Friday, May 12, 2006

Express Scripts Demands $200,000 From City - Mayor York Signed Contract Without Council Approval

By Tony Brockmeyer

At an executive meeting of the City Council on Tuesday evening, City Attorney Mike Valenti told the Council members that Express Scripts had made a demand on the City for a payment of $200,000.

The demand was made because Mayor York signed a contract without City Council approval in violation of the City Charter and City ordinances and Express Scripts is claiming damages because of her actions.

On February 5, 2005 the First Capitol News reported:

The St. Charles City Council asked the City Administration to bid the City’s health insurance. Since the polices were due for renewal, the Administration informed the City Council that there were out clauses and the policies in force would be renewed. The companies would be told the Council was taking bids and would exercise the out clauses provided for in the policies if they were able to obtain better rates.
After appointing a new broker of record and obtaining quotes from several companies, the Council members determined the City could save between $700,000 and $1 million in insurance premiums by changing companies. The City Council members told the administration to notify the insurance companies the City was exercising their right to cancel the policies.

After the companies were notified, the City was contacted by Express Scripts, who provided prescription drugs to the employees. The City was told there was no out clause in their contract. In fact, their contract had been renewed in June of 2004 and had been signed by Mayor York.

A search of City Hall failed to locate any such contract. The City Clerk, who by state law is the keeper of all city records, could not locate a contract with Express Scripts and had no knowledge of it. The City legal department did not know the contract existed and could not locate a copy of it. Express Scripts provided the City a copy of the contract, which had indeed been signed by Mayor York. Apparently on June 22, 2004 Carrie Caskey, former St. Charles City Human Resources Director, requested and received Mayor Patti York’s signature on a contract with Express Scripts Inc. (ESI). The contract was for a three-year period and was part of the City’s prescription drug benefit plan.

Seabury Smith and Marsh Advantage, who were previously handling the insurance for the City, both recommended this program and documents show Seabury would be paid .35 cents to $1 for each prescription filled by Express Scripts. ESI also promised numerous rebates that would be paid for special prescriptions.

The contract with ESI was signed and dated, yet no record of the contract existed at City Hall. Council President Rory Riddler told the First Capitol News, “It is highly unusual for no one in City Hall to be in possession of the City’s copy of a signed contract. Our City Clerk’s office and City Attorney’s office are both extremely careful about how records are kept and would have a copy on file if it had gone through proper channels.” State Law requires the City Clerk to be the keeper of all records and this contract was never submitted to her office.

Sources within City Hall tell us Caskey did not follow the proper protocol which requires the City’s legal department to review the contract before passing it on to the Mayor. Also, it appears York violated a City Ordinance by executing the contract without the approval of the City Council.

Section 40.23 of the City’s code of ordinances states “No contract for the provision of any services, materials, supplies, or equipment shall be extended for a period in excess of one year without an opportunity for public bidding or a request for proposals, unless the extension is by the Mayor and City Council by ordinances.”

This section also provides for a penalty if any violation occurs, 10.99 of the code of ordinances says, (A) “Whenever in this code or in any ordinance of the city, any act is prohibited or is made or declared to be unlawful or an offense, or the doing of any act is required or the failure to do any act is declared to be unlawful or a misdemeanor, except where a specific statutory penalty is provided for, the violation of any such provision shall be punished by a fine not exceeding $500 or by imprisonment not exceeding three months, or both such fine and imprisonment, as may be just for any offense, recoverable with cost of suit:provided, however, that, where the city and the state both prescribe the same offense, the penalty for violating the city provision shall be the same. (B) Each act of violation and every day upon which a violation occurs or continues shall constitute a separate offense. (C) The failure of any officer or employee of the city to perform any official duty imposed by this code shall not subject such officer or employee to the penalty imposed by this section unless a penalty is specifically provided.” The ordinance provides the above penalty. City Hall sources said both Mayor York and Caskey could be prosecuted under this section,

Marsh Advantage was the broker of record, Seabury and Smith the Third Party administrator and Mercer the insurance consultant for the City of St. Charles. These companies are all subsidiaries of Marsh and McLennan who recently settled with the Attorney General of New York for $850 million. The settlement might include money for St. Charles if it is determined Marsh violated the law in dealing with the City.

On July 13,2004, Marsh representatives gave a presentation reviewing the City’s health insurance plan and the cost associated with the plan. During the meeting, the City Council was told that using benchmarks provided by Mercer, the City is just below the average increase.

Councilman Mark Brown told the FCN, “Of course we will appear to be paying comparable rates when we are being compared to only Marsh plans by the Marsh consulting company, Mercer. When you get down to it, if you are charging everyone higher rates, then ours will naturally look normal.” Brown’s comments appear to have merit. The new Broker of Record quickly pointed out every bid the City received for insurance was lower than the bid Marsh claimed was the best the City could hope for. Brown went on to say, “Anytime you meet with the resistance this Council met regarding the insurance, you know something is wrong.”

During the presentation the Marsh representative explained her close relationship with the City and Caskey’s department. Some on the Council believe this close relationship may be the reason for the blatant disregard for policy, procedure and ordinances when dealing with contracts that obligate the taxpayer’s money. Caskey left the City’s employment during the bid process and after it became apparent the City would no longer use the services of Marsh.

Councilman John Gieseke was very outspoken about Marsh, “This Company has violated the trust of the people they claim to represent, and their motive was profit. I argued in the past that having one company as the only source of information was dangerous, but Caskey fought for Marsh all the way. The cost savings we were able to achieve, and now the backroom deal with this contract demonstrates bad things can happen when you deal in this manner.”
Since the Council took office, they have complained about city staff directing and entering into contracts and then presenting them to the Council after the contract had been executed. It appears this happened with this contract. ESI told the City they are not willing to release the City from their obligation. The City might incur costs upwards of $200,000. This has many on the Council questioning why York and Caskey would enter into a contract knowing the Council had not been informed and knowing they did not have the authority to do so.

Council members are reviewing their options.

An attempt was made to have an investigation conducted by the City Council and subpoena witnesses to testify. Several members of the Council including Larry Muench, Mike Weller, Jerry Reese and Bob Kneemiller refused to allow the investigation to continue and made attempts to stop any further attempts to obtain information. They refused to vote to issue subpoenas to require witnesses to testify.

More information can be found on in our archives. See FCN of March 12, 2005.