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Federal law prohibits tax-exempt organizations from donating money to a political campaign or endorsing a candidate verbally or in writing.

So how is it that Gov. Bobby Jindal’s campaign accepted contributions totaling $11,000 from the medical trust fund of the Louisiana Horsemen’s Benevolent and Protective Association (LHBPA), whose former top two officers are currently under a 29-count federal indictment?

The association, created by the Louisiana Legislature in 1993, is considered as a non-profit, public body that receives funding from proceeds derived from slot machines at racing facilities, pari-mutuel horse racing, off-track wagering, and video draw poker.

The funds are used to negotiate contracts for horsemen relative to purses, hospitalization, medical benefits, and other matters of concern to horse trainers, jockeys, and owners.

The association is charged with bookkeeping at Louisiana’s four racetracks and pays out purses, retaining 6 percent of the cut, or about $5 million per year, for pension, workers’ compensation, and medical funds. Following Hurricane Katrina, LHBPA also contributed money to horse owners and trainers to help them to deal with losses and medical costs.

A state audit by the Legislative Auditor’s office was released earlier this week that revealed that LHBPA improperly raided more than $1 million from its medical trust account while funneling money into political lobbying and travel to the Cayman Islands, Aruba, Costa Rica, and Los Cabos, Mexico.

The audit report said the association may have violated state law by borrowing from its medical trust while spending $760,000 on political lobbying and $11,000 in contributions to the Jindal campaign fund.

LHBPA also set up its own workers’ compensation insurance firm and domiciled it in the Cayman Islands.

The questionable expenditures surfaced because of internal fights, led by members Stanley Seelig and Arthur Morrell. Seelig is president of the association’s board of directors and Morrell, a state representative for 23 years and father of current State Sen. J.P. Morrell, is first vice-president.

Both men fought the practices of former board president Sean Alfortish and former executive director Mona Romero. Both Alfortish and Romero have 29-count indictments pending against them in connection with alleged attempts to rig elections to the board. Their trial has been scheduled for Sept. 6.

Alfortish, an attorney who was paid $116,000 per year to serve as director of the association’s workers’ compensation and simulcasting operations, and Romero both refused to meeting with state auditors who said LHBPA also paid nearly $347,000 from its medical and pension trust funds to three law firms without a contract “or evidence of work performed.”

A spokesman for Jindal’s campaign headquarters, when asked why the governor would accept contributions from a non-profit against federal prohibitions of such practices, professed to know nothing about the $11,000 contribution but promised to look into the matter and get back to us.

That was on Monday.

We’re still waiting for the phone to ring.

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Last Tuesday, as testimony wound down before the Senate Retirement Committee over the proposed sale of the Louisiana Office of Group Benefits, committee Chairman A.D. “Butch” Gautreaux (D-Morgan City) commented that perhaps the Jindal administration should consider selling the State Capitol because “it would make a great waterslide.”

Besides Commissioner of Administration Paul Rainwater’s describing published accounts about the administration’s shenanigans as reading “like a John Grisham novel” and Rep. Rogers Pope, reacting to Rainwater’s annoying habit of consistently giving evasive answers to his questions, saying that Rainwater “should be on Dancing With the Stars,” the committee hearing produced precious little levity.

But some comparisons of what was said earlier and what was said later might shed some light on the inconsistencies of statements by Gov. Bobby Jindal and Rainwater. Comparisons between Louisiana’s Preferred Provider Organization (PPO) and that of the state of Utah also are somewhat revealing. The state’s PPO plan is that part of the Office of Group Benefits (OGB) that contracts with doctors and hospitals for services to members and which Jindal is so desperate to privatize over the objections of plan members and legislators.

Jindal at first was pragmatic about his proposed auction of OGB, saying that it just made good financial sense for the state to rid itself of the burden of serving as a health insurance agency. Besides giving him a couple of hundred million dollars to plow into the $1.6 billion budget abyss, it would eliminate 149 state jobs, something he seems determined to do.

But in Friday’s Baton Rouge Business Report, Jindal shifted gears oh so subtly when he said his reasons for wanting to divest the state of OGB was rooted as much in his philosophical opposition to government-run health care–he equated it to his opposition to President Barack Obama’s health care plan–as any other reason.

