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One year later: Nixon fee office process still steeped in controversy

March 16, 2010

“It’s all politics. Don’t let anybody fool you.” –Ray Salva, Democrat State Rep

One year ago today, the first license offices were awarded under Jay Nixon’s new bidding process.  Lloyd Smith, Executive Director of the Missouri Republican Party, released the following statement regarding the anniversary:

“Jay Nixon has bragged about changing the system for awarding license offices, but while the bidding process is different, the outcome is the same—wealthy donors and political insiders continue to be rewarded with the state’s most lucrative with fee offices.  Despite Nixon’s assurances that politics would be removed from the system, his method of awarding fee offices has been marred by controversial decisions, irregularities in the bidding process, a lawsuit, and a rumored FBI investigation.”

Background:

• Eight of the nine most lucrative license offices in the state have been awarded to major donors linked to more than $150,000 in donations to prominent Democrats—Columbia, Springfield‐South Fremont, Lee’s Summit, St Charles, Liberty, Raytown, Joplin, and Deer Creek.

• To date, Alternative Opportunities has been awarded 15 offices with revenue totaling $4,347,841 (according to 2008 figures from the Department of Revenue).

• Nixon’s actions are so egregious that Democrats and the media have taken notice.
  • Kansas City Star, June 30, 2009: “Even before Gov. Jay Nixon took office in January, he had declared that the ‘era of license office patronage in Missouri is over.’ But the debate over fee offices apparently isn’t. A fellow Democrat, state Rep. Ray Salva of Sugar Creek, contends that Nixon misled voters. ‘It’s all politics,’ Salva said. ‘Don’t let anybody fool you.’”
  • St. Joe News‐Press editorial, June 11, 2009: “Ending political patronage in awarding contracts for driver’s license fee offices needs to account for both reality and perceptions… And to say that appearances do not count in this process is to miss much of the point about patronage. Detractors — virtually all of them Republicans — have ample ammunition in criticizing the selection of St. Joseph attorney James Montee to run the Lee’s Summit office with a partner.”
  • Independence Examiner editorial, July 23, 2009: “Didn’t Gov. Jay Nixon follow through on his pledge to remove politics once and for all from the practice of awarding bids to run state license offices? He might have – but it sure doesn’t look like it.”

• By the media’s own benchmarks, the system appears rigged.
  • St Louis Post‐Dispatch, January 15, 2009: “There are some, of course, who believe this is all a smoke screen and the bidding process will be rigged to simply benefit Democratic supporters of Nixon. For instance, St. Charles‐area Democratic activist Ken Kielty said he might bid on the office that he formerly ran, and Kielty is a frequent political donor to Nixon… The transparency will allow reporters and the public to examine the process and determine if there are any political shenanigans being played. Will there be? We’ll find out.”
  • June 26, 2009: Kielty was awarded the St Charles fee office.

• Some local organizations have questioned the process or seen sources of revenue disappear:
  • Lake Sun Leader, August 25, 2009: “Members of the Camdenton Rotary Club are questioning the state’s motives after being notified that another organization was slated to take over the local license office… The move cost the club $40,000, which is what the organization handed out during the last school year to students from Stoutland, Macks Creek, Climax Springs and Camdenton high schools. The organization has been operating the license bureau office under a contract with the state since the mid 1980s. Over that period of time, Rotary members estimated more than $700,000 has been given to local students to pursue a higher education. Without the revenue from the license bureau, the club will not be able to continue to provide financial assistance to students.”
  • Despite the fact the Nixon removed the revenue stream that the Camdenton Rotary Club used to fund local scholarships, the state responded: “The (Lake Area Civic Association) is not precluded from continuing to provide scholarships to local citizens in the area if the organization chooses.” (Springfield News Leader, March 16, 2010)
  • St Louis Post‐Dispatch blog, July 9, 2009: “In 2005, Dolan had said Fila planned to distribute some of the office’s profits to benefit Howell schools and to other schools. Fila said the office indeed had donated to charities, including the Howell Foundation, but that would stop in the future. Instead, he said, he would return some of the office profits to the state above what the state normally gets from the license sales.”

