A state Medicaid contract that shouldn’t have been signed in the first place was cancelled last week after officials found out the agreement is under federal investigation. Nothing about the contract with Client Network Services Inc. (CSNI) of Maryland smelled right from the beginning.

Now, the chickens have come home to roost. Kristy Nichols, state commissioner of administration, dropped the CSNI contract like a hot potato after she learned a federal grand jury in Baton Rouge subpoenaed documents related to the contract.

“We have zero tolerance with wrongdoing, and we will continue to cooperate fully with any investigation,” Nichols said.

CSNI was going to pay claims and act as the intermediary for the state’s $6.7 billion Medicaid system, which is a federal-state health care program for the poor.

If Gov. Bobby Jindal and his chief administrators really believed in the ethics code the governor has bragged about since he first took office, they would have told CSNI in the beginning they weren’t interested. The reason is Bruce Greenstein, secretary of the state Department of Health and Hospitals, was a vice president for CSNI from June of 2005 to September of 2006. It is DHH that oversees the Medicaid program.

As the saying goes, “everybody and his uncle” could see there was a potential conflict of interest there. However, there was more. Greenstein admitted to the Senate and Governmental Affairs Committee in June of 2011 at his confirmation hearing that his office rewrote a request for bids in a way that made CNSI eligible to do the work. He said he wasn’t personally involved in making the change that was designed to allow for greater competition.

Greenstein was also asked by the committee why he met with a CSNI official within days of coming to DHH, and had a later meeting on the same day with his staff to discuss the Medicaid contract. Greenstein said the lunch was just for him to catch up with a former colleague.

“Did they ask you anything about the proposal that was going to be submitted?” asked former state Sen. Rob Marionneaux, D-Livonia.

“I can’t remember,” Greenstein said.

CSNI was eventually awarded the contract designed to pay the company $185 million over a 10-year period to process Medicaid claims for the more than 1 million Louisiana residents covered by the program.

Even the company’s selection was a secretive process. The Senate and House Health and Welfare committees are supposed to hold a hearing before contracts are awarded, but DHH attorneys said state law prevented the department from releasing the name of the firm that was selected until the committees met. The name of the company wasn’t made public until senators said Greenstein’s confirmation as DHH secretary was jeopardized by his silence on the contract.

It is easy to see why this CSNI contract was bad news from the get-go.

Two other companies that had submitted bids filed protests over the contract. ACS State Healthcare LLC of Atlanta had come in second with a bid of $238 million. Molina Medicaid Solutions has the current $300 million contract.

ACS claimed CSNI had received special treatment. Molina said DHH had a bias against its company. Both eventually dropped their protests after earlier ones had been denied by the state’s chief procurement officer.

CSNI was then clear to begin its operations to start processing claims in 2014. The company said it would pay health care providers faster for the services they deliver, allow recipients to keep up with their health care services online or through a call center and better detect Medicaid fraud.

Critics of awarding the contract to CSNI said the company underestimated the cost of the contract and made incorrect assumptions to win the bid. Time would prove them right about the cost.

The state Division of Administration in February of this year agreed to a contract amendment paying the company an additional $8.9 million. DHH officials said the new work wasn’t part of the original contract and was necessary because a federal deadline was changed.

Maybe so, but that wasn’t the end of the story. DHH proposed a second contract amendment that would have allowed the company to be paid another $40 million. The Division of Administration wisely decided to derail that additional payment. The $40 million would have boosted the contract to nearly $234 million, just $4 less than Molina’s original bid of $238 million.

Nichols said Molina has the current contract and will continue to provide services until a new request for proposals can be completed. Businesses that may be interested will be able to submit proposals explaining what they would do and at what cost.

The Advocate said Jindal declined to be interviewed about whether any of this will have any effect on Greenstein’s job status. Paul Rainwater, the governor’s chief of staff, did release a statement saying the administration has confidence in the DHH secretary.

Where this investigation ends is anybody’s guess. However, one thing is clear. This sordid episode demonstrates the Jindal administration isn’t immune from the state’s ethics laws it likes to number among its political accomplishments.

Jim Beam, the retired editor of the Lake Charles American Press, has covered people and politics for more than five decades. Contact him at 337-494-4025 or jbeam@americanpress.com.