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Rainwater throws Kipper, Brady under the bus during confrontational Senate confirmation hearing

Posted in Governor's Office, House, Senate, Legislature, Legislators, OGB, Office of Group Benefits, Privatization, Public Records, Teague on June 1, 2011| 17 Comments »

Members of the Senate and Governmental Affairs Committee, led by Sen. Ed Murray (D-New Orleans), grilled three of Gov. Bobby Jindal’s appointees in 40 minutes of tense confirmation hearings on Tuesday.

The committee will make its recommendations on the confirmations of Commissioner of Administration Paul Rainwater, Deputy Commissioner Mark Brady, and Office of Group Benefits (OGB) CEO Scott Kipper to the full Senate which will then vote on those recommendations.

It didn’t take long for Rainwater’s survival instincts to kick in at the expense of Kipper who, it seemed, had been instructed to say as little as possible but soon found himself in trouble as members of the committee quickly smelled blood and moved in for the kill.

The thrust of the questioning of Rainwater and Kipper (Brady, who spent the first few minutes of questioning fidgeting in his chair, was all but ignored) centered around administration efforts to privatize OGB and the existence and availability of a report generated by a New Orleans firm.

Chaffe and Associates was hired in March by the administration to generate a rush financial analysis of OGB preparatory to the receipt of proposals from financial analysts with experience in negotiating sales of insurance companies.

Committee staff members had received an email from Paul Holmes, an attorney with DOA, that was identical to one he sent LouisianaVoice on Friday (see May 31 posting) that denied access to the Chaffe report, a denial not well received by committee members.

During the questioning process, Rainwater threw his two subordinates under the bus by denying knowledge of conversations between Brady and Kipper relative to keeping the Chaffe report from the public. Rainwater seemed content to leave Kipper twisting in the wind while he busied himself with texting.

Requests by LouisianaVoice for a copy of the Chaffe report were sent directly to Rainwater which would seem to weaken his deniability of any knowledge of efforts by Brady and Kipper to keep the report confidential.

That comment came after Kipper, appearing to be taking directions from higher ups to reveal as little as possible to the committee, first said he had no knowledge that the Chaffe report existed and that he wouldn’t have wanted to see it at any rate because of an existing request for proposals (RFP) on the OGB privatization. He said he feared the Chaffe report might jade his decisions on the RFP if he knew its contents.

Rainwater spent much of the time Kipper was testifying taking notes and openly texting at the witness table, never once coming to the aid of his subordinate to clarify an answer or to assist Kipper when he faltered. Instead, he appeared perfectly willing to let Kipper suffer the wrath of the committee for actions perpetrated by his (Rainwater’s) office.

Murray was incredulous that Kipper, as CEO of OGB had not seen a report that potentially “could affect thousands of people.”

But that was not the most damaging part of Kipper’s testimony. Earlier, he bantered with Murray over the very existence of the report and quickly lost credibility with the committee.

When he asked Kipper if a third party had been brought in to conduct a financial analysis of OGB, Kipper replied, “Not that I’m aware of.” That answer set off a firestorm of questioning from several senators.

Murray later came back to say, “I’m told a report was done but the Legislative Auditor was denied access to that document because it was part of the ‘deliberative process.’ Now we have another report (Chaffe) that was requested by members of the Senate staff and you won’t turn it over. Are you telling this is not true?” he asked.

“I’ve not seen the report,” Kipper said.

“So it does not exist?”

“I have no knowledge that it exists.”

“You’re the CEO of OGB and you’re telling me you have not seen a report that would impact OGB? Other people have seen it. When will you see it?” Murray asked. “Have you asked for it?”

“I have not.”

“This is really disturbing to me that you, as CEO of OGB, have not seen a report that is out there that is so important to so many people,” Murray said. “The report might tell you there is no need to privatize OGB. Don’t you think you need the benefit of that information? Who suggested that Chaffe do the report?”

“I don’t know,” Kipper said.

“You don’t know that either? Who’s running OGB?”

In fairness to Kipper, the Chaffe contract was issued prior to the firing of Kipper’s predecessor, Tommy Teague, on April 15.

Sen. Karen Carter Peterson (D-New Orleans), vice chairman of the committee, raised the issue of transparency with Rainwater.

“Did you commission the Chaffe report?” she asked.

“Yes,” said Rainwater.

“Wouldn’t it be helpful for Mr. Kipper to have the report?”

