Thursday, October 21, 2010

AP Hits Barnes & Thornburg on Conflicts of Interest in $5.25 Million FSSA Contract, Reveals Governor's Office Asked that Contract be Awarded

Associated Press Ken Kusmer reports on the Barnes & Thornbug conflict of interest in being awarded a $5.25 million contract to represent the State in the lawsuit against IBM, the general contractor on the Medicaid privatization project. This is something I had blogged about a few days ago, however, Kusmer connects the dots that apparently lead straight to the Governor's office:
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."
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 1/2-page contract detail Barnes & Thornburg's conflicts of interest from having represented ACS Human Services, a division of Dallas-based Affiliated Computer Services; 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 that 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."

To see the rest of the article, click here.

Some observations:

Barlow's claim that it is normal to enter into a state contract for professional services eight months after the work begins and pay that contractor for that work for those months when there was no contract, is something I'm pretty sure the State Board of Accounts would not agree with. Further, as an attorney, the first thing I learned in private practice is that you do not do any work for a client, until that client signs a contract. I'm pretty sure the attorneys at Barnes & Thornburg, the state's largest law firm also know that.

The email statement form the Attorney General's Office that "hiring this firm was a specific request of the Governor's Office" is telling. The reason why you do a written response to a reporter's query is that you want to carefully control what is being said. Reading between the lines, it would appear that Attorney General Greg Zoeller is laying the blame at the feet of Governor Daniels and that the AG probably did not agree with the decision. That doesn't absolve the Zoeller of criticism, but he may well have gone along with it rather than pick a fight with the most popular Republican state wide officer holder.

Just a couple weeks ago, the Governor's Office took action over an IURC administrative law judge who went from presiding over cases involving Duke Energy to a well-paid position as Duke's attorney. The Governor deserves credit for going after an ethical problem within one the state's agency. The problem here though is even worse. First of all B&T is a big contributor to Governor Daniels. His Deputy Chief of Staff Betsy Burdick is the sister of Brian Burdick, one of the Barnes & Thornburg attorneys hired by the State pursuant to the $5.25 million contract. How is that not as bad as the situation involving the IURC attorney?

Then you have the huge conflict of interest involved in the hiring of Barnes & Thornburg to represent FSSA. That alone is far worse in terms of damage to the public than that presented by the Duke Energy-IURC matter. Barnes & Thornburg was in the middle of the Medicaid Eligibility project representing several subcontractors who worked with IBM. It is inevitable in representing FSSA against IBM that issues dealing with B&T's clients, including FSSA, will be deeply involved in the litigation. It is inevitable that IBM and the subcontractors will start pointing fingers at each other, and ACS and other B&T clients could be brought in as co-defendants by IBM. How exactly is that to work - B&T's attorneys being on both sides of the litigation.

If that conflict wasn't bad enough, you have another one outlined by Kusmer:

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.
So let me get this straight, in providing legal representation, B&T says in the contract that it may on behalf of FSSA go after its own clients for screwing up the Medicaid eligibility project...the very deal they worked on on behalf of those clients? And Barnes & Thornburg is supposed to somehow divorce itself of this conflict of interest? Of course, B&T's clients should love being pursued by their own lawyers on the project. B&T will, on behalf of the State, cut a pretty good deal to let ACS and the other contractors off the hook...because, well, they want to keep them as a client. The contract even specifically says that B&T will continue to representing ACS and the other subcontractors.

This isn't the first time, B&T immersed itself deeply in a conflict of interest involving government. In April of this year, Gary Welsh of Advance Indiana reported on stories out of Lake County where B&T acted to screen applicants to consolidate trash processing in Lake County. B&T actually had represented the winning applicant, Earl Powers. According to Powers he had severed his relationship with B&T a few months before signing the contract with Lake County, a fact that was disclosed to the county. Anyone who has worked as a law firm knows that's a disingenuous claim. Relationships with clients, especially business clients, continue over the course of years, even though there may be no pending cases. It's easy to claim that an attorney-client relationship has been terminated when it may well be instead that there is simply no existing legal work taking place.

Locally I've seen the same thing. Barnes & Thornburg represents the local Pike Township School district. CSO Architects has won projects in Pike to build new schools. Who represents CSO? Barnes & Thornburg. Who advises the school district about matters relating to CSO? Barnes & Thornburg.

