During the Watergate hearings nearly 40 years ago, U.S. Sen. Howard Baker (R-Tenn.) asked that now-famous question, “What did the President know and when did he know it?”
That question today could be addressed to Commissioner of Administration Paul Rainwater, Office of Risk Management (ORM) Director J.S. “Bud” Thompson, and F.A. Richard & Associates (FARA) CEO Todd Richard after revelations on Thursday that FARA had been sold to Avizent, a national claims and risk management company in Dublin, Ohio.
FARA last year was the winner of a bidding contest to take over ORM’s claims, loss prevention, and subrogation operations in the first of Gov. Bobby Jindal’s ambitious plan to privatize everything in state government that moved and to cut funding for those that remained stationary.
Under the contract, “not to exceed” $68.2 million, that went into effect on July 1, 2010, FARA was to phase in its takeover of ORM over a five-year period.
The Loss Prevention, Subrogation, and Worker’s Compensation units were the first to go over to FARA and General Liability was scheduled for the transfer later this year.
In the meantime, only eight months into its contract, FARA, with the blessings of Thompson, requested a contract amendment of $6,811,971, bringing the new contract to “a maximum amount of $74,930,868.
Under law, the Office of Contractual Review may approve contract amendments of up to 10 percent without legislative approval.
The contract amendment was conveniently requested—and approved by Contractual Review—for precisely 10 percent.
The Office of Contractual Review is under the direct supervision of Rainwater, also convenient.
Both facts were not lost on Rep. Jim Fannin (D-Jonesboro), who chairs the House Appropriations Committee. He was understandably miffed that neither ORM nor DOA requested approval of the amendment from his committee, choosing instead to circumvent the intent of the legislation by keeping the amendment to exactly 10 percent.
Adding insult to apparent injury, Patti Gonzales, assistant director of ORM and who works immediately under Thompson, calmly informed Fannin that the full $6.8 million amendment wasn’t even necessary because it was anticipated that only about $2 million of that would actually be spent.
That could have been because the 10 percent clause is a one-time Get Out of Jail Card. Any subsequent amendment requests, no matter the amount, must come before the Appropriations Committee. Gonzales knew that and admitted as much to Fannin and the committee at its May 12 hearing on the contract amendment. It was a classic case of ORM hedging its bets.
Thompson sat behind Gonzales at that hearing, choosing not to speak. That was probably advisable, considering the near disaster last year in allowing him to testify before the same committee when it was considering the privatization proposal.
Thompson was dressed down by Sen. Ed Murray (D-New Orleans) during the morning session of the committee when Thompson, with many of his soon to be out-of-work employees sitting behind him in the hearing room, quipped that once the privatization took place, he would remain in his job to oversee operations and would “probably need a raise.”
That comment came on the heels of a legislative decision to forego civil service merit salary increases beginning on July 1, 2010—a policy that has been carried over into 2011 because of the state’s fiscal crisis.
Murray delivered a withering reprimand to Thompson that the committee was considering a serious matter and that he should act accordingly. Thompson did not attend the afternoon committee session after that public relations fiasco.
He apparently learned his lesson because at last week’s hearing, he allowed only one ORM employee to attend, citing in an email to ORM employees the rising Mississippi River and preparations for the transfer of the General Liability section to FARA as his reasons.
In a Feb. 28 memorandum to Rainwater, Thompson requested Division of Administration (DOA) approval of the contract amendment.
“Since the implementation (of the FARA takeover) began, ORM has begun experiencing difficulty in retaining our experienced adjusters, as many are seeking employment elsewhere in state government,” the memo said. “We are currently utilizing contract adjusters to supplement our in-house staff for lines not yet transitioned to FARA, at considerable expense to the state and with a significant loss of efficiency.”
So, what did he expect “experienced adjusters” to do? Their jobs and benefits were being yanked from beneath them. Did he realistically expect them to quietly remain on their jobs until the final shoe fell? ORM, as of last July 1, was a sinking ship and rats, as the expression goes, are predisposed to leave. Did he not take that into account when ORM and DOA first issued the request for proposals (RFP) or later when the contract with FARA was negotiated?
All that would seem surreptitious enough but now comes word that FARA is selling out to Avizent, which presently has 35 offices in 25 states. Its Baton Rouge office has one employee.
