Vendors gave big to DeWine, GOP

Ohio AG denies politics played role in awarding lucrative collections contracts.

Special Counsel

The Ohio Attorney General hires outside attorneys for specialized work. They generally fall into three categories:

Complex Litigation — Law firms take cases such as securities fraud on a contingency basis, meaning they’re paid a percentage of any settlement or court-ordered award. They get nothing if they lose.

General Legal — Lawyers or firms with specific expertise are hired on an hourly basis.

Collections — Lawyers and third party vendors collect debt owed to the state and public universities. They are paid a percentage of what they recover.

Top 10 Collections Attorneys, Earnings 2011 to March 2014:

Charles Mifsud, $6.55 million

Keith Weiner, $6.41 million

Robert Schuerger II, $5.65 million

James Swaim, $5.06 million

Gregory Delev, $4.1 million

Michael Scoliere, $3.67 million

David Pariser, $3.09 million

Michael Igoe, $3.08 million

David Douglass, $2.92 million

Timothy Sullivan, $2.89 million

Top Collections Agencies, Earnings 2011 to March 2014:

Reliant Capital Solutions, $15.4 million

United Collections Bureau, $8.9 million

General Revenue Corp., $6.3 million

Value Recovery Group, $3 million

Revenue Group, $3 million

CBCS, $2.4 million

CELCO, $1.2 million

Source: Ohio Attorney General’s office

Debt Collection by the Ohio Attorney General

Year, Amount Certified, Amount Collected

2013:$4.85 billion, $448.67 million

2012: $4.82 billion, $453.87 million

2011: $5.24billion, $460.94 million

2010: $5.36 billion, $411.36 million

2009: $5.21 billion, $365.19 million

2008: $4.52 billion, $345.03 million

2007: $4.16 billion, $330.4 million

2006: $4.3 billion, $321 million

2005: $4.14 billion, $279.47 million

Source: Ohio Attorney General’s office

Top political contributions from collections agencies to Mike DeWine, Pat DeWine and the Ohio Republican Party since 2010:

Marjorie Brickner and Lisa Varney, Reliant Capital Solutions, $67,000

Pete Spitalieri, CELCO Ltd., $36,150

John J. Sheehan III, Revenue Group, $35,000

James Scharfeld, HMC Group, $2,000

Barry Fromm, Value Recovery Group, $1,500

Source: Ohio Secretary of State campaign finance reports

Top 10 political contributions from collections attorneys and their relatives to Mike DeWine, Pat DeWine and the Ohio Republican Party since 2010:

Michael Scoliere, $147,000

Timothy Sullivan, $134,000

David Douglass, $101,250

Keith Weiner, $84,375

Kevin Kurgis, $71,050

David Pariser, $60,400

Sue Pohler, $59,875

Kevin Kerns, $58,210

Yale Levy, $37,125

Gregory Delev, $35,650

In doling out lucrative collections contracts, Ohio Attorney General Mike DeWine passed over more experienced vendors in favor of a friend’s new collections agency.

His campaign and the state Republican Party received hundreds of thousands of dollars in campaign donations from collectors as they sought work from the state.

And DeWine involved his former fundraiser and other politically connected people in a process that is supposed to independent from political influence.

Those are the findings of a Dayton Daily News investigation that raises questions about whether some vendors used campaign dollars to land contracts potentially worth millions of dollars.

DeWine, a Republican elected in 2010, denied those with political connections or who make campaign contributions have a leg up in the awarding of state collections contracts.

“Our goal is to find the best people that we can and to put the best combination of people out in the field to get the job done,” he said. “And I think the results have shown that we have been able to do that.”

The newspaper reviewed hundreds of pages of state documents, campaign finance reports and other records relating to the attorney general’s role in picking outside attorneys and collections agencies that go after back taxes, defaulted student loans and other money owed to state government and public universities.

The DeWine administration raked in $1.36 billion in debt revenue in his first three calendar years as AG, collections that helped to balloon state coffers. Though the totals peaked in 2011 and dipped in both 2012 and 2013, the annual collections numbers are higher than in the six years prior to DeWine taking office.

