Louisiana Voice

A $49,999.99 contract between the Office of Group Benefits (OGB) and Chaffe and Associates appears to give the legislative auditor’s office complete and unfettered access to all records of Chaffe’s work for OGB, something it lacked in its recent audit of the Louisiana Office of Economic Development (LED).

Chaffe’s contract with OGB, executed on Feb. 16, calls for the New Orleans investment banking firm to prepare a “detailed report structured to provide sufficient information to permit OGB and the State Affiliated Parties (Office of the Governor and/or the Division of Administration) to understand the data, reasoning, and analysis underlying its (Chaffe’s) conclusion of value” of OGB.

Chaffe is charged with preparing and submitting a report setting forth its opinion of the current fair market value of the operations of OGB in preparation for Gov. Bobby Jindal’s anticipated attempt to privatize the office.

Capital News Service earlier reported that the Wall Street investment banking firm Goldman and Sachs was brought in for several weeks to assist in the preparation of a request for proposals (RFP) from “qualified financial advisors” to assess the market value of OGB.

The deadline for bids was March 7 with interviews of bidders scheduled to begin last Monday, March 14. The problem of timing arose when the administration realized it needed preliminary figures at least in time for the presentation of the governor’s proposed budget on March 11, three days before interviews were to begin.

Chaffe was given a contract to fast track the valuation of the agency in time for the budget presentation. The $49,999.99 contract amount was for one penny less than the minimum contract amount requiring Office of Contractual Review approval. CNS first reported that the contract was for $49,999 but upon receipt of a copy of the contract pursuant to a request under the Louisiana Public Records Act, it was learned that the contract was actually for an additional 99 cents.

While the contract was signed by Tommy Teague, chief executive officer of OGM, and Chaffe Managing Director Jonathan Briggs on Feb. 16, it was back-dated to Feb. 10 and runs through June 30, according to terms outlined in the document.

The contract also gives the legislative auditor the right to audit Chaffe’s work. “Chaffe grants to the Office of the Legislative Auditor, the Office of the State Inspector General, and any other duly authorized agency of the state the right to inspect and review all books and records pertaining to services rendered under this contract,” it says.

State auditors recently complained that the Louisiana Office of Economic Development (LED) denied them complete, unfettered access to requested documents during an audit of that agency.

The audit report said two meetings were held with LED Secretary Stephen Moret and the legislative auditor also sent two letters requesting unrestricted access to records but LED, citing workload issues and legal concerns, refused to cooperate, thereby preventing auditors from knowing to what extent documentation that was provided may have been compromised or whether or not they received complete information.

LED is a public agency, supported by taxpayer dollars, while Chaffe is a private entity.

R.S. 24:513 (I) provides that the legislative auditor’s authority to audit extends to “all documents, records, and files, whether confidential or otherwise.”

While appearing to give the legislative auditor carte blanche in the examination of Chaffe’s work product, the contract also takes careful measures to protect the firm’s report and work papers from public disclosure.

“Chaffe will not release any information to any third party about OGB or this engagement without OGB’s prior written permission,” the contract says, adding, “Chaffe’s work product or other written or electronic documentation regarding this engagement does not carry with it the right of publication without Chaffe’s previous written consent.”

The last sentence might be open to legal challenge inasmuch as once the report is submitted to OGB, DOA, or the governor’s office, it is presumed to be a public document under the state’s public records law and Chaffe would have no say in any decision to make the report public. The contract does appear to recognize that contingency in the next paragraph when it says that OGB agrees to notify Chaffe in writing “prior to the production of any Chaffe work product in response to a request pursuant to the Louisiana Public Records Act or any proceeding before a court or governmental or regulatory body.”

Payment terms of the contract calls for OGB to pay Chaffe a fee of $45,000 for the report, due upon delivery. The maximum payment, inclusive of other fees, expenses and copies is not to exceed $49,999.99, according to terms of the contract.

At the March 7 formal bid opening for the state’s RFP on the “qualified financial advisor,” an RFP in which Goldman Sachs played a major role in drafting, the only bidder was Goldman Sachs.

The global investment banking firm’s bid to more fully assess the fair market value of OGB and to find a buyer for the agency was for $6 million. A spokesman for DOA said that under terms of its bid, Goldman Sachs would receive the $6 million even if it is unsuccessful in securing a purchaser for the agency.

The same source said OGB’s current surplus of more than $500 million would be discounted and the state would receive $150 million to $200 million of that to help Jindal plug the gaping $1.6 billion budget gap with the purchaser retaining the balance.

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