As Archie Bunker might have said, he switched from pragmatic to philosophical in the blink of a hat.

Likewise, consider the words of Rainwater. A week ago, he said the reason OGB would be attractive to buyers in the private sector was because the $500 million existing surplus would allow a new owner to pay claims out of that reserve without the buyer having to dip into its own reserves initially.

But on Friday, Rainwater sent out a two-page letter to OGB members in which he emphatically claimed that was not the case at all. These are his words, lifted directly from that letter:

“Strong restrictions remain in place governing the OGB surplus, and it will continue to be utilized just as it is now – solely for the purpose of providing health coverage for plan members.”

So, with Rainwater making such a strong promise (in boldface type, no less), why was it necessary to inject those four notorious lines into HB-32 which would have the effect of directing the state treasurer to divert any surplus funds from OGB to the state’s General Fund when current law strictly prohibits just such action by the administration?

That’s a question that only Jindal or Rainwater can answer but so far they have not addressed that provision of the bill.

Finally, there’s the comparison between Louisiana and Utah.

Why? Because no less than half-a-dozen times during last Tuesday’s Retirement Committee hearing Rainwater alluded to the fact that Louisiana is one of only two states in the U.S.—Utah being the other—that has a completely self-administered system. Put another way, the two states are the only ones that pay PPO claims exclusively in-house.

Each time Rainwater made the statement that Louisiana was one of only two such systems, he said it like it was a bad thing. And he said it so often that Gautreaux, apparently weary of hearing the line repeated as if by rote, finally interrupted Rainwater to say that after hearing it said repeatedly, everyone present was now aware the fact and there was no further need to dwell on that point.

But perhaps the point needs to be scrutinized more closely.

So, with that in mind, CNS contacted Jeff Jensen in Salt Lake City. He is Director of the “other” program in Utah.

Strangely enough, he said when asked the direct question that the Republican administration of that state had introduced HB-404 which seeks to privatize the Utah group benefits program. What a coincidence.

“Our program has worked well for 30 years,” he said in a telephone interview with CNS.

How well? Well, the Louisiana OGB has an administrative cost of roughly 3.5 percent compared to about 4 percent for Utah. Among private insurance companies, administrative costs run, on average, between 10 and 15 percent–some even higher.

“We don’t have quite the surplus, or escrow, that Louisiana does,” Jensen said. “When we accumulate a surplus at a certain level, we refund that to our members by reducing premiums.”

In Louisiana, members are happy with OGB because it averages no more than 48 hours on claims payments. In Utah, Jensen, said, the average is about 14 days, “but improving.”

In Louisiana, privatization of OGB would cut the number of employees in that agency by half, Rainwater has been quoted as saying. Later, the number was given as 149, meaning that the agency now employs about 300 people to service the health insurance needs of approximately 220,000 active members, retirees, and dependents. That’s one OGB representative for every 733 members.

Jindal said that number is far too many and is wasteful.

Utah currently employs 230 people to service the health needs of 140,000 members, or one representative for every 609 employees.

The comparisons, however, end there. Utah’s State Capitol is not conducive to use as a water slide.

Below is the blurb from the Business Report followed by Rainwater’s letter in its entirety:

Jindal says La. shouldn’t run health insurance program

Gov. Bobby Jindal is pitching his bid to privatize a health insurance program for state workers as a fight against government-run health care, equating it to his opposition to President Barack Obama’s health overhaul. Jindal says that he doesn’t think Louisiana should be in the business of running a health insurance program, as he tries to gain support for his plan to hire an outside company to run the program currently run by the Office of Group Benefits. The idea faces significant opposition from some lawmakers and current and retired state employees. Jindal says privatization would cut in half the 300-employee group benefits office workforce and generate $10 million in annual savings for the state, in addition to an up-front, lump-sum payment that could top $150 million. “In a time of serious fiscal challenges, these funds, in future years, could go a long way toward protecting critical taxpayer-supported services that benefit all our citizens,” says Paul Rainwater, commissioner of administration and Jindal’s budget chief. Rainwater made the statement in a letter to Office of Group Benefits plan members. He assured members that potential privatization would not affect service, coverage, benefits or premium rates.

Rainwater’s letter:

April 29, 2011

Dear Plan Member,

I write to you regarding the possible further privatization of the Office of Group Benefits (OGB). In the past few weeks, numerous rumors about this proposal have caused concern, among government employees and retirees alike, over what it might mean for their future health coverage. I certainly sympathize with those concerns, and I would share them too, if the rumors were true – but they are not.

As Commissioner of Administration, with responsibility for overseeing OGB, I believe strongly in the need to provide you with the facts, to separate rumors from reality, and hopefully alleviate any concerns you may have.

As you know, OGB has long used private companies to deliver various health plans, including the most popular plan, the HMO. These plans operate successfully and provide quality service, with administrative oversight by OGB. Only the PPO plan – which provides coverage for 61,469, or 27 percent, out of a total of 225,870 government employees, retirees, and dependents covered through OGB – is self-administered by state government, and it is only this plan, under the proposal, that would change in that regard.
My pledge to all plan members is this:

• You will continue to receive quality service and coverage regardless of the potential further privatization of OGB.

• Premiums rates, likewise, would be unaffected by this transition, and increases, when they occur, will continue to be reflective of medical market rates, as they are now.

• Benefits for all plan members, including retirees, will NOT change. We will continue to provide an HMO, PPO, and other plans with a benefit structure that is the same or better than the health plans OGB now offers.

• Current eligibility rules for coverage will not change for all plan members, active and retired alike.

• And OGB’s administrative oversight will continue, securing the continued success of all the plans.

As for the allegation that OGB’s surplus will somehow be “stolen” and diverted for other budgetary purposes, let me be absolutely clear: This claim is categorically untrue. Strong restrictions remain in place governing the OGB surplus, and it will continue to be utilized just as it is now – solely for the purpose of providing health coverage for plan members.

So why, then, explore such a proposal? Well, the simple fact of the matter is that taxpayers, who pay 75 percent toward plan member premiums and the cost of providing coverage, also have a stake in this discussion. A preliminary estimate suggests that a financial transaction with a commercial health provider involving the HMO and PPO plans could generate for the state at least $150 million. In a time of serious fiscal challenges, these funds, in future years, could go a long way toward protecting critical taxpayer-supported services that benefit all our citizens.

Our research of best practices shows that every other state besides Louisiana that offers a PPO plan does so through private companies, so we know it can be done with positive results. In the coming weeks we will engage an expert financial advisor to assist us in a thorough evaluation of this proposal, and to help us make a careful determination to proceed on a course of action that’s in best interest of both plan members and taxpayers.

This lengthy evaluation will also prepare us to present a detailed presentation of the proposal to you, as well as to the Legislature’s appropriation and finance committees, whose members have jurisdiction over OGB and whose approval would be needed for any contract involved.

In closing, I hope that expressing to you the reality of the situation, which runs so counter to the rumors you have may have heard, has helped to dispel concerns these rumors have caused. As we gather more information, I will see to it that you are given updates as they develop. More importantly, I will make sure that you continue to receive the quality service and coverage from your health plan that you expect and deserve.

Sincerely,

Paul Rainwater
Commissioner of Administration

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Public school teachers at the bottom of the seniority ladder are being called in by their principals in parish school systems across the state to hear the bad news: because of budgetary cutbacks, their contracts will not be renewed next school year.

It’s bad enough when State Superintendent of Education Paul Pastorek insists that poor grades are the fault of the teachers and schools, not poverty or the lack of public support of education. The mindset in Pastorek’s office is not more funding, but more charter schools.

Teacher layoffs are something that should never happen in any society that pretends to make education a priority. But it is happening right now so perhaps we should take a quick refresher course in Louisiana history or civics or what some might prefer to call the Big Lie.

Think back for a moment to a campaign that took place 21 years ago. It was 1990 and Louisianans were being told that legalized gaming (that’s gaming, not gambling; gaming was the nice way to say gambling which, of course, was illegal and carried bad connotations) was the panacea for all the state’s fiscal problems.

We once thought the same thing about oil and gas but that myth was exploded in the eighties when the oil patches dried up with six-dollar-a-barrel oil (remember those days?). So legislators began looking around for other sources of revenue. Never mind computer technology, Fortune 500 businesses, or some other livelihoods with an emphasis on education and some modicum of intelligence. No, it had to be something that could be fed to the masses, something that would be in keeping with Louisiana’s third-world, banana republic image.