Meanwhile, some of the companies bidding for that work made campaign contributions just as hiring decisions were being made. In the two months before DeWine announced his most recent picks for outside debt collectors, the attorneys and debt agencies seeking work poured more than $215,000 into the campaign accounts of DeWine and the Ohio Republican Party.

There also appears to be a nexus between how much debt collectors earn and the size of their contributions, though some collectors did not make any campaign contributions.

Since 2010, the pool of 119 outside attorneys handling debt collection for DeWine, their firms and their close family members contributed $1.38 million to the campaign coffers of Mike DeWine, his son Pat DeWine, who is a First District Court of Appeals judge, and the Ohio GOP.

Of the 30 collections attorneys who contributed more than $10,000 to that total, the average annual earnings on debt collection work was $796,500 between 2011 and 2013. Of the 89 who contributed less than $10,000, the average earnings during that time period were $192,000.

Debt collectors are paid a percentage of what they recover. It’s at the discretion of the administration how many and what kind of accounts are assigned to each vendor and attorney.

‘We were absolutely flabbergasted’

Records show DeWine has been actively involved in the debt collection process. A review of his calendar shows he has met routinely with debt collection attorneys, vendors and their lobbyists, many of them with close ties to DeWine’s political operation.

“Please call Debbie Walsh in Alex arishnikoff (sic) office. He wants to bring in Pete spiteleri (sic).…The issue is collections. So figure out who needs to be in the meeting,” DeWine wrote in an email to top aides on Feb. 20, 2011.

Pete Spitalieri, the owner of PASCO, Inc., is a DeWine political supporter. Alex Arshinkoff, also referred to in the email, is a well-connected lobbyist and long-time chairman of the Summit County Republican Party.

In his first 16 months in office, DeWine met four times with Arshinkoff and Spitalieri in his office, lunched with the two men at Spitalieri’s property in Hudson and held a conference call with them, according to DeWine’s work calendar. DeWine said he doesn’t recall meeting that many times with Spitalieri, who he described as a friend and highly successful businessman.

Spitalieri formed CELCO Ltd. on April 11, 2012 — just two days before DeWine’s office put out a request for proposals from collections agencies for the upcoming fiscal year. Three weeks later, CELCO turned in a proposal that acknowledged the company had no experience handling collections accounts.

Nonetheless, CELCO beat out several bigger, more established bidders, including ones that had a national footprint and licensing.

“We were absolutely flabbergasted,” said Barry H. Fromm, chief executive of Columbus-based Value Recovery Group, or VRG, which was founded in 1993 and had worked for the past five attorneys general. His firm got edged out by CELCO.

CELCO, VRG and HMC Group – another experienced firm — each scored 95 out of a possible 100 points, according to the scoring sheets. Fromm questions how a company without experience, a computer system or licenses to collect from people in other states could score the same as his firm, which he says has 20 years of experience, licenses in 37 states and an experienced team.

Numbers also were changed on the handwritten scoring sheets — scribbled out or written over — for 15 of the 21 bidders. For example, CELCO initially scored 23 points for experience but that number was written over to say 24 points — boosting the company’s total score to 95.

Fromm contributed $500 to DeWine’s campaign in November 2011 and another $1,000 in July 2012. Spitalieri and his relatives contributed nothing to Mike DeWine’s campaign but sent $1,150 to Pat DeWine’s campaign and $35,000 to the Ohio Republican Party, plus $23,000 to the Summit County GOP, which has sent Mike DeWine’s campaign $405,500 since 2010.

“It became very evident that to me that these numbers were changed and the rationale for the decisions among those numbers was irrational or arbitrary or capricious or intending to be accomplishing the goal that they had intended, which was to give business to Peter Spitalieri’s firm through Alex Arshinkoff and his close relationship with DeWine,” Fromm said. “It was a way to pay him.”

‘Is that a factor? Yeah, it’s a factor.’

CELCO referred media questions to DeWine’s office, which defended the selection of Spitalieri’s firm.

