Saturday, December 17, 2005

Article: Unbid Contracts - or 'Sweetheart donations, a secret AG advisory, and welcome to Ohio!'

Wanna avoid the ethics raps and still enjoy the fruits of sweetheart donations to Ohio politicians thanks to Jimmy Petro's secret advice? Just join the School Facilities Commission or the Turnpike Commission!

"This approval today is pretty much a cover-up," state Sen. Teresa Fedor, a Toledo Democrat, said after the vote. She serves as a nonvoting member of the School Facilities Commission.

The vote came after Petro’s office secretly advised the commission that state boards and commissions — including the School Facilities Commission and the Ohio Turnpike Commission — aren’t subject to the ban on political donors receiving unbid contracts.

(Comments: John Curry)

Agency votes to end ethics ‘loophole’

School facilities panel may be legally exempt but will follow rule
Saturday, December 17, 2005

Ohio’s longstanding ban on granting lucrative state contracts to political donors does not apply to the state agency responsible for spending more than $4 billion to build schools, the attorney general’s office quietly told agency officials this week.

In an informal opinion, Attorney General Jim Petro’s office said the rule doesn’t apply to independent boards and commissions because they — and not Gov. Bob Taft or other statewide politicians — are responsible for awarding contracts, according to people who have reviewed the attorney general’s opinion.

The Ohio School Facilities Commission and Petro’s office both declined to release the written opinion yesterday, citing attorney-client privilege.

Acting to close a "loophole," the commission voted Thursday to prohibit unbid contracts of $500 or more from being awarded to companies whose owners have donated $1,000 or more to Taft in the two years preceding the contract.

While some officials hailed the decision as an important step in eliminating the perception of "pay to play" in state government, others questioned why an agency that spends $2 million a day has been exempt from ethics rules in place since the mid-1970s.

"This approval today is pretty much a cover-up," state Sen. Teresa Fedor, a Toledo Democrat, said after the vote. She serves as a nonvoting member of the School Facilities Commission.

The vote came after Petro’s office secretly advised the commission that state boards and commissions — including the School Facilities Commission and the Ohio Turnpike Commission — aren’t subject to the ban on political donors receiving unbid contracts.

The ban, which dates to 1974, prohibits companies from receiving unbid state contracts worth $500 or more if people owning 20 percent or more of the company or their spouses have donated $1,000 or more to the elected official who oversees the agency responsible for the contract.

The rule is intended to eliminate the practice of companies giving money to politicians in exchange for contracts.

Some companies have received contracts from the School Facilities Commission in recent years after their principals donated to Taft, although the practice doesn’t appear to be widespread. For example, a consortium of builders including Danis Building Construction Co. was awarded a $1.5 million contract to manage the building of Dayton schools in October 2003, even though Danis principals had donated $5,500 to Taft’s 2002 campaign, according to state records.

Taft spokesman Mark Rickel and Rick Savors, spokesman for the School Facilities Commission, said the commission has never directed contracts to political contributors.

"The policy that’s now in place has been our intention all along," Savors said. "We can’t unring the bell on anything that’s happened . . . but it’s not like there’s been a pandemic of problems out there."

Rickel said the commission vote places the agency under the same rules that govern the Ohio Department of Transportation and other agencies that report directly to the governor.

"The governor is doing this to preserve the public trust and also for consistency, to codify the same rules for the School Facilities Commission that apply to other agencies," Rickel said. "Right now, there’s an exemption in the law that the governor thinks should be closed."

The commission was dogged by ethical questions shortly after it was formed in 1997 to manage a program to replace Ohio’s aging schools with new facilities. The commission’s original executive director, Randall A. Fischer, stepped down in August 2002 amid revelations that he had accepted free golf outings, meals and other perks from companies that received millions of dollars in unbid contracts he unilaterally awarded. He later was convicted of two criminal ethics violations.

Unlike the Ohio Turnpike Commission, the School Facilities Commission does not require contractors to certify that they have not given $1,000 or more to the governor in the preceding two years. Rather, the standard contract requires contractors to affirm that they are in compliance with state ethics laws, but it does not spell out the contribution limit.

The Ohio Turnpike’s director of contract administration, Kathy Weiss, said the commission voluntarily follows the campaign-finance limit even though turnpike officials don’t consider themselves bound by the same laws as most state agencies.

Article: Salaries soar for hospital CEOs

Report says average income was $638,559

By Kevin Lamb, Dayton Daily News (12/17/05)

DAYTON Local hospital CEOs had the highest average total compensation of eight Ohio regions in the latest report by the state's largest union for health care workers.

That was 36 percent above the statewide average of $468,941.

Cash income averages were $488,637 locally and $379,755 for the state.

As it attempts to organize health-care workers in some Ohio hospitals, District 1199 has published three studies in the hospital accountability project it calls "Care for Ohio."

This week's study is called "Over the Top."

One reason for Dayton's state-leading CEO compensation might have been the absence of two hospital presidents on the list and the high compensations of two network presidents, which increased the local ratio of higher-paid system CEOs to hospital CEOs.

Frank Perez of Kettering Medical Center Network received $1,346,259 in 2004 compensation, a 32.6 percent increase over 2003.

Premier Health Partners' Tom Breitenbach received $934,511, a raise of 3.4 percent.

Presidents Fred Manchur of Kettering Medical Center and Roy Chew of Grandview and Southview hospitals were not in the report.

Article: Medicare dangles Rx carrot; STRS mentioned

Subsidy of drug costs aims to keep retirees off Uncle Sam's tab

December 12, 2005
Susan Jaffe
Cleveland Plain Dealer

Marge Townsend raised pigs in Ashtabula for 30 years, but because her husband worked for the public library, her medicine is covered by the Ohio Public Employee Retirement System.

She called the system last week to find out whether she should join one of the dozens of Medicare drug plans that begin Jan 1.

"You read such confusing things, it's possible it might be better to sign up," said Townsend, 77, who lives at the Judson Manor retirement community in Cleveland.

"They said I'm covered already and don't do anything," she said.

Starting next year, PERS, FirstEnergy, Goodyear and many of the nation's major corporations providing retiree drug coverage will get help paying the bill - subsidies worth several billion dollars a year from federal taxpayers.

The money - which totals roughly $71 billion tax-free through 2013 - is part of the Medicare Modernization Act, which added a drug benefit to Medicare.

It is aimed at encouraging employers to maintain their coverage instead of forcing retirees onto Medicare's tab.

Some members of Congress and seniors' advocates feared that without a financial incentive, the Medicare drug benefit would become one more reason - in the face of rising health-care costs - for companies to reduce or eliminate the drug coverage promised to their retired employees.

The incentive seems to be doing the job in Ohio and elsewhere around the country - at least for 2006.

Beginning next year, the federal government will give PERS a subsidy of roughly $50 million annually for providing drug coverage.

The subsidy covers 28 percent of each retiree's drug costs, or up to $1,330 in 2006.

To qualify, the employers' drug plan must be the same or better than the standard Medicare drug benefit. And the employers' share of the cost must at least equal Medicare's share of the standard benefit to prevent employers from turning the subsidy into a profit.

The measure was intended to slow the increasing number of employers who have been slashing health-care benefits for retirees. In 1988, 66 percent of employers provided health care coverage for retirees, compared with 33 percent today. More than 12 million retirees now get drug coverage from their employers.

Next year, the State Teachers Retirement System expects a $33 million reduction in retiree drug costs.

Over the next several years, FirstEnergy Corp. estimates the subsidy will reduce its drug bills by $318 million and Sherwin-Williams Co. expects to save $21.4 million.

"This just shifts a portion of the cost from the company to the government and does not affect the benefits we offer the retirees," said FirstEnergy spokeswoman Ellen Raines.

According to John Ryan, executive secretary of the Cleveland AFL-CIO Federation of Labor, it's money well spent.

"Increasingly, companies have been reducing health-care coverage for retirees, so it is an incentive to do the right thing," he said.

A complete list of companies and their subsidies, approved in October and November, is not available from Medicare, spokesman Gary Karr said.

He said the agency did not have "a neat report" of approved companies and could not provide copies of letters or other correspondence.

But the information is not exactly a military secret.

Some subsidy estimates are listed in the companies' filings with the U.S. Securities and Exchange Commission.

Clues are also in the notices that retirees were supposed to get by Nov. 15 from their former employer, indicating whether their drug plan next year met the subsidy criteria of equal to or better than the standard benefit. The notices assure plan members that they won't have to pay a late fee if they decide to join a Medicare drug plan later.

A survey released last week by the Kaiser Family Foundation and Hewitt Associates of 300 businesses with more than 1,000 employees found that four out of five expect to collect the subsidy.

