They were just a few words slipped into D.C. budget legislation, but they cost city businessman Jeffrey E. Thompson millions.
The passage — “up to $2 million shall be allocated . . . to perform comprehensive audits of programs within Medicaid” — was aimed at three health-care companies thatcoordinated care and handled billings for tens of thousands of low-income city residents.
Thompson’s D.C. Chartered Health Plan was by far the largest, handling $124.8 million in local and federal funds at the time, with scant oversight. The audit that followed the 2005 legislation found questionable business practices at Chartered and resulted in an unprecedented court settlement.
Long a prodigious political donor, Thompson, 56, is now a key figure in a federal investigation into campaign finance in the District. His home and offices were searched March 2 by federal agents, and his name appears on subpoenas delivered recently to several D.C. Council members.
That a single sentence in a 142-page bill could cost him so dearly — even after the provision was watered down with the assistance of well-connected lobbyists — illustrates Thompson’s stake in maintaining his political clout. Chartered now handles in excess of $300 million a year in taxpayer funds, and Thompson’s fundraising network can be traced to hundreds of thousands of dollars in donations to District campaigns in the past decade.
“I don’t think anyone should be surprised that [Thompson] was heavily engaged in the process, because he had a lot at stake in the outcome,” said D.C. Council member David A. Catania (I-At Large), who placed the audit language in fiscal 2006 budget legislation.
Thompson’s attorney, Brendan V. Sullivan Jr., has declined to comment on the federal investigation.
Former council member John L. Ray, who has lobbied the city government on Thompson’s behalf, said his contributions to health care for the city’s poor are underappreciated. “Chartered, at great risk, played a very important role in making this system what it is today,” he said.
But regulatory filings, audit reports, financial statements and lobbying records reviewed by The Washington Post show how deeply Thompson’s finances have become intertwined with politics.
Building an empire
Starting in the late 1980s, Thompson built his accounting firm — Thompson, Cobb, Bazilio & Associates — into one of the country’s largest minority-owned firms, in part by courting government clients for auditing, consulting and technology work.
But in the late 1990s, he saw a new government business opportunity. A political ally, Mayor Anthony A. Williams (D), was pushing to change the way District government handled health care for its neediest residents, relying more heavily on private companies to manage public health spending.
Thompson bought Chartered Health Plan in May 2000 in a $4 million bankruptcy sale. The company had been in the red for at least two years, but under Thompson’s control, Chartered returned quickly to profitability.
The company’s enrollment would grow from about 27,000 members at the time of the purchase to more than 59,000 by 2006. For 2006, the company was recorded a surplus of $6 million and paid its parent company — D.C. Healthcare Systems, solely owned by Thompson — a $1.54 million dividend, according to regulatory filings. In the next two years, the company would pay an additional $6.1 million in dividends.
But in early 2005, a threat had emerged. Catania had taken over the council’s Health Committee, and he wanted the city to take a closer look at managed-care spending, the biggest line item in the city budget.
His committee put the language in budget legislation that directed the D.C. Department of Health to spend as much as $2 million on “comprehensive audits of the Medicaid managed care organizations providing health care services to Medicaid enrollees in the District.” Moreover, the language specified that the reviews needed to be performed by a firm without a “prior contractual relationship” with the department — disqualifying Thompson, Cobb, Bazilio & Associates, which is 79 percent-owned by Thompson and which audited Chartered’s books in the late 1980s.
After Catania released the audit language in early May, city reports show, Chartered’s lobbyists — Ray and his associate Tina Ang — held about two dozen meetings with council members and staff over the next two months to discuss the budget legislation.
Another lobbyist, David W. Wilmot, was engaged on behalf of the D.C. Association of Health Maintenance Organizations, of which Chartered is a member.
The lobbying continued to the last minute: Ang met with council staff the day before and the day of the final budget vote in July 2005 “regarding revised language for Medicaid audit,” according to a lobbying report.