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Archive for February, 2015

Fans of mystery, intrigue and political corruption can have a field day with DA motives in Livingston Parish investigation

Posted in Audit Reports, Auditor, Contract, Contracts, Corruption, Courts, Ethics, Fraud, GOHSEP, Lawsuits, Politicians, Waste on February 24, 2015| 8 Comments »

By Robert Burns (Special to LouisianaVoice)

When Hurricane Gustav struck south Louisiana on Sept. 1, 2008, almost three years to the day after Katrina, it set in motion a series of events that would ultimately:

  • upset the Livingston Parish political structure;
  • leave the parish facing a bill for more than $40 million in cleanup costs;
  • see a call for but never a follow up on an investigation into the formation of a fictitious corporation (at a fictitious address headed by a fictitious person) which somehow managed to be the only bidder on a lucrative contract;
  • result in the arrest of another contractor who was also serving as an FBI informant to help root out fraud, and
  • leave residents more than six years later still wondering who are the good guys and who are the bad guys.

First, some background.

The massive cleanup that followed Gustav required fast action and, regrettably, such fast action oftentimes opens the door for governmental abuse. The Federal Emergency Management Agency (FEMA) declared that to be the case in Livingston Parish’s cleanup, and the agency denied an astounding $59 million in clean-up costs.

Crucial to FEMA’s decision was Corey delaHoussaye, a contractor hired by Livingston Parish to assist with U.S. Army Corps of Engineers permitting issues nearly a year after the storm struck.  DelaHoussaye, coincidentally, also served as an FBI informant during the cleanup.  Livingston Parish District Attorney Scott Perrilloux, along with the State Office of Inspector General (OIG), have accused  delaHoussaye of submitting his own fraudulent invoices for hours they assert he did not perform work as part of his $2.3 million billings.  DelaHoussaye attorney, John McClindon, contends that the OIG got a search warrant for delaHoussaye’s residence on July 17, 2013 but delayed executing it and arresting delaHoussaye for eight days so it would coincide with a council meeting to approve delaHoussaye’s final $379,000 in invoices.  DelaHoussaye wasn’t paid, and he sued the parish for nonpayment.

Meanwhile, Perrilloux sought an indictment against delaHoussaye, but he came up one vote short in an 8-2 vote of the grand jury in December of 2013.  Undeterred, Perrilloux proceeded with a bill of information containing 81 counts, including 73 of filing false public records, but last Friday Perrilloux dropped 19 of those 73 counts.

On Monday, 21st Judicial District Judge Brenda Ricks ruled that insufficient evidence exists to proceed with a trial—a major victor for delaHoussaye.  Perrilloux presented only one witness during Monday’s hearing: OIG investigator Jessica Webb, who testified that, during times delaHoussaye charged the parish for hours worked, he sometimes was at an anti-aging clinic, at Greystone Country Club playing golf, or at Anytime Fitness working out.

McClindon, calling the OIG’s investigation “half baked,” said the OIG’s office seized his client’s computers and “looked at what they wanted to look at,” ignoring emails and failing to talk with anyone.

Similarly, at the trial of Murphy Painter, former director of the State Office Alcohol and Tobacco Control (ATC), former OIG investigator Shane Evans testified that he merely “wrote down” what ATC employee Brant Thompson said to him regarding Painter’s being “manic depressive, out of control, and selectively enforcing alcohol statutes,” and admitted the OIG did zilch to corroborate Thompson’s assertions even though it was Thompson’s initial characterization that reportedly prompted Gov. Bobby’s firing of Painter. (Subsequent details later revealed Painter’s firing was steeped in the time-honored tradition of Louisiana politics as usual.) https://louisianavoice.com/2013/02/06/emerging-claims-lawsuits-could-transform-murphy-painter-from-predator-to-all-too-familiar-victim-of-jindal-reprisals/

A company called Comprehensive Business Solutions, with an address on Coursey Boulevard in Baton Rouge, was created by someone named Patterson Phelps of Mandeville in March of 2010, according to corporate records filed with the Secretary of State’s office.

That date was just prior to the Livingston Parish Council’s issuing invitations to bid on a lucrative contract for cleanup.

The only problem is there is no such business at the address given and in fact, never was, and no one has been able to ascertain who Patterson Phelps is, other than speculation that it was an alias for a member of the parish council who was attempting to obtain the contract for himself.

