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Job Prospects Can Put State Employees in Conflict-of-Interest Bind, Audits Say

More than five years ago, the S.C. General Assembly was warned about potential conflicts of interest involving state employees who leave their jobs and go to work for companies that do business with the state.

And for just as long, the Legislature has failed to do anything about it, other than a couple of bills being introduced.

Now, the Legislature recently has been given the same exact warning – this time after two former state workers in supervisory roles took jobs with a company that, according to a top state official, might have been overpaid by $10 million.

Tony Keck, director of the state’s Medicaid agency – the S.C. Department of Health and Human Services (HHS) – contended that the overpayment was made by HHS to Community Health Solutions, a medical home network company based in St. Petersburg, Fla., HHS spokesman Jeff Stensland said in answering questions from The Nerve.

Keck publicly asserted the $10 million overpayment by HHS to Community Health Solutions in June 2011, five months after he took over as the agency head.

Around that same time, in January 2011, the two former HHS employees left the agency to take positions with Community Health Solutions, according to Stensland.

At the time, Keck was quoted in an Associated Press article saying he had no knowledge of any wrongdoing related to the overpayment by the two former HHS supervisors.

The AP reported Keck stating that being questioned about it “certainly raises an appearance issue.”

Reached on Monday, one of the two previous HHS supervisors, Beverly Hamilton, said she had no direct role in Community Health Solutions obtaining a contract with HHS or in determining how much the company was paid.

“That is correct,” Hamilton, who oversaw the agency’s care management and medical support services bureau, said when asked whether she was not involved in those decisions.

The other former HHS supervisor, Felicity Myers, who was deputy director of medical services at the agency before going to work for Community Health Solutions (CHS), could not be reached Monday afternoon.

The company, disputing the overpayment contention, entered into negotiations with the state to resolve the allegation, according to Stensland. Through that process, the final amount identified by HHS as overpayment was $2.53 million, Stensland said in a follow-up email.

"The amount CHS has agreed to pay as part of the settlement is $1.73 million," he said, adding, "As stated previously, we believe there was no ill-intent involved in the situation with the overpayments."

Meanwhile, the Legislature’s inspector general – the Legislative Audit Council – warned lawmakers as early as 2007 of weaknesses in state law that could create conflicts of interest relating to future employment of state workers by companies with which they interact.

The warning was part of a Legislative Audit Council (LAC) report on the S.C. Department of Health and Environmental Control.

The Audit Council examined DHEC’s water quality permitting and certification processes. The inquiry included the hiring of former DHEC workers as consultants by people seeking water quality permits and certifications from the agency.

“South Carolina law does not adequately restrict former employees of state regulatory agencies from representing clients before those agencies,” the LAC wrote in its report, released in February 2007.

Along with that conclusion, the Audit Council recommended that the Legislature amend state law to address the concern.

But the Legislature failed to do so.

Then, in a report released just a few weeks ago, the LAC reiterated the same cautionary note about the Department of Health and Human Services.

“State law does not consistently address potential conflicts of interest that might arise when employees leave state employment and work for private organizations that do business with the former employer,” the LAC wrote in a June 27 report.

The Audit Council’s review of HHS focused on how and why the Medicaid agency ran up a more than $220 million deficit in fiscal 2011. Among other conclusions, the LAC asserted that the department engaged in unauthorized accounting procedures to mask the red ink.

The Audit Council's report on HHS said both of the former agency supervisors "had authority to approve payments to this company (Community Health Solutions) and other contractors." But the report did not address the alleged $10 million overpayment to the company.

As with its report on DHEC, the Audit Council review of Health and Human Services includes recommendations to remedy possible conflicts of interest in state employees’ dealings with companies they might work for later.

Section 8-13-755 of the S.C. Code of Laws imposes a one-year ban, or “cooling off” period, on former state employees representing clients before their previous employers on matters they “directly and substantially” participated in while working for the state.

The LAC, finding that other states and the federal government have tighter restrictions, said South Carolina should follow their lead.

In both its DHEC and HHS reports, the Audit Council suggested that the Legislature extend the one-year cooling-off period to a lifetime ban on ex-state employees going before their former employers on issues in which they were directly involved.

And for all other former state workers, regardless of what their jobs entailed, the LAC recommended a one-year ban on those individuals being paid to “appear before or communicate with” the agencies for which they worked.

The General Assembly, however, has not acted on the Audit Council’s recommendations.

In the recently ended legislative session, former Senate President Pro Tem Glenn McConnell, R-Charleston and now the lieutenant governor, sponsored a bill to expand the existing one-year ban to all former state employees.

The bill, S. 50, was sent to the committee McConnell chaired, Senate Judiciary, but never made it past the panel.

Also this session, Rep. Boyd Brown, D-Fairfield, sponsored House bill 4673 to extend the current one-year cooling-off period to three years. The extension would continue to apply only to matters in which former state employees were “directly and substantially” involved.

Brown’s bill also died in committee.

In lieu of statutory changes, evidently neither DHEC nor HHS implemented written policies to follow the LAC’s recommended law changes on their own.

DHEC follows the law as it’s written, says the agency’s spokesman, Mark Plowden.

“If there has ever been a question as to the law and our following it, with regard to our discussion, in those instances we have asked for a ruling from the (S.C.) Ethics Commission,” Plowden told The Nerve.

That practice is DHEC’s “unwritten policy,” he said.

Stensland, the HHS spokesman, said in his follow-up email, "We not have any agency-specific policies regarding those who choose to end their employment with S.C. DHHS."

In its report on DHEC, the Audit Council wrote in part:

“DHEC employees who review environmental permit applications are allowed to resign and immediately begin representing clients seeking environmental permits from DHEC. As a result, there is an increased potential for conflicts of interest.”

The LAC cited possibilities such as:

  • A temptation “to show favoritism toward former coworkers who have recently left state government;” and
  • “The increased potential of a job offer from a permit applicant” that could “decrease the objectivity of the application review process.”

In its HHS report the Audit Council said similarly:

  • “Companies with an interest in acquiring or maintaining state contracts could be motivated to offer future employment to public officials with approval and contract management responsibilities;” and
  • “Public employees responsible for contract management or monitoring the performance of those companies with whom the state has a service contract might be less objective in their oversight responsibilities.”

Asked about such potential conflicts of interest, Carlton Washington, director of the South Carolina State Employees Association, told The Nerve, “No, it’s not something that we have discussed and we don’t have a formal policy on it.”

Reach Ward at (803) 254-4411 or eric@thenerve.org.

Accountability Ethics General Assembly Legislation State Agencies

S.C. Legislative Audit Council S.C. Department of Health and Human Services Rep. Boyd Brown Tony Keck S.C. Department of Health and Environmental Control Lt. Gov. Glenn McConnell South Carolina State Employees Association