First Assistant Attorney General Mary Mertz said the companies were all scored within a few points of one another, which gave the staff comfort that CELCO was qualified. She noted that although CELCO was new to collections, PASCO Inc. — Spitalieri’s other company — ran high-volume call centers for large government agencies such as the Ohio Bureau of Motor Vehicles.

“To be quite candid and blunt, Spitalieri is a highly successful individual who runs highly successful companies,” DeWine said. “I told you how long I’ve known him and there is some, frankly, assurance if you have somebody you know and you know they’ve been highly successful and you trust them. Is that a factor? Yeah, it’s a factor. We go through the process and make the objective decisions but is that a factor? Yeah.”

Former Hamilton County commissioner David Pepper, a Democrat who is running against DeWine for attorney general, called the bid process a “sham — blatantly rigged to help a large donor who was not qualified to beat out firms with decades of experience. The entire episode should be fully investigated just as any other bid-rigging scheme for government work would be. The fact that Attorney General DeWine himself would work so hard to help an unqualified friend and donor shows just how deeply corrupted the culture in this office has become.”

The DeWine administration stopped scoring debt collector proposals after the 2012 round. Mertz said the scoring took considerable time and didn’t help much since all the firms were scoring close together. Instead, Mertz said the administration relies on verbal feedback from those who do business with the firms.

In its first year of state government debt collection, CELCO earned $103,696 in fees from the state. A year later, it made $819,938.

Although Spitalieri didn’t directly contribute to Mike DeWine’s campaign, he and his wife donated $5,000 or more to Hands Together, which operates the Becky DeWine School in a slum in Port-au-Prince, Haiti, according to the Hands Together 2013 report. Funding and supplying the school, named after Mike and Fran DeWine’s daughter who died in a car crash, has been a DeWine family project since 1998.

DeWine said he doesn’t specifically recall asking Spitalieri or others seeking state business to give to Hands Together but noted that he and his wife Fran frequently talk about the school and its good work.

“And I don’t apologize for it,” he said.

Not every third party vendor selected by DeWine made big contributions to DeWine or the Ohio GOP. But some did.

Lisa Varney and Margie Brickner of Reliant Capital Solutions, a third party vendor selected by DeWine for four straight years, have given a combined $67,000 to the campaign coffers of DeWine, his son and the Ohio GOP since 2010.

John J. Sheehan III of Revenue Group, another firm picked for four straight years, gave $35,000 to the Ohio Republican Party between 2012 and 2013.

A national expert on campaign finance said 90 percent of political donations are given by people who want something from government.

“Ideally you want all state decisions made by public officials to be on the merits only. And you don’t want friendship or campaign money or other types of contributions to influence it,” said Robert Stern, former president of the California-based Center for Governmental Studies. “But we all know that decisions are made for sometimes acquaintances, friends, for people who give campaign money or other inducements. And I think the public should be made aware of it. And the public official should explain it. And what he will say, I predict, is that none of this had an influence on him. He will not say, ‘oh, yes, all of this had an influence on me.’”

‘I was reaching out to anybody’

DeWine said he met with a number of people early in his administration in an attempt to improve on collections.

His calendar confirms there were meetings, although it is not clear what was discussed.

On Sept. 26, 2011, DeWine met with Arshinkoff and David Myhal, who was DeWine’s 2010 campaign fundraiser, to cover “general thoughts on collections,” according to DeWine’s calendar. Myhal is the registered lobbyist for attorney Charles Mifsud, who made $5.87 million in fees off collections between 2011 and 2013.

On June 14, 2012, DeWine met with Myhal again where they went over a list of third party vendors and attorneys that work as debt collectors, according to documents released through a public records request. The meeting occurred while the DeWine administration was weighing which firms and attorneys to hire for the work in the upcoming fiscal year.

In May 2013 — again while the DeWine’s office was considering who to hire for upcoming collections work — Myhal and J.B. Hadden hosted a $500 per person fundraiser for the DeWine campaign at Huntington Park, which is the minor league baseball stadium in Columbus. Hadden serves as DeWine’s campaign treasurer.