One has to wonder, in retrospect, about that $6.8 million contract amendment. Was it truly essential for FARA to continue its takeover, which it now turns out, was fairly short-lived? Or was it necessary to bolster the revenue side of FARA’s ledger in order to make the firm more attractive to a buyer?
Did Rainwater know of the impending sale when he signed off on the amendment request? Most probably.
Was Thompson aware of what was taking place when he made the request for the amendment? If not, he should be fired. No one in the position of running a multi-million dollar agency should operate in a total vacuum and be allowed to remain.
If he did know, he should be fired. If he knew, he had an obligation to so inform Fannin and his committee last week. Instead, he sat quietly by and said nothing.
Did Richard know the formal announcement of the sale of his company was merely days away as he sat next to Gonzales at last week’s committee hearing? Of course he did.
These transactions don’t take place over a matter of a few days or weeks. It takes months, sometimes years, of poring over books, reviewing clients, debts, and staffing for such decisions to be made.
Of even greater importance, what does the sale mean to the remaining ORM employees? Or for that matter, what does it mean to those who have already gone over to FARA?
The original contract called for FARA to retain ORM employees for at least a year at salaries comparable to the industry standard.
Will that requirement be carried forward in a new contract with Avizent? Or will a new contract even be required? Most likely. Avizent, after all, now has only a one-person office in Baton Rouge. It will need to obtain employees from somewhere. As to salaries and benefits, those remain unanswered questions.
Rainwater, asked by email to address the sale, has instead chosen to ignore LouisianaVoice inquiries. FARA also has been strangely silent. Only Avizent, through a spokesperson for Avizent CEO Tom Watson even so much as acknowledged that company was “in the process” of acquiring FARA.
Of course, since FARA contributed $10,000 to Gov. Bobby Jindal’s 2003 gubernatorial campaign, all is quite likely to be forgiven.
Louisiana Voice 
Why are there no criminal charges filed against these lying toadies? Where is the investigation to expose the actions of Rainwater and Jindal? LouisianaVoice is the only source I know of. The legislature needs to kick butt.
I know what we as taxpaying citizens of Louisiana SHOULD do, but we are apt to go to prison for that action. Therefore, what can we legally do about this?
Please don’t tell me to contact my legislator as he/she will be too busy waiting in line to receive their “hush money” or “walk away money”, or their “I’ll not vote to sanction you for $XXX payable to my re-election campaign fund money”.
Is this Jindal’s idea of ethical behavior and transparency? If so, heaven help us if he ever backslides.
I think I’ll move to Libya or Somalia or even Syria where, comparatively speaking, decent, honest leaders are in charge. Under Jindal and Rainwater, Louisiana has gotten too corrupt for my liking.
Keep it rolling Tom, because if you do not, no one else will:)
i don’t know if anything illegal was involved, but i do know that all taxpayers should want to know just what’s going on… these goons don’t really care about the state, all they care about is furthering their agenda on the backs of those not-so-well-off… i also know the b.r. advocate is in jindal’s pocket, who knows what other “news”papers
Paul Rainwater was on the Jim Engster show on WRKF this morning. He managed to deflect all criticism launched at him and ended answering a softball call about consolidating housing programs that seemed to be a setup – if so, it was serendipitous for him given the number of people trying to get through. I don’t know Mr. Rainwater, but I have to say he is slicker in his evasiveness than most of his predecessors – a trait that serves him well in this administration. If you missed the show and want to hear it, it will be replayed at 8 tonight and Rainwater was the second guest (if you can stand to listen to “Brownie”, the first guest, for 15 minutes or so.
Where is our Attorney General??? If the state Attorney General’s office will not get involved in this, maybe the feds will take a look!! I bet they can find something.
The attorney general may not initiate an investigtion unless asked by the local district attorney. It is the duty of the local DA to launch the investigation unless he prefers not to get involved. At that point he may request assistance from the AG. The proper state agency to investigate this would be the Inspector General’s office.
And of course, there is always the U.S. Attorney’s office which may conduct its own investigation of any possible federal violations. Thus far, however, there have been no allegations of federal violations. The primary criticism by LouisianaVoice is of duplicity and deception of state employees on the part of ORM and DOA.
This is exactly what will happen if Rainwater and co. get away with what they are trying to do to our health insurance program.
