(Photo Stock.xchng.)

By Steve Miller
Florida Center for Investigative Reporting

It is, by any number of measures, a beautiful building.

Located on eight acres in Fort Myers, the Florida office of technology research giant Gartner Inc. is 125,000 square feet of modern corporate campus, with a cafeteria large enough to feed 200 at a time, a gym and second-floor outdoor patio. It houses just over 10 percent of the multinational company’s 4,500 staffers.

Gartner’s technology services and consulting operation grew up in Florida, setting down in Lee County in 1998 with a state tax break worth $1.4 million and a promise to hire 335 people for the service center.

The move worked, if you measure success by the number of jobs created. Today, Gartner employs 500 people in Fort Myers.

“We’ve had great success in Florida,” said Christopher Lafond, Gartner’s chief financial officer. “We were looking to expand a few years ago and started talking to Lee County and the state, and our plan was to add a significant number of jobs. And both the county and the state told us of these programs.”

These programs were incentives. Florida was already doing business with Gartner, and to sweeten the deal for the company to build a new office in Lee County, the state gave Gartner economic incentive grants — $6 million as part of an agreement in which Gartner promised to create 800 more jobs and invest $18.2 million of its own money in Florida.

Incentives are the bedrock of Gov. Rick Scott’s economic policy agenda. Scott’s administration awarded more than $130 million in economic incentives in 2011 and 2012. Scott’s predecessors, Charlie Crist and Jeb Bush, shared the same enthusiasm for incentives.

To date, Gartner has received $1.9 million of that $3.2 million in incentive money and has created 289 jobs.

Headquartered in Stamford, Conn., Gartner also has a two-year contract for $156,146 with the state for technology consulting services.

Peter Sondergaard, head of Research for Gartner Inc., discussed technology spending on Bloomberg TV. Sondergaard’s company has received $6 million in economic incentives in Florida. (Photo courtesy of Gartner Inc.)

Combining the incentives with the state contract gives Gartner the resources to help the company meet those job creation goals.

With both economic incentives and state contracts, Gartner is an example of how big business is done in the Sunshine State.

Through economic incentives and state contracts, the state of Florida every year chooses winners in a selection process that open government advocates criticize as too secretive.

The incentives come in the form of grants, tax breaks, low-interest loans and training reimbursements. Enterprise Florida, a public-private partnership, recommends to the state companies it believes should receive economic incentives. Some of Enterprise Florida’s board members own companies that benefit from the very incentives they approve.

Yet incentives are the only beginning of how state money flows to the bank accounts of corporate America.

Gartner isn’t alone in receiving both state economic incentives and state contracts. Target, Publix, Lowe’s and other corporate giants have been contractors for dozens of state agencies, earning millions while also receiving millions more in economic incentives, such as work training grants and tax breaks.

Financial firm T. Rowe Price, one of the state’s employee retirement system providers, has received both incentives and state contracts.

According to a review of state data by the Florida Center for Investigative Reporting, 25 companies have received substantial state contractor payments and economic incentives in Florida.

“This is more proof that Enterprise Florida is picking winners, and most small businesses cannot imagine being successful in securing these awards,” said Dan Krassner, executive director of the Tallahassee-based watchdog group Integrity Florida. “The whole incentives strategy needs further review to see if it is truly in the public interest.”

State Money, Big Business

Gartner’s work in Florida and its recent expansion represent a success in the eyes of company officials.

“We’ve been working with the state of Florida since before we had offices there, well before we decided to expand into the state,” said Lafond, the Gartner CFO.

None of the contracts the company has with the state is connected to the Florida operations, he said. The company’s three lines of business are Internet technology events and seminars, consulting and research. In Florida, Gartner’s work is in sales and customer service, while the contract with the state is for consulting.

“We don’t have the [direct] connection that others might,” Lafond said. “I’m very comfortable with what we’ve done in Florida.”

Gov. Rick Scott announces a $650,000 economic incentive for Digital Risk, the nation’s largest provider of mortgage risk, compliance and transaction management solutions. (Photo courtesy of Enterprise Florida.)

The state government’s generosity has extended to nonprofits as well, such as Burnham Institute for Medical Research in Orlando. The nonprofit received a state subsidy in 2006 that would max out at $155 million if Burnham fulfilled a number of requirements, which included an investment of $67,000 by Burnham Institute and the creation of 303 jobs.

According to state records, the state Department of Health paid Burnham Institute $98,781 in 2008 for services not disclosed in the state data. That pay went up to $153,445 in 2009 and $282,971 in 2010, with Burnham Institute taking in $535,197 for those three years.

Through September, the state had paid $118 million on the incentive, while Burnham had spent $36,000 and created 210 jobs.

Oracle, a publicly traded technology company valued at $158 billion, received $3.87 million in Florida tax credits and rebates in the late ’90s just as the California-based software company was hitting its financial stride. Since 2005, the state has paid Oracle $14 million for work performed for a number of agencies.

