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Showing posts with label Welfare Privatization. Show all posts
Showing posts with label Welfare Privatization. Show all posts

Wednesday, June 26, 2019

IBM Ordered to Pay $78 Million to the State Ending Decade Long Lawsuit

Good afternoon friends! Well it appears that the decade long shit show IBM-FSSA lawsuit has come to an end. IBM has been ordered by the Indiana Supreme Court to pay $78 Million to the state over the bungled welfare privatization performed during Mitch Daniels “reign of error” as Governor. Olivia Covington over at The Indiana Lawyer gives the lowdown on this case:

In its second opinion issued in the years-long dispute between Indiana and IBM Corp. over the failed contract to create a new Hoosier welfare system, the Indiana Supreme Court has allowed IBM to collect post-judgment interest on its $49.5 million damages award. However, that interest will date back only to a 2017 judgment on remand, not the original judgment entered in the company’s favor in 2012, and only serves as an offset to the greater sum IBM owes the state.

Justice Steven David wrote for the court in the Wednesday opinion in International Business Machines Corporation v. State of Indiana, acting on behalf of the Indiana Family & Social Services Administration19S-PL-19. The justices, excluding Justice Mark Massa, heard their second round of arguments in the case in February.

At issue in the litigation is a contract between IBM and the state requiring IBM to develop a new welfare system that utilized a centralized call center to handle customer requests. The new system, colloquially known as “modernization,” was meant to be a shift away from the prior welfare system that emphasized face-to-face contact with customers.

But the state terminated the IBM contract in 2009 after modernization began experiencing problems. Instead, the state created its own welfare system, known as “hybrid,” that combined the call center with the former face-to-face model.

Both parties filed breach complaints, and the Marion Superior Court initially determined modernization’s failure was not a breach of IBM’s contract. Instead, the state was ordered in 2012 to pay IBM $49.5 million for the costs of equipment and assignment fees.

Barnes & Thornburg attorneys John Maley and Peter Rusthoven, counsel for the state in the IBM litigation, released a statement Wednesday afternoon saying they are pleased with the court’s ruling.

“Hoosiers will finally benefit from IBM’s multi-million-dollar payment of this judgment,” the statement said, referring to the $78 million owed to the state.

The article does mention the ruiling was 3-1 in favor of the state. Justice Mark Massa did not participate in the ruling since he worked as General Counsel for Governor Mitch Daniels who had ordered the IBM contract canceled. We have blogged previously on this issue once or twice before. Personally we feel that IBM was royally shafted by the state and should have not been forced to pay the state anything. On the other hand though IBM should have realized that doing business with the state was a bad idea. Especially since after IBM was given the heave ho, Affiliated Computer Systems (ACS) was put in to do the work. This was a big problem because then FSSA Secretary Mitch Roob had previously worked for ACS. Why this matter was never investigated by the US Attorneys Office in Indianapolis is a mystery to this day. Barnes and Thornburg’s role in representing the state is particularly troubling because as Paul Ogden pointed out back in 2012 that Barnes and Thornburg had lobbied the state to get ACS put in charge of the states welfare privatization project. Paul Ogden said at the time:

According to Judge Dreyer, the services provided by ACS were the major source of the complaints, Nonetheless, IBM ended up being discharged from the while ACS remained on as part of a "hybrid system."  Conveniently for ACS, a former executive theirs, Mitch Roob, headed FSSA, when IBM-ACS won the original privatization contract and yet another ACS executive, Mike Gargano, headed FSSA during the litigation over IBM's discharge.

The State, i.e. FSSA, ended up suing IBM to recover under the contract.  IBM countersued, claiming that the State breached the contact through its termination.  But who does the Daniels' administration insist the State hire to represent the State?  None other than Barnes & Thornburg the very law firm that represented ACS in lobbying to get the contract and still represents ACS to this day.  

Let me summarize what appears to have happened. ACS lobbies state officials to oust IBM so ACS can have the lucrative Medicaid privatization contract to itself.  ACS eventually succeeds.  The State sues IBM, perhaps to counter the inevitable breach of suit IBM was about to file.  After, IBM sues, the State hires Barnes & Thornburg, ACS's attorney to represent the state.

The State appears to be nothing more than a proxy for ACS. This case is essentially ACS v. IBM, yet we taxpayers are on the hook to pay Barnes & Thornburg, ACS' attorneys, $9.6 million.  That is uttterly outrageous.

Given that federal money here is involved, I too wonder why there has not been a federal investigation opened up by the FBI into this matter.  There certainly should be now that the facts here expose troubling, if not illegal, conduct by government officials and private lobbyists.

Between attorneys fees and the cost of the original contract with IBM. We estimate that the state has easily put us taxpayers on the hook for well over $500 Million. This whole mess could have been avoided if the Daniels administration had just listened to what some of his own people told him and given FSSA caseworkers new computers. Instead “Little Man” Mitch was determined to privatize food stamp delivery no matter what. Daniels and his bagman Governor “High Tax” Holcomb seem content knowing they slit the wrists of us taxpayers to feed the vampire looters and moochers who have helped through their demonic means to advance their political careers. 