Companies can use the savings to defray their share of drug coverage costs or the beneficiary's contribution, or both, said Dave Repko, a top consultant at the Cleveland office of Towers Perrin, a national human-resource and employee benefits consulting firm.

Most of his Ohio clients, which include many of the state's largest employers, are not making changes in their drug plans.

Repko's view echoes the Kaiser survey findings, where only a minority of companies getting the subsidy reported that they would increase the retiree's share of the coverage or impose restrictions to control costs.

That's despite the fact an employer can receive the subsidy and still cut typically more generous benefits as long as the employer's drug plan still equals the value of the standard Medicare drug benefit.

Most employer plans don't have the standard benefit's gap in coverage or a $250 deductible, Repko said.

He said the status quo is largely a result of timing - employers didn't have much of an opportunity to review the Medicare drug plans offered by insurance companies, which were unveiled about the same time the subsidy applications were due.

Employers didn't want to drop coverage if it meant retirees would have a severe cut in coverage, Repko said.

"No one knew how to integrate their benefit plan with a [Medicare] plan," he said.

Next year, he predicts, will be different.

John Rother, chief lobbyist for AARP, which insisted on the subsidy as a condition for backing the Medicare drug benefit, conceded that more employers want to cap their share of retiree drug costs - with or without a federal subsidy.

As long as drug prices continue to soar, Rother said, retirees will be shouldering a growing portion of the cost.

"It's a gradual exit strategy for employers," he said.

Article: Locking onto Key Tower

Atlanta real estate trust wants to buy or buy into the property

December 17, 2005

Christopher Montgomery, Cleveland Plain Dealer

The future of downtown Cleveland's 57-story Key Tower appears to be coming into focus.

Wells Real Estate Investment Trust Inc., based in suburban Atlanta, said in a Dec. 9 Securities and Exchange Commission filing that it is ready to spend $312 million to buy into -- if not buy outright -- Ohio's tallest building.

Westlake's Richard E. Jacobs Group Inc. and the State Teachers Retirement System of Ohio, which each own 50 percent of the property, put the 1.3 million-square-foot Key Tower on the market in April. Included in the deal are the adjacent 403-room Marriott hotel and a 982-space parking garage.

Wells said in the filing that it signed a "recapitalization and reconstitution" agreement with Jacobs and the pension fund on Dec. 1, and the deal is expected to close on Dec. 23. Details of the agreement, including whether Jacobs or the pension fund would retain any ownership in the property, weren't included in the filing. But Wells said that when the deal closes, it "will be entitled to all the benefits of ownership of the Key Center property, including the right to receive all net cash flow from the operation" of the property, less some for the hotel. It has already made a $20 million deposit, according to the filing.

A Wells spokeswoman declined to comment, and a spokesman for Jacobs didn't return phone calls seeking comment.

Pension fund spokeswoman Laura Ecklar would say only that the sale of the fund's stake in the property is on track.

Wells owns 30 million square feet of real estate, most of it office buildings, valued at about $6 billion. Its trophy properties include Chicago's 83-story Aon Center. Locally, it owns a 102,500-square-foot office complex in Mayfield Heights that's occupied by Progressive Casualty Insurance, an arm of Progressive Corp.

Sale of Key Tower

December 17, 2005
This was sent to me by a retiree who has a point to ponder. John
In my humble opinion, all of the members of the STRS System are entitled to a complete statement regarding the sale of the Key Tower. This is the largest STRS real estate holding.. I do not consider Laura Eckler the "expert" to explain the need for diversification of OUR assets!
This proposed sale will indeed increase the bonus for Mr. Mitchell and the real estate investment staff.
Once confidence has been lost in the organization, we are all carefully watching every action of STRS!
After the information that has been released in the Medco case, it is obvious that some staff members that have been richly rewarded, do not understand their responsibilities. Why did Petro retain 5 law firms in this case? Although STRS told us that the evidence was significant, I am not certain who is telling the truth and who will win!

Article: Medicare Part D may opt spouses out of coverage

December 17, 2005
From Suddenly Senior


The Associated Press

WASHINGTON -- The government's new drug benefit program is causing big headaches for the spouses of some patients who fear they will be dumped from their own health insurance next month due to a wrinkle in the program.

Katherine Kowalewski, 56, of Tonawanda in Upstate New York, worries that she is on the verge of losing the health care she receives through her husband's former employer because of a rule in the new drug program known as Medicare Part D.

She receives health insurance through his National Grid policy, but under the government's new health benefit plan, she and many other spouses may lose the company's coverage when the prescription drug benefit goes into effect next month.

Under government rules, those who fall into that triple-insurance category will be dropped automatically from their retiree benefit health plan in January if they don't tell the government they want to opt out of the new prescription drug benefit.

A spokesman for the federal agency administering the program says they don't know how many spouses could be affected by the rule, but notes that companies have an obligation to alert their retirees of the potential loss of coverage due to Medicare Part D.

"It's a mess," Kowalewski said. "I'm being told different things, and nobody can confirm or deny what will happen to us.

"I think the Medicare Part D that was created may be very good for a lot of seniors, but I think they totally neglected to think of the younger people in the community, particularly the people with spouses, Alzheimer's, multiple sclerosis and Lou Gehrig's disease."

Kowalewski, a bookkeeper at a Buffalo company, takes medication for high blood pressure and a thyroid condition and worries that even a temporary loss in coverage could seriously hurt her health.

Medicare spokesman Peter Ashkenaz said companies are notifying retirees by mail that if they don't opt out of Part D, they will lose coverage under the company plan. In the case of the Kowalewskis, that would mean the spouse also loses company coverage.

"The people who don't take any action at all could actually find themselves just covered by Medicare or Medicaid ... so it's real important that they look at the information they received in the mail," Ashkenaz said.

Ashkenaz urged those with questions to call the Medicare hotline at (800) 422-7800.

Sen. Charles Schumer, D-N.Y., criticized federal officials for making the options -- and potential dangers of losing coverage -- hard to understand.

"This is just a glaring example of what a mess this prescription drug program is. My own parents called me up and they said, 'What do we do?"' said Schumer, who is calling for the whole plan to be scrapped.

"For all the thousands of bureaucrats that they have, they did not think this through clearly enough," Schumer said.

Schumer said there are 124 residents alone in Cattaraugus County nursing homes who stand to lose their retiree health plans if they don't opt out of the government's plan by the end of the month.

Article: Charter schools not thorough and efficient

Columbus Dispatch, December 17, 2005

Here we go again. The Dispatch is signaling the Ohio Supreme Court on how to rule on the charter-school case. This case, like the DeRolph schoolfunding case, invokes the "thorough and efficient system of common schools" clause of the Ohio Constitution. The Dispatch tried to instruct the court in the DeRolph case that the determination of thorough and efficient is the sole prerogative of the legislature.

In the Monday editorial "Innovation on trial," The Dispatch warned that the court once again may be tempted to dictate education policy. The court did not dictate education policy in De-Rolph. The court reviewed the evidence and found: "All the facts documented in the record lead to one inescapable conclusion: Ohio’s elementary public schools are neither thorough nor efficient." The court ordered the state to give the school-funding system a complete systematic overhaul. That is a far cry from dictating education policy.

The Dispatch says that the Constitution is silent on the meaning of thorough and efficient. The delegates at the 1850 and 1851 Constitutional Convention set forth not just a system of common schools, but a "thorough and efficient" system. The proceedings of that convention indicate that the debates regarding the provision for education were enthusiastic and explicit regarding the role of the state and the kind of system intended. Words were carefully and thoughtfully chosen. A dictionary in use in 1851 defined thorough as perfect.

Currently, thorough is defined as absolutely complete and efficient is defined as effective. Hence the system must be unconditionally complete, effective and, as perfect as can be devised — a stark contrast to the current unconstitutional system.

Ohio has the reputation and the reality of having one of the most inequitable systems of public schools in the United States. The gross inadequacies in the system are indisputable. It is unconscionable that the legislature, as the editorial stated, "declined to meet the court’s mandate and, lacking any recourse, the court reiterated its demands, then declared the DeRolph case closed." The legislature’s contempt of court should be condemned, not applauded, by The Dispatch. If the court rules any or all of the charter-schools statutes unconstitutional, would The Dispatch encourage the state to decline to meet the court’s mandate?

The DeRolph decisions gave the legislature the perfect opportunity to make a quantum leap toward a thorough and efficient system. But, instead of overhauling the school-funding system for the benefit of all the children of all the people, the legislature enacted legislation, through the 1998 and 1999 biennial budget, to privatize part of the system by creating charter schools. Ohio’s privately operated, publicly funded charter schools are outside the parameters of the one thorough and efficient system of common schools envisioned by framers of the Ohio Constitution.