The incentive system is set up in such a way that incentives often are not fully realized by a recipient until it meets the job creation goal.

In some cases, the total payment is based on performance, meaning that a company that does not provide the benefits promised is not given the whole subsidy.

Incentive money is given to projects in defined sectors — clean energy, corporate headquarters, financial services and life sciences — and must create at least 50 new jobs.

The state’s incentive payout programs include a wide range of tax refunds to companies including rebates for taxes on sales, insurance, property and corporate income. There are tax breaks for specified sectors including clean energy, biomedical technology, financial services and information technology. There are tax credits and cash for companies that open their doors in certain areas, be they rural, urban or specially zoned. The state pays for worker training programs for select companies and provides matching money to smaller municipalities.

Critics of corporate subsidies and economic incentives, including free-market advocates such as Americans for Prosperity and state watchdog Integrity Florida, say public money should not be given to companies that have the wealth to operate yet insist on taxpayers funding part of their business.

“There are a lot more rules regarding procurement than there are for subsidies,” said Phil Mattera, research director at Good Jobs First, a Washington, D.C.-based public interest group and another critic of taxpayer-funded subsidies. “There has to be fair competition in procurement, so the case can be made that a company with a subsidy is engaged in unfair competition.”

The very funding from an economic incentive may be what made it possible for that company to make the winning bid on a state contract, Mattera said.

Florida law does not prohibit a company that receives a subsidy or incentive from bidding on a state contract.

Corporate Leverage

In the fall of 2008, T. Rowe Price Associates made noise about moving its large financial services campus in Tampa, claiming it had several suitors from out of state — Houston, St. Louis, Tulsa and Omaha.

T. Rowe Price, which handles some of the state’s retirement plans, began to receive grants and incentives shortly after it threatened to move. It has been approved for $38.7 million in grants and abatements since 2009.

None of the money has been paid yet, state records show. In 2011, T. Rowe Price announced that a planned new campus, which the incentives would help pay for, was going to be delayed.

T. Rowe Price has been among the managers of state employees’ retirement funds since 1987. Over the years, the state has invested millions of its employees’ retirement dollars with T. Rowe Price, with the financial giant earning hundreds of thousands in fees.

The first year those investments show up in state records is 2010, when T. Rowe handled $10.8 million for the state. In all, from 2010 to 2012, state employees invested $38 million with T. Rowe Price.

“We are recruiting companies from outside of Florida as well as helping those inside Florida expand,” explained Stuart Doyle, a spokesman for Enterprise Florida. “There’s always the threat that some of these companies may leave the state and take those jobs elsewhere.”

Doyle acknowledged that there are no guidelines or statutes that prevent the issuing of a state contract in the wake of an incentive.

“If a company did get a contract with the state in another capacity, it may mean nothing,” Doyle said. “It just means another capacity of its operation went up for bid and was simply chosen. One may not have anything to do with the other.”

Many of the companies with both incentives and state contracts have only one type of business. T. Rowe Price administers financial plans. Oracle makes software.

Picking Winners

In 2011, there were calls to reform the state’s incentive program. Shortly after Gov. Scott’s election, Senate Bill 2156 wound its way through the Statehouse, imposing more restrictions and demanding greater accountability among the state agencies that hand out incentives.

A new database and website, called Transparency Florida, launched in 2012, administered by Florida’s Department of Financial Services. The information is intended to allow the public to trace payments and search state contracts. But the site contains conflicting information, showing contract information in one portal but not payments in another, making it impossible to follow the money.

“The contracts are only now required to be entered in the system,” Alexis Lambert, a spokesperson for the Department of Financial Services. “Before 2011, departments can enter contracts if they want, or as time permits.”

That system impedes the transparency the new state law attempts to provide. In the database, disbursements for grants are mixed with those for goods and services, making it difficult for the public to discern just how much business the state is giving an incentive recipient.

Despite attempts to make the incentive system transparent, covert deals continue.

Gov. Rick Scott announced a $19 million economic incentive for Hertz to open a new headquarters in Fort Myers. (Photo courtesy of Enterprise Florida.)

Most recently, rental car company Hertz announced that it would move its headquarters from New Jersey to Southwest Florida after officials with the state and Lee County offered $19 million in economic incentives. Lee County Commissioners approved the deal not knowing which company would receive the economic incentive.

As with other incentive recipients, Hertz has done substantial business with Florida, receiving $2.5 million in state business from 2009 through 2012, records show.

Gov. Scott and his office staff declined to speak with the Florida Center for Investigative Reporting for this story. In an email, his office offered a written comment: “[State agencies] evaluate economic development projects on their ability to create jobs in Florida and provide the greatest return on investment for taxpayers. State-taxpayer funded contracts are not considered in evaluating return on taxpayer investment.”