WoW! Talk about setbacks. Now the State of Louisiana is going to pay the great state of Ohio to run its risk management. There are no corporate taxes and with no employees on the ground no local or sales taxes collected, no pride. Wait until the Administration announces a $68 million dollar tax incentive for this company to move employees to Louisiana. Of course, Ohio has electoral votes as the Gov climbs the ladder and lets the rest of us figure it out.
It seems like we have a very misinformed author as well as some readers which left comments. Firstly, ORM would not have been privatized it it were sufficient. Take a look at legislative audits for ORM and then try to justify your position. Secondly, Avizent bid on the ORM contract and lost it. Had they put in a better bid, Avizent would have had it from the get go. Thirdly, FARA being bought by Avizent means that Avizent will have to expand quickly to support the ORM contract? You think the FARA employees are just SOL? Clearly your knowledge of mergers and acquisitions is at an amateur level. Actually, it seems as if your entire business sense is a bit skewed. Lastly, get a hold of the ORM/FARA (now ORM/Avizent) contract. Read it. After you’ve read it, read it again. After you’ve done that, try to clear up some of your misconceptions.
First of all, we have the contract, have had it since it was signed. It said, in black and white, that FARA would be paid a “maximum” of $68 million. Now comes the amendment that says FARA will be paid “no more” than the current price of just under $75 million. Moreover, we have all the original bids for the ORM takeover and we also know that FARA did not have the best bid initially until it was tweaked in order to award FARA the contract. Now, with a $7 million amendment, it certainly seems that FARA did not have the best bid after all. ORM was an entirely self-supporting agency, receiving no funding from the state general fund budget. Moreover, we know several ORM employees who have 20 years and more with the state who will not be able to continue their state retirement contributions which, of course, adversely affects their retirement. They will be losing their state health benefits with no assurance that they will continue to have coverage. No, we don’t think the FARA employees are necessarily “SOL,” as you so eloquently asked but their futures as well as those still with ORM are certainly up in the air. We also watched as Bud Thompson, Patti Gonzales, and FARA CEO Todd Richard appeared before the Appropriations Committee little more than a week ago and said absolutely nothing about the merger. They had a moral obligation to inform the committee of the pending sale.
Perhaps our knowledge of mergers and acquisitions is at “an amateur level” and our entire business sense “a bit skewed,” but at the same time we take some pride in the fact that we also have not yet perfected the art of deception.
How has the contract held up thus far in terms of performance and fulfillment of the terms? In simpler terms, how has the contractor performed? You seem to be in the know, so give me an honest status on the contractor.
Why was the 10% provision even utilized? Was it a conspiracy to get one over on you? The contract doesn’t exist to screw state employees. It is exists to benefit the great State of Louisiana. Think about all sides of the situation before you spout of this paranoid assumption nonsense.
You sound like a scorned state employee who feels entitled. Moral obligation? Business operates effectively by not announcing megers until the deal is sealed. In this case, the deal got sealed and you’re upset that you didn’t know about it a week ahead of time? Again, a fallacy of state employee logic.
I could totally understand if FARA was just sucking…. if the contract was just a total waste. But for you to sit there and give the reasoning that state employees can’t fully benefit is ridiculous. It’s the very reasoning that ORM was outsourced in the first place.
You say ORM was an entirely self-supporting agency, receiving no funding from the state general fund budget, but again… did you check the Legislative audits of ORM? Why was it outsouced? Certainly not to screw you.
How can you even comment on this situation when you know absolutely nothing of it at all? To say their futures are certainly up in the air is proof that you’re just assuming.
If you are to assume anything, the contract remains in tact. The only change is you’ll be saying “Avizent” instead of “FARA” is saving the state millions. Just because it is a state function operated by a private company does not entitle you to full transparency and up to date knowledge of business transactions. There are clients other than the State of Louisiana which FARA has…. think in terms of business instead of promoting the notion there are back room deals and conspiracies.
history has shown that every contract between state and a private entity isn’t always a benefit to the state. i would agree the actual performance under the fara contract should be fairly evaluated and made public. the turn of events regarding the 10% contract increase and impending sale do create questions, don’t they? the reason giving for asking for the increase was that state employees working for risk management are leaving before the operations are fully turned over to fara. it would seem that should have been anticipated and factored into the original bid…