The Monica Liang Affair

Monica Liang with Gov. Mitch Daniels
 

I've often wondered why Gov. Mitch Daniels entrusted Mitch Roob with such important positions in his administration. As FSSA Secretary, he forced through the ill-fated privatization of the state's welfare services, which was nothing more than a ruse to direct hundreds of millions of dollars to the hands of his former employer, ACS. As head of the Indiana Economic Development Corporation, he was caught inflating job creation numbers credited to the efforts of the economic development agency. According to a lengthy report in today's Star titled The China Letter, he also covered up the actions of a Chinese immigrant with a checkered past who he had hired on contract in a $100,000 a year position to help with the agency's efforts to forge business deals with China. Before Monica Liang died suddenly in October, 2011, reportedly from a brain aneurysm, she had been quietly removed from her state position after she was later accused of soliciting a bribe and engaging in other self-dealing activities which potentially implicated other state officials. The Monica Liang affair, according to the Star's investigation, was simply swept under the rug and not referred to law enforcement officials for further investigation.

Here's the quick and dirty about the Monica Liang Affair according to the Star:

Liang immigrated to the U.S. from China after getting married in 1997 to an American businessman, Amadio Morais, who was working in China when the two met. She arrived in Indiana in 2001 and becomes a naturalized citizen in 2003. The following year she divorced her husband and walked away with a pretty decent sum of money as part of the couple's property settlement agreement. While living off her divorce money, she takes classes at IUPUI, invests in the stock market and meets a contractor from Marion, Bryan Harris, and winds up buying a building there for $32,000 and becoming a business administrator for a family medicine clinic. Liang gets introduced to Mayor Wayne Seybold, who hires her as a part-time international affairs coordinator, which provides her an opportunity to meet some of Indiana's top officials, including Gov. Mitch Daniels, and she travels with them to China on trade missions to serve as a translator. Liang meets Roob in 2009, moves from Marion to Carmel and later becomes a $100,000 a year contractual employee working for Roob as a Special Assistant to the Secretary of Commerce for Chinese Relations. Apparently while traveling with Mayor Seybold's wife to China after starting her new job, she was soliticiting business deals for herself, including a nursing home project for her Marion building that she claimed involved several government officials, including Daniels, Seybold and Roob. Liang manages to convince a Chinese billionaire, Ao Yuqi, to deposit $50,000 into her bank account. Liang also solicited an $8,000 bribe from another Chinese businessman to secure talks with Indiana officials. Roob later travels to China with Liang and inks a memorandum of understanding with a Chinese company, SME. A month later in July, 2011 a formal complaint is filed by Pacific World Trade with IEDC alleging misconduct by Liang. In September, IEDC terminates Liang and Roob steps down from his position. IEDC months later terminates its contractual relationship with Pacific World Trade after a 25-year relationship. 

Based on the Star's reporting, it sounds like IEDC is being less than forthcoming about the entire Monica Liang matter. IEDC tells the Star that Roob confronted Liang about the allegations, which she denied; however, she continued to take trips on the agency's dime and conduct business more than a month after the agency learned of the complaint against her. Her contract with the agency was terminated at the beginning of September, 2011 based on misrepresentations she had made about her education credentials, not because of the allegations in the complaint, which the IEDC says it was unable to substantiate. "She had claimed a bachelor's degree from Indiana University-Purdue University Indianapolis, but had only attended classes," the Star reports. "The state has a zero-tolerance policy for not accurately documenting your academic credentials," Roob said. Roob became quite defensive when questioned by the Star about the timing of his departure and his relationship with Liang:

On the same day Liang was let go, Daniels announced the resignation of Roob, who had hired Liang.

Officials say it was not related to the Liang incident. "Don't be preposterous," Roob said when asked by The Star about the timing of his departure. He said the two events happening on the same day was either a coincidence, or he wanted to take care of the matter before Dan Hasler took over as the new Secretary of Commerce. "I brought Monica into the agency, right?"

Asked if he had a personal relationship with Liang, Roob answered, "No."

With high praise from Daniels, Roob returned to the private sector as chief executive of the health-care technology company WoundVision. 

The money the Chinese billionaire wired into Liang's account was no longer in her account by the time her personal representative took over her estate following her death in October. Her estate is estimated to be worth about $120,000. The Star obtained records which confirmed the wire transfer of $50,000 into Liang's account had taken place. Roob and Liang had met with Ao in China a month prior to the wire transfer. Asked how that could have happened, Roob told the Star, "I have no idea." The Star also learned that Roob had actually conferred the title of  "Special Assistant to the Commerce Secretary" by letter before she even started work for the agency. "Roob acknowledged the appointment letter came from him but offered few details." "I don't even recall signing the letter, candidly," he told The Star. At the time, she was still working for Mayor Wayne Seybold, who was bothered that Roob had provided her the letter. He told the Star he would have objected to the appointment had he known about it. "At some point," Seybold said, "you gotta work for either one or the other."

Not surprisingly, ethics experts the Star reached found the agency's handling of the matter "woefully inadequate" and created the impression the agency was simply "sweeping it under the rug." "You look at it in hindsight," said white-collar crime expert and former federal prosecutor Peter Henning, "and you go, 'What were you thinking?'" As for what Gov. Daniels knew about the Monica Liang affair: “The governor knew the IEDC dealt with a personnel issue by terminating a contractor after receiving a complaint. He was not otherwise involved in an agency personnel matter.”

None of this surprises me. I used to work for a company that was trying to expand into China. I made one business trip over there and learned all I needed to learn about the business mores there. Remember, this is a country where religion is virtually non-existent, there is a one-child per couple limit imposed by the government, the government forces millions of abortions every year to enforce that limit and the vast majority of the people live in abject poverty and are forced to work at slave labor wages with few rights. People don't value human life there as much as they do in the U.S. The average Chinese citizen wants to get the hell out of the country because of how horrible life is there for the vast majority of people. There is a growing class of super wealthy in China thanks to an extremely corrupt mixed form of crony capitalism and communism that exists there, a system that apparently is very attractive to many of America's elites given the direction we're headed. If you're an American company looking to establish a business relationship in China, you must first set up a Chinese company under which you will conduct business. The China business entity will not meet with government approval until you include individuals blessed by the government as partners in your endeavor, which typically includes Chinese government officials. When Liang told the Chinese counterparts that government officials were shareholders in her American company, they wouldn't have batted an eye because they're used to that arrangement over there and would assume government officials get kickbacks from businesses in one form or another.

Roob's Former Employer Will Have To Wait Until Year's End for Payoff--If Then

The Daniels administration is further delaying Mitch Roob's plan to hand over administration of most of the agencies' welfare programs to a group of private contractors, including ACS, where he worked as a vice president immediately prior to joining the administration as FSSA Secretary. The AP's Ken Kuzmer writes:

The lengthened timetable is a setback for FSSA Secretary Mitch Roob's plan to solve problems with fraud, waste and delays in awarding benefits by outsourcing the system to private vendors.

Some critics of the plan, however, have questioned whether Roob and FSSA were rushing into privatization and risked repeating other states' mistakes. North Carolina this month canceled a five-year, $171 million deal to create a new Medicaid billing system because it said the contractor, Dallas-based Affiliated Computer Services Inc., failed to meet its deadlines.

Affiliated, where Roob was a vice president before taking over FSSA last year, also is part of the IBM team that's negotiating for the Indiana contract. Roob said he has no remaining financial interest in Affiliated.

Roob and FSSA began soliciting interest from IBM, Affiliated, Bermuda-based Accenture Ltd. and other companies last year and had planned to begin turning work over to the winning bidder this month. Then Daniels announced in May that he would make the decision on the contract and appointed a team of top aides from agencies besides FSSA to review the plan. He has already given them more time for the review.

The "review team" Daniels created to give the appearance that Roob is not involved in the decision-making is expected to complete its work within the next few weeks according to Daniels. "I would like to see us begin the transition, certainly, this year," Daniels said. "... Then again, it's more important to get it right than to get it quickly. That's why I had the special review, that's why I gave them an extension, and I'll give them another one if they need it."

The Governor said, "Our food stamp error rate is high, our recovery rate is terrible, and we've had fraud problems. ... So I would think that [USDA] would be pleased at the prospect of reform, but they'll take whatever time they'll take." So what the hell has Mitch Roob been doing for the past 18 months to clean this mess up--other than trying to outsource everything to private contractors?

Daniels Intent On Awarding Welfare Contract To Roob's Former Employer

Notwithstanding all the criticsm his administration has faced for selecting a final group of vendors with whom to negotiate a $1 billion contract to administer the state's welfare programs, one of whom is the former employer of FSSA Secretary Mitch Roob and has encountered numerous problems with similar contracts in other states, Gov. Daniels remains intent on outsourcing these services. The Evansville Courier-Press quotes Daniels as saying on Friday, "We have dedicated employees, but our welfare system is slow, cumbersome, inaccurate, inconsistent and conducive to waste and fraud." Daniels added, "It continually fails recipients and taxpayers alike and must be changed."

A report Daniels cites in support of the privatization move found the following problems:

• 35 percent of Medicaid long-term care applications approved by the agency contained errors.
• A backlog of people waiting to learn if they were eligible for disability because the applications were not processed within the allotted 90-day period.
• Indiana's welfare caseload decreased by only 6 percent over the last decade, while other states had an average reduction of 58 percent.
• At least 15 of the agency's employees have been arrested for fraud since 2003, with the average fraud case costing taxpayers $50,000.
• Lack of consistency occurs, with 107 welfare offices statewide determining and verifying eligibility in 107 ways.

