Whitmire Seeks Inquiry Into HHSC-21CT Contracts

_{*Editor's note: This story has been updated.}

As questions continue to surround agreements made between the Texas Health and Human Services Commission and a contractor, a legislator is calling for investigators to get involved.

State Sen. John Whitmire, D-Houston, on Thursday asked the state’s public integrity unit to look into agreements between the commission and 21 Century Technologies. 

In a pointed letter to Gregg Cox, director of the unit, Whitmire said he was "particularly concerned" about the potential steering of any contract to a particular vendor outside the bidding process and whether the HHSC's former top lawyer, Jack Stick, or any other employees were involved. 

"It is alarming to read of Mr. Stick's direct involvement and apparent insistence that 21CT be granted a contract when there is the reality, or certainly appearance, of relationships between Mr. Stick and the principals of the company," Whitmire's letter to Cox stated. 

Cox said an investigation is probable.

"We've been following the press coverage, so we're not surprised to receive a complaint," Cox said. "I do anticipate we will open an investigation."

Stick, a former member of the Texas House and former deputy inspector general for the health commission, was promoted this year to be HHSC's top lawyer.

In recent months, his involvement in a $110 million contract for Medicaid fraud software, awarded to Austin-based 21CT, has been the subject of intense scrutiny. A series of stories by the Austin American-Statesman delved into how 21CT won the deal not through competitive bidding, but by being selected by HHSC from the state's computer services catalog managed by the Texas Department of Information Resources, or DIR.

In this case, DIR had a list of vendors who had previously met — through its competitive process — the requirements for a state contract in the "security products and related services" category. HHSC has confirmed it chose 21CT from the DIR list of those pre-approved vendors without a competitive process. 

So far, about $20 million has been paid to 21CT this year and another $90 million was to be paid once the contract extension kicked in later this month. That extension was canceled a week ago.

Late Thursday, HHSC Commissioner Kyle Janek released a statement that he had contacted State Auditor John Keel and asked for a thorough investigation of the Medicaid contract awarded to 21CT by the HHSC Office of Inspector General. 

"The public must be able to trust the contracting process at the Office of Inspector General and HHSC," Janek said.

Irene Williams, the CEO of 21CT, said in a statement that the company welcomes any review of its work to validate its technology.

"We are saddened by the false innuendo and unsubstantiated claims made by self-interested competitors who attacked a procurement process that HHSC and DFPS asked us to follow,” Williams said. She later issued a statement that she is now laying off employees.

“21CT followed the competitive process at DIR. We look forward to fully restoring our good name and explaining the power and success of our analytics and capabilities."

The Statesman’s stories also detailed how Stick, while deputy HHSC inspector general, would travel to conferences and tout the software that has pinpointed $200 million in state overpayments to Medicaid providers, according to Williams. 

As more questions about how HHSC made a purchase order for 21CT, the agency announced a week ago that Stick offered his verbal resignation to Janek. Friday was Stick's last day in the office, the agency said. Stick's wife, Erica, who is Janek's chief of staff, remains with the agency.

Whitmire also said he was concerned to learn that Stick remained at the agency one week after offering his resignation.

"When you resign, they confiscate your computer and you get your keys and you leave," Whitmire said. 

HHSC spokeswoman Linda Edwards Gockel told The Texas Tribune it was normal practice to let executives remain on the job after they offer their resignation to finish their projects.

On Wednesday, the Tribune reported that there was a second, $452,000 purchase order made for 21CT by one of the agencies HHSC oversees, the Texas Department of Family Protective Services.

DFPS had made a purchase order for 21CT to run a pilot program testing its software, which uses Medicaid information and other data to help state child abuse workers locate better information about families under investigation. Williams told the Tribune that she first brought the software idea to Stick, who encouraged her to take it to DFPS.

Late Wednesday, following a demonstration of both software tools, 21CT officials notified the Tribune that the DFPS contract was canceled. Days after inquiries about the contract from the Tribune, HHSC and DFPS notified the Tribune that a Dec. 12 letter was sent to 21CT notifying the firm of the child welfare software pilot being terminated. As of Thursday, the contract was still listed as "active" on the DFPS website.

Also Wednesday, data analysis by the Houston Chronicle revealed HHSC's method of selecting a new software product from 21CT was normally used for much smaller products, for purchases averaging about $3,493. 

A spokesman for Gov. Rick Perry’s office said it was on state agencies to address such issues.

“Neither the governor nor our office were involved with this contract," said Felix Browne, a spokesman for Perry. "The governor expects the leadership of any state agency to quickly and thoroughly review any allegations of mismanagement and take the appropriate action."

A request for comment from Gov.-elect Greg Abbott was not immediately returned Thursday.