RICHMOND, VA—Millions of dollars in questionable contracts, public funds used to pay for work that was apparently never completed and a high ranking state employee signing off on the whole sordid mess in violation of Virginia law.
8News Investigative reporter AJ Lagoe dug into allegations of improper procurement issues at the Virginia State Corporation Commission.
Located amidst the hustle and bustle of downtown Richmond sits a government agency that has a hand more facets of your life than you probably realize.
A portion of every power bill you pay, every phone bill you write a check for and every insurance premium you scrimp and save for, goes to fund the State Corporation Commission (SCC).
The SCC regulates how a lot of business is done in Virginia, but 8News found how the commission does business behind closed doors, can leave a lot to be desired.
"For the SCC to regulate and criticize public companies and then to act what looks like this way internally certainly is bizarre at best," said Mike Thompson, the Executive Director of the Thomas Jefferson Institute, a government reform group.
"These are the kinds of things you'd expect to go on in 1932, not 2013," said Thompson.
8News began investigating after receiving a tip from a group of state employees who told us they could "no longer idly stand by as many unethical and potentially illegal activities take place."
8News poured over hundreds of pages of SCC contract documents, and what we found was a sweetheart deal.
It was a deal worth millions of dollars being paid out of public funds to one company, a company that got the job with no competition.
In 2008, CGI Technologies and Solutions Inc. was brought in by the SCC to perform analysis on what was to become the e-file system—a system that provides on-line payment and filing services to the public on the SCC website.
From the beginning, the deal was fishy.
Under a state IT contract, protocol is to allow "more than one contractor" the opportunity to bid on the work to "to ensure best possible value for the commonwealth."
That protocol wasn't followed—CGI was the only contractor approached to do analysis on how to build the electronic filing system.
Then, in what appears to be a flaunting of the spirit of the Virginia Public Procurement Act, CGI brought in to do the initial analysis, developed the design and was then given the contract to build the system, with no competition.
The deal's initial price tag—nearly $3 million. So why, without any competition, was CGI getting the sweet-heart deal? 8News pushed for answers.
The State Corporation Commission's CAO is Danny Payne, Virginia's former Commissioner of Taxation. During Payne's time as the Commonwealth's tax czar, his department awarded a mega contract worth well more than $100 million to a company called AMS. One of the main players at AMS was Deal Merrill, who was a project manager. AMS has since been bought out by and merged with CGI.
Within a year of Danny Payne's appointment to run the SCC, CGI was hired with no competition to build the e-file system.
The whole time, agency insiders tell 8News a posed photo of Danny Payne & Dean Merrill hangs in Payne's office.
"It [the picture] certainly shows they're friendly, and as the saying goes a picture's worth a thousand words," said Thompson. "When you review these documents, you wonder if that statement should be amended and a picture's worth millions of dollars."
The original $3 million dollar contract ballooned to more than $7 million through a series of contract modifications and exclusive "sole source procurements."
The first sole source never even justified why CGI's price was reasonable, something Virginia's Procurement Manuel clearly says "must" be part of the file.
In multiple contract modifications, CGI was awarded more and more money. One contract modification was for an additional $805,195, resulting in a 27.6% hike over the original contract amount.
"When a contract in Virginia goes up by more than 25%, who has to sign off on it?" asked 8News Investigative Reporter AJ Lagoe.
"It's either the Governor or his designee, and I am his designee,"— Richard Sliwoski, Director of the Virginia Department of General Services.
State code clearly says a contract can't be increased by more than 25% without the advance written approval of the governor or his designee, the Director of the Virginia Department of General Services, Richard Sliwoski.
But in this case, the person who signed off on the contract approval was Danny Payne.
And it didn't' just happen once, the exact same thing happened again. In that case, CGI was awarded an additional $782,000, increasing the contract by more than 25%. Once again, it's Danny Payne's name on the approval.
"Did you sign off on any of the contract increases between the SCC and CGI?" —8News Investigative Reporter AJ Lagoe.
"No I did not," — Richard Sliwoski, Director of the Virginia Department of General Services.
"The whole thing frankly brings up so many questions," said Thompson.
There are other serious questions surrounding the contract modifications.
In a previous contract, CGI agreed to do "20 days of post live support" once the e-file system launched, for which they'd be paid $100,000.
Documents show the project was completed March 21st, 2012. However, just one day later, CGI Vice President Dean Merrill signs another contract modification, which says the "20 days post live support" "have been satisfied." Danny Payne of the SCC then signs off March 26, 2012.
"It doesn't look like they did the work they were originally contracted to do," said Thompson.
And yet CGI was paid in full, $100,000. There's nothing in the SCC files showing what the SCC, and therefore taxpayers, received in exchange for the six figure payout.
"It would be interesting to see what justification the SCC has for doing these kinds of things," said Thompson.
8News repeatedly asked Danny Payne and the SCC to comment on camera, they declined, but did say via email a state audit is being completed. The added, "As a result of your inquiry, the Auditor of Public Accounts has authorized the Commission to advise you that this current audit, which included the CGI contract and other procurement transactions, found no evidence of fraud, abuse or impropriety."
8News will continue to follow this case. The audit is due to be released within the next 30 days.
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