Agent Smart, one of my sources
This chapter was substantially chopped down and presented in, "Siegelman v. Riley," a chapter about the 2002 election.
“The contract states that Group One will redesign the (ADECA) web page for a cost of over $798,000. Web pages can be done for under $2,000! What is going on here? The company is not in the phone book.”
-- Anonymous e-mail from tipster identifying himself as, “Maxwell Smart.”
-- Amount that Nick Bailey testified he was given by Jim Lane, a Montgomery businessman, Siegelman donor and co-owner of Group One. Bailey said he believed he’d repaid about $30,000 of that sum, but wasn't entirely sure.
After the Riley administration assumed power, a former employee of the public relations office at the Alabama Department of Economic and Community Affairs told me the agency, per instructions from the governor’s office, had a practice of withholding and delaying records sought by me. This did not come as a surprise.
Nor did it serve the governor. Time after time – I’m inclined to say every story – the administration’s delaying tactics led to stories published weeks, even months later than they would have been otherwise, but they were invariably more thorough and damning because of the delays. While they were withholding stuff, I hunted elsewhere, often as not locating records that nailed the stories shut.
Certainly that was the case with stories on a company called Group One. Because of Team Siegelman’s delaying tactics, a story published two months before the election would instead have come six or seven months before the vote, been less comprehensive, and for both reasons, done less damage.
But they had it their way, so with the campaign in high gear, Siegelman had to eat a story by me, a series of scalding editorials and, worst of all, some blistering comments from his Republican challenger Bob Riley.
Of the computer contract stories, those one Group One were probably the most satisfying because unlike the others, it was reasonably straightforward, or as much as such things can be.
In late March 2002, I received an anonymous handwritten letter suggesting I check out payments to and work done at ADECA by a firm called Group One. “Co. has no experience,” reported the tipster. “This is a bunch of B.S. and not needed and can be done in-house.”
The source wrote that ADECA paid Group One about $800,000 to build and maintain the agency's web-site, and that the company’s performance was atrocious. Shortly thereafter I made the first of what would be a good dozen requests for ADECA’s records on Group One.
A few weeks after receiving that letter I opened my e-mail to find a similar if more entertaining tip on Group One from someone identifying himself as Maxwell Smart (See record below). For younger readers, that’s the comically inept spy played by Don Adams in the 1960s sitcom, “Get Smart.”
It took a few minutes on the Internet to get the basics on the company. In its filings with the secretary of state, Group One described itself as an insurance marketing firm owned by Montgomery businessmen Jim Lane and H.S. “Bill” Gordon III.
The usual perusal of campaign records and newspaper databases showed that Lane contributed $32,500 in cash and services to Siegelman’s 1994 campaign for lieutenant governor, and four years later provided services valued at $18,806 to Siegelman's gubernatorial campaign.
Gordon had contributed services valued at $500 in the 1994 race and a consulting company he operated worked on that campaign. After becoming governor, Siegelman appointed Gordon to the influential Alabama Housing Authority, which awards tens of millions of dollars a year to developers of low- and medium-income housing.
On April 9, I made a second request, this time seeking records and correspondence between the governor's office and ADECA regarding Group One. Ten days later – ample time for them to locate the files – I arrived at ADECA’s media office after having been told the records were ready. I anticipated a substantial load, considering the cost of the work.
Instead, I was handed a slim file containing the three similar contracts, one for each of three years, and some payment vouchers.
Group One’s invoices were models of brevity. Each month, the company sent ADECA a one-page bill requesting $65,500. There were no employee names or numbers of hours worked. As our story would later put it: “The bills included brief descriptions of what the firm reported doing that month, such as ‘Initial redesign of Web site’ and ‘Assist in the Development of the entire ADECA Web site.’ No records reviewed by the newspaper indicate that ADECA personnel questioned the bills.”
The first contract, signed in July 1999, was for $30,000. Four months later it was amended, the cost climbing to $399,000 for fiscal year 1999-2000. The third and final contract, for the next fiscal year, was for the same $399,000.
The contracts, like all contracts submitted to the legislature for review, contained cover pages. These forms seek basic information about the contract. That includes name of the hiring agency, contractor, amount, source of funds and a line item asking if the contractor had “to compete for the business."
Group One, it was reported, had not had to compete for the business.
“Contractor selected by Governor’s Office,” was the surprisingly candid statement on the cover sheet. (See record below.)
As we reported, for several years the web work was performed by Auburn University at Montgomery, which charged $139,865 a year. That contract – like Group One’s – involved updating information on the myriad state and federal grant programs managed by ADECA.
Unlike Group One, Auburn submitted detailed expense reports with its bills.
The day after reviewing what was represented as the end all and be all of the Group One records I e-mailed Larry Childers, the ADECA spokesman. At the time I was battling the former top Siegelman aide over ADECA’s piecemeal production of records on another story.
