Former finance manager Bailets accuses Penn Pike chiefs of corruption, waste in lawsuit

A former finance manager Ralph M Bailets has lodged a lawsuit in Commonwealth Court in Harrisburg Pennsylvania accusing Turnpike Commission chiefs of serious wrongdoing. He says he was fired for his efforts to resist corrupt procurement practices and waste at the Turnpike Commission. His suit which names the Turnpike Commission, its accounting director Anthony Maun and chief financial officer Nikolaus Grieshaber as defendants is headed up as a complaint of violation of the state whistleblower law.

To our knowledge the law suit has not previously been reported although it was lodged last summer. James West lawyer for Bailets told us it is in the discovery and depositions phase.

Bailets was Assistant Secretary of Treasury and also Manager of Financial Reporting and Systems at the Turnpike Commission February 1998 through July 2008 when he was then moved to another job. In November 2008 he was told he was being laid off as an economy measure.

While assistant secretary of treasury Bailets was prominent at public meetings of the commission and in financial review sessions with top management, the suit says. His formal annual job reviews  gave him high scores.

Major focus of the law suit is an apparently rigged procurement and poor performance of CIBER, information technology (IT) consultants out of the Denver area hired at a cost of $82m (to date) to implement a major computer software package called Enterprise Resource Planning (ERP) from the leading German software company SAP.

Fumo paid by CIBER's Turnpike project manager

CIBER's Turnpike boss made campaign contributions during the period of their consultancy to former Pennsylvania state senator Vincent Fumo, currently serving a jail sentence after a conviction in US Court in Philadelphia for corruption. 

Last year Pennsylvania Governor Ed Rendell fired Turnpike Commission chairman Mitchell Rubin after the feds said he was the subject of a criminal inquiry. Rubin's wife, Ruth Arnao, an aide to Fumo was convicted along with the former senator on some 40 counts of thievery.

Contributions to Fumo by Dennis Miller, the CIBER project manager at the Pennsylvania Turnpike Commission in the years 2006 through 2008 totaled $16.5k, according to official filings. The payments to Fumo continued after Fumo's indictment by the US Department of Justice Feb 6 2007, we've discovered independently of the law suit. (see filing nearby and link at bottom)

Bailets' law suit says he saw "problems" in a January 2005 RFP for services to implement the Enterprise Resource Planning in that CIBER through an earlier contract had access to Turnpike legacy systems in breach of procurement rules, giving CIBER "an unfair advantage over other vendors."

Bailets mentioned the breach of procurement rules to defendant Maun, Turnpike accounting director, who told him not to say anything about it. Maun allegedly told Bailets that if he made trouble over the favoritism toward CIBER: "your job will be in jeopardy."

The suit states: "Ralph M. Bailets knows that such insider information and competitive edge would not only violate the terms of the RFPs but would also be in violation of the Federal Acquisition Regulation and not a good practice for the Pennsylvania Turnpike Commission to engage in as it could expose the organization to litigation regarding the awarding of the RFP and the appearance of impropriety through favoritism."

CIBER was nonetheless allowed to bid and the company was awarded the contract.

The company performed poorly, Bailets suit says, in the areas of treasury and finance that were his responsibility. Staff supplied by CIBER lacked relevant skills, had high absenteeism rates and high turnover. Their work was poorly documented.

By March 2007 a Turnpike group led by Bailets was meeting with Maun on a weekly basis to deal with CIBER's non-performance. The consultant's turnover of staff was leading to significant extra cost to the Turnpike because new CIBER staffers billed for hours to redo or pick up on work already done and billed by their predecessors, the law suit says.

CIBER contrive to turn non-performance into another contract

Worse still CIBER was using the problems to contrive a case for an expansion of the contract at substantially greater cost to the Turnpike.

"As the project continued, it became obvious that the most serious issue and deficiency was the lack of training for assigned Commission resources (CIBER personnel) and a turnover plan for the maintenance and support of certain modules of the ERP system being implemented pursuant to the (contract). This training and turnover plan was to be part of the original (Contract) 05-101-3119 work product and it became clear that the way CIBER was handling the project, the Commission would have to enter into additional contracts with CIBER to obtain proper post-implementation system performance."

