Monday, June 28, 2010

Republican Council Approves $16 Million IT Contract With Shaky Company, Vaughn Abstains Due To Conflict

The Republican-controlled Indianapolis City-County Council wrecklessly approved at tonight's council meeting a whopping $16 million contract for a publicly-traded company that has been losing millions of dollars a year and was facing potential delisting as a publicly-traded company on NASDAQ for the second time because its stock has consistently traded below $1. As recently as March 31 of this year, Zanett, Inc. warned investors that debt-refinancing issues could force it out of business. The council approved Zanett's contract by a 15-11 vote with most Democrats voting against it. Only one Republican, Christine Scales, voted against it.

Zanett Inc.'s stock was trading for about $1.25 a share on the day the City announced it was awarding a $16 million contract to implement an enterprise management system using Oracle's PeopleSoft application. In March, the company's stock was trading well below $1 a share and facing delisting when it dramatically saw a 521% increase in its stock price in a single day of trading from 31 cents to $1.93, which was near the time the City of Indianapolis was putting final touches on the contract and preparing it for submission to the city council for approval. One recent commenter suggested a carefully worded press release from the company in the past had misled investors into believing the company had won a much bigger contract than it actually had won. Today, the stock's price closed at $1.52 a share, off its 52-week high of $3.74 a share. Its stock price dramatically jumped 70% to $2.62 a share after the City of Indianapolis announced it was awarding the contract to Zanett.

In yet another strange twist, which might explain why the Republican council was so willing to hand over millions of taxpayer dollars to an out-of-state company that is struggling to financially survive, City-County Council President Ryan Vaughn announced as the council took up the matter of approving the contract that he was turning the gavel over to Vice President Marilyn Pfisterer due to a conflict of interest. Vaughn announced to the council that he would be abstaining from casting a vote on the approval of the contract due to the conflict. When questioned by Councilor Vernon Brown about the nature of his conflict, Vaughn disclosed that he had recently learned that a client of his law firm, Barnes & Thornburg, had been awarded a subcontract to work under Zanett's $16 million contract. Vaughn did not disclose the name of the client. I would note that Vaughn refused to recuse himself from participating in the proposal to transfer the utilities to Citizens Energy despite the financial stake one of his firm's clients, Veolia, had in the outcome, not to mention the firm's clients, such as Crowe Horwath, that were being paid to advise the city on the proposed deal.

This is just another example of why the Republicans have forfeited their right to continue running this city. Your taxpayer dollars are simply being pissed away so that somebody's client gets taken care of. This represents a complete abrogation of the council members' duty to be good stewards of the taxpayers' money. It is simply beyond belief how corrupt this Republican administration and council have become. We're facing the worst economic times since the Great Depression and they're spending our money like drunken sailors. It's reached a pretty sad point when the only sober acting adult in that council assembly room is Crazy Larry Vaughn, even with his silly paper bag hat emblazoned with the N-word and his white clown lipstick that Councilor Pfisterer told him was rude to wear while he was speaking against awarding a contract to the financially-troubled company. She should have been wearing a paper bag over her head tonight as stupid as she looked and sounded during this debate. She couldn't answer why the company's financial woes were being disregarded so she asked the city controller to explain why it would be okay. Controller David Reynolds never really answered the question other than to say they checked it out and it probably wouldn't become a problem. We can only hope and pray.

11 comments:

Indy Student said...

If it isn't broke, don't fix it. Why does the city need this IT service? And if it does need it, why is a failing company the best bang for our bucks?

Advance Indiana said...

I'll bet you a steak dinner, Matt, that Crowe Horwath is the driving force behind this contract. They were always pushing this sotware system off on the state of Indiana. These people think David Reynolds knows what he's talking about. The guy is totally stupid. He's twice as bad as Bob Clifford was as city controller. He's only doing what it takes to get him a big six-figure paying job when he leaves his city job just like Clifford did when he landed his job at Umbaugh & Associates, that winning consulting firm that convinced the water company to covert those 30-year bonds to variable rate bonds and wound up costing us at least $60 million.

artfuggins said...

Ryan Vaughn is a walking, talking conflict of interest.

american patriot said...

>>The guy is totally stupid.

I'd take him over Pfisterer any day, the town hall meetings where he spoke impressed me. I've know Bob Lutz for many years and am really disappointed in him. Funny how politics is a cesspool that newcomers swear to change, but once elected they decide it's a sauna.

Advance Indiana said...

This company we are talking about used to be locally-owned Onex, which was owned by Joe Huffine and Sally Huffine Breen. They sold Onex to InRange, a New Jersey company, that later became part of a bigger New-York based company Zanett. I don't know how David Reynolds could have reviewed Zanett's financial situation and concluded it posed no risk to taxpayers on this deal. There must be insiders with a financial stake in this company that is pushing this contract real hard for the city to take such a risk with our money, either through stock ownership in it or through an ownership in one of the subcontractors. If Reynolds is so smart, he would have never dismissed the company's financial stability in rating it against others competing to win this contract. I would note that the city bragged about the company's use of MBEs/WBEs as one of its decisions for awarding it the contract. How in the hell Ballard ever came to the conclusion that the people elected him to see how many MBE/WBE contracts he could award is beyond me, but that has become a bigger emphasis by this administration than any previous administration. The MBE/WBE set-asides simply corrupt the entire contracting of government products and services. Many of these companies are set up by insiders who take a minority interest in them simply to steer work to them and make money. Some of them operate as mere pass-through companies.

Advance Indiana said...

Here's what the City's press release said about those MBE/WBE subcontracts:

Also, in keeping with the City-County‟s minority business goals, Zanett is partnering with several local Minority, Women and Veteran-Owned Business Enterprises (MBE/WBE/VBE). Local firms ENTAP, Sondhi Solutions, CSCI Consulting and PME will provide specialized implementation services as part of the project.

Not sure which of those companies Ryan Vaughn's firm represents. The firm isn't registered to lobby for any of them.

HOOSIERS FOR FAIR TAX said...

Good for Ryan Vaughn. He did the right thing this time.

Jon said...

So why did Vaughn recuse himself from a vote on a 16 million contract but not on the water company deal which is hundreds of millions of dollars? His firm represents Veolia. Apparently a conflict isn't a conflict if the money is right.

dcrutch said...

Thank you, Christine Scales. Closest person there is on the Republican side to someone that hasn't sold-out. I'm glad my councilman Vaughn recused himself. But, at this point- why bother? It would be a hell of a lot more entertaining, and probably not as corrupt, to have my representation from the Vaughn with the paper hat.

varangianguard said...

Jon, I would say it's because Councillor Vaughn can later say, "Oh, I recuse myself if there's a conflict of interest. Look at Zannett." He's playing the odds that no one will call him out that he neglected tp recuse himself on the Great Water Company Giveaway.

Marycatherine Barton said...

Cronyism and corporatism at work in the Beurt Servass Assembly Room, CC Bldg., on another Monday night. Thanks to Crazy Larry Vaughn for the ridicule of our rulers present at that session, taking money from him and us, and giving it to their favored.