vantage?

For openers, Vantage and its officers have been active in writing checks for state politicians.

Gary Jones, president of Vantage, has personally contributed at least $20,000 to state politicians since 2003, including $10,000 to Jindal and $5,000 to former Gov. Blanco.

Michael Ferguson, a director of Vantage Holdings, Vantage Health Plan’s predecessor, gave $4,000 to state office holders, including $1,500 to Rep. Frank Hoffman (R-West Monroe) who serves as vice chairman of the House Health and Welfare Committee; Matthew Debnam, also a director of Vantage Holdings, $1,000 to Hoffman, and Terri Odom, also a Vantage Holdings director, $500 to Hoffman.

But it is Vantage Health Plan itself that is the biggest player in lining the pockets of state politicians.

Vantage, since Jan. 1, 2003, has kicked in no less than $61,900 to candidates. These include $1,000 to Jindal, $2,000 to former legislator Troy Hebert who now serves as director of the Office of Alcohol and Tobacco Control (AGC), $1,500 to House Speaker Chuck Kleckley (R-Lake Charles), $16,000 to Insurance Commissioner Jim Donelon and $5,000 to Sen. Mike Walsworth (R-West Monroe), among others.

While these contributions are all legal, they do raise the recurring issue of influence buying at all levels of government. And it is the $70 million contract in 2010 that raises the issue of possible bid-rigging. And while there may well have been no such attempt, if Teepell did indeed issue instructions to Teague to craft the RFP in such a way that only Vantage would meet the bid criteria, then the administration crossed a serious legal line for which it must be held accountable.

It was subsequent to that 2010 meeting and only weeks before the contract was awarded that Davis submitted her resignation and Teague was gone the following year on April 15, 2011.

This claim should spark investigations by the Inspector General’s office, the Attorney General, the East Baton Rouge District Attorney’s office and the U.S. Attorney’s office—the latter because federal Medicare funds were involved in several other Vantage contracts.

Read Full Post »

Former Department of Health and Hospitals (DHH) Secretary Bruce Greenstein has been indicted by the Louisiana Attorney General’s Office on nine counts of perjury stemming from a lengthy investigation of his involvement in the awarding of a $183 million contract to a company for which he once worked.

Greenstein is accused in four counts of lying under oath to the Senate and Governmental Affairs Committee during his confirmation hearings of June 8 and June 17, 2011 and five counts of lying to an East Baton Rouge Parish Grand Jury on June 3 of this year.

Greenstein was appointed head of DHH in September of 2010 and was terminated by the governor’s office on May 1, 2013 when it was learned that the FBI had begun an investigation of the state’s contract with Client Network Services, Inc. (CNSI) as far back as January, 2013 when records of the state’s contract with the company were subpoenaed.

When the FBI probe became known in late March, Jindal immediately cancelled the CNSI contract and Greenstein announced his “resignation” a short time later, though he was allowed to remain on the job until May 1.

The indictment that came down on Tuesday (Sept. 23) is the first time that it was revealed that Greenstein did not resign, but was terminated and apparently allowed to announced that he had resigned.

There was no immediate word of the status of the federal investigation of CNSI and Greenstein but legal observers said Tuesday that pressure will most likely be applied to Greenstein to cooperate with the investigation.

Assistant Attorney General David Caldwell said that while the indictment is for perjury, “it really stems from the entirety of the activity in the awarding of this contract” and the grand jury will remain empaneled to do additional work on the case.

At his confirmation hearings, Greenstein first refused to tell legislators who had won the contract to provide Medicaid billing services for the state but under unrelenting pressure and scolding from legislators, as well as threats of his not being confirmed, he finally admitted that CNSI, his old employer from Washington State, was awarded the contract.

Greenstein, however, insisted that he had built a “firewall” between himself and the selection process and had not intervened in the deliberations, nor had he had any contact with CNSI officials.

It was subsequently learned from emails and text messages subpoenaed by the committee that he had had thousands of text messages and hundreds of phone calls from CNSI officials during the bidding and selection processes.

It was also learned that Greenstein had learned that CNSI was initially not qualified to bid on the contract and that he had added addendums to the bid requirements that made the company eligible.

