02/13/2009 - Feds: Ethics conflict in Ind. workforce contract (Associated Press)

Feds: Ethics conflict in Ind. workforce contract

By Ken Kusmer, Associated Press Writer

INDIANAPOLIS - A former top official in the Indiana Department of Workforce Development initiated a $2.8 million state contract that ultimately went to a company he had just sold, violating federal and state rules at a time when Gov. Mitch Daniels was ordering higher ethical standards for his administration.

A U.S. Labor Department audit obtained by The Associated Press found the agency's former director of information technology, Roy Templeton, still held a financial stake in @Work Solutions Inc. when it received the contract for a case management system in June 2006. The company was formed when Templeton sold In Touch Information Services Inc. and In Touch Information Services of Kentucky Inc. and the two were combined.

State officials say Templeton was removed from the team evaluating bids after he informed them that his former companies would seek the contract for the computer system, which manages information on job training, education and other services. But they say Templeton never disclosed that he was still collecting monthly payments from the sale.

Templeton said he was up front about owning the companies and the potential for conflict of interest before he took the state position.

"The fact (is) that even before I was hired I made the issue of me owning these companies known ... prior to Governor Daniels taking office," Templeton said in a phone interview Thursday night. "So when I was approached about this position I did my level best to make this position known, that I owned these companies and it may represent a conflict of interest and talked about it from the very get-go and saying I would do everything I could to sell the companies so that conflict wouldn't be there."

He said he agreed to take monthly payments to "facilitate the sale" and for tax purposes. "But no aspect of it, and only tonight did I discover, that from the auditor's point of view that I still had an interest in those companies, which I was unaware of."

Ron Stiver, who was commissioner of workforce development at the time, said he "went above and beyond in taking appropriate measures to ensure there was no conflict of interest."

Those steps weren't sufficient, according to the audit released Dec. 17 by the Labor Department's Office of Inspector General.

The auditors said Templeton continued to directly supervise two members of the team and had "the opportunity to influence the final decision." Once @Work Solutions got the contract, he was directly involved in administering the contract.

The audit also found no evidence that the workforce agency conducted ethics training for its employees between January 2005, when Daniels took office, and February 2008. Templeton, who was hired in February 2005, told auditors he never received ethics training and did not know he needed to report the payments.

"IDWD lacked sufficient internal controls to prevent or detect such conflicts of interest," said the audit, which does not mention by name Templeton or any other individuals involved in the matter. The AP confirmed his identity through state documents.

Stiver said employees did receive ethics training, which Daniels made a priority on his first day in office by issuing an executive order imposing new ethics standards for all state employees. The order prohibited them, in part, from taking gifts from those they do business with and created a state Office of Inspector General to police those rules.

He promised in his first State of the State address to "lift the ethics rules governing the conduct of state employees to the highest levels in America."

Daniels said Thursday he didn't know anything about the audit and would not comment on it.

"Everyone has been trained in ethics by the inspector general, including me," he said.

Critics questioned whether that training is adequate.

Rep. Russ Stilwell of Boonville, the Indiana House Democratic floor leader and a member of the Labor and Ethics committees, said Templeton's actions were "appalling" and fall short of even kindergarten standards of telling right from wrong.

He called on the administration to review the report and make changes to avoid similar situations.

"These things should not happen in government," Stilwell said.

Others questioned whether Daniels' inspector general office was effective.

Indiana Inspector General David Thomas said initially that he did not learn of the audit and Templeton's conflict of interest until contacted this week by the AP. He later said he thought current Workforce Development Commissioner Teresa Voors might have mentioned it once.

"I do remember they said the feds were looking at something," Thomas said, but he could not recall if it was the matter involving Templeton.

Voors was the general counsel for Workforce Development while Templeton was director of information technology, and Labor Department auditors interviewed her as part of their investigation, which began after a tip to the federal agency's hot line in September 2006. She became commissioner in September 2007.

Voors, in her Nov. 26 official response to a draft of the audit, said her agency "will take all steps necessary to rectify this situation" and promised to cooperate with the investigation.

Spokesman Marc Lotter said Voors would not comment on the audit because her actions while general counsel were covered by attorney-client privilege.

The state agency did not conduct its own internal investigation of the matter.

Stiver said he fired Templeton in July 2006 for reasons not related to the contract but would not elaborate. State personnel records don't list a reason for his dismissal.

A spokesman for the Labor Department Office of Inspector General, Jeff Lagda, said Templeton's conflict of interest might have unfairly tilted the bidding process. It also created the possibility the government paid too much for the case management system, he said.

The audit recommended the Labor Department review the costs related to the contract and recover any amount found to be unreasonable. A report is due by June 15 on whether Indiana should return any of the $2.8 million federal grant, Lagda said.

Workforce Development so far has paid @Work Solutions $2.2 million under the contract, Lotter said. Asked if the state agency has the money to reimburse the Labor Department if asked to, Lotter said, "We don't plan for hypotheticals."

Julia Vaughn, policy director for the government watchdog group Common Cause Indiana, said the matter was "disturbing" because warning signs of the potential for a conflict of interest were "either ignored or forgotten."

"If we don't have a strong system in place to enforce the new ethics system that the Daniels administration has put in place, what good is it?" Vaughn said.

Messages seeking comment were left with an officer for @Work Solutions, which has offices in Louisville and Indianapolis. ___

Labor Department audit: http://www.oig.dol.gov/public/reports/oa/2009/05-09-001-03-390.pdf