- The Washington Times - Tuesday, May 8, 2012

On the day before the D.C. financial control board returned city finances to local officials more than a decade ago, it approved a preliminary $1.8 million, no-bid deal with a company run by health care contractor Jeffrey E. Thompson to open a 24/7 health clinic for low-income residents of Southeast.

But Mr. Thompson’s company never converted the clinic to operate around the clock, as the high, locked iron gate keeping people off the property late at night made clear. And the D.C. government, under the administration of Mayor Anthony A. Williams, didn’t seem to mind, either.

City officials didn’t seek return of any money for the promised 24-hour clinic until years later amid unwanted publicity brought on when the contract was disclosed through an open-records request by The Washington Times.

For Mr. Thompson, the situation proved only a minor setback. Over the next decade, hundreds of millions of dollars would continue to flow from the city treasury to Mr. Thompson’s health plan and to a D.C.-based accounting firm he founded.

While a recent federal raid on his office has put Mr. Thompson’s ties to current city politicians under close scrutiny as federal agents scour his fundraising activities, records show the foundations for his political and business fortunes were paved during the Williams administration.

Mr. Thompson, for example, bought D.C. Chartered Health Plan out of bankruptcy for $4 million in 2000. Near the end of Mr. Williams’ administration seven years later, thanks to lucrative managed-care contracts with the city, the health plan was paying millions of dollars in cash dividends to a holding company wholly owned by Mr. Thompson.

Mr. Williams, who recently was named executive director of the Federal City Council, an influential business group, did not respond to messages seeking comment. Mr. Thompson’s attorney has declined to comment, citing a policy of not discussing clients in the media.

Early concerns

In 2003, D.C. Inspector General Charles C. Maddox issued a scathing report highlighting corruption in the city’s election and campaign finance offices. He uncovered schemes by officials to get illegal pay raises, hide damaging information about lawmakers’ fundraising, and hire a woman as a chief technology officer who had lied about having a computer science degree.

Though not widely publicized at the time, the report also uncovered the illegal bundling of a handful of campaign contributions by Mr. Thompson’s health care company, D.C. Healthcare Systems, and its affiliates.

Under D.C. law, a parent company and its subsidiaries are limited to a single contribution limit, but Mr. Maddox’s report showed how D.C. Healthcare Systems and two of its affiliates each gave maximum contributions to a D.C. Council member, Carol Schwartz, at-large Republican. Together, the donations easily exceeded a single contribution limit.

It was just one example of what Mr. Maddox’s office concluded were failures or selective enforcement by the city’s Office of Campaign Finance, though federal prosecutors turned down the case for criminal charges. After the report, however, city politicians did little to halt the illegal bundling. Instead, they continued to accept thousands of dollars from Mr. Thompson’s health care holdings, with donations fitting the same pattern deemed so problematic by Mr. Maddox.

“It was pretty obvious we were doing our job,” Mr. Maddox said in a recent interview. “The report speaks for itself.”

Campaign cash

On Sept. 3, 2002, while Mr. Williams was running for re-election, his campaign received more than $15,000 from donors whose patterns of giving over the years suggest their participation in Mr. Thompson’s powerful fundraising network, campaign records show.

Donations of $2,000 each to the Williams campaign that day came from, among others, Mr. Thompson, executives at his health plan, his accounting associates and Nursing Enterprises Inc., a company headed by Myrtle R. Gomez, who serves on the board for Mr. Thompson’s health plan.

In other campaigns, many of those same donors gave maximum contributions on the same day to the same politicians as Mr. Thompson and his associates, records show.

In October 2002, the Williams campaign received another infusion of cash from donors tied to Mr. Thompson, including a contribution from Mr. Thompson’s health care holding company, D.C. Healthcare Systems Inc.; his accounting partner, Michael Cobb; and a Philadelphia company whose owner had done consulting work for Mr. Thompson’s accounting firm.

The contributions were hardly unusual. The same pattern has emerged, election after election, in a review of dozens of campaign disclosure reports filed by city lawmakers in the past decade.

“I think it started as very small,” city activist Dorothy Brizill, who runs the DCWatch website, said in an interview early last week. She began posting information about contributions tied to Mr. Thompson about a decade ago.

