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Contract Squabble 

Is Accounting Firm PricewaterhouseCoopers Eligible To Work Under The County's Bad-Boy Ordinance?

IN HIS PUSH for accounting giant PricewaterhouseCoopers to get more than $1 million in Pima County contracts, Supervisor Raul Grijalva has ignored the "bad boy" debarment rules he championed nine years ago.

And he had help from his colleagues on the Board of Supervisors, who on Tuesday voted without dissent to pay PricewaterhouseCoopers another $75,000 for work at debt-ridden Kino Community Hospital.

That is on top of the narrow approval Grijalva received in November to ratify a county Health Commission decision to award PricewaterhouseCoopers a $201,000 contract to evaluate the longstanding, previously investigated billing problems at Kino.

But supervisors balked last month when Grijalva, the commission and Kino administrator Honey Pivirotto sought nearly $1 million for more work by PricewaterhouseCoopers' Los Angeles office. That proposal failed after Grijalva could not get a second to his motion.

Grijalva expressed solid support for PricewaterhouseCoopers last week in a standing-room-only appearance in front of Kino medical staff and employees.

"I supported the big contract with Pricewaterhouse and now we're going to do it incrementally," Grijalva said. "We're not going to do it all at once. But we'll end up there with the same amount."

Asked later about the bad-boy ordinance, Grijalva said he had asked County Administrator Chuck Huckelberry to initiate a review of PricewaterhouseCoopers' eligibility to do work for the county. If Huckelberry determines the accounting firm falls under the bad-boy ordinance, Grijalva says, "I have no problem saying, 'Sorry, guys, you don't meet the criteria.' "

Schaller Anderson, the company that had the most success operating Kino until it was dismissed in the county's 1993 political upheaval, also is expected to be hired to implement a billing system overhaul.

The Pricewaterhouse report has been praised by Grijalva and others, including Health Commission Chairwoman Sylvia Campoy, a Grijalva loyalist, and criticized by others who say it simply confirmed what was shown in other reviews done by consultants from Arthur Andersen and Kino's own employees.

Indeed, a woman who has worked in the Kino business office for many years asked Grijalva during his appearance last week why he and others insist on paying so much money to consultants to get what she and others have been saying.

"Why do you guys believe them and we've been telling you this all along?" she asked.

"I don't have a good answer. You got me. You got me," Grijalva replied. "And so I support that study because of the commitment to work with the people who are doing the job and then pull out."

But others are wondering why the county is doing business with PricewaterhouseCoopers after an embarrassing disclosure on January 6 by the Security and Exchange Commission that the firm violated -- on 8,064 occasions -- federal rules that prohibit partners, auditors and employees of having investments in the entities they audit.

"What they (PricewaterhouseCoopers employees) indicated is they were separated from any of that other stuff that was done. I mean, nobody raised the issue," Grijalva said after Tuesday's vote. "And I didn't raise the issue of the Securities and Exchange Commission quite honestly because it wasn't brought up to me as an issue until later."

The firm could be reviewed under the bad-boy ordinance for other reasons. Coopers & Lybrand, the accounting firm that married into the PricewaterhouseCoopers merger in 1998, was deeply in trouble long before because of a bid-rigging scandal in the state's Project SLIM contract.

Coopers & Lybrand paid $2.3 million in September 1996 to end a federal investigation into the Project SLIM contract scandal. A year earlier, Coopers & Lybrand reached a settlement with the state Attorney General's Office, paying a $725,000 fine and agreeing that it could not seek state contracts for two years.

A central figure in those cases, John Yeoman, was a Coopers & Lybrand partner and close friend of then-Gov. J. Fife Symington III. Yeoman, Symington's personal and business accountant, also served as his campaign treasurer. He was indicted along with George Leckie, Symington's one-time deputy chief of staff, in 1996 on federal charges that they rigged the bidding process so that Coopers & Lybrand could get a $1.5 million contract for Symington's government cost-cutting initiative Project SLIM. Yeoman was killed in a car accident two days after he was arraigned. Leckie, whose trial ended in acquittal, died of cancer.

Yeoman and Coopers & Lybrand also were key parts of the federal charges, and conviction in 1997, against Symington that he deceived creditors of his real estate empire. That conviction has been overturned and the case is now under appellate review.

County rules that Grijalva pushed during his first term bar companies that run afoul of state or federal laws.

"Obviously it gives you problems under the "bad boy" ordinance," said Grijalva, a Democrat who wants a fourth term in District 5 that covers the UA area, part of the south side and the Tucson Mountains. "And it's something that has to be looked into."

Grijalva used the suspension and debarment provisions nine years ago as part of his effort to keep regional and national garbage companies out of landfill operations here.

"We shouldn't be rewarding companies that have a bad record," Grijalva said at the time. "Good companies that have never been in any trouble should get the benefit of county business."

Byron Howard, a former director of county waste water management and a longtime advocate for small business, was wary then of what he said was "blacklisting."

Now Howard, a Democratic candidate for the Board of Supervisors in central and foothills District 1, said the rules must be applied evenly.

"What's good for the goose is good for the gander. Part of that company bought its way out of the (Project SLIM) case more so than many bought their way out of savings and loan cases," Howard said. "What's unfortunate is a senior board member doesn't remember how many people were hurt by part of that company.

"There should be no wiggle room. Unless they are going to eliminate the law, it should apply to all," Howard said.

Under the suspension and debarment sections, companies can be eliminated from county business for "any conviction of any person or any subsidiary or affiliate of any person for commission of a criminal offense arising out of obtaining or attempt to obtain a public or private contract or subcontract or in the performance of such contract or subcontract."

Among other causes included in the debarment code:

· "Conviction of any person or any subsidiary or any person under any statute of the federal government, this state or any other state for embezzlement, theft, fraudulent schemes and artifices, fraudulent schemes and practices, bid rigging, perjury, forgery, bribery, falsification or destruction of records, receiving stolen property or any other offense indicating a lack of business integrity or business honesty which affects responsibility as a Pima County contractor.

· "Any other cause deemed to affect responsibility as a Pima County contractor, including suspension or debarment of such person or any subsidiary or affiliate of such person by another governmental entity for any cause" included in the county code.

· "Indictment for a criminal offense may be considered as evidence for purposes" of the code.

No one has asserted that PricewaterhouseCoopers has not done its job on the Kino contract or committed any violation in connection with the county work.

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