ustxtxb_obs_1972_04_14_50_00003-00000_000.pdf

Perot… sweetheart contract; and he snookered some bureaucrats into approving the contract; and ever since the government has been paying through the nose for a process it paid to develop in the first place. The snookered bureaucrats were none too happy to reveal the details of Perot’s relationship with the Health, Education and Welfare Department. Federal employees who originally called some of EDS’ contracts “exorbitant” retreated to a position at the right hand of Perot himself. There was no explanation during the House hearings as to why these originally critical feds had become staunch defenders of Perot, but it’s not hard to imagine what kind of pressures might come from a Republican administration to protect Perot, a dues-paying member of the Nixon Foundation. PEROT HAS always denied that there was the slightest tinge of politics in the POW issue. “If I thought there was anything political behind this, I’d be working just as hard for the other side,” he told the Observer two years ago. Nor, of course, was there anything political in his decision to take over the floundering investment firm, DuPont, Glore, Forgan, Inc. Perot himself said he helped DuPont out of concern for the national interest. In the fall of 1970, there was speculation on Wall Street that the collapse of the firm might be the straw hat tipped the whole U.S. economy into the slough of depression. “I feel strongly that everyone is out to make every contribution he can to the country,” Perot told Fortune magazine contribution in the area of business.” The purchase was so non-political that when Atty. Gen. John Mitchell recently , was hauled into the ITT hearings and asked about his meeting with ITT director Felix Rohatyn, he said they were talking at a donation to the Republican Party at all. Ross Perot was there and they all were talking about Perot’s buying DuPont. One can understand why federal bureaucrats would be reluctant to rat on a man who has so much love for his country that he is willing to spend $55 million to buy 90 percent control of an American brokerage house \(which now, by the way, is expected to be worth $300 million by When the word drifted through the halls of HEW that a House committee was going to investigate EDS, James L. Calhoon, assistant deputy director of program operations for the Bureau ‘of Health Insurance, ordered all of his section chiefs to destroy their files on EDS. That, at least, is what Walker Evans, then chief of the contract administration branch, testified under oath at the House hearings. \(Mr. Evans has since been transferred out best of his recollection, that’s not what happened. He said he just wanted to gather up all the materials and put them in one safe place. At any rate, the records were not destroyed. Evans explained, “There was an undercurrent among the people in my branch that when they heard that there was going to be a congressional investigation of the EDS contracts that they all said “Hallelujah.” To throw away a document, then, under those circumstances, that they thought was really hilarious.” : Subcommittee attorney James Naughton, one of the government men responsible for bringing Billy Sol. Estes to justice, dragged the story of Perot’s success out of the reluctant bureaucrats bit by juicy bit. PEROT FORMED Electronic Data Systems, Inc., on his 32nd birthday, June 27, 1962. The firm didn’t have many pretentions then; the members of the board were Perot’s wife, mother and sister. At first, the company simply bought computer time wholesale and sold it retail. Collins Radio was EDS’ first client. In 1966 Electronic Data Systeins was still small potatoes and Perot, owning 80 percent of EDS’ stock, was working part time managing Texas Blue Shield’s data processing division. When Blue Cross became the prime contractor for medicaid and medicare in Texas, it subcontracted with EDS to do the computer work on the federal health insurance claims. Perot received invaluable help at the time from James Aston, a Blue Shield director, who headed the Republic National Bank of Dallas. According to Ramparts, Aston pressured other Blue Shield executives to sign a formal contract with Perot which could be used as collateral for the bank. In return for a loan, Aston’s bank received EDS stock. It was a profitable investment: during the next five years EDS and its subsidiaries took in more than $37 million from medicare and medicaid subcontracts in Texas, California, Pennsylvania, New York, Massachusetts, Iowa, Kansas, Indiana and Minnesota. EDS is now the largest medicare subcontractor in the nation. \(Next in terms of revenue is Applied Systems Development Corporation which has been paid the relatively paltry sum of $275,000 EDS shares to the public in 1968, his 80 percent of the company’s stock was worth a cool $300 million. Of course, it was against federal regulations for Blue Cross-Blue Shield own employees. The Department of Health, Education and Welfare first received word from a former employee of BC/BS in November or December of 1966 that Perot worked for Blue Shield. Thomas M. Tierney, director of the Bureau of the hearings that he queried Texas BC/BS about the allegation and “it was indicated that there was nothing to this situation. This was not pursued further,” Tierney said. Perot worked Blue Shield until just before another contract was given to EDS in 1968. The contract was a rather unusual one. Although the government requires medicare carriers to get prior approval of subcontracts, this one had no such approval. There is a standard clause giving the government the right to inspect the records of a company with which it is contracting, but the instrument between Texas BC/BS and EDS had no such provision. And the contract was approved by Blue Cross without competitive bidding in violation of government regulations. Under the ’68 contract, EDS received more than $250,000 to develop a data processing systeiri for Texas BC/BS. Despite the fact that the government paid for the design of the system, it did not get title under the contract to use the system. Walker Evans testified that the government should have been given access to the system. “This is the tradition in government,” he said. “When you pay for a system or you pay for having anything developed, you get use of it.” In July of 1968, Tierney wrote a letter to Texas BC/BS sayind that some of EDS’ charges were “exorbitant.” He said HEW would reimburse Blue Cross only “for the reasonable value of the services provided by EDS.” Tierney asked for permission to have HEW audit agents examine EDS records to determine what a reasonable charge might be. Otherwise, he said, the money would be withheld. The government never got access to the records, but Tierney later talked over the EDS situation with upper echelon administrators in HEW and they decided to go ahead and pay the bill. Tierney said he paid up because he later learned that it was costing Texas Blue Cross $3.05 to process an insurance claim while one state carrier was spending $4.50 to do the same job and the average nationwide for comparable plans was $3.96. “How can you be paying the carriers in this nation an average of $3.75 per unit cost and then say to us that our costs of $3.05 are unreasonable? Now that is the basic problem we had,” he explained. “We could no longer sustain our position, since we had a contractual obligation to pay Texas the costs they incurred. They had costs under the national average.” EVANS, AN attorney who specializes in government contract law and administration of government contracts, told the House subcommittee that the government should not have given in to EDS. He and William C. Lanning, chief of part B systems branch of the Bureau of Health Insurance, were dispatched to April 14, 1972 3