The Jindal administration rejected a CNSI offer to settle a dispute over the cancellation of its nearly $200 million Medicaid claims contract.
A state lawyer also served notice an effort will be made to recover some of the $17 million the state paid Client Network Services Inc. since it started work in 2012.
The state abruptly cancelled the contract, one of the largest awarded by state government, on March 22 after news broke that a federal grand jury was investigating how the contract was awarded. State health chief Bruce Greenstein, a former CNSI executive, resigned a week later in the wake of the probe.
As it canceled the contract, the state cited Louisiana law that states: “if the person awarded the contract has acted fraudulently or in bad faith, the contract shall be declared null and void.”
CNSI proposed that the state and the company agree to end the contract “for convenience rather than for cause,” according to a letter from Michael W. McKay, a lawyer representing CNSI.
McKay suggested that CNSI would then provide an itemized list of its costs and expense resulting from the contract cancelation after which the parties would negotiate toward “an agreed-upon cost and expense payment to CNSI.”
If an agreement could not be reached within two weeks, CNSI suggested the parties enter into binding arbitration.
The existence of the settlement offer by CNSI, of Gaithersburg, Md., came to light in a letter released by the company as it complained that the state had shut the door on discussions that could lead to “a business-like resolution.”
Details of the settlement offer were not divulged by CNSI.
The state Division of Administration released the settlement proposal after The Advocate sought the document under state public records laws.
“In light of the reasons for termination of the contract and the $17,024,979.43 which the state has already paid CNSI, it is the state’s position that CNSI is not entitled to receive any additional costs, expenses or other amounts resulting from the termination of the contract,” Richard Zimmerman Jr., the state’s contract attorney, wrote CNSI’s attorney in rejecting the April 29 offer.
“It is further the state’s position that CNSI owes the state reimbursement for a significant portion of the payments which have already been made to CNSI.”
Zimmerman said the state is willing to sit down and talk about how much CNSI owes the state.
In a prepared statement Friday, CNSI’s general counsel Kathryn Harris expressed disappointment in the state’s reaction to settlement offer.
“CNSI will aggressively pursue all legal remedies in order to be justly compensated for the state’s improper cancellation and to protect our corporate reputation, which the state has repeatedly impugned by its unsubstantiated allegations,” Harris said.
Harris complained that state officials have failed to respond to “repeated public records requests for documents they claim will justify their cancellation of our contract.”
CNSI Louisiana spokesman Sonny Cranch said Friday that the company would have no further comment. “We feel the statement speaks for itself,” he said.
Last Friday, the Jindal administration detailed why it canceled the contract in late March, citing — among other things — “improper contact” by Greenstein, the former health secretary, and alleged intervention by him to alter the request for proposals so CNSI could compete.
Greenstein worked as a CNSI vice president for health care in 2005 and 2006.
Greenstein consistently has said he removed himself from anything to do with the contract, creating what he called a “firewall.” The administration’s letter said information had come to light of hundreds of phone calls and thousands of text message between Greenstein and CNSI-affiliated officials and employees.
CNSI President Adnan Ahmed called the contract cancelation a “travesty” in an interview last month and denied improprieties.
CNSI started work in February 2012 on a conversion from current contractor Molina Medicaid Solutions, which had been targeted for completion in late 2014. Molina, as well as ACS State Healthcare LLC and HP Enterprise Services LLC, competed for the contract.
CNSI competitors complained that the firm “low-balled” its price.