From the archives: Syringa CEO says one of Otter's top aides threatened and strong-armed him

Editor's note: This story first published on Feb. 28, 2010

The good friend and riding buddy that Gov. Butch Otter tapped to help him reshape government may be alienating state leaders in both parties and may soon have to defend his actions in court.

Mike Gwartney took over the Department of Administration in 2007 after a career at Boise Cascade and with the determination to run the state like a business.

And though few Idaho legislators would agree to talk on the record, many said displeasure with Gwartney is widespread in the Statehouse and does not stem from one or two specific instances, but from a pervasive pattern.

"It is the imperialistic attitude Mr. Gwartney brings to a lot of the projects he does, " said Sen. Dean Cameron, co-chairman of the powerful budget committee.

One Idaho corporate executive says he's seen Gwartney's style up close. He says Gwartney has bullied him in person and blackballed his company from state contracts, and he has taken his case to court.

"We set aside a $1 million war chest, " said Greg Lowe, CEO of Syringa Networks, a telecommunications company."And that's just for 2010."

Gwartney would not meet with the Statesman for this story. His staff said attorneys told him he shouldn't discuss anything to do with the Syringa lawsuit.Even when asked to respond to criticisms broader than the lawsuit, Gwartney would not agree to an interview - again citing advice from attorneys.

FROM A GENTLEMAN'S CLUB TO A COURTROOM

Lowe's dispute stems from a state contract for the Idaho Education Network, a statewide broadband system linking Idaho public schools, universities and businesses.

Syringa — a fiber-optic network provider formed by 12 rural Idaho phone utilities in 2002 — and a partner company bid in late 2008 for the project, which was estimated to cost some $25 million over its first three years.

An independent review panel found the Syringa group was the least expensive and most technically proficient bidder, scoring the group's proposal well above that of fellow bidder Qwest in six of seven categories.

But Gwartney's agency awarded the project to both bidders in January 2009 - using Syringa's estimate that it would cost about $570,000 a month to run the network (not Qwest's bid of $854,000).

Six months later, though, Syringa officials wanted to know why they still hadn't been given one piece of the project or one dollar of its budget.

So Lowe and Syringa lobbyist Ken McClure met with Gwartney at Boise's members-only Arid Club on July 15, 2009.

According to Lowe and McClure, Gwartney warned against further pursuing complaints against the state.

"I'd sure hate to see the rest of your (state) business go away, " Lowe says Gwartney told him.

"I've already written it off for 2010, " Lowe replied.

"Good," Gwartney responded.

"I couldn't swear under oath that those were the exact words, " said McClure, an attorney with the Boise firm Givens Pursley and a longtime Statehouse figure. "But they are very, very close and accurately convey the substance of the exchange."

Five days later, on July 20, Syringa filed notice that it could sue the state for awarding the contract illegally and for engaging in unlawful conduct. The lawsuit itself was filed in December against the state. The suit also named Qwest and Syringa's original partner, Tennessee-based Education Networks of America, saying they, too, played a part in Syringa being cut out of the contract.

The state denies Syringa's allegations. "Our attorneys are confident that we will prevail, " said administration spokeswoman Teresa Luna.

Qwest, too, says the "suit is completely without merit."

"Qwest acted professionally and appropriately at all times during the bidding and award process and any accusation or insinuation to the contrary is false, " said Qwest spokesman Bob Gravely.

LAWMAKERS ARE LOSING CONFIDENCE

During the decade Cameron has chaired the powerful Joint Finance-Appropriations Committee, he said, Gwartney is the only department head to blatantly defy the committee.

"For two years in a row, when Mr. Gwartney has been invited to come in front of the committee ... he's said, 'No, I'll send staff, '" said the Republican from Rupert. Cameron's district is home to Project Mutual Telephone, one of the members of the Syringa Network.

Earlier this month, as Gwartney's staff made the department's annual presentation to the budget committee, Gwartney did attend the hearing and made himself available to answer questions.

Cameron asked Gwartney to respond in writing about his role in the decision to phase out funding for the Idaho Digital Learning Laboratory and Idaho Public Television - both of which Otter's administration has said could duplicate services provided by the IEN.

Cameron also asked Gwartney to submit an updated business plan for his department - something Otter chastised IPTV and several other agencies for not doing. So far, Gwartney has not responded to either of Cameron's requests.

"An updated plan for 2010 will be made available to all legislators shortly. The final responses to the JFAC questions will be delivered at that time, " Luna said on Friday.

"I think there's a belief that he can do whatever he wants to do, and if we don't approve the money he'll get the governor to issue an executive order, " Cameron said. "He'll do whatever he wants to do and the Legislature is a temporary pain in his backside."

Sen. Kate Kelly, a third-term Boise Democrat who is now Senate minority leader, was the only senator to vote against Gwartney's confirmation two years ago.

"Having worked with a number of directors of the Department of Administration during the years that I have served in state government, it is my observation that the current director manages the agency with less transparency, less stakeholder and public involvement in decision-making, and less respect for legislators and public employees, " she said this week.

Assistant Senate Minority Leader Elliot Werk, another Boise Democrat, agrees.

"Mr. Gwartney led the charge to basically disembowel the benefits of the state employees, which aren't as generous as people think they are, " Werk said.

