Thursday, June 30, 2016

The Cook Report

By the time the long awaited Cook Report arrived from Boston, the final cost in human terms of the Neal deficits was that 858 municipal employees lost their jobs. Ironically, the loss of all those employees actually increased the city’s costs in the short term, because the city had to pay unemployment benefits to each one fired, causing that expense to rise to nearly $5 million dollars from only a half million dollars the year before. That was just more millions for Mayor Hurley and the City Councilors to try to scrape up from somewhere. While the partially successful Proposition 2½ override relieved some of the financial pressures, it served mostly to prevent further lay-offs. Everything depended upon the state legislature appropriating money to clean up what remained of Neal’s deficits so that Springfield could begin the long, difficult process of recovering from the financial crisis.

However, the State Department of Revenue, deeply concerned over how Springfield’s finances had crashed so suddenly and without warning, decided to withhold action until an investigation could be conducted into the mysterious and unique situation in Springfield. For that purpose, the Commonwealth brought out of retirement former Department of Revenue Auditor Newell Cook, chosen by the state because of his decades of expertise in municipal financing and reputation for unbending integrity.

The Dukakis Administration wanted as unbiased and objective an appraisal as they could get, because they had little desire to embarrass unnecessarily their fellow Democrats and supporters in Springfield. They also knew that the report had the potential to have explosive political ramifications, possibly even threatening the career of the newest member of the state's delegation to the United States Congress, Richie Neal. Cook would have to navigate quite a political minefield in order to present his investigation’s results in a way that would avoid accusations of political interference.

Surprisingly, the final report Cook wrote for the Department of Revenue released in September of 1989 succeeded in obtaining that neutral political objectivity. Ironically, the report was all the more powerful in it’s political implications for the fact that no one could accuse Cook of bias. One of the means by which Cook avoided casting political aspersions on anyone was to refrain throughout the report from mentioning anyone by name. Richard Neal was referred to only as “the Mayor” and Mitch and his colleagues were always referred to simply as “the City Council” so no one could claim that they were being singled out personally.

Although officially titled “City of Springfield – Analysis of Financial Status” the document soon became known simply as “The Cook Report.” Financially, the city got both good news and bad out of the Cook's report. The bad news was that Cook opposed a direct bailout of Springfield through a special appropriation by the legislature, as Cook reasoned that there was no reason for the taxpayers of the entire state to be hit with a bill for the fiscal mismanagement of Springfield.

However, the report did urge the state to come to Springfield’s rescue through special legislation allowing Springfield to deficit spend (in essence borrow against future taxes to be collected) which would provide a short term fix that would solve the fiscal crisis of today by spending money that the taxpayers would be forced to pay off tomorrow. It was hardly a solution for the public to cheer about, but at least it avoided the only other alternative, which was for the city to go into bankruptcy, which would have resulted in a forced state takeover of the municipal government placing Springfield under state receivership. The city might be broke and in debt, but at least under Cook’s recommended legislation allowing deficit spending, Springfield could at least keep its sovereignty, thereby allowing the city to preserve its last remaining shreds of dignity.

In return for providing this way out, Cook insisted on a list of reforms that he believed were necessary to guarantee that Springfield would not fall into the same financial hole again. It was in the course of making these recommendations, and describing why they needed to be adopted, that the Cook Report emerged as a political as well as a financial document, despite the author’s plain desire to avoid doing so. However, there was simply no way of describing what went wrong, without making obvious who was responsible for the wrong-doing. As a result, the Cook Report was inadvertently a scathing condemnation of the mayoralty of Richard Neal.

The report began with a frank appraisal of the city’s terrible fiscal situation. “The City of Springfield,” Cook wrote, “has found itself, apparently without advance warning, in financial distress.” He described the components of that distress as “1) the operating results for FY1989 have been clouded with surprises, uncertainty and acrimony; 2) the budget for FY1990 requires a reduction in total spending and has consequently required reductions in service levels and the layoffs of many employees, and; 3) the elected and appointed officials of the City believe that the public has lost respect for and belief in the financial operations of the government.”

Cook then goes on to state that “the root cause of the distress is a general and longstanding weakness in sound fiscal management.” How longstanding? Cook pointed to “the generous growth in spending capacity experienced over the prior five years.” Of course everyone reading the report knew who, and who alone, had been mayor during that five-year period, even though Cook never mentioned Richard Neal by name.