A spokesperson for the Secretary of State said the corporate papers were filed electronically with payment made by credit card and that no records exist that would reveal who was actually responsible for creating the shell company.

The parish council did indicate it would instruct Perrilloux to conduct an investigation into the identity of the mystery person, but no results of any investigation, if it was ever conducted, have been made public.

Perrilloux, apparently fuming over Ricks’ ruling, said after the hearing that he would proceed with trial anyway and added, “Just because they wear a black robe doesn’t mean they know everything.” Legally, Perrilloux cannot proceed with a trial unless Ricks’ ruling is overturned by the First Circuit Court of Appeal or the Louisiana Supreme Court. He later said he would appeal the decision.

Brian Fairburn was Livingston Parish’s Emergency Manager and Coordinator for Homeland Security at the time Gustav struck.  His job was to hire monitors who would oversee operations to ensure FEMA reimbursement eligibility.

Fairburn testified that Mike Grimmer, then-Livingston Parish President, indicated to him that he had grave concerns regarding some of the itemized charges on the FEMA project worksheet and likely would not sign off on it.  When asked why, Fairburn indicated Grimmer told him, ‘“The costs are too high and we have permitting issues.’ (He) specifically told me we were taking kickbacks, that we were just out there creating work for these contractors to do.”  When asked whom Grimmer asserted was taking kickbacks, Fairburn responded, “Jimmy McCoy (Councilman from District 2), and he included me as being in on it also.” Fairburn added that Grimmer, “tried to ruin McCoy,” and that he “wanted to show that there was trouble, corruption, and crime in the parish.”  Fairburn also testified that he was terminated soon after the Gustav project but added that when Layton Ricks defeated Grimmer for parish president, he was rehired.

Brian Fairburn testified that during a meeting on November 26, 2008, Eddie Aydell of Alvin Fairburn and Associates (no relation to Brian) expressed serious reservations about proper permitting with the Army Corps and that Aydell was “scared” the Corps would assert that permits should have been issued before work was begun.

It was at that juncture that delaHoussaye was hired to assist with permitting issues.  Brian Fairburn said that McCoy said that the parish “would not” be obtaining any Corps permits and that Grimmer “shut the project down,” after which the Corps issued a cease and desist order on drainage projects.

FEMA’s attorneys were not happy with state and parish attorneys’ attempts to turn the hearing into a trial of delaHoussaye, and they strongly objected to 20 exhibits and depositions, including photographs of delaHoussaye and his son, which they said were unrelated to the hearing.  FEMA attorney Linda Litke said, “delaHoussaye was hired a year after the disaster in 2009 to basically go through the documentation and clean up the mess……  The parish attempted to criminally indict him…..They have now attempted to proceed with criminal action against him without an indictment.  It is reprehensible that they would bring this documentation in this case……DelaHoussaye is a confirmed FBI informant.  He was a whistleblower, and that is why the parish has gone after him.”

Perhaps the most riveting testimony was that of former Parish President Mike Grimmer, who testified that McCoy signed a contract addendum even though Grimmer was the only one with authority to do so.  He said he was “unaware the contract addendum was even out there.”  He indicated the addendum greatly increased the prices, including an increase in the per linear foot price.

Grimmer stated that he got calls from irate homeowners regarding crews, “trespassing on their properties….. and the trees had been taken with no permission.”  Grimmer also testified he obtained invoices for payment on work performed at local schools and North Park which had already been paid by other local agencies.  He referenced Legislative Auditor Daryl Purpera’s report which he testified that he’d requested.  He said it reinforced his concerns about documentation problems for cleanup operations. Grimmer’s response took “no exception” to the report.

That report also cited a contractor for hiring direct family members of Council members McCoy and Don Wheat which the report said may have violated ethics laws, so the matter was referred to the Louisiana Ethics Board.  Wheat, Councilman from District 6, responded angrily to the report and stated that Gov. Jindal’s GOHSEP’s Office had indicated the FEMA report was “fundamentally flawed” and on appeal and that Purpera, “continued with the same flaws and I urge you to correct your mistakes.”

Grimmer expressed shock when he attended an Office of Emergency Preparedness (OEP) meeting in May of 2009 and a $42 million tab for wet debris removal was “dropped in my lap.”  Grimmer asked for a breakdown and, on June 9, 2009, he got one and an indication that the final tab was estimated at $92 million.  He refused to sign off on the $42 million and verbally instructed all work to cease, and the Army Corps followed up with a written cease and desist order shutting down all drainage work.