Krassner, of Integrity Florida, said it’s time for state officials to begin questioning who’s benefitting from state incentives and contracts.

“We can see that the companies benefiting,” he said, “are the same companies that are winning all the time.”

Trevor Aaronson of the Florida Center for Investigative Reporting contributed data analysis to this report.

Companies Receiving Incentives and Contractor Payments

Gov. Rick Scott signs transparency for economic incentives into law. (Photo courtesy of Rick Scott.)

By Ashley Lopez
Florida Center for Investigative Reporting

Gov. Rick Scott signed a bill into law today that would create some transparency in the state’s controversial economic incentives program.

The state’s economic development agency, through a public-private partnership called Enterprise Florida, has doled out millions of dollars in tax breaks and subsidies to big companies in Florida in exchange for job creation.

However, there has been little to no public disclosure about whether those jobs are actually being created. Integrity Florida, a statewide ethics watchdog, wrote in a press release today that companies have not been entirely up their end of the exchange.

According to Integrity Florida:

In 1992, the Florida Legislature created Enterprise Florida with an initial objective of creating 200,000 high wage jobs by 2005. Eight years beyond its original deadline for job creation, Enterprise Florida is less than halfway to its jobs goal. [Emphasis mine]

Enterprise Florida has been operating as an outsourced commerce department with 90 percent of its funding from taxpayers but less transparency than a state agency. The Florida Legislature mandates that Enterprise Florida obtain fifty percent of its operational budget from private sector contributions but the organization’s revenue is presently far short of that mark. Lawmakers may want to revisit Enterprise Florida accountability again in 2014 if the public-private partnership continues to fall short of its required level of private sector support.”

These economic incentives via Enterprise Florida have been one of the major components of Scott’s job creation plans. No other governor in Florida’s history has spent as much money as the Scott administration on economic incentives. For this upcoming fiscal year, Scott asked the Florida Legislature to allocate $278 million for the state’s economic incentives program, but state lawmakers allocated about one-fourth of that amount.

And up until now, there really hasn’t been a way to see whether the strategy is working effectively.

Integrity Florida said that the newly signed House Bill 7007 will be a step toward that transparency.

According to the group, HB 7007:

1. Implements an independent return on investment calculator to assess taxpayer-funded economic development projects pursued by state government.
2. Builds an online database of all state and local tax incentives given to businesses for economic development.
3. Adds accountability clauses to applications to protect taxpayers in economic development agreements between the state government and companies receiving incentives.
4. Increases public access to information about taxpayer-funded economic development incentive deals.

HB 7007 also creates a tax break for manufacturers in Florida. The tax break was one of Scott’s legislative priorities this legislative session.

There has also been some controversy surrounding whether this bill legitimately passed in the Florida Legislature. Some state analysts said a supermajority vote was required for the bill to pass because it would negatively affect the revenues of local governments by a large amount. However, the bill only passed with a simple majority. Since that time, some analysts have reversed their opinion that a supermajority was needed.

Integrity Florida and the state’s Office of Inspector General have offered many other ideas on how to improve Enterprise Florida and the state’s economic incentives program, but they have not become law.

Stephen Gass, president of SawStop, LLC, at company headquarters near Portland, Ore. (Photo courtesy of FairWarning.)

By Myron Levin
FairWarning

They crowded in for the hot dog show.

An Oscar Meyer wiener, serving as proxy for a finger, was pushed into the spinning blade of a table saw. The demonstration, at the International Woodworkers Fair in Atlanta, mimicked the way gruesome table saw injuries often occur. But this saw was equipped with a safety device called SawStop that allowed the blade to distinguish between wood and flesh, and to stop fast enough to prevent serious harm. Sure enough, the blade came to a dead stop in about three one-thousandths of a second, leaving the dog with only a minor nick.

Table saw accidents are painful, life-changing and expensive. Each year, more than 67,000 U.S. workers and do-it-yourselfers suffer blade contact injuries, according to government estimates, including more than 33,000 injuries treated in emergency rooms and 4,000 amputations.

Gerald Wheeler had other numbers on his mind as he watched hot dog meet blade that day in August, 2002. As the operator of a wood shop in Hot Springs, Ark., he was all too aware of the unforgiving nature of table saws. Not long before, two of his employees had been maimed within a few weeks of each other. Wheeler felt awful about the injuries, the loss of two good workers, the $95,000 in medical bills, the doubling of his workers compensation rates.

Wheeler thought: If only this had come along sooner. He took out his Visa card to order two of the saws, but was told none were available. As the SawStop guys explained, they had been seeking licensing deals with the big power tool makers, but had found no takers.

Faced with the prospect of never getting the invention to market, the little company, also known as SawStop, eventually started making its own saws. Since the first went on sale in 2004, SawStop says it has recorded 2,000 “finger saves”—customer reports of  accidents likely to have caused disfiguring injuries with conventional saws, but that resulted in minor cuts or a few stitches at most (SawStop acknowledges two reports of amputations).