Cook partially excused Ogulewicz and his colleagues from having a significant role in causing the crisis. Although he suggested that the City Council should have exercised a more aggressive oversight role, he acknowledged that there were legitimate reasons why that did not occur. “It had not been until December 1988 and January 1989 that the public and most City officials were aware that there were any major problems.” Cook wrote. “Indeed during the fall and into the early winter of 1988, the financial officers of the City had been presenting reassuring projections." In other words, the City Council couldn’t be expected to carry out its oversight functions while it was being completely misled by those in charge of the city’s finances. Again, no names were mentioned, but every reader knew that Cook was referring to Richard Neal and his advisers Henry Piechota and Joseph Dougherty.

One of the most devastating conclusions Cook reached was that the decrease in state and federal financial aid had not caused the city’s crisis. Obviously those cuts did not help, but Cook plainly stated that the crisis would have occurred regardless of what happened at the state and federal levels. “Springfield’s budget’s growth exceeded inflation by nearly $14,000,000 over this five year period,” Cook explained (and again, every reader knew who was mayor in that five year period). “While adjusting to the FY1990 level funding of State Aid, even before the further cuts required in State Aid, has led to serious cutbacks in local operations, MOST OF THIS PAIN HAS BEEN IMPOSED ON THE CITY BY ITS OWN ACTIONS OVER THE PAST FIVE YEARS” (capitals added). So even if state and federal funds had not been cut, the overspending of the Neal years would still have caused the city to go into debt following Neal’s departure. Cook’s conclusion robbed Neal of the excuse that he had simply been the victim of an economic downturn, and made it clear that it was the Neal Administration’s own fiscal policies that had brought about the crisis.

Nor would Cook allow Neal to hide behind his fiscal advisers. “While the Auditor performs a critical role in the municipality’s fiscal operations,” Cook wrote, “that role does not carry with it major policy-making responsibilities. In a “strong mayor” form of government such as exists in Springfield, this role, within the executive branch, RESIDES IN THE MAYOR. The Auditor, and indeed all other department heads, are expected, with limited exceptions to carry out THE MAYOR’S DECISIONS (capitals added).” One by one, Cook was stripping away Neal’s excuses, leaving him nowhere to hide.

The implications of Cook's accusations were enormous. Many couldn’t help but look back at the abrupt departure of Eddie Boland from Congress, despite every indication that he intended to run again, in a whole new light. Had Neal foreseen the fiscal crisis coming to a head, and then realized that his only hope of going to Congress was to shove Boland aside and get out of City Hall before the crisis broke? What if Boland had stayed for another term, and the fiscal disaster had been Neal’s to deal with? Not only would an angry public have been unlikely to send Neal to Congress, they would’ve been unlikely even to re-elect him as mayor, thereby ending Neal's career. The possibility that Boland had left office completely voluntarily now seemed even more remote.

But that wasn’t the worst of it. Cook then went on to plainly state that the Neal Administration had been guilty of violating state laws. This was an accusation that Vinnie DiMonaco had made over the funding for Springfield Central, and what Mitch had complained about in the MOCA controversy and the unexpected firing of summer help. Vinnie had described Neal’s appropriation process as “half-ass backward,” but using more subtle terms Cook stated that “the city of Springfield routinely, and with the concurrence of the City’s financial officers . . . spent large sums without appropriation.” Refusing to go very deep into this political and legal minefield, Cook simply dryly recommended, “Immediate compliance with the General Laws should be established.”

One might have thought that such a completely devastating indictment of city government would have inspired shouts of anger from outraged taxpayers. And perhaps it might have, if the public had ever read it. Unfortunately, the media accounts, particularly in the Springfield Newspapers, focused only on the recommended reforms in the report, conveniently overlooking the far more serious implications of exactly why such reforms were necessary. Indeed, much of the material reprinted here from the Cook Report is being presented to the public for the first time in this chronicle.

Neal appeared driven nearly to desperation to make excuses for himself in the wake of the report. At first he absurdly stated that the report never referred to him by name, but only to some entity called “the Mayor.” That excuse was so lame that even his media lackeys at the Springfield Newspapers, who at first reported that excuse with a straight face, had to back off from it. Then Neal pretended that the fiscal crisis had nothing to do with him, since it had erupted after he had left office(by a matter of weeks). He was now the Congressman, and not to be bothered by questions relating to anything that happened before he held his current office.

