Grand jury looking at DHHS contracts

RALEIGH -- Federal prosecutors have sought information about high-priced work agreements between the North Carolina Department of Health and Human Services and four contractors, as well as a former technology head for building a Medicaid billing system marked by excessive spending and peculiar hires.

Subpoenas from the U.S. Attorney's Office in Raleigh, released by the state's health agency Friday afternoon, requested the information be provided last month.

U.S. Attorney Thomas Walker didn't return a phone call seeking comment. Letters attached to the July 27 subpoenas, written by Assistant U.S. Attorney Banumathi Rangarajan, say they had been "issued by a federal grand jury pursuant to a criminal investigation," but didn't provide details on that probe.

Department spokeswoman Kendra Gerlach declined to comment late Friday when asked whether the documents were provided on the subpoenas' Aug. 18 due date, referring to a prepared statement from the agency.

DHHS "is cooperating and working with the federal government in this process," the statement read. "We will continue to respect the confidentiality of the process by the federal government to protect the integrity and fairness of this review."

One subpoena seeks records for contracts between DHHS and Les Merritt, Thomas L. Adams, Joe Hauck and the firm Alvarez & Marsal. The other seeks records about more than 30 employees, including Angeline Sligh, the former Medicaid information systems director, who was singled out in a State Auditor's report in May that found at least $1.6 million in wasteful spending related to hiring temporary help for the project.

In seeking the contractor documents, a subpoena also asks for the employment contract and records related to required financial disclosures by former DHHS Secretary Aldona Wos.

The prosecutors sought information on now-expired contracts for three individuals hired early in Wos' time as secretary, as well as a contract with Alvarez & Marsal, which was hired to work on the state Medicaid program. The information sought also includes solicitations for bid proposals and email and written communication between Wos and the contractors.

Hauck received $310,000 for 11 months as a department consultant to Wos in 2013. He had been working for a firm led by Wos' husband. Hauck and his wife also were donors to Gov. Pat McCrory, who appointed Wos to the secretary's post, for which she accepted a $1 annual salary. Wos announced her resignation as secretary in early August, citing the need to be with her family after working in Raleigh well longer than she had anticipated. Wos didn't immediately reply to an email seeking comment. Neither did Houck.

Merritt, a former elected state auditor, was hired in May 2013 at the rate of $150 per hour on budget and payment issues within the state mental health division. At the close of the one-year contract, he had been paid $263,100, a DHHS official said earlier this year. Merritt didn't return a phone call at his accounting office in Zebulon.

Adams worked as Wos' chief of staff for only a month before leaving his $155,000-a-year job in April 2013. That summer, Adams agreed to a $37,227 lump sum payment to settle any potential claims he might have against the state agency, according to records. The written settlement didn't explain why Adams left or would have standing to file a claim. Phone and email messages for Adams weren't immediately returned.

Alvarez & Marsal won a no-bid contract in early 2014 to help with the reorganization and finances of the Division of Medical Assistance, an agency within DHHS that operates Medicaid. The firm has been praised by DHHS leaders for their work in helping turning around the agency.

A DHHS website said the contract with the firm, which included three amendments, ends early next month and had an "amended total" of nearly $11 million. Company officials didn't respond to an email request.

Sligh, who did not return a telephone message left at a home number listed to her, had been director of a Medicaid information systems office tasked with bringing online the NC Tracks Medicaid billing system. Current State Auditor Beth Wood's office found that Sligh had hired her daughter, ex-husband, his wife and several members of her church. The NC Tracks build out was marked by significant cost overruns before it was turned on in July 2013.

The News & Observer of Raleigh first reported on the existence of the subpoenas.

__

Associated Press writer Emery P. Dalesio contributed to this story.