Jefferson Parish’s handling of two hospital consulting contracts worth almost $4 million — one of which didn’t even legally exist — was marred by mismanagement, lax oversight and poor communication, the Jefferson Parish Inspector General’s Office said Wednesday.
In a scathing 426-page report, Inspector General David McClintock laid out numerous problems his office identified in reviewing parish contracts with Nemzoff & Co., a consulting firm that specializes in health care mergers and acquisitions, and the multinational law firm Hogan Lovells.
The two firms helped guide the complex negotiations for the $563 million contract to have LCMC Health take over the operation of parish-owned West Jefferson Medical Center.
The report describes a procedural no man’s land in which $3.9 million in taxpayer money was paid out to consultants charging by the hour.
“The cost of not having a well-drafted contract can be significant where consultants’ hourly rates are in excess of $600 per hour,” McClintock wrote.
Among the report’s findings:
The parish paid Nemzoff & Co. $1.1 million — $375,000 more than the upper limit the parish originally set but later removed — without proper verification of services rendered or the documentation necessary to support a proper audit.
The parish paid Hogan Lovells $2.86 million without ever having a legally executed contract or the legally required compensation limit. The parish simply took over a previous arrangement between Hogan Lovells and the board of the hospital two months after the deal was struck.
The Parish Council never kept any minutes while it met in executive session, leading to redundancies and disconnects during the three-year process. Council members gathered behind closed doors as many as 25 times a year to discuss the negotiations, but they never had a record of what had been discussed or decided previously, making it vulnerable to misinterpretations.
The parish assembled and reassembled its negotiation team at least four times between April and December 2014 due to ambiguity about the consultants’ roles and poor communication, making the process more costly and inefficient.
Despite structuring the process so that the consultants would report to the council through the Parish Attorney’s Office, “the boundaries of communication were not honored, and (Joshua) Nemzoff was permitted access to certain council members outside the chain of reporting.”
The parish allowed Nemzoff to replace a clause in the contract that said it could be terminated if the work was not done in a satisfactory manner with one that required “gross and willful malfeasance.”
In its section on the council’s poor management of the negotiating team, the report noted that the council never designated a team leader, which led to internal squabbling via email.
“It is in our client’s interest that we work together collegially — and your repeated and unwarranted ‘nastygrams’ make that difficult. Please refrain,” Cliff Stromberg, an attorney for Hogan Lovells, wrote to Nemzoff in August 2014.
“They are repeated but not unwarranted,” Nemzoff replied. “But you are right. I will be nice. My apologies.”
“You should have checked with me about the presentation of your list of open issues,” Stromberg wrote again five months later. “I would have worded some differently and added others. I cannot understand why you persist in your loose cannon independent approach.”
“Loose cannon is an old term,” Nemzoff replied. “I am thinking more like a laser guided missile. And I don’t work for you, so you can kiss my ass.”
McClintock’s report noted that “however difficult it may be to quantify in dollars, the tone of the communications fairly indicates that all efforts and energies were not focused on representing the parish’s interest to the LCMC team in a unified manner or providing the parish with the best information available.”
Nemzoff declined to comment on the report.
McClintock’s recommendations on each area of concern largely consist of suggesting the parish follow the law and adopt standards and practices that would ensure the problems won’t come up again.
In the case of Hogan Lovells, for example, the inspector general said that had the parish followed up on the fact that no cap was placed on the contract, it might have discovered that no contract actually existed with the firm.
The report suggested the parish adopt a model for handling professional services contracts similar to what the state uses.