Presto! The idea of legalized gambling, er, gaming was born and the politicians nurtured the concept and they were oh, so slick in the way they did it. Casino gambling was too much to throw at their constituents from the get-go, so first came the Louisiana Lottery, approved in 1990 with the first scratch-off games going on sale in 1991. Skeptics immediately dubbed the Lottery as a tax for those who were not good at math.

The legislature passed riverboat gambling in 1991 once the Lottery was up and running and the following year approved a bill to allow New Orleans to build a land-based casino.

And just how did lawmakers sell the hard-nosed Baptists of north Louisiana on gambling? Why, education, of course. In December of 1986, The Louisiana Association of Educators agreed to support and work for the lottery, provided at least 75 percent of the proceeds are dedicated to education, a stipulation to which Gov. Edwin Edwards quickly agreed. That number now hovers somewhere around 35 percent, less than half of what was originally sought.

Politicians from the governor all the way down to local school board members were busy touting the financial windfall for education that was sure to come from gaming revenue. After all, hadn’t the Support Education in Louisiana First Fund been a good thing for state education?

The Support Education in Louisiana First Fund had its origins in September 1986 with a proposed amendment that would dedicate about $540 million from oil and gas leasing production in the outer continental shelf lands in the Gulf of Mexico. Known as the 8(g) fund, it has pumped more than $500 million into the state’s general fund for education since 1986. Or has it? In 2010, the Louisiana Legislature allocated $109.1 million in 8(g) funds to the Minimum Foundation Program (MFP) to fund public education in Louisiana. Or did it?

Since its inception, the Louisiana Lottery has transferred almost $2.3 billion to the state treasury but it wasn’t until 2003 that the legislature got around to passing a bill calling for a constitutional amendment dedicating lottery proceeds to the MFP. That law became effective on July 1, 2004. Last year, the legislature allocated $137.4 million in State Lottery proceeds to the MFP. Or did it?

And then there’s the $10 billion Education Jobs Fund passed by Congress last year. Also known as EduJobs, Louisiana’s share was $147 million and was supposed to be added to the MFP. But was it? Remember, this is Louisiana.

Even as many of the state’s local school boards had already factored their share of that $147 million into their budgets, Gov. Bobby Jindal on Nov. 11 announced plans to redirect the money. Just that quickly, at the whim of a “reform” politician, it was gone.

It turns out that the Support Education in Louisiana First Fund, the State Lottery proceeds allocated to education in Louisiana, and the EduJobs fund are nothing but part of an elaborate shell game and skullduggery, the political equivalent of a stage magician’s misdirection tactic. Smoke and mirrors.

Instead of allocating the full $3.3 billion to the MFP from the state’s General Fund as it had before the existence of 8(g), the State Lottery, or EduJobs funds and then adding those allocations to produce the education windfall Louisiana voters had expected, they were first subtracted from the General Fund. Only then were the combined $393.5 million in 8(g) funds, State Lottery proceeds, and EduJobs funding added back to the legislative appropriation which by that time, had shrunk to less than $3.1 billion.

The net gain to education from 8(g), EduJobs, and the lottery?

Zero. It was all a big con. Mission accomplished. Politicians 3, Louisiana 0.

So now, after the 2010 legislature gave top priority to pet projects, appropriating more than $500 million on non-governmental organizations (NGOs) such as councils on aging, golf courses, tennis courts, and community centers, and projects that should have been financed by local governments, the state has run out of money and teachers are being laid off.

And instead of budget cuts, Superintendent of Education Paul Pastorek sees the problem as bad teachers and failing schools. The more things change, the more they stay the same.

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The former state budget director says little has changed in the Louisiana Legislature’s spending mentality in the decade since he retired.

Stephen R. Winham, who served as the state’s budget director from 1988 to 2000 and as a budget analyst for the Department of Corrections budget, is also a vocal critic of the proliferation of professional service contracts.

“Back when the State Budget Office actually had some clout, budget analysts did a common sense review of professional services contracts,” he said. “But then Governor (Dave) Treen decided that the budget office had too much power and that no one should be questioning things his cabinet appointees did.”

