Procurement controversy -- Incorrect Corrections in Mississippi

State awards billions in no-bid contracts

State government spends billions of taxpayers' dollars — nearly $6.5 billion in the last four years — through "no-bid" contracts, with little oversight or transparency. It's a system ripe for overspending, malfeasance and cronyism. And it's one that apparently allowed corruption to fester for years, with the head of the state prisons system allegedly taking $2 million in bribes to hand out hundreds of millions of dollars in no-bid contracts. A Clarion-Ledger analysis of state records in the wake of that scandal discovered not only a lack of accurate data on no-bid agreements but numerous contracts with little or no explanation.

These include contracts given to sole-source vendors, whose products and services state agency officials claim no one else can provide, contracts with those whose professions are exempt from bidding and "emergency" contracts. It also includes contracts with dollar amounts that fall below generous state thresholds for bidding.

Some state officials concede Mississippi government has a contracting system with thresholds for bidding that are too high and with too many exemptions. They also say there appears to be abuse of provisions for emergency contracts and overall lax oversight, provided primarily by a board of the same state agency leaders who are inking the contracts.

In general, state agency leaders within liberal limits can hire whomever they want for whatever price they decide. Need to hire a motivational speaker? No bidding is required as long as it's under $100,000. Need an accountant or engineer? No bidding or approval needed because their services are exempt. Need a media consultant? No bidding is required if you declare it an emergency.

"At this point, I do not have proof that there is corruption (beyond the prisons scandal), but I think the Legislature in the past that set up this review board and system made it awfully easy for corruption to exist," said House Accountability, Transparency and Efficiency chairman Jerry Turner, who's leading the charge for reform.

MDOC Scandal Highlights Privatization Problems

Facing a federal magistrate judge in Jackson, Chris Epps and Cecil McCrory made a curious pair. Despite receiving his appointment to one of the most visible posts in state government from Democratic Gov. Ronnie Musgrove, Epps was also able to survive Mississippi's hyper-partisan government, later serving under conservative Republicans Haley Barbour and Phil Bryant. McCrory, Epps' alleged co-conspirator, seemed to have been a key cog in that system. A former legislator who held a number of elected political positions as a Republican, McCrory knew all the ins and outs of state government. During his time in the Legislature, he served on the Joint Committee on Performance Evaluation and Expenditure Review (PEER), the very agency that would later raise questions about McCrory's business dealings with the state. At their arraignment before U.S. Magistrate Judge Keith Ball, both men pleaded not guilty on all counts.

The alleged activities outlined in the indictment began seven years ago, in November 2007, when Epps signed a no-bid contract with G.T. Enterprises for commissary services at state prisons. That year, McCrory paid Epps $3,000 to $4,000 on about 15 occasions in exchange for the contract that McCrory's company's had with MDOC. That contract was later transferred to St. Louis, Mo.-based Keefe Commissary Network LLC., which resulted in a large profit for McCrory, the indictment states.

Despite PEER's criticism of Epps' no-bid contract for commissary services in 2011, policymakers failed then to take action on the report. Rick Ward, a former official with the Mississippi Gaming Commission, called PEER, which performs thorough investigations but lacks any enforcement power, a paper tiger. "The problems is you've got members of the Legislature on the commission—that's like the fox guarding the henhouse," Ward said. "It's a waste of our taxpayer dollars."

Prison review group examining no-bid contracts

Republican Gov. Phil Bryant appointed a bipartisan, five-member task force to examine the Mississippi Department of Corrections' spending practices after former Corrections Commissioner Christopher Epps and businessman Cecil McCrory were indicted last month on federal corruption charges.

"What we're going to do is try to review all the contracts that have been involved in this indictment and also all the other contracts for the Department of Corrections to see if we can change some of the practices, maybe close some of the loopholes that caused this big mess," said one of the members, former Attorney General Mike Moore. "As you know, taxpayer money must be spent to serve the needs of the public, not to perpetuate ineffective contracts or enrich government officials," Bryant wrote.

Lawyers: Epps said prison companies 'spread' money

During 2011 negotiations, then-Corrections Commissioner Chris Epps said he couldn't get rid of Mississippi's private companies running prisons "because of all the money they spread around Jackson," attorneys told The Clarion-Ledger. His remarks took place during the time when federal prosecutors say Epps was receiving more than $700,000 in bribes, including a beachfront condo.

In early 2011, Margaret Winter, associate director of the ACLU, and Sheila Bedi, then-deputy legal director for the Southern Poverty Law Center, had a meeting with Epps, which they say was also attended by Department of Corrections officials, attorneys and consultants. Bedi said Epps gave her the impression he desired to hold the private prisons accountable, but his hands were tied. She said she thought, "This is a progressive reformer beating his head against the wall." Winter said she asked Epps point blank, "Why don't you just get rid of the private contractors? We all know they're part of the problem, not part of the solution." Bedi said Epps went on to say that it was impossible to get rid of the private contractors "because of all the money they throw around Jackson."
Christopher Epps, Former Chief of Prisons in Mississippi, Is Arraigned The indictment says that Mr. McCrory operated several companies that had contracts with the state, including for prison administration, commissary services and evaluating Medicaid eligibility across the state prison system. Mr. Epps, 53, had been Mississippi’s longest-serving corrections commissioner until he resigned Wednesday. He had been president of both the Association of State Correctional Administrators and the American Correctional Association until his resignation. Mr. McCrory resigned as president of the Rankin County School Board on Wednesday within hours of Mr. Epps’s resignation.