Daniels and FSSA officials believe a privately-run system would have fewer errors, process cases more quickly, improve access to benefits and move more persons from welfare to work. If the privatization plan is approved, as many as 1,700 agency employees could lose their jobs.

The problem with the report Daniels' relies upon in support of this privatization initiative is that it did not include a cost-benefit analysis which would demonstrate that private companies could operate the system more efficiently. One of their arguments against the current system is that the state's rate of moving people from welfare to work is much lower than other states. Ironically, Indiana has relied on private vendors in the past to administer welfare-to-work programs mandated by former President Clinton's welfare-to-work program. If the private vendors had successfully done the job the taxpayers paid them to do, Indiana should have realized a much greater reduction in those dependent on welfare. It's hard to understand how the administration can place the entire blame on agency employees under these circumstances.

The administation also overlooks the fact that many of the agency workers who are responsible for administering these programs are being paid by the state slightly more than poverty-level wages themselves. That no doubt contributes to a higher rate of errors and fraud than is desirable. Ironically, Mitch Roob seems to agree. In an unrelated article in today's Star about how much government employees are paid, Roob laments, "We've got folks who are running $80 million programs getting paid $40,000 a year."

Also, the computer systems these employees rely upon to perform their tasks are the very systems some of the vendors who now seek to take away their jobs were paid to develop for the state in the first instance. If those systems are inadequate to perform the tasks, don't these private vendors bear some responsibility for the problems with the current system? Wasn't it the failure of one such system that resulted in more than 10,000 Medicaid clients being denied service when it was rolled out earlier this year under Roob's management?

Unfortunately, the hell-bent determination of Daniels to privatize these services seems to be based on good old-fashioned political graft. The Associated Press' Ken Kuzmer reports that ACS, Roob's former employer and major vendor participating in the privatization deal, has lavished campaign contributions on Daniels--$12,500 in just the past 3 years. ACS' most recent contribution to Daniels was made weeks after it sat down with the agency to begin discussing the bidding process for the contract it now expects to be awarded. Daniels declined to comment on the contributions Kuzmer reports.

As first reported by Advance Indiana, Kuzmer notes that Roob went to work for ACS in 2001 after the company he co-founded with former Indianapolis Mayor Steve Goldsmith, Netgov, went bankrupt and was taken over by ACS. Goldsmith is still affiliated with ACS. Roob left ACS at the end of 2004 to join the Daniels' administration as FSSA Secretary. Roob also refused to comment to Kuzmer.

Indiana's Job Claims Are A Fraud

Many of the business expansions the administration of Gov. Mitch Daniels has funded with state dollars through the Indiana Economic Development Corporation sit empty after much fanfare when they were originally announced. Do you want to know the specifics on how your tax dollars were spent? That information is strictly off limits according to the Daniels administration. Those were some of the findings of an investigative report by WTHR's Bob Segal that aired last night. Frustrated by months of stonewalling on open records law requests, Segal confronted Daniels not once but twice about the requests. The second time Daniels stormed out of the room without responding. As Segal's report discovered, the reason the administration is keeping the public information secret is because the job claims being made by the IEDC--over 100,000 jobs created--are simply not true.

A former member of Daniels' Office of Management and Budget is blowing the whistle on the fraudulent job claims of IEDC. Tad DeHaven served as Deputy Director of OMB's Government Efficiency and Planning Office. DeHaven told Segal that the administration's secrecy claims to the public records is specious. "I can tell you if they have the numbers and they were good, you'd have them by now," said Tad DeHaven. "If they don't the numbers, it means either they're bad or they don't have them," he continued "IEDC was one of those programs we consistently laughed at because we knew that their numbers were ‘wave their magic wand and, poof, up they came,'" he said. "No one in their right mind would have believed the numbers coming out of IEDC because these state agencies would just submit whatever numbers they wanted to: real, fake...who knew? We didn't audit it, and whenever we'd suggest an independent auditing process, it was always shot down."

Mitch Roob, the guy who handed the failed multi-million dollar contract to his former employer to manage the state's welfare programs while serving as Secretary of FSSA in the Daniels administration, wants you to believe him when he says 87% of the jobs are on track, even if he can't release the specific details. Segal's investigation suggests the actual percentage is below 60%. Roob conceded that his agency had no way of tracking whether all of the business firms awarded state incentives actually produced the jobs promised. Although Segal's investigation found that every other state and city that he contacted made this kind of information available to the public, Roob insists the information must remain confidential under Indiana law. "That's not a mistake," Roob said. "That is a competitive weapon that companies believe can be used against them by their competitors."

What is particularly embarrassing about Roob's claim is that his counterpart agency in Illinois, the Department of Commerce and Community Affairs, makes all of this information public. Roob served as a member of former Gov. James Thompson's administration before moving to Indiana. DCCA Director Warren Ribley was puzzled by Roob's claims. "I don't understand that philosophy, particularly if a state is using public funds and state tax dollars to pay the bill for those new jobs," Ribley said in response to Segal's inquiry. "We need to hold [companies] accountable to make sure they do create those jobs, and the public also has the right to hold us accountable" said Ribley, adding that publicly releasing corporate job numbers has not discouraged companies from bringing jobs to Illinois. "We've never had a single company express concern or raise the fact that they did not want to choose Illinois because they were going to have to report that information," he said. In the case of Illinois, they provide to the public the number of jobs promised, the actual number of jobs produced and the wages paid on those jobs, among other information.

If Gov. Daniels is planning to run for president, he had some moments in Segal's report that could come back to haunt him and don't bode well for the scrutiny presidential candidates often face. He reacted angrily when Segal first asked him about his own report's finding that less than 60% of the jobs claimed to have been produced never materialized. "You seem to have a blindingly clear view of what is perfectly obvious," the governor said of the Eyewitness News investigation. "In a recession, a lot of businesses have to change their plans." Daniels directed Segal to attend an IEDC board meeting if he wanted the specific information he requested, which are open to the public. So Segal took him up on his offer and this was what transpired:

WTHR attended IEDC's spring board meeting, where board members reviewed charts and graphs showing summary job information. But despite the governor's invitation, the board offered no job realization numbers to support specific job commitments previously promoted by Daniels and the IEDC. So after the meeting, WTHR again asked the governor to provide that information and, this time, he simply walked out.

IEDC director Mitch Roob explained the governor and IEDC will not release Indiana's detailed job numbers to anyone. While the state uses Hoosier tax dollars to help attract new jobs, Hoosier tax payers do not get to see what they're paying for.

"We don't share it with the public. We don't release it to the news media. That's confidential information," Roob said.

Political advisers to Daniels must have cringed after watching Segal's report last night. I'm sure Democratic operatives are storing away the video footage from this investigative report, particularly the part where Daniels stormed out of the room to avoid Segal's questioning. Nationally, Republicans should be having second thoughts about what kind of a candidate this guy would make. Daniels showed poor form this past week when he cancelled his own health insurance plan he muscled through the legislature a few years back, which he funded with a cigarette tax increase, blaming its demise on Obama's health insurance reform, even though it doesn't take effect fully for another three to four years. While some pundits in this state and elsewhere have played up Daniels' chances of winning the 2012 GOP presidential nomination if he chooses to run, you won't find me among those pundits. People forget that Daniels was arrested for drug dealing when he was a student at Princeton while other brave American soldiers were getting killed and wounded in Vietnam. That may be a badge of honor for a Democratic candidate, but Republican voters are far less forgiving on such transgressions. While the Indiana media may have ignored his drug arrest at Princeton during his previous gubernatorial campaigns, Republican Party voters nationally won't once that case is put under a microscope. You can bet his opponents won't let that one slip by.

A Republican View Of FSSA's Failed Privatization From The Inside

Mitch Roob didn't know what he was getting into when he brought Carl Moldthan aboard his FSSA ship back in 2005 as a $45,000 a year administrative assistant. Moldthan, a retired firefighter, worked hard to elect Daniels as the head of the Hoosier Taxpayers Association. In the previous years following his retirement, Moldthan, in addition to being a private business owner, provided consulting services to local governmental agencies. Moldthan recounts a phone call he received from Gov. Mitch Daniels in January, 2005 after Moldthan had been interviewed by the news media about Daniels' call for an income tax increase on persons making more than $100,000 a year in his first State of the State address, a move for which Daniels caught flack from conservatives in Indiana and around the country:

On January 19th I received a call from Associated Press (AP) for an interview. They asked me what I thought of the proposal to increase the income tax for those making over $100,000 per year for one year only. I stated that I had no problem with a one year tax such as that but if it lasted any longer I would have a problem with the Governor. I went on to say that most of the people I represent don’t even come close to making that kind of money.


The following day a statement appeared in a number of Indiana newspapers. On Friday, January 21st I received a call from a gentleman name Jeff (I don’t remember his last name) from Chicago who represented FOX NEWS out of New York. He said he would like to meet me and do an interview on the Governor’s proposal. I explained to him the same thing I told AP. He told me that he might focus on the part about people not making that kind of money. He said thank you and we hung up.

After he hung up I thought since there was no interview and because at that time I supported Governor Daniels that maybe I should call his press secretary and give them a heads up. She was busy so I left a message. About ten minutes later I received a call back from Jane Jankowski and she asked what I wanted. I told her that I thought I would give her a heads up on the call from FOX. She said she had a message to call someone from FOX named Jeff (she gave last name) and I said that was him. She thanked me and I told her I thought the Governor was doing a great job. Again she thanked me and we hung up.