My relations with Larry remained frosty from the G.H. Construction stories. Luckily his top assistant, a bubbly redhead named Dollie Burkhalter, was a joy to work with, and I tried as often as possible to bypass Larry in favor of her. But it was Larry who held the key to the records, or in any event, was higher up the food chain than Dollie.
I told Larry that it appeared he’d provided no more than the “bare bones” of the agency’s records pertaining to the company. And then:
At least $731,500 has been paid to date to Group One. However, there were no records provided to me in response to my public records request -- such as e-mails, reports, memos or other correspondence -- that addressed the actual work done by the company, or any meaningful correspondence to or from the company.
The records provided contained no letters, memos or e-mails to and from ADECA officials to each other, to or from ADECA officials and officials or workers with Group One, or to and from officials with other agencies, such as the Finance Department or the governor’s office, and regarding Group One, the quality of the work it performed, and what it actually did for the money.
Why, for example, did ADECA choose to double the contract rather than make the company provide the work at its original price? There are no records in the files explaining this.
Also, the contracts show that federal dollars paid for most of this. Are there no records, including correspondence, between ADECA and whatever federal agency that’s providing these funds?
In summary, there were no records reflecting the quality of the
firm’s work, or showing what they really did.
During this time I was also busting my tail and the administration’s for the elusive lottery foundation records. Team Siegelman’s mulish refusal to abide by the public records law on both matters, to say nothing of every other issue about which I inquired, had become a physical burden. Had I been based in Montgomery, their incessant violation of the law would have been vexatious, but at least I could have exerted pressure from close by. As it was, I was forever driving to Montgomery, finding the cupboard bare or near it, returning to Mobile, sending more e-mails, driving back to review what I’d been promised would be a complete set of records and – well, you get the point.
After months of such on Group One I drafted a letter for my editor Paul Cloos to send to Siegelman’s new spokesman, Mike Kanarick. This led to Paul talking to Larry, and a subsequent e-mail from the latter addressed to, “Mr. Curran.” Whether this was a sign of respect or Larry’s way of flipping me the bird was open to interpretation.
He said that “at Mr. Cloos’ request” he’d begun looking for copies of e-mails that were generated, which he’d assumed had been deleted, but which he’d discovered had been printed but misplaced.
Lo and behold, some e-mails were found, suggesting they'd never been missing. Nothing, though, was shown as going to or coming from the governor’s office. In terms of correspondence regarding contracts, the governor’s office remained the same black hole it had always been. No records whatsoever. E-mails or memos to or from Bailey, Hamrick, Siegelman, Ted Hosp and other administration figures regarding state business? Forget it. Serial violators of the public records law, each and every one.
The newly located e-mails reflected sorry work by Group One. In October 2000, a company employee e-mailed Childers to report that he was “genuinely sorry for your dissatisfaction.” He pledged to work hard to improve the quality of the work. Weeks later, for reasons that could only be political, ADECA extended the company’s contract another year, for the same $399,000.
The e-mails showed ADECA employees, Larry included, complaining that the site was prone to crashing; that links to ADECA divisions often didn’t work; that the web-pages were unattractive and that Group One was taking forever to build the site.
By summer 2001, agency employees were losing patience. We illustrated this to readers with the following examples from the records produced five months after I first sought them:
“The ADECA Web site is still down,” read one e-mail to Childers in July.
“The workforce development people are chewing my butt about getting their document online. What’s happening with it?” Childers asked Group One in an August e-mail.
In a September 2001 e-mail to a Group One worker, Childers wrote, “As usual, the hyperlink does not work.”
A month after that e-mail, an ADECA official called Group One and ordered the company to cease work. By Jan. 5, 2002, the date of its official termination, Group One had been paid $761,500.
During the months of waiting for ADECA to abide by the records law I’d learned that the state auditor’s office was conducting a review of the contract. I contacted Chris McCracken, the auditor working on the project, and his review up to that point jibed with what I was finding.
Our first piece on Group One was published Sept. 1, and began:
A company owned by two supporters of Gov. Don Siegelman received more than $760,000 to design and maintain the Web site for the Alabama Department of Economic and Community Affairs, but the state wound up scrapping the work, records show.
State employees in the Finance Department's technology division are rebuilding the Web site. For the work done to date, Finance will bill ADECA no more than $3,800, and the final cost is not likely to exceed $7,000, agency records indicate.
It’s unclear why state officials will be able to do the work for so much less than what Montgomery-based Group One Inc. was paid.
It’s also unclear, based on a review of ADECA files and other records provided to the Mobile Register:
-- Why Group One was picked.
-- What the firm did for almost two years before being terminated in October.
-- Why, after expressing dissatisfaction, state officials entered into a second, $399,000-per-year contract with the company.
The newspaper learned last week that the office of State Auditor Susan Parker has raised some of those issues with ADECA and Group One. Parker’s office hopes to complete a report on the contract within weeks, she said.
Notes by an auditor in Parker’s office describe monthly invoices submitted by Group One as “very vague.” Finance Department officials who reviewed the invoices at the auditor’s request termed them “nebulous,” the notes show.
