Medicaid contractor sues Jindal administration

BATON ROUGE, La. (AP) -- A Maryland-based company whose nearly $200 million Medicaid contract was canceled amid an ongoing federal investigation sued Louisiana Gov. Bobby Jindal's administration Monday for terminating the deal.

Client Network Services Inc., known as CNSI, filed the lawsuit in state district court in Baton Rouge, claiming the contract with the Department of Health and Hospitals was improperly canceled.

"DHH and the administration continue to lob vague accusations against CNSI without producing one shred of evidence that termination of the contract is justified under the contract," said Kathryn Harris, general counsel for the company, in a statement.

CNSI is seeking compensation for all work done, reimbursement for its costs, loss of anticipated profits and unspecified financial damages for harm to its reputation.

The Jindal administration scrapped the 10-year contract on March 21, after details emerged about a federal subpoena seeking information about the contract award. A separate state investigation by the attorney general's office also is ongoing.

"It is unclear how the mere existence of the subpoena would be a proper basis for the cancellation," the lawsuit says.

The company has never received notice that it failed to comply with the contract's terms and fulfill its performance obligations, the lawsuit says. Claims by the administration that the contract was terminated because the agreement was reached through fraud or in bad faith are unfounded, the lawsuit says.

Jindal's DHH Secretary Bruce Greenstein, who was vice president of CNSI from 2005 to 2006, resigned after the contract was terminated.

Greenstein has denied involvement in the contract award, but the Jindal administration has accused him of inappropriate contact with CNSI throughout the bid process.

The Division of Administration said Greenstein exchanged hundreds of phone calls and thousands of text messages with CNSI during the bid process, creating an unfair advantage for the firm.

"We stand by our decision to cancel the contract for cause, which was based on consultation with the Attorney General's office, and for the reasons recently communicated by the division in a letter to CNSI," Commissioner of Administration Kristy Nichols said in a written statement.

CNSI's lawsuit says the solicitation for contract proposals doesn't contain a blanket prohibition on contact between bidders and DHH officials and says allegations that it had an unfair advantage were unfounded.

The company said Greenstein didn't evaluate proposals, which the lawsuit says involved 60 different people on 11 evaluation teams. CNSI beat out three other companies for the contract.

The lawsuit says CNSI doesn't know of any state law or regulation that prohibits the communications, and it claims that lobbyists for every contract bidder contacted Greenstein and other DHH and state government officials during the bid process.

The company noted that Greenstein acknowledged he had contact with company officials during his confirmation hearing before lawmakers in 2011.

"Defendants have long known that there were contacts between CNSI and Secretary Greenstein, giving rise to serious questions as to why Defendants are suddenly terminating a $197.4 million contract and citing contacts between CNSI and Secretary Greenstein as the basis," the lawsuit says.

Lawmakers raised concerns about the contract two years ago when it was awarded and questioned the health secretary's involvement. But the Jindal administration still proceeded with the deal.

Greenstein acknowledged under questioning from lawmakers in 2011 that a decision he made in the bid solicitation process made CNSI eligible for the contract. He also met with a top CNSI official within days of taking the health secretary's job.

CNSI describes the DHH decision as a clarification that confirmed CNSI could be eligible as the primary contractor on the work. Otherwise, the company says it still would have bid on the job as a subcontractor for another firm.

Named as defendants in the lawsuit were Jindal, the state, the Department of Health and Hospitals, interim DHH Secretary Kathy Kliebert, the Division of Administration, Nichols and Director of State Purchasing Sandra Gillen.