On Fridays, I almost always go to dinner with my sister and her husband. I also always forward my home calls to my mobile phone. I was on my way home and I had just entered Beech Grove and my phone rang. I answered it and said, “This is Carl”. The voice on the other end stated, Carl, Mitch Daniels. I said, “Hello Governor, how are you”. He went on to say that he wanted to thank me for not taking a shot at him that morning and that he knew how easy it would have been. I said, “Well, Governor, if you deserved it I would have, but in my opinion you didn’t deserve it.” He said thanks again and we went on talking. I told him that I was very pleased with his plan to save the state money and was trying to get a job inside his administration. He asked if I still did consulting and I said that I did but that I was looking for a job, job. He said he didn’t know that. I explained that I thought there was more waste in Indiana government than anyone realized. He agreed and he made some comment that he knew that I was good at doing that type of work. We went on speaking for another few minutes but nothing more was discussed about any job.

Because of my admiration of the Governor I worked and succeed in obtaining a job with FSSA. That is when this all began.

Following that phone call with the governor, Moldthan would accept an invitation to join Daniels' new team at FSSA. When Moldthan arrived at his his new job, Mitch Roob wasn't quite sure how to best utilize him. Because there had been so much talk about privatizing the services administered by the county welfare agencies, Moldthan suggested he be tasked to visit all of the offices, learn better what they were or were not doing right and make recommendations to Roob and his management team. Roob thought that sounded like a fantastic idea so off Moldthan went to visit every single county welfare agency--all 105 of them--over the next several months. During the course of his visits, Moldthan would make no fewer than 70 suggestions to Roob and his superiors on ways of improving the agency's operations, changes if implemented, he claims would have resulted in hundreds of millions in savings. Little did Moldthan know at the time that his common sense ideas would be met with scorn, laughter or otherwise summarily rejected by his superiors and would culminate in earning him a trip to Roob's office where he would be undressed for being the most disloyal person Roob had ever met.

What Moldthan came to learn was that Roob was going to privatize the work done by those county welfare agencies come hell or high water. Anyone who didn't believe in privatization should leave, an offer Moldthan gladly accepted after less than a year on the job. Moldthan also learned that Roob had no intention of saving money from privatization. After all, the county welfare agencies comprised only $180 million of FSSA's multi-billion dollar budget, representing just 7% of the agency's entire budget. Surely there were other more effective ways of findings savings at the agency than getting rid of your front-line workers.

Roob must not have shared his "no savings" comments about privatization with his boss. Gov. Daniels promised savings of more than $500 million over the first decade at the time he publicly proposed the privatization initiative in 2006. “Today, we act to clean up welfare waste, and to provide Indiana’s neediest people a better chance to escape welfare for the world of work and dignity,” Daniels said in his press release. “We will make America’s worst welfare system better for the people it serves, a much fairer deal for taxpayers, and for its own employees.”

Moldthan traces the privatization charade back to a KPMG report Roob had done on behalf of the agency in 2005, which he says did nothing more than restate problems that had been identified over the past 20 years but never addressed. As Moldthan explained:

In the early part of 2005, KPMG was hired and completed a report called the Indiana Family and Social Services Administration Diagnostic Report. If any report could be called unfair in it’s use this would be the report. Knowing full well that the operations of FSSA is and has been in terrible shape for years, the new management of FSSA put this totally biased report out saying, “This is prove something needs to be done.”


This report listed known problems that have existed for over 20 years in FSSA. It’s somewhat like telling someone that their roof leaks and they have known about it for 20 years. The best example I can think of is a person who is brought into the Governors office and told by him that he wants you to operate the State Garage. You look at him and because it is such a challenge, you accept. The Governor hands you a pair of pliers and a regular screw driver and says, “Here you go, here’s your tools.”

You immediately take a deep breathe and accept the seemingly unbelievable task and proceed to try and do the job. After 5 years the Governor says, “Well, he’s tried his best to do the job but I’m going to hire a consultant to see if we cannot privatize it to do better.” The consultants report comes back and says that even though you have tried to do a good job, all of the screws are messed up and all the bolts are rounded off. Their advice, privatize!

Now anyone who would read this would say that this scenario isn’t fair. The person in charge wasn’t given the proper tools, the proper money the proper support so how could they succeed? The answer is they couldn’t. If this sounds vaguely familiar to what has happened at FSSA, it is.

While Moldthan disagreed with Roob's plan to privatize the family services work performed by county welfare agencies, he hastens to add that he is not opposed to privatization in general. "I have always been a supporter of privatization and still believe in it," he says. "However, I believe that when privatization is used its purpose should be to bring better service at a less expensive price but it should not be used as an end all tool for problems in government." He continued, "We should check it out to insure it will not harm what we are trying to do. And by far the most important thing is we should not pass on something that we can do ourselves and save even more money."

Moldthan warned Roob and his superiors that they had failed to check out the root of the problems at the county level before making a decision to privatize. "After reviewing the situation in FSSA it has become clear that no one has checked this out and in my opinion will be a very BIG mistake [to privatize]," he warned. "It is also clear that there was NO ONE who spoke against it and if they did, they were told as I was that, "Since you don’t believe in what we are going to do, maybe you shouldn’t work here'" "This cuts out all discussion in the negative and causes much of it to be canned or without truth," Moldthan says. "It also increases the chance of failure when the other side is kept quiet." How prophetic his warning to Roob and his superiors turned out to be.

Moldthan became very disturbed by the disparaging comments Roob was making about the county welfare workers as he was visiting their offices. “They are nothing but glorified order takers”, “They give away too much”, are just but a few of the disparaging remarks that Moldthan noted Roob had made about them. Astonishingly, Roob sent an e-mail to all employees complaining about comments AFSCME representatives had made to them about his privatization plans that included warnings that they would lose their jobs. Roob wrote in that September 1, 2005 e-mail, in part:

It disappoints me greatly to learn of this recent communication to FSSA employees from union representatives. This information intends to persuade you by frightening you. The union representatives who took the time to create this scare tactic have not only given you false information, they have been intentionally misleading by improperly using the seal of the State of Indiana, suggesting they represent the leadership of the state, which they do not . . .

In addition to emails and newsletters to provide you with current information, I am also very willing to respond to phone calls and emails to keep you informed. It is my hope that with enough direct lines of communication between us, misleading memos like the one sent this week will simply go unnoticed by those not willing to fall victim to such a blatant manipulation of the truth.

Moldthan, who by that point had been taken off his road trip to the county welfare offices and reporting back to Roob and his superiors what he learned, took Roob up on his offer of "direct lines of communications between us" and e-mailed him to express his concerns about privatization. He wrote:

I would suggest as I have to Jim Robertson and Zach Main that you start by producing a weekly update to all employees on the issue and progress of privatization. Having been to all counties I can say the fear out there is thick enough to cut and to be honest they don't believe you. Many of them have heard nothing so far except for rumors and such and most of them don't even know what you look like. To be honest I have my doubts and if I do others will surely have them also. By taking me off the road this made some of them even more suspicious. They need someone to talk to, someone they can see and someone they can trust. I believe in privatization and I have many doubts of whether or not it will work and I know a great deal about what is going to happen. If I feel this way then can you blame them?


When I attended the meeting on July 1st you made two statements that surprised and confused me. One was that the part of the budget you were talking about (county offices at $180 million) was only 7% of DFR's total budget. The other is that privatization was not going to save any money. If both of these are true then why may I ask are we going to privatize? You need to keep them informed.

As I stated before these people are paid poorly, eat lunch at their desks and most are more conservative than you and I. They feel what needs to change are the rules and policies and other changes. I think if they were given a chance they could and would succeed at the task of saving money. Unfortunately they're not going to get that chance.

Roob never responded to Moldthan's e-mail.

Moldthan admits to being surprised by the dedication of the more than 1,000 county welfare workers he met during his road trip. Many of them had worked in their jobs for more than 20 years, earning low pay and seldom receiving pay raises. Moldthan said he was shocked to see the conservative leanings of many of the workers, who experienced first hand the fraud and abuse taking place in the system but found themselves completely frustrated by efforts to make changes by middle management folks at FSSA to whom they reported. Moldthan believed that the vast majority of the county welfare workers had voted for Daniels in 2004, even the ones who previously were hired under Democratic administrations. They honestly believed he would make the changes Governors Bayh, O'Bannon and Kernan had failed to address if he was elected. Moldthan outlined some of the basic problems that these workers confronted on a day-to-day basis:

1. No new computers for over 9 years.


2. Many of the forms are still done in paper which takes many extra hours from caseworker’s days.

3. Many very simple problems that cause counties extra work have not been addressed and have been left to fester.

4. Contrary to current beliefs county caseworkers DO NOT make decisions, Indiana’s written polices must be followed. If changes are expected the rules need to be changed and this move would save millions in the cost of employees alone.

5. Present computer forms for various programs such as Medicaid and TANF are out dated and are not equipped with relational ship databases.

6. Counties DO NOT control or have any input into their yearly budgets.

7. No raises. According to some people, out of 25 years they have only received raises 11 times. These people eat their lunch at their desks, work over without extra pay, come in early without pay and many other things that most people would quit over. This being the case they deserve a chance to make it work.

8. Starting wage for a caseworker is $22,700 and most are college graduates and are NOT big supporters of the union. Most are also very dedicated, however, they are anything but liberals in their beliefs about whom and how much the State gives to clients.