The patchwork of schools functioning in the early 1800s had no semblance of uniform standards of governance and operation. This situation spurred the framers of the 1851 constitution to mandate a uniform statewide thorough and efficient system. The current charter-school experiment has the potential of fragmenting schooling to the point it was during the pre-1850s era. The quest for a thorough and efficient system of common schools may well give way to the same kind of chaos and confusion of early schooling in Ohio. The current well-documented academic deficiencies of charter schools will be extended to multitudes of Ohio schoolchildren.

The publicly funded, privately operated charter schools have not shown to be innovative. They often merely have taken shortcuts that compromise educational opportunities. Therefore, The Dispatch’s concern that a ruling of unconstitutional "would put a damper on innovative attempts to reform or challenge public education" is unfounded. State government should focus on fixing the one system for the benefit of all rather than establishing questionable alternatives. WILLIAM L. PHILLIS Executive director Ohio Coalition for Equity & Adequacy of School Funding Columbus

Article: Atlanta REIT looks to buy into Key Center

From Cleveland Business on the Web
December 16, 2005
By Stan Bullard

An Atlanta realty company is preparing to invest $312 million to buy into downtown Cleveland's Key Center, which includes the tallest skyscraper between New York City and Chicago and the attached Marriott hotel.

Wells Real Estate Investment Trust said in a Dec. 9 SEC filing that it expects to close the deal by Dec. 23.

The owner of more than $7 billion in real estate, Wells said in the filing that it agreed to make the investment as part of a so-called "recapitalization and reconstitution agreement" signed Dec. 1 with Key Center’s owners, the Richard E. Jacobs Group and the State Teachers Retirement System of Ohio. The state teachers retirement fund and Westlake-based Jacobs Group have been marketing the property for sale since April.

Wells already has made a $20 million deposit on the deal. The filing states that when the transfer occurs, the Georgia investment group will be "entitled to all the benefits of ownership of the Key Center property, including the right to receive all net cash flow from the operations."

Robert Byrd, Wells vice president of corporate communications, said this morning, "We don't have any comment beyond the filing itself. Should the time occur when we can say more about it, we look forward to saying more about it."

Key Tower would become part of a big-league portfolio if the transaction is consummated.

Wells owns the 2.7-million-square-foot Aon Center in Chicago — better known as the former Amoco headquarters — and earlier this year bought an office building in East Palo Alto, Calif.

Wells is a slightly different bird in the high-flying world of trophy real estate. It is a publicly regulated REIT, which triggered the SEC filing, but its shares are not publicly traded on the stock exchanges. Wells owns more than 32 million square feet of commercial property, most of it office, and the balance industrial.

All of the Public Square landmark is involved in the proposed transaction: the 57-story, 1.3-million-square-foot tower that houses KeyCorp's headquarters and white-shoe law firms; the 25-story, 400-room Marriott hotel; and the 1,000-space underground parking garage that serves the properties.

State Teachers spokeswoman Laura Ecklar refused to discuss the proposed sale or the meaning of the obtuse "refinance" and "recapitalize" phrasing before the deal closes.

But what's at work here appears to be a sale, at least on the pension fund's part.

"We have always said we will sell our ownership in the building," Ms. Ecklar said this afternoon. "We are still on course to sell it." The teachers retirement system is selling its stake in the asset because it's overextended in the office sector, she said.

Jacobs spokesman Bill Fullington did not return a call before noon today.

Sale of Key Tower: questions

I am distributing this email below from a person who wishes to remain anonymous. According to this information, it seems to me like someone got the steal of the Century on this parcel. Maybe some of you out there can shed a little more information. John

Why are we selling this property so cheap? Or what is happening here? Please copy it and send it to them. This is the 2005 Real Estate tax record. The next is 2003 in red. What is happening here? Is Mitchell going to get a bonus when this sale is added before the end of the year into earnings? Is STRS Ohio the Redevelopment Corp? This is the Key Tower. The 1.36 million-square-foot office building, 403-room Marriott hotel and 982-space parking garage will be sold to affiliates of Wells Real Estate Investment Trust II for $312.25 million. See Kathy's Blog!

PRIMARY OWNER Public Sq North Comm SECONDARY OWNER Redevelopment Corp PROPERTY ADDRESS 127 Public Square Cleveland, OH 44113 TAX MAILING ADDRESS Public Square North Comm, 25425 Center Ridge Rd, Westlake, OH 44145-4122 LEGAL DESCRIPTION 61 62 S/L BLK-A 10107023 Field Definitions PROPERTY CLASS OFFICE BUILDINGS - 3 OR MORE STORIES (ELEVATOR) 2005 (pay in 2006) TAXBILL SUMMARY PARCEL NUMBER 101-07-022 TAXSET Cleveland TAX YEAR 2002 (pay in 2003) 2003 (pay in 2004) 2004 (pay in 2005) 2005 (pay in 2006)



2005 (pay in 2006) CHARGE AND PAYMENT DETAIL Tax Information is up to the hour - tell me more. TAXSET CHARGE TYPE CHARGES PAYMENTS BALANCE Cleveland 1st half tax 235,987.62 0.00 235,987.62 1ST HALF BALANCE 235,987.62 0.00 235,987.62 2nd half tax 235,987.62 0.00 235,987.62 2ND HALF BALANCE 235,987.62 0.00 235,987.62 TOTAL BALANCE 471,975.24 0.00 471,975.24



PRIMARY OWNER Public Sq North Comm SECONDARY OWNER Redevelopment Corp PROPERTY ADDRESS 127 Public Square Cleveland, OH 44113 TAX MAILING ADDRESS Public Square North Comm, 25425 Center Ridge Rd, Westlake, OH 44145-4122 LEGAL DESCRIPTION 61 62 S/L BLK-A 10107023 Field Definitions PROPERTY CLASS OFFICE BUILDINGS - 3 OR MORE STORIES (ELEVATOR) 2002 (pay in 2003) TAXBILL SUMMARY PARCEL NUMBER 101-07-022 TAXSET Cleveland TAX YEAR 2002 (pay in 2003) 2003 (pay in 2004) 2004 (pay in 2005) 2005 (pay in 2006)



2002 (pay in 2003) CHARGE AND PAYMENT DETAIL Tax Information is up to the hour - tell me more. TAXSET CHARGE TYPE CHARGES PAYMENTS BALANCE Cleveland 1st half tax 197,680.68 197,680.68 0.00 1ST HALF BALANCE 197,680.68 197,680.68 0.00 2nd half tax 197,680.68 197,680.68 0.00 2ND HALF BALANCE 197,680.68 197,680.68 0.00 TOTAL BALANCE 395,361.36 395,361.36 0.00



Transfer History NEXT PREVIOUS

Page 1 of 1

Transfer Date: 01-JAN-89 AFN Number: V89000000000 Receipt: Parcel Deed Type Vol / Page Sales Amt Convey. Fee Convey. No Multiple Sale / No. of Parcels 101-07-022 Not Entered 00000 / 0000 $0 $0 0 / 0

Grantee(s) Grantor(s) Public Sq North Comm Redevelopment Corp

Article: Investor payments likely to be suspended

Toledo Blade, December 16, 2005
By Mike Wilkinson
Blade Staff Writer

Retirees anxious about Westhaven turmoil -- Like many retirees, Mary Fisher worries. She worries about how she'll pay for her prescription drugs that require her to work part-time at the McDonald's restaurant at Toledo Hospital.

Now she has new worries, and they're also about money. She invested $25,000 with John Ulmer's Westhaven Group, and she relies on the $229 a month he has paid her since the summer of 2003.

In the last two months, the checks have been late; last week she had to show up at Westhaven's office on Tremainsville Road in West Toledo to get paid.

But with the Ohio Department of Commerce taking over Westhaven amid charges that it violated state securities laws, the 71-year-old Bedford Township widow wonders if she'll ever see that money again.

"I need this money to live on," she said yesterday.

Ms. Fisher and her friend, Richard Klosek, who also has an investment with Westhaven, may be among the last people to get paid for a while.

John Czarnecki, appointed as a receiver of the company, said yesterday that he will likely suspend - temporarily - all interest payments to the estimated 180 people who have money invested with Westhaven. He said cash flow from the company's assets fall below the monthly interest payments of investors.

He declined to identify how much the company owes its investors each month. The Commerce Department has said the company has an estimated $26 million in investments.

"We are doing the best we can to get our arms around the situation to maximize the returns," Mr. Czarnecki said. The company's dozen employees will not be paid this week as well, he said.

