Client Network Services Inc. filed a lawsuit Monday over the Jindal administration’s cancellation of a nearly $200 million contract for state Medicaid claims processing.
The lawsuit, filed in 19th Judicial District Court, alleges “bad faith breach of contract” and seeks financial damages, including for harm to the Maryland-based company’s reputation and business losses.
Last week the administration rejected a settlement offer made by Client Network Services Inc., or CNSI, serving notice that an effort will be made to recover some of the $17 million the state paid the firm since it started work in 2012.
“We stand by our decision to cancel the contract for cause, which was based on consultation with the Attorney General’s office, and for the reasons communicated by the Division of Administration in a letter to CNSI,” Commissioner of Administration Kristy Nichols responded in a statement released late Monday. That letter, among other things, cited improper contact between the state’s then-health secretary, Bruce Greenstein, and CNSI officials and employees.
The Jindal administration abruptly canceled the contract in late March after a news report that a federal grand jury had subpoenaed documents related to the contract’s award. Controversy surrounded the selection of CNSI because Greenstein had been a vice president with the firm and unsuccessful contractors claimed the firm “lowballed” the price.
Greenstein resigned a week after the federal probe came to light.
As it canceled the contract, the state cited Louisiana law that states: “If the person awarded the contract has acted fraudulently or in bad faith, the contract shall be declared null and void.”
The CNSI contract allows termination if the company fails to comply with contract terms or fails to fulfill its performance obligations, but the state has yet to document how and when such failures might have occurred , CNSI attorneys claim.
“It is unclear how the mere existence of the (grand jury) subpoena would be a proper basis for the cancellation” of the contract, the lawsuit states.
CNSI lawyers state that the firm has done no wrong and met contract terms in spite of roadblocks thrown up by the current Medicaid contractor — Molina Medicaid Solutions — and some DHH employees who had close relationships with Molina.
“To the best of CNSI’s knowledge, information, and belief, neither CNSI nor any of its representatives is a target of the federal investigation,” CNSI attorney Michael McKay wrote. “Federal authorities to this day have never contacted CNSI about any investigation of the (contract) award.”
In its petition, CNSI notes that its dismissal came despite the firm having been praised by state Department of Health and Hospitals Undersecretary Jerry Phillips in a letter of recommendation to Arkansas health officials.
The petition also disputes the state’s allegation that communication between Greenstein and company representatives may have influenced the contract award. CNSI attorneys said the proposals from four different companies were evaluated by independent teams and the difference between the CNSI technical evaluation and the highest score was less than 90 points out of 4,000. Price was assessed separately and scores combined, with the CNSI price putting it over the top.
Greenstein “was not part of any evaluation teams and played no role in the evaluation process,” the petition states.
Greenstein denied any involvement throughout the process.
However, the Jindal administration said in a letter to CNSI detailing reasons for contract termination improper contacts — including hundreds of phone calls and thousands of text messages — between Greenstein and CNSI employees and officials during his tenure as health secretary.
The administration also cited Greenstein’s role in changing a provision in the request for proposal that allowed CNSI to compete and potential conflicts of interest among DHH and CNSI employees.
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