Former Indiana GOP Chairman James Kittle Fingered In Bribe Offered To House Speaker To Block HJR-3

Wealthy businessman and former Indiana State Republican Chairman James Kittle has been identified as the businessman who offered House Speaker Brian Bosma unlimited campaign cash earlier this session if he would kill HJR-3, the proposed marriage discrimination amendment according to the AP's Tom Lobianco. Citing multiple sources familiar with the offer, Lobianco said Kittle withdrew the offer of "unlimited" campaign help after Bosma questioned the legality of his offer.

Jim Kittle offered "unlimited" campaign help to House Speaker Brian Bosma as part of a push to defeat the proposed amendment, according to multiple people with direct knowledge of the discussion. They spoke on condition of anonymity because they weren't authorized to disclose the private discussions.

Kittle withdrew his offer after Bosma questioned its legality, and it turns out the money wasn't needed after all. Only four House Republicans targeted by ban supporters face primary challenges, and changes to the proposed amendment's language will keep the issue off the ballot until at least 2016. But the back-room intrigue illustrates how election-year politics and campaign dollars shape some of the state's most important decisions . . .

Bosma also has said a potential candidate notified him that he had been offered $500,000 from an out-of-state source to challenge the speaker in the May primary.

But Kittle's offer is the one that raised some eyebrows. Bosma first announced an offer of campaign dollars in a January news conference but did not identify the potential contributor.

"I received a pledge of unlimited campaign funding if I were to make this issue go away," Bosma announced.

Bosma said he rejected the offer and expressed concern that it might have violated state or federal law. He has worn his decision as a badge of pride throughout the session, telling reporters he does not bow to threats or intimidation.

Bosma told The Associated Press last week that he didn't think the offer constituted a crime. But the speaker, who has never said Kittle made the offer, acknowledged voicing some concerns.

"I did bring to that individual's attention what it sounded like he was saying and I think he was pretty concerned about it after he said it," Bosma said.

Kittle did not return calls seeking comment . . .

This isn't the first time Kittle's name has surfaced in connection with nefarious activities. Kittle, who stepped down as the GOP's state party chairman and Gov. Daniels' finance chairman after before his arrest for drunk driving in Hamilton County in December, 2010, was identified as one of several investors a controversial Chinese immigrant had supposedly lined up to start up a new company that would assist Chinese investors with investment opportunities in the United States. Monica Liang, then a newly-hired consultant to Mitch Roob, the former head of the Indiana Economic Development Corporation (IEDC), became the subject of a complaint lodged by Chinese businessmen after Liang lured a Chinese billionaire, Ao Yuqi, to wire $50,000 into her bank account. According to a written complaint several Chinese businessmen had delivered to Gov. Mitch Daniels accusing Liang of criminal wrongdoing, Liang had identified Kittle as someone with whom she was very close who had tremendous political clout in Indiana.

She advised us that the State of Indiana would set up an office in China and she would be appointed as the manager of that office. She also repeatedly hinted to us that she was connected politically because she was in an intimate relationship with Chairman of Republican Party of Indiana. She advised us that the Chairman was "super rich," owned two large biotechnology companies and was the largest campaign contributor of Governor Daniels' election. As she put it that meant it was no problem for us to meet Governor Daniels when we next visit Indiana.

Sources familiar with an FBI investigation of Liang's business dealings tell Advance Indiana that she had formed a new company, China North American Investment Group, LLC, whose members according to Liang were to include herself, Ao, Kittle, Mitch Roob and Bingham McHale managing partner, Toby McClamroch, a former Indianapolis City-County Council member. Liang used a letter dated February 18, 2011 signed by Roob appointing her as his special assistant for Chinese relations to impress potential investors in China. Liang had also supposedly represented to the Chinese investors an opportunity to invest in a $12 million nursing home project she was trying to develop in a building she had purchased in Marion, Indiana, which she claimed included Gov. Daniels, Marion Mayor Wayne Seybold and Roob as investors according to an expose' on the entire sordid affair by the Indianapolis Star, titled, "The China Letter." Among the supporting documents Liang provided to the Chinese investors was a letter on the City of Marion's letterhead signed by the city's economic development director, Darren Reese, pledging support for TIF incentives for the project.