Although Mr. Ulmer and his sons have offered to help, Mr. Czarnecki said they would have no role in the operation of the company. He said the company has 180 clients making payments on homes they bought on land contract and another 50 homes that it owns as part of its inventory. Those homes will be put on the market, he said, to generate cash for the investors.

Ms. Fisher's concerns are being played out in homes throughout the area as some investors struggle to figure out how they'll make ends meet if their interest checks don't materialize and their initial investments aren't repaid.

While many of Mr. Ulmer's investors may be well-heeled professionals, a portrait is emerging of many smaller, less wealthy individuals who have put large chunks of their life savings in his care.

One of them is Daniel Cairl, also of Bedford Township, who has invested more than $320,000 with Westhaven. He filed a lawsuit yesterday against Mr. Ulmer, the company, and others.

In the lawsuit, Mr. Cairl said that he contacted Westhaven last week, concerned that his investments were not covered by real estate. Mr. Ulmer allegedly sent a letter back the next day.

"Our research at the office shows that the property captioned above is not collateral on your loan, and that your conclusion that you may be unsecured is correct," said the letter signed by Mr. Ulmer. "I am sorry for this to have occurred and hope you realize it is from the bottom of my heart."

Al Stanton, 77, of Perrysburg invested with Westhaven as well, and the retiree said it generates more than $6,000 a year for him. It's part of his self-directed IRA, he said. Asked if he was worried, he said: "Not a little, a lot."

Westhaven and its subsidiaries take investors' money and then buy homes, repair them, and resell them, often at a substantial profit. Other properties are rented. Westhaven also acts as a bank, loaning money to the prospective homeowners through land contracts.

The Commerce Department said Mr. Ulmer, Westhaven, Haven Holdings, and two of its former employees violated securities laws by selling promissory notes that weren't sufficiently covered by real estate. An assistant Lucas County prosecutor said Wednesday that the state is considering criminal charges in the case.

The state estimates that of 336 investments it reviewed, 77 were not secured by real estate; 53 were not properly recorded with the appropriate county recorder's office, and 48 notes were assigned mortgages valued at less than the amount of the loan.

Ms. Fisher is one of those in the first category; it is unclear if Mr. Klosek's investment of more than $40,000 is secured with real estate. He said he could survive if the investment failed.

But his good friend, Ms. Fisher, who worked at Toledo Hospital for 23 years in the catering department, is less sure. "I don't think I'd be OK. I need that money," she said.

Article: Medco's 'Aggravating' Case

By Melissa Davis
December 16, 2005

Medco (MHS:NYSE) could soon find out that cheap cures don't always last

Until recently, the giant pharmacy benefit manager had expected to pay $42.5 million to settle a major class-action lawsuit. But an appeals court ruling will force a federal judge who presided over the case to re-examine the deal, raising the prospect that the settlement could collapse.

Medco has been accused of improperly favoring expensive drugs, especially those sold by former parent Merck (MRK:NYSE) , and then pocketing manufacturer rebates that should have gone to its clients instead. The $42.5 million settlement was negotiated three years ago, with Medco admitting no wrongdoing. Medco says it settled only to put the legal expense and burden involved behind it.

But the settlement hasn't ended the controversy over the case. The appeals court has challenged the legitimacy of some plaintiffs who settled on behalf of some 815,000 health plans in the suit. Four of the plaintiffs are simply individuals, the court points out, who have not shown that they were personally injured by Medco's alleged misconduct. And a fifth, it notes, is a health plan that has so far failed to prove that it ever had a contract with the big PBM.

The sixth plaintiff, a trustee for the Blumenthal Print Works represented by attorney Linda Cahn, has from the beginning rejected the settlement as inadequate. Meanwhile, 200 other Medco clients have declined to participate in the deal and left the door open for their own lawsuits instead.

Some plaintiffs are clearly hoping they can get more money out of Medco if the settlement is set aside. In a high-profile case that went to court earlier this month, the Cincinnati Enquirer has reported, a single health plan -- the Ohio state teacher retirement system -- is seeking $152 million in damages from Medco based on allegations resembling those levied in the class-action complaint. In the meantime, the federal government has already secured $137.5 million from a Medco competitor in another similar case.

David Machlowitz, general counsel for Medco, offered a mixed reaction to the ruling.

"I'm not sure yet whether this is a good thing or a bad thing," Machlowitz told on Thursday. "It might be a very good thing. I think it's unlikely to become a bad thing. But it could be an aggravating thing."

Medco's stock jumped 1.8% to an all-time high of $57.80 on Friday.

Right to Sue?

For its part, Medco has argued all along that the individual plaintiffs who filed the class-action lawsuit had no right to do so. Moreover, the law firm that represented those plaintiffs -- led by high-profile attorney David Boies -- nearly conceded as much when attempting to justify collecting $12.75 million in legal fees for the case.

"In the years since these actions were commenced, several courts have questioned the standing of participants and beneficiaries to sue for the benefit of plans in the absence of some showing of direct injury to the participants themselves, and a very similar action has been dismissed for lack of such standing," the firm stated in a passage cited by the court. "The risk of having these cases dismissed in their entirety on this or other grounds was very real."

The court then goes on to portray the trustee for Blumenthal -- the lone holdout on the settlement -- as a proper plaintiff with the legal standing necessary to file the complaint. Cahn appears to have left the Boies law firm during settlement negotiations, with Blumenthal following her as a client.

Cahn has long suggested that Medco bilked its clients out of billions of dollars and that the lawyers had no business settling for such a small amount. An assistant to Boies told on Thursday that the lawyer -- his star tarnished recently by conflict scandals -- would not be offering any comments to the media.

Matter of Debate

In the meantime, Medco is looking on the bright side.

For starters, Medco says that a number of similar lawsuits will disappear if the court bars individuals from suing companies on their health plans' behalf. In addition, Medco believes that it may now have a new weapon to fight the remaining lawsuits -- filed by actual health plans -- still pending in the group.

Those lawsuits, Machlowitz explains, are based on the premise that Medco serves as a fiduciary under the Employee Retirement Income Security Act. However, he says, a recent court ruling in Maine states that PBMs do not function as fiduciaries under ERISA at all.

If that is the case, he adds, all of the ERISA-based lawsuits could ultimately go away. Medco hopes to see the matter, described by Machlowitz as admittedly complex, addressed by the court as early as next month. The company continues to face a slew of other, non-ERISA complaints in the meantime.

But some legal experts, who are familiar with the PBM litigation, say the Maine case never set out to address the ERISA issue directly.

"I sponsored the law," says Sharon Treat, a former Maine senator who now serves as executive director of the National Legislative Association on Prescription Drug Prices. "The PBMs tried to say that we were making them ERISA fiduciaries. But the Maine law isn't really about ERISA. It's about governing the relationship between PBMs and whoever hires them."

Cahn echoes that view.

Friday, December 16, 2005

Notes from your editor: missing sidebar, search engine for blog

See that big white space over on the right, where you used to see text? Where is it now?

Occasionally a post requires extra space and pushes the right sidebar (the part with my bio, titles of the most recent posts and access to Archived posts, over on the right-hand side) down to the bottom, where it is currently resting. It's still there; you just need to scroll down to get to it. (Or hold down Ctrl/End keys, once the page is fully loaded, to get there quickly; you can get back to the top by holding down Ctrl/Home keys.) When the affecting post gets pushed off the first page (due to subsequent posts moving it down), the sidebar will flip back up to the top. With the number of posts I'm publishing these days, this should happen within the next day or so.

On another topic, if you've never used the search engine at the top of this page to look for a post by or about a particular person or related to a particular topic, try inserting one or more key words in the little box up
there and click on "Search this blog." (If you want to see what other blogs may have to say on the same subject, click "Search all blogs.") This is a good way to save time if you want to find a particular post. KB

Paul Kostyu speaking in Lima, October 6, 2005

Paul Kostyu, Ph.D: astute STRS watchdog

From John Curry:

Dr. Paul Kostyu (yes, Ph.D.) spoke to the Allen County reirees about his national award-winning coverage of the STRS situation. Without him, reform would have been more difficult. Just like Dr. Leone, this guy is able to communicate with the public without the need for the public to carry a dictionary to the presentation! Too bad other journalists and newspapers in the Buckeye State didn't have the political courage to cover the STRS fiasco. Knowing what has transpired at STRS is one thing -- sharing this information with the general public is another! Along with a copy of ORC 3307.15, his picture should be hung near the entrance at 275 East Broad Street so that all those who show up for work would know that he is looking over their shoulders.

