Cozy Ties

In the battle to privatize welfare services in Texas, corporate bidders have enlisted some inside help

The council has been one of the prime forces behind TIES. Original TIES planning documents described CCG as "the sole point of contact with regard to all procurement and contractual matters" relating to TIES. The council, in tandem with the Health and Human Services Commission, was also charged with reviewing bids and awarding contracts for TIES. The CCG's decision-making power has been diluted somewhat by legislation that Bush signed a few weeks ago creating a major TIES oversight role for the Legislature and requiring public hearings before a contract is awarded. Nonetheless, the CCG remains a key player in the revamping of Texas's welfare system. Among the arrangements that critics have called into question:

Comptroller Sharp's former director of communications, Greg Hartman, now heads up the Southwest branch of MGT of America, a consulting firm that was in line to evaluate the performance of TIES contractors. While working for Sharp, Hartman helped design initial plans for privatizing human services, according to the Texas State Employees Union. Hartman did not respond to a request to be interviewed for this story.

Lieutenant Governor Bullock's former special assistant, Steve Bresnen, is now registered as a lobbyist for Lockheed Martin IMS. Bresnen denies he has any conflict of interest, insisting, "When I worked for the lieutenant governor, I had zero, zip, nada to do with this [welfare privatization] project." But Bresnen added, "If there should be a legislative effort to shape or inhibit the project, we will be lobbying."

Another member of Lockheed's all-star lineup, Richard Evans, has worked as an aide for two CCG members -- Bush and Workforce Commission head Perdue. According to the Texas Ethics Commission, he now works as an assistant to Lockheed lobbyist Dan Shelley, himself a former top Bush aide and a onetime Republican state senator from Crosby.

As Bush's chief welfare lobbyist and legislative director, Shelley convinced the 1995 Legislature to pass bills creating strong incentives for contracting out welfare to private firms. One measure authorized the CCG to study the cost-savings potential of privatizing human services.

"As soon as the bill was passed, Shelley went to work for Lockheed," says Lynn McCray of the Texas State Employees Union, which raised the complaint that led to the Travis County Attorney's investigation.

Lockheed IMS spokesman Ron Jury denies that his firm has any conflicts of interest. "Our employees did absolutely nothing improper. Our company maintains the highest ethical standards and follows the ethical requirements of any state we do business in." But after claiming that none of Lockheed's lobbyists had a direct hand in privatization legislation, Jury quickly called back to amend his comments: "I believe I gave you some erroneous information by suggesting that Dan Shelley wasn't involved in some aspect of the legislation when he worked for Governor George Bush."

A call to Shelley produced a more revealing response. A message about "welfare reform" left with Shelley's lobbying office several months ago was returned by Lockheed consultant Bill Miller, the ubiquitous lobbyist and adviser who's worked for Mayor Bob Lanier, the city of Houston and developer Wayne Duddlesten on his convention center hotel proposal. Miller stressed that Lockheed is "just one of Mr. Shelley's clients" and also downplayed Shelley's role in welfare privatization, saying it was "just one of his responsibilities." But Miller added: "Welfare reform, of course, is privatization. That was part of the governor's initiative. As his legislative director, of course, it was [Shelley's] responsibility to get the bill passed."

Rick Levy, legislative director of the Texas AFL-CIO, contends that Lockheed, in lieu of expertise in welfare, was banking on its name recognition and political connections: "It's a very sophisticated system of using the leverage they've gained with power in government through defense contracting, and now plucking out the highest leaders in the system they're looking to run."

Lockheed isn't the only company with a potential conflict of interest. According to the Texas Ethics Commission, Mike McKinney, the Health and Human Services commissioner, also worked in 1995 as a lobbyist for EDS -- one of the firms bidding for the welfare contract. Now, McKinney's commission will review his former client's bid. McKinney was unavailable for comment, but Health and Human Services spokesman Charles Stuart denied that McKinney's past connection to EDS poses any conflict.

Another questionable public-private meshing -- recently discontinued by state lawmakers -- joined state agencies and for-profit corporations in bidding "consortiums" competing for the TIES contract. One such team involved the Department of Health and Human Services, EDS and Unisys; another conjoined IBM, Lockheed Martin IMS and the Texas Workforce Commission. The consortiums exacerbated the potential conflicts of interest, since many of the corporate lobbyists and their public allies had worked for both competing and oversight agencies. The new law dissolves these consortiums and directs them to work "in concert," as Health and Human Services' Stuart puts it, to redesign welfare eligibility and delivery programs.

The angling for TIES has its roots in 1995 legislation that called, rather innocently, for a "privatization study" to evaluate the cost savings of outsourcing human services. With bipartisan approval, the Legislature created TIES.

No mere bureaucratic reshuffling, TIES was aimed at "streamlining" services and cutting costs through layoffs and competition between public agencies and private firms. TIES's emphasis on downsizing and contracting out government programs drew opposition not just from the Clinton administration, but from state and national unions, which warned that for-profit welfare administrators will skim public employees and welfare recipients in order to meet the corporate bottom line.

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