The FBI dropped its investigation of Liang's business dealings after she died unexpectedly from an aneurysm during a visit to her apartment in Carmel in late October, 2011 from a Chicago attorney, Thomas Gehl, who was advising her on EB-5 immigrant visas, a visa program that allows large foreign investors to obtain permanent resident status in the U.S. in consideration for investing in qualified American investments.  As a result of an internal investigation of the complaint sent to Gov. Daniels, Liang was immediately terminated and Roob stepped down as IEDC's CEO a short time later, although he insisted that the sordid affair was not the cause for his resignation. IEDC also ended its long-term relationship with Pacific World Trade, which had an exclusive contract to assist the IEDC in developing business relationships in China, in retaliation for its perceived role in helping bring the serious allegations of wrongdoing on Liang's part to light. The company's owner, Dennis Kelley, delivered the complaint on behalf of the Chinese businessmen, a fact that irked state officials, even though essentially all of the allegations contained in their complaint had been determined to be accurate based on the state agency's internal investigation of the complaint. Roob had demanded that Kelley retract the allegations set forth in the complaint prior to his abrupt departure from the state agency.

Last December, the Indianapolis Star featured a $2.5 million log cabin home in Carmel owned by Kittle that was being offered for sale. "Detailed craftsmanship is the hallmark of this spacious Carmel home being offered for $2.5 million," the article read. "Jim Kittle's custom log home is filled with signature lines from the family furniture business." "Set in a private, wooded area, the home resembles a mountain retreat, complete with natural interior features such as slate flooring and exposed board and batten ceilings." Watch the Indianapolis Star and other media outlets to bury this AP story since it doesn't fit their meme on HJR-3, not to mention the advertising Kittle's furniture store purchases from them.

IBM Lawsuit Closing Arguments

The six-week trial in the battling lawsuits between the state's Family and Social Services Administration and IBM over the failed welfare privatization initiative is coming to a close. There's been very little reporting of the trial to date, which will be decided by Marion Superior Court Judge David Dreyer. Media interest in the story waned after Gov. Mitch Daniels avoided having to testify at the trial after the Supreme Court ruled that he was immune from doing so under state law. The Fort Wayne Journal-Gazette's Niki Kelly offers some interesting comments made by opposing lawyers during closing arguments. Barnes & Thornburg's John Maley argued for the state:

“Were there breaches? Scores and scores and scores,” said John Maley, the state’s primary lawyer. “Needy Hoosiers were not being well served.”

Maley said IBM clearly did not meet its contractual obligations to Indiana and the state suffered substantial damages by having to create a new hybrid system.

“It’s time for IBM to finally be held accountable,” Maley said . . .

He said the company could have invested more in the project by hiring more workers to improve the metrics, but IBM executives were focused on profit.

“Shareholders trump a million needy Hoosiers,” Maley said.

If needy Hoosiers being well served was the motive, there would not have been a privatization initiative. See my bombshell report on Carl Moldthan's inside account of the welfare privatization debacle. It was all about Mitch Roob, FSSA's former secretary, steering hundreds of millions of dollars to his former employer, ACS. That Barnes & Thornburg was even permitted to represent the state's interests in this lawsuit is nothing short of an outrage. The law firm has long represented ACS and has very close ties to Roob and others who have worked for the firm, including the current FSSA secretary, Michael Gargano. IBM was merely a place holder to provide cover for the primary purpose behind the contract. Not surprisingly, ACS' financial role with FSSA grew substantially after IBM was dumped.

Kelley has an interesting e-mail exchange between Roob's replacement, Anne Murphy, and the agency's spokesman, Marcus Barlow, in explaining IBM's theory of the case.

Steve McCormick, attorney for IBM, argued further that the state intentionally looked for a way to terminate the contract to get out of paying additional dollars to convert the contract to a new hybrid system.

“This is not about IBM’s performance,” he said. “This is all about saving the state from having to pay.” 

“This was a wrenching, difficult transition,” he said. “Everybody understood there were going to be problems.”

He noted that the tenor of the state’s relationship with IBM changed in January 2009 when Anne Murphy took over as secretary of the Indiana Family and Social Services Administration. Within days, she fired off an email asking whether IBM might be in default.

