The Jindal administration on Friday detailed why it canceled a contract with CNSI for Medicaid claims processing management, citing — among other things — “improper contact” by former state health secretary Bruce Greenstein throughout the bid and award process.

Greenstein, an ex-CNSI official, resigned his state job and the administration scrapped the nearly $200 million contract after a federal grand jury probe became public last month.

Controversy had surrounded the contract’s 2011 award rooted in Greenstein’s prior work for the Maryland firm and accusations from competitors that the firm “low-balled” the price.

CNSI officials have denied any wrongdoing and said the firm would appeal the cancelation administratively and through the courts.

The state Division of Administration released a letter late Friday detailing specific reasons for the contract cancelation in response to a request from CNSI officials.

The letter from state purchasing Director Sandra G. Gillen said her office became aware after consultation with the state inspector general of “numerous and repeated telephone and text message contacts” between Greenstein and officers, employees, representatives and-or management of Client Network Services Inc.

“These contacts and communications include hundreds of telephone calls and thousands of text messages which took place from the time that Greenstein became DHH secretary and continued throughout the entire bid and award process,” Gillen wrote.

The communication “created an unfair advantage to CNSI and prevented the fair, impartial and free competition among all proposers required under the SFP (Solicitation for Proposals),” the letter continued. The communication “tainted the entire process,” providing cause for contract cancelation.

Greenstein said on numerous occasions that he removed himself from the contract dealings and had met with CNSI’s president only once and that was prior to the solicitation.

Greenstein later said under legislative questioning that he inserted a provision which resulted in CNSI being able to compete.

Gillen cited Greenstein’s intervention in making the change as another reason for the contract cancelation, saying it “created an unfair advantage for CNSI.” She cited a flurry of telephone calls and text messages in January 2011 between Greenstein and CNSI management, including 16 on the day Greenstein ordered the change in the original solicitation.

As it canceled the contract, the Jindal administration cited a Louisiana law that states “if the person awarded the contract has acted fraudulent or in bad faith, the contract shall be declared null and void.”

CNSI Louisiana spokesman Sonny Cranch said he just became aware of the letter. “We will review the letter with our legal counsel and we will respond appropriately,” Cranch said.

Gillen cited other problems :

  • Failing to fully include a key component of the solicitation for proposal “resulting in CNSI’s unfair underbidding” of the Medicaid Management Information System project.
  • CNSI painting a rosy picture of CNSI’s financial condition and relationship with its lender, Bank of America.
  • Irregularities with the creation and submission of a proposed $40 million contract addition, including potential conflict of interests between DHH and CNSI employees. Gillen earlier scrapped that contract amendment. “We understand that a significant portion of the additional cost included in (the amendment) was contemplated by and should have been included in CNSI’s original proposal,” the letter stated.
  • Failing to complete required document and system tasks in a timely and quality manner. “CNSI has on multiple occasions submitted to DHH planning and other documents identical to those submitted by CNSI in connection with its operations in the state of Washington,” Gillen wrote. The documents “were not even revised or tailored to the Louisiana requirements.”

In other CNSI-related developments Friday:

DHH put Jina Hughes, the chief of the agency’s program integrity section, on paid administrative leave pending a review of her role in CNSI contract dealings. Hughes’ husband, Robert, performs data management and analysis for CNSI, according to state records.