Wednesday, October 20, 2010

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

IBM spokesman Clint Roswell had no immediate comment. The company is suing the state agency for $52.8 million it claims it is owed under the contract.
Naturally, Kusmer makes no mention of the earlier reports about the controversial legal contract on the blogs. Mainstream reporters knock the blogs all the time, but rip off their reporting without attribution on a daily basis. He does add another crony tie to the mix, noting Brian Burdick, one of the attorneys who signed the contract on behalf of Barnes & Thornburg, is the brother of Gov. Daniels' chief of staff. I would add that Burdick is not a litigator. He is a bond lawyer and everyone involved knows that is the case. His involvement in the case is nothing more than sister helping brother make bigger bucks at his law firm. Here's how Burdick's bio at the firm's website describes his credentials:

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

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


Paul K. Ogden said...

The AG spokesman said:

"hiring this firm was a specific request of the Governor's Office."

Oh, my gosh. Gary, this deal is a 1000 times worse than the IURC conflict of interest than Daniels jumped all over as being improper. B&T represents several of the subcontractors in the welfare privatization deal, including ACS. (My research too also showed B&T at one time represented IBM.) If IBM's attorneys have any brains, they'll start bringing in those subcontractors as co-defendants. Then B&T is on both sides of the litigation with clients pointing fingers at each other, and attorney's sitting there with intimate knowledge of what's going on.

It could well be that facts uncovered in litigation indicate that the State should also go after ACS. Now how do they do that with B&T representing ACS. What is B&T supposed to do if they start finding out stuff on behalf of FSSA which are damaging to ACS. Do they pursue it on behalf of FSSA or do they protect their client ACS and not pursue it?

In my 23 years of practicing law, I've never seen a more blatant, damaging conflict of interest. If anyone at my firm pulled this stunt, we'd be in jeaopardy of losing our licenses...and rightfully so.

B&T just assumes in the contract the conflict can be waived. They seem oblivous (or unconcerned that the rules will be enforced against them) that under Rule 1.7, there are nonconsentable conflicts, in particular those types of cases where the conflict involved strikes at the very integrity of the judicial process. Boy if thee was ever the case of that, this is it.

Diana Vice said...

I'm certainly not impressed with Brian Burdick. Barnes & Thornburg gave bad advice to their former client, The Wilson Education Center, and helped to create a monumental mess that cost Indiana taxpayers millions of dollars. Here's a link with the details:

Once we learned of Burdick's association with the governor, we understood why we were continually stonewalled in our quest for accountability. The overpriced lawyers are B&T aren't worth their salt in my humble opinion.

Good work, Gary.

Gary R. Welsh said...

Yeah, Paul, Don Lundberg applied those rules mercilessly against the little guys in the legal profession during his many years at the attorney disciplinary commission while turning a blind eye to almost anything attorneys at the big law firms did. Now Don sits in a cozy job over at Barnes & Thornburg.

Paul K. Ogden said...

A few years ago, Gary, I filed a complaint against a B&T attorney. Lundberg immediately dismissed it even though the State Bar Association had issued an opinon saying that the conduct I complained of is unethical under our disciplinary rules. (I know an ISBA opinion is not binding.) Within a few months, the B&T attorney I complained about was appointed to the Commission. Yet last year Lundberg required me to answer a complaint filed against me by an elected official who complained that I had been suing him too much. It should have been dismissed outright for not stating a claim, yet I had to spend hours responding to it.

We attorneys have all been complaining for years about the Commission's approach to enforcement of the rules under Lundberg. Everyone was afraid to talk because of fear of being a target. I have confidence that the new leadership of the Commission will take a much better and more even handed approach to the enforcement of the rules.

Gary R. Welsh said...

I suspect, Paul, that Kevin Murray billed the taxpayers for the cost of preparing that complaint against you by Sheriff Anderson. We know Anderson didn't write the complaint. I totally agree with you, Don should have dismissed the complaint without making you waste the time responding to it.

Paul K. Ogden said...

Gary, and I have no doubt that the Sheriff illegally used commissary money to pay Kevin Murray's firm. Either that or the taxpayers.

M Theory said...

Our God Lot project to bring urban farming to the near east side has been stuck in city legal since July.

This is a project that would cost the city nothing. All we are asking is that they give us a licensing agreement for one of the abandoned lots they want to used for inner city gardening.

We presented the proposal, they liked it, yet city legal has sat on it.

I can't help but think city legal could care less about Indy's poor and the urban farming initiative.

I'm quite fed up because summer is almost over and our window of opportunity to get a foothold with the God Lot project is closing.

I can see that citizen initiatives that cost the city nothing, yet would bring positive results in the inner city, are clearly the lowest of priorities.

Consider me FED UP!

Paul K. Ogden said...


Did you make a contribution to the Mayor's campaign? Did you hire the right law firm?

I think the answer is "no" to both those questions.

Why then do you expect your project to be supported by the City? Surely you know how things work around here by now.