John, a Proud CORE member

Article: Wells buying Cleveland's Key Center (from STRS) for $312.25 million

December 15, 2005
Written by Mark Heschmeyer
Reconstituted ownership will give Wells control over 57-story office and hotel complex
Richard E. Jacobs Group has found a buyer for its behemoth Key Center project in Cleveland. The 1.36 million-square-foot office building, 403-room Marriott hotel and 982-space parking garage will be sold to affiliates of Wells Real Estate Investment Trust II for $312.25 million.

Wells has already paid a $20 million escrow deposit and expects the deal to close Dec. 23, according to information it reported in a securities filing.

As opposed to a direct sale of the property, the deal is being treated as a recapitalization and reconstitution of ownership. The parties involved in the agreement include Richard E. Jacobs Group, affiliates of Wells Real Estate Investment Trust II and the State Teachers Retirement Board of Ohio.

It could not be determined how the ownership interests would be divvied up. However, when the closing occurs and the entities that own the interests in the Key Center Property are recapitalized and reconstituted, Wells will be entitled to all the benefits of ownership of the Key Center property. That will include the right to receive all net cash flow from operations.

Key Center has been on the market for most of the year.

The Key Tower office building is approximately 93% occupied with asking rents in the building averaging about $31/square foot. The building at 57 stories tall is considered the tallest office building between New York City and Chicago.

KeyCorp bankholding company is the primary tenant in the tower. Key leases approximately 695,000 square feet of the complex, encompassing the first 23 floors, the 28th floor and the 54th through 56th floors on a lease that expires in April 2014.

The Marriott hotel stands at 25 stories and contains approximately 385,000 square feet with full-size ballroom and extensive meeting/catering facilities.

Article: More could lose health benefits

Many businesses likely to drop coverage in '06, poll says

Friday, December 16, 2005

Ken Stammen, The Columbus Dispatch

It’s becoming a familiar — and distressing — theme for workers: employers dropping health-care coverage.

Expect more of the same.

One in five respondents to the Ohio Society of CPAs 2005 Statewide Ohio Business Poll said it is likely that a significant number of employers will eliminate health-care coverage for their employees in 2006. Forty-one percent said it is somewhat likely.

The reason cited was cost. Two-thirds of those answering the survey predicted that health-insurance costs will rise between 10 percent and 20 percent in the new year.

Jim Newton, chief economic adviser at Commerce National Bank, said he doesn’t think that large numbers of employers will eliminate health insurance but, instead, likely will pass more health costs to workers by raising deductibles and co-payments.

"It’s becoming prohibitively expensive to fully fund everyone’s health benefits," he said.

Business leaders named health-care costs as one of the top four deterrents to economic growth in Ohio. The others were rising fuel prices, government regulations and outsourcing.

The group surveyed 850 members in senior leadership posts.

The Ohio survey results come nearly three months after a national survey showed that the number of businesses providing health-care coverage fell to 60 percent this year, down from 69 percent in 2000. That study, by the Kaiser Family Foundation and the Health Research and Educational Trust, found that small employers were responsible for nearly all the decline.

Health costs have increased 73 percent since 2000, the Kaiser foundation said.

The Ohio CPA survey also found that most employers don’t expect to give big pay raises next year. Three-fourths said increases will average 1 percent to 3 percent; 20 percent said raises will be in the 4-percent-to-6-percent range.

Forty-seven percent said they expect the economy to stay the same in 2006; 26 percent said it will get stronger and 26 percent said it will get weaker.

Tom Mooney to Molly Janczyk: OFT endorsements for next STRS Board election

From Tom Mooney
December 12, 2005


OFT has endorsed John Brackett, a professor at the U. of Cincinnati, and past president of the UC Chapter of AAUP. I have known John for many years. he is a person of the utmost integrity, an accomplished scholar and proven leader. I think he is a truly outstanding candidate. John was also endorsed Saturday by the AAUP State Conference.

Our second candidate is Mark Frederick, a Cleveland teacher who ran last year without OFT endorsement (We did not know he was interested until we had committed to three others). In his campaign, Mark demonstrated a lot of energy and passion for addressing the challenges facing STRS. He is a career teacher and a very independent guy. I am confident will make a good board member.

Please pass this on to John and Dennis. I don't seem to have their email addresses.

I will also forward resumes for John and Mark.

All the best,

Article: Paying the Way (charter schools)

Conflict of interest raised in charter school approval

I-News December 25-31

Paying the way

Four school-board members who recently backed a new charter school in Colorado Springs School District 11 had accepted from $7,000 to $23,000 each in campaign contributions from a handful of prominent school-choice proponents, one of whom serves on the board of the charter school they approved last week.

According to campaign-finance reports, board president Sandy Shakes, Vice President Craig Cox and Treasurer Eric Christen each took $11,000 in contributions from local developer Steve Schuck during their election campaigns in the fall. Board Secretary Willie Breazell also received $4,000 from Schuck.

They then turned around and voted, on Dec. 17, to approve the Life Skills charter school, of which Schuck is a board member.

Board member Mary Wierman, who received no contributions from Schuck, also backed the school, while Karen Teja opposed it. Board member David Linebaugh did not vote.

Two of the members who supported the school said Schuck's contributions played no role in their decision.

"It had nothing to do with my vote for his school," Cox said.

Shakes said she was barely even aware that Schuck was on the charter school's board. "I have not ever spoken with Mr. Schuck about it," she said.

Concerns aired

And District 11 spokeswoman Elaine Naleski said that according to the district's attorneys, the vote did not represent any legal conflict of interest.

But fellow board member Teja said the vote "absolutely" raises questions among the public about the board's integrity.

"I have gotten calls on that, from people saying, 'I'm concerned; it looks like they bought the charter school,'" Teja said. "I would hope that I could make the assumption that no deals were made, that [the donors] did not say, 'I'll give you money to support my charter school.' ... But it does raise a moral question."

Teja said she opposed the school mainly for financial reasons, noting that the district will pay for the charter's operations.

Wierman said she voted for the school because she was impressed by presentations from the charter's other board members, including Colorado Springs Police Chief Luis Velez.

Still, Wierman said she shared Teja's apprehensions about fellow board members having been bankrolled by Schuck. "I did have concerns about that, and some of the public brought it up, too," Wierman said.

Cox and Shakes, meanwhile, both pointed out that in the past, board members who have taken campaign contributions from teacher's unions have supported a charter school run by the Colorado Springs Education Association.

Breazell, Christen and Linebaugh did not return calls seeking comment as of press time.

Money from Denver

According to its charter, Life Skills will target highschool drop-outs and help them earn diplomas. While a board of local community leaders will oversee the school, day-to-day operations will be handled by White Hat Management, an Ohio for-profit corporation that operates charter schools in several states.

White Hat's chairman, David Brennan, serves alongside Schuck on the board of Children First America, a national school-choice advocacy group. Also on that organization's board is Alex Cranberg, a Denver oilman who gave the second-largest amount of campaign contributions to Shakes, Cox and Christen.

According to reports, the three received between $6,500 and $8,500 each from Cranberg.

Schuck's and Cranberg's contributions were "in-kind" donations, meaning they were not direct cash gifts. The campaign-finance reports do not specify the exact nature of the in-kind contributions.

Schuck himself said he found the suggestion of a conflict of interest "insulting," adding he has no financial interest in the charter school.

"I want to help a bunch of kids who are in trouble, and I make no apologies about that," Schuck said. "What possible gain do I have?"

-- Terje Langeland

Article, charter schools: 'F' for Life Skills

Controversial D-11 charter school flunks state evaluation

I-News, Dec. 15-21, 2005

A charter school for dropouts, approved by the Colorado Springs School District 11 board two years ago against the recommendations of district staff and advisers, has earned the equivalent of an "F" on its first state report card.

The grade comes as the D-11 board prepares to consider a second charter application from the for-profit company that runs the school, White Hat Management.

Life Skills Center of Colorado Springs, which opened last year, was rated "unsatisfactory" on an accountability report from the state Department of Education last week. It was the only school in the Pikes Peak region to earn the dubious distinction.

Moreover, students at the school saw a "significant decline" in their academic growth, according to the report.

The school offers an alternative path to a high school diploma for students who have dropped out of traditional public schools. The school's approximately 200 students spend much of their classroom time in front of computers and are required to work part-time jobs, mostly at fast-food restaurants.

Life Skills principal Charles Holt did not respond to requests for comment on his school's rating. Others suggest it's too soon to judge the school.

"How much judgment do you want to make after one year's time?" asks John Gudvangen, newly elected president of the D-11 board. The state report is only one indicator of the school's performance, he notes.

"There are other indicators to look at, and I don't know enough about the other indicators for that school," he says.

However, Life Skills Centers in Ohio, White Hat's home state, have a history of abysmal performance on state evaluations. According to news accounts, the schools also have failed to test most of their students, drawing rebukes even from Ohio's Republican, pro-charter governor, Bob Taft.