Adam Thull was building a checkout counter for a local bookstore when he noticed a wood panel falling off the edge of his table. As he lunged to catch it, his right forearm got caught on the blade of his Ryobi table saw – and the machine quickly cut completely through one of his forearm bones and a nerve.

“Bravo!” a man named Frank Oslick emailed SawStop, explaining that he had lost two fingers and part of his thumb in a table saw accident when he was 14. “I have not lived a single day without regretting that accident,” he wrote. “If your device prevents even one person from going through what I have gone through it is a world class accomplishment.”

However, SawStop still makes the only saws with skin-sensing technology, and accounts for a tiny fraction of sales. Tens of thousands of fingers have been sliced off since the system was invented, but the rest of the industry, which is self-regulating, has been allowed to go on as before.

Over the years, top saw makers and the Power Tool Institute, their trade group, have defended the design of their saws and the decision to snub SawStop.

They’ve argued that injury numbers have been inflated and that the government’s estimate of $2.36 billion in annual costs to society from table saw accidents—including medical bills, lost wages, pain and suffering—is exaggerated. They say the market for popular, lightweight saws costing as little as $100 to $200 would be destroyed by the added expense of SawStop. They note that under some circumstances, SawStop can stop a blade without skin contact–such as when the blade touches conductive materials like metal or very wet wood. In such cases, the owner usually has to replace the blade and an electronic cartridge.

But as court records and testimony have shown, the companies rejected the safety advance for  another reason, too: They worried that if a way to prevent severe injuries got traction in the market, they would face liability for accidents with conventional saws.

Even so, they have had to defend lawsuits. About 150 have been filed in recent years, focusing on the companies’ decision not to use available safety technology.

The industry is also trying to keep the Consumer Product Safety Commission from requiring injury reduction systems on all table saws—either SawStop or something similar. Indeed, another firm, Massachusetts-based Whirlwind Tool Co., says it has developed a “proximity detection” systems that will shut down a saw when a hand comes close to the blade.

But the industry may have little to fear from the commission. The agency has been wrestling with the issue, on and off, for 15 years. So far, its most definitive act has been to give SawStop an award for safety innovation. It will be at least next year before the agency adopts a regulation, if it ever does.

The SawStop story is about an industry’s ability to resist a major safety advance that could, by now, have prevented countless disfiguring injuries, but might have been bad for business. It highlights the endless due process that makes it virtually impossible for regulators to enact safety measures over the unified objections of industry.

It’s also something of a David-and-Goliath story–though in this case David, rather than carry a sling, is armed to the teeth with patents.

Several industry representatives declined interview requests or did not return calls and emails seeking comment. The Robert Bosch Tool Corp. provided a statement: “Safety has historically been one of the Bosch principles…and is reflected in our slogan ‘Invented for life.’”

Birth of SawStop

Stephen Gass is energetic and intense, a trimly built man of 49 whose home near Portland, Ore, is a manageable drive from some of his favorite whitewater kayaking runs. He grew up on a horse farm in Eastern Oregon, and was taught woodworking by his father. He earned a doctorate in physics and a law degree, then joined a patent law firm in Portland, but retained his interest in building things.

Gass created an elaborate workshop behind his house. For some reason, while out there on a fall day in 1999 he was struck by a question: Would it be possible to stop a saw blade quickly enough to keep it from slicing off your fingers? After a series of calculations and with parts you could buy at Radio Shack, he showed it could be done.

The invention involves running a weak electrical current through the saw blade. When a person comes in contact with the blade, the body absorbs part of the signal. An electronic sensor detects the change in current and activates a spring. The spring jams an aluminum wedge between the teeth of the blade, which acts as a brake. The blade also drops below the surface of the table. It all happens in so few milliseconds that, unless the hand is moving unusually fast when it hits the blade, the injury typically is minor.

One of the mysteries is why the power tool industry, with its engineering prowess, didn’t invent SawStop before Gass did.  Maybe he was smarter. Or maybe the industry didn’t do it because it didn’t need to.

There were no clear financial or legal incentives. Table saws are a must-have tool for millions of construction workers, cabinet makers and do-it-yourselfers. In the U.S., there are about 9.5 million of them in use, according to industry figures. Of about 500,000 sold each year, 85 percent are supplied by members of the Cleveland-based Power Tool Institute, including such well-known brands as Black & Decker, DeWalt, Makita, Skil, Bosch and Ryobi.

For decades, the companies were shielded from liability by a few unquestioned assumptions: Namely, that table saws were inherently dangerous; that everyone knew this; that accidents typically involved carelessness or failure to follow directions; therefore, when people got hurt it was their own fault. As an industry lawyer told a jury: “This is a table saw. It cuts wood. And if you’re not careful, you can get injured.”