Bailets and his team reported the CIBER problem to Maun in many discussions and emails but he wouldn't take any action. Instead Maun told Bailets to lay off CIBER and to stop "making waves."

The suit says that Baliets worry that CIBER was exploiting non-performance to justify an expansion of its work was borne out when it was given a new contract (08-10340-3609) for computer system maintenance and support for $19.3m in 2008. Much of the work to be done in this new contract was supposed to have been completed in the previous CIBER contract.

No action on E-ZPass discounting racket

The suit says that Bailets discovered and reported a racket in which several large commercial E-ZPass users were exploiting a 20% volume discount program by enrolling the vehicles of smaller operators otherwise ineligible for a discount, and splitting the discount with them.

Again accounting director Maun was fully informed, but did nothing.

Says the suit:

"This situation was also documented and provided to management by staff from the Credit and Collections Department. Despite the loss of potentially millions of dollars in toll revenue (which could have relieved budgetary pressure), no action was taken to further investigate or correct this situation."

New positions created, posted and filled within a single secret session of Turnpike Commission

Bailets says he complained on many occasions about irregular staff appointments made in "executive" or closed sessions of the Turnpike Commission during which jobs were formally created, officially posted, and filled, all at once.

His suit states:

"This practice routinely denied any competition from qualified internal and external candidates for these positions.. and the impact... could not be subject to the reviews and controls used in the annual Operating Budget process."

Investment funds managers granted lucrative uncompeted contracts

Recent years saw a big increase in the employment of consultants and investment management firms for Turnpike funds, Bailets suit says.

"These firms were paid a flat fee or a percentage based on the amount of funds managed, whichever was higher. These were lucrative contracts requiring very little effort for the large and profitable returns. It remains questionable that the expense of this practice yielded any significant advantage to the Commission in terms of financial return on their investments. Returns on these investments were limited due to the constraints of the investment policy governing investment managers.

These financial services contracts were not competitively bid.

Contracts go to the politically connected

Bailets says the contracts went exclusively to "those with favorable political connections."

The suit says that CIBER was being protected above his level at the Turnpike where political direction of contracts was apparently rife.

"It was obvious to Ralph M. Bailets that CIBER was being protected and not required to do the work called for in the (contract) but rather would be rewarded for failing to do that work by being given additional contracts by the Pennsylvania Turnpike Commission."

The suit argues the whistleblower angle:

"The Commonwealth of Pennsylvania has a strong public policy encouraging employees of the Commonwealth to report waste and wrongdoing to appropriate authorities for corrective action. This policy is reflected in the Whistleblower Law, 43 P.S. §1421 et seq.

"The conduct of Ralph M. Bailets was in conformity with this strong public policy in reporting wrongdoing and waste to his superiors.

"Ralph M. Bailets was discharged and otherwise discriminated and retaliated against as an employee of the Pennsylvania Turnpike Commission (a)ffecting his compensation, terms, conditions and privileges of employment because he made a good faith report, verbally and in writing, to his employer, his employer’s representatives and appropriate authority of wrongdoing and waste as defined in the Whistleblower Law, 43 P.S. §1421 et seq."

The suit asks the court to order Bailets' reinstatement plus back pay, damages and attorney's fees.

13 page text of Bailets' law suit:

http://www.tollroadsnews.com/sites/default/files/BailetsSuit.pdf

see details of CIBER project manager Miller's funding of jailbird Fumo with third $5,500 payment made after Fumo's indictment for racketeering:

http://www.campaignfinance.state.pa.us/ContributionSearchResults.aspx?RequestID=299304&StartRow=1&RowsPerPage=10&SortOrder=0

see http://www.ciber.com

NOTE: The text of the law suit misuses the term RFP (just a Request For Proposals) when it means contract. We've corrected that in our account and in quotes.

TOLLROADSnews 2010-01-25