High-Paid FSSA Consultant Has Two Masters: Who Would Have Thought?

Seema Verma leading a state health care policy panel discussion 

Those of you familiar with my reporting on this blog know that I've discussed the Family & Social Services Administration and the tangled web of conflicts of those entrusted at the highest levels of the agency. I devoted considerable time discussing former FSSA Secretary Mitch Roob, who left a high-paying executive job at ACS to run the agency at the beginning of the Daniels administration. Roob knew that he planned to privatize the agency's welfare services when he took the job, and by no accident his former employer wound up in the driver's seat on that lucrative contract worth hundreds of millions of dollars. Similarly, one of Roob's successors, Mike Gargano, had a history of performing work both as a consultant to FSSA and to others like ACS who did business with the agency before he joined the agency the first time, and during the short period of time he left the agency during Debra Minott's brief tenure at the beginning of Pence's administration.

It turns out that there is another high-paid consultant who has been with the agency since the days of the O'Bannon administration who has an equally troubling conflict of interest. The Star's Tony Cook has an excellent investigative story describing the two masters FSSA consultant Seema Verma has been serving for some time. Verma is the owner of SVC, Inc., a business which lists its business address at her upscale home in The Woods at Williams Creek subdivision in Carmel where I'm pretty sure the covenants don't permit you to operate a business. As Cook's story points out, she and her company's employees share offices within FSSA's state office building offices downtown to perform their high-level health care consulting role for the agency. Prior to becoming an FSSA consultant, Verma served as Vice-President of Policy & Planning for the Marion Co. Health & Hospital Corporation where Mitch Roob once served as CEO. According to Cook, Verma has assumed the state's lead role in developing the Healthy Indiana Plan, Indiana's alternative health insurance plan to Obamacare.

So what's the problem? Well, according to Cook's story, Verma has been consulting another IT company doing business with FSSA at the same time she and her employees occupy offices in the state office building as a captive agency contractor. Under a contract with HP, Verma can earn up to $1 million, which is a drop in the bucket for the nearly $500 million HP has won in state contracts during her tenure as FSSA's chief health policy consultant. Verma's state contracts for health care consulting have totaled more than $3.5 million to date, over $1 million of which she earned in the last year alone. What is disturbing is that Verma's role as a consultant to HP was fully disclosed and signed off on by state officials as totally kosher. A spokesperson for Gov. Pence defended Verma, noting that she has "played a valuable role in the state's health care policy since the O'Bannon administration." Verma's paid spokesman, Lou Gerig, tells Cook that her role as a subcontractor to HP was spelled out in HP's contracts with the state.

According to Cook's story, her power and influence within FSSA cannot be understated. It sounds like her obvious conflict of interest might not have even come to light had she not butted heads with former FSSA Secretary Debra Minott. It was Minott who lost her job, not Verma. Cook says that Verma's contractual role with HP came as a big surprise to Minott when she discovered it in 2013 after a dispute over one of its invoices. According to Minott, HP dispatched Seema to visit the agency's CFO about resolving the disputed invoice. "I was troubled because I thought Seema was our consultant," Minott told Cook.

Ethics experts agree there is a problem with Verma serving two masters. State lawmakers to whom Cook spoke were also surprised to learn of the arrangement, both as to the size of her contract and the dual, conflicting consulting role. Cook's story doesn't touch on this point, but I noticed that several of the employees listed on SVC's website are former employees of FSSA. Stephanie Baume worked in the Office of Medicaid Policy & Planning where she administered the Hoosier Heathwise plan before joining SVC. Nicole Spears worked as an integration manager within OMPP before joining Verma's company. Kelly Greene served as FSSA's general counsel before she joined SVC. It's no wonder she wields so much power within the agency. People can leave the state payroll and join her firm as consultants to their former employer earning more than they earned in their prior roles as state employees.

Pence Keeps The Doors Revolving At FSSA

Surprise! He's back. I can't say that I'm surprised since I never thought Gov. Mike Pence cared much about ethics, but it's rather galling for him to name former FSSA Secretary Michael Gargano in a new deputy secretary role where he will be in charge of operations and the Healthy Indiana Plan. Just last month I wrote about Gargano going to work for an FSSA contractor awarded contracts during his previous tenure in top FSSA roles shortly after he departed the agency in January, 2013, apparently unaffected by the state's revolving door law. Prior to his last stint at FSSA, Gargano owned a consulting firm that not only provided consulting work for the agency but also provided consulting work for ACS, the controversial company awarded a contract worth hundreds of millions of dollars to manage welfare services for the agency. Pence named Carmel psychiatrist John Wernert as Secretary, replacing Gargano's successor, Debra Minott, who Pence fired last week after a little more than a year on the job. Pence isn't fooling anyone with Wernert's appointment. Everyone knows that Gargano will be the de facto head of the agency. Barnes & Thornburg's Bob Grand, ACS's attorney, wouldn't have it any other way, and we know that Gov. Pence does whatever he's ordered to do by Grand. Government in Indiana sure works to enrich Gargano and his wife, Ann Lathrop, who works for another state contractor, Crowe Horwath, and also once worked at ACS.

Former Family & Social Services Administration Head's New Job Raises More Revolving Door Questions

When Michael Gargano first joined the Family & Social Services Administration as a senior-level political appointee in the Secretary's office, he left behind a consulting firm he founded, Watertown Group, which had not only provided consulting work for FSSA but also ACS, the politically-connected IT company which would later become embroiled in a legal tug-of-war between ACS' former partner in the privatization of the agency's welfare services, IBM, after FSSA fired IBM and retained ACS alone to fulfill the contractual duties FSSA previously hired IBM to perform. The welfare privatization deal FSSA entered into with ACS was worth hundreds of millions of dollars to the firm.

Gargano left FSSA at the end of Mitch Daniels' term in office in January 2013 after Pence opted to name a new secretary to run the agency and just three months later joined another technology company that is under contract to perform services for the very agency he had administered. This blog raised concerns then about Gargano's prior consulting work before joining the agency, concerns that are renewed by his post-employment after leaving FSSA last year.

Gargano joined Indianapolis-based CSpring on April 15, 2013 according to an announcement released to the media as the company's managing director. According to the firm's website, Gargano has "overall responsibility for CSpring's business development and service delivery efforts . . . to ensure each aligns with CSpring's vision and growth strategy, while expanding the firm's client and project portfolio." The firm's website identifies two specific projects that it provides to Gargano's former employer. One project is described as providing enterprise architecture and engineering (EAe20X) for the agency. A second project is described as providing senior advisory and policy analysis services regarding the FSSA's Medicaid reporting to the agency's data manager and director of health informatics. The contract amount for the original multi-year contract from 2011through 2013 was $568,400 with an amendment valued at $128,470.

Indiana law imposes a one-year cooling off period that applies to former state employees under particular circumstances. As the former head of FSSA, Gargano was prohibited from accepting employment for a one-year period from the last day of his state employment from an employer with whom 1) he engaged in the negotiation or administration of a contract on behalf of a state agency and 2) was in a position to make a discretionary decision affecting the outcome of the negotiation or nature of the administration of the contract.

The state's cooling off law prohibited Gargano from accepting employment from an employer if the circumstances surrounding the hire suggest the employer’s purpose is to influence him in his official capacity as a state employee. Gargano would also be prohibited from lobbying the executive branch for his new employer during the one-year cooling off period.

As FSSA's former Secretary, Gargano may also be subject to the post-employment rule’s “particular matter” prohibition in his potential employment. This restriction prevents him from working on certain particular matters indefinitely if he personally and substantially participated in such things as a business transaction or a contract with his new employer. This latter prohibition extends to the life of the matter at issue.

The database of formal opinions issued by the Indiana State Ethics Commission does not include any opinions sought by Gargano after he left his state employment. A written advisory opinion issued by the Commission that a former appointee's new employment does not violate the cooling off and particular matters prohibitions is conclusive proof that the former employee is not in violation of the law.

By comparison, Gargano's successor, Anne Murphy, sought and obtained a formal advisory opinion from the Commission when she obtained employment as Vice President of Government Affairs for Community Health Network upon her departure from the agency. Gargano worked as chief of staff for Murphy prior to succeeding her as the agency head on November 5, 2010. Mitch Roob served as Gov. Daniels' first Secretary of FSSA before he stepped down in 2008. Roob had been heavily criticized for his big push to privatize the agency's welfare services, particularly since his former employer, ACS, became a major benefactor of those efforts. The fact that Gargano had also previously provided consulting services to ACS before joining the agency further heightened conflict of interest concerns.