FEMA attorneys then provided the panel with a handout of a power point presentation created by Grimmer entitled, “The Truth about the Debris Cleanup.”  Slides were presented depicting:

  • an oak tree removal for $8,415;
  • two other single-tree removals for $6,570 and $4,600, and
  • a pile of limbs for $2,805.

Grimmer said those types of vastly inflated costs prompted his decision to shut down the entire project.

Grimmer, over the objections of state and parish attorneys, last May told a three member arbitration panel that he alone would have been accountable to Purpera if he’d approved the project worksheet and that contractors, monitors, councilmen, and others would all be “gone and happy.”  He expanded on how the whole episode and his decision had adversely impacted him in the community, with long-time friends and business associates distancing themselves from him and people being angry at him but that, “at the end of the day,” he felt he’d made the right decision and felt vindicated by Purpera’s report.

Cross examination at that hearing focused on Grimmer’s frosty relationship with council members and his having referenced five such members as “the five amigos.”  Grimmer confirmed McCoy and Wheat were included in the five.  Grimmer admitted that delaHoussaye shared the fact that FBI investigator Steven Sollie had contacted him and that he was cooperating in an FBI investigation of the Gustav cleanup operations.  State and parish attorneys sought to get Grimmer to admit that he “had no interest” in the project’s costs until he obtained knowledge of the ongoing FBI investigation, a charge Grimmer vehemently denied.  Grimmer also indicated that, though he couldn’t remember which one, a FEMA monitor was paid $20,000 to make debris FEMA-eligible.

The panel ruled in FEMA’s favor.

If Perrilloux follows through and if the state’s and parish’s appeal hearing of FEMA’s decision is any guide, a trial is likely to air some of the dirtiest elements of Livingston Parish political corruption.  Louisiana Voice has obtained a transcript of the 2,197 page appeal hearing, and the contents are interesting, to say the least.

Perhaps that may be why delaHoussaye attorney McClindon said after Ricks’ ruling, “It would probably be best for us all to sit down and work this whole thing out.”

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Moody’s warns that Louisiana higher education can’t absorb further cuts; Gov. Bobby taking the state out of state colleges

Posted in ALEC, American Legislative Exchange Council, Budget, Economy, Education, Exemptions, Golf Courses, Governor's Office, Health Care, Incentives, Legislators, Legislature, Privatization on February 23, 2015| 23 Comments »

As our friend and former State Budget Officer Stephen Winham recently said when Moody’s and Standard & Poor’s recently moved Louisiana’s credit outlook from stable to negative, the bond rating agencies are finally waking up to what the rest of us have seen coming for some time now.

Now Moody’s has gone on record as saying what Gov. Bobby refuses to acknowledge: Louisiana’s public universities are not equipped to absorb additional credit stress expected with an anticipated cuts of yet another $300 million.

State Treasurer John Kennedy agrees while Joseph Rallo, barely acclimated to his new office after being chosen last October as the state’s eighth commissioner of higher education, tried to remain optimistic in the face of the latest announcement by Moody’s that the state’s colleges and universities are now in danger of having their credit ratings reduced if the legislature does not finally grow a set and stand up to Gov. Bobby.

“Moody’s is putting us on notice that it will reduce the credit ratings…if the legislature continues to cut higher ed funding,” Kennedy said. “We’ve cut our college campuses by $700 million since 2008. We’ve made deeper cuts than any other state. Enough is enough.”

Rallo told LouisianaVoice that it is not a matter of not having the revenue available to fund higher education, but rather it is an issue of allocation of funding. He said Moody’s is holding off taking the step of actually downgrading high education’s credit rating until June in order to see what the legislature will do to resolve the funding problem.

The problem at this point is twofold: Gov. Bobby refuses to take steps to increase revenue and legislators lack sufficient backbone to face Bobby down for fear of losing precious projects in their districts by veto. The legislature always blinks first.

Therefore, if Bobby won’t take steps to increase funding (he’s a party to that no-tax pledge the tea partiers forced down the throats of legislators and congressmen who had no taste for facing up to real problems and finding real solutions when self-serving rhetoric and pandering could get them re-elected), then the only alternative is to cut and cut again and then cut some more.