Full speed ahead

Though managed by White Hat, Life Skills in Colorado Springs is overseen by a board made up of prominent, mostly Latino community leaders, who first proposed the school as a way to help dropouts.

The original board included Colorado Springs Police Chief Luis Velez, Fire Chief Manuel Navarro, Hispanic Chamber of Commerce president Gene Sanchez, Pikes Peak Library District director José Aponte, Pikes Peak Community College president Joseph Garcia, Hispania News publisher Bob Armendariz, and Brenda Quiñones, an economic development officer for the city.

The board's sole non-Latino member was real estate developer Steve Schuck, who for years has been involved in statewide attempts to push increased "school choice" via vouchers and charter schools.

Life Skills got the green light shortly after Schuck orchestrated a takeover of the D-11 board in 2003 by funneling unprecedented amounts of cash into the campaigns of four reform-minded candidates.

Schuck also happened to be friends with David Brennan, the millionaire founder of White Hat.

A D-11 committee in charge of reviewing charter applications had recommended rejecting Life Skills. The district already had programs for dropouts and would be better off boosting those programs, committee members argued.

The D-11 board approved Life Skills anyway. (For a detailed account of Schuck's board takeover and the Life Skills controversy, see "Command Performance," a two-part series that appeared on Feb. 19 and Feb. 26, 2003, at

Academic emergencies

This year, every single Life Skills school that was rated by the state of Ohio was listed as an "academic emergency" -- the worst possible rating -- on the Ohio Department of Education's Web site.

Of all 16 Life Skills schools in the state, none made "adequate yearly progress" as measured by the department.

Moreover, a recent state analysis revealed that the schools' participation in mandated state graduation tests ranged from just 3 percent to 50 percent of students. Public schools in Ohio's biggest cities had participation rates close to 100 percent, the Associated Press reported.

"The kids need to take the tests that all the other students are taking," Gov. Taft said of the findings. "There should be no excuses for that."

In Colorado Springs, Life Skills will be required to submit an improvement plan to the Colorado Department of Education. If the school were to receive an "unsatisfactory" rating four years in a row, it could lose its charter, meaning D-11 would manage the school directly or hand the charter to a different organizer.

Meanwhile, the school board is about to consider another application from White Hat, which now wants to open a distance-learning school. Although the school officially would be chartered in D-11, it would aim to enroll as many as 2,500 students from all across Colorado.

The students would learn from home, using computers, and would contact teachers for support via chat rooms and toll-free phone numbers.

Once again, D-11's charter review committee has voted to recommend denial. Its chairwoman, Trish Nixon, said committee members had "quite a few" concerns about the proposal.

For one thing, the school targets "at-risk" students. If hundreds or thousands of new at-risk students from outside district boundaries suddenly are to be counted as D-11 students, that could hurt the district's overall academic rating, Nixon notes.

The school board is scheduled to vote on the charter school application, along with two others, on Dec. 21.

-- Terje Langeland

Article: Health Care Reform: Beyond Band-Aids (Suddenly Senior)

From: Frank Kaiser, Suddenly Senior
Sent: Wednesday, December 14, 2005
Subject: [RxNews] Health Care Reform: Beyond Band-Aids - from Suddenly Senior

Health Care Reform: Beyond Band-Aids

The brief burst of $3 a gallon gasoline reminded some Americans of how much they rely on oil. As a country, we use more than 20 percent of the world's oil.

But our overconsumption of oil, with its problems for both family budgets and the world's environment, is minor compared to how we use health care. A recent series of Post-Intelligencer Op-Ed page articles from people associated with a health care reform group, CodeBlueNow!, carried some shockingly revelatory facts that help illuminate the extent of our failures at providing quality, affordable care for all.

The United States accounts for a shocking $1.7 trillion of $3.3 trillion annually spent worldwide for health care. That's more than 50 percent, overshadowing the estimates of our gluttonous share of world oil consumption (more than 20 percent). Health care administrative costs -- consider the ever-rising ratio of clerks to physicians in doctor's offices -- account for nearly $300 billion.

By one measure cited in the series, we rank 37th in the world in quality of care. A study of six advanced nations put this country worst in medical error rates and lack of access to care. The RAND Corp. found that U.S. adults receive only about half of the health care services they need just to avoid or treat some of the main causes of death and disability, such as high blood pressure and heart disease.

Accustomed to the system as it is, we lose sight of how out of step U.S. health care is. Citizens of other advanced countries spend far less individually or as a society, but have guaranteed coverage for all. And our problems of access, cost and quality are less alarming because they have incrementally grown as we lurch along with a unique, hybrid system haphazardly built around private care, employer insurance, inadequate federal dollars for the elderly and poor and the deadweight of insurance-industry bureaucracy.

By now, however, 46 million Americans have no health insurance. Access is becoming a problem for middle-class families. Businesses struggle more each year with the insurance costs, which hurt U.S. manufacturers' competitiveness.

CodeBlueNow!, the National Coalition on Health Care and other independent groups want to push a national discussion, leading to consensus about goals and well-thought-out fundamental changes. We must move beyond the Band-Aid fixes that politicians love to advocate for the interest of one group of consumers, doctors or campaign contributors.

But nothing will change until Americans decide our system doesn't have to be the way it is. Scientists, doctors and hospitals have managed marvelous achievements. But the lack of a coherent public policy on health increasingly gets in the way of delivering the fruits of scientific advances to the American public, no matter how much we overspend.

Thursday, December 15, 2005

Reminder: STRS Health Care Predicted to Become Insolvent in 2018 or 2019

Straight from the horse's mouth..........

At a PRSC meeting on December 14, STRS Executive Director, Damon Asbury was asked by Michelle Schneider when STRS Retiree Health Care would be come insolvent. Mr. Asbury replied that STRS Health Care would become insolvent in 2018 or 2019.

(ORTA website)

John Curry commentary: Fleeced by Medco for NINE YEARS @ $1000 a head? Where was the Benefits Department, STRS?

Medco and why the delay?

December 15, 2005

Today's news article [below this post] brings to light new questions re. STRS vs. Medco.

"Chesley told jurors that Medco engaged in 'bait and switch' sales tactics when it agreed to three-year contracts in 1993, 1996 and 1999."

The lawsuit wasn't initiated until 2003. One question comes to my mind immediately. If the "bait and switch" tactic was being employed by Medco, then why did it take STRS all those years to discover it and do something about it ? Did those in the benefits department at STRS have their head in the sand while the alleged atrocity was being performed for nine years?

The complainants' (STRS) attorney claims that Medco took STRS retirees to the cleaners for over $100,000,000. In ball park figures that's $100,000,000 divided by 100,000 retirees which equals $1,000 per retiree!

Article: Jury gets teachers' Rx case (STRS vs. Medco)

Cincinnati Enquirer, Thursday, December 15, 2005

Arguments end in trial over pension fund claim

By James McNair, Enquirer staff writer

"They sold these contracts like aluminum-siding salesmen," Chesley said. "They played fast and loose with the contracts."

After a trial lasting more than a month, the Ohio teachers pension fund's claim that a New Jersey drug-benefits company cheated its members out of more than $100 million was in the hands Wednesday of a Hamilton County jury.

Lawyers summed up their cases Wednesday, and Hamilton County Common Pleas Judge David Davis instructed the eight jurors on how to consider the civil allegations of breach of contract, breach of fiduciary duty, tortious interference and constructive fraud.

The jury, seated Nov. 9, will begin deliberating this morning.

The State Teachers Retirement System of Ohio alleges that Medco Health Solutions of Franklin Lakes, N.J., pocketed $55 million in drug-maker rebates that belonged to the system.

It also accuses Medco of charging $49 million in unwarranted prescription-dispensing fees from 1993 through 2001, when Medco served as the system's pharmacy benefits manager. Medco's former parent, pharmaceutical giant Merck & Co., is also a defendant.

Medco, which is also defending itself against civil fraud charges filed by the Justice Department in Philadelphia, says it fulfilled the obligations of the pension system's contract and did not enrich itself at the expense of the system's 430,000 retirees and beneficiaries.

The lawsuit was filed in 2003 by Ohio Attorney General Jim Petro but is being tried by Cincinnati lawyers Stan Chesley and Mike Barrett on behalf of five law firms handling the case for Petro.

The retirement system is also seeking an unspecified amount of punitive damages.

Chesley told jurors that Medco engaged in "bait and switch" sales tactics when it agreed to three-year contracts in 1993, 1996 and 1999. He called Medco "smooth" operators who used the contracts to increase the number of Ohio's retired teachers who use Merck's high-priced proprietary drugs. He said Merck - the "mother ship" - supplied 18 percent of the name drugs sold by Medco to retirement system members, including Medco's top three sellers in 1997 - Zocor, Mevacor and Vioxx.