More recently, the former head of FSSA's Division of Disability and Rehabilitative Services under Gargano obtained an advisory opinion from the Commission in December, 2012 seeking permission to leave his state employment and form a new consulting firm that would be employed as a subcontractor for Health Management Associates working on its contract with FSSA's Office of Medicaid Policy & Planning. The Commission approved the Director's post-employment work as a subcontractor of HMA based on his representations that he had not previously performed any work at the agency for OMPP and would screen himself off from performing any work for DDRS, the division in which he was formerly employed.

In June, 2012, another former FSSA employee received an advisory opinion that allowed her to perform work for a software consulting firm during the cooling off period. The former employee served in various capacities at the agency, including Deputy Director of the Division of Family Resources (“DFR”), Director of Aging, CFO, Appointing Authority for the DFR, and Chief of Staff. The Commission ruled that she could help her new employer respond to an RFP released by the agency during the cooling off period despite the fact that she had signed off on the prior contract issued to the current vendor for those same services.

A refresher on Gargano's incestuous ties: He's married to Ann Lathrop, the president of the Capital Improvement Board who works as a consultant for Crowe Horwath, which has a bunch of state and local government contracts. Lathrop and Mitch Roob cut their teeth in Indianapolis politics working for former Mayor Steve Goldsmith. Roob told people long before Daniels' election as governor that he would be named FSSA Secretary, and that he would privatize the agency's welfare services. ACS was awarded a similar contract in the state of Texas while Roob was still employed there. Roob kept his word and, to no one's surprise, his former employer was part of the team led by IBM that was awarded the contract to privatize the agency's welfare services. All three worked at one point or another for ACS. Goldsmith, working in concert with ACS's attorneys/lobbyists at Barnes & Thornburg, including Bob Grand, Joe Loftus and then-City-County Council President Ryan Vaughn, who doubled as a lobbyist for Barnes & Thornburg before becoming Mayor Ballard's chief of staff, engineered the 50-year privatization agreement for Indy's parking meter assets for ACS. Bob Grand, who previously served as President of the Capital Improvement Board, arranged for Lathrop's appointment to the CIB to ensure that the CIB would approve the more than $200 million in subsidies awarded to his law firm's client, the Indiana Pacers. It is rumored that Goldsmith, who has never been registered as a lobbyist with the City of Indianapolis despite all the time he spent on the 25th floor advising Ballard, received a $600,000 consulting fee for his role in getting the parking meter privatization deal awarded to ACS. Another former Goldsmith staffer, Skip Stitt, worked for ACS in Washington when Indy decided to privatize its parking meters. Stitt once employed Mike Huber, Ballard's former economic development deputy who ran the efforts inside the Ballard administration to privatize the parking meters, and who now runs the Indy Chamber. And of course, Gargano worked as a consultant for ACS before he went to work for FSSA. Can it get any more incestuous?

State Paid Barnes & Thornburg $9.6 Million For Losing Case Against IBM

The state's lawsuit seeking hundreds of millions in damages against IBM for the failed welfare privatization implementation was a dubious lawsuit from day one. It was no secret that the Daniels administration had conspired with the law firm of Barnes & Thornburg , which represented ACS, to concoct a plan to privatize the state's welfare services and steer the bulk of that work to the law firm's client. It began with making sure that Daniels appointed a former ACS executive, Mitch Roob, to run the agency. Roob and another former executive of ACS, former Indianapolis Mayor Steve Goldsmith, immediately began pushing a model based on a privatization model being implemented by ACS in the state of Texas, one that would ultimately be chosen by the agency Roob ran. That model was known as "remote eligibility," one under which remote call centers would process all claims for welfare benefits over the Internet or over the phone rather than the traditional model of having case workers in county offices who met with those applying for benefits face-to-face. Word spread quickly among potential bidders that the bidding process was rigged in favor of the coalition of companies responding to the public bid, which was led by IBM but included ACS as the major subcontractor participant. In the end, all competitors dropped out of the bidding process, leaving the IBM-led coalition as the sole bidder for a more than $1 billion, 10-year contract, the largest in the state's history. The state inked a contract with the IBM-led team despite the fact that the model upon which it was based in Texas had been halted by that state's governor because problems with implementation were "so severe."

As Judge Dreyer's opinion denying all claims the state made against IBM found, the bulk of the services provided under the privatization contract were being performed by ACS, which was the source of most of the complaints against the system when its first rollout began. Instead of working with its prime contractor to work through the problems, ACS's lobbyist at Barnes & Thornburg, Joe Loftus, began meeting secretly with high levels of the Daniels administration behind IBM's back to undermine its control of the contract, including Gov. Mitch Daniels. Judge Dreyer noted one e-mail exchange that Loftus had with Roob where he complained that IBM "just didn't get it" in reference to frequent lectures he received from them reminding him that IBM was the lead contractor and the principal point of contract for all communications under the conract. Even ACS officials who testified at the trial conceded that Loftus' communications behind IBM's back constituted a breach of their contract, and the state was breaching its contract with IBM by engaging in the direct communications with ACS. These communications created "distrust" among the contract partners according to Judge Dreyer's opinion. "Certainly the State showed that IBM did not perform well in some respects, especially when trying to get subcontractor ACS Human Services ("ACS") to answer phones notwithstanding evidence of ACS lobbying against IBM in violation of its own subcontract." But Dreyer found plenty of evidence offered during the long trial where the state and IBM traded claims against one another where the state had given favorable reviews of IBM's work. One scoring of the company's performance prepared by FSSA's Zach Main gave the company 9 out of a possible 10 points. What the evidence showed was that IBM was being scapegoated as public pressure mounted to drop the privatization move, particularly from state lawmakers.

The state had the option of terminating its contract with IBM for convenience, but it chose instead to terminate the contract for cause and put ACS in charge of a new hybrid approach to delivering services, and to file a lawsuit against IBM seeking more than $150 million in damages, and IBM, in turn, filed a countersuit against the company seeking more than $100 million in damages. What stunned legal observers was a decision by Gov. Mitch Daniels personally to hire the law firm of Barnes & Thornburg to represent the state's interests over the objections of Attorney General Greg Zoeller given that it had been knee deep in representing ACS from day one. The engagement agreement entered into with the law firm contained pages of disclosures concerning the law firm's potential conflicts. Some legal observers questioned whether the conflicts of interest raised in the engagement letter were even waivable under the rules of professional conduct. A key deputy chief of staff in the governor's office, Betsy Burdick, worked with her brother at the law firm, Brian Burdick, to ink the deal. Although Burdick signed the agreement, he's a bond lawyer and not a litigator or an expert in contract law. According to the Star's Mary Beth Schneider, the state has paid the law firm a staggering $9.6 million to represent the state's interests in the lawsuit. If the Attorney General's office had been allowed to handle the lawsuit, existing state employees would have been utilized at no additional expense to the state. Instead, the very law firm which played an instrumental role in the privatization fiasco was allowed to profiteer from its own handiwork. Judge Dreyer ruled against all of the state's claims against IBM, and he ordered the state to pay IBM more than $52 million. Remarkably, one of the key attorneys handling the lawsuit against IBM for the firm, Peter Rusthoven, had the audacity to accuse Judge Dreyer of writing an opinion that contained "unnecessary political commentary that is neither accurate nor relevant." I think what he meant to say was that he used words that hit too close to home. He said the state will appeal Judge Dreyer's ruling, and the firm will charge the state at least another $250,000 for its services.

For the life of me, I do not understand why a criminal investigation has not been launched by the FBI and the U.S. Attorney's office. This has got to be one of the most corrupt deals in the history of Indiana state government. Hundreds of millions of federal tax dollars were being misspent simply so big campaign contributors of Gov. Mitch Daniels could make a lot of money with no concern at all to the services being provided using those tax dollars. One of the administration's biggest critics in the state legislature is a Republican lawmaker, State Sen. Vaneeta Becker (R-Evansville). “The whole thing could have been avoided if the state from the beginning had just provided new computers and additional training to caseworkers,” she told the Star's Mary Beth Schneider. “A lot of this could have been avoided and a lot of costs.” Gov. Daniels, for his part, was totally unapologetic about the outcome and says he expects the decision will be overturned on appeal. Even if the state loses on appeal, he told Schneider that the more than $52 million the state will be required to pay IBM was irrelevant because they "are so tiny compared to the savings we’re achieving.” The state has spent more than a half billion dollars to date on the privatization effort. What do you expect from a guy who told Congress when he was OMB Director that the Iraq war would only cost taxpayers $50 billion? Oh, and did I mention that Gov. Daniels put a former paid consultant for ACS, Mike Gargano, in charge of FSSA after Roob's successor, Anne Murphy, left the agency after a short stint running the agency? Her sole task was to get rid of IBM after Roob stepped down to become head of the Indiana Economic Development Corporation. Murphy's short tenure simply provided cover for the conspiring parties. When that task was completed, she moved on and Gargano stepped in so ACS and Loftus would have a person under their thumb in charge of the agency.