What these tea partiers and their ilk, including Gov. Bobby, refuse to admit in their manic pursuit of free market economics, is that corporate welfare (read lucrative tax breaks) costs this country many times what individual welfare costs and corporate fraud costs the nation billions upon billions more than the roughly 1 percent in documented welfare fraud (see details of the 2008 Wall Street bailout for verification). Corporations and corporate executives pay far fewer taxes, percentage-wise, than do middle- and low-income taxpayers in this country. Those are the cold, indisputable hard facts. To claim otherwise is to throw up that same tired old argument that the middle- and low-income are a drag on the nation’s economy while the super-rich produce wealth and jobs, thank you very much.

But Gov. Bobby would much rather continue doling out tax breaks that cost the state billions of dollars with little or no return than to take the necessary steps to pull the state out of the financial quagmire in which it currently finds itself and thus allow college to be affordable to the middle class and for the working poor of this state to have access to health care.

And legislators are a party to the scheme and must share the blame. Let’s consider some projects in the districts of four key legislators from the 2014 legislative session:

  • Appropriations Committee Chairman Rep. Jim Fannin: $13 million in projects, including the Jackson Parish Riding Arena and Livestock Pavilion ($195,000 last year, $1.4 million in Priority 2 and $1.6 million in Priority 5 funding;
  • Senate President John Alario: $121 million in projects for Jefferson Parish;
  • House Speaker Chuck Kleckley: $107 million in projects in Calcasieu Parish;
  • Senate Finance Committee Chairman Jack Donahue: $60 million in projects in St. Tammany Parish.

And then there are these little projects we found in last year’s capital outlay bill:

  • City Parish Golf Complex improvements (Orleans)—$9.1 million;
  • Junior Golf Training Facilities (Caddo)—$445,000;
  • Golf Course Development (Calcasieu)—$1.6 million;
  • Zephyrs Baseball facilities repair (Jefferson)—$1.5 million;
  • Professional Sports facilities improvements (Jefferson, Orleans)—$18.4 million;
  • New Orleans Sports Arena improvements (Orleans)—$41.5 million;
  • Bayou Segnette Recreation Complex (Jefferson)—$5.5 million;
  • Improvements to New Orleans Superdome—$6 million;
  • Recreational complex (Iberia)—$100,000;
  • Baseball stadium improvements (East Baton Rouge)—$1.4 million (Baton Rouge has no baseball team);
  • Improvements to amusement area, tennis center improvements (Orleans)—$1.2 million;
  • Repairs to Strand Theatre (Caddo)—$950,000;
  • Various community centers (statewide)—$11 million;
  • Various hall of fame projects (statewide)—$15 million.

One can just follow the money to see why legislators become shrinking violets when Gov. Bobby is holding that veto pen. Sure, there will be all manner of posturing, bluster and harangue but in the end, they always end up going along with whatever the governor wants.

And the governor wants what the American Legislative Exchange Council (ALEC) wants and ALEC wants to take the state out of state universities.

And Louisiana isn’t alone.

If you don’t believe that, just take a look at what is going on in Wisconsin, Illinois, Arizona and Kansas. http://neatoday.org/2015/02/19/cuts-to-higher-education-taking-public-public-universities/

  • Louisiana: Tuition costs have increased 90 percent since Gov. Bobby took office;
  • Arizona: Tuition has more than tripled while state funding has decreased by $3,500 per student;
  • Wisconsin: Like Louisiana, $2 billion tax cuts have resulted in $300 million in cuts to higher education that could eliminate the schools of nursing, law, business, pharmacy and veterinary medicine at the University of Wisconsin-Madison even as Gov. Scott Walker lobbies for $220 million in public donations to the Milwaukee Bucks to build a new team arena;
  • Illinois is losing $2.1 billion in tax revenues because of lawmakers’ refusal to extend taxes that are expiring even as colleges are facing a $400 million cut;
  • Kansas is projecting a loss of $5 billion in revenues because of reckless tax cuts and higher education, not surprisingly, is on the chopping block.

It’s not a coincidence, it’s a pattern. And what would one suppose these five states have in common besides this disturbing trend in higher education funding?

Republican governors who feel they owe their allegiance not to the voters of their states, oddly enough, but to ALEC and the Koch brothers who insist on defunding state colleges and universities in the hopes they will be forced to become private universities.

That, of course, will drive tuition up even further, necessitating much larger student loans and greater profits to lending institutions and Wall Street. It also will make a college education assessable only to the wealthy while relegating the rest of society to low paying jobs in the service sector in the absence of manufacturing jobs that have all been moved offshore.