"County Offices have computers that are over 9 years old, forms and computer programs that are over 12 years old and many totally outdated policies, rules and regulations," Moldthan lamented to his superiors. "If a private company is hired the rules will be changed and regulations will be suspended to allow things such as phone banks and rules and regulations will be waived." Moldthan was right about that. We all know about the infamous call center in Marion, Indiana run by ACS that much has been written about over the past few years. Moldthan had a whole list of changes Roob and his superiors could make that would achieve real savings without actually privatizing. They included:

• Closing 15 to 20 offices and combining them with other local county offices.
• Reduce staffing at the offices by one-third.
• Modernize the technology used by the workers to increase efficiency, including newer leased computers supported by relational databases instead of static information contained on outdated computers that are unable to communicate with other databases.
• Employ independent medical review teams rather than relying on a client's physician exclusively. Moldthan noted that some offices experienced as many as 50% of the disability claims being based on a clients' claims that they suffered from bipolar disorder. Workers told Moldthan they believed that many of those claims would have and should have been disallowed if independent medical review teams were utilized instead of the client's physician.
• Hire more fraud investigators. Moldthan learned that as much as 25% of the benefits may have been consumed by fraudulently-claimed benefits.
• Allow clients access to computers placed in the office lobbies to fill out basic information in advance of meeting with welfare workers to aid the workers in assisting the clients more efficiently.
• Provide incentive bonuses to county workers who come up with ideas that are implemented and save the agency money.

After Moldthan failed on numerous occasions to get Roob or his other superiors to listen to him and act on any of his suggestions, causing him to become increasingly frustrated, he hand-delivered his findings to Gov. Mitch Daniels, then-Senate President Robert Garton and then-House Speaker Brian Bosma. Moldthan's cover letter included a scathing indictment of Roob's administration of FSSA. Moldthan wrote in his October 31, 2005 letter, in part:

My job with FSSA was to suggest methods to save money. To date, I have made over 70 suggestions with an estimated savings of many hundreds of millions of dollars. However, not one of these suggestions has been implemented and as far as I know have not even been studied. In fact, I have heard every obscure and ridiculous reason NOT to do them. I wish I could count the number of times I have heard, “that’s not our problem” or “that’s not our area”.


I have seen irresponsible management within the agencies and a total disregard for taxpayer’s dollars. I have also witnessed incompetence. The sad part is the only people who seem to give a damn about saving taxpayer money are those employees who work in the trenches and deal directly with the public. They see the waste and tell the appropriate people and then they are ignored.

I believe one of your favorite sayings is, “If you are not keeping score then all you are doing is practicing”. It is sad for me to say that many of the functions in Indiana Government are just practicing due to a lack of interest in change found in middle and upper management.

It is this type of total disregard for taxpayer’s funds that concerns me and creates skeptics in the public sector. After careful thought and consideration I have come to the conclusion that the leaders of FSSA are so focused on privatization that they are disregarding numerous opportunities worth potentially hundreds of millions of dollars in savings. I generally am in favor of privatization and I have made that known on many occasions, however, I have made known my reservations about moving too quickly and without studying this situation to insure success . . .

I voted for you and have worked very hard for your administration because I feel you stand for good and low cost government. I am not convinced that those in middle and upper management are looking out for your best interests and believe as you do in serving the people. Thank you very much for your time and consideration. I would be happy to sit down and talk with you further about my findings and how I think FSSA can better serve the public and make your administration look good while costing less.

Unfortunately, Daniels never took Moldthan up on his offer to meet with him and discuss his ideas and the problems he encountered at FSSA under Roob's leadership. His letter did result in an angry Roob summoning him to his office for a verbal undressing and a demand that he recant the comments in his letter. As Moldthan recounts his meeting with Roob:

On the morning of November 23rd I met with Mr. Roob and John Davis, General Counsel for FSSA and I apologized for not copying Mr. Roob in the original document. Mr. Roob then told me I should write him a letter recanting the entire document as "innuendos", “factually incorrect information" and merely “my opinion”.  Roob stated that I was the "most disloyal person he had ever met." During the entire meeting I sat there quietly and NEVER said a word. I let Mr. Roob babble on.


After the meeting Mr. John Davis came running out of the meeting and stated that he had told me that Mr. Roob was angry. He handed me notes he had taken during the meeting and stated that I should write the letter. I never wrote the letter and NEVER will.

Following that cold meeting with Roob, Moldthan was reassigned to work as an administrative law judge, a post he held for another two months before leaving to join his son in a private venture.

Four years later it has become abundantly clear how right Moldthan was and how wrong Roob was. After spending $361 million on a privatization contract with IBM and its partner, ACS, who just happened to be Roob's former employer before joining the Daniels administration, even Daniels had to agree the effort had become an unmitigated disaster and had become a major embarrassment for him. Daniels cancelled the contract Roob executed on behalf of the state and sued IBM, which in turn has filed suit against the state. The Daniels administration declined requests by the media to compare the cost of the old system run by county welfare workers to the costs under the IBM-ACS-led effort. Daniels' spokesperson said there were too many variables to make such a comparison beneficial. Before the privatization was undertaken, the administration claimed an internal modernization would cost $220 million a year compared to an annual cost of $150 million under the privatization plan.

Daniels has retained ACS's services after cancelling the contract with IBM under a new hybrid approach to delivering welfare services. The fallout from the ill-fated privatization plan continues, however. The Associated Press recently reported that the federal government has levied a $1.2 million penalty against FSSA for miscalculating food stamp benefits.  According to the report, Indiana was only one of four states in the nation facing financial penalties. "The federal Food and Nutrition Service said FSSA, in running the food stamp program for USDA in Indiana, overpaid in 5.45 percent of cases and unpaid in 1.68 percent of cases," Ken Kusmer reported. "That's a combined error rate of 7.1 percent, or more than 1.5 times the national average of 4.36 percent." "FNS also said Indiana erred in 13.69 percent of cases when it came to denying benefits or granting eligibility. The national average was 9.41 percent." FSSA blamed the problems on IBM and its partners, from whom it would seek to recover the financial penalty in its lawsuit against IBM.

A Case Of Ghost Employment?

The Star's Robert King takes a look at the state chaplain FSSA Secretary Mitch Roob hired to work for his agency at a pay of $60,000 a year to set up a network of volunteer clergy to counsel agency employees. According to King's story, the Rev. Michael Latham isn't qualified to be a chaplain, has failed to set up the network he was hired to establish and continues to maintain his full-time job as a minister in Fort Wayne and another job as head of the Fort Wayne NAACP. King writes:

The slow start has prompted other questions about the program, including whether Latham meets the state's own guidelines for chaplains working in other settings, such as hospitals and prisons.

Then there's his salary: He's the highest-paid state chaplain and has an assistant at the same time he holds two other jobs. Latham has a full-time ministry in Fort Wayne and is the head of the National Association for the Advancement of Colored People in his home city.

Latham, who was an active supporter of Mitch Daniels during Daniels' successful 2004 campaign for governor, said he had to start from scratch in his state job because there was no chaplaincy program geared toward state employees.

In addition, he said, much of his time has been spent helping FSSA's Division of Aging ask churches to launch day-care programs for the elderly.

Finally, there has been some resistance from clergy who are skeptical of a government that asks for their help but won't let them proselytize.

"I feel like there's been great progress with all the other things that we had to deal with to get the chaplain program off to a good start," Latham said.

Latham operated with little public notice until last month, when a lawsuit was filed in U.S. District Court in Indianapolis challenging his position.

The Wisconsin-based Freedom From Religion Foundation sued, saying a chaplain for government employees violated the constitutional separation of church and state.

A Baptist minister who preached his first sermon at 17, Latham graduated from high school unable to read, eventually getting help from tutors in his church. He never attended college or seminary and has no chaplaincy or counseling training.

That kind of resume would disqualify Latham from being considered for the chaplain's job in one of the state's five psychiatric hospitals or in Indiana's prisons,
which require a bachelor's degree and a master's of divinity.

The average salary for other state chaplains is about $32,000. Latham was hired at FSSA for $60,000, given an assistant who makes $37,500 a year, issued a state car and allowed to work from Fort Wayne, where he is pastor of Renaissance Baptist
Church.

Latham said that in some weeks, he has devoted up to 60 hours to his state job, delegating the duties of running his 200-member church to his pastoral assistants.

He said he has focused his initial work in Northern Indiana, making the drive to Indianapolis once or twice a week. He has ventured to Southern Indiana only twice since being hired. FSSA has offices in all 92 Indiana counties.

State government employs more than 40 chaplains, who work mostly at hospitals and state prisons. Some have called Latham's hiring "bizarre."

"He's overpaid and underqualified," said the Rev. Earl W. Hoppert, who recently retired from FSSA after 28 years as a chaplain and chaplain educator. "I don't know how he got that job."

FSSA Secretary Mitch Roob said questions about Latham's credentials are legitimate, but he said Latham was hired largely because of his real-world experience.

His time as a law enforcement chaplain in Allen County has given him a solid understanding of working with government employees, Roob said. He also likes that Latham has worked with "disadvantaged communities."

One of FSSA's main roles is determining which Hoosiers qualify for welfare benefits.
"His experience was such that it made up for a lack of degree," Roob said.

After reading King's story, I had to agree with the comments of Andy Downs. "Some may begin to question whether his job is to recruit chaplains or to help make inroads into the African-American community," said Andy Downs, director of a nonpartisan political research center based at Indiana University-Purdue University Fort Wayne. I'm frankly surprised the words ghost employment didn't appear in King's story. I don't see how Latham could possibly be putting in a 40-hour week at FSSA and continue to serve as a full-time minister and head of the Fort Wayne NAACP. The fact that he doesn't even hold the educational requirements for working as a chaplain only heightens skepticism about his true role.