The administration naturally declined comment for our story. That option wasn't available when the Associated Press called after deciding to pick up the story. Rip Andrews, by then serving as Siegelman's campaign spokesman, told the AP that the contract with Group One was the very type situation that inspired Siegelman to call the September 2001 special session to strengthen state laws on the awarding of contracts.
“From what I gather, ADECA entered into the contract thinking it was a sound contract and scrapped the contract when they found a better way to do it,” Rip said.
The blame it on ADECA strategy was disingenuous, since A) Siegelman basically ran ADECA; B) Group One was selected by the governor’s office; and C) the final $399,000 a year contract was signed after passage of the new laws touted by Andrews.
Rip had developed into an eager if unconvincing practitioner of diversion through obfuscation.
As with my other investigative stories at the time, we refrained from teeing the ball up and calling Riley and asking him to take a whack at it. The AP did, and used a quote from the challenger.
“This is another example of fraud, waste and abuse of the people’s money by the Siegelman administration and a major reason why Alabama’s government remains in financial crisis,” Riley declared in a press release rehashing our story and adding commentary.
I had a second Group One story ready to go but we held it, in keeping with the paper’s code of not popping candidates too soon before an election. It reported that the finance department’s information services division had rebuilt and redesigned the web site at a grand cost of $4,000. The rebuilt site went online in early October, but was yanked the next day.
ADECA went a week without a Web site – to the bemused delight of those who knew why -- and when it returned, was the faulty model designed by Group One.
The agency used the Group One site until the election, after which it was replaced, for good, by the state-built $4,000 model.
“Two state employees told the paper that an order came from ADECA management to use the old site until after the election,” we reported. “The employees requested anonymity, saying they feared reprisal if they were identified.”
Also noted was that ADECA’s press office “declined to explain why the new site was removed and the Group One site was put back up or to otherwise comment for this story.”
The state auditor’s report supported our findings. When auditors asked Group One executives to produce internal records showing hours worked by its employees on the ADECA contract, they were told that the company hadn’t maintain such records.
A report by the U.S. Department of Housing and Urban Development (commonly known as HUD) was more damning. Every dime of the contract had come from HUD, and after agency officials read our story, they demanded answers. A HUD report six weeks after our first story blasted the cost of the contract and said the almost $800,000 in expenditures “could not be documented or explained by the ADECA staff.” (See record below.)
The federal agency faulted the state for a “breakdown in contract administration;” and declared that there was “no known document,” such as a cost proposal from Group One, explaining how the state arrived at the $399,000 per year amount. HUD noted that the contract had required Group One to submit audits of expenditures and quarterly progress reports to the state. However, the company never did so and ADECA didn’t ask it to.
In February 2003 – with Siegelman by then out of office – we reported HUD’s demand that ADECA refund $518,270 of the $761,500 paid to Group One.
The feds ultimately gave the state break, cutting the refund demand to $140,196. The official story was that Group One provided additional records supporting its work. However, HUD and ADECA officials said off the record that the Riley administration pleaded with HUD not too punish the new administration for what occurred under someone else’s watch, and that HUD agreed to accept the lesser amount.
The bottom line, then, was that the federal government, not the state, bore the brunt of Siegelman’s web page giveaway.
During the 2006 trial, Nick Bailey testified to having received money from, among others, Group One co-owner Jim Lane. Bailey said Lane gave him about $90,000 in 1998 and 1999.
Of that, about $20,000 was to supplement his campaign salary during Siegelman’s 1998 run against Fob James. Bailey said Siegelman knew about the off-the-books campaign money but testified he didn’t tell the boss about the other $70,000.
I don’t know why Lane wasn’t prosecuted. I assume it was because (Siegelman case prosecutors Louis Franklin and Steve Feaga) already had, in Bailey, the public official who received the money and that they didn’t have a strong Group One case against Siegelman.
The Group One contracts began in 1999, when Dewayne Freeman, not Bailey, led ADECA. Nick, in 1998 and 1999, did not have the authority to award business to Group One.
As I’ve said before and will again, I am convinced that Bailey held back in his revelations to prosecutors to protect Siegelman. I cannot prove it, but will always believe that among his duties during his tenure as public servant was bag man for the boss. Certainly the notion that he would hide anything from Siegelman is preposterous.
I go back to the 2006 trial testimony by Siegelman fund-raiser Darren Cline on Bailey’s, “God complex.”
“Whatever the governor said was right” and didn’t require explaining, Cline had said of Bailey.
He testified that he and his boss, Jim Cunningham, came to see Nick as “too far gone.”
Bailey was too far gone, but he wasn’t alone.
So too was his idol, the governor of Alabama.
Here is my first e-mail from "Maxwell Smart," one of two anonymous sources who recommended that I look into the Group One Contract.
As seen on this form, submitted to the legislature by ADECA for the Group One contract, the company was chosen without competition and was "selected by the Governor's Office."
Below is one of the letters from HUD informing ADECA that records provided by the state to justify the Group One contract failed to meet criteria for the spending of federal funds.