IBM Lawsuit Closing Arguments

The six-week trial in the battling lawsuits between the state's Family and Social Services Administration and IBM over the failed welfare privatization initiative is coming to a close. There's been very little reporting of the trial to date, which will be decided by Marion Superior Court Judge David Dreyer. Media interest in the story waned after Gov. Mitch Daniels avoided having to testify at the trial after the Supreme Court ruled that he was immune from doing so under state law. The Fort Wayne Journal-Gazette's Niki Kelly offers some interesting comments made by opposing lawyers during closing arguments. Barnes & Thornburg's John Maley argued for the state:

“Were there breaches? Scores and scores and scores,” said John Maley, the state’s primary lawyer. “Needy Hoosiers were not being well served.”

Maley said IBM clearly did not meet its contractual obligations to Indiana and the state suffered substantial damages by having to create a new hybrid system.

“It’s time for IBM to finally be held accountable,” Maley said . . .

He said the company could have invested more in the project by hiring more workers to improve the metrics, but IBM executives were focused on profit.

“Shareholders trump a million needy Hoosiers,” Maley said.

If needy Hoosiers being well served was the motive, there would not have been a privatization initiative. See my bombshell report on Carl Moldthan's inside account of the welfare privatization debacle. It was all about Mitch Roob, FSSA's former secretary, steering hundreds of millions of dollars to his former employer, ACS. That Barnes & Thornburg was even permitted to represent the state's interests in this lawsuit is nothing short of an outrage. The law firm has long represented ACS and has very close ties to Roob and others who have worked for the firm, including the current FSSA secretary, Michael Gargano. IBM was merely a place holder to provide cover for the primary purpose behind the contract. Not surprisingly, ACS' financial role with FSSA grew substantially after IBM was dumped.

Kelley has an interesting e-mail exchange between Roob's replacement, Anne Murphy, and the agency's spokesman, Marcus Barlow, in explaining IBM's theory of the case.

Steve McCormick, attorney for IBM, argued further that the state intentionally looked for a way to terminate the contract to get out of paying additional dollars to convert the contract to a new hybrid system.

“This is not about IBM’s performance,” he said. “This is all about saving the state from having to pay.” 

“This was a wrenching, difficult transition,” he said. “Everybody understood there were going to be problems.”

He noted that the tenor of the state’s relationship with IBM changed in January 2009 when Anne Murphy took over as secretary of the Indiana Family and Social Services Administration. Within days, she fired off an email asking whether IBM might be in default.

McCormick also said a three-month corrective action plan was just a sham – a ruse to fire IBM when it was up in October 2009.

As proof, he showed an email between Murphy and then-department spokesman Marcus Barlow from the summer of 2009 where Murphy wanted Barlow to say negative things about IBM to the media. He warned it would be the first time to do so and said, “we just need to survive until October. Then we’re going to drop bombs ala Hiroshima and Nagasaki.”

McCormick said of the 22 corrective-action-plan items, all were improved except the four controlled by subcontractor ACS, whose liaison was working in Murphy’s executive office. He reiterated several witness statements that suggested ACS was purposely not trying to improve so IBM would get fired.

The state retained ACS in the hybrid system.

“They engineered that to happen and then come in here to use the failure of the (corrective action plan) against us,” he said. “They terminated this contract because of their budget problems.”

Marcus Barlow is a friend. I'll have to check to see if he comments on the nuclear option e-mail on his Facebook page today.

LA Times' Look At The Corrupt FSSA Privatization Deal Indiana Media Refused To Do

Taking a look at today's LA Times article discussing Gov. Mitch Daniels administration's failed FSSA privatization deal, it's no small wonder he decided against running for president. Reporters from the newspaper came to Indianapolis to investigate the deal while Daniels was still being encouraged to jump into the 2012 GOP presidential race. Reporters Tom Hamburger and Melanie Mason spent several days in Indianapolis in May digging for information on the deal in the days leading up to Daniels' surprise announcement that he would not run due to family considerations. The two reporters met with me for several hours back in May to ask questions and discuss my reporting on the subject (even though there's no attribution in their story). They were surprised the botched privatization deal hadn't received more coverage by the Indiana media, particularly given the ties of key players in the deal to ACS, the big benefactor of the deal. I thought the story would be dropped after Daniels decided not to run, but the material they uncovered was just too good to pass up.

Here's some of what the reporters had to say on those corrupt ties that seemed to drive the deal from the beginning:

Though the $1.37-billion project proved disastrous for many of the state's poor, elderly and disabled, it was a financial bonanza for a handful of firms with ties to Daniels and his political allies, which landed state contracts worth millions . . .

Critics say that in Indiana, the privatization process barreled forward with little public input and was marred by the appearance of conflicts of interest. Despite the massive nature of the changes he was proposing, Daniels insisted he did not need legislative approval. And the only public hearing occurred after he announced he would proceed with the project.

Key players involved in the process had ties to Affiliated Computer Services, the company that benefited the most from the deal. Mitch Roob — a Daniels appointee who ran the state's Family and Social Services Administration when it awarded the contract — was a former ACS vice president. As the state began the project, Roob occasionally sought advice from former Indianapolis Mayor Stephen Goldsmith, a political ally of Daniels and fellow privatization advocate who also had been an ACS vice president . . .

In a brief interview, Daniels called "completely bogus" the suggestion that his administration was too close to companies that won lucrative contracts.

"There is no evidence of that," he said. "Our approach was either firms perform well — or we will get rid of them and try someone else."

Yet it took two years before the governor acknowledged that replacing caseworkers with centralized call centers "just didn't work." In October 2009, Daniels canceled a 10-year contract with an IBM-led consortium of companies that included ACS among its subcontractors. IBM and Indiana are now engaged in dueling lawsuits scheduled to go to trial next February.

After IBM was fired, ACS — which was blamed by welfare advocates for many of the problems — was given a new eight-year contract worth $638 million to continue its work, according to state records.

All told, three politically connected firms gained from the welfare privatization effort in Indiana: ACS; the Lucas Group, a Boston-based firm that wrote the specifications for the contract; and Barnes & Thornburg, the Indianapolis law firm that lobbies for ACS and is representing the state in its suit against IBM.

ACS — via several political action committees — donated nearly $50,000 to Daniels' gubernatorial campaigns and his state leadership PAC between 2003 and 2010. Barnes & Thornburg gave Daniels almost $120,000 between 2004 and 2010.

Daniels began pursuing the idea of privatizing Indiana's welfare eligibility system soon after his 2005 inauguration. The idea was taken up enthusiastically by Roob, whom Daniels had brought over from ACS, and who repeatedly described the failings of Indiana's social services agency, which serves more than 1 million needy residents . . .

Even before Daniels signed off on the privatization effort, the little-known Lucas Group started reaping benefits. Its role was not publicized at the time, but the consulting firm had a nearly $4-million contract — signed by Roob — to write the specifications by which the bidding companies would take over the system.

Like ACS, the Lucas Group had ties to former mayor Goldsmith: He served for a time as a senior consultant for the firm, which is run by a longtime associate. Goldsmith, now a deputy mayor in New York, said in an interview that he had nothing to do with the state's awarding of contracts to the Lucas Group or ACS . . .

During Indiana's deliberations, ACS was under fire from federal regulators examining backdating of stock options, as well as from officials in several states who complained of delays, technical problems and, in one case, manipulation of data to justify bonus payments.

Ken Ericson, a spokesman for ACS, said the company remained in good standing with its government clients, continuing to provide services in all 50 states.

Despite its troubles around the country, ACS — as a subcontractor to IBM — ended up with the biggest piece of the contract in Indiana. The company hired 1,500 former state workers, built the system's call center and provided the staff that did the initial processing of welfare applications. It was also poised to make a minimum of $596 million in fixed fees, according to documents obtained by the Tribune Washington Bureau/Los Angeles Times.

Roob, whose agency solicited bids for the project, did not return calls for comment. But aides to Daniels said the former Family and Social Services Administration secretary played no role in the selection process.

They noted that the winning consortium, then led by IBM, ended up being the only bidder for the deal after another group led by Accenture dropped out in May 2006. An interagency review committee studied the proposal by the IBM-led consortium and recommended that the governor move forward with the project.

"No one ever said, 'We want to make sure ACS is part of this,'" said Earl Goode, Daniels' chief of staff, who chaired the review committee. "It was looking at the best solution and what's best for the taxpayers of Indiana."

In late November 2006, Daniels announced he had accepted the review committee's recommendation. A week later, the state held the only public hearing on the proposal. He signed the deal with IBM a month later, declaring the move would save taxpayers $1 billion . . .

IBM said the problems were due to an unexpected surge in applications.

"Our contention has always been there weren't enough caseworkers," said IBM spokesman Clint Roswell.

The state said the issue was IBM's oversight of ACS.