Specifically, Werk cited Gwartney's cuts to part-time employee benefits that he said "devastated" colleges and universities and Gwartney's "mishandled" attempt to cut retiree medical benefits two years ago.winning the bid but losing the contract

Today, the Idaho Education Network project is well into its first phase, with 56 of 200 high schools connected or in progress.

"The IEN is very proud of the work it has accomplished in its first seven months. ... 18,000 students now have access to high-speed broadband services. Over 20,000 hours of class time is being received and 765 credits are being earned, " Luna said.

Syringa hasn't been given any of the work.

Lowe said he thinks his company's troubles started more than a year ago — at the same swanky member's-only club in Downtown Boise.

In December 2008, just days before the state was about to request bids for the multimillion-dollar network, Lowe was seated at a table with some high-powered companions, including Jason Kreizenbeck, the governor's chief of staff, and Cameron, one of the most influential overseers of state purse strings and a guest of Lowe at the club that night.

Lowe says he suggested that in order to protect Idaho taxpayers, the state should first conduct an inventory to determine which areas needed new or upgraded Internet service to avoid duplication of services already put in place by Syringa, Qwest and other companies.

Four days later, Lowe says, Gwartney pulled him into a hallway.

He "got aggressively in my face, telling me if I didn't keep my opinions to myself he would make sure we would never get any of the (state's) business, " Lowe said.

The best reason Lowe can figure for the anger? The state was rushing to avoid missing a $6.8 million federal payment for reimbursement for telecommunication services, which meant the IEN contract had to be in place by Feb. 12, 2009.

To do this, Gwartney issued an emergency declaration on Dec. 15, 2008, and put out the IEN bid request that evening - without Lowe's suggested inventory - with responses due Jan. 12, 2009.

After the state announced the award to Qwest and the Syringa group on Jan. 20, 2009, agency administrator Bill Burns sent an e-mail to Gwartney and other department staff: "I do believe we placed ourselves in this expedited process due to inadequate advanced planning."

Now, more than a year later, the state is undertaking the inventory Lowe recommended. In November, the state was awarded a federal grant to map all broadband services in the state, Luna said. It will take two years and cost $1.4 million.

Syringa is also having to sue its partner ENA, Lowe said, to show that the state forced that partner to work with Qwest in a "forced marriage" in violation of its contract with Syringa. When the state awards a contract, that triggers a five-day appeal period in which a bidder can protest the award or the process.

Syringa did not file an appeal because it had won that contract, at least in part. After the protest period ended, Lowe says, the state revised the IEN strategic plan, effectively scratching Syringa's name out.

The Statesman obtained a draft of the 20-plus-page plan circulated Feb. 3, 2009, - one week after the appeal period ended - that specifically mentions Syringa eight times. A draft circulated two days later does not reference Syringa at all.

"We ceased to exist within that document. Prior to that we had the lion's share in the early drafts of the core network and then after the protest period there is nothing, zero, not even a mention, " Lowe said.

Syringa's partner remained in the state's plan.

According to several e-mails between the partner company and Syringa, Education Network of America officials had requested multiple times that the state get quotes from local service providers to determine which one could provide the best service at the best cost.

"To date, the State has rejected those requests. (T)he State has made it impossible for us to use Syringa (or anyone other than Qwest for that matter), " the company's Bob Collie wrote to Lowe in July.

"The sad part is the state could be saving millions of dollars" by utilizing some of Syringa's existing 2,000-mile fiber-optic network in the IEN, Lowe said. "They are passing up opportunities right now to save a lot of money."

Additionally, the state may have to spend hundreds of thousands of dollars to defend its decisions. The Attorney General's Office said it does not have the resources to help Gwartney and his office fend off the lawsuit, so the Department of Administration had to contract with Boise law firm Hawley Troxell Ennis and Hawley at $250 an hour - more than four times the $57 an hour it costs to use state attorneys.

Unlike the state, Syringa has money to devote to the fight, having fared well during the recession and seen revenue grow 15 percent in 2009. It has more than doubled its employees in the past 18 months, from 21 to 52.

THE PROPER ROLE OF GOVERNMENT

Cameron, Kelly and other lawmakers say they are saddened to see the Idaho Education Network tainted by the lawsuit — and questions raised on whether it connects to Otter's proposed cuts.

"We were enamored with the idea and we still are. We still want to see it succeed," Cameron said. "(The IEN matter) is certainly symptomatic of a bigger problem that Mr. Gwartney has."Cameron added: "I do not lay this blame on the governor. I do not blame him. I lay the blame at Mike Gwartney's feet."

Gov. Otter declined, via spokesman Jon Hanian, several opportunities to comment for this story.When Otter was elected, one of his first goals was to dissolve the Department of Administration. It didn't work - for political and logistical reasons.

Now some lawmakers think Gwartney has gone from phasing out the department to building it into a kingdom.

"Rather than 'devolving' the agency as the governor initially indicated was the plan, " Kelly said, "there has been a distinct, and disturbing, pattern of concentrating more and more control and responsibilities with the agency and its director."

This story was originally published February 28, 2010 at 11:09 AM with the headline "From the archives: Syringa CEO says one of Otter's top aides threatened and strong-armed him."