“He will get the information, obviously,” Rainwater said.

“No, it’s not obvious,” she said. “Why would the CEO of the agency not have the information before making a major decision on the agency’s fate?”

“It (the Chaffe report) was more of a validation of what we already had,” Rainwater responded, not saying that the data validated had been compiled with the aid of Goldman Sachs which helped draft the original RFP on which Goldman Sachs was the lone bidder. “The numbers came back as we thought they would,” he said.

“We’re looking in this hearing at character and judgment. How can I have confidence in confirming anyone if I don’t have confidence in their character, judgment and integrity?” Peterson asked.

“Transparency is something touted by the administration but to withhold information from key department officials is significant.”

Sen. Jack Donahue (R-Mandeville), directing his remarks to Rainwater, noted that Kipper had testified that he did not want to review the Chaffe report.

“That was a conversation between Mr. Kipper and my deputy commissioner (Brady). I was not aware of those discussions.”

“If you spent money on this report, it would seem that everything should be on the table,” Donahue said. “I’m surprised by your answers to tell you the truth.”

“I’m surprised by the conversations my staff has had,” Rainwater countered, again revealing his willingness to deflect criticism onto his lieutenants for actions that, ultimately, were his responsibility.

Peterson returned to Kipper’s testimony about his lack of knowledge about the existence of the Chaffe report. “You testified you didn’t know if the report existed,” she said. “You raised your right hand and took an oath. Are you sure you don’t want to try again?

“The first element in these jobs is integrity. I don’t think that of you, Mr. Kipper. I think you’re fudging. I think you’re teetering and for someone in your position, there is a fundamental element of trust necessary. I don’t have that today. Do you want to try again on that report?”

“Senator, I’ve not seen the report,” Kipper said.

“Do you know the report exists?” she asked.

When Kipper hesitated, she again asked, “Do you know the report exists?”

“I think the report exists,” he responded.

At that point Murray said, “Even after the commissioner (Rainwater) told you the report exists, you still don’t know it exists?”

“I believe it exists,” Kipper said again.

“This is absolutely amazing to me that you can sit there and give answers like that,” Murray said.

“It disturbs me that the CEO of OGB sat there and I had to pull it out of him that the report even existed and even as I was asking Mr. Kipper those questions, his bosses (Rainwater and Brady) sat right next to him and said nothing,” he said.

“I hope you change your attitude,” he said to Kipper. “If you are confirmed, I hope you will take your job more seriously and treat us with more candor.”

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Ruminations on taxes, sales, public records, and blivets

Posted in Governor's Office, House, Senate, Legislature, Legislators, OGB, Office of Group Benefits, Public Records, Retirement, Taxes, Transparency on May 31, 2011| Leave a Comment »

BATON ROUGE (CNS)—When is a tax not a tax?

When is the old bait and switch scam not a scam?

When is a sale not a sale?

When are public records not public?

The answer to all of the above: when Gov. Bobby Jindal or Commissioner of Administration Paul Rainwater says they’re not.
Got it?

Good. Discussion over. Let’s go home.

Hold up a minute, Guv, it ain’t quite that cut and dried. Sure you can rattle off statistics that tell us just how good your medicine is going to make us feel—after the nausea it induces passes. We’ve heard you do it in that non-stop staccato delivery of yours. But you know what they say: there’re lies, there’re damned lies, and there’re statistics.

Your statistics, figures, and projections amount to little more than what we called a blivet back in the day. We know you’re Ivy League-educated, so it’s pretty much a sure bet you don’t know what a blivet is, so we’ll tell you: a blivet is five pounds of excrement in a one-pound bag.

Let’s take the questions one at a time and examine them more closely.

When is a tax not a tax?

Jindal has repeated his “no tax” mantra so often that we hear it in our sleep. He killed the Stelly Plan and he has vowed to kill a renewal of the state’s tobacco tax, currently the second-lowest rate in the nation.

Yet he supports HB 479 that would require some 52,000 state employees to increase their contribution to the state pension system by an additional 3 percent, from 8 percent to 11 percent, beginning July 1.

It’s not a tax, it’s a fee increase. Any fool should be able to see that.

When is bait and switch not a scam?

Notwithstanding the fact that it wasn’t state employees who created the current fiscal crisis, that might make sense for employees to chip in a little more—if raises weren’t frozen and the money was to be used to put the retirement system on sounder financial footing—but it isn’t.

The 3 percent increase would mean employees would be paying an additional $70 million per year in premiums, which will result in roughly $25 million of state general fund savings. That $25 million, however, would not mean additional benefits or in a paydown of the pension’s unfunded liability. Instead, it would be used toward reducing the current $1.6 billion state budget shortfall. A classic example of robbing Peter to pay Paul.

That’s the same shell game that was used when $393.5 million was subtracted from the $3.3 billion Minimum Foundation Program for public education before the combined $393.5 million in 8(g) funds, state lottery proceeds and EduJobs funding were added back in. The net gain to education? Zero.

Both look an awful lot like looting and pillaging to us, but they’re not. They’re sound fiscal policy because Jindal, in amongst all his statistics, says so.

When is a sale not a sale?

Apparently when it involves the Office of Group Benefits (OGB).

Rainwater has testified before the Senate Retirement Committee that he does, doesn’t, does, doesn’t want to sell OGB, that he will, won’t will, won’t put the agency up for public auction.

Meanwhile, despite hostile hearings by the Senate Retirement Committee—three of which Rainwater simply boycotted—and ample evidence that OGB is a well-run agency that state employees would rather just leave alone, Jindal and Rainwater blithely plunge ahead hell-bent with their plans to privatize the agency despite a total lack of solid evidence that said privatization would result in any savings.

At stake in the meantime are the futures of about 150 OGB employees that Rainwater says must be cut. One of those employees, former OGB CEO Tommy Teague, who brought the agency from a $60 million deficit to its present-day $500 million surplus, was fired on April 15. No reason was given for his firing other than his “lack of leadership.”

What part of $60 million deficit to $500 million surplus in five years don’t you understand, Mr. Rainwater? Mark Brady? Bueller? Gov. Jindal? Anyone?

His latest pronouncement was that the state was seeking a third party administrator (TPA) for the state’s Preferred Provider Organization (PPO) and possibly for the state HMO, now administered by Blue Cross/Blue Shield (BCBS). Of course the state’s contract with BCBS is presently in litigation with Humana claiming it was outmaneuvered when the state allowed BCBS to submit a proposal that was not within the parameters set forth by the state’s request for proposals (RFP).

Thrown into the mix was the decision by the Division of Administration (DOA) to do a quickie financial assessment of OGB by issuing a contract to a New Orleans company even as the state was soliciting proposals through an RFP for a financial analyst with experience in negotiating sales of insurance companies. (There’s that word “sale” again; it just won’t go away like Rainwater now wishes it would.)

That contract, for $49,999.99, which just happens to be one penny less than the $50,000 that would require approval of the Office of Contractual Review, was issued to Chaffe and Associates of New Orleans back in March.

Repeated requests for a copy of Chaffe’s report have met with denials that any report had been received. Those denials were reminiscent of the lawyer who, when confronted by a man who said he’d been bitten by the barrister’s dog, responded in typically lawyer fashion, “My dog doesn’t bite. I keep my dog inside my house. Besides which, I don’t own a dog.” But then, at a recent Senate Retirement Committee hearing, a DOA spokesman let slip a mention of a preliminary report.

Aha! Time for LouisianaVoice to make its fourth request for the report.

When are public records not public?

A former request for the document was made to Rainwater under the State Public Records Law which stipulates that the custodian of a public record has three days in which to respond to any such request. Our request was made on May 24. On May 27, a gentle reminder was sent, along with a copy of the statute which laid out civil and criminal penalties for non-compliance. Those penalties include fines, payment of the requestor’s legal fees and court costs, and jail time.

At 4:52 p.m. on May 27 (last Friday), Paul Holmes, Attorney 4, Division of Administration, Office of the General Counsel, responded thusly:

“A report generated by Chaffe & Associates was received on May 25, 2011. The report is privileged as part of the deliberative process and is exempt from disclosure under R.S. 44:4.1 as well as pursuant to Kyle v. Public Service Commission, 878 So.2d 650 (La. App. 1st Cir. 2004) and Donelon v. Theriot, 2011 WL 1733548, (La. App. 1st Cir. 5/3/11).”

Now we don’t pretend to know the law the way Mr. Holmes Esq. must (he’s an attorney 4, after all), but we do know the Public Records Law from more than a quarter-century of having to deal with unenthusiastic, recalcitrant bureaucrats.