I got a chuckle out of Roob's comment denying politics was involved in Latham's hiring. King writes, "Roob also insists there was nothing political about the appointment." "He was vice chairman of the Indiana Republican Party in 2004 and heavily involved in the Daniels campaign, but Roob said he was unaware that Latham had played any role in Daniels' election." "I ran into a lot of people over the course of the campaign," he said, "and -- no offense to Pastor Latham -- our paths never crossed." The sad part is that Roob wouldn't remember Latham if he had met him a dozen times. The aloof Roob was renowned for turning off Daniels volunteers during the 2004 campaign. Come to think of it, he was renowned for turning off supporters of former Indianapolis Mayor Steve Goldsmith as well, particularly during his unsuccessful gubernatorial race against Frank O'Bannon. How this guy ever managed to get a job working for Daniels after pissing on so many people during that campaign is a mystery to many Indiana Republicans.

Regardless of whether Latham is a ghost employee, which is a crime under Indiana law by the way, it's hard to argue that his job is not a huge waste of taxpayer dollars. As Downs points out, Daniels "campaigned on greater government efficiency." "At some point in time, you have to wonder if that was a program that was worth keeping," Downs said. "That is not to say that there is anything nefarious going on here. It is just that some programs don't work that well."

More FSSA Outrage

Confirming that his administration is more concerned about rewarding political contributors and business cronies than cleaning up state government, Gov. Mitch Daniels has confirmed that FSSA Secretary Mitch Roob's former employer is now the only bidder left in the competition for a $1 billion privatization deal at FSSA. Roob worked as an executive at ACS, along with former Mayor Stephen Goldsmith, immediately prior to joining the administration. The Star's Tim Evans writes today:

A $1 billion proposal to privatize the application process for welfare benefits in Indiana now has a favored candidate: a group that includes the most recent past employer of the state's social services chief.

Gov. Mitch Daniels recently confirmed that the only group left in negotiations is an IBM-led team of 10 companies that includes Dallas-based Affiliated Computer Systems, which is where Indiana Family and Social Service Administration chief Mitch Roob worked just before joining state government.

"If there is a move forward," Daniels said, "it seems certain it will be IBM." If approved, the group would collect and manage information on poor, disabled and elderly Hoosiers who apply for state welfare benefits. Currently, about 2,500 state employees make those decisions for about 1 million people.

Having just one candidate for such a large and important contract may provide fodder for critics of privatization and political foes of Daniels and Roob, although an expert on government ethics said the situation doesn't necessarily pose a conflict of interest.

The entire procurement process for this contract has been a complete joke. Everyone knows that it was preordained that ACS was going to get this contract. This project has nothing to do about improving services at FSSA; it's all about lining the pockets of political friends and associates that have aided you in the past, and will most certainly aid you in the future. When the process came under attack because of Roob's past employment with ACS, Gov. Daniels' response was simply to install a Kangaroo court to finish the job Roob had all but completed. ACS' financial windfall will come at the expense of our state's most needy citizens. So much for aiming higher.

Is Roob About To Award $1 Billion Contract To Ex-Employer?

The Family and Social Services Agency, which is administered by Mitch Roob, is about to award a contract to manage the state's Medicaid, food stamps, welfare and other benefit programs. And it's a big contract--as much as $1 billion over 10 years. There are just two finalists, and one of the finalists is Roob's former employer, Affiliate Computer Systems, Inc., which is partnering with IBM according to a report today by the AP's Ken Kusmer. He writes:

Controversy likely will flare again around FSSA once it picks the winner of the largest contract in state history. Two teams of vendors _ each vulnerable to criticism _ are vying for a deal estimated at $1 billion over 10 years to take over applications for Medicaid, food stamps, welfare and other benefits received by one in six Indiana residents. Critics went to work months ago gathering information on the out-of-state companies leading each team.

FSSA changed the timeline for awarding the contract after The Associated Press reported the agency would not hold a public hearing until after the contract was awarded. The agency now plans a hearing June 30, five days before the deal is due to be awarded.

The flaps illustrate the politically charged atmosphere Roob and other Daniels lieutenants face in trying to reshape a state run by Democrats for 16 years.

"Republicans and Democrats alike have been critical of the way FSSA is organized and run, and we're trying to make relatively quick changes to the agency," Roob said. "We're going to move at a pace that we think is aggressive but not destructive" . . .

Roob, in awarding the state's largest contract ever, will choose between two teams of vendors, one led by Bahamas-based Accenture LLP and the other by IBM and Affiliated Computer Systems Inc., or ACS. The two teams submitted their final offers last week.

Accenture leads a similar team of vendors in Texas currently coming under harsh criticism for problems rolling out that state's privatized benefits system. ACS, based in Texas, has had its own problems: It lost part of a Georgia contract two years ago when it ran into problems processing claims for Medicaid and the state's health insurance program for low-income children.

Nowhere in the article does it mention the obvious conflict of interest Roob faces in making a decision on whom to award the biggest contract in the state's history. Shortly after Roob left the employ of the City of Indianapolis at the end of Steve Goldsmith's tenure, he and Goldsmith formed a new company, NetGov that promoted Internet web portal services to local governments across the country based upon the IndyGov.org website they had helped create under the Goldsmith administration. An Indianapolis Star column by John Strauss in December 2000 described NetGov: "Every day's a reunion at Netgov, the company founded by former Mayor Stephen Goldsmith that helps develop government Web sites. At least seven former Goldsmith associates have joined the company, including former Deputy Mayor Skip Stitt and City Controller Ann Lathrop."

Roob and Goldsmith lured investors' money with the anticipation of getting contracts with the cities of New York, Chicago and Los Angeles based upon the "close relationships" the two had developed with the mayors of each of these cities. The company lost out on all three bids and, a short time later, the company filed bankruptcy after spending more than $20 million of the investors' money. Before going under, a 2001 article in the IBJ reported that "NetGov appears to have hit the skids as its handful of customers mull backup plans after receiving spotty service in recent weeks . . . The town of Fisher . . . saw parts of its [web] service go down for more than a week . . . NetGov's executive chairman, Steve Goldsmith, the former Indianapolis mayor, did not return IBJ telephone calls for comment. Roob . . . also could not be reached."

While the investors lost their money, Goldsmith and Roob jumped to another company, with the business' intellectual property in hand, and eventually wound up at ACS after it acquired that company. At ACS, Roob served as Vice President responsible for client relations in the Midwest and developing an integrated response to the Medicare Modernization Act (MMA).

Governor Daniels, hope you're surfing the Internet this weekend and read this. Stop Roob before he causes another major scandal in your administration.

Roob Files Election Challenge To Wallace's Petitions

Apparently the train wreck known as Mitch Roob, who totally turned the Family & Social Services Administration upside down in his successful effort to steer hundreds of millions of dollars to his former employer, ACS, has reappeared to derail the gubernatorial campaign of Jim Wallace. WRTV is reporting that Roob, who left as head of the Indiana Economic Development Corporation last year, filed a challenge to the petitions filed by Wallace's campaign in an effort to get him tossed from the Republican primary ballot:

A former longtime aide to Gov. Mitch Daniels is challenging GOP businessman Jim Wallace's qualifications to run for governor.

Mitch Roob filed a challenge with the Indiana Elections Division on Thursday afternoon charging that Wallace had not collected enough signatures from certified voters to run against U.S. Rep. Mike Pence in May's Republican primary.

Roob formerly served as Daniels' economic development chief and human services secretary.

Wallace came up 14 signatures short of the 500 needed in Indiana's 7th District last week. The Indiana Elections Commission is scheduled to hear the Wallace challenge next Friday.

The four-member panel is also set to hear more than two dozen challenges to Republican presidential contender Rick Santorum's appearance on the May ballot. Santorum came up 8 signatures short in the 7th District.

Like the challenge to Santorum's presidential ballot petitions, questions over the number of valid signatures filed with Wallace's petitions arose in Marion County in which the 7th District is located. Typically, a candidate files the petitions and as long as there are a sufficient number of signatures on the petitions, it is presumed the candidate has satisfied the requirement, except in Marion County. Here, a Republican-appointed, county-paid employee scoured the petitions filed by both the campaigns of Santorum and Wallace to ascertain if all of the signatures on the petitions were voters residing in the 7th District. Most, but not all, of Marion County's voters reside in the 7th District. The government elections employee, Cindy Mowery, did the work that normally falls to an opposing candidate's campaign to marshal evidence and lodge a challenge against an opponent's candidacy.

Santorum has questioned Marion County’s decision to throw out 49 signatures. But Cindy Mowery, Republican member of Marion County Board of Voter Registration, said the signatures are still invalid.

“I don’t think any of these signatures that they brought in matter,” Mowery said. As of Monday afternoon, Mowery said she had not done a thorough review of the signatures, but she said she talked with Santorum campaign lawyers in the morning and based on their arguments decided the county’s earlier decision to disqualify him for the ballot would likely stand.

Roob didn't have to go down to the Clerk's office and review those petitions himself; he relied on the information Mowery furnished to him. That's not how the process is suppose to work. That's tantamount to a judge gathering evidence and announcing the findings of that evidence without a party having to do that work themselves before filing a lawsuit.

