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Discussions start before IWIF deal; Corporate papers list succession of contacts within state agency; No-bid contract was goal; Company lawyer says meetings with official were not one-on-one


A top official of the company that won a $21 million contract from the state Injured Workers Insurance Fund met repeatedly with the head of that agency in the months before the award and ultimately got just what his firm wanted, a negotiated no-bid contract.

A document obtained by The Sun shows that Joseph B. Harlan, an official of Statutory Benefits Management Corp., met with IWIF President Paul M. Rose on 11 occasions between July 1995 and April 1, 1996, when the agency formally solicited proposals for a managed health care contract.

Those visits included a three-day lobbying effort in Ocean City in September 1995. Harlan also met with members of IWIF's board of directors, the document shows.

The internal SBMC report shows that Harlan, the company's general counsel, and other top SBMC officials had a specific goal: to persuade Rose not to use the competitive bidding process, but to negotiate an exclusive contract with their company.

The SBMC report, called "Joseph B. Harlan -- Hours Devoted Exclusively to IWIF Project," lists the following item in October 1995: "Strategy meetings re persuading Paul Rose to consider negotiating a full service contract with SBMC instead of RFPs," or Requests for Proposals.

Rose told his board in June 1996 he was doing just that. He said he had thrown out all the bids submitted in response to the April 1 solicitation and was negotiating an exclusive contract with SBMC.

Harlan said in an interview that while he didn't specifically remember the report, which details the work he did to win an IWIF contract, "it looks like it's fairly accurate." He said he did recall that company executives had asked him to put together a report on the hours devoted to specific projects.

Harlan said that none of the meetings with Rose were one-on-one and some were at events related to workers' compensation that he and Rose attended. He said that SBMC was opposed to the contract being opened to bidding because as, a matter of policy, the company does not respond to RFPs.

Asked if Rose didn't do just what SBMC wanted, Harlan said, "To a degree."

Rose declined to comment, saying that attorneys for the board had advised him not to comment on matters relating to SBMC.

Question of specifications

The same document lists this assignment in March 1996, the month before the specifications were released: "Assist in design of proposal for RFI [Request for Information] -- 26 hours."

In addition to that entry, two sources with direct knowledge of SBMC's successful efforts to win the contract told The Sun that SBMC officials were actively involved in drafting specifications for the RFI.

Under the state public ethics law, a person who "helps in the drafting of specifications" is barred, with any related parties, from submitting a bid on that same proposal. Though it is exempt from some state statutes, IWIF's enabling law makes it subject to the Public Ethics Law.

Harlan said in an interview that the entry referred to preparations for a response to the RFI, though it had not been formally issued.

"Unequivocally we did not create the RFI," Harlan said. "I am not aware that anyone [from SBMC] submitted suggestions."

He said that SBMC did pose questions to IWIF officials about the forthcoming procurement, but said he assumed other potential bidders did the same.

Meetings continue

After the specifications were issued but before the contract was awarded, Harlan continued to meet with Rose, the report shows. In April, Harlan listed two meetings with Rose lasting a total of four hours. Three more meetings between the pair, totaling six hours, were listed in May.

The contacts with Rose occurred despite a provision in the 22-page RFI that instructed bidders to address any inquiries to the IWIF official, then Vice President Fred Pelosi, who was overseeing the bidding process.

"You may not contact any other IWIF employee for any reason regarding this RFI. Any contact with any other IWIF employee related to this RFI may result in immediate disqualification of your organization," the RFI states.

Harlan also acknowledged meeting with two board members -- one for dinner and the other for lunch -- to inform them his company was submitting a bid.

Bids being accepted now

As The Sun reported late last year, an outside auditing firm concluded that IWIF failed to follow its procurement procedures when it awarded the contract to SBMC in June 1996. Recently, IWIF's board voted to reject a recommendation from Rose and his staff to extend the SBMC contract for another year.

IWIF is soliciting proposals from about 45 companies for a contract to oversee the care provided to thousands of workers injured on the job. IWIF, created by the legislature, provides workers' compensation insurance coverage to thousands of Maryland businesses. Its board is appointed by the governor.

Rose was most recently questioned about the SBMC contract in a Jan. 26 hearing before the House Economic Matters Committee.

In response to a question from Del. Hattie N. Harrison, Rose said that after reviewing the responses to the RFI, he and his staff decided none of the bidders had submitted a proposal that would meet IWIF's needs. Rose told the Baltimore Democrat that the agency decided to negotiate a customized proposal with SBMC.

Rose knew Harlan

Rose acknowledged in an interview late last year that he had known Harlan professionally for several years before SBMC won the IWIF contract. As an attorney, Rose said Harlan was actively involved in workers' compensation issues.

Court records show Harlan was suspended from the practice of law for six months in 1990 by the state Court of Appeals on charges brought by the Attorney Grievance Commission. The court concluded that Harlan and another attorney kept $17,529.62 from the settlement of a workers' compensation settlement that should have gone to their client.

The two returned the money to their client.

Pub Date: 2/05/99

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