"The state is now managing them and they're doing fine," said Peter Rusthoven, one of the lawyers representing the state in its suit against IBM.

When the state decided to sue, the Daniels administration opted to hire Rusthoven's firm — Barnes & Thornburg, which also represents ACS — to handle the case, rather than rely on the state attorney general. One of the Barnes & Thornburg partners listed on the $5.25-million contract is Brian Burdick, the brother of Daniels' deputy chief of staff.

Mark Massa, who was Daniels' general counsel at the time, said hiring outside counsel was necessary because of the complexity of the case.

"I just wanted to hire the best litigators I could find," Massa said. "The decision was solely mine and I didn't take political considerations into account." . . . 

The LA Times reporters missed one big item: the hiring of Mike Gargano as FSSA's new secretary to oversee ACS. Gargano is a former consultant for ACS who is married to Ann Lathrop, another former member of the Goldsmith administration who worked as an executive at ACS, alongside Goldsmith, Roob and Skip Stitt. The reporters had access to documents prepared by former FSSA employee Carl Moldthan, now deceased, who warned Daniels and legislative leaders the privatization of the FSSA services was misguided and being done for all of the wrong reasons. Moldthan's critique included an admission by Roob that the privatization would not save taxpayers one dime despite Daniels' public claim that it would save $500 million over ten years.

 

Another Ballard Tax Increase Takes Effect Today

Mayor Greg Ballard's plan to make more than a billion dollars for one of City-County Council President Ryan Vaughn's clients moves a step closer today. ACS, the politically-connected firm that Ballard awarded a 50-year lease for the City's parking meter business, begins collecting higher parking fees and charging for extended hours of use today. Persons parking at metered spaces downtown and in Broad Ripple will be charged to park an additional 5 hours during the week as hours are extended from 7:00 a.m. to 9:00 p.m at the rate of $1.00 an hour. Additionally, the City will charge them to park those same hours on Saturdays for the first time in city history. The rates will jump to $1.50 an hour beginning in January, 2011, double the current rate.

The Star's Jon Murray misleads the papers readers on a bit of bait-and-switch ACS and the Ballard administration engaged in when it sold the City on the deal. Individual meters mounted on the existing poles were to be replaced by multi-space pay boxes; however, when ACS began switching out the meters, it instead installed electronic meters on the existing meter poles, not even bothering to replace the rusty old poles. The Star, which endorsed the corrupt 50-year deal, tries to explain it away:

Beginning in late spring or early summer, ParkIndy will install multispace pay boxes to replace about two-thirds of the meters.


ParkIndy has drawn criticism for leaving rusty meter poles and bases and replacing only the heads. Lou Gerig, a spokesman for ParkIndy, said that as pay boxes go in, leftover meter parts that are in good condition will be used to replace older hardware on remaining individual-space meters.

The multi-space pay boxes were the cornerstone of what councilors were sold when they approved the deal last year. ACS is installing the electronic meters on the poles for now, which are actually used meters that were removed from another city where they were previously used. By installing the older technology now, ACS is getting immediate access to revenues it will generate from the 50-year lease that includes the higher rates and extended hours. ACS will use those revenues to finance the cost of installing the more costly multi-space boxes over time for most but not all spaces. ACS plans to use newer poles already purchased by the city to put on the remaining parking spaces where it intends to use its used electronic meters. In other words, ACS and the Ballard administration flat out lied about how much money ACS would invest up front to install new parking meter technology.

There are many signs that ACS has used insiders with ties to the company to expand its business operations in state and local government in Indiana. ACS played a key role in the botched privatization of FSSA's welfare services that cost taxpayers more than a half billion dollars. The administration of Gov. Mitch Daniels blamed the entire mess on IBM when it terminated IBM's contract but kept in place ACS. IBM partnered with ACS in order to win the contract originally because then-FSSA Secretary Mitch Roob, a former executive with ACS, initiated the privatization effort. Gov. Daniels then named another former consultant for ACS, Michael Gargano, to run the agency, who is married to another former ACS executive, Ann Lathrop.

ACS has long used the law firm of Barnes & Thornburg as its hired gun lobbyist to win government business in Indiana. The firm lobbies both state and city officials on behalf of ACS. Its chief lobbyist at the firm, Joe Loftus, is also paid as a key adviser to Mayor Greg Ballard. Lobbying records also showed City-County Council President Ryan Vaughn lobbied the state on behalf of ACS as a lobbyist for the firm; however, when this blog reported on his registered status as a lobbyist for ACS, Vaughn claimed a paralegal at his law firm registered him with the state in error. Vaughn also twisted arms of councilors to ram the deal through the council and voted in support of the 50-year parking meter lease despite his obvious conflict of interest.

Daniels Administration's Attorneys Lose Fight To Exclude Thousands Of Documents From Discovery In Lawsuit Over Failed FSSA Privatization

I can't say that I'm surprised attorneys at Barnes & Thornburg, who are representing FSSA in a lawsuit with IBM over the failed welfare privatization effort despite their obvious conflict of interest in doing so, tried to exclude more than 11,000 documents from discovery under a claim of privilege. Fortunately, Judge David Dreyer wasn't impressed with the claim of privilege after personally reviewing the documents himself. With dollar signs no doubt flashing in his eyes (the state is paying him $475 an hour), Barnes & Thornburg's Peter Rusthoven says the state may appeal Dreyer's ruling. The Star's Carrie Ritchie explains:

A Marion Superior Court judge has ordered Indiana to turn over thousands of documents to help sort out two lawsuits over the state’s cancellation of a welfare modernization contract with IBM.


In an order entered this afternoon, Judge David Dreyer said documents the state claimed were privileged are not and should be turned over to IBM for review. They will not be released publicly.

Attorneys for the state are considering an appeal, which would temporarily stop the suits from moving forward, and will notify the court of their decision within 10 days, said Peter Rusthoven, who’s representing the state.

The documents include state employees’ e-mails, including some belonging to Gov. Mitch Daniels.

Daniels cancelled the 10-year, $1.37 billion contract in 2009 after only three years because of complaints about the automated system.

The state sued IBM in May to take back the $437 million it paid the company.

The most interesting aspect of Ritchie's story is the mention that some of the documents include e-mails authored by Gov. Daniels, who IBM is trying to depose in the matter. Under normal circumstances, it wouldn't be appropriate to insist the governor himself be questioned about an agency contractual dispute due to executive privilege, but a governor typically doesn't get directly involved involved in such matters; rather, he uses intermediaries to carry out his wishes to the extent he risks any involvement to keep his own hands clean. It is remarkable that the governor appears to have taken a more direct role in this matter.

IBM countersued, saying the state still owes the company about $100 million.


Dreyer, who reviewed more than 11,000 pages of documents privately before ruling, said in the order that he excluded “a relatively small number of individual e-mails or pages that are extraneous, personal or obviously unrelated communications.”

He also noted that he tried to be considerate of state employees’ privacy, and that he afforded the governor’s e-mails “particular scrutiny and due regard.”

Attorneys for IBM had criticized the state for trying to shield the documents.

“The state has delayed production of these documents since last fall and we hope we will now receive them promptly,” IBM spokesman Clint Roswell said today.

IBM also is trying to get a deposition from Daniels, and the state has requested a protective order to prevent the company from doing so.

The most outrageous aspect of this litigation is the fact that Barnes & Thornburg is being allowed to represent the state's interests. As I've previously pointed out, the firm has long represented ACS, the company that partnered with IBM on the welfare privatization agreement. ACS got to continue its role after the state opted to dump IBM. That ACS's services were retained was even more troubling because the company formerly employed former FSSA Secretary Mitch Roob, who initiated the privatization effort after leaving the company to work for Daniels. After Roob departed, the agency named another ACS consultant, Michael Gargano, as the agency's chief of staff and then later as the agency's Secretary. Gargano's wife, Ann Lathrop, also formerly worked at ACS with Roob. The agreement the state entered into with Barnes & Thornburg to handle the representation acknowledged the existence of the conflict of interest, but Daniels nonetheless insisted on using the firm. A top deputy in Daniels' office, Betsy Burdick, is the brother of the Barnes & Thornburg partner who signed the agreement with the state, Brian Burdick. It's notable that Burdick is a bond lawyer and not a litigator.

IEDC Jobs Audit Findings Confirm Segal's Reporting

WTHR's Bob Segal continues his excellent investigative reporting on the Indiana Economic Development Corporation's grossly inflated job creation claims under Gov. Mitch Daniels. His continuing series of reports has poked many holes in the IEDC's often-cited 100,000 jobs-created claim. Now he has an audit conducted for the agency that confirms the findings of his investigation, although the Crowe Horwath audit performs hat tricks to try to convince you the numbers don't really mean what they otherwise indicate. Segal reports on the tricky audit numbers:

Only a fraction of job commitments announced by the Indiana Economic Development Corporation have resulted in actual Indiana jobs, according to an independent IEDC program review obtained by Eyewitness News.


