- Special Projects
A week ago, the State of Hawaii filed suit against Ciber Inc., a large information technology firm, accusing the company of misrepresenting its capabilities when competing for a contract to design and implement a new accounting system for the Department of Transportation, and then fraudulently billing the state even as the new system failed test after test, and fell farther and farther behind schedule.
The company was paid over $8 million in fees before finally pulling its staff out of Hawaii in 2014 without ever getting a system up and running. The state is seeking to recover those costs, plus millions more in damages.
Ciber is a publicly traded company headquartered in Colorado but with national and global operations. It reports having 6,500 full-time employees and over $864 million in revenue in its last fiscal year.
The state alleges Ciber engaged in a classic “bait and switch,” initially winning the contract with representations that it had the experience, and the personnel, to create a new DOT accounting system to replace and upgrade the department’s aging financial software. But the lawsuit alleges Ciber instead brought in unqualified consultants to staff the project, quickly fell behind in reaching contract milestones, understaffed the project to boost company profits, and submitted false bills for work that hadn’t actually been done.
The state says that although Ciber failed to produce a working accounting system, it hired the state’s largest lobbying firm as part of a strategy of “using inappropriate political influence to muzzle its critics at DOT and pressure DOT into paying still more fees for a worthless system.”
Facing increased pressure from DOT to comply with the terms of their original contract, as well as threats to terminate the contract if the company couldn’t resolve its probems, the lawsuit alleges the company hired Capital Consultants and one of its principals, John Radcliffe, to lobby within the Abercrombie administration. He is considered by many to be one of the state’s top lobbyists.
The lawsuit alleges that Ciber’s lobbying succeeded in getting the governor’s office to intervene and insulate the company from DOT’s increasing demands.
In early August 2013, according to the lawsuit, DOT Deputy Director Jade Butay warned the company that if its new software was unable to pass its next test, the state would consider terminating the contract. When the test was done, the system again failed, and Butay then wrote to the company, demanding a detailed work plan be submitted within 10 days.
But instead of producing the plan, the company turned to Radcliffe, who used his ties to the Abercrombie administration and the governor’s chief of staff, Bruce Coppa, to his advantage.
Soon after John Radcliffe began lobbying the governor’s staff on Ciber’s behalf, Butay was transferred to the Labor Department. He was replaced with another political appointee, Audrey Hidano, who had no experience in information technology and “little if any experience transportation financial management, budgeting, or account,” the lawsuit alleges.
In Hawaii, lobbying isn’t legally considered “lobbying” if it aims to influence the governor, his staff, or the executive departments.
Hidano allegedly repeatedly told DOT staff and the department’s other consultants that the Governor’s Office supported keeping Ciber on the job despite its failures to produce a working system.
Several months later, when the director of transportation again pressed for specifics from Ciber, the company responded that the director “may be unaware of how this project is currently being run,” and suggested he contract Coppa for updated instructions.
Just months later, Capital Consultants named Coppa executive vice president and partner.
The implication, although not supported with details, is that with prodding from Radcliffe, the governor’s office simply took over administration of the contract and took DOT administrators out of the loop.
And then, in February 2014, Gov. Neil Abercrombie requested an additional $3.3 million in special funds for the project without consulting with DOT administrators, and Ciber quickly sought to tap into the new funding.
The lawsuit alleges “inappropriate political influence” was involved, but the complaint provides no details of what might be considered inappropriate, the extent of the lobbying effort, or what the company spent on it.
Looking for additional information, I turned to the reports that lobbyists, and their clients, are required to file with the Hawaii State Ethics Commission.
According to the commission’s records, Radcliffe and George “Red” Morris, partners in Capital Consultants, were first registered as lobbyists for Ciber on February 3, 2014.
By the end of the 2014 legislative session, Ciber had paid each lobbyist a total of $5,864, including $2,094.24 prior to the end of 2013, before they were technically authorized to represent the company.
That’s not as much as one would expect, given the amount of money at stake for Ciber, and the allegations of undue political influence now being made by the state.
But here’s the catch.
Hawaii’s lobbyist law doesn’t regulate the kind of lobbying alleged in the lawsuit, because it was aimed at influencing the governor’s office and the state administration rather than members of the Legislature or their staff.
That’s right. In Hawaii, lobbying isn’t legally considered “lobbying” if it aims to influence the governor, his staff, or the executive departments. So although this level of lobbying can have major impacts, as is alleged in this case, it isn’t regulated in the same manner as legislative lobbying.
Bills in recent years to extend the lobbyist law to cover executive branch lobbying have gone nowhere.
Lobby the Legislature, and there’s a healthy degree of transparency. Lobby the governor, or department directors or their deputies, and the activities never see the light of day.
What did Ciber spend lobbying the governor’s chief of staff? We don’t know, because that lobbying wasn’t subject to public disclosure.
Neither registration nor public disclosure are required of lobbyists influencing decisions by the governor or executive departments. We don’t know what lobbyists are paid, or what is spent on their efforts.
And while state law prohibits hiring and paying lobbyists contingent on a successful outcome to their lobbying, that doesn’t apply to executive branch lobbying because, in the eyes of the law, it isn’t really lobbying.
Unfortunately, the Ethics Commission has in the past been less than enthusiastic about extending its jurisdiction to include executive branch lobbying. Its concern is that given its limited funding and its already heavy workload, there would be practical problems with extending its jurisdiction.
There have been a number of bills in recent years to extend the lobbyist law to cover executive branch lobbying, but they went nowhere. Most died without a public hearing.
But now that the Ige administration’s lawsuit against Ciber has identified executive branch lobbying as a problem, and potentially a very expensive problem at that, the administration should be pressed to add its weight to calls for reform.