"Running Out the Clock"

This is the second piece that was published, providing details regarding the pending litigation.

Reprinted here is the entire text of the submitted article, including key-information that was not included in the final "cut" due to space-limitations.

Montco Commish Race Set To Explode

By ROBERT B. SKLAROFF and ROBERT R. GUZZARDI, For The Bulletin

08/30/2007

The highly-competitive race for the MontCo Courthouse is poised to explode. We, the People, will benefit from learning whether our incumbent MontCo commissioners covertly conveyed confidential counsel to campaign contributors.

On August 28, 2007, United States Magistrate Judge Thomas M. Blewitt ordered Montgomery County Commissioners James R. Matthews and Thomas J. Ellis to give evidence regarding allegations of political influence peddling and State Ethics Law violations. Matthews is a candidate for re-election.

Specifically, they are to honor discovery requests By September 7 and submit to being deposed by September 12.

This stems from litigation filed by Municipal Revenue Services against Xspand which, on February 24, 2005, won MontCo’s “no-bid” tax collection contract worth at least $600,000. There was neither prior issuance of a Request for Proposal nor any public bidding or negotiation with competing vendors.

MRS claims Xspand—plus other people and companies—engaged in unfair competition; this includes secret communications between Xspand personnel and these two MontCo commissioners. MRS produces evidence that their leak of private, internal data undermined the public trust, is illegal, and allowed a lucrative contract to be steered to the favored, politically-connected Xspand.

MRS charges the conduct that led to outsourcing the functions of MontCo’s internal Tax Collection Bureau violated the Lanham Act, Sunshine Acts, and the Pennsylvania Public Official and Employee Ethics Act. Essentially, these laws mandate that governmental business be conducted publicly and fairly.

On the day the commissioners approved the deal, MontCo Treasurer Garrett D. Page publicly predicted that firing six of his in-house employees would save $107,000.

Yet, six days earlier, Page sent a memo to the Commissioners that concluded, “This deal may not be financially advantageous….In the long run, therefore, the County may pay out more to accomplish not any better than our present collection rate.”

He noted MontCo would still pay $323,300 to provide all support services, that the most Xspand could save MontCo would be $101,400 annually, reduced by $47,000 to cover retention of one liaison-employee in the Tax Claim Bureau.

MontCo would lose income when some townships delinked from its system. And MontCo would be obligated to bonus Xspand annually for its performance, reducing further any anticipated tax revenue. A comprehensive cost-benefit analysis has not been generated, annotating at least the first year’s experience.

Four days after Page filed his report…and two days before the public meeting at which the Commissioners were scheduled to vote…at least three Xspand personnel had been apprised of Page’s opposition by Matthews. On February 22, 2005, Gregg R. Melinson sent a memo to (Xspand President) Paul Scura that reported precisely what Matthews had told former-Governor Mark S. Schweiker.

Xspand paid Melinson and Schweiker for lobbying services. Melinson also chaired a governmental affairs group at the Philadelphia law firm Drinker Biddle. And Schweiker received $90,000 annually plus 3000 shares of stock (for which he had received a payout of more than $50 a share, with additional payments expected). Schweiker also served as full-time Executive Director of the Philadelphia Chamber of Commerce, at salary and benefits totaling approximately a half-million dollars annually.

Xspand executive, Charles Smith, stated in a February 22, 2005 e-mail (edited for clarity): “Gov. Schweiker spoke with Matthews today, who said (1)—Xspand will be retained to perform functions of TCB; (2)—Ruth S. Damsker (the third commissioner, the lone-Democrat) will register her opposition on grounds of ‘not in public interest’ (3)—Garrett Page is ‘off the reservation’ and the author of a four-page memo concluding ‘Xspand won’t save County any money.’ I strongly suspect that this is why the county is going to ask us to drop base fee and increase incentives. This is the commissioners appeasing Garrett.”

Schweiker acknowledged, during his deposition on March 21, 2007 that he had conveyed this information from Matthews to Smith: “(M)y assessment was that Commissioner Matthews was viewing favorably…the platform of services that Xspand…could be retained to provide.” He admitted, however, that, when he was a Bucks County Commissioner, he “generally” did not leak what was going to occur at public meetings to vendors or interested parties.

Thus, this serial-whisper pathway apparently led from Commissioner Matthews, to Schweiker, to Smith, to Melinson, to CEO Scura. Preferable is an open, competitive, public process, encompassing ongoing input from staff and Minority Commissioner Damsker.