The review, presented to the IEDC audit committee earlier this month, is part of an audit that examines how state job numbers are collected, tracked and announced by IEDC. The numbers presented in the audit offer a stark contrast between the job realization figures cited by Governor Mitch Daniels and his job creation agency and those reported by auditors and WTHR. It also presents statistics in a manner that allows state leaders to still cite high levels of job creation, even though the realization figures suggest otherwise.

The "Summary of Incentive Program Review" prepared by audit firm Crowe Horwath examined 597 job-creation projects outlined in IEDC annual reports from 2005 to 2009. The projects were listed as "Indiana Economic Successes" that would bring new jobs to Indiana.

According to the report, those projects were expected to create 44,208 jobs by late 2010 and, based on the most recent information available to auditors, have so far resulted in 37,640 actual jobs – a realization rate of 85%.

But the state's job realization rate is actually much lower than 85%, according to additional data reviewed by WTHR.

The numbers cited above are based solely on data for "reporting companies," and they do not include job data for 200 other projects also listed as "Indiana Economic Successes" in IEDC annual reports. Including those projects, as well, the number of newly-created jobs the agency had anticipated to materialize by the end of 2010 is 57,088 (not 44,208), according to the report. Using that figure, IEDC's job realization rate is 66%.

And nowhere does the audit report mention the 98,683 total new job commitments announced by IEDC from 2005 to 2009. Using that number – which IEDC and the governor have repeatedly promoted in their press releases, speeches and annual reports – the audit data suggests, so far, only 38% of jobs announced by IEDC have resulted in actual jobs. While that percentage is expected to increase in coming years (some of the companies are not expected to fulfill all of their job commitments for several more years), the overall numbers show IEDC's real job realization statistics are much lower than the agency portrays to the public by citing far more limited data.

Did you catch that? Crowe Horwath tries to bolster the IEDC job claims by suggesting an "85% realization rate" using  44,208 jobs-created as the benchmark, but as Segal notes, the audit conveniently omitted job data for 200 job-creation projects identified in IEDC's annual reports during the reporting period as successes. Throw in those numbers, the number jumps to 57,088 and the realization rate drops to 66%. And if you use the 98,683-jobs number often touted by IEDC, the realization rate is only 38%. Unbelievably, the Crowe Horwath audit summary states "there is no evidence that IEDC has inflated job projection or job project figures." Instead, the audit summary claims "concerns with job creation figures are the result of inconsistent use of terminology." It recommends IEDC "clarify terminology internally and externally by developing a glossary of standard terms and definitions used by IEDC staff to evaluate and report job creation figures." How could any reputable audit firm expect us to take their work seriously when they engage in this kind of deceptive audit reporting? I dare to think how much of our taxpayer money was spent on this contrived audit to whitewash the actual deception taking place.

The fact IEDC chose Crowe Horwath to perform the audit should come as no surprise. IEDC's Chairman Mitch Roob has very close ties to Crowe Horwath's Ann Lathrop. The two both worked in the administration of former Mayor Steve Goldsmith and they all worked together at ACS. Roob, while serving as Secretary of FSSA, steered the massive welfare privatization at the agency to a team of companies that included ACS. While the state eventually canned the leader of that team, IBM, after the privatization effort failed miserably, resulting in protracted and costly litigation, FSSA continued to use the services of ACS and even hired the law firm that lobbies for ACS, Barnes & Thornburg, to represent the state's interest in that litigation. Later, Lathrop's husband, Mike Gargano, a former consultant for ACS, was installed as FSSA's new Secretary. So you can see how they have the wagons pretty much circled with their incestuous relationships. If the IEDC wanted to bolster public confidence in its work, Crowe Horwath should have been the last firm it used in an attempt to redeem itself with this suspect audit because of the Roob-Lathrop connection. Roob and other IEDC officials are refusing to discuss the audit findings with Segal, and he has still not been given access to the actual audit Crowe Horwath conducted; only its findings. Instead, Roob sent a letter to Segal accusing him of "blatantly misrepresenting the information and intentionally creating an incomplete picture of Indiana's economic development successes." Unbelievable.

Outrage: ACS Consultant Named New Head Of FSSA

If you thought the stench of political corruption in the Daniels and Ballard administrations couldn't get worse, it just did. Unbelievably, Gov. Mitch Daniels, who is on a trade mission to Japan and China, has announced Michael Gargano, a former paid consultant for ACS, is the new Secretary of the Family and Social Services Administration. Until now, he has been the chief of staff to Anne Murphy, who took over for Mitch Roob, another former ACS executive before he joined the Daniels administration. Gargano became chief of staff after Murphy took charge of the agency. It was Roob's decision to enter into a controversial privatization agreement with IBM and its partner, ACS, for FSSA's welfare services. After the privatization failed so badly, Gov. Daniels terminated the contract after Roob had left the agency to run IEDC and Murphy had taken over the agency. The state and IBM have traded lawsuits against each other, and some estimates calculate the state's losses on that deal as high as $500 million. The state oddly decided to retain ACS as the lead contractor for welfare services despite its role in the failed privatization effort.

Adding to the controversy was the Daniels' administration's insistence that Barnes & Thornburg represent the state in that lawsuit, notwithstanding the fact that the firm has served as ACS's paid lobbyist in the State of Indiana in matters before the Daniels' administration and the Indiana General Assembly, as well as the City of Indianapolis. An engagement agreement signed by the law firm with the state detailed the conflicts of interest anticipated by the firm's representation of the state because of its representation of ACS.

I first reported on Gargano's gigantic conflict of interest on October 15 after Murphy announced she was leaving her position. I noted Gargano's role as the owner of the Watertown Group, which at that time still had an active website on the Internet that boasted of its role as a consultant for a number of state agencies, including FSSA, as well as his role as a consultant for ACS. Shortly after I posted that bit of information, the link to the firm's website went dead. Gargano's appointment takes effect on November 15 according to the press release issued by the Governor's office. The Governor's press release conveniently omits the fact that Gargano once worked as a consultant to ACS.

Gargano is married to Ann Lathrop, the president of the CIB and a former ACS executive, who succeeded Barnes & Thornburg's Bob Grand in that role. Prior to that, she served as the CIB's treasurer. She was appointed to the CIB at the recommendation of Grand. Grand's service on that board raised serious conflict of interest concerns because he and his law firm had represented Simon family interests, including the Indiana Pacers. The CIB just recently under Lathrop's leadership agreed to give a $33.5 million additional subsidy to the Pacers, which use Conseco Fieldhouse rent-free under a lease arrangement that makes the team responsible for the operating and maintenance expenses of the facility, but allows the team to pocket all revenues it generates from both game and non-game events.

CCC President Ryan Vaughn triggered controversy when this blog disclosed he was a registered lobbyist for ACS but was participating in the Ballard administration's controversial 50-year privatization agreement for the city's parking meter assets with ACS. Vaughn insisted the state lobbying reports were filed in error by a paralegal of his firm and should not have indicated he was a registered lobbyist for ACS. Vaughn's boss at Barnes & Thornburg, Joe Loftus, who is a paid personal adviser to Mayor Greg Ballard at the same time he is registered to lobby for ACS, insists he has not participated in any discussions concerning the parking meter lease on behalf of his client. I just earlier reported on Vaughn removing Councilor Christine Scales from the Public Safety Committee after she told him and her fellow councilors she could not support the ACS parking meter lease deal Vaughn is pressing members of his caucus to support.

My question is how much more of this crap do we have to tolerate before a federal prosecutor or the Marion County Prosecutor, who are supposed to be representing the public's interest, steps in and starts an investigation into these tangled webs of conflicts that are raping the taxpayers of this state and city. Enough is enough already. Where is the outrage? Where is the news media? Absolutely unbelievable.

AP's Ken Kusmer Talks About Barnes & Thornburg Conflict In Representing State In Lawsuit Against IBM

The AP's Ken Kusmer is a regular reader of this blog and others and often gets his story ideas here. For example, when I first broke the conflict of interest former FSSA Secretary Mitch Roob had as a former executive with ACS in entering into the privatization agreement with IBM that included ACS as a key partner, Kusmer quickly picked it up and ran with it as a story for AP. Last weekend, I raised questions about ACS's continuing influence at FSSA with the presence of another former ACS consultant, Michael Gargano, chief of staff to Roob's successor, FSSA Secretary Ann Murphy, who recently announced she is leaving the agency to work  in government relations for Community Health Network. Gargano is also married to Ann Lathrop, another former ACS executive who also served as president of the CIB. I discussed in my post last weekend how Gargano was a leading contender to take Murphy's place, as well as the irony in ACS's hired gun lobbyist, Barnes & Thornburg, being hired by the state to represent the state's interest in a lawsuit against IBM over the termination of the IBM welfare privatization agreement that resulted in a hybrid approach which includes the participation of former IBM partner, ACS. Fellow blogger Paul Ogden posted on the details of  Barnes & Thornburg's $5.2 million legal contract in follow up to my post. Today, Ken Kusmer picks up on that legal contract and how it has watchdogs and Democrats screaming foul:

Indiana's human services agency is paying $5.25 million to a private law firm, including the brother of a key aide to Gov. Mitch Daniels, to represent the state in its fight over a canceled IBM Corp. welfare outsourcing contract.


