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.
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