Subcontractor working on Obamacare site under investigation

Michael Volpe Contributor
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One of the subcontractors working on the Obamacare website is being investigated in a probe by state and federal authorities that led earlier this year to the cancelation of one of the company’s state contracts as well as the resignation of a state health secretary and former vice president at the company.

Client Network Services Incorporated (CNSI) became a sub-contractor on the Obamacare website in 2012, working hand in hand with QSSI, according to its website. QSSI was one of several contractors hauled before Congress to address the sites troubled rollout in October.

According to Department of Health and Human Services (HHS) “war room” notes released in October, CNSI was responsible for assisting with electronic data interchange (EDI) — defined as a system to transfer data between computer systems without human interaction.

Among the plethora of problems with the website rollout, insurance companies have complained that data received on their computers has often been inaccurate, suggesting a problem with the EDI.

CNSI is currently under investigation as part of a probe by state and federal authorities into the procurement process of the state of Louisiana. Louisiana Health and Hospitals Secretary Bruce Greenstein, a former CNSI employee, resigned after the investigation came to light in March, amid reports that he exerted undue influence in steering the Pelican State’s Medicaid contract to CNSI.

In January, an FBI subpoena to the Louisiana Department of Administration sought information on the procurement process for several contractors including CNSI.

In addition to the state investigation prompted by that subpoena, WBRZ in Baton Rouge, the Huffington Post, the Baton Rouge Advocate, the Chicago Tribune, the New Orleans Times-Picayune and other media have all reported a federal grand jury probe of the state’s contract with CNSI.

Louisiana canceled its contract with CNSI in March.

According to a story in the New Orleans Times Picayne, the FBI also accused CNSI of witness tampering in another case.

“According to the FBI report in this Court’s possession, one of CNSI’s owners, in front of the other three owners, said if the employee ‘ever disclosed the misconduct at the company they would have him killed.’” The FBI discontinued that investigation without bringing charges.

In 2011, the State of South Dakota accused CNSI of overbilling for a state Medicaid website, according to a story by the Aberdeen News:

The South Dakota Department of Social Services has paid $49.7 million so far for a new Medicaid processing system that at this point remains inoperable.

The original contract was for $62.7 million, but the new system is now expected to cost far in excess of $80 million to complete and will take two to three more years to get running, according to court documents filed as part of a lawsuit between the contractor and the department.

The company that eventually won the contract, Client Network Services Inc. of Maryland, submitted a proposal in 2007, later participated in another final-and-best offer round, and was awarded the contract in June 2008.

The cost of the Obamacare website — which has reportedly run “north of $600 million” — has also become a scandalous issue.

In Michigan, The Southeast Michigan Health Care Exchange — which set up a state Obamacare exchange — pursued a suit initially valued at $7 million for breach of contract involving services provided by CNSI for IT services with that website.

In 2006, CNSI was the subject of a lengthy expose in the IT trade journal, CIO Magazine, which detailed allegations that CNSI produced a low-ball bid in order to win a contract, only to have the final cost balloon exponentially.

In August 2013, Fox News ran a story detailing how CNSI was involved in a scheme to subvert the normal contractual process in Illinois in another IT contract involving the States of Michigan and Illinois:

A company from Gaithersburg, Maryland, Client Network Services Incorporated or CNSI, already has a contract in Michigan to perform similar services.

By forming an alliance with Michigan, Illinois was able to bypass a drawn-out, expensive bidding process because the state procurement code says HFS doesn’t need one if there is an intergovernmental agreement.

According to the war room notes, CNSI was in constant communications with staffers at HHS on the Obamacare website.

“CNSI is working on items to be able to provide to us management reports. It probably won’t be a daily email update; it will likely be a portal log-in to view the information, which would be cumulative and provide trending analysis.”

CNSI, QSSI, HHS and CMS did not return TheDC’s requests for comment.

Update: Three days after publication, CNSI representatives contacted The Daily Caller. “To our knowledge and based on our inquiries there is no active federal investigation related to CNSI and its procurement in Louisiana,” a company spokeswoman said. She declined to address the multiple press reports of a federal grand jury investigation cited above. The headline and first sentence of this story have been updated to reflect that CNSI was named in a subpoena issued this year to Louisiana by a federal grand jury and signed by a special agent of the Federal Bureau of Investigation. Other supporting documentation has been added to this article.