Neal's excuses were lame, but still necessary if every attempt was to be made by the newspapers and other establishment voices to protect their pet congressman. Long before the presidency of Bill Clinton, the Neal camp had discovered and were practicing the Clintonian methods of defense: deny everything, volunteer nothing and say anything necessary in your own defense, however absurd, as long as it confuses and distracts. Indeed the Neal people would soon adapt a forth pillar of Clintonism as well - destruction of your enemies.

The Cook Report had a number of recommendations as to what Springfield should do in order to prevent a similar crisis in the future. Most of them were commonsense reforms a second year accounting major could have recognized as necessary, but which seasoned professionals in the Neal Administration either could not see or pretended they could not. Among them was a suggestion that the Auditor and Budget Director, one and the same under Neal in the person of Henry Piechota, be divided into two positions. There was a clear conflict of interest in allowing one person to do both jobs, since the auditor (Piechota) would naturally protect the budget director (Piechota) and vice-versa. Unfortunately, Pichoeta was now on unlimited sick leave for vaguely described “heart problems,” a condition apparently so severe that he was never available again to answer any questions. The local media appeared to accept Piechota’s vanishing act without question.

Although the fingers of guilt were pointing toward the congressman in the wake of the Cook Report, there continued to be a massive attempt at damage control by the Neal camp. With the help of political and media allies, it looked as if Neal might emerge from the crisis with most of the public never becoming fully aware of his central role.

Despite the absent or incomplete nature of the reporting on the fiscal crisis by the greater Springfield media, up in Holyoke there appeared coverage that was not distorted by political concerns. Holyoke’s scrappy daily The Transcript-Telegram wrote several pieces that were much more clear-eyed than anything that Springfield residents were reading. Columnist Mark LaFrancis wrote a devastating piece entitled “Neal’s Blunder” that showed LaFrancis had no illusions about Neal’s role. “The trouble is,” LaFrancis wrote, “that Neal wasn’t worried as much about the public’s welfare as he was his own image.” Another major article by editors Bob Unger and Carolyn Lumsden was entitled, “Freshman Congressman Left Troubled City Behind.”

Yet as if the fiscal crisis were not enough, there were other disturbing civic matters also demanding the public’s attention. Running simultaneously with the fiscal crisis of 1989 was a gradually unfolding concern regarding the city’s employee insurance program. The first hint that something was wrong was an odd rumor that circulated within insider circles during January of 1989. According to these accounts, the city was alleged to have come within hours of having its employee health insurance coverage cancelled due to nonpayment of fees.

The insurance bill was said to have languished on the desk of city Personnel Director Joseph Dougherty, only to be rescued at the last minute by Budget Director/Auditor Henry Piechota. He allegedly had to personally retrieve the bill from Dougherty’s desk and take it to be paid. Piechota did so only after Joseph Tierney, President of MED-TEC (the administrator of the employees health plan) complained to acting-Mayor Vincent DiMonaco that their repeated phone calls to Joseph Dougherty were not returned. Everyone was wondering why Dougherty had withheld submitting the bill for payment and for what reason he had placed the city’s employees at risk.

It fell on Mitch Ogulewicz’s Administration and Internal Affairs Committee to look into the matter, which was not a task he relished. Was it possible to imagine a more deadly dull topic than insurance law? Mitch’s own academic background was in business, and a group called the Insurance Advisory Board, rather than the City Council, was primarily responsible for the general oversight of the city’s insurance contracts. The Advisory Board consisted of Dougherty, retired cop Bobby Brown, teachers Christopher Collins and Mary Ann Salmen, Police Officer Robert P. Moynihan and a half dozen others representing every aspect of the city’s workforce. Yet despite his lack of background in insurance matters, Mitch could recognize a case of inter-departmental bickering when he saw one, and he realized the importance of nipping it in the bud.

So his fellow committee members Mary Hurley and Robert Markel met one afternoon with Dougherty, Piechota and a man named E. Paul Tinsley, who was the founder of a consulting firm, Insurance Cost Control, which the city had hired in 1986 in order to advise the city on how to lower its medical insurance costs. At the meeting everyone was anxious to reassure Mitch and the committee that all was going well and that the problem with paying the bill to MED-TEC was merely a one-time mix-up that would not be repeated.

