Gov. Kathleen Sebelius

Gov. Kathleen Sebelius

President Barack Obama announced yesterday that Gov. Kathleen Sebelius is his choice for the new Health and Human Services secretary.

Also yesterday, a news story by Kansas Health Institute’s News Service, Special funding arrangement questioned, revealed Gov. Sebelius may have granted special favors to one program, Community Living Opportunities (CLO),  which specializes in caring for people with severe disabilities.  This favor was at the expense of other related programs, and to the benefit of CLO where Gov. Sebelius’ confidante served on its board.

Gov. Sebelius’ friend and Kansas Democratic Party chair, Larry Gates, appealed only as a “Kansas citizen” to Gov. Sebelius for approval of $712,00 in “extraordinary” funding for CLO.   Gates and his law partner, Dan Biles (who was appointed by Gov. Sebelius to the Kansas Supreme Court in January 2009) happen to be on the board of CLO.

From KHI News Service:

It was an unusual move that stood the normal process on its head, was done without legislative review or endorsement, and soon raised outcry from surprised service providers elsewhere across the state.

Some upset with the move said the increased payments violated the state’s contract with service providers. Others have questioned whether the arrangement complies with the state’s Medicaid plan and in protests to SRS even suggested it might be “Medicaid fraud.”

Gates said he did nothing wrong by taking CLO’s case to the governor’s office after talks between CLO and SRS had failed to satisfy CLO’s pleas for more state assistance. …

Gates said he called the governor’s office on CLO’s behalf, acting as a “Kansas citizen,” not as chairman of the Kansas Democratic Party or as an attorney for CLO.

Gates’ law firm does some work for CLO, which has reported making annual payments to the Gates firm ranging between about $38,000 and $49,000.  …

CLO Chief Executive Officer Mike Strouse had been unsuccessful in arguing the case since Sept 2007.

Months went by, but Strouse made no apparent headway with SRS officials.  …

Apparently, Gates was more persuasive than Strouse in making the case for additional funding, but Jordan said it wasn’t Gates’ political connections that made the difference.

Even if this was only perceived favoritism, that can cause problems:

“I’ve worked in state government since 1981,” [Jane] Rhys said, “and one of the things I’ve learned is that no matter where you are, some people have the ability to get away with things that nobody else can get away with. That’s certainly been the case with CLO.”

The Meadowlark reviewed corporations records from the Kansas Secretary of State’s web site and found three different related CLO corporations:

A review of the corresponding IRS 990s at GuideStar showed all three non-profits share the same board of directors.

The 2007 IRS 990s show gross receipts of $18,769,712 + $92,581 + $102,375 for the three related non-profits.  It’s unclear why there are two much smaller entities with most of the money in one of the non-profits.

Salary information in the IRS 990 for CLO revealed CEO Strouse was paid $200,000 per year with the top five employees paid a total of $402,824.

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