A Maximus Postscript

Hidden Conflicts of Rudy's Welfare Team

Giuliani hailed that ruling, saying it proved that politics—not ethics or corruption—had always been the real problem, and that Hevesi's opposition was rooted in liberal hostility to welfare reform.

The great Maximus controversy ebbed after that. The law enforcement probes closed, with no charges filed. In the midst of the mayoral campaign of 2001, Hevesi tried to revive interest when he got hold of a separate DOI memo he called "a smoking gun." That memo revealed—for the first time—that before he became commissioner, Turner had worked as a private consultant for Schwartz's company. The memo also described failures in earlier work done by Schwartz's firm, which resulted in a penalty against it. Hevesi accused Giuliani of hiding the Turner-Schwartz relationship and said the performance problems should have been enough to block the Maximus/Opportunity America deals.

Giuliani brushed those findings aside, saying Hevesi was the one who was "ethically challenged."

And there the matter rested until the December 2001 report landed with a thud on desks at HRA and, a few days later, on those at City Hall, where the new Bloomberg regime was setting up shop.

Every word in the DOI report was carefully couched. Maximus's funding of Angela Turner's Milwaukee project was described as "de minimis," meaning it didn't rise to the level of criminal activity. Nevertheless, the federal Department of Labor, which was providing almost half of the funding for the Maximus contracts, had strict rules regarding conflicts of interest. And the evidence regarding Turner and Maximus had been uncovered by the labor department's Office of the Inspector General for Labor Racketeering and Program Fraud, which had reported it to federal officials.

As commissioner, Turner was "responsible for the administration" of the Maximus contracts, the DOI report stated, hence "Turner's activities may have risen to the level of a conflict of interest, in violation of [federal regulations]." Federal labor investigators used even tougher language in a separate, sum-up report written a year later, in December 2002. "The evidence collected by [the Office of the Inspector General] supports that George Leutermann, acting in the capacity of Maximus's vice president, directly and indirectly gave Commissioner Turner, his wife and his father-in-law things of value while being provided access to HRA during the development of the [welfare-to-work] solicitations and before the contract award."

How to deal with the situation became an early headache for Bloomberg's staff. Turner at the time was trying to keep his job as welfare commissioner, and the new mayor's first step was to turn thumbs down on that request. Instead, he appointed Verna Eggleston, executive of a nonprofit group.

Under Eggleston, HRA took the next step, ordering in March 2002 that Maximus's contracts be cut from $104 million to just $16 million—without citing any problems with the firm.

Five months later, in October, there was a faint echo of the great Giuliani-Hevesi battle when HRA announced that it was not renewing its contracts with Maximus. A spokesperson for HRA said then that "things hadn't worked out."

Even today, HRA officials refuse to acknowledge that any punitive steps were taken against the company, saying the cuts were only part of a general reduction in welfare programs.

The only public announcement of the probe's findings was contained in a little-read semiannual report issued last year by the U.S. labor department's inspector general. "Among the potential conflicts of interest [found by its investigation] was Maximus's giving things of value to a high-level official at HRA," the report said. "After the results of the investigation were released to the City of New York, the contracts were reduced to approximately $16 million."

Today, Maximus insists its departure from New York was unrelated to the probe.

"As far as we knew, the decision was not performance related," said Rachael Rowland, a spokesperson for Maximus. "We cooperated with all the investigations that were under way, the district attorney and U.S. attorney's office. We are pleased they were closed without any criminal charges."

After all was said and done, Maximus received few of the millions it had hoped to earn here. The court battle stalled its contracts, and by the end of last year, the firm had collected about $1.4 million in total.

None of the key players in the controversy were happy to be reminded about these events, nor eager to hear about the law enforcement findings.

Leutermann retired from Maximus in 2001 at the age of 54—a voluntary departure, he said. He now runs a nonprofit group in Milwaukee and lives in a suburb on Lake Michigan less than a mile from the Turners. The allegations in the reports were "all bogus," he said.

He acknowledged, however, that Maximus had chipped in for the sex abstinence program after he was approached by Angela Turner, a longtime acquaintance. "She indicated they were doing this and would we be interested in it. We bought services for the school. Programming around abstinence," he said. "I have no idea if Angela Turner made a profit from that," he added.

"This has all been over and done with for a long time. It was very confusing. My intention was to bring quality services to the city. We had no more access to Jason Turner than any other [firm] working in New York City."

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