Lanier Cansler Gets Lobbying Firm Cash To Award No-Bid Contracts
The NC State Secretary for Health and Human Services has continued to receive checks of about $3,000 a month from his former lobbying firm even as the firm helped land $30 million in No-Bid contracts from the agency.
Lanier Cansler, a former Republican legislator from Asheville, says he stepped away from any role in awarding the contracts to avoid a conflict of interest.
He said that before he returned to government service, he sold his stake in Cansler Fuquay Solutions, the lobbying firm he helped found in 2005. Cansler said the monthly checks are payments and interest for his share of the company, which he sold to his partner.
In a complaint filed with the NC State Ethics Commission this week, Richard Morgan, the former co-speaker of the state House, said that the continued payments violate a state law that forbids government officials from enriching themselves through their duties.
"The money travels in a circle," said Morgan, a Moore County Republican now campaigning for the state Senate. "Delegating to someone you hire and control isn't a recusal - it's a dodge. It's like Mike Easley appointing the trustees of N.C. State University, telling them to hire his wife, then saying they made the decision."
Cansler said that he has done nothing wrong and that Morgan has a beef against him going back more than a decade, when the two served together in the state House.
"I've been completely open about all of this," Cansler said Thursday. "I've complied with every ethical requirement under state law. I'm confident there are no ethical violations."
The issue revolves around two no-bid contracts awarded to the Carolinas Center for Medical Excellence, a firm the state hired to help determine whether Medicaid recipients are qualified to receive in-home nursing care or specialized outpatient therapy.
The programs are expensive, and Cansler has made it a priority to save the state money by making sure services go only to those entitled to them.
Cansler Fuquay Solutions is the lobbyist for CCME.
On state ethics forms filed in February 2009, Cansler disclosed that Cansler Fuquay owes him money from the sale of his share of the business and that the debt would be paid over time. He did not disclose on the form the amount of his regular payments from Cansler Fuquay. He said Thursday that amount totals about $36,000 a year.
A certified public accountant, Cansler said he was not required to disclose the repayment arrangement at all, but did so only out of an "abundance of caution."
The ethics form requires officials to disclose income. The repayment of principal from a debt is not income, Cansler said, only the interest earned on the note is. He said his former firm pays him 6 percent interest on the debt.
Governor Bev Perdue was aware
Chrissy Pearson, a spokeswoman for Gov. Beverly Perdue, said the governor knew about Cansler's arrangement with his former lobbying firm before appointing him.
"The governor was aware of the secretary's prior business arrangement, as was everyone else because he disclosed them freely from day one," Pearson said. "A plan was in place before he even began work to recuse himself as was appropriate. As far as the governor knows, he has done just that."
Cansler's lobbying ties were raised as a potential ethical issue almost from the moment Perdue, a Democrat, announced his appointment in January 2009.
In addition to his relationship with CCME, Cansler also worked for Value Options and Computer Services Corp. , companies that have DHHS contracts valued in the hundreds of millions.
Stacey A. Phipps, an attorney for the Ethics Commission, wrote to Cansler in a Dec. 30, 2009, letter that the payment of the debt presents "the potential for a conflict of interest."
As long as Cansler recused himself from decisions involving current and past clients of his former firm, Phipps advised, he would not violate ethics rules.
Cansler says he did right
Cansler said Thursday that he has recused himself in every case, including the no-bid contracts to CCME. A deputy secretary handled the negotiations, and they were given final approval by the state Department of Administration.
"I had nothing to do with any part of the process," Cansler said. "I didn't even know they had done them until they were pretty much done."
Morgan said that argument doesn't hold up. He is making the issue a focus of his campaign for the state Senate.
Morgan is running for the Moore and Harnett county state Senate seat held by GOP Sen. Harris Blake. Morgan has created a television ad that accuses Cansler of participating in a "pay to play" scheme.
"You are supposed to divest yourself of those types of potential conflicts," Morgan said. "It's an embarrassment to Bev. The timing on it is right in the middle of when she's talking about more transparency and cleaning up government and stopping corruption, and Bev, now's the time to do something about it, with all due respect, governor."
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No-Bid Deals Draw Criticism
NC State officials say the motivation behind a no-bid contract to provide diabetes supplies for people on Medicaid was the need to cut costs in difficult budget times.
But critics - from Government watchdogs to health educators - say North Carolina may have been too quick to embrace such contracts after awarding the diabetes contract to a company whose owners have a troubled business history.
They also question whether the use of such contracts provides the sort of Transparency in government that Gov. Bev Perdue promised.
The NC State Medicaid office has signed Charlotte-based Prodigy Diabetes Care to a two-year contract to provide supplies for about 50,000 people on Medicaid who have diabetes.
Prodigy is run by two brothers, Ramzi Abulhaj and Rick Admani, who have been involved in a string of legal battles involving companies they started in Florida, including a Bankruptcy and Lawsuits Alleging Patent Piracy.
The state signed a contract with the little-known company in October, two months after Prodigy was founded. Until word leaked about the no-bid contract, competitors, retailers and diabetes educators were unaware that state officials had been talking to Prodigy's parent company for months. People with diabetes on the government health insurance program did not know they would need to get new meters to monitor their blood glucose levels.