• The FBI may be investigating the possibility that the bid process is rigged in favor of Nixon’s friends and donors.
  • AP, October 31, 2009: “A friend and the ex‐husband of Missouri Auditor Susan Montee have amassed millions of dollars of contracts from Gov. Jay Nixon’s administration under a new competitive bidding system that was supposed to eliminate political favoritism in awarding state license offices… But some losing bidders and former license office operators claim the bid process was fixed so Williams and [Susan’s ex‐husband James] Montee could prevail…An FBI spokeswoman in Kansas City said the agency could neither confirm nor deny whether it is investigating this year’s license office contracts.”

• In December, the state was forced to rebid 10 offices awarded to a Southwest Missouri non‐profit with close connections to Nixon after a reporter discovered major errors in their bids.
  • Springfield News Leader, December 10, 2009: “Gov. Jay Nixon’s administration has decided to rebid 10 motor vehicle license office contracts awarded to Alternative Opportunities after the Springfield-based non-profit failed to disclose its financial ties to an Arizona corporation… One of the stipulations in the contract bidding process is fee office agents could not use subcontractors to provide main services to the license bureaus. The managers of Alternative Opportunities contract their management services to W.D. Management, a company initially set up by the executives of AO but later sold to Tucson, Ariz.-based Providence Service Corp., a publicly traded company. In its application, AO listed Tom Goss as the contract manager. But Goss works directly for W.D. Management, not AO, a violation of the contract stipulations, according to the Department of Revenue.”
  • Since the offices were rebid, Alternative Opportunities has been awarded 5 more fee offices.

• A Cole County judge recently issued a restraining order preventing Alternative Opportunities from taking control of the Deer Creek license office after the current operator sued citing inconsistencies in the bidding process:
  • Springfield News Leader, March 2, 2010: “A Cole County judge has blocked Springfield-based Alternative Opportunities from immediately taking over a motor vehicle license fee office in St. Louis County pending the outcome of a lawsuit by the current contractor…But Judge Patricia Joyce on Friday granted a temporary restraining order to Michael Becker of Deer Creek Building Management, Inc… Becker’s lawsuit alleges the state gave AO ‘a substantial and unlawful advantage’ by changing the points system in the middle of the bidding process.”
  • St Louis Post-Dispatch Political Fix, March 1, 2010: “Becker’s lawsuit alleges ‘multiple violations of law’ in the competitive bidding process… Becker’s lawsuit contends that awarding extra points to nonprofit agencies goes against standard bidding practices in the state of Missouri. Also, the lawsuit contends that once the state entered into what is called the ‘best and final offer’ negotiations with bidders, it substantially changed the rules and tilted the process in favor of Alternative Opportunities…During the negotiation process, the lawsuit contends, the state increased the amount of points that would be given to a nonprofit’s bid, making it even more difficult for Becker’s for-profit company to contend with Alternative Opportunity’s bid. Becker’s lawsuit contends that under state bidding practices, his company would have been the lowest and best bid, and that the allegedly skewed process gave Alternative Opportunities ‘a substantial and unlawful advantage over other bidders.’”

• Legislation has been filed to address problems in the bidding process that have allowed Alternative Opportunities to be so successful at the expense of other local organizations.
  • Springfield News-Leader, March 16, 2010: “State Sen. Gary Nodler has introduced a bill that would limit the preference only to nonprofit organizations whose primary administrative office is located in the county, House or Senate district where the fee office is based. Nodler said the bill is in direct response to AO winning license fee office contracts in communities outside of Springfield, including his hometown of Joplin. ‘Nobody envisioned a single, giant not-for-profit gobbling these things up across the state,’ Nodler said.”