Smith asked Melinson (in the February 22, 2005 e-mail) to “get with Tom Ellis” before the upcoming commissioners’ meeting to “get any better intelligence regarding (Page’s) memo’s tone and tenor. I’m not looking for inside financial analysis. I’m looking more for framing language for our last couple discussions.”

The next day, Melinson reported back to Smith that Ellis “didn’t think there would be any problem tomorrow, in light of the changes on fee structure that you apparently agreed to (150 vs. 200, and 20%). Using the new figures, savings for the county rise into the six figures, even using Garrett’s numbers, which made Commissioner Damsker happy….”

Thus, all of this last-minute maneuvering to secure the contract occurred beyond public purview, with the details shrouded in the black-hole of oral communication, with its calculated fiscal-impact not subject to the Treasurer’s subsequent input.

Ellis also had previously advocated for (and communicated with) Xspand, as per an e-mail sent on June 2, 2004 by Melinson to three Xspand executives (Scura, Smith and Kurt Shadle). Melinson reported, “I spoke with Commissioner Ellis, who told me that our proposal was discussed at yesterday’s briefing session ….(T)hey’re moving forward with Xspand. The other two proposals have been rejected….” (It is unclear what these alternate approaches had been.)

One month later, on July 7, 2004, Smith wrote a memo that reported Page had been lobbied by his TCB employees, adding, “He has reviewed the information recently circulated in opposition to our legislative efforts in Harrisburg and recommended to the Commissioners that what they wish to do can’t be done. Gregg has spoken with Tom Ellis and Ellis relayed that he and Matthews remain committed to the idea of outsourcing the TCB, but that they wish for us to join them in a meeting with Page.”

Yet, two days hence, an Xspand employee, Ms. Colleen DiVirgilis, distributed information to be “used to combat the campaign by the tax claim folks.” She then set-up their ability to ambush Page, adding “I would not advise you give Garrett Page any of these documents prior to our next meeting with the Commissioners and him. I think it would be best for us to use these in the meeting.”

MRS also complained of corrupt linkage between official acts and politics citing, for example, Xspand’s campaign contribution to Ellis “after we were named” contractually “after March of 2005,” as per Scura’s March 20, 2007 deposition.

MRS concluded its court filings thusly: “It is highly improper and a violation of the State Ethics Act for any public official to leak confidential information to vendors …about Montgomery County’s strategies” because such pre-meeting disclosure of “non-public, confidential information…violated the public trust and betrayed the public interest.”

Both the MontCo Republican commissioners (Matthews and Ellis) and Melinson (who serves on two state-level boards) are subject to three ethical mandates.

The “Pennsylvania Public Official and Employee Ethics Act” prohibits office-holders from gaining personally from their public service. They are prohibited from releasing confidential information, defined as “Information not obtainable from reviewing a public document or from making inquiry to a publicly available source of information.”

The “Sunshine Law” governs the release of proprietary information, and it is subject to a broad or liberal interpretation that is most favorable to the public.

The “Lanham Act” prohibits false or deceptive advertising when seeking contracts with governmental entities. It applies to goods and services both of the index vender and those that the vender might portray. Xspand personnel are primarily subject to such legislation, although the commissioners would also be affected if they had disseminated any misinformation on behalf of Xspand

The MontCo Republican Committee-People were not given “informed consent” before they were asked to endorse Matthews and Ellis for re-election as County Commissioners on March 15, 2007. The latter was rejected, but not the former.

This MRS suit had been filed almost two years prior (April 1, 2005), but the two MontCo Republican commissioners had filed a motion to quash subpoenae (intended to force them to give depositions) eight days prior (March 7, 2007). Further, another commissioner candidate, Ms. Melissa Murphy Weber, is a member of the law firm that is representing MRS. It is believed that she knew of this litigation—for we understand that she made a presentation on behalf of MRS to Norristown Municipal Council—but we do not know how much she knew of it.

Yet, the chair of the MontCo Republican Committee, Ken Davis, did not ensure the elected Committee-People—his constituents—knew of this political liability. He was mum because such information could only threaten the chances that his preferred candidate, Matthews, would (narrowly) win the GOP endorsement.

