Burnt Orange Report

Scandal in State Agencies

By Andrew Dobbs

Hey everyone, sorry for the lack of posting lately. My personal computer is on the fritz and I try not to post too much from work, but this story is a big one that people need to hear about, so I'm going to put it out there.

On Sunday and Monday of this week the Houston Chronicle's R.G. Ratcliffe put out two stories detailing widespread cronyism and corruption in at least two state agencies- the Department of Health and Human Services and the Texas Workforce Commission.

From Sunday's article:

When Deputy Health and Human Services Commissioner Gregg Phillips and private consultant Chris Britton helped write the $1 billion legislation to privatize Texas' human services system, they apparently did so partly with an eye on profit — their own.

A Houston Chronicle investigation into the activities of Britton, Phillips and Texas Workforce Commission Executive Director Larry Temple found weaknesses in Texas ethics laws concerning conflicts of interests and cronyism. Their relationships and how they benefited from state business illustrate how Texas law has overlooked the power of lower-level bureaucrats who are often charged with crafting laws.

Current laws force state agency chiefs to disclose their financial interests but do not apply to their subordinates.

And a private consultant such as Britton can help write a state law, then try to profit from it without being subject to either the state's lobby-registration laws or revolving-door prohibitions.

That's just a taste, read the whole thing. On Monday:

During Larry Temple's tenure at the Texas Workforce Commission, the state unemployment agency has become the conduit for more than $4.1 million in state and federal jobs, grants and contracts for friends of his from Mississippi.

Temple began facilitating the flow of government money to one friend's company just months after they worked together on a project in Mississippi.

He directed another Texas job-training grant to a Mississippi nonprofit corporation run by a friend of his mother's.

And his agency hired the ex-wife of the mayor of Vicksburg, Miss., after her divorce.

Temple, the commission's executive director, said he played a role in those situations.

Oh, by the way, that ex-wife of the mayor of Vicksburg also happens to be the sister-in-law of Gregg Phillips- the other main culprit in these crimes.

The articles can be rather complicated and hard to follow everything, so I diagrammed it out the other day and culled the important information. To make it easier, I can give that info, but please read the articles as they are very well written and give a much deeper understanding of the issue.

The story starts in the mid-90s when Gregg Phillips was named the top dog for welfare reform in Mississippi under Gov. Kirk Fordice, a Republican. His deputy and long-time friend was Larry Temple. In 1995 the Mississippi legislature felt the need to investigate Phillips for a series of questionable activities, first and foremost among them being an $875,000 contract given to a company shortly before Phillips left government to work for that company. The investigation concluded that "Mr. Phillips' actions create the appearance of impropriety, facilitating an erosion of the public trust." Phillips went into the private sector and in 1997 Larry Temple went to Texas to begin working for the Texas Workforce Commission.

In 2000 Phillips started a company called Enterject, Inc. which made its money lobbying for companies seeking Health and Human Services contracts and consulting them on how to win these contracts. His business partner on this deal was a young lady named Paige Harkins. Harkins is the daughter of one Gary Harkins of Mississippi- a close friend of Larry Temple's. Over the last 3 years Temple distributed $2.7 million in job training contracts to clients of Enterject, as well as $670,000 in immigrant labor certificates given to the company when Phillips (who by then was the Deputy Commissioner of Health and Human Services) and former Deputy Chief of Staff to Rick Perry Chris Britton merged his company with Enterject to get a part of this action.

The hiring of Phillips here in Texas occurred in November of 2001, and nobody who would have been a part of his hiring can remember who hired him and each is passing the buck. His personnel file is missing key documents like letters of reccomendation. Its not surprising that they would want to avoid admitting to hiring a guy essentially censured by the Mississippi legislature. Phillips was supposed to cut off all ties to Enterject, which he claims that he did. But Phillips' wife was listed as the #2 person at Enterject (its CFO), their website was registered under the name GHT Development Inc.- which has Gregg Phillips listed as their CEO, and anonymous sources claim that the new head of Enterject- Paige Harkins- could not make any decisions without checking them with Phillips. This would explain the 90 hours of calls he logged to Enterject on his state cell phone and desk phone in a 16 month period. So Phillips was essentially secretly and illegally running a lobbying firm while working as a top official in state government.

Two of his clients- Texas Home Health Care of America and D&S Residential Services Inc.- were awarded $167 million in contracts by Phillips. His former employer DeLoitte Inc. was given a $1.7 million contract and Accenture, a client of Harkins when she started a Texas lobbying firm (while still being essentially employed by Phillips) won a $1.2 million contract. She started this lobbying firm on the express suggestion of Phillips, who told her he could help her set up contracts and set up meetings between her clients and himself. As if all of this weren't enough, he went out of his way to prequalify a company that he was a partner in- Scribe Inc. of Illinois for contracts under HB 2292, the Health and Human Services privatization bill. So literally hundreds of millions of dollars were spent on friends and business associates of Phillips- some of whom were surely kicking back quite a bit of money to the DCHHS.

Temple on the other hand gave an $800,000 contract to an old family friend for job training contracts when the friend had no experience in the business. He gave Phillips' sister-in-law a $55,000 a year job and in between the $670,000 immigrant labor certificates, the $2.7 million in job training grants and $800,000 to his friend in Mississippi, almost $4.2 million was questionably appropriated.

So let's do the final math here. Phillips gave out $167 million to Texas Home Health Care Services of Americ and D&S Services Inc. (two of his clients), $1.7 million to DeLoitte Inc. (former employer) and $1.2 million to Accenture (client of his business partner and subordinate). Temple gave out $4.2 million as we just said. Add it all up and that is $174.1 million given out under highly questionable or outright illegal circumstances. Even if only 5% of that money made it back into Phillips' and Temple's pockets (and that is certainly an underestimate), that is $8.7 million of taxpayer money in the pockets of two "public servants."

This scandal reaches to the top as well. In May of this year Temple's secretary blew the whistle on him, claiming he was giving out state contracts to personal friends. Top state officials appointed an auditor- Jose Garcia- who found absolutely no wrongdoing either ethically or legally. But come only a few months later and little ol' R.G. Ratcliffe, who probably had less access to the information, found $4.2 million worth of shady deals. The term for this is a coverup.

It's like Texas Democratic Party Chairman Charles Soechting said about who is responsible for Phillips and Temple's hiring and the blind eye turned towards their crimes, "One thing is for sure- it was someone near the top and it was a Republican." How far this one reaches will be interesting to watch. One close personal associate of Rick Perry was involved- Chris Britton became a subcontractor with Enterject in order to win a $670,000 contract given out by Temple to his old friend- and state reps and others are keeping their mouth shut. Ratcliffe reported on Tuesday that the House General Investigating Committee will open an investigation of the scandals during the session. While the committee is chaired (of course) by a Republican, he was prompted to open the investigation by Democrats and seems to be serious about the effort. Keep your eyes open for this one.

I just want to hear a legislator say the words "What did the governor know, and when did he know it?" once this session. If Ratcliffe's work pans out, we might be hearing a lot more than that.