NewsChannel 5 Investigates: Friends in High Places
Cabinet Member in TennCare Business
(Story created: 9/9/02)
When state lawmakers recently passed the largest tax increase in Tennessee history, they said TennCare was partly to blame.
Now, a NewsChannel 5 investigation has discovered that a key member of Gov. Don Sundquist's Cabinet may have quietly profited from the state's health insurance program.
Investigative reporter Phil Williams discovered the insider deal as he followed the money trail from a multimillion-dollar state contract involving Monteagle insurance agent John Stamps, a friend and former business partner of the governor.
As NewsChannel 5 first reported, Stamps formed Workforce Strategists in 1999. The Chattanooga company provides intensive counseling to the unemployed.
That same year, the Sundquist administration handed Stamps' company an exclusive contract that would eventually be worth almost $2 million.
Administration officials justified not offering the contract to anyone else, claiming Workforce Strategists was "the only company in Tennessee that has experience" for the job.
That statement came just 6 days after the company was incorporated.
The contract was approved despite concerns raised by the career state employee who reviews contracts for the state.
In tapes reviewed by NewsChannel 5, Workforce Strategists' executive director tells a state board that the idea for the company was hatched inside a "sister" company in Chattanooga.
That company, Comprehensive Community Care, is an outpatient mental health facility that serves severely mentally ill clients.
Our NewsChannel 5 investigation discovered that one of the owners of that sister company was a key official in the Sundquist administration.
And get this: all the revenue for that sister company came from the state's TennCare health insurance program.
That official was Alex Fischer, who joined the Sundquist administration in December 1997 as deputy commissioner of economic and community development. In December 2000, he was named commissioner. Then, in September 2001, he was named deputy governor.
Fischer's involvement in the company came despite state policies that prohibit TennCare contractors from paying money "directly or indirectly to any officer or employee of the State of Tennessee as wages, compensation, or gifts in exchange for acting as officer, agent, employee, subContractor, or consultant to the Contractor in connection with any work contemplated or performed relative to this contract unless otherwise authorized by the Commissioner, TDFA (Tennessee Department of Finance and Administration)."
The language, included in the state's TennCare contracts, also requires the health plan's managed care organizations and behavioral health organizations to include that same language in their subcontracts.
"It doesn't pass the smell test," says state Rep. Gary Odom, D-Nashville, regarding Fischer's involvement in TennCare. Odom has been a frequent critic of how state government spends your tax dollars.
"When you've got people in the executive branch of government owning interest in companies doing business with TennCare MCOs, that's a credibility problem."
Six years ago -- when Sundquist's first deputy governor, Peaches Blank Simpkins, considered investing in a health care company -- the governor insisted he wouldn't back away from the prohibition against state employees profiting off TennCare.
Fischer refused to discuss his TennCare dealings on camera, as did the governor.
The governor's press secretary insisted that any contract Comprehensive Community Care received "was obtained solely on its merit and the company's outstanding record in the mental health field."
But state records show Comprehensive Community Care was incorporated in April 1998.
A month later, CCC applied for a state license as a mental health facility, saying it already had an agreement to receive money from Premier Behavioral Systems -- one of the state's major TennCare contractors.
Fischer was listed as the company's secretary. In addition, the application listed its other owners as:
Privatization Strategists, a limited liability corporation controlled by the governor's friend, John Stamps; and
Bonnie Currey, a Chattanooga mental health professional who is a cousin to the governor.
Stamps works as a paid lobbyist for Premier Behavioral Systems and an affiliated company, Advocare -- as did Fischer before he went to work in Tennessee's Department of Economic and Community Development.
In November 2000, CCC reported receiving about $120,000 a month from TennCare, but no income from any other sources.
It also reported spending about $54,000 a month on employees' salaries and $43,000 on "training."
Fischer also owns interest in a training company, ComTraining.Net, that he says has done work for CCC, but he declined to say how much money it received from the TennCare provider. In addition, the wife of the current ECD commissioner, Tony Grande, also owns an interest in ComTraining.Net -- which she says was partly financed by Stamps.
Fischer, who recently left state government, insisted in a written statement that he had "fully disclosed" his business interests on financial reporting forms, as required by law.
"State law does not prohibit employees from having outside business interests," Fischer wrote. "State law does require the disclosure of those interests so that they are publicly known. I have always fully complied with these requirements."
Those forms did not specify that the Comprehensive Community Care was receiving TennCare funds.
He argued that questions about his involvement in CCC are really a non-issue since he "never had any direct or indirect authority" over TennCare while serving in the department of economic and community development.
But Odom questions whether the separation is really that distinct.
"The problem is, TennCare I know was being discussed at Cabinet meetings where this gentleman was participating," he adds.
Fischer also claims he "fully divested" his interests in the TennCare provider when he became deputy governor.
But financial statements filed by the company after he took the job show he had taken $186,000 out of the company -- and it still owed him another $75,000.
Odom says, "If someone is in debt to you, I'm not sure how you divest yourself from interest in that entity."
Fischer declined to say how much he had invested in Comprehensive Community Care.
The governor's press secretary insisted Sundquist had no idea that his former Cabinet member had an interest in a company that did business with TennCare.
Still, she said:
"We are proud of the open and honest way Mr. Fischer has disclosed his financial interests while serving the State of Tennessee and have found no improprieties whatsoever."