Counts 1and 2 of the indictment cited his testimony under oath in a response to a question from Sen. Rob Marionneaux that he did not know if CNSI was unqualified under the original request for proposals and became eligible only after the addendum was added to the bid specifications.

Counts 3 and 4 involved his responses to Sen. Karen Carter Peterson about his emails to and from CNSI founder Adnan Ahmed relative to the addendum that made CNSI bid eligible.

The remaining five counts, all for lying to the grand jury, involved charges that he lied about email communications with CNSI, about a directive to DHH personnel forbidding contact with bidders and whether or not the directive applied to Greenstein himself, about his false testimony regarding legal advice he said he received from DHH staff attorney Stephen Russo, and his false testimony regarding his confrontation with DHH and administration officials prior to his June 17 Senate testimony and their efforts to learn the truth about his contacts with CNSI.

Interestingly, none of the counts was for bid-rigging or public corruption, leaving observers to speculate while waiting to see what other charges might be forthcoming as the grand jury continues its investigation.

For the full text of the indictment, go here: INDICTMENT

Of course, he has not been convicted of any of the charges as yet but if prosecutors are able to flip Greenstein, things are going to get pretty interesting around the State Capitol and in Washington State in the coming weeks and months.

And it’s not very likely that he will take the full brunt of the charges if he has committed any wrongdoing. That is, if he can implicate others further up the line.

Read Full Post »

Two audit reports released this week by Legislative Auditor Daryl Pupera’s office focus on documentation of expenses related to hurricane recovery and costs incurred by the state for vacant office space in downtown New Orleans as part of a costly incentive package to induce Saints owner Tom Benson to keep the NFL team in New Orleans

The first indicates that the Governor’s Office of Homeland Security and Emergency Preparedness (GOHSEP) has invoices for more than $49 million in exceptions, or undocumented expenses by disaster recovery specialists in the perpetual recovery efforts of hurricanes Katrina, Rita, Gustav and Ike.

The other, which we first wrote about in February of 2013, smacks of the kind of political back scratching for which Louisiana has become famous: the state’s capitulation to New Orleans Saints owner Tom Benson as part of a costly incentive package to induce him to keep his team in New Orleans. Part of that package included the state’s leasing of office space in his Benson Towers office building at inflated rental rates, a deal that appears to border on financial irresponsibility.

The report says that auditors evaluated 4,476 expense reimbursements totaling $711 million submitted by disaster recovery “specialists,” and found 665 “exceptions” totaling nearly $49.6 million.

Pupera explained that the questioned expenses do not necessarily indicate fraud or mismanagement but rather a need for more thorough documentation and justification for the invoices. “The money has been allocated but because it’s federal money, we want to be sure that all invoices are adequately justified before they are paid so we won’t have the feds coming back later and asking for their money back,” he said.

He said the exceptions fall into five different categories: contract work ($42.56 million), force account labor ($3.8 million), force account equipment ($1.3 million), materials ($1.8 million) and rented equipment ($88,000).

Other questionable costs included:

Expense reimbursements of $6.6 million which exceeded cost estimates;

Expense reimbursements of $22.7 million not supported by invoices, receipts, lease agreements, contracts, time records, equipment logs, inventory records of other documentation;

Purchases and contracts totaling $11.6 million which did not comply with federal and state procurement requirements;

Expense reimbursements of $11.6 million which did not comply with federal and state procurement requirements;

Expenses of $2.1 million in work which did not comply with FEMA regulations and guidelines;

Duplicate, omitted and/or miscategorized expenses of $5.7 million.

Pupera said once issues raised by auditors are addressed by GOHSEP, most of the expenses will be properly documented for payment. “There may still be some exceptions at the end, but a large majority are expected to be justified,” he said.

Benson purchased the 26-story Dominion Tower in September of 2009 and re-named it Benson Tower. He made the purchase after entering into a generous—to Benson—agreement whereby the state gave away the store to keep the Saints from moving to San Antonio.