In typical B&T fashion, the firm claims that it will simply take off its ACS hat when representing FSSA and take off its FSSA hat when representing ACS. That's what Bob Grand said when his law firm represented the Pacers and he sat as President of the Capital Improvement Board which dealt with matters involving the Pacers. It is pure nonsense that supposed internal "ethical screens" within the firm somehow divorces the firm of blatant violations of conflicts of interest we attorneys are obligated to follow.

Contrary to the assumption contained in the the conflict of interest provision of the FSSA-Barnes & Thornburg legal services contract, not every conflict can be waived by getting a client's consent.Rule 1.7(b) deals with four conditions that must be met all be met before conflicted lawyer can provide representation, even if his clients consent. One of those is Rule 1.7(b)(3) which says that if the representation "involve[s] the assertion of a claim by one client against another client represented by the lawyer in the same litigation" that conflict is not waivable. That is precisely what is going on in this case.

There should be an investigation of who in the Governor's Office insisted that the State enter into such a foolish, conflict-ridden contract that by any measure is not in the best interests of the State of Indiana. This deal unfortunately makes a mockery of the conflict of interest laws that every attorney in the state is supposed to be following.

Note: Photograph is of Brian Burdick.


Diana Vice said...

And don't forget Barnes & Thornburg's conflict-of-interesting involving the no-bid roofing scheme that cost taxpayers millions of dollars.

These are mediocre attorneys at best, IMHO.

Cato said...

Diana, a good attorney knows that law. A great attorney knows the judge.

Bradley said...

"Barlow's claim that it is normal to enter into a state contract for professional services eight months after the work begins and pay that contractor for that work for those months when there was no contract, is something I'm pretty sure the State Board of Accounts would not agree with."

I know how you feel about the Inspector General's office, Paul, but below is a link showing in black and white an investigation of the Department of Workforce Development and the IG's take of DWD hiring a law firm without a written contract AND not even bothering to get permission from the Attorney General's office.

Starting at the bottom of page 6:

We also find statutory non-compliance with the hiring of a private law firm by DWD.
From July 24, 2007 through February 15, 2008, DWD made payments to a private law firm to perform legal services on its behalf without the consent of the Attorney General, contrary to I.C. 4-6-5-3.2
We are also unable to locate a written contract reflecting this hiring of the law firm. Contracts must be in writing, I.C. 4-13-2-14.2, and must be approved by the Department of Administration, Attorney General, and Budget Agency. I.C. 4-13-2-14.1 and 14.3.

2 IC 4-6-5-3 Written consent; employment of attorneys or special general counsel

No agency, except as provided in this chapter, shall have any right to name, appoint, employ, or hire any attorney or special or general counsel to represent it or perform any legal service in behalf of such agency and the state without the written consent of the attorney general.

So the FSSA hiring a law firm without a contract is nothing new under the Daniels' administration - DWD engaged in the same practice a couple years ago. Of course, nothing was made of this in the media or anywhere that I am aware. I had forgotten it until you made mention of the State Board of Accounts not agreeing with Barlow's assertion (I am pretty sure SBOA would agree with you there) - and what the IG found about DWD violating state law in hiring a law firm without consent and a contract should be regarded as against state law and the people at DWD (and now FSSA) should be held responsible and terminated.

The DWD investigation (and SBOA audit from earlier in the year) only have slightly scratched the surface of all the improper contracts, gigantic ethics violations, negligence, incompetence and waste of hundreds of millions of dollars from that agency. If everybody only knew what all has gone on at DWD the last few years, everybody would be appalled. I think soon enough you all will be hearing what really has gone on there.

I know said...

Gee go figure there is a CONFLICT OF INTEREST in a State Agency.

Diana has done the wonderful job. So has Gary and Paul.

It is really sad the Department of Justice does not come into Indianapolis and just sit down and start sifting through the State Agencies.

Some of us have also factually and with mounds of evidence reported hundreds of millions of dollars of broken contracts, defaulted bonds, changing contract requirements after the contract was issued and the contractor and his lawyer telling the State Agency Commission and Director they were changing the rules.

The blogs are reporting campaign contributions to be from sleazy people. Check the latest contracts from Brizzi and his friends to the mess in French Lick Indiana and the wealthy folks that have evaded the media or controlled it to stifle the two defaults, no money to economic development and the GOVERNOR bragging how he fired Donald Trump. The Governor signed the contract that is being over seen illegally and by people who have been compensated with millions of dollars by contractors for their land after they got the vote they needed.

Wake up Indiana