Remember when Marion Co. Clerk Beth White learned that Patrice Abduallah had used an address on his statement of candidacy that was located outside the 15th District he represented on the City-County Council? She notified him by letter of the problem, but she did not announce the discrepancy publicly or otherwise put others on notice so they could file a complaint against his candidacy. When people like myself complained about her lack of candor, White said as the county's chief elections officer she had no right or legal obligation to challenge the sufficiency of Abduallah's statement of candidacy. Yet Cindy Mowery is scrutinizing the petitions of some Republican candidates like Santorum and Wallace and publicly declaring them insufficient. What gives? Does anyone care? In 2008, Barack Obama was able to file petitions containing hundreds of forged signatures on his Indiana ballot petitions and nobody even noticed. The Indianapolis Star is still sticking to its blackout order on coverage of that story broken by the South Bend Tribune and Howey Politics.

Judge Dreyer's Decision Vindicates Carl Moldthan

Carl Moldthan started out as a big fan of Gov. Mitch Daniels who gladly accepted his invitation to join his administration in helping remake the Family & Social Services Administration. After less than a year on the job, Moldthan left the agency disillusioned and disheartened by Mitch Roob's single-minded mission of getting rid of the county welfare case workers and replacing them with remote call centers run by Roob's former employer, ACS. Carl passed away a little more than a year ago after suffering a serious stroke, but I couldn't help but think about him as I read through the decision Judge David Dreyer handed down today awarding IBM $52 million in a drawn out lawsuit during which the state and its former contractor traded multi-million dollar claims against one another after Daniels fired IBM when the state's privatization plan didn't go as planned. The Indiana Law Blog has uploaded a copy of his 73-page opinion here.

Moldthan visited all of the state's county welfare offices and learned first-hand what problems ailed the system. He found that dated computers and obsolete computer systems made it impossible for case workers to do their jobs efficiently. Add to that the low pay of workers and poor communications with mid-level managers and decision-makers in Indianapolis, Moldthan found a broken system. Moldthan pleaded the case for an alternative solution to privatization recommended by the consulting firm hired by Roob, but Roob and others rebuffed him. As Moldthan explained to me his disgust and disappointment at the chosen outcome:

The best example I can think of is a person who is brought into the Governors office and told by him that he wants you to operate the State Garage. You look at him and because it is such a challenge, you accept. The Governor hands you a pair of pliers and a regular screw driver and says, “Here you go, here’s your tools.”

You immediately take a deep breathe and accept the seemingly unbelievable task and proceed to try and do the job. After 5 years the Governor says, “Well, he’s tried his best to do the job but I’m going to hire a consultant to see if we cannot privatize it to do better.” The consultants report comes back and says that even though you have tried to do a good job, all of the screws are messed up and all the bolts are rounded off. Their advice, privatize!

Now anyone who would read this would say that this scenario isn’t fair. The person in charge wasn’t given the proper tools, the proper money the proper support so how could they succeed? The answer is they couldn’t. If this sounds vaguely familiar to what has happened at FSSA, it is.

Reading Judge Dreyer's opinion, it is unmistakable that he understood and took to heart the exact sentiment Moldthan summarized.

The largely undisputed evidence shows that the Governor, the Family and Social Services Administration ("FSSA") and various State of Indiana ("State") officials set out to fix Indiana's poorly-performing welfare system by inserting an untested theoretical experiment, and substitute personal caseworkers with computers and phone calls ("remote eligibility"). This is now admitted to be an error, and there is nothing in this case, or the Court's power, that can be done to correct it, or remedy the lost taxpayer money or personal suffering of needy Hoosiers. All that can be done in this case is to take the first step at setting the final numbers among so many millions already spent.

This case is about nothing but the intent of the parties, performance of the parties, and whether there was a "material breach" of the contract as a whole. Breach of public trust is not included here, consideration of private greed is not included here, nor is any measure of public injury. It is just about the money between the parties, much of which is already spent by the State.  

The good faith of the parties cannot reasonably be questioned, especially the hard-working employees of the State and IBM. But the competence of the parties in this project is sometimes open to question.  

The short ill-fated life of this super-sized contract will remain an enigma. Overall, the Court finds, as a matter of fact, that the State failed to meet its burden to show that International Business Machines Corporation ("IBM") committed a material breach of the contract. 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 the record is too laden with too much evidence of political factors, the overwhelming difficulty of attempting such a project, and the State's own inconsistent performance to not allow a conclusion that unsatisfactory results were not caused as much by the State as IBM. Considering the contract as a whole, IBM's performance does not show breach going to the heart of the contract, and the State did not prove otherwise.

I have always steadfastly maintained that it was never the intention of the Daniels administration to put IBM in charge of this major undertaking. I've contended that IBM's role was that merely as a placeholder to provide cover to Mitch Roob from criticism that he was steering the state's largest contract in Indiana history to his former employer. Judge Dreyer fully grasped this fact. In his opinion, he traces back the origins of the "remote eligibility" model for delivering welfare services by a private contractor to Roob and his former colleague at ACS, former Indianapolis Mayor Stephen Goldsmith. The model was based on one previously undertaken by Texas, which just happened to be an ACS project that also ran into serious problems with implementation. Dreyer observed that the problems with the Texas rollout were "so severe" that the project rollout was stopped even before Indiana signed the IBM contract. The documents Dreyer references in his opinion tying Roob and Goldsmith to the decision undercuts the administration's claim that Roob had not participated in the selection process that ultimately chose the IBM-led proposal that provided most of the work under the contract to ACS as the lead subcontractor. "The largest portion of the work among the Coalition members, and the largest portion of the compensation, went to ACS, which employed the personnel assisting in the processing of eligibility applications (many ofwhom were former State employees)," Dreyer wrote. Dreyer noted that all of the competing bidders had dropped out of the procurement process before it had concluded, leaving the IBM-led coalition alone as the single bidder for the state's largest contract.

Underscoring my view, Judge Dreyer noted evidence in the record that ACS's lobbyist, Joe Loftus, was lobbying state officials behind IBM's back to have it assume control of the contract and to oust IBM despite ample evidence that many problems with the implementation involved tasks performed by ACS. He cited testimony that Loftus "used his political contacts with the administration to help his clients, ACS and Arbor, with respect to Modernization" and "Anne Murphy relied on Joe Loftus as a source of information in her dealings with IBM." Judge Dreyer found that ACS was interfering with IBM's contract "by directly lobbying the Governor, and the State was unable or unwilling to redirect the revenue necessary to adequately fund Modernization with IBM." Judge Dreyer found that Loftus' lobbying actions were creating distrust among the contract partners. He cited an e-mail exchange Loftus had with Roob in which he said, "I expect to get a lecture today from IBM reminding me that they are the Prime." Loftus added, "They just don't get it." Dreyer found that Loftus' communication behind IBM's back "presumably violated its contract with IBM and the state was in violation of the terms of the MSA, which provided that IBM was the sole point of contact with regard to contractual matters." Loftus' communications included conversations directly with Gov. Daniels and one of his top staffers, Betsy Burdick, who is the sister of Brian Burdick, the Barnes & Thornburg attorney who signed the contract on behalf of the firm to represent the state in its lawsuit against IBM despite its obvious conflict of interests. Loftus' actions were that of a snake in the grass, completely stabbing IBM in the back to win the contract for his client. Dreyer noted that ACS officials testified that Loftus' communications behind IBM's back "were contractually prohibited." As Dreyer put it, "The Court is unable to find that IBM breached the contract by failing to adequately manage ACS at the same time ACS and the State were talking behind IBM's back.

In the end, the State cooked its case against IBM by the multiple favorable reviews members of the Daniels administration gave on various occasions both internally and publicly regarding IBM's performance on the contract cited in Judge Dreyer's opinion. Perhaps the administration officials were just blowing smoke to cover up the botched privatization effort, but it all came back to bite the state hard in the butt. Judge Dreyer figured out that IBM was sacrificed for window dressing purposes because of all the flack the state was getting over the privatization effort, particularly increased pressure from state lawmakers. Nonetheless, the conflicted attorneys at Barnes & Thornburg were shameless in their criticism of Judge Dreyer's opinion. "We believe the court's view that IBM's concededly bad performance did not materially breach the contract is wrong, and cannot be squared with the overwhelming evidence of poor performance," Peter Rusthoven said in a statement to the media. Rusthoven also said the ruling contained "regrettable, unnecessary political commentary that is neither accurate nor relevant." It's absolutely incredible that the law firm has been permitted to profit to the tunes of millions of dollars result of a problem largely of its own making. Gov. Daniels is promising to appeal the decision, which will allow the law firm to profit even more from their wrongdoing

Former Indiana GOP Chairman James Kittle Fingered In Bribe Offered To House Speaker To Block HJR-3

Wealthy businessman and former Indiana State Republican Chairman James Kittle has been identified as the businessman who offered House Speaker Brian Bosma unlimited campaign cash earlier this session if he would kill HJR-3, the proposed marriage discrimination amendment according to the AP's Tom Lobianco. Citing multiple sources familiar with the offer, Lobianco said Kittle withdrew the offer of "unlimited" campaign help after Bosma questioned the legality of his offer.

Jim Kittle offered "unlimited" campaign help to House Speaker Brian Bosma as part of a push to defeat the proposed amendment, according to multiple people with direct knowledge of the discussion. They spoke on condition of anonymity because they weren't authorized to disclose the private discussions.

Kittle withdrew his offer after Bosma questioned its legality, and it turns out the money wasn't needed after all. Only four House Republicans targeted by ban supporters face primary challenges, and changes to the proposed amendment's language will keep the issue off the ballot until at least 2016. But the back-room intrigue illustrates how election-year politics and campaign dollars shape some of the state's most important decisions . . .