In addition to owning companies with state prison contracts, Mr. McCrory was a paid consultant to firms seeking such deals in Mississippi, including the Management & Training Corporation, a private company based in Utah that operates the East Mississippi Correctional Facility in Lauderdale County, Miss. According to the indictment, around the time that Mr. Epps signed a contract with the Management & Training Corporation to run the prison in August 2012, Mr. McCrory — the company’s consultant — wired $34,000 to Wells Fargo Home Mortgage as a payment on a condominium Mr. Epps had recently bought in Biloxi, Miss. Mr. Epps, according to the indictment, had suggested that Management & Training Corporation hire Mr. McCrory as a consultant, and had also negotiated Mr. McCrory’s fee. “I got us $12,000 per month,” Mr. Epps told Mr. McCrory, according to the indictment. Prosecutors say the two men split the money after calculating how much tax Mr. McCrory would have to pay on the fee. Mr. Epps eventually signed a number of contracts with the management corporation to provide various prison services, including a no-bid contract in October 2012 — just weeks after Mr. McCrory paid another $14,000 on Mr. Epps’s condominium, the indictment said.

Mr. McCrory’s initial payment to Mr. Epps, according to prosecutors, was in 2007, after Mr. Epps had awarded a no-bid contract to G. T. Enterprises, a firm owned by Mr. McCrory, to supply commissary services to the prison system. Mr. McCrory went on to pay Mr. Epps $3,000 to $4,000 15 different times, and Mr. McCrory later sold the commissary business at a substantial profit, prosecutors said.

State contracts: Where should Miss. look for reform?

Past legislation aimed at reform — which was killed — is being revived and has a much better chance at passage. The state also can look to others that have reformed no-bid spending and contracting, which can be a breeding ground for corruption and overspending. "There are some opportunities here for changes in the way the state does business," said former Attorney General Mike Moore, a member of the task force. He and others on the task force said they will look for "best practices" in other states.

One of those might be in Washington state. State law there requires agencies requesting a sole-source contract to make that request public for at least 10 days prior to the contract start date. The Washington Department of Enterprise Services publishes the proposed no-bid contracts on a website. Washington, D.C., has a similar 10-day public posting of intent to award a no-bid contract.

In Iowa, such requests for sole-source contracts also are made public, and the agency must fill out a lengthy questionnaire explaining why a particular vendor is the only one who can provide a good or service and detailing what research went into this finding. The request is posted for at least five business days on Iowa's bid opportunities website, which would allow other vendors to see the request and potentially make bids.

In Pennsylvania, Gov.-elect Tom Wolf made enacting a ban on no-bid contracts with private law firms part of his campaign platform. He vows to issue an executive order banning what he called "crony contracts" with law firms, placing a cap on fees paid to lawyers and making the process transparent online.

Website not designed to track no-bid contracts

The scope and scale of the state's multibillion-dollar business with preferred vendors remains shrouded in darkness despite a 2008 law demanding transparency in government spending.

Mississippi agencies awarded nearly $6.5 billion in no-bid contracts to at least 1,807 individuals and businesses in the past four years alone, according to a Clarion-Ledger investigation. But the public would never know this by viewing the state Transparency website, which the law requires to house agency contract information.

Built and maintained on a shoestring budget by the state Department of Finance and Administration, the website contains countless contract inaccuracies caused by software glitches and human error, making it nearly impossible to know the true number and value of no-bid contracts. It's also impossible to view a list of just no-bid contracts — accurate or not — because the website doesn't track or store them that way. Neither does the Department of Finance and Administration, which, when asked for a list of such contracts, pulled it directly from the website.

But the biggest problem is that no one anticipated the need to examine no-bid contracts on a statewide scale. "The concept of no-bid is an entirely new concept to me that came out of the Epps scandal," said DFA Executive Director Kevin Upchurch, referring to the recent federal indictment of former state Corrections Commissioner Chris Epps.

It took more than two weeks of exhaustive analysis and fact checking by The Clarion-Ledger and several records revisions by the DFA — which provided assistance in the effort — to produce a viably accurate list of no-bid state contracts. Sortable by vendor, agency, contract date and dollar value, the list shows not only who gets the most cash without having to compete for it but also which agencies ink the most agreements and why. But the list is stagnant. Contracts awarded after its completion won't appear unless someone continues to track them.

It's the basis for a series of questions about the way state government operates, and perhaps chief among them are these:

•Is this the first comprehensive list of no-bid state contracts ever created in Mississippi?

•Has no one in state government tracked this before — not just posted data on a website but really tracked and analyzed it?

•And if not, should someone start, especially in light of the Department of Corrections scandal?