Barnes & Thornburg of Indianapolis was hired despite several conflicts of interest arising from the fact that it also represents former IBM partners involved in the welfare deal. Bryan Corbin, a spokesman for the state attorney general's office, said in an e-mail to The Associated Press that "hiring this firm was a specific request of the Governor's Office."

Daniels' press secretary, Jane Jankowski, said the hire "made the most sense given the scope and complexity of the case."

The law firm's contract with the Family and Social Services Administration outlines its conflicts, and Barnes & Thornburg even suggests in the document that the agency consider hiring a co-counsel to handle conflict-of-interest issues as needed. The contract was obtained by the AP.

"They're very good litigators and that's why they were chosen," family and social services spokesman Marcus Barlow said of Barnes & Thornburg. Barlow said the $5.25 million is "a small fraction" less than 1 percent of the $1.3 billion in damages the agency is seeking from IBM.

Indiana House Speaker Patrick Bauer, however, called it foolish for the agency to hire outside counsel when the Indiana attorney general's office could represent it for no cost in attorneys' fees.

"To spend another $5 million is bad money after bad money, and the taxpayers are the losers," said Bauer, a Democrat from South Bend.

Daniels, a Republican, fired Armonk, N.Y.-based IBM last October from a 10-year, $1.37 billion contract to introduce call centers, document imaging and other automation to the process of applying for food stamps, Medicaid and other benefits. IBM and Indiana sued each other in state court last May.


The $5.25 million contract with Barnes & Thornburg also calls for the human services agency to pay attorneys' expenses. Barlow said the money would come out of the agency's administrative budget, which includes legal costs.

The Barnes & Thornburg team includes longtime Republican activist Peter Rusthoven at a rate of $475 per hour, John Maley at $465 and Brian Burdick at $405. Burdick is the brother of Betsy Burdick, Daniels' deputy chief of staff.

Signed by Brian Burdick and members of the Daniels administration in August, the contract covers Dec. 18, 2009 a few days after IBM's state contract ended through June 30, 2012. The case is scheduled to go to trial next September.

"This just smells to the highest heaven," said Rep. Charlie Brown, a Democrat from Gary and chairman of the General Assembly's Health Finance Commission.

Brown questioned the legality of a contract not signed until eight months after work began, but Barlow said it's normal for the state to sign contracts after a vendor has started a project.

Three pages of the 9-page contract detail Barnes & Thornburg's conflicts of interest from having represented ACS Human Services, a division of Dallas-based Affiliated Computer Services Inc.; Arbor Education and Training; and other subcontractors involved in the IBM deal. Arbor and ACS have new eight-year contracts with the state totaling $853.2 million.

The contract says Barnes & Thornburg attorneys, in representing the human services agency, expect to make claims against its other clients but will not share with the state any "potentially relevant" information gained from representing them. It said the state's case will be screened from other clients.

The state agency also should expect IBM's attorneys "will look for creative ways to exploit the fact that (the firm) represented and continues to represent" the other clients, the contract says.

Julia Vaughn, policy director for the government watchdog group Common Cause/Indiana, said the conflicts of interest were "handing IBM a potential hornet's nest to bat around."

"For a lot of different reasons it screams that Barnes & Thornburg isn't an appropriate firm to put in charge of this case. It looks like their political connections overrode common sense," Vaughn said.

Barlow, the human services agency spokesman, said "any law firm that could handle a lawsuit of this size would have conflicts."

Barnes & Thornburg spokesman Ty Gerig said the firm would not comment on the contract.

IBM spokesman Clint Roswell had no immediate comment. The company is suing the state agency for $52.8 million it claims it is owed under the contract.

Naturally, Kusmer makes no mention of the earlier reports about the controversial legal contract on the blogs. Mainstream reporters knock the blogs all the time, but rip off their reporting without attribution on a daily basis. He does add another crony tie to the mix, noting Brian Burdick, one of the attorneys who signed the contract on behalf of Barnes & Thornburg, is the brother of Gov. Daniels' chief of staff. I would add that Burdick is not a litigator. He is a bond lawyer and everyone involved knows that is the case. His involvement in the case is nothing more than sister helping brother make bigger bucks at his law firm. Here's how Burdick's bio at the firm's website describes his credentials:

Brian L. Burdick, a partner in Barnes & Thornburg LLP’s Indianapolis, Indiana office, concentrates his practice in the areas of government services and public finance. In the public finance area, he serves as special counsel to commercial and investment banks, money management firms, and registered investment advisors advising them on issues in the tax-exempt marketplace including Indiana public-fund banking and investment issues. Mr. Burdick also represents governmental entities as well as underwriters and credit providers in their various roles in public debt offerings. He serves as general counsel to the Indiana County Treasurers’ Association and the Indiana Bond Bank. His government services practice focuses primarily on representing both public and private clients before state and local regulatory bodies and administrative agencies, counseling them on public contracting and bidding, state and local government ethics laws, and financing transactions. As a registered lobbyist, he represents numerous public and private clients before the Indiana General Assembly and advises them on Indiana’s lobbying, election and campaign finance laws. Mr. Burdick was selected for inclusion in The Best Lawyers in America® 2010 in the fields of government relations law and municipal law.

Note that Burdick's bio doesn't use the word "litigation" once. Burdick once worked as a Deputy Treasurer in the State Treasurer's office, where he directed bond work to Barnes & Thornburg's Bob Grand, who hired Burdick to work for the firm in consideration for all the legal work he sent to the firm while he was at the State Treasurer's office. Will you have a follow up report on Michael Gargano and his relationship to ACS, Ken? Glad to help you out in doing your job. Well, at least you're reporting on the obvious and not ignoring it like the Indianapolis Star.

Will ACS Gain Complete Control Of FSSA?

Michael Gargano

It's been no secret since Gov. Mitch Daniels took office that ACS and its lobbyists at Barnes & Thornburg have wielded enormous influence over the state Family and Social Services Administration. Former ACS executive Mitch Roob became Secretary of FSSA just as he had predicted years earlier during the failed attempt to elect another ACS executive, former Indianapolis Mayor Steve Goldsmith, as governor. Roob made no bones about his intent to privatize the administration of welfare services, and everyone knew that meant a major role for his former employer, ACS. Roob departed the agency at the end of Daniels' first term, having succeeded in delivering one of the largest state contracts in history to IBM and its primary partner, ACS, notwithstanding the costly disaster that ensued, to become the state's top economic development guru for Daniels. Anne Murphy, a veteran manager at the agency, took Roob's place.

This week, it was learned Murphy began searching for a new job after only a year on the job. Murphy had the unenviable task of playing clean-up for the privatization mess Roob left behind. Daniels convinced Murphy to stay at the helm of FSSA until the state unwound the controversial IBM contract and implemented a hybrid approach to welfare administration. Little noticed in Murphy's ascension to FSSA Secretary at the time was the naming of her chief of staff, Michael Gargano, a strong voice for ACS's interests. Gargano is married to another former ACS executive and former controller during the Goldsmith administration, Ann Lathrop. She, Roob, Goldsmith and another top Goldsmith administration staffer, Skip Stitt, all landed at ACS following the end of Goldsmith's tenure as mayor. With Gargano in a key position but not technically a decision-maker, ACS succeeded in maintaining a contract with FSSA to administer call center activities for welfare administration after IBM had been sacked and sued by the state for damages occasioned by the failed privatization initiative.

The state ethics commission approved this week an employment offer Murphy has received from Community Health Network as its new vice president of government relations. Murphy has not formally accepted the offer but is expected to do so relatively soon. The state ethics commission determined the state's one-year revolving door law would not prevent her from accepting this new job. Murphy, unlike the controversial hiring of the IURC's top lawyer, Scott Storms, by Duke Energy, has not been involved in any contract or regulations pertaining to Community Health Network since she began her job search. Murphy has agreed not to lobby the Daniels administration on behalf of her prospective employer during the one-year cooling off period. The focus is now shifting to who will replace Murphy once she departs.