Louisiana, says Moody’s latest assessment, has had the steepest declines in state funding in the nation from 2009 through 2014.

“As the state tries to close its widening budget gap, Louisiana public universities will face additional reductions in state appropriations,” the assessment said. “After five years of the deepest cuts to public higher education in the nation and significant expense reductions, these universities are ill-equipped to face additional credit stress.”

Moody’s said the timing and magnitude of budget cuts, the ability of universities to quickly align expenses with revenue, and the degree of financial cushion to absorb operating volatility “will factor into our assessment of ratings and outlooks for individual universities.

“Currently, Louisiana public university credit quality is lower than the median A1 nationally, reflecting historically weak state funding, anemic operating performance and limited liquidity,” the report said.

So while legislators wring their hands and gnash their teeth over the hard decisions they’re going to have to make this year, just remember no one held a gun to their heads and made them drop those golf courses and baseball parks into the Capital Outlay bill last year. And the year before that. And the year before that.

And remember that Gov. Bobby and ALEC do not (boldface that: Do Not) have the survival of our universities as public institutions as a priority item. If they are ultimately forced to become private colleges, that will be perfectly fine with them.

With all due respect to Dr. Rallo, we shouldn’t expect too much from this governor in the way of meaningful solutions to a problem that has persisted since he became governor more than seven years ago—long before the latest decline in oil prices which he conveniently uses as a scapegoat for Louisiana’s fiscal ills.

The late Wiley Hilburn, who headed up the journalism program at Louisiana Tech University, once told us that Bobby visited the Ruston campus when he was Commissioner of Higher Education under former Gov. Mike Foster, ostensibly to get an overview of university operations. Instead he spent his entire visit in Hilburn’s office playing computer games.

Perhaps that’s what Louisiana’s public colleges and universities are to Gov. Bobby—a game with students serving only as action figures for his personal enjoyment.

It certainly appears that that’s all this state is to him.

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Office of Telecommunications Management balks at Kristy Nichols demand to purchase personal Smart Phone for her

Posted in Budget, Campaign Contributions, Computers, Corruption, DOA, Economy, Ethics, Governor's Office, IT, Legislature, Legislators, Retirement, State Police on February 22, 2015| 13 Comments »

The Baton Rouge Advocate had a superb story today (Sunday, Feb. 22) that revealed that Gov. Bobby was out of state 45 percent of the time during 2014 at a direct cost of $314,144 to taxpayers in travel, lodging, meals and rental vehicles for state police security details. You can add another $58,500 (45 percent of his $130,000 per year salary) in additional costs for which taxpayers got no return while he was chasing the pipe dream of becoming president. http://theadvocate.com/news/education/11626690-63/frequent-flier

What you are about to read, though, is not about that. We’ve written about his travels before and The Advocate’s story thoroughly documents the actual costs of his travel to the extent that it would be redundant for us to beat that drum here.

Instead, this story, while much shorter than my usual posts, is simply about a Smart Phone.

And it says volumes about just how casually this administration takes its responsibility for the looming $1.6 billion state budget deficit.

It also says a lot about how certain people are not above helping themselves as they prepare to head out the door even as the institutions they are sworn to protect are swallowed by the expanding financial crisis—non unlike the captain abandoning a sinking ship with passengers still on board. We can only hope they remember to turn off the lights as they leave.

It speaks to the disdain contempt these people have for moral codes and legal constraints which require that they put the welfare of the state first and their own interests last.

And it practically shouts the double standard, the hypocrisy, and the lack of character ingrained in the makeup of the very people entrusted with running the state in the most economical, most responsible and yes, the most principled, manner possible—and their willingness to take ethical shortcuts even as they create and then walk away from a huge fiscal mess for someone else to clean up.

All this fuss over a Smart Phone?

Yes, because the entire affair is symptomatic of a much greater illness—official callousness, obliviousness and indifference—character flaws this state can ill afford in its leaders.

All over a Smart Phone.

You see, Commissioner of Administration recently decided she wanted a new Smart Phone.

Not a state-owned Smart Phone, one that would remain for her successor when she leaves office, but a Smart Phone for her very own personal use, owned by her.

And she wanted the State of Louisiana (taxpayers) to pay for it, according to our source inside the Division of Administration.

And she wasn’t shy about asking the Office of Telecommunications Management (OTM) to purchase one for her.

But OTM said no.

Nichols persisted.

OTM continued to say no.

Nichols finally relented.

