Firm with Beshear ties won last-day contract

FRANKFORT, Ky. – On its last day in office, the Steve Beshear administration awarded a no-bid contract of about $3 million to a technology company that retains the husband of one of its top officials as a consultant and employs one of its former officials as a lobbyist.

Records obtained by the Courier-Journal through requests made under the Kentucky Open Records Act show that the administration awarded the contract Dec. 7 to SAS Institute of Cary, N.C., to extend for one year work that SAS was doing for state government analyzing data to detect fraud in billings made to Medicaid and other state programs.

Frank Lassiter, the husband of Beshear's executive cabinet secretary, Mary Lassiter, has been a consultant for SAS Institute since 2012, according to personal financial disclosure reports that his wife filed with the Executive Branch Ethics Commission.

Frank Lassiter said in an interview that he played no role in helping get the no-bid contract for SAS and did not make any additional fees because SAS got the contract.

“I had no direct or indirect conversations with anyone at the state cabinet or the procurement process about that contract,” he said.

Chief justice: Bevin cuts would close courts

Mary Lassiter said in an interview she "wasn't involved at all" with any government dealing with SAS.

"My disclosure forms disclosed for many years all of Frank's business dealings and I abstained from any discussions about any of those entities if and when they ever bid on state work or were involved in any work at all," Mary Lassiter said.

John Esham, chief deputy policy adviser in the Governor’s Office under Beshear from late 2008 through early 2011, works as a lobbyist for SAS in Kentucky. Esham did not immediately return a phone message left at SAS on Tuesday.

State records show that technology officials within the Beshear administration asked that the no-bid contract be issued because it was vital not to interrupt the “unique” and “critical” work done by SAS under a state contract that was about to expire.

But the old contract with SAS did not expire until Dec. 31, and the spokeswoman for Beshear’s successor, Matt Bevin, who took office Dec. 8, said that the state did not risk interruption of urgently needed services if the no-bid contract had not been awarded before Beshear left.

“Any contract potentially benefiting the husband of Gov. Beshear’s secretary of the cabinet raises serious questions,” said Jessica Ditto, communications director for the Governor's Office under Bevin. “This particular contract deserves extra scrutiny given that it was not competitively bid and awarded by the Beshear administration on the former governor’s last day in office.”

SAS is a major developer and marketer of analytics software that has 13,873 employees worldwide, according to its website. Trent Smith, a spokesman for SAS, also said in an email that expiration of the prior contract would have jeopardized Kentucky's ongoing fraud detection efforts.

Thayer blasts Beshear oversight of Horse Park

Terms of the new contract are the same as the old, Smith said, and a "one-year extension" would give "the new administration the opportunity to make adjustments."

Smith also said, "While Mr. Lassiter has received fees for some of his work in Kentucky related to the previous contract, he did not support the most recent contract and did not, and will not, receive fees related to it."

Records show that on Dec. 2, state government’s technology agency – the Commonwealth Office of Technology – requested that SAS be given a no-bid contract so that the fraud detection services it was providing would not be disrupted.

“The commonwealth currently has a contract with SAS which will expire on December 31, 2015. This contract is performing unique fraud services for three agencies which is critical to on-going operations,” an official of the Commonwealth Office of Technology, said in the request. “Disruption of this service would be detrimental to current fraud initiatives.”

State law requires such services be advertised so multiple qualified vendors can compete for the work, thereby reducing costs for taxpayers. But the law allows exceptions to that requirement for the purchase “of limited goods or services that cannot reasonably or practically be obtained through competitive sealed bidding” as determined by the Finance and Administrations Office of Procurement Services.

The head of that office, Don Speer, approved the request.

Beshear on ending kynect: 'I cannot sit idly by'

Speer, who was among the non-merit officials of the Beshear administration fired by Bevin in December, said in an interview that the work SAS had been doing for Kentucky began as a subcontractor for Deloitte Consulting’s big contract to create and manage Kentucky’s health benefit exchange known as kynect.

Because Bevin had made clear both before and after his election that he planned to do away withkynect, Speer said that the state technology officials said it was urgent that the contract be approved before Beshear left office to assure continuance of the work of SAS – which was providing important fraud detection services to not only Medicaid but also to other agencies including the Department of Revenue.

Speer said he never spoke with Frank or Mary Lassiter about the contract and did not even know Frank Lassiter was a consultant for SAS.

SAS said the new contract is for up to $3,079,000. The final cost may be less because while the state must pay at least $1,954,000, the remaining $1,125,000 of the contract is the maximum the state will pay depending on how much in consulting services it needs.

Steve Beshear did not immediately return a message left on his phone late Monday or phone messages left at his law office in Lexington early Tuesday.

After Bevin was elected governor last November, he asked Beshear by letter for information about any big contracts that the Beshear administration planned to issue before it left office.

Bevin said in a Nov. 19 letter, “I would like to request that your administration provide my transition team a copy of all contracts in excess of $1,000,000.00 (over the lifetime of the contract) that you anticipate your administration will consummate.”

Beshear responded Nov. 23 by letter saying the state law required such information remain confidential until a contract is awarded or a procurement canceled. “Any contracts that are awarded during the transition period will be available to the new cabinet officials when they take office,” Beshear said.

Frank Lassiter worked for state government earlier in the Beshear administration but left a position as executive director of the Office of Administration and Technology Services in the Cabinet for Health and Family Services in 2011.

In 2012, he formed a technology company with other former Beshear administration officials called HealthTech Solutions.

Annual personal financial disclosure reports that Mary Lassiter was required to file with the Executive Branch Ethics Commission also show that starting in 2012 Frank Lassiter began drawing consulting fees from SAS.

State law requires those top executive branch officials who must file personal disclosure reports to list their own – and their spouse’s – outside sources of income of more than $1,000 per year.

Mary Lassiter listed SAS as a source of income of more than $1,000 for Frank Lassiter in 2012, 2013, 2014 and 2015.

Frank Lassiter declined to say in the interview how much more than $1,000 he has been paid per year by SAS. “That’s private between us and them,” he said.

Asked how he came to be retained by SAS, Lassiter said, “I don’t know exactly how the link-up was made, but they were looking for some help – not only in Kentucky but in some other states, and I just inquired into it and was able to secure a contract with them.”

Lassiter acknowledged he is not a technology expert but said he believes he was hired “because of some marketing expertise that I provide and I have a master’s in business. … I try to provide them some guidance and some advice on how they might approach, help them develop their marketing plans and strategy.”

Mary Lassiter’s disclosure forms also show that Frank Lassiter in the past two years received consulting income of at least $1,000 each from two small Frankfort businesses. They are Capital Partners and Commonwealth Consultants, both of which are headed by Jim Sullivan, a former state government employee who was appointed by Beshear as chairman of the state Board of Claims.

Esham is registered with the Executive Branch Ethics Commission as a lobbyist for SAS. When he left Beshear’s office in 2011 the Governor’s Office sought guidance from the commission on any prohibitions or restrictions against his going to work for SAS.

The commission’s executive director at the time advised that Esham could immediately be employed by SAS but could not personally represent SAS before any state agency for one year upon leaving state government.

Reporter Tom Loftus can be reached at (502) 875-5135 or tloftus@courier-journal.com