Winham said after that, central oversight of state agency expenditures began to decline “and now nobody routinely second-guesses the need for professional services contracts above the agency level.”

The State of Louisiana Annual Report for 2008-2009, the latest report available, shows that the state issued more than $5 billion in contracts, fully 20 percent of the state budget. That figure is somewhat misleading because 1,083 contracts for $2.9 billion, nearly 60 percent, were in the form of cooperative endeavor agreements with other public agencies; $213.4 million was for interagency contracts, and $79.4 million was for intergovernmental contracts.

Still, the report showed there were 1,275 consulting contracts in the amount of $1.4 billion; 1,292 professional contracts totaled $178 million, 160 personal contracts came to another $7.4 million, and 1,531 contracts for social services came to $288.9 million.

Winham said during his tenure, his office presented an annual budget to the Legislature that cut funding to programs “below the line” of available funds. He said that list was a best effort at a fair representation of what people want and need from state government. “Every year the program ranked dead last on our list was funded,” he said. The program consistently ranked last by his office was an appropriation of about $3,000 for CODOSPAN (the Council for the Development of Spanish). It was the Spanish equivalent of CODOFIL (the Council for the Development of French in Louisiana),” he said. “Always last on our priority list and always funded.”

He said there were other local subsidies (now called Non Governmental Organizations, or NGOs) that were always funded, like basketball tournaments and festivals.

He said his worst experience was coming to realization that “when it comes down to a choice of politics and what makes the most sense, politics always wins. In a political environment, you can’t avoid that but when politics always supersedes everything else, it’s always frustrating.” His best accomplishment, he said, was getting the budgetary process automated and available on line. “We made the budget more accessible to the citizens.”

Given a choice, he said he would make a different career choice. “I felt I was spinning my wheels,” he said. “I would not do it over. I felt I was accomplishing things early on but I became less and less effective. The Joint Legislative Committee on Appropriations just started ignoring my presentations. Everything was just a formality,” he said.

“They say all politics are local, and they’re right,” he said. “That’s why (Gov. Bobby) Jindal goes all over the state handing out those little checks to local governments. It’s the same reason legislators want to protect their turf with those local appropriations and it’s also the reason Jindal won’t veto any of those appropriations.

“Jindal is always thinking about the next thing,” Winham said. “We need a governor who will think about the now.”

He said government is not a business. “When a candidate says he is going to make government operate like business, it’s just rhetoric. Government and business do not exist for the same purpose; government exists to serve the people and business exists to make a profit.”

Still, he expressed concerned about the Legislature’s apparent inability to rein in pork spending. He said he agrees with State Treasurer John Kennedy’s assessment that until individual legislators, working together in large numbers, begin to take their responsibility seriously, funding decisions will remain irrational, irresponsible, and reckless.

Winham said former Gov. Buddy Roemer was a strong fiscal conservative but where he cut in some areas, he added in others, so he never got credit for any cuts.

“I was surprised once when I did an analysis and found the least budget growth occurred during one of Edwin Edwards’s terms, his third term, I believe,” he said.

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The following story was first reported by Capitol News Service, which is affiliated with this web blog, in June and though vehemently denied by Gov. Jindal’s office, we felt it was worth posting here.

Politics do indeed make strange bedfellows, especially when one of the partners is in denial.

When Louisiana Attorney General Buddy Caldwell entered the fray in challenging the recently passed federal health care law, he stood alone as the only Democrat among 14 state attorneys general doing so. The litigation, if successful, could also ultimately cost the state.

It also turns out that Caldwell may have been reluctant to become what he described as the “token Democrat” in the litigation, but was backed into a corner by Gov. Bobby Jindal. Jindal’s press secretary Kyle Plotkin, however, vehemently denied that.

Caldwell and 12 Republican attorneys general joined in the lawsuit filed in Pensacola by Florida Attorney General Bill McCollum, who is taking the lead in the litigation filed only minutes after President Barack Obama signed it into law. Virginia’s attorney general, also a Republican, filed a separate suit challenging the constitutionality of the law.

Caldwell initially declined to comment on Louisiana’s participation in the lawsuit, saying that he anticipated a spokesperson would be appointed by the litigation group to address media inquiries. “It would not be appropriate for me to comment in the interim,” he said.