"They sold these contracts like aluminum-siding salesmen," Chesley said. "They played fast and loose with the contracts."

While the state's benefits handlers thought the retiree group was contractually entitled to all rebates paid by drug manufacturers, Medco says it was entitled to rebates paid to pharmacy benefits managers for their overall "book of business" with manufacturers and for increasing the market share of certain drugs.

In one such arrangement, Chesley said, Eli Lilly paid Medco a 15 percent rebate in exchange for a "neutral" stance on prescribing Prilosec, a rival acid reflux drug made by AstraZeneca.

"That's the side deals these guys were doing to the detriment of STRS," Chesley said.

Medco lawyers disputed the amount of "book of business" rebates that Chesley said the company earned from drug makers during the nine-year contract period. They put the figure at $28 million, not $55 million. And despite the "smorgasbord of theories and hypotheses," Medco lead trial lawyer Earle Maiman said, manufacturer rebates are generally divided into two classes, one for the pharmacy benefit manager and one for its client.

"The whole truth in this case is they got exactly what they wanted - the best price available in the marketplace for a customer their size," Maiman said. "And now they want to punish us for it."

Medco's ownership by Merck, he said, saved the system $5.58 million over the life of the contract. He said no evidence was presented of Medco forcing system members to use a Merck product - or causing adverse health effects.

Maiman also denied the system's claim that Medco had a fiduciary duty to the retiree group. He cited contract language that identified Medco "solely" as an independent contractor.

Medco manages pharmacy benefits for four other large public retiree groups in Ohio, and Maiman pointed out that none has voiced complaints like those of the teachers system.

Article: Landmark study tests safety of painkillers (Cleveland Clinic)

Cleveland Clinic will determine whether drugs that treat arthritis are OK for heart patients.

Marilynn Marchione / Associated Press

December 14, 2005

The Cleveland Clinic will lead a huge international study to learn whether painkillers taken by millions of Americans for arthritis are safe for those at risk of heart problems.

With an unusual mix of industry, academic researchers and government oversight, the study aims to restore public confidence in the wake of the Vioxx debacle.

"There's only one way -- through good science," said Dr. Steven Nissen, the Cleveland cardiologist who will lead the study. Results are expected in four years. "We know the burden is upon us to do this right."

Drug safety and the credibility of research have been concerns in recent months since Vioxx and Bextra were pulled from the market because of evidence they can raise the risk of a heart attack or stroke. That left Pfizer Inc.'s Celebrex as the only available cox-2 inhibitor, drugs that became blockbusters because they were gentler on the stomach than older pain relievers.

Many people who switched to over-the-counter pain relievers called non-steroidal anti-inflammatory drugs, or NSAIDs, then had a new worry when the Food and Drug Administration ordered stronger warning labels earlier this year.

The new study will test Celebrex and two types of NSAIDs: ibuprofen (sold as Motrin, Advil and other brands) and naproxen (Naprosyn, Aleve).

About 20,000 people in the United States, Eastern Europe, Canada, Australia and South America will be randomly assigned to get one of the three -- neither they nor their doctors will know which -- and a drug to prevent stomach irritation so each pain reliever's true effectiveness can be assessed. Drugs and follow-up monitoring will be free.

To be eligible, participants must have had a heart problem in the past, such as a heart attack, blocked arteries or chronic chest pain, or diabetes, stroke or clogged vessels in the neck or legs.

"The idea here is if you know what happens in the highest-risk individuals, you will know how to use the drugs in people at lower risk," Nissen said. "We will have 10 times the statistical power of any trial ever done of these drugs."

Pfizer will fund the study, expected to cost more than $100 million, but independent researchers will collect and control the results and have offered to make all of them public. No top researchers can have financial ties to any pain drug maker.

Flashback; John Curry (2003): Leone not afraid to change 'good ol' boys' system

From: John Curry
Sent: Tuesday, December 14, 2004
Subject: Leone, long before Johnson (who's Johnson)

As I look at ORTA's recent endorsement of a person (Johnson) who is not familiar with investigating and exposing misspending at STRS I wonder where in the world 3 out of 5 officials at ORTA had their heads. Political patronizing is the reason these 3 ORTA officials decided upon not endorsing Dr. Leone. What debt did they owe Joe Endry? Maybe ORTA should be investigated. Where was Johnson when I wrote this article? Since this article below was written, I have learned that John Lazares assisted with Dr. Leone's investigation. John Lazares is now on the STRS board- DENNIS LEONE WILL BE NEXT.John
Leone not afraid to change 'good ol' boys' system
Editor, the Gazette:

It is with great pride that I write this letter about one of your school administrators and his recent accomplishments.

Chillicothe Superintendent Dennis Leone has single-handedly taken it upon himself to investigate the gross mismanagement of the State Teachers Retirement System. He has uncovered gross mismanagement of taxpayer and teacher contributed monies. He has stood up to those who denied any wrong-doing and who hoped he would go away.

His investigations have led to a barrage of newspaper reports from reporters, who like himself, were not afraid of ruffling feathers of politically entrenched lawmakers, administrators, and other media giants. His investigations have led to a statewide movement to investigate the STRS from the bottom up and to legislate change for more honest and ethical operation of an agency who controls billions of taxpayer and teacher contributed dollars.

Leone is an administrator who is not afraid of his political shadow as are some of his cohorts and other politicians with lack of intestinal fortitude.

By his actions, Leone has insured a change in the "good old boys" way of managing a retirement system whose love of "entitlement" stood in the way of service to its deserved recipients, the retirees of Ohio's public school systems.

John Curry


Originally published Wednesday, September 10, 2003

Chillicothe Gazette

Wednesday, December 14, 2005

From John Curry: STRS 2005 Kodak Moment-1507 reasons to like this guy -or- "The Fonz" smiles

September 15, 2005: A day that will go down in history.

John Lazares is all smiles, maybe because he is rightfully being recognized and honored on the occasion of Dennis Leone's swearing-in, but I suspect more because he FINALLY has company on the Board. We know we now have at least TWO who will unfailingly and without compromise support and defend ORC 3307.15. They have a HUGE task, which will require the support of every STRS retiree in the state, and then some. And whose job will it be to garner that support? Go look in your mirror. KBB

An ORC Carol

O Christmas Tree III
$ $ $

O, ORC three-three-O-seven
Point one-five, we need thee;
STRS is in the lurch
Because they spent our money;
They used retiree funds to play
We watched our health care go away
O, ORC three-three-O-seven
Point one-five, we need thee!

Frank Kaiser: Taking Medicare plan by the horns, this senior gets gored

Yesterday, as former Sen. Bob Dole told bewildered neighbors here not to listen to those who say the new Medicare drug program is confusing, I was befuddled, overwhelmed, and finally mind-numbed by this most fiendishly complex can of worms that ever wiggled.

I would so like to see Dole brave these swamps. But then, the good senator has a far simpler program. It pays for everything.

Ours should be so simple. It would be cheaper.

Instead, I went online, entered the drugs I'm using, and…

"No plans were found to have ALL the drugs you selected on their formulary. The following 287 plans have some of the drugs you selected on their formulary."

Humana alone has 36.

I click on. It takes me twenty minutes just to decode the acronyms.

Then it gets tricky.

As far as I can tell, Medicare has decreed that no two plans can be similar or comparable. This $800-billion fiscal fiasco is a mystery inside an enigma wrapped in a conundrum.

Each drug in each plan has its own restrictions: "Formulary Status" (Tier 1, Tier 2, or Tier 3), "Prior Authorization," "Quantity Limits," and something called "Step Therapy."

Don't ask.

If that weren't confusing enough, deductibles vary from zero to $250, and no two co-pays cost the same. The devil himself could not have devised a more complicated, more bewildering method to compare a meager list of drugs.

Insurance companies could. And did.

I start looking for the fewest restrictions.

About two hours and 30 plans later I'm ready to kill. I need IBM's Big Blue computer, the one that won all those chess games.

Heck, I need an AK-47!

Triple Martini, Please

My wrist is sore, my carpel tunnel screaming. Eyes blurred, neck cramped, and back breaking, I attempt to recall my own name just as Medicare's site goes blank. And when I try, thank God I can't get back on.

How I wish I were a drinking man.

But instead of a triple martini, I call Medicare — 1-800.663.4227 — to get help from a real human being.


After recorded messages ("Simply choose the one best meets your needs, blah, blah, blah...") finally asking me to go to Medicare's Internet site for faster service, Latoya comes on the line, wanting my name, address, Medicare number, and a bunch of other stuff.