Bosma also has said a potential candidate notified him that he had been offered $500,000 from an out-of-state source to challenge the speaker in the May primary.

But Kittle's offer is the one that raised some eyebrows. Bosma first announced an offer of campaign dollars in a January news conference but did not identify the potential contributor.

"I received a pledge of unlimited campaign funding if I were to make this issue go away," Bosma announced.

Bosma said he rejected the offer and expressed concern that it might have violated state or federal law. He has worn his decision as a badge of pride throughout the session, telling reporters he does not bow to threats or intimidation.

Bosma told The Associated Press last week that he didn't think the offer constituted a crime. But the speaker, who has never said Kittle made the offer, acknowledged voicing some concerns.

"I did bring to that individual's attention what it sounded like he was saying and I think he was pretty concerned about it after he said it," Bosma said.

Kittle did not return calls seeking comment . . .

This isn't the first time Kittle's name has surfaced in connection with nefarious activities. Kittle, who stepped down as the GOP's state party chairman and Gov. Daniels' finance chairman after before his arrest for drunk driving in Hamilton County in December, 2010, was identified as one of several investors a controversial Chinese immigrant had supposedly lined up to start up a new company that would assist Chinese investors with investment opportunities in the United States. Monica Liang, then a newly-hired consultant to Mitch Roob, the former head of the Indiana Economic Development Corporation (IEDC), became the subject of a complaint lodged by Chinese businessmen after Liang lured a Chinese billionaire, Ao Yuqi, to wire $50,000 into her bank account. According to a written complaint several Chinese businessmen had delivered to Gov. Mitch Daniels accusing Liang of criminal wrongdoing, Liang had identified Kittle as someone with whom she was very close who had tremendous political clout in Indiana.

She advised us that the State of Indiana would set up an office in China and she would be appointed as the manager of that office. She also repeatedly hinted to us that she was connected politically because she was in an intimate relationship with Chairman of Republican Party of Indiana. She advised us that the Chairman was "super rich," owned two large biotechnology companies and was the largest campaign contributor of Governor Daniels' election. As she put it that meant it was no problem for us to meet Governor Daniels when we next visit Indiana.

Sources familiar with an FBI investigation of Liang's business dealings tell Advance Indiana that she had formed a new company, China North American Investment Group, LLC, whose members according to Liang were to include herself, Ao, Kittle, Mitch Roob and Bingham McHale managing partner, Toby McClamroch, a former Indianapolis City-County Council member. Liang used a letter dated February 18, 2011 signed by Roob appointing her as his special assistant for Chinese relations to impress potential investors in China. Liang had also supposedly represented to the Chinese investors an opportunity to invest in a $12 million nursing home project she was trying to develop in a building she had purchased in Marion, Indiana, which she claimed included Gov. Daniels, Marion Mayor Wayne Seybold and Roob as investors according to an expose' on the entire sordid affair by the Indianapolis Star, titled, "The China Letter." Among the supporting documents Liang provided to the Chinese investors was a letter on the City of Marion's letterhead signed by the city's economic development director, Darren Reese, pledging support for TIF incentives for the project.

The FBI dropped its investigation of Liang's business dealings after she died unexpectedly from an aneurysm during a visit to her apartment in Carmel in late October, 2011 from a Chicago attorney, Thomas Gehl, who was advising her on EB-5 immigrant visas, a visa program that allows large foreign investors to obtain permanent resident status in the U.S. in consideration for investing in qualified American investments.  As a result of an internal investigation of the complaint sent to Gov. Daniels, Liang was immediately terminated and Roob stepped down as IEDC's CEO a short time later, although he insisted that the sordid affair was not the cause for his resignation. IEDC also ended its long-term relationship with Pacific World Trade, which had an exclusive contract to assist the IEDC in developing business relationships in China, in retaliation for its perceived role in helping bring the serious allegations of wrongdoing on Liang's part to light. The company's owner, Dennis Kelley, delivered the complaint on behalf of the Chinese businessmen, a fact that irked state officials, even though essentially all of the allegations contained in their complaint had been determined to be accurate based on the state agency's internal investigation of the complaint. Roob had demanded that Kelley retract the allegations set forth in the complaint prior to his abrupt departure from the state agency.

Last December, the Indianapolis Star featured a $2.5 million log cabin home in Carmel owned by Kittle that was being offered for sale. "Detailed craftsmanship is the hallmark of this spacious Carmel home being offered for $2.5 million," the article read. "Jim Kittle's custom log home is filled with signature lines from the family furniture business." "Set in a private, wooded area, the home resembles a mountain retreat, complete with natural interior features such as slate flooring and exposed board and batten ceilings." Watch the Indianapolis Star and other media outlets to bury this AP story since it doesn't fit their meme on HJR-3, not to mention the advertising Kittle's furniture store purchases from them.

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?

Roob Won't Participate In Billion Dollar Contract Decision

It may be the largest single contract the state of Indiana has ever awarded, but the head of the state agency which will decide who gets the contract will not be participating in the decision. Following up on AI's report last weekend about Mitch Roob's ties to one of the two bidders for an FSSA contract to manage the state's Medicaid, food stamps, welfare and other benefit programs, the Star's Tim Evans tells us that Roob is not participating in the decision. Evans writes:

A partner in the IBM group, Affiliated Computer Services, lost part of a Georgia contract two years ago because of problems processing claims. Texas-based ACS also is the former employer of FSSA Secretary E. Mitchell Roob Jr . . .

[Dennis] Rosebrough said Roob will not be involved in the selection process because of his former ties to ACS . . .

An IBM spokesman said he could not comment on the proposal Tuesday. Rosebrough said Roob and other state leaders knew there was a possibility Roob's former employer would be a bidder "because there are only a limited number of companies who provide these services."

Roob has delegated responsibility for the project to James Robertson IV, director of the agency's division of family resources, said Rosebrough.

Once a firm is selected to do the work in Indiana, Rosebrough said, state officials will negotiate final details of the contract, including the cost. The $1 billion estimate is based on the current cost of the work done by state employees.

So if ACS is chosen, does that also mean that Roob will be walled off from participating in any contract administration decisions with respect to the contract because of his past ties to ACS? Or will it be about that time that he returns to ACS in an even-higher paid job than he had prior to joining the administration?

Marion City Officials Unable To Account For $2 Million In TIF Bond Proceeds For Failed Redevelopment Deal With Korean Businessman

The Marion Chronicle-Tribune continues to perform investigative journalism virtually every other major newspaper in Indiana has ceased doing. "Where did the money go?" seems to be a common theme of their reporting of late and for good reason. In 2009, the administration of Mayor Wayne Seybold obtained approval from the town's council to issue up to $2.5 million in tax increment financing ("TIF") bonds to a little-known Korean businessman from Ontario, California, to purchase and redevelop the city's recently-closed YMCA building on Third Street. Five years later, the building sits undeveloped and has been put on the selling block for unpaid taxes. No visible work has been done on the building, and the property generated no bids when it was offered at a tax sale last year. When the Chronicle-Tribune set out to learn what happened with the money through a public records request, it learned that city officials couldn't account for how at least $2 million of the bond proceeds had been spent.

This saga began when Korean businessman Michael An's Global Investment Consulting, a Nevada corporation, approached city officials in 2009 about redeveloping the vacant YMCA building. An's local business representative was Chad Seybold, brother of Mayor Seybold. An's $6 million redevelopment plan included adding a dry-cleaning business, men's clothing store, women's clothing store, spa, hotel and restaurant to the vacant building after renovations. An told city officials that the project would add between 80 to 90 new jobs with an annual payroll of between $1 to $2 million. Anyone who drove by this location, knew a little about Marion's economic situation and turned on his or her brain for a few minutes would quickly conclude it was a half-baked deal that had no realistic chance of success. Unfortunately, no due diligence was performed before proceeding with the investment of public tax dollars in the project.

An was described to local officials as "a Korean-born investor and retired businessman in California." According to Nevada Secretary of State corporation records, An appears to be the sole shareholder of Global Investment Consulting. An individual by the name of Claude Brock, who serves as a registered agent for multiple businesses, is identified as the company's registered agent. A Google Earth view of the business address for Brock shows a high-rise residential building a few blocks off the Las Vegas strip. A business address in Santa Ana, California is also listed, which appears as a small residential house on Google Earth. The Indiana registered address for Global Investment Consulting according to the Secretary of State records is the vacant YMCA building with An listed as the registered agent at that address. That foreign registration occurred the same month that Marion's common council approved the issuance of $2.5 million in TIF bonds for the project. Global Investment Consulting's business address is listed in its Indiana filing as a post office box in Cucamonga, California.

Further research reveals that Global Investment Consulting is listed as one of the few regional centers in Indiana certified for the controversial foreign immigrant immigrant visa program known as EB-5, although it doesn't appear to have operated as a regional center. Under this immigrant visa program, foreign investors can get a green card for investing at least $1 million in a qualified American investment, or $500,000 if the business investment is made in an area that qualifies as a depressed economic area.

The EB-5 program's controversy was raised in a December 15, 2012 investigative series by the Indianapolis Star titled, "The China Letter." The investigative series focused on Monica Liang and her controversial role as a former consultant to Mayor Seybold and the Indiana Economic Development Corporation's former executive director, Mitch Roob. Liang, a Chinese immigrant, had defrauded a Chinese billionaire out of $50,000, which she represented to the billionaire was part of a plan to invest in a building that she owned in downtown Marion that was to be redeveloped as a nursing home for veterans.