“Then you say, well, nobody got caught,” she said. “And then soon everyone starts doing it. Then it’s a situation where your campaign might suffer if you don’t accept $10,000 or $15,000 in these bundled contributions.”

In a rare public remark on his political giving, Mr. Thompson told the now-shuttered Common Denominator newspaper in 2001 that his companies backed politicians who “support good public-health policy.”

“We will continue to support politicians who are on the side of supporting quality health care,” he told the newspaper. “It’s the right thing to do.”

Big business

Since April 2002, D.C. Chartered Health Plan has secured Medicaid and other contracts totaling at least $800 million from the city government, a review of city contracting records shows. The health plan also handles claims for a separate city-funded health plan for low-income people who do not qualify for Medicaid called the D.C. Healthcare Alliance, records show. The alliance was created after D.C. General Hospital was closed, a move Mr. Williams backed.

While most of the money paid out to D.C. Chartered went to administer health care claims, the company still paid out millions of dollars in dividends to Mr. Thompson’s holding company, records show. Annual reports show D.C. Chartered posted net profits in 2004 and 2005 of more than $5 million each year, while also paying millions in fees to affiliated companies controlled by Mr. Thompson.

In 2006 and 2007, D.C. Chartered paid cash dividends totaling more than $5 million to its parent company, D.C. Healthcare Systems Inc. The Washington Post reported on the dividend payments in March.

In addition, D.C. Chartered paid management fees totaling more than $3 million to D.C. Healthcare Systems during the same period, records show. The health plan also paid Mr. Thompson’s accounting firm more than $400,000 from 2003 to 2007, and nearly $5 million in 2006 and 2007 for transportation services to RapidTrans Inc., a company also owned by Mr. Thompson.

Meanwhile, the accounting firm that Mr. Thompson founded, Thompson Cobb Bazilio & Associates, has won tens of millions of dollars in contracts since 2000, though several of the engagements were so-called supply schedule agreements, where vendors are paid up to a certain amount but actually can receive less money. In one case, however, the firm received a lot more money.

In 2000, the city awarded a $999,000 contract to Thompson Cobb Bazilio & Associates. The consulting deal lasted only a year, but the task orders paid out to Mr. Thompson’s company continued for years, records show.

By the time the city government finally sought the council’s approval nearly five years after the contract was first approved, the city already had paid out about $6 million.

It was one of several contracts at the time, including several with no ties to Mr. Thompson, in which city officials said they paid vendors too much money without getting the required approvals.

In a request by Mr. Williams’ office to approve the payments retroactively, city officials explained, “Due to an oversight in administration, option year one was not exercised and the contract expired on March 14, 2001,” records reviewed by The Times state. “After the contract expired, the [Office of Contracting and Procurement] mistakenly awarded task orders to [Thompson Cobb Bazilio and Associations] in the total amount of $6,830,127.27, and TCBA continued to work without a written contract until March 14, 2005.”

Revolving door

After the disclosure that the health care clinic wasn’t open 24 hours a day, seven days a week, several D.C. Council members, past and current, raised questions about the deal, including Mrs. Schwartz. But Mr. Thompson never publicly addressed the criticism, relying instead on longtime associate John L. Ray, an at-large Democrat on the council from 1979 to 1997 and now a lobbyist, to explain things.

Mr. Ray is just one of a number of people who have spun through the revolving door between the city government and businesses tied to Mr. Thompson over the years.

Francis Smith is another. He was the executive director of the financial control board and signed off on the preliminary clinic contract with Mr. Thompson just before the control board suspended its operations after six years overseeing the city’s budget and spending as mandated by Congress. Later, Mr. Smith went to work for Mr. Thompson’s health care company. He denied any conflict of interest when the deal surfaced years later.

James Christian, who was chief operating officer at the city-funded D.C. Healthcare Alliance, also later went to work for Mr. Thompson at D.C. Chartered.

Karen Dale, a spokeswoman for D.C. Chartered, said Tuesday that Mr. Christian and Mr. Smith “have both added significant value to the operations of Chartered and the members we serve.”

In the wake of the federal raid, Mr. Thompson has left both the accounting firm and the health plan, and D.C. Chartered is seeking buyers.

• Jim McElhatton can be reached at jmcelhatton@washingtontimes.com.

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