Some of INDY REPUBLICANS allies in the cultural war against President Trump. Have tried to assuage our concerns about Holcomb by saying he is not on the side of Trumpian tribalism and authoritarianism. Don’t be fooled. Former Governor Mitch Daniels his boss whose legacy Holcomb carries out. Mitch Daniels created the tribalism, authoritarianism, and waste and theft of taxpayers money that would have been an embarrassment even in Tsarist Russia. We the men and women of truth, the guardians of freedom and justice for all will continue to fight until the Daniels-Holcomb Syndicate is a distant memory. 

Sunday, October 28, 2018

When Will The IBM-FSSA Debacle Ever End?

As many of our readers are undoubtedly aware. For the better part of the last decade now. We Hoosiers have been on the hook for well over a half billion dollar debacle because “Godfather” Governor Mitch Daniels and his stooge Mitch Roob had to enter into a boneheaded contract with IBM/ACS to privatize Indiana’s welfare system. We blogged about this last year and about a month became aware of some new developments in this case.


Callahan also reported:

The three-judge court also found that IBM is entitled to interest on nearly $50 million in state fees that Welch ruled Indiana owes the company. 

Judge Heather Welch had rejected IBM’s request for interest on those fees, but the appellate court reversed the decision and sent the matter back to Welch to determine the amount of interest IBM is owed. The court specified that the interest be calculated for the more than six years that have elapsed since another Marion County judge found in 2012 that Indiana owed IBM $49.5 million in state fees.

John Maley, one of the private attorneys representing Indiana in the case, called Friday’s ruling “a significant victory for Hoosier taxpayers.” He said the state’s attorneys believe Welch ruled correctly on the interest issue and that they will be conferring with state officials “regarding that narrow legal issue and possible further review.”

IBM spokesman Doug Shelton said the New York-based company is disappointed by the ruling and plans to appeal.

“IBM invested significant resources in its partnership with the state to help turn around a welfare system described at the time by Indiana’s governor as one of the worst in the nation,” he said in a statement.

Indiana and IBM sued each other in 2010 after then-Gov. Mitch Daniels, a Republican, cancelled the $1.3 billion contract that his administration reached with the company to privatize and automate the processing of Indiana’s welfare applications.

Under that deal, an IBM-led team of vendors worked to process applications for food stamps, Medicaid and other benefits. Residents could apply for the benefits through call centers, the internet and fax machines. But the contract was pulled in late 2009, less than three years into the 10-year deal, following complaints about long wait times, lost documents and improper rejections.

Not mentioned in the article is that former Assistant State House Assistant Leader Eric Turner had owned a building which was then leased by ACS to be used as a welfare call center. IR and the late great Gary Welsh have blogged about Turners legal and ethical issues.

It’s extremely frustrating to the IR crew and those of us on the front lines of fighting the most corrupt state government in the nation that this whole shit show over at FSSA is still going on. But as long as it is we and others like us will continue to report it. Don’t worry Gary. Your crusade will continue and intensify. Until our state is rebuilt. Good night and God Bless!

Monday, August 7, 2017

Will someone finally blame Mitch Daniels for his foul ups with FSSA's Welfare Privatization?


Mitch Daniels after his lobotomy 

You would think after the better part of a decade we the taxpayers would finally be able to put former Governor Mitch Daniels now infamous welfare privatization scheme behind us! But if today's story in the Indianapolis Star is to be believed we maybe nowhere near the finish line on this.

Earlier today Fatima Hussein and Tim Evans wrote "IBM owes $128M in welfare privatization". Mr. Evans and Miss Hussein give some background on the ongoing pissing match between IBM and the State of Indiana:

The state of Indiana has won a judgment for $128 million in damages in a lawsuit against alleging IBM breached its 2006 contract to modernize delivery of welfare services by the Family and Social Services Administration.

Marion Superior Court Judge Heather Welch awarded the damages in an order today, according to a statement issued by Barnes & Thornburg, which represented the state in the lawsuit. The suit has been going on since the state terminated IBM's contract in 2009 claiming the company's performance was poor.

IBM intends to appeal the latest ruling "which is contradicted by the facts and the law," says Clint Roswell, an IBM representative in an emailed statement to IndyStar.

"IBM worked diligently and invested significant resources in its partnership with FSSA to help turn around a welfare system described at the time by Indiana’s governor as one of the worst in the nation," Roswell said.

The Indiana Supreme Court ruled in 2016, according to the statement, "that IBM was owed around $50 million for certain unpaid fees and equipment charges, but rejected over $53 million of IBM’s other claims, and held that IBM had breached its contract with the State as a matter of law." 

The Supreme Court then sent the case back to the trial court to determine the amount of the state’s damages.

The net result of today’s ruling, the statement said, is that IBM now owes the state more than $78 million, plus interest at 8 percent from the date of the judgment.

Evans and Hussein provide a condensed account of the events leading up to today's ruling:

The case stems from a $1.37 billion,10-year contract that IBM and Indiana entered in 2006. It was hailed at the time as the solution for fixing one of the nation’s most-troubled welfare systems.

The state, though, canceled the contract three years later after a flood of complaints about the system from clients, their advocates and federal officials. At the time, the state had paid $437 million to IBM.