Yet somehow Mitch could not shake the sense that Pichoeta wasn’t quite buying into all the happy talk, although Pichoeta himself was not openly objecting to anything being said. At one point Piechota discreetly slipped a sheet of paper across the table to Mitch. It was a document from MED-TEC, the city’s health insurance administrator that was hired after Blue Cross/Blue Shield was dropped by the city due to their rapidly rising fees. The document slipped to him by Piechota thanked acting-Mayor DiMonaco and Piechota for finally getting the bills paid, and also seemed to suggest that MED-TEC was very unhappy with the way it was being treated by Dougherty and E. Paul Tinsley.

Mitch asked Tinsley for an explanation, but found the consultant evasive, even indignant over answering his questions. Finally Mitch could take no more of Tinsley’s attitude. “Listen, you work for the taxpayers the same as I do,” Mitch scolded, “and when there is a question regarding the people’s business you WILL answer the question and answer it in full!” Yet despite the dust-up, that single meeting, in which Mitch’s committee was repeatedly assured that no more problems regarding the insurance accounts would occur, would probably have been the end of Mitch’s interest in the insurance accounts if not for one fateful phone call.

One day in February, Mitch received a call from an old friend. Attorney Thomas Murphy had known Mitch since high school and had been very active in all of Mitch’s campaigns. Although Murphy had many ties to people in the Neal camp, he had always remained supportive of Mitch and his family (eventually Murphy would become the personal attorney of Peter Pan’s Peter Picknelly). Murphy asked Mitch to meet him for breakfast the next morning at Russ’ Restaurant, a popular Glenwood Circle Diner in the Atwater Section of Springfield that was often frequented by political people.

When they met the next morning, Murphy did not bring up any topics out of the ordinary. Finally, when they were outside the restaurant and safely away from any eavesdroppers, Murphy told Ogulewicz that there was an insurance contract that Neal had signed during his last days in office which might be bad for the city and that ought to be re-examined. Murphy claimed not to know much about the contract himself, which was with Insurance Cost Control, but he knew of an employee of MED-TEC named Vincent Britt who had some concerns. Mitch agreed to talk with him, and a few days later, after Murphy had arranged the meeting, he met with Murphy and Britt at the same diner. Later, Mitch spoke to Piechota, requesting to see all contracts pertaining to Insurance Cost Control and MED-TEC.

Even with his own limited background in insurance, Mitch soon realized that something was wrong. He discovered that Insurance Cost Control, which had received the contract Murphy and Britt had warned him about, was at the very least duplicating work already being done by MED-TEC . Mitch began to wonder just what is this entity called Insurance Cost Control, and what exactly did it do for the city? He saw all over the documents the name of E. Paul Tinsley, the arrogant consultant he had met at the committee meeting. Who was E. Paul Tinsley and why did he appear to be so powerful? The more Mitch looked, the more convinced he became that E. Paul Tinsley and Insurance Cost Control were bad news. His opinion was even more reinforced when he showed the information to insurance experts he knew, who also suggested to him that something wasn’t right about the role of I.C.C. in city government.

Mitch also began to ask around City Hall about the insurance contract. He arranged to have breakfast one morning with Joe Dougherty at a place called The Court Square Restaurant. Mitch asked him his opinion of Insurance Cost Control and E. Paul Tinsley. Dougherty praised Tinsley to the roof, saying he ran a great organization and even said that he and his family had stayed at Tinsley’s house on Cape Cod that past summer. It appeared to Mitch that Tinsley was not just someone that Dougherty worked with on the city’s insurance matters, but was a personal friend as well.

Ogulewicz recognized that he personally lacked the expertise to conduct a full investigation. Actually an “investigation” in a criminal sense was not what he had in mind. What Mitch wanted was to have the contract reviewed so that if it had been pushed through in an ill-advised manner during the last days of the Neal Administration, then the city could revisit it with an eye toward getting a better deal. It seemed to Mitch that the contract’s length – five years – was extraordinarily long (it was rare for the city to sign a contract for more than a year) and the terms of ending the contract seemed extraordinarily generous to Insurance Cost Control. He also wanted to know whether or not there were duplication of services and determine if Springfield was being overcharged. It appeared to Mitch as if a similar contract I.C.C. held with Worcester cost much less even though Worcester had more employees.