Michael Gargano is expected to be a leading contender to replace Murphy as FSSA Secretary as her chief of staff. Curiously, he is still listed as the principal for Watertown Group, a consulting firm he founded in 2003 after he left KPMG Consulting, where he met his current wife, Ann Lathrop. Among the clients listed for Watertown Group are his current employer, FSSA and several other state agencies, the City of Indianapolis and, no surprise, ACS. As an example of the work it does, Watertown Group's website has this testimonial:

Indiana’s Family and Social Services Administration suffered from a contract process filled with inefficiencies, delays and errors. Watertown was able to improve the contract process, ultimately providing faster, more accurate service to FSSA’s many clients.

It is unclear to me how Gargano could have a private consulting firm with all of these clients while he serves in a full-time position at FSSA as chief of staff. Campaign contributions as recently as March, 2008 list Gargano as an executive with Watertown Group. A database of state employees salaries at the Indianapolis Star's website lists Gargano's annual salary at FSSA as $124,195 for the period of 2009-10. It looks like ACS and Barnes & Thornburg, which has a big contract with the agency handling the state's lawsuit against IBM, as well as serving as ACS's lobbyist before the Daniels administration, the General Assembly and the City of Indianapolis, will likely be in the driver's seat if Gargano becomes FSSA's new Secretary. [Paul Ogden has more on that legal contract here.] Not as if that hasn't already been the case though. I'm still trying to figure out how Barnes & Thornburg could represent ACS at the same time it is suing its partner in the FSSA privatization deal on behalf of the state, but the big law firms must know more about conflicts of interest than gumshoe attorneys like myself.

If you connect the dots, which is easy enough to do, you can see why Robert Grand asked Mayor Greg Ballard to appoint Ann Lathrop to the CIB at the beginning of his administration when Grand took charge of the CIB and later asked him to name her as its head after he departed. It's quite an incestuous cesspool of political cronyism Barnes & Thornburg, Grand, Lathrop and ACS have going on, isn't it? Any big surprise that Mayor Ballard would pick ACS to award a 50-year lease for the city's parking meter assets?

UPDATE: Tell me why this shouldn't surprise me? The link to Watertown Group's website went dead this morning. You can still see the cached version here. Lots of State of Indiana users visiting the blog this morning.

Unraveling The Tangled Web Of Conflicts On The CIB Board

The American people scratch their heads and wonder how government regulators of banks and publicly-traded and regulated businesses could allow them to betray the public's trust. We wonder how there could be trillions of dollars in unaccounted expenditures by the Pentagon. And closer to home, we ask how an unelected board could shoulder the people of our community with a mountain of debt and and a $50 million operating deficit incurred primarily for the personal benefit of the state's wealthiest two families and be told the public must pay higher taxes to fix the problem. In each instance, you can track the root of the problem back to a pervasive pay-to-play environment and a never-ending revolving door between the entrusted regulators and the regulated.

To illustrate this problem with our own deeply-indebted Capital Improvement Board of Managers of Marion County, I requested from the City's Public Access Counselor the most recent statement of economic interest statement on file for the Board's nine appointed members. Despite Indianapolis' vague and incomplete disclosure requirements, more than enough information could be gleaned from the members' statements to shed light on why this obscure, unelected board is so non-responsive to the public interest and, at the same time, such a big cheerleader for those who benefit directly from the capital improvements over which it has been entrusted. Not surprisingly, I found reporting among the members inconsistent and, in some cases, incomplete. This is an important point for members of my own Republican Party to keep in mind, as they were quick to cast stones at the former Democratic President of the City-County Council, Councilor Monroe Gray, when he failed to disclose contracts a business he owned had with the government-related entities.

Let's start with the Board's President, Robert Grand. He answers affirmatively questions asking if he has a "direct or indirect pecuniary interest in any contract with the City of Indianapolis or Marion County" and has "received any compensation from any business entity" that is "doing or contemplates doing business with an agency of the City of Indianapolis" during his term on the Board. Grand also affirmatively acknowledges owning stocks, bonds or other investments" which have "a value in excess of $5,000 and which business entity" is "doing or contemplates doing business with an agency of the City of Indianapolis or Marion County." Grand's disclosure, however, becomes blurred on the part of the form where he is asked to provide an "additional explanation" if the answers he gave on the form "needs additional explanation."

Grand discloses that he is a partner with the law firm of Barnes & Thornburg. Grand's biographical listing on his firm's website also lists him as the firm's "Managing Partner", a fact not mentioned in his disclosure. The firm's bio for him states that he "concentrates his practice in the areas of public finance and governmental regulation." "In the public finance area, he counsels State officials, county officials, and mayors on various aspects of bond financing issues and also assists them with many aspects of economic development initiatives." Grand is also known in Republican circles for his ability to raise lots of campaign contributions for Republican candidates. His bio notes he has served as an advisor to many Indiana Republican candidates and chaired the Bush-Cheney Indiana finance committee. It should also be noted that Grand's law firm raised more money for Ballard's mayoral campaign in 2007 than any other city law firm.

Grand's disclosure states that his firm "has represented the City and County from time to time for several years based on the knowledge and expertise of the firm." He states that he anticipates his firm "will have other contracts." He adds, "The firm does not represent the Capital Improvement Board of Managers of Marion County. Noticeably missing from Grand's disclosure statement is his representation of the Simon Property Group and the Indiana Pacers. Much ado was made about this conflict of interest because of the CIB's lease with the Pacers on Conseco Fieldhouse and its financial relationship with Circle Centre Mall, which is operated by Simon Property Group. Grand assured the public he had taken steps up to wall himself off from participation in matters which presented a conflict of interest. Yet, reading his disclosure statement, you would have no idea such a conflict even existed. Instead, Grand vaguely discloses the fact that "several clients for whom I do legal work are doing business with the City of Indianapolis and Marion County. That list is quite lengthy, but his statement does not list who those businesses are. The fact that his firm represents AT&T, for example, should be disclosed but is not. Also, Grand on at least two separate occasions as Board President had to abstain on votes approving parking agreements between the CIB and Wellpoint and Dora Brothers, two adjoining property owners of the CIB. Those clients aren't listed on Grand's disclosure form.

Grand does list 557 shares of common stock he owns in Citigroup and another 184 shares of common stock in Microsoft, neither of which would seem to pose serious conflicts for Grand. I should also note that Grand's disclosure states that he, his spouse or minor children have not accepted any gift or honoraria in excess of $100 from a business entity which is "doing business with an agency of the City of Indianapolis or Marion County.

Patrick Early is the Board's Vice President, its former President and its longest-serving member. His disclosure statement is very brief. He lists as his employer, Somerset CPA. Although his firm's website bio lists him as one of "25 principals" and identifies him as the company's "President", his disclosure statement omits those two items. He answered negatively to every question pertaining to potential conflicts. He acknowledges receiving one gift valued at $225 from the Indianapolis Colts identified as a "Super Bowl Souvenir". I'm surprised that his firm, unlike many of the other major CPA/consulting firms in town, has not done business with the City of Indianapolis or Marion County. I'm also surprised Early had no free tickets to disclose.

Ann Lathrop is a recent addition to the Board and serves as its treasurer. Lathrop formerly served as City Controller during the administration of Mayor Steve Goldsmith. She also formerly worked for ACS, a client of Bob Grand's Barnes & Thornburg. ACS recently won the contract to privatize Indiana's welfare delivery system. She discloses as her employer, Crowe Chizek, and offers this additional explanation: "From time to time, Crowe provides services to the City of Indianapolis and Marion County." Although Crowe's website identifies her as a "partner" of the firm, her disclosure statement does not state that fact or the type of work she performs for Crowe. She adds, "My spouse, Michael Gargano, is employed by KPMG." "KPMG provides services to the City of Indianapolis and Marion County." She had no gifts or honoraria in excess of $100 to report.

On the one hand, Lathrop's experience as the City's former controller makes her a potentially valuable asset for the Board. At the same time, both she and her husband work for companies which rely on contracts with the City of Indianapolis and Marion County. Because of Lathrop's and her husband's jobs, their employers are vulnerable to financial retaliation if she doesn't conform her actions on the Board to persons who have influence within the Ballard administration. Grand and another Barnes & Thornburg attorney, Joe Loftus, exercise enormous power in the Ballard administration. The two ran Ballard's transition team and, according to the Indianapolis Star, they sit in on weekly senior staff meetings with Mayor Ballard. Lathrop's desire for her company to win favor with key people to ensure a steady stream of contracts for her employer could severely cloud her independent judgment as a CIB board member.