Saw designs are governed by a voluntary standard worked out between an industry-dominated technical committee and Underwriters Laboratory. When SawStop came along, the voluntary standard called for a guard that fit like a hood over the blade. Because a hand can slip under the guard, many thousands of injuries occurred even with the guard in place. Usually, however, the guard wasn’t being used. Because it limited visibility, had to be removed for certain cuts, and took a long time to detach and put on again, most people worked without it.  Critics said the guard did more to protect the manufacturers than users.

In a letter to Underwriters Laboratory in April, 1998, an engineer for the CPSC linked the high injury toll to poor design of the guard. Said the engineer, Caroleene Paul:  “Experienced saw users comment that ‘the typical stock guard that comes with many saws is so frustrating to mount, align, adjust, remove and work with, you’re tempted to leave it off permanently.`”

Members of the Power Tool Institute insisted there was nothing wrong with the guard. Following a December, 1999 meeting, Paul summarized their position: “Education is the only way to affect the injury hazard patterns seen. Education, not redesigning the guard, is needed to convince the operators to use the blade guard.” The institute pledged to do its bit by making a video.

SawStop wrecked this way of thinking. Saw makers now had the ability to prevent the tragedies they knew were going to happen, that had always happened. For this reason, Gass thought, his invention should be an easy sell.

“I couldn’t imagine that anyone would not want to put this on the saws that they were offering to people,” he said.

He recruited three friends from the law firm, all named David, to put up seed money for the new venture. The industry’s initial reaction was not encouraging.  Gass recalled being told by one executive: “The marketing guys say safety doesn’t sell.”

Hoping to stir grass-roots interest, Gass and the Davids made their first trip to the woodworkers fair in August, 2000. They were sent to the nosebleed section—a tiny booth in a conference room on the third floor of the Atlanta Convention Center. But as word of the hot dog demonstration spread through the fair, they were soon drawing crowds. SawStop was awarded a top prize for technological advancement.

Saw makers also took notice and issued invitations. Soon Gass and his partners were visiting corporate offices of Emerson Electric; Black & Decker (now Stanley Black & Decker), Ryobi and Bosch. In November, 2000, they briefed members of the Power Tool Institute in Cleveland.

The companies seemed intrigued but wary. SawStop vice president David Fanning recalled being asked at Ryobi and Black & Decker: “Have you been to the CPSC? Our response was: ‘What’s the CPSC? ‘ ” Gass said a Black & Decker executive also warned: “If you guys don’t cooperate with us, the industry is going to get together and squish you.”

Still, the SawStop men were stoked, maybe even cocky. “We think you don’t have any choice here,” Gass said he told an executive of one company: “It’s the right thing to do. And if you don’t do it, you’re going to be liable for the injuries—and there’s a lot of injuries happening.”

Their prospects seemed to rise when CPSC engineers, in July, 2001, announced the results of a technical evaluation. “The SawStop concept is valid and the prototype impressively demonstrates its feasibility.” Ann Brown, then head of the agency, awarded SawStop a Chairman’s Commendation for safety innovation.

Negotiations were held with several companies. Talks with Ryobi advanced farthest, then collapsed under mysterious circumstances.

A leading manufacturer and supplier to Home Depot, Ryobi is based in Anderson, S.C., and is a subsidiary of Techtronics, Inc. of Hong Kong.

In January, 2002, Ryobi sent SawStop a signed licensing agreement. It called for Ryobi to investigate SawStop’s feasibility, and to incorporate it in Ryobi saws within 18 months if it proved feasible.  SawStop would get a royalty equal to 3 percent of the wholesale cost of each saw, with the fee rising as high as 8 percent should the technology be widely adopted.

Gass said a small typo led him to return the contract to Ryobi’s general counsel, who Gass said told him he would immediately fix the mistake and mail the contract back. Days turned into weeks, then months. Gass said he got repeated assurances that Ryobi wanted to proceed, but the contract never came back.

Years later, in the trial of a lawsuit against Ryobi, a company lawyer explained it this way: “Ryobi decided that it did not want to go forward with this project,” he said. Ryobi was going through a corporate acquisition, the SawStop deal took “a back seat”, and “eventually Ryobi lost interest.”

Robert Bugos, the former general counsel Gass said had strung him along, put it another way in a deposition. “There was negotiation back and forth,” Bugos said. “Our position was always that SawStop was asking too much.”

Lawsuit Worries

However, testimony and documents reveal the industry feared liability exposure should SawStop gain a foothold. According to testimony by David Peot, Ryobi’s former director of advanced technologies: “There certainly was a feeling that if a single company invents or improves a product that could have an effect on product liability, then other manufacturers could be at a disadvantage if they don’t have that on their product.”

Without naming SawStop, an April, 2002 Bosch memo warned of the threat from “competitive technology”  The “expectation will be that the most severe injuries will be mild to moderate lacerations and that amputations will be virtually eliminated,” it said. This “will create a new and significant liability concern for our corporation because of this enhanced safety performance.”

