Ballard’s $774,000 ‘No-Contract’ Work for PA: Governor Rendell’s former firm went beyond ‘non-bid’ contracts

Pennsylvania Gov. Ed Rendell (D) has recently come under fire as more information emerges regarding the frequency and high-dollar amounts of no-bid state contracts doled out to his political donors and friends. The Bulletin has published an ongoing series on this issue, much of which centers on the Governor’s intimate relationship with his former law firm, Ballard Spahr.

Many eyebrows have been raised on these lucrative no-bid contracts, especially since the records from past Administrations were "lost" under Rendell’s tenure—- ostensibly the only way to compare the frequency, amounts and recipients of these types of contracts.

The state Senate passed a reform bill 50-0 last session amending how contracts are awarded, but it was stifled in the Democratic-controlled House. The legislation, sponsored by Republican Majority Whip Jane Orie, Allegheny, will be re-introduced early this term.

While conflicts of interest abound, the awarding of no-bid contracts to political donors is not illegal, so long as no quid pro quo arrangement exists.

But in 2007, the ethical line was taken to a whole new level when Ballard performed $773,000 of state legal work with NO contract at all, leaving many questions unanswered.

On March 1 of that year, the firm began work on the proposal to privatize the Pennsylvania Turnpike. Over the next 83 days, Ballard utilized 55 attorneys (more than 10% of its legal staff), and billed the state for 2300 hours, which equates to an average of 27.38 hours per 24 hour day. The hourly rates varied based on seniority, with firm Chairman Arthur Makadon billing $637.50/hour, and partners Ken Jarin and Adrian King, Jr. billing $531.25 and $403.75 per hour respectively.

Mr. Makadon, a close friend to the Governor, has contributed $87,500 to his campaigns. Mr. Jarin is listed as the "relationship partner" on the $773,000 project. He is a longtime confidante and fundraiser to Mr. Rendell, contributing $90,000 to the Governor’s coffers. He also serves as Treasurer to the Democratic Governor’s Association, an entity which has contributed nearly $1.5 million to Rendell. Jarin is married to Robin Wiessmann, who until this week was state Treasurer. Her office approved and issued payment for the Ballard invoices. Adrian King, Jr., served as the Governor’s Deputy Chief of Staff and in a Cabinet position prior to rejoining Ballard as a partner. According to the Ballard press release at the time of Mr. King’s return, Mr. Makadon was quoted as saying, "Adrian was a star here at Ballard and has been a star for the governor. Upon his return, we expect him to play a large role in the future of the firm representing important clients and managing key client relationships."

The Ballard firm, a Limited Liability Partnership (LLP), contributed $481,000 to Gov. Rendell’s campaigns. The Philadelphia Future Political Action Committee (PAC), registered at the Ballard offices in Philadelphia and whose Treasurer is David Cohen, former Ballard Chairman and former Chief of Staff to then-Mayor Rendell, contributed $470,000. Cohen donated $80,000, and his wife, Rhonda, has contributed $156,000 to the Rendell campaign efforts. Ballard associates contributed nearly a half million more dollars to Rendell. There is no limit to how much an individual or an LLP can contribute to state candidates. The majority of law firms are LLPs.

Additionally, on Pennsylvania Department of State campaign filings, the address of Gov. Rendell’s campaign treasurer is the 51st Floor of 1735 Market Street in Philadelphia. Ballard Spahr occupies the entire floor.

When performing work for the Commonwealth, the normal procedure is to negotiate and execute a contract before commencing any activity. But since the Ballard firm jumped headlong into the project without a contract, it had no way of receiving compensation for its work. Consequently, it had to sign a "Compromise, Settlement and Release" agreement initiated by the state Department of Transportation to receive payment retroactively.

The document specifies that authorization to pay Ballard in this manner was due to certain "circumstances", among them that on March 1 the firm "was directed by the Office of General Counsel to provide professional services as special counsel to the Commonwealth of Pennsylvania in connection with the Pennsylvania Transportation Funding initiative."

The document continues, "due to the extreme urgency of the work required, work began immediately at the Office of General Counsel’s direction prior to having a fully executed contract document in place."

The Settlement also states that, " the Commonwealth cannot otherwise pay the Law Firm for services performed during the period of March 1, 2007 and May 23, 2007 because no agreement was in place prior to performances of such services."

A no-bid contract was executed on May 24, 2007 for future services on the privatization initiative. To date, Ballard has billed the state over $2 million in legal fees relating to the project.

While state law allows for work of an urgent nature to be performed without a contract, questions have been raised as to how the Turnpike privatization initiative qualifies an "urgent" matter. The Turnpike, the nation’s first, was in no danger of disappearing or being unable to continue operations. Additionally, the legislative process is typically slow, preventing political issues from moving with any sense of speed and urgency in Harrisburg. Since the Governor’s plan had been met with resistance in the legislature and had little chance of passage, why Ballard rushed into the project with no contract remains a question on many political observers’ minds.

On numerous occasions, Mr. Rendell has been asked if he has played a role in the selection of no-bid contract recipients, especially when political donors are involved. The answer typically given is that the Governor has no involvement in the process, and that firms are chosen based on their particular expertise, with no consideration being given to large dollar political donors.

However, legislators, political experts and the media have been increasingly questioning the close relationship of the Governor to these no-bid contract recipients, especially the Ballard firm and its partners. In particular, questions have been raised regarding the role of John Estey, Mr. Rendell’s former Chief of Staff and currently a partner at Ballard.

While he was not involved in the $773,000 project, Mr. Estey still maintains a position of enormous influence with Rendell. He is Chairman of the Philadelphia Regional Port Authority, an agency of the Commonwealth that in June of 2008 chose Ballard Spahr to be its outside counsel. In addition, Mr. Estey still chairs board meetings of the Delaware River Port Authority (DRPA), of which Gov. Rendell is the self-appointed Chairman. Ballard is the largest recipient of DRPA legal fees, receiving nearly $3 million since Gov. Rendell’s election in 2002. As a point of comparison, Ballard had received only $25,000 in the three years preceding Gov. Rendell’s election. As a board member, Mr. Estey receives and votes to approve DRPA legal bills, including those going to his own firm.

Many questions have also been raised as to why the state is utilizing outside counsel to such an extent, especially on the Turnpike project, given that that the Pennsylvania Department of Transportation (PennDot) has a large in-house Legal Department. Ballard’s 55 attorneys working on the project are larger than the entire roster at many firms, which some believe is akin to the state renting a high-value law form for several months. Calls to PennDot revealed that there are 49 attorneys on staff. The Pennsylvania Turnpike Commission currently has five attorneys serving as in-house counsel, and had several more at the time of Ballard’s work.

The public’s cynicism and mistrust of government has become exacerbated by the numerous scandals and pay-to-play investigations on the state and national level. The debate surrounding whether there is a need to reform how no-bid and "urgent" non-contracts are awarded will intensify as the Senate reform bill is reintroduced.

The Bulletin will continue to seek responses from the Governor and legislative leaders to questions this investigative report raises.

Chris Freind can be reached at [email protected]

[b]Editor’s Note: For more on this subject read "Freindly Fire" below. [eb]