McCormick also said a three-month corrective action plan was just a sham – a ruse to fire IBM when it was up in October 2009.

As proof, he showed an email between Murphy and then-department spokesman Marcus Barlow from the summer of 2009 where Murphy wanted Barlow to say negative things about IBM to the media. He warned it would be the first time to do so and said, “we just need to survive until October. Then we’re going to drop bombs ala Hiroshima and Nagasaki.”

McCormick said of the 22 corrective-action-plan items, all were improved except the four controlled by subcontractor ACS, whose liaison was working in Murphy’s executive office. He reiterated several witness statements that suggested ACS was purposely not trying to improve so IBM would get fired.

The state retained ACS in the hybrid system.

“They engineered that to happen and then come in here to use the failure of the (corrective action plan) against us,” he said. “They terminated this contract because of their budget problems.”

Marcus Barlow is a friend. I'll have to check to see if he comments on the nuclear option e-mail on his Facebook page today.

Roob Files Election Challenge To Wallace's Petitions

Apparently the train wreck known as Mitch Roob, who totally turned the Family & Social Services Administration upside down in his successful effort to steer hundreds of millions of dollars to his former employer, ACS, has reappeared to derail the gubernatorial campaign of Jim Wallace. WRTV is reporting that Roob, who left as head of the Indiana Economic Development Corporation last year, filed a challenge to the petitions filed by Wallace's campaign in an effort to get him tossed from the Republican primary ballot:

A former longtime aide to Gov. Mitch Daniels is challenging GOP businessman Jim Wallace's qualifications to run for governor.

Mitch Roob filed a challenge with the Indiana Elections Division on Thursday afternoon charging that Wallace had not collected enough signatures from certified voters to run against U.S. Rep. Mike Pence in May's Republican primary.

Roob formerly served as Daniels' economic development chief and human services secretary.

Wallace came up 14 signatures short of the 500 needed in Indiana's 7th District last week. The Indiana Elections Commission is scheduled to hear the Wallace challenge next Friday.

The four-member panel is also set to hear more than two dozen challenges to Republican presidential contender Rick Santorum's appearance on the May ballot. Santorum came up 8 signatures short in the 7th District.

Like the challenge to Santorum's presidential ballot petitions, questions over the number of valid signatures filed with Wallace's petitions arose in Marion County in which the 7th District is located. Typically, a candidate files the petitions and as long as there are a sufficient number of signatures on the petitions, it is presumed the candidate has satisfied the requirement, except in Marion County. Here, a Republican-appointed, county-paid employee scoured the petitions filed by both the campaigns of Santorum and Wallace to ascertain if all of the signatures on the petitions were voters residing in the 7th District. Most, but not all, of Marion County's voters reside in the 7th District. The government elections employee, Cindy Mowery, did the work that normally falls to an opposing candidate's campaign to marshal evidence and lodge a challenge against an opponent's candidacy.

Santorum has questioned Marion County’s decision to throw out 49 signatures. But Cindy Mowery, Republican member of Marion County Board of Voter Registration, said the signatures are still invalid.

“I don’t think any of these signatures that they brought in matter,” Mowery said. As of Monday afternoon, Mowery said she had not done a thorough review of the signatures, but she said she talked with Santorum campaign lawyers in the morning and based on their arguments decided the county’s earlier decision to disqualify him for the ballot would likely stand.

Roob didn't have to go down to the Clerk's office and review those petitions himself; he relied on the information Mowery furnished to him. That's not how the process is suppose to work. That's tantamount to a judge gathering evidence and announcing the findings of that evidence without a party having to do that work themselves before filing a lawsuit.

Remember when Marion Co. Clerk Beth White learned that Patrice Abduallah had used an address on his statement of candidacy that was located outside the 15th District he represented on the City-County Council? She notified him by letter of the problem, but she did not announce the discrepancy publicly or otherwise put others on notice so they could file a complaint against his candidacy. When people like myself complained about her lack of candor, White said as the county's chief elections officer she had no right or legal obligation to challenge the sufficiency of Abduallah's statement of candidacy. Yet Cindy Mowery is scrutinizing the petitions of some Republican candidates like Santorum and Wallace and publicly declaring them insufficient. What gives? Does anyone care? In 2008, Barack Obama was able to file petitions containing hundreds of forged signatures on his Indiana ballot petitions and nobody even noticed. The Indianapolis Star is still sticking to its blackout order on coverage of that story broken by the South Bend Tribune and Howey Politics.