But it was the very act of trying to get the state to pony up the money for a Smart Phone for her personal use that rubs salt into the state’s festering fiscal wound and calls into serious question the very integrity of the entire administration of Gov. Bobby.

It Nichols’ apparent disregard for well-defined rules and regulations disallowing just such actions that leaves the authenticity of everything she says and does subject to scrutiny and justifiable skepticism.

She should never have made such a request…and she knows it.

Her attempt at compromising her office and that of OTM, however, was only an extension of an attitude that runs throughout the upper levels of state government.

From the purchase of the luxury Eddie Bauer and Harley-Davidson trucks by former Insurance Commissioner Robert Wooley, to long-term Enterprise auto rentals for State Department of Education employees, to legislators who use campaign funds for LSU, Saints and Pelican tickets and for expensive meals, to last year’s unconstitutional attempt to bolster State Police Superintendent Mike Edmonson’s retirement by $55,000 a year, to Deputy Commissioner of Administration Ruth Johnson’s ordering of two desktop computers, a laptop and expensive furniture for her office, there is an attitude of entitlement that permeates the offices of those who impose a completely different set of standards on the rest of us.

And it’s an attitude that flows from the top down.

And the real tragedy is nobody will do a damned thing about it.

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Buck Consultants had contract with MedImpact at time it recommended MedImpact for major contract in Alabama; later repeated recommendation for $500M OGB contract

Posted in Contract, Contracts, Ethics, Health Care, Lawsuits, OGB, Office of Group Benefits, Public Records, RFP, Request for Proposals on February 20, 2015| 7 Comments »

What began as an 18-month $350 million contract with a San Diego firm with ties to former U.S. House Speaker Newt Gingrich has morphed into a 15-month $500 million agreement with the Office of Group Benefits OGB to administer the state’s prescription drug program for more than 220,000 state employees, retirees and dependents.

But details have emerged that raise questions about a possible conflict of interests involving a consulting firm retained by a teachers benefits program in Alabama and OGB in Louisiana which ultimately recommended awarding contracts to the same company by both states.

OGB’s contract with MedImpact was originally for $350 million and was to run from Jan. 1, 2014 through June 30 of this year but has been amended to $500 million and the terms shortened to March 31, which equates to an increase of about 74 percent.

Gingrich launched the Center for Health Transformation as part of an ambitious consulting and communications conglomerate to let consumers, not health maintenance organizations (HMOs), choose their doctors, medical treatments and hospitals. http://hl-isy.com/Products-and-Services/Pharmacy-Benefit-Evaluator/PBE-Abstracts/2012/MedImpact

But Gingrich failed to reveal that his idea would be financially beneficial to drug manufacturers, health insurers and other health care professionals who paid up to $200,000 annually to participate in the center’s operations.

MedImpact was one of those companies.

Gingrich’s taking money from organizations and then using the weight of his name to advance their interests was described as “a massive financial conflict of interest” by Sid Wolfe, director of health research for the watchdog group Public Citizen. http://www.washingtonpost.com/wp-dyn/content/article/2007/06/10/AR2007061000484.html

Even former Congressman Billy Tauzin of Louisiana has entered the picture as co-chair of Medicine Access and Compliance Coalition (MACC), an assortment of health care providers who advocate lower drug prices through the federal 340B Program. http://www.huffingtonpost.com/2013/08/13/billy-tauzin-drugs_n_3719468.html

Section 340B of the Public Health Service Act requires pharmaceutical manufacturers participating in the Medicaid drug rebate program to provide outpatient drugs at discounted prices to taxpayer-supported health care facilities that provide care for uninsured and low-income people. http://www.aha.org/content/13/fs-340b.pdf

Despite the magnitude of the MedImpact contract, it is the company’s connections to Buck Consultants, hired by the state to select the winner from among four proposals for that contract, which appears more than a little questionable.

OGB’s Notice of Intent to Contract for the Pharmacy Benefits Management (PBM) service, obtained from the Division of Administration (DOA) nearly four months after requested by LouisianaVoice—and then only after we filed a lawsuit against DOA—says, “Representatives of Buck Consultants, OGB’s actuarial consulting firm, provided assistance to the (selection) committee throughout the review and evaluation process.”

Buck Consultants, readers may remember, figured prominently in the controversy over DOA’s mishandling of OGB and the dissipation of more than half of OGB’s $500 million reserve fund.