“Myhal has been involved in collections or knows about collections. I was reaching out to anybody,” DeWine said. “I talked to Spitalieri about collections and what our practices were. This was before, long before he ever came to us and made a pitch to do the work. I talked to him about it. I’ve talked to a lot of the lawyers who do the collections. Those conversations began probably right after I was elected and continued on for at least a year where I was just reaching out to people.”

Myhal did not return telephone messages seeking comment.

The DeWine administration hires between six and eight third party vendors and between 74 and 118 attorneys each year to handle debt collection work. The state paid those agencies and attorneys a total of $137.9 million between 2011 and 2013.

Attorney Sue Pohler, who earned more than $2 million in fees off work from the attorney general’s office in the past two years, said her contributions to the Republican Party have no connection to her work as a collector.

“I’ve been contributing to the Republican Party my whole life, large or small amounts depending on whatever I could,” said Pohler, who also managed debt collection for Republican Jim Petro when he was Ohio’s Attorney General. “I started 35 years ago and I’ve been a faithful contributor ever since. So, it’s really about the party for me. It’s always been about the party.”

Pohler sent $30,000 to the Ohio GOP on April 30, the day before bidders had to turn in their qualifications to DeWine’s office to apply for collections work. Since late 2010, she has contributed $60,625 to the party.

Other collectors too made contributions around the time DeWine’s office deliberated on which firms would get the work.

On April 11, just three days before DeWine’s office advertised that it was seeking debt collectors for the upcoming fiscal year, Mifsud sent a $20,000 check to the Ohio Republican Party. Last year, Mifsud earned $2.64 million from debt collection work from the attorney general’s office, up from $1.12 million in 2010 when Democrat Richard Cordray held the office.

Timothy Sullivan gave to the Ohio GOP at both ends of the bidding process: $25,000 on April 10 and $2,500 on June 4, the day before DeWine announced his picks. Sullivan has earned $2.9 million off AG debt collection work since 2011, including $1.1 million last year.

Democrats complain that such close timing between contracting decisions and campaign donations looks bad and undermines public confidence in government.

“It has been a problem in the past. You know that and I know that. He’s not the first attorney general to receive large amounts of money from people who want to be of counsel. He should be the last one,” said state Rep. Ron Gerberry, D-Canfield, who introduced legislation that calls for blackout periods during which lawyers and firms seeking special counsel work would be barred from making political contributions.

Gerberry described the proposed blackout period as a starting point for discussing needed reforms.

“What we’re really saying is ‘look, there has to be a better way of doing this because the way you’re doing it looks terrible even if you’re not doing anything wrong,’” Gerberry said. “Why don’t we find a way that Democrat and Republican attorneys general – doesn’t matter – that it doesn’t look like your office is being bought and sold?”

Under Ohio law, individuals and Political Action Committees may contribute up to $11,543 to candidates for statewide office and $34,631 to state parties. But the contribution limit is $1,000 for donors who receive an unbid contract from the officeholder. The more stringent limit, though, doesn’t apply to political parties, which allows law firms, vendors and PACs to give more to the officeholder’s state party.

Earmarking party donations to help a particular candidate is illegal, but the parties do send money to candidates and candidates sometimes send money to the party. Since 2010, the Ohio GOP has donated $2.7 million in cash to DeWine’s state campaigns. During the same period, DeWine’s campaign has donated $233,628 to the state party.

Stern, who helped write campaign finance laws in California, said the attorney general should set an ethical standard for other officeholders to follow.

“He is the chief law enforcement authority,” he said. “In a sense, he has higher standards than other public officials in my view. He is sort of like a judge. He should be setting the example for the absolute highest ethics.”

DeWine said no ethical boundaries were crossed in his office’s efforts to boost collections.

“We follow the law. We have a very good record in collections,” he said. “Collections is important to the people of the state of Ohio. It’s important to this office. It’s important to me. We do everything we can to enhance the collections. But there is no relationship between anybody getting any business from us and campaign contributions.”

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