Three days later, however, he did issue a brief statement and his office said, “No other statements will be made.”

“As Attorney General, I am duty bound by my oath of office to pursue a request by the Governor of the state of Louisiana for legal assistance, so long as it has substantial legal merit.”

Democratic attorneys generals in three other states apparently do not feel so duty bound. Minnesota Attorney General Lori Swanson, a Democrat, refused Republican Governor Tim Pawlenty’s request to join in the suit. Democratic attorneys general in Georgia and Nevada also have balked at demands by Republican governors of those states to challenge the health care law.

Some legal experts, according to the Associated Press, feel the lawsuit has dim prospects of success because, under the U.S. Constitution, federal laws prevail over state laws.

Caldwell said it was his decision to sign onto what he called Florida’s “well-drafted action” at the least cost to Louisiana in order to accomplish the same objective.

But his decision may not have been as willing as he attempted to make it appear.

In a subsequent address to employees of his office, the Attorney General said the decision was made more out of the necessity of saving jobs in his agency than any real hope—or desire—of overturning the health care law.

Four separate employees said Caldwell, in a candid admission, claimed that a deal was made with Jindal. Under terms of that agreement, the governor would not make additional cuts in the attorney general’s budget if Caldwell joined in the litigation. Caldwell agreed to be the “token Democrat,” they said, so that he might save additional job cuts by an administration whose stated goal is to reduce the number of state employees by as much as 5,000 per year over three years.

A spokesman for the Division of Administration said Jindal could not cut the attorney general’s budget at this late date even if he wanted to because the budget has already been submitted and is “set in stone.”

A side effect of the lawsuit, one source said, could be the jeopardizing of $300 million in Medicaid funding, negotiated by Sen. Mary Landrieu in return for her support of the bill.

Because of the heavy influx of millions of dollars in insurance payments, aid, and money for new construction following Hurricane Katrina, the federal government calculated on paper that state income increased by 40 percent. That resulted in a drastic cut in Medicaid funding, prompting Landrieu to do some 11th-hour horse-trading to restore the lost funding to the state.

The $300 million recovery, however, would be offset by the costs of the health care bill, according to Louisiana Department of Health and Hospitals Secretary Alan Levine. Levine said the bill, because it was passed as an unfunded mandate, would mean a minimum additional cost to Louisiana of about $350 million per year to implement. “Unfunded mandates have been successfully challenged in court before,” Caldwell said in his written statement.

“As Attorney General I will not engage in political opportunism or partisan politics nor file any claim that does not have substantial legal merit,” he said.

Both Caldwell and Jindal were unavailable for comment on the reports of the agreement to spare Caldwell’s office further budget cuts in exchange for joining the lawsuit.

Plotkin demanded to know the source of the information but was told only that the information came from within the attorney general’s office and was corroborated by no fewer than four employees of Caldwell’s office.

“Your story (first published earlier this week in the Eunice News) is preposterous,” Plotkin told a reporter. “Moreover, you said you tried to call the governor and he and the attorney general were unavailable for comment. We have no record of any inquiry made to the governor’s office.”

The initial report, however, never said the governor’s office was called since at the time the story was being filed late last Thursday, Jindal was in Winnsboro. An attempt was made to call Caldwell but because it was the day before Good Friday, Jindal had sent his employees home early and closed the attorney general’s offices.

Plotkin then demanded that the reporter add a sentence to the initial story “saying that you never called the governor’s office.” The reporter refused, saying it was never claimed that the governor’s office was called so there was no reason to correct an error that was never made.

Plotkin, when asked for the governor’s version of what happened, insisted that Caldwell joined the suit “on his own volition.”

“You’ve caused a lot of problems for this office,” he said. “This story has been all over the internet and national television. Why don’t you call the attorney general and let him tell you what happened?” He was told that no fewer than four employees of the attorney general’s office had already related details of Caldwell’s address to his employees.

Plotkin, who had first contacted the reporter by email, was asked to reduce Jindal’s version of events to writing and to submit them to the reporter via email “so there would be no chance of any misunderstanding.”

Plotkin refused, suggesting again that the reporter call Caldwell.

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