Or, as minutes of the Power Tool Institute’s product liability committee put it: “Liability exposure has increased based on the product’s introduction at IWF [International Woodworkers Fair].”

Gass recalled being told by Peter Domeny, then chairman of the committee and Bosch’s director of product safety, that SawStop had kept him awake nights wondering how the industry could defend itself in court. Domeny was questioned about this in 2008, when his deposition was taken in the case of a Pennsylvania man who suffered the amputation of four fingers.

“We had discussions as far as the liability implication, but not in that form as he [Gass] quotes it,” Domeny replied. “I don’t think I have discussed my sleep patterns with Mr. Gass.” Domeny declined an interview request.

Gass said he came to realize the threat his invention posed. “What the industry saw as a problem was not the amputations and injuries occurring on their product,” he said, “but the advent of a technology that could prevent those injuries. That was the problem we created.”

Early on, Gass and two of the Davids had quit the law firm to give full time to SawStop. Having failed to license the technology, they faced a stark choice: Either go back to patent law and let the invention die, or find the capital to make their own saws. They chose the latter, Gass said, and raised $3 million from about 30 investors.

The industry response was unprecedented. Five companies, including Black & Decker, Bosch and Ryobi, formed a joint venture to develop their own injury reduction system. To head off possible anti-trust problems, they told the Justice Department and Federal Trade Commission what they were doing. Their notice said they would pursue “research and development of technology for power saw blade contact injury avoidance, including skin sensing systems, blade braking systems, and/or blade guarding systems.”

Years later, Peot, the former Ryobi executive, still seemed stunned by the move. “The people who belong to the Power Tool Institute are very fierce competitors,” he testified. “Never before in my 30, 35 years of working with the Power Tool Institute had I ever been exposed to something where they said let’s get together and jointly develop something.”

The joint venture ended in 2009, when members said they had developed a system superior to SawStop. It has yet to be incorporated into a single saw.

Their system is designed to retract the blade into the table immediately on skin contact. Unlike SawStop, it does not use a brake, which can damage the blade. Representatives of Ryobi, Black & Decker and Bosch did not return calls about when, or if, the technology will be used. Industry comments filed with the CPSC asserted that SawStop’s patents were holding them back–potentially forcing them to pay royalties or engage in expensive patent litigation to introduce their system.

SawStop, for its part, put its first saws on the market in 2004 and has sold about 40,000 since. Along with flesh-detection technology, the company’s saws came with an important safety device called a riving knife that had been mostly limited to models sold in Europe. A riving knife is a curved steel blade that cuts the risk of “kickback,” which occurs when a piece of wood suddenly jerks while being cut, sometimes pulling the operator’s hand into the blade.

Gerald Wheeler, who had been wowed by the hot dog show, got two of the first saws.  In March, 2006, Carl Seymour, a foreman at his shop, accidentally touched a whirring blade. A photo on SawStop’s website shows Seymour beaming in triumph as he lifts the wounded thumb, which looks like it has a paper cut.

“You couldn’t wipe the smile off him (Seymour) after this,” Wheeler told FairWarning, saying he, too, was “totally ecstatic.” All saws should have this technology, Wheeler said. “I mean, we’re dealing with human beings.”

Shot Across the Bow

No longer having anything to lose, SawStop fired another shot. It organized a petition signed by more than 300 woodworkers, shop teachers and others, asking the CPSC to regulate. Filed in April, 2003, it called for a performance standard that would most likely require SawStop or something like it.

Gass told Fairwarning the idea came from Caroleene Paul, the CPSC engineer. Given the commission’s limited resources, Gass said Paul told him, the agency would be more likely to investigate the issue if petitioned to do so. (A commission spokesman confirmed this account.)

In July, 2006, commissioners voted 2-1 to instruct their staff to draft a document starting the rulemaking process. Called an Advanced Notice of Proposed Rulemaking, it would have been published in the Federal Register with a request for public comments.

Then things took a bizarre turn. Within days of the vote, commission Chairman Hal Stratton, who had voted yes, resigned to join a law firm. The resulting 1-1 stalemate meant the rulemaking notice could not be approved. This was during the Bush administration, which was stridently anti-regulation. The commission would go three years before getting a third commissioner and again having a quorum.

Battling in the Courts

Even as the threat of regulation eased, the industry faced trouble in the courts.

Carlos Osorio was a computer technician from Colombia who moved to the Boston area in 2003 to be near his girlfriend. Unable to find work in his field, he took a job as a flooring installer and learned to use a table saw.

He was working at a home in Lexington, Mass., in April, 2005 when a piece of flooring got stuck in the Ryobi saw and Osorio’s hand slid into the blade. “There was blood on my face, my body. It was everywhere,” Osorio testified. “I was able to see my tendons.”

Screaming in pain, Osorio and a co-worker ran into the street and flagged down a motorist, who called 911.  The first of five surgeries lasted 12 hours and reattached Osorio’s pinky finger. Another transferred tendons from a toe to his hand in an attempt to restore movement. Osorio said he endured so much pain that one doctor suggested he have two fingers surgically amputated. Osoriio had  95 physical therapy sessions. His medical bills topped $384,000. Now living in Florida, he still has limited use of his left hand. “The damage that was done to my hand, it’s something that stays with you for the rest of your life,” he said in an interview. “I think the manufacturers should think less about cost, but more about people who are using the saws.”

During the trial of his lawsuit in February, 2010, in federal court in Boston, Osorio admitted he was working without a saw guard, and said guards were not used by anyone on his crew.

Before SawStop, this fact alone would have made a successful lawsuit unthinkable. But Gass testified about his efforts to license SawStop to Ryobi and others. He said that Osorio almost certainly would have escaped serious injury had SawStop or another skin-detection system been in use. The jury awarded damages of $1.5 million.

SawStop was a “game changer,” said Osorio’s attorney Richard Sullivan, whose Wellesley, Mass., firm has been involved in most of the recent cases. The industry position was “ ‘Hey, don’t blame us,’ ” Sullivan said. “Now with Saw Stop it was ‘Oops, we actually can prevent these accidents from taking place.’”

About 70 of the roughly 150 cases have been settled, said Sullivan. Only two, besides Osorio, have been tried. A Los Angeles case last year ended in a hung jury, then was settled. In the other, tried last July in Chicago, Ryobi was victorious.

The plaintiff was Brandon Stollings, who suffered the amputation of two fingers while installing flooring at his mother’s house in Wisconsin in May, 2007. Stollings, then 23, had been captain of his high school basketball team, and had passed on college to pursue his goal of becoming a homebuilder. He testified that after the blade sliced into his hand, he began running around in circles in his mother’s yard, screaming in pain and terror about what had just happened.

“ ‘Am I ever going to be able to do carpentry?’ “ he remembered thinking. “ ‘If I cut off my ring finger, who’s going to want to marry me if I can’t even put a ring on my finger? ‘ ” Lying in the ambulance, he told his mother: “ ‘Just let me die’…because I thought my life was over.”

After nine hours of surgery the ring finger was reattached, but Stollings lost the index finger. Though five years had passed between the accident and his court appearance, Stollings said he remained self-conscious about his hand. “If I’m meeting new people, my hands will be in my pocket,” he said. “I never had this hand really out in the open.”

Stollings, who had years of experience with table saws, testified that he was not using a guard and never did because it got in the way. Gass testified that Stollings would have escaped serious injury if the saw had skin-sensing technology.

“If the manufacturers had to pay the cost of those injuries,” Gass said, “they would have adopted technology like this within months of the time they heard about it instead of looking for excuse after excuse to delay for year after year.”

This time, however, Ryobi’s lawyers shifted the focus from the maiming of a young man to a purported conspiracy between plaintiffs attorneys and Gass—designed to bleed the industry by, in the case of the lawyers, filing lawsuits; and in the case of Gass, forcing manufacturers to adopt SawStop. The jury found Ryobi not liable.

Wall of Patents

SawStop’s headquarters is in the back of a business park in the Portland suburb of Tualatin, next to a marshy field favored by egrets and geese. About 40 employees occupy the hive of offices, workbenches and warehouse space. Saws aren’t actually manufactured here; as with nearly all others sold in the U.S., SawStop’s models are made to its specifications in Taiwan

Rows of gleaming patents for saw components cover entire walls. Those patents have become an obsession of the industry as it fights to keep the CPSC off its back.

Legislation passed by Congress in 2008 had resuscitated the agency, adding funding and expanding it to five commissioners. Yet the table saw issue stalled. In November, 2010, the National Consumers League fired off a protest letter to commission chairman Inez Tenenbaum.

“While this…languishes before the Commission, with no action taken by previous CPSC officials, every day ten new amputations associated with the use of table saws occur,” the letter said. “The hazards posed by table saws are unacceptable, especially when we have the means to prevent these accidents.”

The thrust of the letter, said the league’s executive director Sally Greenberg, was “what the heck have you guys been doing over there?”

The league arranged for several injury victims to meet with commissioners. In October, 2011, they voted 5-0 to publish an Advanced Notice of Proposed Rulemaking–the step nearly taken five years earlier. In the notice, the CPSC pegged the average cost of a table saw injury at $35,000—for a total cost to society of $2.36 billion for the estimated 67,300 injuries per year.

The Power Tool Institute disputed the estimate as highly exaggerated. And in comments filed with the commission in March, 2012, it said a federal regulation would grant a “monopolistic advantage’’ to SawStop, whose patents might shut out rival safety systems, such as the one developed by the joint venture.

