Conflict avoided, but not revealed: Director didn’t participate in hiring Sallie Mae unit for $15M state project

Keywords Government

Records filed with the Indiana Ethics Commission show that Goode last July removed himself from involvement in vetting the contract his department later OK’d between the Indiana Department of Revenue and General Revenue Corp., a Cincinnatibased subsidiary of the student-loan giant.

General Revenue, which pursues overdue payments for Sallie Mae, was hired in August to help the state collect $255 million in back taxes through a tax amnesty program last fall.

But the Department of Revenue never sought competing bids for the job.

Revenue department officials believed they didn’t have time to put the contract out for bid, with Gov. Mitch Daniels signing the amnesty legislation in May and the program scheduled to start in September, said spokeswoman Stephanie McFarland.

“That’s a very short period of time,” she said.

At the same time, state revenue officials who were talking to other states about their amnesty programs learned that the help of a third-party collections firm, such as General Revenue, improved the amount of recovery, she added.

McFarland said the Revenue Department was permitted to seek a sole-source contract under state law that allows for such action “when the purchase of the required supplies or services under another purchasing method … would seriously impair the functioning of the using agency.”

“Quite frankly, no one [else] came forward. GRC came essentially out of the blue,” she said. As for the contract, “DOA took a very fine-tooth comb to it.”

Apparently, Goode was nowhere near that comb. The department’s attorney sent a recusal letter to state Ethics Director Mary Lee Comer dated July 26, about a week after Goode found out talks with General Revenue were under way. The company has done similar tax-collection work in Ohio.

Goode asked that either Rob Wynkoop, deputy commissioner of procurement, or Susan Gard, deputy attorney general and deputy commissioner, make the determination on the contract.

“The disclosure is clear and the screen that you propose is adequate to handle conflicts if they arise,” Comer replied in an e-mail to Gard later that day.

State law requires a state official with a potential conflict of interest to seek an advisory opinion from the Ethics Commission. The commission generally posts the outcome of its decision on its Web site. But because Comer’s response was considered an informal opinion, Goode’s conflict was not publicly disclosed.

Comer has the authority to make informal opinions because the commission meets only once a month, and there are times when the state needs a “speedy” answer.

While the state never disclosed the potential conflict or remedies taken to avoid it, officials clearly were sensitive that it could be a contentious issue.

“Because this will likely be a high-visibility contract, I’d like to get something ‘on file’ … to document Earl’s early disengagement from this particular process,” Department of Administration attorney Gard wrote to Comer in an e-mail.

Goode stands to gain as Sallie Mae-formally known as SLM Corp.-and its subsidiaries prosper. His compensation as an SLM board member is an annual grant of 15,250 stock options.

As of SLM’s latest full-year report, Goode held more than 144,000 shares in Reston, Va.-based SLM: 38,927 common shares and 105,945 in vested options. The stock has been trading around $55 a share.

But SLM isn’t hanging its financial fortunes on the Indiana contract. In the last sentence of a Sept. 2 press release announcing the contract, SLM said it was “not expected to have a material impact on the company’s earnings per share.”

The state is still auditing the General Revenue contract, McFarland said, but the company likely will collect $12 million to $15 million for the tax amnesty work. SLM generated $1.9 billion in profit in its most recent annual earnings period.

Although Goode appears to have complied with the state’s procedure for reporting conflicts of interest, the state could do more to improve the disclosure process, said Julia Vaughn, policy director for watchdog group Common Cause of Indiana.

Among some more progressive agencies in that regard has been the Indiana Lobby Registration Commission, which in recent years even published a compilation of written questions it received from lobbyists, she said.

Disclosure “is really only useful if it’s public because that’s the point, to assuage fears,” Vaughn said. “The whole point of this is to remove deals from the back room.”

But “even if there there’s no wrongdoing or legal questions, in a conflict of interest, it’s always best to be above suspicion,” said Stephen Graham, associate professor of political science at the University of Indianapolis.

In Goode’s case, “it would have been better for it to have been announced that he had recused himself from the decision and why,” said Dick Simpson, a professor of political science at the University of Illinois at Chicago and a former Chicago city alderman.

However, said Jane Jankowski, press secretary for Gov. Daniels, “a hazard in forcing those conversations into the public square is that you end up” having fewer state employees inquiring whether something is a conflict.

The preamble of the governor’s highly touted ethics policy, adopted in early 2005, acknowledges the challenge: “Currently the functions of state government are often performed with a lack of openness and adequate disclosure.”

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