THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, May 27, 1995 TAG: 9505270454
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY DAVID M. POOLE, STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium: 75 lines
Gov. George F. Allen said Friday that new ethics laws may be needed to prevent the appearance of favoritism and cronyism in his plan to privatize government services.
Allen said his recommendations would hinge on the results of an internal review of a $270,000 contract awarded to a former state employee who oversaw an Allen administration privatization panel.
The state attorney general's office said the deal - while not illegal - had the ``smell'' of a conflict of interest.
``Preliminarily, it looks like everything was legal,'' Allen said in an interview. ``If there's nothing illegal, let's make sure the laws are changed in such a way (that) there is again that confidence that the decision was made based on the merits of the applicant, rather than on favoritism or croynism.''
The Virginian-Pilot and The Ledger-Star last Sunday disclosed ethical and legal questions surrounding one of the first contracts awarded under Allen's plan to turn over a variety of state services to the private sector.
The contract was awarded to a Richmond company associated with G.G. ``John'' Crump III, whose ties to state government and the Allen administration enabled his Richmond company to beat out three competitors.
Crump - until his resignation in February - was the deputy state comptroller, whose duties included the payroll deductions covered by the contract. He also staffed an Allen administration panel that recommended privatizing various state services, including the payroll deductions.
Crump's overlapping roles - high-ranking state employee, privatization advocate and entrepreneur - troubled the attorney general's office.
``While I am unable to identify any technical violations of statutory law, this situation does not, in my opinion, pass the `smell' test,'' Assistant Attorney General Donald R. Ferguson wrote in March.
Experts said that without a thorough review of existing procurement and conflict-of-interest laws, such murky ethical situations could become more commonplace, as Allen accelerates the pace of privatizing state services.
``I would say under Virginia law it's new terrain,'' said A.E. Dick Howard, a University of Virginia law professor who headed a 1992 commission on campaign finance reform, government accountability and ethics.
Allen said Friday he would consider new guidelines and laws, including what he considers the drastic step of barring former state employees and their companies from doing business with the state.
``I think above all there needs to be trust in government,'' he said, suggesting that revolving-door statutes that now prohibit former high-ranking state officials from lobbying their former agencies could be extended to cover procurement.
In bidding for the payroll deduction contract, Crump emphasized his insider knowledge of the state's system.
His former boss, state comptroller William E. Landsidle, decided there was no legal basis for excluding Crump and his company, Employers Resource Management Co.
The bidding came down to two companies: Employers Resource and S.F. & C. Insurance Associates of Baltimore.
Employers Resource won the contract in part because two of Crump's former employees assigned to the bid review committee gave S.F. & C. unusually low marks.
Crump signed the contract May 19. He denied that he had an unfair advantage, but he acknowledged that his ties to the comptroller's office gave him a ``competitive'' edge.
Allen declined to pass judgment on the Crump contract, though it is clear that the Republican chief executive is concerned that it could undermine future privatization efforts.
``Procurement laws are designed in a certain way,'' Allen said, ``but something like this comes up and you say, `Well, uh, how can we prevent it from happening in the future?' ''
KEYWORDS: ETHICS CONFLICT OF INTEREST by CNB