The two sides sued each other for damages. In 2012, a Marion Superior Court judge awarded $52 million to IBM.

In 2014, though, the Indiana Court of Appeals reversed the ruling and ordered a determination of damages suffered by the state. Indiana was seeking $177 million in a breach-of-contract countersuit against IBM. The Indiana Supreme Court then took up the case.

John Maley and Peter Rusthoven of Barnes & Thornburg, issued a joint statement saying they were gratified by the latest decision. “We are very pleased the court awarded $128 million in damages for IBM’s failure to keep the important promises it made to the State of Indiana,” the statement said.

“This has been a long, tough battle with a big corporation that refused all along to take responsibility for its poor performance," the statement said. "This hurt Hoosier families most in need, who depend upon the help of the Family and Social Services Administration. Today’s ruling is another victory for those families, for our State, and for all our citizens and taxpayers. It also vindicates the consistent determination of former Governors Mitch Daniels and Mike Pence and now Governor Eric Holcomb that IBM must be held responsible for not doing what it promised.”

As frequent readers of the late Gary Welsh's Advance Indiana blog and Paul Ogden's Ogden on Politics blog will note. The state bears at least as much and probably more of the blame for screwing up Indiana's welfare programs! John Marley and Peter Rusthoven might want to avoid pointing fingers. According to rumor the biggest reason why Mitch Daniels did not run for President in 2012 is because the Obama administration would have had the US Attorneys Office in Indianapolis investigate and possibly prosecute many key players in the whole IBM-FSSA-ACS debacle. The fact that IBM is going to appeal the most recent decision in this case should give former Indiana Governor now Vice President Mike Pence pause about ever running for another office! This problem won't go away even if IBM loses. Also Marley and Rusthoven are probably hoping nobody will ever ask them about their law firms representing the state, while having a non waivable conflict of interest in doing so since they also represent ACS as well. Click here to read more about the conflict of interest. 

The late Carl Moldthan who worked for Mitch Daniels and argued against the privatization of welfare services warned of problems that would emerge back in 2005. But Mitch Roob was hell bent on privatization. And as Gary Welsh pointed out IBM was most likely a placeholder put on so that they could be later fired and Roob's former employer ACS could step in.

Here are some extracts from both Gary Welsh and Paul Ogden's work documenting the whole FSSA nightmare:

Carl Moldthan's time 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."

Moldthan's warnings to Mitch Roob:

"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."

Gary Welsh explains Mitch Daniels and Mitch Roob's real plans for FSSA:


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 (ACS). 

"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."

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

There were lots of hiccups along the way, some of them IBM's fault, some of them the fault of subcontractors like ACS, some of them the fault of FSSA and some due to circumstances beyond both parties' control attributed to the explosion in claims caused by the Great Recession. The undisputed facts show the state devised metrics for measuring IBM's performance and an overwhelming number of those metrics were on target. What few were under-performing were moving in the right direction when Gov. Daniels abruptly terminated IBM's contract and handed its work over to ACS entirely to fulfill, which I believe was the objective all along. Roob just needed IBM as a placeholder not to make it so obvious he had steered one of the most lucrative contracts in the state's history to his previous employer, although everyone knew that was his objective all along beyond a shadow of a doubt.

Gary Welsh predicted Indiana would try to screw over IBM:

Sometimes justice works, and sometimes justice works in mysterious ways. This is one of the most corrupt and sad chapters in recent Indiana government history. There should have been criminal prosecutions for what took place involving this contract in the Daniels administration and what continues to take place to this day. Unfortunately, I don't see much upside for IBM finding justice in this state, and its attorneys would probably be well-advised to pick up its marbles and go home without being stripped too bare of its clothing before leaving the state by the wheels of justice in Indiana, which can work in very mysterious ways. IBM should have realized it was lying down with dogs when it got involved in this taxpayer feeding frenzy years ago and the inevitable result of waking up with fleas.

Paul Ogden on FSSA debacle and Barnes and Thornburg's conflict of interest representing the state and ACS:

The State, i.e. FSSA, ended up suing IBM to recover under the contract.  IBM countersued, claiming that the State breached the contact through its termination.  But who does the Daniels' administration insist the State hire to represent the State?  None other than Barnes & Thornburg the very law firm that represented ACS in lobbying to get the contract and still represents ACS to this day. 

Let me summarize what appears to have happened. ACS lobbies state officials to oust IBM so ACS can have the lucrative Medicaid privatization contract to itself.  ACS eventually succeeds.  The State sues IBM, perhaps to counter the inevitable breach of suit IBM was about to file.  After, IBM sues, the State hires Barnes & Thornburg, ACS's attorney to represent the state.

The State appears to be nothing more than a proxy for ACS. This case is essentially ACS v. IBM, yet we taxpayers are on the hook to pay Barnes & Thornburg, ACS' attorneys, $9.6 million.  That is uttterly outrageous.

Given that federal money here is involved, I too wonder why there has not been a federal investigation opened up by the FBI into this matter.  There certainly should be now that the facts here expose troubling, if not illegal, conduct by government officials and private lobbyists.