Nowhere in the statute is a financial document on a taxpayer-supported agency exempted from compliance with the state public records statute.

Stand by. After all, a wise old sage named Yogi Berra once said, “It ain’t over ‘til it’s over.”

Jindal’s efforts to privatize OGB, cut OGB personnel by half, sell state prisons, increase employees’ pension contributions (while continuing to freeze state employee salaries), and to resist efforts to renew taxes that make sense (like tobacco taxes) while at the same time, protecting ludicrous and financially crippling tax breaks for the rich will continue unabated.

Moreover, remember last year when legislation was introduced to abolish Civil Service? That met with quite a bit of resistance and the effort sputtered. It wasn’t renewed this year. Want to know why? It’s an election year.

If Jindal is re-elected, and at this point, there’s no one on the horizon to take him on, you can expect those bills to pop up again and to be pushed by the administration with an intensity that will dwarf his privatization efforts.

Remember when that happens that you read it here first.

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Notable Quotables (in their own words)

Posted in House, Senate, Legislature, Legislators, Notable Quotables, Politicians, Transparency on May 23, 2011| 1 Comment »

“Because you all passed a statute making it that way.”

—Louisiana Supreme Court Chief Justice Kitty Kimball, responding to State Rep. Noble Ellington (R-Winnsboro) who questioned why Orleans is the only parish with a separate criminal court.

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Appropriations Chairman Jim Fannin deflects administration effort to cut 149 OGB positions

Posted in Governor's Office, House, Senate, Legislature, Legislators, OGB, Office of Group Benefits, Privatization, Public Records, RFP, Request for Proposals, Transparency on May 23, 2011| 4 Comments »

The Jindal administration suffered a legislative setback in its efforts to privatize the Office of Group Benefits (OGB) Monday when the House Appropriations Committee voted unanimously to reinstate 149 positions the administration had cut from the OGB budget.

The move came as an amendment to HB 32 by bill author and Appropriations Committee Chairman Rep. Jim Fannin (D-Jonesboro).

At the same time the committee further amended the bill by deleting five lines that would have directed the state treasurer to transfer a portion of the OGB $500 million surplus into the general fund, thus guaranteeing that the administration may not use part of the surplus to help plug the $1.6 hole in the state budget.

In asking the committee to amend the bill to restore the jobs and to protect the agency surplus, Fannin said, “I have had no communication (from the administration) about any savings to be realized by eliminating these positions.”

Communication has become something of a problem lately as administration officials have refused to attend meetings of the Senate Retirement Committee. Retirement Committee Chairman Sen. Butch Gautreaux (D-Houma) has made no secret of his opposition to efforts to privatize OGB.

Gov. Bobby Jindal has run into considerable opposition to his efforts to privatize OGB although the administration has issued a request for proposals (RFP) for a financial adviser to evaluate the agency and to seek a third party administrator (TPA).

It is the second RFP issued by the administration after Wall Street banking firm Goldman Sachs was the lone bidder on the first and then only after taking part in drafting that RFP.

DOA representatives say that the current RFP was drafted completely in-house.

Former OGB CEO Tommy Teague, who was fired on April 15 after leading OGB from a $60 million deficit when he took over five years ago to its current $500 million surplus, testified before the Senate Retirement Committee that he could not understand the need for a financial adviser if the intent of the administration was only to obtain a TPA.

“It’s not necessary to know the financial situation of the agency just for a TPA,” he said. “The only rationale for a financial assessment would be that the administration plans to sell OGB.”

The original RFP did indeed make repeated references to the sale of the agency and Commissioner of Administration Paul Rainwater has consistently given conflicting testimony about whether the administration’s intent was to sell the agency or obtain a TPA for OGB’s Preferred Provider Organization (PPO).

Approval of Fannin’s amendment does not necessarily mean that Jindal has failed in his efforts toward privatization of the agency. It does mean, however, that he would have to come back before the legislature to obtain approval for cutting the positions, a move Rainwater claims would save the state $10 million a year.

Even that claim, however, is somewhat vague since the $10 million does not come from the state’s general fund. OGB is completely self-funded, deriving its revenue from premiums charged state employees for health care coverage.

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Rainwater & Thompson need to answer this: What did you know about the sale of FARA and when did you know it?

Posted in Governor's Office, House, Senate, Legislature, Legislators, ORM, Office of Risk Management, Privatization, Transparency on May 20, 2011| 13 Comments »

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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