Investigation finds $80M worker's comp deal badly botched
The Department of Administrative Services doomed the 2001 deal by hiring a contractor lacking the expertise to properly evaluate claims slated for privatization, Blumenthal found. The contractor, MRM Consulting Inc., hired college interns to do key parts of the highly specialized analysis, charging the state $105 an hour.
The $80 million payment to ACE Financial Solutions to assume the claims was based on MRM's flawed analysis. MRM included many claims already closed.
Blumenthal's report concludes that the state probably overpaid ACE and the deal probably failed to save the state money -- its stated goal.
Blumenthal recommends that the state hold MRM responsible, if possible, for its failure to properly evaluate the claims and strictly adhere to laws requiring careful cost-benefit analysis before privatizing any activity.
"The state could and should have paid less to settle these workers compensation claims," Blumenthal said. "Overestimates and overpayments resulted from misinformation and misadvice -- and because of improper oversight. The $80 million payment assumed completely erroneous numbers of cases and lengths of time to resolve them. Taxpayer funds were spent needlessly and heedlessly."
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