Dorothy Henry serves as the Board's secretary. She states that her employer is the Indiana Healthcare Association. The Association is a trade organization for nursing homes in the State of Indiana, and Henry is a registered lobbyist for the organization, neither of which are mentioned on her disclosure statement. Henry formerly worked for the City of Indianapolis in the Goldsmith administration with Joe Loftus and Ann Lathrop. Her husband, Bruce Henry, was promoted to head up human services at IMPD in the Ballard administration after his unsuccessful bid for a City-County Council seat as a Republican in 2007. Her husband's employment is not disclosed; however, the wording of the disclosure statement purports to exclude a "contract of employment" from the disclosure requirement. Henry indicates that neither she nor her spouse or minor children have accepted gifts or honoraria exceeding $100, and she answers in the negative on every question pertaining to potential conflicts of interest. Coincidentally, Barnes & Thornburg represents some of the IHCA's clients and has lobbied the Indiana legislature in the past for its nursing home clients. It doesn't take a rocket scientist to figure out that Henry would be wise not to risk offending certain persons in her service on the Board and face potential retaliation.

Craig Huse is one of the newly-appointed members of the Board by Mayor Greg Ballard. Huse discloses that St. Elmo Inc. and Harry & Izzy's Inc. are his employers. His disclosure statement does not indicate that he is a co-owner of these neighboring, downtown restaurants. Huse's statement indicates that he has no direct or indirect pecuniary interest in any contract with the City of Indianapolis or Marion County. Harry & Izzy's operates a restaurant at Indianapolis' new International Airport, which is not mentioned on Huse's statement. His St. Elmo's and Harry & Izzy's restaurants are located just a block from the Indiana Convention Center, two blocks from Conseco Fieldhouse and within walking distance of Lucas Oil Stadium and Victory Field. It goes without saying that his businesses receives a direct economic benefit from the CIB's facilities that most businesses in Marion County never see.

Huse's disclosures offer just one additional explanation for one of his investments. He states that he is an investor in Centaur, Inc. Centaur is a large gaming/entertainment-related company with a controversial past. Centaur owns Hoosier Park horse race track in Anderson, which operates an off-track betting parlor in Claypool Court, which is owned by Simon Property Group and connects to Circle Centre Mall. Its race track recently won the right from the Indiana legislature to operate a racino at its horse race track. It also helped establish the Argosy riverboat casino in Lawrenceburg, Indiana. Centaur's lobbying activities became the subject of scrutiny last year in Pennsylvania, where the company's attempt to win a gaming license to operate slots at a horse race track was turned down. The company was criticized for making hundreds of thousands of dollars in contributions to key politicians prior to the passage of a state law banning gaming-related contributions. It was also criticized for its ties to former Conseco CEO Steve Hilbert.

There have been recent discussions about the possibility of establishing a downtown casino to bail out the CIB, an idea originally proposed by former Mayor Bart Peterson as a way of funding the construction of Lucas Oil Stadium. Centaur would no doubt be in the driver's seat to win a downtown casino license because of its OTB's presence in Claypool Court tied to its racino in Anderson. Centaur's business relationship with the Simons, who own the Pacers, could be an added boost for the company.

Doug Brown is another attorney member of the CIB. He identifies Stewart & Irwin, P.C. as his employer, in which he discloses that he is an "Equity Shareholder." Brown adds, "One or more of Stewart & Irwin's clients may from time to time to business with the City of Indianapolis." Brown, unlike Grand, specifically identifies one such client posing a conflict for his role on the board. "The firm has performed legal services for Lucas Oil Co., the new naming sponsor of the Indiana stadium." He adds, "I abstained from voting on the approval of the Lucas Oil Co. Agreement and will abstain from voting on any Agreements in the future involving my Firm or its clients." Brown also acknowledges that he has received gifts or honoraria in excess of $100, but he does not itemizes them.

While it's noble that Brown disclosed his firm's relationship with Lucas Oil, it raises a serious concern that a member of the Board was involved in representing a company that was competing with other companies to purchase the naming rights to the new stadium from Colts' owner Jim Irsay. Brown's disclosure does not specify the legal services his firm performed for Lucas Oil so it is unclear whether it had anything to do with the naming rights. Lucas Oil obviously had a vested interest in seeing the new stadium built and a new lease entered into between the CIB and the Colts. There is the potential for the appearance that Brown's knowledge of the Board's negotiations with the Colts could have aided Lucas Oil in winning the naming rights it purchased for a whopping $120 million. Under the lease deal with the Colts and the CIB, Irsay gets to keep the revenues from the stadium naming rights, as well as all other advertising opportunities at the new stadium. The Colts have refused to disclose the amount it is earning from those other revenue opportunities.

Brown also lobbies for Indianapolis Downs, the Shelbyville horse race track that won a state gaming license for a racino last year. Like Huse's Centaur, Indianapolis Downs would have a considerable interest in a potential downtown casino to bail out the CIB. A casino that didn't involve Indianapolis Downs could prove financially devastating to the company.

City-County Council President Bob Cockrum is the Council's representative on the CIB. Cockrum's disclosure statement lists him as being retired. He discloses that one of his sons is an executive with White Lodging, the company to which the City of Indianapolis awarded the right to develop a new J.W. Marriott convention hotel adjacent to the Indiana Convention Center to be connected by an elevated connector. The City pumped approximately $65 million in public funds into the project. Cockrum is the only Board member who itemized a number of gifts, totalling almost $1,000. Cockrum identified $150 worth of free Colts tickets he received from the CIB and another $150 worth of free tickets he received from the Colts. He also listed several free dinners he received courtesy of United Water, IUPUI, Marion County Soil & Water, IPL and the Indianapolis Parks Foundation. I found it very odd that Cockrum was the only CIB board member who disclosed receiving free Colts tickets.

Jay Potesta identifies his employer as the Sheet Metal Workers Union No. 20. He notes that he serves on the Mayor's Labor Advisory Board in addition to the CIB. Potesta says that he has received no gifts or honoraria exceeding $100 and answered in the negative on all other questions about potential conflicts. Potesta's union contributed tens of thousands of dollars to the campaign of former Mayor Bart Peterson. Last year, the union made similar contributions to Ballard's political campaign after he took office. Thousands of the union's members have won work in recent years on various projects undertaken by the CIB, including Lucas Oil Stadium and the expansion of the Indiana Convention Center. It goes without saying that the more the CIB taxes us for public works projects, the more members of Potesta's union will win work on those projects.

John Short, the ninth and last board member, discloses that he works for Indiana University. He doesn't state the specific job he holds, and he indicates he answers in the negative on every question relating to potential conflicts. He also indicates that he has accepted no gifts or honoraria exceeding $100. Short may not have any relationship with the City of Indianapolis or Marion County, but you can bet his IUPUI employer does. Shouldn't those be identified if they exist?

There you have it in a nutshell. In the case of virtually every member on the Board, potential conflicts of interest or prevailing influences exist that would inhibit them from exercising independent judgment and acting on behalf of the public's interest and not on behalf of their employer's or one of their employer's clients interests. I'm reminded of President Dwight D. Eisenhower's farewell address in 1961 in which he warned us against the growing influence of the vast military industrial complex:

We must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved. So is the very structure of our society. In the counsels of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals so that security and liberty may prosper together.

Now, Eisenhower's message was directed at the influence of the military and the defense industries which support it, but the same influences have emerged at all levels of government and in all facets of government relating to the interaction of government regulators and the various overseers and the persons who seek to influence them. Our failure to heed Eisenhower's warning has been met with disastrous consequences for our country. Indeed, our individual liberties and democratic processes have suffered greatly because of the improper meshing of these conflicted and self-serving actors.

I consider it my civic duty to make the citizenry of this city and state as knowledgeable as possible to help guard the public interest. It comes at a personal cost, though, for those of us who are willing to stand up and fight for this cause. Paid bloggers who won't disclose who is paying them launch personal and defamatory attacks against us, calling us "batshit crazy bloggers" and seeking to discredit our volunteer work for the public good. Anonymous bloggers employed by our city government and the Marion County Republican Party have launched a blog devoted entirely to discrediting citizen activist and fellow blogger Paul Ogden, often taking swipes at me and others as well along the way. Sadly, the Citizen Kane mayoral candidate many of us fought so hard to elect when others in our party wouldn't give him the time of day, and who promised us on his election night victory to end "country club politics" in Indianapolis as we know it, will not even give us an ear to hear our concerns. He won't even speak to me or acknowledge my presence when he sees me. Even U.S. Rep. Andre Carson, a politician who has been on the receiving end of many barbs from this blogger, always greets me with a friendly handshake and a smile. No sooner had our new mayor taken office than the same government contractors who populated his predecessor's campaign finance reports began writing similar checks to his campaign committee. True to form, publicly-funded contracts were rolled out to satisfy many of those same contributors.

What these people can't understand is that there are some people who still want to participate in the political process who aren't looking for a job or a government contract. We're driven by civic virtue and the public good. Unfortunately, we've created a political system at all levels of government in this country where the free and unfettered are not welcome. If you cannot be controlled, then just go away. Well, we're not going away and these people will just have to learn to live with that fact.