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Senate bill would block state contracts if bidders' lobbyists are convicted of crimes

Lexington Herald-Leader logo Lexington Herald-Leader 1/10/2022 John Cheves, Lexington Herald-Leader

Jan. 10—A Senate bill would block state contracts from going to companies for five years after their lobbyists are convicted of crimes related to helping those companies win those contracts.

If the language in Senate Bill 46 sounds awfully specific, that's because the sponsor has in mind a particular contract and a particular lobbyist and particular crimes.

Sen. Stephen Meredith, R-Leitchfield, said he objects to a $51.7 million, two-year contract renewal awarded by the Kentucky Personnel Cabinet in 2020 to Cannon Cochran Management Services Inc. of Danville, Ill.

For more than 15 years, CCMSI has been paid to administer the state's self-insured workers' compensation insurance program.

But in 2019, the company agreed to pay a $50,000 fine to the Kentucky Executive Branch Ethics Commission to settle 14 counts of violating the state's ethics code.

CCMSI got in trouble with the Ethics Commission after one of its officers, Executive Vice President Jerry Armatis, testified in 2018 at the federal bribery trial of Democratic lobbyist James Sullivan. CCMSI paid Sullivan on "a success basis," based on whether he helped CCMSI win the contracts it wanted in Frankfort, Armatis testified.

Paying lobbyists on a success basis is a violation of Kentucky ethics law. It has been since shortly after Operation BOPTROT, an FBI investigation in 1992 that exposed 15 current or former state legislators who sold their votes.

As a Frankfort lobbyist, Sullivan allegedly paid thousands of dollars to secure favors from Tim Longmeyer, a longtime Democratic Party activist who served as former Gov. Steve Beshear's personnel secretary and, later, as then-Attorney General Andy Beshear's top deputy before Andy Beshear became governor.

Following bribery prosecutions in U.S. District Court in Lexington, Sullivan and Longmeyer both were sent to prison. However, the jury acquitted Sullivan on the specific bribery charges related to the CCMSI contract. Sullivan later did pay a $15,000 state ethics fine, in part because of his CCMSI work.

Given this background, Meredith said he was stunned in 2020 when the Personnel Cabinet announced that it wanted to renew CCMSI's contract, especially because at least one of two competing bids was cheaper.

Between the ethics fines and its former lobbyist going to prison for bribing a state official, the time has come for the Personnel Cabinet to reconsider using CCMSI, Meredith said.

"I think this is about as egregious as it could get," said Meredith, co-chairman of the legislature's Government Contract Review Committee, in a phone interview.

In a written statement provided Monday by its attorney, CCMSI said Sullivan's 2018 conviction was for a bribery count unrelated to his lobbying work for the company. CCMSI's ethics fine was for "unintentional" conduct due to "a good-faith but misplaced reliance on the advice and counsel of its lobbying firm," the company added.

At a Government Contract Review Committee hearing in August 2020, Personnel Cabinet officials defended the $51.7 million contract award. They said CCMSI submitted the best bid based on its long history with the state and superior technical knowledge of the workers comp contract, even though it was not the cheapest offer.

The "inappropriate" conduct that led to the ethics fine happened more than five years earlier, and so, under the state's procurement law, it was not considered during the bid process, said Gordon Rowe, a cabinet attorney.

"We had to find the company that was best qualified to serve as third-party administrator," Rowe told lawmakers on the committee.

Meredith bristled in his response to Rowe.

"I think it's an insult to the taxpayers of this state," Meredith told Rowe. "I can't believe given the history of this company and the surroundings and the people that are involved in it ... that the current administration would not want to distance itself as far as it possibly can from this company."

Last week, Meredith said he filed his Senate bill in response to the CCMSI contract. Under Meredith's bill, no state contract could be awarded or renewed for a company if the company had used a lobbyist to win an earlier version of the contract and the lobbyist was convicted of a related crime within the last five years.

The bill would apply retroactively to state contracts entered into since Jan. 1, 2017.

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