Sacramento, CA…Senator Ted Gaines, today issued a letter to Covered California Executive Director Peter Lee, criticizing the recent $184 million no-bid contract fiasco and calling on Mr. Lee to give a full accounting of the decision-making process that went into awarding the no-bid contracts to his friends and former colleagues….

October 13, 2014
Mr. Lee,
I recently read disturbing reports about the contracting practices at Covered California and am writing to try to understand how the Exchange, under your control, fulfills the public trust when it comes to spending taxpayer dollars.

As you may recall, I have had cause in the past to question Covered California’s spending. The infamous Richard Simmons infomercial, mocked around the country, spurred me to write a letter to you regarding the Exchange’s marketing budget, goals and measures of success. Not getting a satisfactory answer, I moved forward with a Joint Legislative Audit Committee request to further examine Covered California’s spending and inquire into some of the Exchange’s contracting practices, which was denied by the Committee. In hindsight, that appears to have been a terrible mistake.

Today’s news story regarding $184 million in no-bid contracts is the most troubling piece of information I’ve ever seen regarding the Exchange and appears to be part of a pattern of irresponsible spending from Covered California. Even worse, the story indicates that the contracts were in large part awarded to former colleagues of yours. I’m sure you exercised the most rigorous financial controls and your personal relationships with the contract recipients were incidental, but the initial reports are at the very least unseemly and reek of the kind of cronyism that all public servants should be interested in eliminating. Even the appearance of well-connected consultants and personal friends of decision makers getting bid-free contracts should not be tolerated.

The Bureau of State Audits called the Exchange a “high risk entity,” and it faces deficits of $78 million in fiscal year 2015/16. It’s critical that all possible safeguards are in place to protect the public from what appear to be serious fiscal problems at Covered California.

As such, I know that you would be eager to give a full accounting of the decision-making process that went into awarding the no-bid contracts. For example, regarding The Tori Group, founded by your former colleague Leesa Tori:

1. Was this firm the only company who could perform the duties of the $4.2 million contract?

2. What criteria were used to select this firm?

3. How many staff/resources did the firm have prior to its selection? How many now?

4. Was the issue of your relationship with Leesa Tori ever disclosed to counsel or the Covered California Board?

5. Have there ever been plans to eventually open this contract up to bid?

6. Are there any future contracts awarded to The Tori Group that have not been publicly
disclosed?

7. Do you anticipate awarding any future, no-bid contracts to The Tori Group?

8. I would extend those questions to $525,000 in no-bid contracts awarded to The Pacific Business

Group on Health Negotiating Alliance, which is also affiliated with one of your former business
entities, and all no-bid contracts awarded to by the Exchange.
Please do not feel constrained by my questions to limit your explanations to only those queries. In the
interest of transparency and good government, and in light of Covered California’s highly questionable
spending history and shaky financial footing, it’s imperative that the public get a full understanding of
the Exchange’s contracting practices and awards.
These answers will be a great benefit to taxpayers and I am calling on you to address these concerns
immediately.
I look forward to your timely response.
Sincerely,
Senator Ted Gaines