Therefore on March 9, 1989, Mitch Ogulewicz held a press conference calling on the city to hire a respected outside company such as the accounting firm Coopers and Lybrand to come in and examine the Insurance Cost Control contract. While fielding questions from the press, Mitch noticed acting-Mayor Vincent DiMonaco discreetly slip into the Council chamber. DiMonaco gave Mitch a signal to meet with him after the press conference, and then quietly stepped into the Council’s private office. After the press conference, Mitch met him there. “What the hell are you doing?” Vinnie demanded in his typically gruff manner.

Mitch explained that he was convinced that the city was getting screwed on the I.C.C. contract and wanted the Council to hire an outside investigator to get to the bottom of it. “Write a formal request and I’ll see that it’s brought to a vote,” Vinnie replied and then walked away. It was as close to an open endorsement as Mitch could hope to get from the crusty old veteran, and he was grateful to have Vinnie on his side. What neither realized at the time was that both of them had just entered into a mutual political suicide pact.

Mitch was somewhat taken back by the response to his press conference. Within one hour, an emergency meeting was held of the Insurance Advisory Board, which rammed through a resolution expressing full support for I.C.C. The resolution caught Mitch by surprise, since why was it necessary to rush forward to defend I.C.C. when no inquiry had yet taken place and no accusations had been made? It seemed like an almost panicky overreaction.

A few days after Mitch’s press conference, Joe Dougherty contacted Mitch and asked to meet with him again. At breakfast the next morning Dougherty got straight to the point and said he wanted to clarify something. Did Mitch remember him telling him that he had stayed on the Cape with Tinsley last summer? Of course Mitch remembered that very well, and it had troubled him at the time as being potentially inappropriate and a conflict of interest. Now Dougherty was saying that he had misspoke; that it had been the summer before that when he had stayed with Tinsley, in 1987, rather than 1988. The difference was important, because if it was 1988 than Dougherty was socializing with Tinsley at the same time that he was supposedly negotiating a contract, something which would have been a clear conflict of interest. “No problem," Mitch said regarding Dougherty’s sudden change of story. “Surely you have receipts of some kind to prove that?” Dougherty nodded his head yes, but did not seem to enjoy the remainder of his breakfast.

Another unexpected wrinkle developed when the day after Mitch’s press conference the Springfield Newspapers revealed that one of I.C.C’ s consultants was city tax collector Charles Kingston. It turned out that Kingston was a campaign consultant to Councilor Mary Hurley, who was running at the time for mayor against acting-Mayor Vincent DiMonaco. Mitch had no previous knowledge of the Hurley/Kingston connection, or of other details of I.C.C. controversies in Worcestor which appeared in the Union-News in an article by Brad Smith that appeared the day after Mitch's press conference. It seemed improbable that Smith could have gathered all that information so quickly in the few hours following Mitch's press conference, leaving Ogulewicz wondering whether the Union-News had also been quietly looking into the I.C.C. contract.

Because he was a strong supporter of Hurley's election, Mitch regretted that he might have inadvertently opened a can of worms that might prove to be embarrassing to Hurley because of her ties to Charlie Kingston. Therefore Ogulewicz wrote to Kingston asking him to clarify his relationship with I.C.C. so as to let Hurley off the hook. He received a terse reply, with Kingston sounding like he was doing Mitch a big favor by even responding. But the letter did appear to leave Hurley in the clear. Mitch was relieved, yet he was also annoyed by Kingston's attitude. Here again was another example of an arrogant consultant who was acting as if he was beyond the reach of the public and its elected officials.

In short, a whole lot of people seemed to be getting awfully nervous about the spotlight being thrown on I.C.C. – in a way that appeared way out of proportion to what few things Mitch had suggested might be wrong with the contract. Mitch had indicated that there might be some duplication of services and perhaps some overly high fees. So what? That could describe half the contracts in the city. A few adjustments and renegotiations and all should’ve been fine. Mitch couldn’t figure out why his simple requests were causing a commotion bordering on panic.

Then the formal investigation began.

These two videos feature local news coverage of the fiscal crisis and the unfolding Insurance Cost Control scandal.

No comments:

Post a Comment