She may be intrusive, but she's the first human voice I've heard all day. And she's there to help.

I want to ask her to marry me. Instead, I bore her with my drug list.

Latoya brightens. "I have Humana PDP Complete with a zero deductible, a $61.70 monthly premium and a monthly cost share of $130.53."

Hey, that's less than $200 a month! "But what about the gap, the $2,850 out-of-pocket "donut hole?" I ask.


"You know, that woeful netherworld of coverage from $2,250 to $5,100?"


I decide not to ask about local drug store availability.

The second plan has a $250 deductible, $10.35 premium and $131.63 monthly cost share. The third, a $100 deductible, $45.89 monthly premium and $126.97 monthly cost share.

Then there was a pause.

"What's next?" I ask.

Turns out Latoya can give me only three of the 287. I plead for another. "But what if the next one is better than the first three?"

No way, José. Three's the limit. "But you might want to call your local State Health Insurance Assistance Program (SHIP) ," says Latoya. "But call before January 1st or you'll pay a big penalty."

Just as I am about to correct her, Latoya mutters, "Oh my God! My computer is down. Everybody's computer's down! Oh my God!"

That's the experience Senator Dole declares not confusing. And he's right. It was just stupid.

Drug Prices Changing Already

After months of false starts, false statements and false promises, we now have a false program, the only understandable part of which states that if you don't sign up by May 15th you will be hit for the rest of your life with a penalty of one percent for every month's delay.

Also, to keep the game interesting, it's like a pari-mutuel: prices for some specific drugs offered by some plans actually changed between last Friday and Monday.

At this point, isn't it clear why America's health care system spends more, for worse results, than that of any other advanced country in the world?

Bob Dole would tell you not to listen to that, either.

Damon to Tom: Postponement of grandfathering discussion

Thank you Damon.
----- Original Message -----
From: Damon Asbury
To: Tom Curtis
Sent: Wednesday, December 14, 2005
Subject: RE: 121305 Curtis To Knoesel; Employee HC


The discussion on grandfathering was postponed on Friday morning, because four board members were unable to attend the board session that day. Three of the four – Dennis Leone, John Lazares and Mike Billirakis – had all expressed interest in being part of that discussion, so Dr. Buser, Sandy Knoesel and I decided that it would be better to delay the discussion until all were present. I’m not sure if that will be the January meeting or the February retreat, but it is still a topic of serious interest.


Article: $722 million needed to fix pensions, lawmakers learn

By Matt Gouras - Associated Press Writer 12/14/05

"An attorney for the Montana Public Employees Retirement Board, which has been feuding with the governor over the way it hired a new executive director, said it is possible the state will be sued for not meeting its constitutional requirement to keep the pension funds whole."

HELENA — Lawmakers learned Tuesday that it will take more than $700 million in tax money to fix the crisis in state government’s pension systems.

They also were told they could face a lawsuit — much like the one forcing them to spend millions on education — if they don’t fix the systems’ financial problems soon.

The three boards responsible for running Montana’s public pension systems and managing their money faced legislative audits a day before lawmakers are expected to start working on a costly pension bailout at taxpayer expense.

Gov. Brian Schweitzer wants to spend $125 million of the state’s surplus to address part of a projected $1.46 billion in pension-fund deficits, then fix the rest of the problem later.

Erasing all of the deficits would require an immediate infusion of about $722 million, the Legislative Audit Committee was told. Returns from investing that money would cover the remainder of the deficit.

The management boards took some heat during the audit committee hearing. Some lawmakers expressed displeasure about a taxpayer bailout just a few years after public employee groups helped obtain increased pension benefits.

The state can increase benefits, as the Legislature did in 1999-2001 at the urging of a long list of lobbyists when pension funds were flush with stock-market gains, but cannot decrease them constitutionally.

Sen. Corey Stapleton, R-Billings, said that the Montana Public Employees Retirement Board and the Teachers Retirement System lobby for more benefits when the systems have cash, then ask for tax money in bad times.

‘‘Isn’t that convenient?’’ he said. ‘‘You couldn’t do that in the private sector.’’

David Senn, executive director for the Teachers Retirement System, said it had appeared the increases were affordable.

‘‘Things were looking good,’’ Senn said. ‘‘We had no idea the market was going to do what it did.’’

Stapleton said Republicans will be reluctant to go along with Schweitzer’s plan. GOP lawmakers don’t want to put more money into the pension funds until there is a complete solution on the table, Stapleton said.

The governor’s office has been adamant that it is better to start chipping away at the problem now, given that spare money is available.

Rep. Joe Balyeat, R-Bozeman, said the state risks throwing $125 million ‘‘down a rat hole’’ if the system is not first restructured.

The Montana Board of Investments, responsible for investing pension money, told lawmakers that steps toward improvements have been taken. Carroll South, the board’s executive director, said a new chief investment officer has been hired, a consultant has been brought on board and the investment mix has changed.

One Republican started circulating a petition to do more on the issue during this week’s special legislative session.

Rep. Dee Brown, R-Hungry Horse, said she wants an interim committee to take a longer look at the problem.

An attorney for the Montana Public Employees Retirement Board, which has been feuding with the governor over the way it hired a new executive director, said it is possible the state will be sued for not meeting its constitutional requirement to keep the pension funds whole.

Melanie Symons said the board has not talked about whether it will sue the state to force a cash infusion to fix the system. Other groups or individuals could sue if the large deficit lingers.

‘‘There’s a possibility a lawsuit could result,’’ Symons said.

One legislative plan calls for future increases of employer contributions, a combination of local and state tax money, along with the $125 million Schweitzer is requesting.

Symons said such a ‘‘good faith effort’’ would likely deflate the possibility of a lawsuit.

Schweitzer’s plan earmarks about $100 million for the teachers’ retirement system, and $25 million for the public employees’ pension fund.

Commentary: Prosecutor won’t touch allegations in August

Columbus Dispatch
Wednesday, December 14, 2005

Timing, apparently, is almost everything when it comes to grabbing the attention of Franklin County Prosecutor Ron O’Brien if a public official is involved.

His is a delicate balance. As prosecutor in the home county of Ohio’s state capital, rare is the day there’s a shortage of shenanigans. What to do? Which case to pick? His cup runneth over during both his tenure as Columbus city attorney and now as county prosecutor.

Then again, O’Brien is smart and knew what he was getting into. So we’ll pity him only a little.

Over the years, he said, "I’ve become more than a little suspicious when allegations arise" within a few months or weeks of Election Day. Fair enough. "Folks," he said, "have a habit of trying to criminalize an election these days."

He mentioned the proverbial "October surprise," a timeworn political device that, even when no wrongdoing is found, can level a candidate.

What if the allegations surface in August? That’s still too close to an election for his taste. He’ll refer you to the police.

January is just right, however, if you’re a well-known lawyer who can make an appointment with the prosecutor without first stating a purpose. That, O’Brien said, is what happened early last January when Columbus lawyer Benson Wolman visited his office and handed over a folder with the allegations and details.

Wolman told O’Brien, among other local officials, that employees of the Franklin County Municipal Court clerk’s office had accused their then-boss, Michael A. Pirik, of allowing an employee to fudge her time sheets. Pirik, who has denied the allegations, was defeated by Lori Tyack in the Nov. 8 election and left his job later that month "to exercise his right to vacation" for the rest of the year.

O’Brien, a Republican, as is Pirik, said he couldn’t just say no when Wolman presented the allegations. So he turned the evidence over to his white-collar investigations unit and then discussed it with at least two Democrats — the city attorney and the city auditor. In the end, there wasn’t enough to proceed, O’Brien said.

So the folks — both Democrats and Republicans — at the clerk’s office continued to look for the goods that would substantiate their claims and persuade someone to take another look. They returned to O’Brien in August with a new lawyer and more evidence. This time, O’Brien wouldn’t even look at the additional evidence.

He said he’s nothing more than a genial political acquaintance of Pirik’s, although he cohosted a fundraiser for him and has donated to Pirik’s campaign. They don’t dine or otherwise socialize together. They are just both Republicans. No conspiracy.

City Attorney Richard C. Pfeiffer Jr. did look at the new information and promptly referred the case to the Columbus police. Now a grand jury is reviewing evidence.

O’Brien was right to question the timing. But his abject refusal in August rang hollow, as if those who would blow the whistle should know and understand the subtleties of timing. They probably did, which is why they first went to him and others in January. When they returned with the goods, it was just too late. "I told them to go where you should go in the first place 100 percent of the time," O’Brien said, "and that’s to the police agency." At least in August.

Larry KehresMount Union Collge
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