Commissioner of Administration Kristy Nichols told a legislative committee that Buck Consultants had recommended that the state lower premiums for members of OGB, a move that led directly to the evaporation of the reserve fund. Communications between Buck and DOA obtained by LouisianaVoice, however, refuted Nichols’ claim.

Four firms submitted proposals to administer the prescription drug program for OGB. They were CVS Caremark, Express Scripts, Catamaran and MedImpact. CVS was disqualified because of sanctions imposed on the company in January of 2013 by the Center for Medicare and Medicaid Services (CMS).

Catamaran was the previous contractor but the company and the state have been involved in extended litigation which is expected to continue at least through June 30 of this year.

“As indicated in the Buck report, the proposal submitted by MedImpact has been determined to be the most advantageous to the state…,” said the Notice of Intent to Contract. “Accordingly, the committee recommends that the contract …be awarded to MedImpact.”

The connections between MedImpact and Buck, a global human resource benefit consulting firm that is part of the Xerox conglomerate, however raise conflict of interests issue—a relationship that LouisianaVoice traced back to the awarding of a contract to MedImpact in 2010 to administer the pharmaceutical benefits program for Alabama public school teachers, retirees and dependents through the state’s retirement system.

The Alabama Public Education Employees’ Health Insurance Plan (PEEHIP) board members, lacking pharmacy specialty training, retained Buck Consultants in late 2009 and early 2010 to handle the entire process, including writing the request for proposals (RFP), receiving and scoring the RFPs and making a recommendation for a contract.

Buck handled the entire process and gave the board the choice of contracting with MedImpact which was named by Buck primary contact person Michael Jacobs as having the best of several proposals submitted. The entire recommendation to the board took up a single paragraph in the board minutes.

The employee for the Retirement System of Alabama (RSA) who negotiated and signed the contract between the state and MedImpact later admitted in deposition that he had been involved in a relationship with a female representative of MedImpact.

But it was the relationship between Buck, Jacobs and MedImpact that warrants a closer look.

Even as he was contracted by RSA to issue, receive and evaluate the RFPs, it turns out that Buck, unbeknownst to Alabama officials, was simultaneously under a $50,000 contract to MedImpact. BUCK DEAL WITH MEDIMPACT

Jacobs, in a Dec. 23, 2009, letter to MedImpact Vice President of Business Development Bryan Boda, noted that the term of the contract was from Dec. 24, 2009, through Feb. 28, 2010, but upon written notice, “will be extended for an additional term, as mutually agreed to by both parties.”

Attached to that letter was a description of the scope of services to be provided by Buck which, among other things called for Buck to:

  • Provide MedImpact with marketplace information without disclosing anything to identify MedImpact’s proposal;
  • Collect competitor information, utilizing the internal proprietary Buck database of vendor information and drawing upon Buck’s “extensive data base” on PBM industry practices as well as outside public sources;
  • Develop a competitive employer marketplace analysis;
  • Present its final report during a final meeting with MedImpact at its (MedImpact’s) corporate headquarters.

It should pointed out that attorneys for three Alabama pharmacies excluded from participation in the prescription drug program for the teachers found it necessary to obtain the letter of agreement between Buck and MedImpact from Buck after MedImpact refused to provide the information.

The discovery of the contract between Buck and MedImpact during the time Alabama was in the process of selecting a prescription drug administrator for PEEHIP immediately raises the question of whether a similar arrangement existed between the two during the time Louisiana was selecting an administrator for OGB’s prescription drug benefits program.

An email to Buck Consultants posing that question was not answered.

MedImpact also refused to divulge what it was paying for prescription drugs, revealing only what it was charging Alabama. In one case, attorneys for the three pharmaceutical companies did obtain a document showing that MedImpact paid about $26 for an amoxicillin prescription but charged the state $96.

That, of course, also raises the question of how the billing is done by MedImpact for OGB. Does MedImpact pass along a 300 percent mark-up to OGB at a time when the state is, for all practical purposes, broke? MedImpact calls itself a transparent company but like our “transparent” governor, it has not been forthcoming thus far with details about what it pays for prescription drugs or about its contract with Buck Consultants.

And at the other end of the spectrum, it appears that not nearly enough hard questions have been asked by officials—either in Alabama or Louisiana.

After all, how can it be considered an acceptable practice for Buck Consultants to contract with a state to issue an RFP, evaluate the proposals and make a recommendation to award the state contract to a firm already contracted with Buck Consultants for Buck to collect competitor information?

