The firm that lost a $200 million state contract sued a whistleblower, claiming his “false statements” led to the Jindal administration canceling the pact.
Client Network Services Inc., known as CNSI, is seeking $30 million-plus in damages from Stephen Smith, the company’s former senior vice president. Smith cooperated with a state grand jury probe that led to the 2014 indictment of Louisiana health secretary Bruce Greenstein on charges related to the contract’s award.
The state investigation continues into potential wrong-doing by CNSI, Assistant Attorney General David Caldwell said. “We are not done,” he said.
CNSI Louisiana spokesman Sonny Cranch said the new lawsuit speaks for itself.
“Mr. Smith secretly acted behind CNSI’s back, while employed by CNSI, to cause damage to our company and reputation,” Cranch said. “We are confident that the truth will come out regarding his actions and those he conspired with in undermining CNSI’s contract in Louisiana.”
CNSI also has sued the Jindal administration for wrongful termination of the deal — one of the most lucrative contracts let by the state — denying any wrong-doing.
Smith said he has retained legal counsel. He declined comment other than to say lawyers “have pretty much told me to keep my mouth shut.”
The lawsuit was filed in U.S. District Court for the District of Maryland. CNSI is located in Rockville, Maryland, a suburb of Washington, D.C.
Smith’s lawyers are expected to file a response Aug. 24.
The lawsuit is the latest development related to the Jindal administration’s scrapping of CNSI’s contract to process claims for treating Medicaid patients. The contract was awarded in 2011.
The contract was terminated in 2013 amid allegations that Greenstein, who was named secretary of the Department of Health and Hospitals by Gov. Bobby Jindal and was a former CNSI executive, had helped his old firm win the state contract. Greenstein was indicted last year on perjury charges related to his testimony before a grand jury and a legislative committee.
In the lawsuit, CNSI claims Smith was a disgruntled employee facing a 20 percent pay cut when he started colluding with the company’s competitor — Molina Medicaid Solutions, of Long Beach, California — to undermine the contract with CNSI. Molina had the existing Medicaid contract.
“Smith, acting under the guise of the alias ‘Kunego,’ made a number of false and defamatory statements to federal and state government officials and investigators, in an attempt to cause Louisiana to terminate its contract with CNSI,” according to the lawsuit. “Louisiana did indeed terminate its contract with CNSI as a direct result of Smith’s actions. CNSI now seeks to recover damages incurred as a result of Smith’s actions.”
The termination came in spite of CNSI’s “exemplary performance,” the lawsuit states. “None of the purported justifications for the ‘for cause’ termination are valid.”
Smith used the name John Kunego when he made allegations against CNSI in an email to Jeoffrey Branch, a federal health agency official reviewing the company’s proposed agreement with the state. He was still working for CNSI at the time. Among the “disqualifiers for CNSI” stated in the email were company trouble getting a performance bond, low-balling costs and preferential treatment by Greenstein.
The email concluded by stating the federal agency “should step in and cancel this procurement and demand that it be re-competed in a fair an [sic] unbiased manner. To proceed with the current contract award will be a devastating disaster for the state of Louisiana and the federal government.”
The federal Centers for Medicare and Medicaid Services did not derail the contract and CNSI proceeded to do work, leading to an ultimate changeover from Molina to CNSI. Branch forwarded the Kunego email to the state Attorney General’s Office on Dec. 9, 2011, which launched an investigation that led to the Jindal administration canceling the contract and the impaneling of the special state grand jury that indicted Greenstein.
CNSI accuses Smith of breach of contract, civil conspiracy and “tortious interference,” which is hindering an existing contract. The breach of contract relates to a Smith’s “at-will employee agreement,” under which he agreed not to make statements that “could reasonably be interpreted ... as embarrassing, disparaging, prejudicial, or in any way detrimental to the interests of CNSI or its past, present or future owners, officers, directors, employees or agents.”
Follow Marsha Shuler on Twitter, @MarshaShulerCNB. For more coverage of the State Capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog.