Governor's Friends Land Big Contracts - NewsChannel5.com | Nashville News, Weather & Sports

NC5 Investigates: Friends in High Places

Governor's Friends Land Big Contracts

(Story created: 7/23/02)

As Don Sundquist took the helm of state government, he promised Tennesseans an era of expanding opportunity.

But for some of his closest supporters, those opportunities would come right from the state's treasury.

For example, Workforce Strategists -- a Chattanooga company with a state contract to provide intensive counseling and coaching to help the unemployed get back to work.

The company was started in 1999 by Monteagle insurance agent John Stamps -- a longtime friend of the governor's and a former business partner.

That same year, the Sundquist administration gave Stamps' company an exclusive contract that would eventually be worth almost $2 million.

Sundquist's labor commissioner, Michael Magill, justified not allowing any other business to compete for the contract in a memo dated June 2, 1999.

He wrote that Stamps' company was "the only company in Tennessee that has experience" for the job.

That was just six days after Workforce Strategists was incorporated.

"Obviously, with six days, their experience is rather limited," observes veteran state Representative Frank Buck. Buck emerged during this year's budget battle as a vocal critic of how state government spends your money.

He says he doesn't understand how Workforce Strategists could be considered the "sole source" for such services.

"These kinds of things are provided all across Tennessee. There's nothing unique about that for this particular company."

Workforce Strategists is located in the same shopping center as a state-funded career center.

Magill's memo notes that the difference between the two is that Workforce Strategists would focus on "hard to employ groups: 1) women and men who are long term recipients, 2) substance abusers, 3) ex offenders, 4) School drop outs."

However, we watched as an unemployed man walked into Workforce Strategists, searching for the career center. He was quickly signed up for an appointment for an evaluation.

But our investigation discovered Workforce Strategists' connections to the Sundquist administration run even deeper:
  • John Stamps also controls another corporation, Privatization Strategies, that is part owner in the business.
  • The registered agent for Privatization Strategies is Billy Stokes, who formerly served as special assistant to Sundquist. Stokes says he only set up the corporation as an attorney and has no knowledge of its business dealings.
  • Another Sundquist Labor Department appointee, Joanna Ediger, helped secure approval for the Workforce contract, then quit -- becoming a consultant and part owner of the company a short time later.

An audit submitted by Workforce Strategists indicates that "members of the company" received $110,500 in "consulting and marketing fees" in 2000. It does not name those members.

    "It's rather convenient that they are benefiting from the ownership of this LLC," Buck adds. "In the country, in common parlance, it stinks."

    In addition, Stamps' company -- Privatization Strategies -- once shared a Chattanooga mailing address with a business called ComTraining.Net. That business is partly owned by deputy governor Alex Fischer, his wife and the wife of Economic and Community Development Commissioner Tony Grande.

    Fischer did not return phone calls seeking an explanation. Grande's wife, Mary Belle Grande, says Stamps financed the company -- which provides online job training -- but she would not discuss its business dealings.

    So how close is John Stamps to the Sundquists? Well, every year he hosts a golf tournament in honor of the first lady, at a small 9-hole course near Monteagle.

    But Stamps isn't the only Sundquist insider who has cashed in.

    Al Ganier served as chairman of Sundquist's inaugural committee in 1995.

    Then, when the Sundquist administration decided in 1996 it wanted to connect all Tennessee schools to the Internet, it gave an exclusive $128,000 management contract to a new company formed by Ganier -- called Technology Partner, LLC.

    That corporation would later become Education Networks of America.

    One of ENA's key officers and its lobbyist: John Stamps.

    At the time, Sundquist's education commissioner Jane Walters justified not considering any competitors, writing in a memo that Ganier alone had "the right mix of business, government, technological and financial expertise [to] accomplish these goals."

    Rep. Buck questions whether that was another sweetheart deal. "There's nothing unique about hooking up a school to the Internet system -- and there's no reason why you can't competitively bid that and go on."

    Even when the state did take bids for the schools' Internet services, ENA used its experience in setting up the network to win two huge contracts -- even though it wasn't the lowest bidder. Those two contracts would be worth more than 180 million dollars.

    The first was a three-year, $74.3 million contract awarded in 1998. That was $23 million more than the bid submitted by the Arizona-based ISIS 2000.

    ISIS 2000 later filed a complaint with the Federal Communications Commission, alleging that the state did not give enough weight to cost in deciding who would receive the contract. The FCC rejected that company's challenge.

    The second was a five-year, $110 million contract awarded earlier this year -- that includes both federal and state funds. It was $35 million higher than the low bid submitted by Qwest Communications.

    State Comptroller John Morgan suggested that the administration consider re-opening bids because of confusion over one question on the Request for Proposals for the second contract.

    "Given the State's major funding problems, saving every State dollar is important," Morgan wrote. "Perhaps, given the results derived from this process, you may want to determine if a re-bid would be in the State's best interest."

    Education Commissioner Faye P. Taylor declined to re-open the bidding process.

    State officials note that Qwest recently pulled out of a school Internet project in Arizona and they say ENA's performance has been "exemplary."

    Still, Rep. Buck says the fact that ENA gained its experience through a sole-source contract makes it look "as though they've frankly set them up an insider deal."

    The governor refused to talk about his friends' contracts, but his office released a written statement, saying in part:

    "The governor's friendship with Al Ganier and John Stamps was not a factor in the contract decisions.... The governor's policy has been to treat every contractor -- friend, foe or stranger -- equally."

    Stamps is also a registered lobbyist for several companies that have received state funds. Part of his lobbying work has been done on behalf of a politically connected firm that secured a multimillion-dollar state advertising contract.

    The Monteagle man asked us to submit our questions in writing -- so we asked about Workforce Strategists' experience before it got the state contract.

    His office replied by listing what they've done since they got the contract, but not before.

    In addition -- despite the fact that the governor has been a frequent guest in Stamps' home and that Stamps is frequently seen around the governor's office -- Stamps says he has "never" discussed his $2 million state contract with the governor.

    As for how your tax dollars have ended up in the pockets of the governor's friends, Buck says it's just a little too coincidental.

    "They believe that charity begins at home, apparently, for the benefit of themselves."

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