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DOA to LaVoice: ‘no records responsive to your request’ though some travel costs being sought already approved

Posted in Budget, Contract, Contracts, DOA, Health Care, Lawsuits, OGB, Office of Group Benefits, Privatization on February 18, 2015| 10 Comments »

Even as the governor’s office was imposing travel and spending freezes as the state continued to struggle with an overwhelming budget deficit last fall, the Office of Group Benefits (OGB) was spending nearly $9,600 to send two of its top executives on five separate trips to California and Florida to train new phone bank employees to handle inquiries about pending changes to health coverage for state employees, retirees and dependents.

The expenditures also occurred in the wake of Gov. Bobby’s depletion of the OGB reserve fund from $500 million before privatization of the agency to less than half of that by last September.

A Division of Administration (DOA) employee with close ties to Commissioner of Administration Kristy Nichols and Deputy Commissioner Ruth Johnson revealed to LouisianaVoice last year that DOA had contracted with Ansafone which has offices to set up the phone bank to take calls from OGB members.

When we were first told of the contract, we understood the company to be Answerphone, Inc., which is in Albany, N.Y. We later learned, however, that the company was actually Ansafone with offices in Santa Ana, California and Ocala, Florida.

The dates of travel for Elise Williams Cazes and Charles Guerra to destinations in California and Florida were from Sept. 9 through Nov. 13 with Cazes running up travel, lodging, meal and car rental expenses of $5,553.74 in three trips and Guerra accounting for the remaining $4,044.33 in his two trips, records show.

Guerra is the Chief Operating Officer for OGB while Cazes, previously employed by Blue Cross/Blue Shield of Louisiana (BCBS), was appointed Group Benefits Administrator last June.

The requirements for her position as the Medical/Pharmacy administrator responsible for benefit plan management and vendor performance were written especially to her qualifications, according to our same DOA source.

LouisianaVoice made a public records request on Oct. 4 for a record of Guerra’s expenses but received a response from DOA on Oct. 13 which said, “The Division of Administration has no records which are responsive to your request.”

But when DOA finally did comply with our request on Jan. 23—and only after we filed a lawsuit against the state on Jan. 16—records indicated that OGB CEO Susan West approved meal expenses of $457 for Guerra for the dates of Sept. 30 through Oct. 5. West signed off on that approval on Oct. 10, three days prior to DOA’s denial of the existence of expense records, meaning DOA had at least partial records in response to our request.

Moreover, records show that the state was billed $732.39 for Guerra’s hotel reservations for that trip on Sept. 23, a full 11 days before our request for the records was submitted and nearly three weeks prior to DOA’s denial of the records.

Likewise, Enterprise Car Rental invoiced the state another $225.82 on Oct. 5 for lease of a vehicle during Guerra’s visit to Santa Ana.

Finally, records reveal that Shorts Travel Management, which books all travel for state employees, billed the state $675.39 on Sept. 23 for Guerra’s Sept. 30 flight to California and his return to Baton Rouge on Oct. 5.

So, bottom line, the state was billed $2,090.60 for travel, car rental, lodging and meals for the first of Guerra’s two trips to California—all well before denial our public records on the basis of DOA’s claim that no such records existed.

For Guerra’s second trip to California, from Nov. 10 through Nov. 13, DOA paid $949.84 for his flight, $290.12 for his meals, $176.77 for his car rental, and $537 for his hotel. The remaining $175 was for parking, airline baggage fees and booking fees for both trips.

Cazes ran up her $5,553.74 in charges for two trips to California and one to Gainesville, Florida, as well as several trips for meetings in various localities in Louisiana in her personal vehicle.

She cost the state $787 for meals for the three out-of-state trips, along with $506.74 in parking and in-state travel in her vehicle, $2,452.34 for airline tickets, $532.80 in car rental fees, $1,197.86 for hotels and $77 in ticket booking fees.

In addition to the $9,598.07 in travel, lodging and related expenses for the two, the state also entered into a $1 million contract with Ansafone to hire 200 persons in California and Florida to field calls about sweeping changes being proposed for OGB at the time.

The “training” that Cazes and Guerra conducted on their trips consisted of a few days of reading handouts distributed to new employees hired to man the phone banks. At the end of training and the first day actually on the job the employees were informed that what they had been told in the training sessions was wrong and the Ansafone web page containing its “Five Star Recipe for Customer Service Failure” was subsequently taken down.

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