Louisiana Voice

Opponents of the proposed privatization of the Louisiana Office of Group Benefits (OGB) got two major boosts last week, first when Wall Street international banking firm Goldman-Sachs appeared to be having second thoughts about its involvement and later when state judges weighed in to oppose the sale.

Both developments could pose major jolts to Gov. Bobby Jindal’s efforts to place OGB on the auction block.

As opposition to the sale of the agency, along with its $500 million accrued surplus grows, Jindal is encountering ever-mounting opposition to his plan. Virgil Orr, retired vice president at Louisiana Tech University in Ruston and a former state representative, has fired off a letter to Attorney General Buddy Caldwell seeking legal guidance in fighting the sale.

Judges from across the state attended a two-day conference at the Hilton Lafayette and Towers in Lafayette on Thursday and Friday of last week and the judges, who are themselves members of Group Benefits, adopted a formal resolution that was forwarded to Jindal asking him to reconsider the sale.

Earlier in the week, Goldman-Sachs appeared to balk at accepting a $6 million contract to assess the value of OGB and to find a buyer for the agency after having helped to write the specifications for a request for proposals (RFP) and subsequently becoming the only bidder on the RFP.

Formal opposition, of course, is no guarantee of success with the Jindal administration. In 2008, both the Louisiana Municipal Association and the Louisiana Police Jury Association objected to Jindal’s signing Act 433 into law. The Consumer Choice for Television Act allowed AT&T to sell cable television service without the necessity of obtaining local franchises from city councils, parish councils or police juries. In effect, the act removed from local and parish governmental entities their authority and responsibility to negotiate cable franchise agreements with companies that relied on locally-owned public infrastructure such as utility poles.

Despite the fervent opposition from the municipal and parish associations, Jindal signed the act into law.

AT&T subsequently contributed $250,000 to Jindal’s wife’s charitable foundation, the Supriya Jindal Foundation for Louisiana’s Children.

Louisiana Supreme Court Chief Justice Kitty Kimball reportedly was in attendance at the judges’ Lafayette conference.

Members of the judges association’s Legislative Committee include Chairman Bob Morrison of the 21st Judicial District Court (Livingston, Tangipahoa, and St. Helena), Raymond Childress of the 22nd JDC (St. Tammany and Washington), Rosemary Ledet of the Orleans Civil District Court, Mary Becnec of the 40th JDC (St. John the Baptist), Ford Stinson, Jr. of the 26th JDC (Bossier and Webster), Jay McCallum of the 3rd JDC (Lincoln and Union), Toni Higginbotham of the East Baton Rouge Parish Family Court, Scott Crichton of the 1st JDC (Caddo), Harry Randow of the 9th JDC (Rapides), and Mike Canaday of the 14th JDC (Calcasieu).

The wording of the resolution was not immediately available but Capitol News Service has submitted a formal public records request of Commissioner of Administration Paul Rainwater and Jindal’s office for a copy of the resolution and any letter that may have accompanied it to the governor’s office.

A similar request was made for any reports generated by Chaffe and Associates of New Orleans after it was awarded a contract for $49,999.99 (one penny less than the amount that would require approval of the Office of Contractual Review) to provide preliminary figures about OGB assets in time for Jindal to submit his proposed 2011-2012 budget.

Despite reports that Chaffe submitted a report draft, Rainwater’s office has twice denied that any such documents have been received by his office. One report also said that the legislative auditor’s office had also been denied access to the Chaffe report if it does, in fact, exist.

Goldman-Sachs, after news stories about its involvement in both writing the specifications for the RFP and then submitting the only proposal, reportedly told the Division of Administration (DOA) during a conference call last Monday that it would opt out of the $6 million contract unless the state agreed to indemnify the banking giant from liability from any litigation arising from the proposed sale of the agency.

Such an agreement would expose OGB to legal liability and require the state on the one hand to spend money to defend an agency that, on the other hand, the state is trying to dismantle.

When told the state would not agree to those terms, representatives of Goldman-Sachs said they would have to check with their legal department and get back to DOA officials.

As of Friday, Goldman-Sachs had not called state officials back.

There are reports circulating around the state that at least two groups, possibly three, are considering filing class action lawsuits against Jindal, Commissioner of Administration Paul Rainwater, the Legislature, and OGB to stop the planned sale. One of those is the Retired State Employees Association of Louisiana.

Orr, contacted in Ruston, said he had sent a letter to Attorney General Buddy Caldwell to explore legal options open to members of Group Benefits.

“I asked the attorney general to advise us on three questions:

“What is the legality of Jindal’s proposal to sell Group Benefits? What course of action is open to us if Jindal’s proposal is not legal? And what should we do if it is legal?”

R.S. 42:854.5(A) says, in part, “any money received by or under the control of the Office of Group Benefits shall not be used, loaned, or borrowed by the state for cash flow purposes.” (emphasis added.)

Under Jindal’s plan, the state would take $150 million to $200 million of OGB’s $500 million surplus to help plug the gaping $1.6 billion state budget deficit with the purchaser of the agency getting the remainder.

Orr said he was concerned with the direction Jindal is taking the state in his efforts to privatize state prisons and OGB. The Office of Risk Management was privatized last July at a contract cost of $68 million to the state but F.A. Richard and Associates, the firm that submitted the winning bid and was awarded the contract, has already requested a $7 million contract amendment.