Xspand is based in Moorestown, New Jersey and was worth $200,000,000 in April, 2006 when it was purchased by Bear Stearns (through its subsidiary, Plymouth Park Tax Services). MRS alleges Xspand acquired the “inside track” because of payments to people such as former-Governor Schweiker and Ellis. How the contract was effectuated will be revealed after Matthews and Ellis are deposed. But it is appears that Xspand used leaked-information to obtain it.

Their confirmation of the accuracy of the prior record (e-mails and depositions) will trigger revision of the Xspand complaint to include them as defendants (judging from rhetoric in court documents) and/or indictment by Pennsylvania Attorney General Tom Corbett (judging from his pursuit of comparable “insider” activity that occurred in Haverford Township through his Public Corruption Unit).

Matthews could tarnish D.A. Bruce Castor’s popularity, integrity and reputation for upholding law and order. Contrariwise, Castor could distract voters from weighing Matthews’ alleged ethical lapses, dragging him across the November finish-line. The latter could only transpire if Matthews runs-out-the-clock, fighting assiduously the procedural briskness characteristic of federal court proceedings.

All of this information is open-source and the Democrats know whatever we know (and probably more). Minority commissioner Damsker had not been outspoken, but she is now claiming she was told “half-truths that were actually non-truths.”

The Democrats’ commissioner candidates (Damsker and former-congressman and former-commissioner Joseph M. Hoeffel) started critiquing Matthews’ insider-dealings during a debate at Penn State’s Abington Campus this past May. They decry insufficient transparency of the contracting process (including no-bid awards), paying former MontCo-employees exorbitantly to complete construction work, and remitting a multi-year $300,000 lobbying fee to a Government Affairs Unit run by Ken Davis…who also serves as MontCo Republican Chair…without ever having received a detailed report as to what he had been accomplishing.

The Democrats seem “juiced” and well-organized, prepared to push the theme of Open Government, changing how business is conducted without raising taxes or sacrificing services. Meanwhile, the Republicans seem poised to self-immolate.

Although the GOP has not needed to run a competitive campaign on the county level in years, Democrats have swamped Republicans during recent state and federal elections. Recall both the overwhelming 2006 defeats of Rick Santorum (by Bob Casey) and Lynn Swan (by Ed Rendell) that were mirrored in MontCo, and that John Kerry beat George Bush in MontCo by 45,000 votes in 2004.

It may well be desirable for Republicans to wander in the wilderness until they can regroup around core principles of Economic Freedom, Individual Initiative, Open Records and Open Government, eschewing the “public service for private gain” which some claim has characterized the Matthews/Ellis administration.

Candidly, the co-authors of this op-ed piece constantly are debating this concept. One of us fears the power of incumbency could become ensconced and, therefore, it’s preferable not to let the D’s assume control (for well-intentioned, free-spending could prove ineffective and hobble MontCo’s economic vitality). The other of us fears the power of alleged insider-deals could become enhanced if it is not subject to public retribution, thereby avoiding a leadership purge.

Thus, the GOP faces a quandary, because Matthews’ name will remain on the ballot even were he now to withdraw his candidacy. If he is forced to confess to this insider (information) trading in a sworn deposition, it may become necessary for a replacement-candidate to be chosen at an urgently-called convention of the elected committee-people (rather than being appointed by the Party Chair, who is responsible for having pushed for Matthews despite his alleged ethical lapses). Recall that, in 2004, New Jersey’s Senatorial replacement-candidate won.

Educating the voters (that the phantom candidate replacing “Matthews” on the ballot had to win more votes than both Democrats) would be a daunting task, but this would be the only way to salvage the endangered slate of row officers.

We believe in the GOP, if for no other reason than to anticipate the need for its 2008 Presidential nominee to flourish in MontCo. But we are deeply troubled by what Matthews appears to have done, and our colleagues must deal with the consequences of defective leadership (which may extend to Bob Asher, who serves as a National Committeeman). Castor is squeaky-clean, so he should not have to become bogged down in what some fear has been Courthouse Mire.

(The text of the deposition order is at www.jimmatthewsexposed.com. It also has background information on the case, including an op-ed essay from The Bulletin by these co-authors, “Tough Love: What MontCo Republicans Must Do.”)

Dr. Sklaroff is an oncologist, hematologist and internist residing in Abington. Mr. Guzzardi is a lawyer, businessman and philanthropist residing in Ardmore. Both are registered-Republicans and political activists; Dr. Sklaroff also serves as a Republican Committeeman.