One of the stipulations, which expired a couple of years ago, called for visiting teams’ players, coaches, and support staff to pay state income taxes on one-sixteenth on their annual salaries (because they played one of their 16 regular season games in New Orleans, thus earning a 16th of their income in the state). Once that money was received by the Louisiana Department of Revenue, the department immediately issued a check for an identical amount payable to Benson.

Another obligates the state to pay Benson a cool $1 million whenever the NFL awards a Super Bowl to New Orleans.

Benson Tower is located across the street from the Mercedes-Benz Superdome. As part of the deal struck between Benson and the state, the Jindal administration agreed to a 20-year lease of some 325,000 square feet of office space at $24 a square foot for various state agencies, some of whom were paying as little as $12 a square foot before being forced to move to Benson Tower in 2011.

At the outset, the state’s obligation was about $7 million a year, $2.4 million more than the $4.6 million the state was paying before the move.

Included in the Benson Tower purchase was a 60,000-square-foot plot encompassing a one-block section of LaSalle Street and part of what once was the New Orleans Centre shopping mall. That facility is now known as Champions Square where Saints tailgate parties are held. Anheuser Busch, makers of Budweiser Beer, has exclusive rights for beer concessions at Champions Square after striking a deal with the Louisiana Stadium and Exposition District (LSED), also known as the Superdome Commission.

Benson, the seven LSED members (each of whom is appointed by the governor) and their families, businesses and business associates, the Mercedes-Benz Superdome management firm, and Anheuser-Busch distributor Southern Eagle Sales & Service combined to contribute more than $203,000 to Jindal campaigns between 2003 and 2012.

Prior to the Benson Tower deal, the average cost per square foot for state agencies leasing office space in New Orleans was $17.66. In 2012, the first full lease year in Benson Tower, the cost per square foot was $23.78. Rent at the building is tied to the consumer price index and today the cost per square foot is $25.10.

The Louisiana Attorney General’s offices were never relocated to Benson Tower because of a lack of 24-hour access to parking facilities.

The $7.4 million now being paid does not include $625,000 being paid by the state for 24,900 square feet of vacant office space in the building. That amount bumps the state’s annual rent up to $8 million per year.

The audit report said a survey of current listing information on available office space in New Orleans, the range for lease rates is $16 to $22 per square foot, including parking, or an average of $19 per square foot.

Accordingly, for the 347,849 square feet of Benson Tower, including the 24,872 of vacant office space, the state is paying an average of almost $2.1 million per year in excess rent to Benson.

And the state is locked in until 2025—an additional payment in excessive rent of at least $23 million during the remaining life of the agreement, although the lease agreement could be extended beyond 2025, according to Mark Moses, director of the State Office of Facility Planning and Control.

In his response to the audit, Moses said the Saints were “an import part of Louisiana’s culture as well as an economic driver for New Orleans and the rest of the state.”

He said the incentive package delivered to Benson with appropriate wrapping and bows “saved the state more than $280 million in addition to adding nearly $400 million in revenue expected to be generated over the life of the agreement.”

Moses also said the number of parking spaces included in the lease rate should be included with comparing Benson Tower rental rates with market rates in New Orleans.

“Commercial Class A buildings typically include one to two parking spaces per 1,000 square feet under lease,” he said. “Based on the approximate 323,000 square feet of space under lease (the auditor’s office gives the area as 348,000), the standard commercial lease rate would include between 323 and 646 parking spaces. The rental rate for Benson Tower, however, includes 900 parking spaces in the Superdome garages.”

He added that additional parking is also available for $50 per month in the state-owned Health Education Authority of Louisiana (HEAL) garage a block from Benson Tower.

Moses also pointed out that the audit report’s comparisons of market rates failed to mention that most commercial leases of Class A buildings including “pass through language,” which requires tenants to pay a proportionate share of operations and maintenance expenses that exceed base year expenses established in the lease. Pass through rates, he said, can vary depending on operating and maintenance expenses for individual buildings and according to occupancy rates. Benson Tower, he said , does not include pass through language in its lease with the state.

 

Read Full Post »

Older Posts »

Follow

Get every new post delivered to your Inbox.

Join 2,714 other followers