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June 17, 2024

NIU Alvarez illegitimate subcontract –

By John Kraft & Kirk Allen

On May 11, 2016

NIU (ECWd) –

So far we’ve looked at numerous ways in which NIU President Baker and his Administration has violated, or at least has made a valiant attempt to violate, state procurement rules: using open orders, putting consultants on payroll, using Foundation funds to pay for illegal contracts, hiring unqualified or inexperienced friends, and hiring friends without any written contract. Is his bag of tricks exhausted?  NOT YET!

Baker keeps finding different ways to circumvent state rules—it appears almost as if he had previous experience with this activity.  This latest violation of state procurement rules involves illegitimate subcontracts.  These subcontracts occur when the University forces a (otherwise legitimate) contractor to accept a subcontractor chosen by the University, even when the scope of the subcontract is not related to the original vendor’s contract.  This action is taken to avoid the open bid requirement of the state procurement rules. We will look at one small example—it only cost the University, and therefore taxpayers, $468,050.00

First, a little history.  The NIU Police Department was raided in March 2013 by the FBI, Dept. of Ed., et al.  NIU press releases at the time confirm that this raid was focused solely on the Police Department and due to the DoEd involvement, appears to have an emphasis on violations of the Cleary Act.  In response to the investigation, NIU retained the services of Pugh, Jones & Johnson PC as outside counsel specifically to represent them on this issue.

Later that year, Nancy Suttenfield began working at NIU as Interim CFO in November 2013. To recap a previous story, Ms. Suttenfield’s employment was in violation of procurement rules and the Foundation shelled out $153K in an attempt to hide the violation [here].  When she left NIU President Baker granted her additional immunity for some as yet undisclosed reasons [here].

One of Ms. Suttenfield’s first actions was to begin searching for an “Internal Control Assessment Contractor”.  By February, Ms. Suttenfield had directly contacted Marc Sherman of Alvarez and Marsal, a Forensic Accounting Firm specializing in white collar fraud; she negotiated scope and cost and entered into a verbal contract with Mr. Sherman.  However, Ms. Suttenfield appears to have deliberately ignored the open bid requirement of state procurement rules, so therefore, this agreement could not be processed as a separate and distinct contract under state rules. (emails here)  In these emails, ex interim CFO is told by both Procurement and General Counsel that she cannot just select this consulting firm without first issuing an RFP.  She responded by stating that she would therefore put the lead investigator/consultant on NIU payroll as another temp (affiliate) employee. 

Therefore, after Ms. Suttenfield had wrapped up her negotiations with Sherman, she emailed Preston Pugh of Pugh Jones (email here) and instructed him to draft the agreement between NIU and Alvarez as if it was a “subcontract” to Pugh Jones’ own existing contract.  The “subcontract” was drafted (contract here), and the carefully chosen phrase:  “A&M shall also assist Counsel with associated forensic accounting needs related to its representation of the University in an ongoing government investigation, as and when requested.” was included at the very end of the scope, almost as an afterthought.

Unfortunately for NIU, if the scope of the “subcontract” is for another investigation that is unrelated to the Federal investigation, this methodology appears to be used simply to avoid state procurement rules.

The first clue that the Alvarez subcontract is unrelated to the Pugh Jones contract, and is therefore in violation of state rules, is that a legitimate contractor will not normally allow a client to dictate which subcontractors he must use under his own contract—let alone allow the client to enter into their own negotiations with a subcontractor.  Yet, as shown earlier, Ms. Suttenfield directly negotiated Alvarez’ scope and pricing PRIOR to instructing Pugh Jones to draft a questionable “subcontract”.

Secondly, Pugh Jones had already engaged their own discovery firms (4Discovery and Advanced Discovery). There is no indication that the scope of the FBI investigation had increased enough to require Pugh Jones to hire an additional discovery firm.  Therefore, this was not a subcontract required by Pugh Jones to defend the University against any results of the federal investigation.

Thirdly, there is a distinct lack of oversight of Alvarez’ performance by Pugh Jones. Alvarez’s work was performed during the period of April-July 2014.  There was only two references on the Pugh Jones invoices during that period for the oversight of Alvarez’ work performance—a total of 5 ½ hours, but which also included five other topics.  Five and a half hours of billings for six topics of which only one was Alvarez; therefore, virtually no oversight for a “subcontract” which resulted in a billing of $468K!

Fourthly, a purchase requisition written by the office of the general counsel for the payment of the first two Alvarez invoices includes a description of services which are outside the scope of the Pugh Jones contract.  These first two bills were submitted to NIU directly by Alvarez; but to maintain the pretense of a subcontract, these bills had to be rejected by NIU and then rebilled as if they were billings by/through Pugh Jones. (original invoiceamended invoice)

Fifthly, departments that were “assessed” by Alvarez had no involvement with, or relationship to, the FBI investigation.  Rumors swirl around the Castle (where administrative offices are located) that the contract with Alvarez was in reality a dirt-finding mission against those department heads who had said “no” to the President.  Several department heads who were “assessed” are no longer with the University, but this investigation was not cited as part of the cause of their departures.

However, at this time, the true purpose of the Alvarez contract cannot be conclusively proven since the Administration apparently deliberately chose not to receive a final report.  It seems to be a deliberate decision since the University had been billed for, and paid for, the drafting and compiling of a report at the end of July 2014. Why did the University not accept a final report? Did Alvarez not supply the results that the Administration had hoped for, and therefore hiding the true purpose of this contract was a better option than admitting to a waste of $468K of taxpayer monies?

$468,050 spent—in violation of state rules—and NO deliverables.

Baker and his administration continue to find ways to violate state rules and squander taxpayer monies.  When will the Board of Trustees own up to their responsibility and put an end to Baker’s continued inappropriate actions?

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1 Comment
  • Edgar County Watchdogs getting kickbacks?
    Posted at 00:35h, 04 August Reply

    Just curious, did the General Counsel’s office approve the arrangement then chose NOT to pay the consultants so they would stop investigating past improprieties? Wouldn’t this be something that so-called “watchdogs” would investigate, if they did not have a financial interest?

    “Fourthly, a purchase requisition written by the office of the general counsel for the payment of the first two Alvarez invoices includes a description of services which are outside the scope of the Pugh Jones contract. These first two bills were submitted to NIU directly by Alvarez; but to maintain the pretense of a subcontract, these bills had to be rejected by NIU and then rebilled as if they were billings by/through Pugh Jones.” Given that the same office gave approval of said contract PRIOR TO WORK COMMENCING, WHY WOULD IT BE NECESSARY TO REJECT UNLESS NIU GC AND OTHERS, ALONG WITH ECWD, WAS LIKELY INVOLVED?

    Given the cesspool that is Illinois and the so-called “EC watch dogs” and past management, why would it NOT BE APPROPRIATE to engage an independent firm to help assess the damage and give an independent assessment?

    Alvarez was hired to provide an honest assessment of the state of affairs of NIU. Given Suttenfield’s short tenure and the tasks she was likely provided, WHY is this an issue, especially if given authority from the GC Office of NIU??

    Since you can only can assume you do have a financial benefit/interest, it explains the story.

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