E-Mails Showed Daniels Worried That Union Was Flooding Call Center With Calls To Sabotage Privatization Effort

IBM is engaged in contentious litigation with the state's Family & Social Services Administration over the decision made by the Daniels' administration to terminate the company's continued role in the privatization of Indiana's welfare services. Lawyers for IBM want to depose Gov. Mitch Daniels and his chief of staff, who they contend were key players in the decision-making process. Attorneys for the state contend state law exempts high-ranking officials, including the governor, from having to testify or otherwise directly participating in litigation involving state agencies. Surprisingly, discovery has shown more than 900 e-mails sent or received by Daniels related to the ongoing privatization effort. To emphasize the governor's close participation in the project, IBM lawyers cited one e-mail in which Daniels suggested a high volume of calls to the troubled call center may have been the work of a state employees union that opposed the privatization effort. Shortly after becoming governor, Daniels signed an executive order that ended the state's collective bargaining agreement with AFSCME that had been entered into by executive order by his Democratic predecessors. The union opposed the privatization move. The AP reports:

Gov. Mitch Daniels had such a keen interest in the state's $1.37 billion contract with IBM Corp. to automate welfare intake in Indiana that he asked an aide if an unexpectedly high number of telephone calls to a call center was a ploy by a state employees union, an IBM attorney said Monday.

IBM wants to depose Daniels soon because it's concerned he will announce he's running for president and would be too busy on the campaign trail to give a deposition, said IBM attorney Steven McCormick, who also wants to depose Daniels' chief of staff.


Daniels has said he won't decide on a White House run until after the General Assembly adjourns later this month . . .

The oral arguments lasting more than two hours revealed the level of Daniels' involvement in one of the biggest outsourcing contracts in state history. McCormick displayed on the IBM attorney's table four thick binders containing what he said were 930 email messages to and from Daniels that the state has surrendered so far.


"They're here to illustrate the cradle to grave, preconception to afterlife" level of Daniels involvement in the deal, McCormick said.

Daniels received detailed reports on the number of calls welfare clients made to a call center created with IBM technology, and after one report showed an unusually large number of calls, he asked an aide if it was a union ploy, McCormick said. McCormick didn't identify the union, but a state employees union, the American Federation of State, County and Municipal Employees, vociferously opposed the outsourcing deal.

Another e-mail message instructed recipients "the governor was to be familiarized with all aspects of modernization," McCormick said, using the term the state used for the IBM project.

"The governor was not only the chief decider, he was the chief cook, he was the chief bottle washer," McCormick said.

"He made the key decisions all the way," McCormick said. "We're concerned that any delay will be met with, 'Well, now it's too late.'"

The story lays out the legal argument one of the state's attorneys, Peter Rusthoven of Barnes & Thornburg, makes to shield the governor from being deposed.

However, Peter Rusthoven, an attorney for the state, said a state law exempts certain high-level state officials including the governor, from court subpoenas and that other current and former state officials who are expected to testify will provide the same information Daniels and chief of staff Earl Goode were privy to . . .

Rusthoven said the level of Daniels' interest in the project did not trump a state law dating to the 1900s that protects the governor and certain other state officials from answering subpoenas. Rusthoven said it protects them from depositions as well, so well that there has never been an exception.


"It's never happened. The governor has never been called to testify," Rusthoven said.

IBM set out to depose Daniels on his knowledge of the deal before it had deposed anyone else in the case, Rusthoven said.

"There's been no attempt to get it by less intrusive means," Rusthoven said.

