Indiana’s legal bill in its lawsuit with IBM Corp. over a canceled welfare outsourcing contract could grow by more than half its original value, topping $8 million by the end of next June, state documents reveal.
Critics of the administration of Republican Gov. Mitch Daniels criticized the growing costs Tuesday while his press secretary and a spokesman for welfare administrators defended them.
The Family and Social Services Administration will pay as pay as much as $8.05 million through June 30 to the well-connected Indianapolis law firm of Barnes & Thornburg to represent it in the lawsuit with IBM under an amended contract approved Aug. 30 by the attorney general’s office. The original contract approved a year ago paid the firm $5.25 million over the same length of time
The firm’s attorneys on the case include longtime Republican activist Peter Rusthoven and Brian Burdick, the brother of Daniels’ deputy chief of staff, Betsy Burdick.
Indiana House Minority Leader Patrick Bauer, D-South Bend, called the higher costs “wasted money, good money after bad.”
“You wonder how many teachers got dismissed because of that $8 million, how many children didn’t get health care because of that $8 million,” Bauer said, referring to budget cuts the Daniels administration has made.
FSSA sued IBM to recover more than $400 million it paid before Daniels canceled the 10-year, $1.37 billion contract in 2009 amid complaints about the automated welfare system IBM had installed. The Armonk, N.Y.-based technology giant countersued for about $100 million for costs including computer equipment it claims the state has held onto.
Indiana Senate Minority Leader Vi Simpson, D-Bloomington, noted the contract amendment runs through only the current state fiscal year and that the costs could grow ever further at a time when FSSA is cutting services.
“When we’re spending $8 million or $10 million or $15 million or whatever this lawsuit will end up costing us … it seems to me that this if frivolous,” Simpson said.
The contract’s original terms called for FSSA to pay Barnes & Thornburg $5.25 million over the course of three state fiscal years ending June 30, 2012, but the amended terms show the agency paying $5.25 million through June 30, 2011, and the additional $2.8 million during the current state fiscal year that began July 1.
FSSA spokesman Neal Moore said IBM “is doing all it can to run up the costs in hopes the state will give up.”
“At IBM’s behest, electronic discovery has been massive and depositions extensive. It’s a tribute to containment efforts that costs are not more. The trial date is set and the state is not seeking to delay it,” Moore said.
IBM spokesman Clint Roswell said it was the state’s attorneys dragging the case. IBM wanted to go to trial next month but state wanted to wait until mid-April or early May. The trial expected to last three weeks currently is set to begin early next year in Marion Superior Court in Indianapolis.
“We hope that the State is indeed ready to go to trial as expeditiously as possible,” Roswell said in an e-mail message.
In a development earlier this month, IBM’s attorneys renewed their request to depose Daniels, a move Rusthoven said was “meritless.” Judge David Dreyer ruled in April that Daniels need not testify then, but left open the possibility he might be ordered to later.
Rusthoven is billing the state $475 per hour, Burdick is charging $405 per hour, and John Maley, a third attorney, is charging $465 per hour.
“This is a sweetheart deal from the get-go, and it just got sweeter for Barnes & Thornburg,” said Julia Vaughn, policy director for the government watchdog group Common Cause/Indiana. “It’s disappointing that they’ve come back to the public trough.”
Daniels’ press secretary Jane Jankowski, defended the administration’s use of the firm.
“They’re among the best in the business, and if there had been a conflict, the firm would not have been selected,” Jankowski said.
Barnes & Thornburg spokesman Ty Gerig said the firm would have no comment on the contract.
Source:http://www.businessweek.com/ap/financialnews/D9PSFH2O1.htm
