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7/22/2012 11:05:00 AM
OPINION: Good government groups always thought IBM deal smelled of patronage

Eric Bradner, Evansville Courier & Press Indianapolis bureau

— The good-government groups sniffed this one out from the beginning.

They were wary from the outset of the 10-year, $1.37 billion contract Gov. Mitch Daniels' administration signed to hire a set of private companies to modernize Indiana's old paper-based welfare delivery system.

The two sides at the forefront of the deal — one that went sour, and is still playing itself out in court — were the state of Indiana and Armonk, N.Y.-based IBM Corp., the prime contractor in the deal.

There was a third group in the middle of it all, though. Dallas-based Affiliated Computer Services was tops in a group of more than 20 subcontractors that collectively made up what was known as the "IBM Coalition."

It's the company that had employed Mitch Roob — that is, until he made the leap into the Daniels administration, becoming Secretary of the Family and Social Services Administration and leading the drive for a modernization deal.

That's the connection about which watchdog organizations always complained. They thought a powerful cabinet secretary should not be handing such large deals to the company that had last employed him.

Their instincts were right — not necessarily about Roob, but about ACS being too connected to the state's government.

It's a connection that Marion County Superior Judge David Dreyer laid out in detail in a ruling issued last week in which he ordered the state to pay IBM a total of $52 million.

You don't have to read very far. On the second page, Dreyer refers to "evidence of ACS lobbying against IBM in violation of its own subcontract."

What that means is that once it became clear the state might move on from IBM, ACS officials were there lobbying to be the replacement at the top of the contract.

The man at the center of it all was Joe Loftus, who lobbied the state on behalf of ACS — and who also is a partner at Barnes & Thornburg, LLC, the law firm that got millions of dollars to do the state's legal work on the deal, and a firm that employs a number of key financiers of Republican campaigns.

"The evidence shows that actions of ACS's lobbyist contributed to an atmosphere of distrust among coalition members," Dreyer wrote.

He then cites an email that Loftus wrote to Roob on Jan. 3, 2007, in which he explained that IBM would try to make its status at the top of the contract clear: "I expect to get a lecture later today from IBM reminding me that they are the Prime. They just do not get it."

When the state and IBM had worked on a "corrective action plan" in hopes of fixing problems with the modernization effort, Dreyer wrote that ACS was less than a partner, and again mentioned Loftus.

"According to state witnesses, ACS failed to make any serious effort with respect to its portion of the CAP responsibilities, and was instead lobbying the state, directly and through its lobbyist, to replace IBM as the general contractor on the project," he wrote.

He then identified another man — Richard Rhoad, who technically was an ACS employee but had an office within the FSSA, around the agency's top leadership — as having "no idea of what was going on" and actively working against IBM.

To be clear, the contract between the state and IBM said that IBM would be the "sole point of contact with regard to contractual matters."

Daniels' chief of staff, Earl A. Goode, is quoted in Dreyer's decision as having told other members of the Daniels administration that they should not be talking to IBM's subcontractors about the deal. However, his word was not heeded.

As it turns out, this contract — at least the ACS portion — was exactly what its detractors thought it might have been. At least a part of this story looks like a modernized kind of patronage.

Related Stories:
• EDITORIAL: IBM ruling reaffirms state's mistakes in privatization
• Judge: Indiana owes IBM $12 million in welfare lawsuit
• EDITORIAL: Decision to privatize state welfare system a mistake from start

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Editor, John C. DePrez Jr.; Executive Editor, Carol Rogers; Publishers: IBRC and IAR

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