"We weren't given all the information up front," said Andy Ingram, owner of Home Assist Medical Equipment in Laurinburg.
"We were given information in bits and pieces," said Ingram, a retailer who will distribute the Prodigy equipment to patients. "We're finding things out after they actually occurred."
The Prodigy contract is one of several no-bid deals the state Department of Health and Human Services has signed in the last few months, using special powers granted last summer by the state legislature. Legislators hoped the state agency would save money by eliminating time needed to request and evaluate bids.
Bob Phillips, Executive Director of Common Cause North Carolina, said no-bid contracting practices should be reviewed and made consistent, and the reasons for eliminating competition made narrower and more clearly defined.
"I think it sends a bad signal to the public at a time when there is already a lot of suspicion about how open things are in state government," Phillips said. "I think the governor has made great strides. There still remain questions, and this just adds to that."
DHHS Secretary Lanier Cansler has said the department is pushed to squeeze savings out of the fast-growing Medicaid program. The contract with Prodigy is estimated to save the state $4.4million over two years.
"This contract is short term and allows savings of millions of dollars," Chrissy Pearson, a spokeswoman for Perdue, said in a written statement. "The secretary has confirmed with the governor that his department is monitoring closely the quality and accessibility of this product while protecting the quality of patient care."
Senate Minority Leader Phil Berger, an Eden Republican, said no-bid contracts should be exceptions and that agencies have an obligation in those cases to make sure the state is getting quality services at competitive prices.
In circumstances where agencies want to move quickly, it may be a good idea to seek informal bids from several companies to find the best deal, Berger said.
"We're talking about taxpayers' dollars," he said. "The obligation is to be very careful with that money."
Sen. William Purcell, a Laurinburg Democrat who helps write the budget for DHHS, has fielded complaints about Prodigy and has heard that the state might face a lawsuit from those who don't like the no-bid contract.
Legislators told DHHS to wring out savings in a time when more people are signing up for Medicaid but the state budget is shrinking.
"It's hard to tell them to save money, then say we don't like what you're doing," Purcell said.
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North Carolina No-Bid DHHS Contracts Questioned
NC Health Care Advocates are questioning contracts the NC State Department of Health and Human Services awarded in recent months without competitive bidding.
Lawmakers allowed the no-bid contracts so DHHS could save time and money during a difficult budget year. Department officials maintain that the contracts are with companies with proven track records and can provide better value.
Still, some people question the fairness of the deals and the potential for conflicts of interest.
"No-bid contracts are bad government," said Adam Searing, director of the North Carolina Health Access Coalition, a group that advocates health care reform to benefit uninsured people.
Searing notes that DHHS Secretary Lanier Cansler was a lobbyist before Gov. Beverly Perdue picked him in January to run the state's largest agency. Three of the five no-bid contracts awarded in recent months have gone to clients of his former lobbying firm: two to the Carolinas Center for Medical Excellence and one to SAS Institute.
CCME's contracts, valued at $29 million total, are to review personal care services and outpatient therapies for determination of clinical necessity. DHHS officials estimate they will save the state at least $24 million.
SAS has an $800,000 subcontract on a $229 million Medicaid information systems contract that was awarded through a competitive bidding process in 2008.
DHHS spokesman Brad Deen said Cansler "has taken deliberate actions to abstain himself from dealings and negotiations involving former clients." He cited a June 9 memo Cansler issued to Deputy Secretary Allen Feezor in which Feezor and other officials were instructed to handle any contract decisions involving Cansler's former clients.
"I don't think, from what I've seen, anything untoward is going on from (Cansler's) perspective, but it gives the appearance of favoritism. That's the problem with these no-bid contracts," Searing said.
Another of the no-bid contracts went to Charlotte-based Prodigy Diabetes Care LLC, which makes diabetes testing equipment. Officials estimate the two-year, $27 million contract will save taxpayers $4.5 million.
Raleigh pharmacist Mike James said he never heard of Prodigy before its blood glucose meters started showing up on his shelves in recent months. Now, the company's monitoring products are the only ones that his customers on Medicaid can buy.
"It is concerning to me. We haven't seen any history on this product," James said.
Federal records show the owners of Prodigy previously ran a company called Vitalcare that filed for bankruptcy after getting sued for patent infringement. The FDA also issued safety warnings for Vitalcare's manufacturing plant in China.
Charlotte used incentives to convince Prodigy's parent company, Diagnostic Devices Inc., to move its headquarters and manufacturing to the Queen City. With the new state contract and tax incentives, the company has promised to add space and jobs.
James said the lack of a track history for Prodigy raises questions for him.
"Is the product going to be in the pharmacies as people need them because of the toughness in supply?" he said. "Is the product going to work efficiently?"
The fifth no-bid contract went to MedSolutions to reduce redundancies and inefficiencies in radiological imaging. The two-year, $230 million deal is expected to save the state $77 million, DHHS officials said.
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Sources: MSNBC, WRAL, McClatchy Newspapers, NC DHHS, Youtube, Google Maps
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