The Jindal administration alleged misconduct as it abruptly canceled a $185 million-plus Medicaid claims processing contract with a Maryland-based firm, according to a letter released Friday.
A letter notifying CNSI of its firing cites a 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 March 21 letter signed by Sandra G. Gillen, director of state purchasing, provides no specific information on the nature of the misconduct the state is alleging.
Sonny Cranch, the local spokesman for Client Network Services Inc., challenged the allegation. He said CNSI would use appeal rights granted through state administrative procedures as well as the courts to overturn the state’s decision.
State health Secretary Bruce Greenstein was a CNSI vice president in 1995 and 1996. The contract is for operations under Greenstein’s agency, the Department of Health and Hospitals.
Greenstein’s office referred all questions on the matter to the Division of Administration.
Commissioner of Administration Kristy Nichols announced Thursday that the Jindal administration was canceling the CNSI contract effective immediately, after news broke that a federal grand jury was investigating the contract award.
The state Attorney General’s Office has also been looking into the contract award, Assistant Attorney General David Caldwell said Friday. Caldwell is head of the Attorney General’s Public Corruption and Special Prosecutions Unit.
On Thursday, Nichols said the CNSI action was taken “based on consultation with the Attorney General’s Office.”
No one at CNSI headquarters responded to a request for interview. However, Cranch said the contract cancelation caught the firm by surprise.
“We have received no indication why it happened,” Cranch said. “We have no clue. We have been working on this project for over a year now.” He said the firm has about 100 employees in Baton Rouge.
The company found out about its firing from a news account, Cranch said. It later got a letter from the Division of Administration, he said.
Cranch said neither the federal grand jury nor the Attorney General’s Office has contacted CNSI officials.
A public records request filed by The Advocate on the state Division of Administration produced a copy of a subpoena that confirmed a federal grand jury probe was under way. The contract cancelation came after the development hit the news.
Caldwell said the Attorney General’s Office “has had a quiet but active inquiry into this matter for some time now.”
He said recent attempts to amend the contract to increase its cost “as well as the need for unfettered access to current state Department of Health and Hospitals and Division of Administration employees prompted our office to inform the Division of Administration of our concerns” about the contract award.
Caldwell said he could not discuss the nature of those concerns.
CNSI was awarded the contract in 2011 amid allegations it was “low balling” the costs and could not perform the required work for the money. Greenstein’s prior connection with the firm also raised questions of a potential conflict of interest.
The state gave CNSI the award, although the firm ranked third among vendors in a technical review of proposals.
The contract has been amended once to add about $9 million to its bottom line. A recent attempt by the state Department of Health and Hospitals to expand it by $40 million got shot down by Nichols. She said the price tag on the amendment and the fact that it was outside the scope of work of the original pact made her reject the amendment in favor of a new request for proposals.
Nichols said the rejection of the $40 million addition came before the Attorney General’s Office warned her to beware of attempts to alter the 10-year contract to give the firm more money.
Greenstein has said he stayed out of the award process because of his prior employment with the firm. But documents obtain under a legislative subpoena showed that he advocated for a change in the solicitation for proposals that allowed CNSI to compete.
Caldwell said the DOA has promised its “full cooperation” with the Attorney General’s Office investigation.