Rendell’s Former Firm Went Beyond ‘No-Bid’ Contracts

Rendell’s Former Firm Went Beyond ‘No-Bid’ Contracts By Chris Freind, The Bulletin Published: Friday, January 09, 2009 Gov. Ed Rendell,D-Pa., has recently come under fire as more information emerges regarding the frequency and high-dollar amounts of no-bid state contracts that have been distributed to his political donors and friends. The details of such contracts have been previously revealed by The Bulletin.

Many eyebrows have been raised on these lucrative no-bid contracts, especially since the records from past administrations were “lost” under Mr. Rendell’s tenure — ostensibly the only way to compare the frequency, amounts and recipients of these types of contracts.

The state Senate passed a reform bill 50-0 last session amending how contracts are awarded, but it was stifled in the Democratic-controlled House. The legislation, sponsored by Republican Majority Whip Jane Orie, R-40th of Allegheny, will be re-introduced early this term.

While conflicts of interest abound, the awarding of no-bid contracts to political donors is not illegal, so long as no pay to play arrangement exists.

But in 2007, the ethical line was taken to a whole new level when Ballard performed $773,000 of state legal work without a state contract, leaving many questions unanswered.

On March 1 of that year, the firm began work on the proposal to privatize the Pennsylvania Turnpike. Over the next 83 days, Ballard utilized 55 attorneys (more than 10 percent of its legal staff), and billed the state for 2,300 hours, which equates to an average of 27.38 hours per 24 hour day. The hourly rates varied based on seniority, with firm Chairman Arthur Makadon billing $637.50/hour, and partners Ken Jarin and Adrian King Jr. billing $531.25/hour and $403.75/hour, respectively.

Mr. Makadon, a close friend to the governor, has contributed $87,500 to his campaigns. Mr. Jarin is listed as the “relationship partner” on the $773,000 project. He is a longtime confidante and fundraiser to Mr. Rendell, having contributed $90,000 to the governor’s coffers. He also serves as treasurer to the Democratic Governor’s Association, an entity that has

contributed over $1.5 million to Rendell. Mr. Jarin is married to Robin Wiessmann, who had served as state treasurer until this week. Her office approved and issued payments for the Ballard invoices. Adrian King, Jr., served as the governor’s deputy Chief of Staff and in a Cabinet position prior to rejoining Ballard as a partner.

According to the Ballard press release at the time of Mr. King’s return, Mr. Makadon was quoted as saying, “Adrian was a star here at Ballard and has been a star for the governor. Upon his return, we expect him to play a large role in the future of the firm representing important clients and managing key client relationships.”

The Ballard firm, a Limited Liability Partnership (LLP), contributed $481,000 to Gov. Rendell’s campaigns. The Philadelphia Future Political Action Committee (PAC), registered at the Ballard offices in Philadelphia and whose treasurer is David Cohen, former Ballard chairman and former chief of staff to then-Mayor Rendell, contributed $470,000. Mr. Cohen donated $80,000, and his wife, Rhonda, contributed $156,000 to the Rendell campaign. Ballard associates contributed nearly a half million more dollars to Mr. Rendell. There is no limit to how much an individual or an LLP can contribute to state candidates. The majority of law firms are LLPs.

Additionally, on Pennsylvania Department of State campaign filings, the address of Gov. Rendell’s campaign treasurer is the 51st Floor of 1735 Market Street in Philadelphia, the same floor entirely occupied by Ballard Spahr, his former law firm.

Normally, a contract must be negotiated and executed before any work for the commonwealth can be performed. However, because Ballard jumped headlong into the project without a contract, it had no way of receiving compensation for its work. Consequently, it had to sign a “Compromise, Settlement and Release” agreement initiated by the state Department of Transportation to receive payment retroactively.

The document specifies that authorization to pay Ballard in this manner was due to certain “circumstances,” among them that on March 1 the firm “was directed by the Office of General Counsel to provide professional services as special counsel to the Commonwealth of Pennsylvania in connection with the Pennsylvania Transportation Funding initiative.”

The document continues, “due to the extreme urgency of the work required, work began immediately at the Office of General Counsel’s direction prior to having a fully executed contract document in place.”

The settlement also states, “the commonwealth cannot otherwise pay the law firm for services performed during the period of March 1, 2007 and May 23, 2007 because no agreement was in place prior to performances of such services.”

A no-bid contract was executed on May 24, 2007 for future services on the privatization initiative. To date, Ballard has billed the state over $2 million in legal fees relating to the project.

While state law allows for work of an urgent nature to be performed without a contract, questions have been raised as to how the turnpike privatization initiative qualifies an “urgent” matter. The turnpike, the nation’s first, was in no danger of disappearing or being unable to continue operations.

Additionally, the legislative process is typically slow, preventing political issues from moving with any sense of speed and urgency in Harrisburg. Since the governor’s plan had been met with resistance in the legislature and had little chance of passage, why Ballard rushed into the project with no contract remains a question on many political observers’ minds.

On numerous occasions, Mr. Rendell has been asked if he has played a role in the selection of no-bid contract recipients, especially when political donors are involved. The answer typically given is that the governor has no involvement in the process, and that firms are chosen based on their particular expertise, with no consideration being given to large dollar political donors.