According to the Star, Liang had misrepresented to Ao Yuqi, the Chinese billionaire, that Gov. Mitch Daniels, Mayor Seybold and Mitch Roob were shareholders in the company that planned to redevelop her building. Ao had expected to obtain a green card as part of his investment in the project as an EB-5 investor. Liang, who was in her early 40s, later died under bizarre circumstances after going into cardiac arrest while a Chicago attorney, Thomas Gehl, who was advising her on the EB-5 program, was visiting her at her apartment in Carmel a short time after Roob had fired her as a consultant to the IEDC after learning of her misrepresentations and fraud and had stepped down as head of the state agency. Roob denied to the Star that he had a sexual relationship with Liang, who had traveled on trips to China with Gov. Daniels and Mayor Seybold as part of larger trade delegation to Asia. It is unclear what, if any, role Liang may have had in introducing Michael An's investment to Marion city officials, although it would have been consistent with her economic development activities with the city during that time period.

An's Global Investment Consulting entered into a loan agreement with Marion for $2.5 million as part of the redevelopment plan for the YMCA building he acquired in February, 2009 in which the city agreed to take out the $2.5 million bond "for financing the construction of the project to create additional employment opportunities in Marion, Indiana, and to benefit the health, safety, morals and general welfare of the citizens of Marion and the state of Indiana." The bond indenture and related loan agreements were prepared by Barnes & Thornburg's Bruce Donaldson, while London Whitte's Bob Swintz acted as the city's financial adviser on the transaction. First Farmers Bank & Trust, which held a $5 million mortgage on the YMCA building, acted as trustee. Repayment of the bonds were to be paid out of TIF revenues generated by Global Investment Consulting's redevelopment project. Obviously, no revenues have been generated by the now-defunct project to pay debt service on the bond issue. According to the Chronicle-Tribune, the city refinanced the outstanding bond obligation less than two years later  in February, 2011 as part of a new $5.8 million bond issue. Swintz told the Chronicle-Tribune that the refinancing was undertaken to get a lower interest rate. The bonds are not scheduled to be paid off until 2021.

Shockingly, Marion city officials were unable to produce bank statements, receipts, vendor invoices, or check or wire transfer records to account for how more than $2 million in bond proceeds were spent for An's project. Mayor Seybold, who is a Republican candidate for State Treasurer this year, refused to comment on the missing documentation according to the Chronicle-Tribune. Naturally, An was nowhere to be found. The city's development director, Lisa Dominisse, produced just 16 pages of records in response to the newspaper's request. The documents were primarily invoices from business entities tied to the redevelopment project. Half of the 16 pages, according to the newspaper, pertained to expenses related to renovation and construction of the former YMCA building. "Three Global Investment Consulting invoices from 2009 and 2010 list purchases or services like 'roofing' and 'brick work,' but none was accompanied by supporting documents like receipts for the purchases or vendor invoices for the services," the Chronicle-Tribune reported.

Together, the invoices contain 27 line items. Five line items, totaling $98,033, are listed under “Michael An,” the CEO of Global Investment Consulting: “building purchase” ($54,754), “architectural drawings” ($15,000), “attorney fee” ($20,120), “accountant fee” ($6,000) and “water removal cost — basement — new sump pump” ($2,159).

The other 22 line items, totaling more than $1.9 million, are listed under “World Enterprise Group Inc.” with a federal tax identification number next to the company name. These line items include the “roofing” and “brick work” as well as “elevator,” “HVAC” and “plumbing,” for example.

World Enterprise Group was created by An, who is also listed as the company’s president, on May 6, 2010, according to state corporation records.

The city’s record-keeping has repeatedly been cited in annual state audits. Concerns noted in multiple years’ audits include omission of entire city hall departments from annual financial reports, transfer of funds without city council approval and inconsistent bank balance reconciliations.

After Gallaway deferred questions about bond financial records to the bond trustee at the bank, First Farmers Bank & Trust Vice President Tade Powell referred questions to the bank’s general counsel, Stephen Wilson.

Wilson confirmed the bank’s role as trustee, essentially meaning the bank was hired by Marion to hold and disburse the bond proceeds.

“The bond proceeds were deposited into an account held and maintained by the Trust Department of First Farmers Bank & Trust, and these bond proceeds subsequently were disbursed by the Trust Department in payment of (i) the costs of the issuance of these bonds, and (ii) costs of the of renovating the former YMCA building in the City of Marion, including site development,” Wilson said by email.

Wilson did not respond to follow-up questions about the lack of records like bank statements for the account that held the loan proceeds.

The Chronicle-Tribune also detailed bond proceeds paid out to the bond lawyers and financial advisers for the transaction:

• $35,000 went to national law and lobbying firm Barnes & Thornburg, which served as bond counsel;

• $25,000 went to Indianapolis-based financial firm London Witte Group, which served as financial adviser;

• $10,000 Marion-based law firm Kiley Harker Certain, whose partner Thomas R. Hunt served as counsel for Marion’s Economic Development Commission;

• $10,000 went to Marion-based law firm Spitzer Herriman Stephenson Holderead Musser and Conner, whose lawyer Herb Spitzer served as counsel for Marion;

• $2,500 went to First Farmers Bank & Trust Wealth Management, which served as trustee; and

• $25,000 was kept by First Farmers Bank & Trust, which bought the bond.

Advance Indiana uncovered another 200 pages of documents online related to the original bond issue, which can be accessed by clicking here.

The Chronicle-Tribune has blasted Seybold's management of the city's finances at length in recent editorials. A recent editorial accused Seybold of "aggressively spreading untruths about public matters that will affect the city for decades," including a claimed $2 million surplus in the city's budget. According to the editors, the surplus was only made possible because Seybold chose not to pay back the amount due on a $1.7 million loan to the water utility, which was originally scheduled to be repaid  in 2012, and delayed payment of other bills "until next year and beyond." The editors insist that Marion's financial situation has been propped up by piling up more debt to be paid off by future generations. The newspaper attacked Seybold for spending $7,000 in public funds to tout a surplus it claims truly doesn't exist.

One of the running feuds Seybold has with the editors of the Chronicle-Tribune is over the categorization of TIF-related debt. Seybold insists that it's not really city debt because repayment of the debt relies on property tax revenues generated by TIF economic development projects. The developers are the one's repaying the debt he argues; however, when the projects fail as has happened frequently in Marion and elsewhere around the state, the taxpayers are left holding the bag. As the Chronicle-Tribune's editors say, "That is a distinction without a difference." The editors point out that the city has been forced to redirect money generated by other projects within TIF districts to repay all of the projects like An's that failed to pan out.

The Chronicle-Tribune's Karla Bowsher has taken Seybold to task for doling out city contracts to the same people who are backing his campaign for State Treasurer, including Barnes & Thornburg's Bob Grand, who co-chairs his committee with Lake County attorney Dan Dumezich, and Jim Higgins, a partner at London Witte.

London Witte Group has served as financial adviser to the Seybold administration on general matters and particularly on bond transactions since at least 2005, making in the neighborhood of at least $25,000 to $30,000 per transaction, records shows. Barnes & Thornburg has served as bond counsel since at least 2005, making in the neighborhood of $35,000 to $50,000 per transaction.

Seybold pointed out that he has also worked with other firms on such matters during his three terms as mayor, although he has for years regularly used London Witte Group and Barnes & Thornburg for bond transactions.

"You're barking up the wrong tree. I don't make decisions of that kind," Seybold said. I try to hire really good people.

Grand agreed with Seybold ’s hiring of Barnes & Thornburg. "He did the best thing for the city because be got the best firm for the city, he said. "Our qualifications we could put up against anybody."

Barnes & Thornburg partner Brian Burdick, named on Seybold's campaign letterhead, is general counsel for the Indiana Bond Bank, according to the firm's website.

The Indiana Bond Bank is one of the boards that the state treasurer chairs in addition to his duties as the state's chief investment officer. Of the 13 boards the treasurer sits on, the Indiana Bond Bank may be the busiest, said Ball State University political science professor Ray Scheele, because so many local governments are authorized to raise money via bonds.

The Indiana Bond Bank helps local governments secure various types low-cost financing. According to the 2013 annual report of the current state treasurer, Richard Mourdock, the bond bank issued about $517 million in debt on half of local governments during the 2013 fiscal year . . .

It's unfortunate that you won't see this kind of reporting in the Indianapolis Star. Previously, this blog built on original reporting by the Chronicle-Tribune on how state and Marion city officials invested tens of millions of our tax dollars in a company founded and controlled by a California businessman who defrauded more than 500 investors out of $160 million through a Ponzi scheme remarkably similar to the one perpetrated by Indianapolis businessman Tim Durham. The public in Indianapolis doesn't have a clue about what's happening with the hundreds of millions of dollars that have been borrowed and invested in TIF projects, virtually all of which benefit developers that have contributed heavily to Mayor Greg Ballard's and other local politicians' campaign committees. The City of Indianapolis is paying huge fees to the same bond lawyers and financial advisers upon which the City of Marion is relying. We've demonstrated time and time again that city finances are being dictated by those same players. The Indiana State Treasurer's Office is similarly controlled by these same people and apparently will continue to be if these self-serving people get their way. Meanwhile, the taxpayers always wind up getting stuck with the bill for the bad deals this corrupt bunch of actors concoct on behalf of public officials whose decision-making is obviously blinded by the campaign support they receive from them.