The state's ongoing litigation with IBM is a lose-lose proposition for Daniels. Critics questioned the deal from the beginning, even from within Daniels' own administration as I laid out in great detail Carl Moldthan's efforts to get Daniels to reconsider the ill-fated plan. Because the state retained the services of ACS after firing IBM, it raises the specter that IBM was nothing more than a placeholder for the Daniels administration to put ACS in charge of the deal. Daniels' former FSSA Secretary, Mitch Roob, who spearheaded the privatization effort is a former ACS executive. Critics believe it was Roob's intention all along to privatize in order to create a business opportunity for his former employer. Critics have also questioned the use of Barnes & Thornburg to represent the state's interests in the litigation. The firm has long represented ACS in its state and local lobbying efforts in Indiana. Indeed, the engagement letter with the firm acknowledged the firm's potential conflict of interest as ACS' attorney as well.

Daniels Administration's Attorneys Lose Fight To Exclude Thousands Of Documents From Discovery In Lawsuit Over Failed FSSA Privatization

I can't say that I'm surprised attorneys at Barnes & Thornburg, who are representing FSSA in a lawsuit with IBM over the failed welfare privatization effort despite their obvious conflict of interest in doing so, tried to exclude more than 11,000 documents from discovery under a claim of privilege. Fortunately, Judge David Dreyer wasn't impressed with the claim of privilege after personally reviewing the documents himself. With dollar signs no doubt flashing in his eyes (the state is paying him $475 an hour), Barnes & Thornburg's Peter Rusthoven says the state may appeal Dreyer's ruling. The Star's Carrie Ritchie explains:

A Marion Superior Court judge has ordered Indiana to turn over thousands of documents to help sort out two lawsuits over the state’s cancellation of a welfare modernization contract with IBM.


In an order entered this afternoon, Judge David Dreyer said documents the state claimed were privileged are not and should be turned over to IBM for review. They will not be released publicly.

Attorneys for the state are considering an appeal, which would temporarily stop the suits from moving forward, and will notify the court of their decision within 10 days, said Peter Rusthoven, who’s representing the state.

The documents include state employees’ e-mails, including some belonging to Gov. Mitch Daniels.

Daniels cancelled the 10-year, $1.37 billion contract in 2009 after only three years because of complaints about the automated system.

The state sued IBM in May to take back the $437 million it paid the company.

The most interesting aspect of Ritchie's story is the mention that some of the documents include e-mails authored by Gov. Daniels, who IBM is trying to depose in the matter. Under normal circumstances, it wouldn't be appropriate to insist the governor himself be questioned about an agency contractual dispute due to executive privilege, but a governor typically doesn't get directly involved involved in such matters; rather, he uses intermediaries to carry out his wishes to the extent he risks any involvement to keep his own hands clean. It is remarkable that the governor appears to have taken a more direct role in this matter.

IBM countersued, saying the state still owes the company about $100 million.


Dreyer, who reviewed more than 11,000 pages of documents privately before ruling, said in the order that he excluded “a relatively small number of individual e-mails or pages that are extraneous, personal or obviously unrelated communications.”

He also noted that he tried to be considerate of state employees’ privacy, and that he afforded the governor’s e-mails “particular scrutiny and due regard.”

Attorneys for IBM had criticized the state for trying to shield the documents.

“The state has delayed production of these documents since last fall and we hope we will now receive them promptly,” IBM spokesman Clint Roswell said today.

IBM also is trying to get a deposition from Daniels, and the state has requested a protective order to prevent the company from doing so.

The most outrageous aspect of this litigation is the fact that Barnes & Thornburg is being allowed to represent the state's interests. As I've previously pointed out, the firm has long represented ACS, the company that partnered with IBM on the welfare privatization agreement. ACS got to continue its role after the state opted to dump IBM. That ACS's services were retained was even more troubling because the company formerly employed former FSSA Secretary Mitch Roob, who initiated the privatization effort after leaving the company to work for Daniels. After Roob departed, the agency named another ACS consultant, Michael Gargano, as the agency's chief of staff and then later as the agency's Secretary. Gargano's wife, Ann Lathrop, also formerly worked at ACS with Roob. The agreement the state entered into with Barnes & Thornburg to handle the representation acknowledged the existence of the conflict of interest, but Daniels nonetheless insisted on using the firm. A top deputy in Daniels' office, Betsy Burdick, is the brother of the Barnes & Thornburg partner who signed the agreement with the state, Brian Burdick. It's notable that Burdick is a bond lawyer and not a litigator.