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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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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 masters the fine are of chameleon testimony

Posted in Governor's Office, House, Senate, Legislature, Legislators, OGB, Office of Group Benefits, Public Records, Revenue, Transparency on May 11, 2011| 15 Comments »

When it comes to twisting his stories and changing direction in mid-testimony, Commissioner of Administration Paul Rainwater, it seems, has no peer.

In yet another legislative committee hearing on the proposed sale/privatization/contracting for a third party administrator (TPA)/hybrid of the Office of Group Benefits (OGB), this one by the Senate Insurance Committee, Rainwater again altered his version of the truth that just doesn’t quite square with public comments he has uttered in the recent past.

Rainwater also got a surprise when his appointee as GEO for OGB admitted that if things remained the same as they are now, he could not reduce his staff. Rainwater has testified before two different committees that the sale/privatization of ORM would reduce the number of employees at OGB by 149, or by about half.

On Tuesday, Rainwater told Insurance Committee Chairman Sen. Dan Morrish that there was no plan to use any portion of the OGB $520 million surplus for the state general fund, nor would any private company that takes over the operations of the agency have access to the fund balance. “That fund is there for the state to pay claims and that’s what it’s going to be used for,” he said.

Barely three weeks ago, Rainwater said that the OGB surplus would be “an attractive selling point” because the private company that ultimately purchases the agency would not have to dip into its own capital to pay claims initially.

And while he steadfastly maintains that OGB is not for sale, his own office’s press release of April 26 describing his appearance before the Senate Retirement Committee repeatedly alluded to his testimony on the “potential sale and privatization of the state’s Office of Group Benefits” and of the procurement of a financial advisor to help the state “evaluate the potential sale of OGB…”

The first paragraph of Rainwater’s press release said that he testified before the Retirement Committee “about the potential sale and privatization of the state’s Office of Group Benefits.”

The second paragraph quoted Rainwater as telling the committee, “The simple fact of the matter is that a sale and privatization of OGB will have no negative impact for those covered. Let me say that again: a sale and privatization of OGB will have no negative impact for those covered.”

If that is not enough, that same press release from his office quoted him as testifying before the Retirement Committee, “The procurement of a financial adviser to help the state evaluate a potential sale of OGB was undertaken in accordance with applicable law.”

Morrish on Tuesday asked, “Is this a sale or a privatization?”

“We’re attempting to bundle our HMO and PPO.”

“Is it a privatization or a management contract?” Morrish asked again.

“It’s a privatization with a five-year contract. We’re taking OGB out of the day to day business of running an insurance company,” Rainwater said.

“We’re not selling OGB,” he said. “We’re not giving up the right to negotiate a contract. This is something that’s never been done before. It is privatization, but we’re not selling OGB.”

A brief but puzzling exchange ensued when Morrish commented that he had not seen the RFP (request for proposal).

“The RFP is not written yet,” Rainwater responded.

The RFP for a financial adviser to conduct an assessment of OGB’s value was issued last Friday giving bidders a deadline of June 6 in which to submit proposals to “assess the market value of the book of business and services provided by OGB and assist in the formulation of alternative methods of benefit delivery.

An earlier RFP was abandoned when the only bidder, Goldman Sachs, who helped in the crafting of the document, was the only bidder but could not agree to a demand that DOA hold Goldman Sachs harmless in the event of litigation.

Throughout the latest RFP, there are references to those submitting proposals having experience in the sale of health insurance entities and of track records in past sale efforts.

Sen. J.P. Morrell (D-New Orleans) asked Insurance Commissioner Jim Donelon about the impact on the state insurance industry if the same company ended up as the third party administrator (TPA) for both the state’s HMO and PPO.

“After Hurricane Katrina visited us,” Donelon said, “Blue Cross/Blue Shield went from having 40 percent of the insurance business in Louisiana to 70 percent. I have tried every way I know how to stop that trend. Blue Cross already has the state’s HMO and PPO, that could be a problem. I spoke to Angel (former Commissioner of Administration Angele Davis) about that when DOA awarded the HMO to Blue Cross over Humana and of course, that’s being litigated right now in the court of appeal.”

Sen. Gerald Long (R-Winnfield) asked Rainwater how he arrived at a value of $150 million for OGB.

“OGB collects $1 billion a year in premiums and currently has a $520 million surplus and we took variables of those figures and arrived at a price of $150 that we expect a company might pay us to manage that volume,” Rainwater replied.

Sen. Eric LaFleur (D-Ville Platte) asked Rainwater if the $150 million was recurring or one-time revenue and Rainwater admitted it would be a one-time payment. “But there would be a $10 million-a-year savings in staff reduction savings,” he said.

“Doesn’t the $500 million surplus help the state?” LaFleur asked.

“It does, but we need some balance,” Rainwater said.

“Isn’t what he’s supposed to do,” LaFleur asked, referring to Scott Kipper,
newly-appointed CEO of OGB following the April 15 firing of Tommy Teague

“It is. That’s why we brought him in.”

LaFleur then asked Kipper, “Is that impossible for you to do, to streamline the agency and make it more effective?”

“It’s not impossible,” Kipper said. “The trick is to try and get an apple-to-apple comparison in order to get the reserve where it should be.”

“What is a good reserve?”

“That’s a good question.”

LaFleur then dropped a bombshell when he asked Kipper, “Let’s assume this RFP doesn’t go anywhere and we’re right back where we are right now, who…how many people would you cut from OGB?”

“If we continue to operate as we do now, there would be no significant cuts,” Kipper said. “There’s not a lot of excess now.”

Rainwater, visibly upset at Kipper’s answer, interrupted to say, “The only way to reduce the number of employees by 149 is to privatize.”

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Don’t do as I do; do as I say do

Posted in Auditor, Governor's Office, Public Records, Transparency, Uncategorized on May 5, 2011| 7 Comments »

When a state audit of the Governor’s Office of Homeland Security and Emergency Preparedness (GOHSEP) turned up a number of deficiencies, GOHSEP Director Mark Cooper, judging from his response, must not have gotten the message from Gov. Bobby Jindal.

Among the shortcomings found by the audit were;

Inadequate preparation of the annual fiscal report—for the fourth consecutive year, no less;

Understating the amount reported for the Public Assistance Program by $120 million;

Inaccurate Federal Financial Reports, including a $25 million understatement of the federal authorized amount on the Public Assistance Report for Hurricane Katrina;

Untimely draws and inaccurate reporting of draws to Office of State Reporting and Accounting Policy resulting in delays in state reimbursements and potential lost interest revenue;

The audit report made numerous recommendations to remedy the shortcomings and Cooper responded in classic fashion:

“I have reviewed the finding(s) in (the audit report) which covers activities of the Governor’s Office of Homeland Security and Emergency Preparedness for Fiscal Year 2010,” Cooper wrote.

“Additional staff has been hired and additional training is planned to ensure that multiple layers of review are implemented,” he said.
Wait. What?

“Additional staff?”

What was it that Jindal said a few months back about doing more with less?

Perhaps that doesn’t apply to certain agencies.

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