However, legislators, political experts and the media have been increasingly questioning the close relationship of the governor to these no-bid contract recipients, especially Ballard and its partners. In particular, questions have been raised regarding the role of John Estey, Mr. Rendell’s former chief of staff and a current partner at Ballard.

While he was not involved in the $773,000 project, Mr. Estey still maintains a position of enormous influence with Rendell. He is chairman of the Philadelphia Regional Port Authority, a commonwealth agency that chose Ballard Spahr as its outside counsel last June.

In addition, Mr. Estey still chairs board meetings of the Delaware River Port Authority (DRPA), of which Gov. Rendell is the self-appointed chairman. Ballard is the largest recipient of DRPA legal fees, receiving nearly $3 million since Gov. Rendell’s election in 2002. As a point of comparison, Ballard had received only $25,000 in the three years preceding Gov. Rendell’s election. As a board member, Mr. Estey receives and votes to approve DRPA legal bills, including those going to his own firm.

Many questions have also been raised as to why the state is utilizing outside counsel to such an extent, especially on the turnpike project, given that that the Pennsylvania Department of Transportation (PennDot) has a large in-house legal department. Ballard’s 55 attorneys working on the project are larger than the entire roster at many firms, which some believe is akin to the state renting a high-value law form for several months. Calls to PennDot revealed that there are 49 attorneys on staff. The Pennsylvania Turnpike Commission currently has five attorneys serving as in-house counsel, and had several more at the time of Ballard’s work.

The public’s cynicism and mistrust of government has become exacerbated by the numerous scandals and pay-to-play investigations on the state and national level. The debate surrounding whether there is a need to reform how no-bid and “urgent” non-contracts are awarded will intensify as the Senate reform bill is reintroduced.

The Bulletin will continue to seek responses from the governor and legislative leaders to questions this investigative report raises.

Mr. Estey still chairs board meetings of the Delaware River Port Authority (DRPA), of which Gov. Rendell is the self-appointed chairman.

According to the IRS, many government "authorities" are little more than fraud machines that help connected insiders swill at the public trough. The IRS lists some of the key ways agencies "cook the books":

— misreporting executive pay

— exorbitant legal fees

— phantom "consultant" fees

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— inflated building estimates

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Some recorded instances include self-serving financial transactions centering on loans, sales, exchange or leasing of government property to politicians, cronies and other insiders.

The U.S. Department of Justice has prosecuted government insiders for engaging in multiple conspiracies, including filing false official documents, accounting fraud, tax evasion (stolen money is taxable), bank fraud, colluding with entry-level employees by directing them to hide evidence and placing phantom employees on the payroll.

Authorities that defraud employing the US mails, electronics and computers could be grounds for additional charges.

L/E needs to determine whether Authority monies were illegally converted, and laundered, into untraceable casino chips. Casino comp programs should be examined closely. Gamblers enroll in comp programs to receive free rooms, meals and other costly emoluments. Casino comp programs also record every wager and every win, including winnings on which taxes may not have been paid. Casinos do not like to be used in illegal activities b/c it jeopardizes their gambling licenses. Casinos would gladly assist investigators in rooting out Authority financial fraud. L/E should be encouraged to use a good computer data mining program to match-up Authority principles, employees and political insiders swilling at the public payroll with casino lists and in other areas of potential fraud.

======================================

Government insiders may also have misled investors if the Authority raised funds raised via voter referendum, through the issuance of tax-free government bonds.

The FBI, DOJ, SEC and IRS consider misuse of tax-exempt bond revenue to be major crimes.

To report misuse of tax-exempt bond revenue EMAIL enforcement@SEC.gov

To report tax fraud TELE IRS TOLL-FREE 1-800-829-0433----you may remain anonymous.

Fiduciary negligence; signing off on falsified documents about the use of tax-exempt bond revenue is reported here: EMAIL askDOJ@usdoj.gov

FBI TIP PAGE http://tips.fbi.gov/ (you may remain anonymous)

FOR YOUR REFERENCE According to the IRS, many "Government Authorities" are little more than government fraud machines that facilitate swilling at the government trough for connected insiders. The IRS reports some of the key ways "authorities" cook the books: (a) misreporting executive pay, (b) exorbitant legal fees, (c) phantom "consultant" fees, (d) phony administration costs, (e) inflated building estimates, (f) misrepresenting Authority upkeep costs.

Recorded instances of government fraud include self-serving financial transactions centering on (1) loans, (2) sales, (3) exchange, and/or, (4) leasing of government property to politicians, cronies, and other insiders. According to the US Dept of Justice, government insiders have been prosecuted for engaging in multiple conspiracies including: (A) filing false official documents: (B) accounting fraud, (C) tax evasion (stolen money is taxable), (D) bank fraud---filing false bank applications to take equity positions in companies doing business with the authority. (E) colluding with entry-level employees by directing employees to hide evidence needed by L/E, (F) placing phantom employees on the payroll. If any of these conspiracies employed the US mails, electronics, and computers to defraud, that would be grounds for additional charges.

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