“There can be little question that Mr. Gass and the SawStop company primarily are motivated by their own monetary gain,” the institute declared, “rather than purely to improve public safety.”

Further, the industry reminded the commission of a legal constraint that could block regulation. By law, the commission must defer to voluntary standards that could adequately improve safety. As a result, by revising a voluntary standard, or by simply working on revisions, an industry might be able to forestall regulation indefinitely.

The industry had, in fact, made a couple of changes to its voluntary standard. A 2005 revision provided for use of a riving knife; another in 2007 called for an improved blade guard.

Since late 2007, hundreds of thousands of saws with the new guard had come into the market. Therefore, the industry said, before adopting a regulation the CPSC must investigate the impact of the changes. The agency has agreed to study consumer usage of the new guards.

“This is a serious hazard which has greatly impacted far too many lives,” commission spokesman Scott Wolfson told FairWarning. “This is a rulemaking that can make a difference…if we can reach the final rulemaking stage.”

Ann Brown, who left the chairmanship soon after the commendation to SawStop in 2001, told FairWarning she was “shocked” that the issue remains unresolved. “The industry has managed to delay every step of the way.”

Hal Stratton, chairman until 2006, said he was not shocked. “How could I be, after being there and experiencing working at the agency?” he asked. “The way the law is written, there’s a lot of hurdles to get over to get a regulation passed.”

Expecting little from the CPSC, SawStop tried another way to force the issue. Last year, it lobbied the California legislature to pass a bill requiring injury reduction technology for table saws sold in the state. California is such a huge market that when forced to meet its design standards, companies sometimes apply the changes across entire product lines. The bill was defeated, however.

SawStop could make plenty of money if a table saw standard were adopted, but is profitable just selling its saws, according to Gass.

“I feel like I’m doing a good thing,” he said, adding that he would not take “a lot of moral credit.  I’m doing what I also think is in my financial interest.”

Lilly Fowler of FairWarning contributed to this story.

FairWarning is a Los Angeles-based nonprofit investigative news organization focused on public health and safety issues.

American Sunrise, a Democratic super PAC in Orlando, paid for this TV advertisement criticizing Republican Allen West in 2012.

By Alan Suderman
The Center for Public Integrity

While much criticism has been lobbed at the federal system for failing to adequately identify who is spending money to influence campaigns, 35 states have independent spending disclosure laws that are less stringent than federal election law.

In fact, in 30 states it’s impossible to total how much money outside groups are spending on campaigns, information that is mostly available when it comes to federal contests.

That’s according to a new 50-state analysis by the National Institute on Money in State Politics, which graded the states on disclosure requirements for super PACs, nonprofits and other outside spending groups.

Fifteen states — Alaska, California, Colorado, Connecticut, Illinois, Maryland, Massachusetts, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, Texas, Washington and Wisconsin — received an “A” grade, meaning the states’ laws were at least as robust as federal independent spending requirements.

New Jersey and Virginia, states where residents will be casting votes for governor and state legislature this year, were among 26 states that received a failing grade.

The others were Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Dakota, Pennsylvania, South Carolina, Tennessee and Wyoming.

States were graded on a 100-point scale, based on how much information is provided to the public about non-candidate organizations that buy ads, often negative and misleading, just before an election. Six states — Alabama, Indiana, New Mexico, New York, North Dakota and South Carolina — didn’t garner a single point in the survey.

Independent super PACs and nonprofits intent on influencing campaigns proliferated in the wake of the 2010 U.S. Supreme Court’s Citizens United v. Federal Election Commission ruling, adding about $1 billion in spending in federal races in the 2012 election cycle.

At the state level, lavish spending by outside groups often faces weaker disclosure rules than federal contests and receives far less media attention.

The result is a mishmash of rules, with some states scrambling to pass legislation in the wake of the high court decision while others show little interest in enacting any changes.

In South Carolina, for example, outside groups paid for ads attacking several state and local politicians in 2012 but were not required to report the spending.

Two federal court decisions have left the state without “any rules” related to outside groups’ spending, according to Cathy L. Hazelwood, deputy director of the state Ethics Commission.

State Sen. Wes Hayes, a Republican from Rock Hill, estimates that an anonymous group called Conservative GOP PAC, which despite its name has no apparent affiliation with the state’s Republican party, spent at least $100,000 on campaign fliers in an unsuccessful effort to unseat him.

He concedes that’s just a guess.

“I’ll never know the amount, just like I’ll never know who spent it,” Hayes says. Efforts to contact Conservative GOP PAC were unsuccessful, as the group has no office, no phone number, no website, did not file incorporation records with the state and no individuals have claimed membership in the organization.

Non-candidate, independent spending on elections can be broken into two general categories: “independent expenditures” and “electioneering.” With independent expenditures, potential voters are asked to back or oppose a candidate. With electioneering, a candidate is named, but there’s no explicit request for support or opposition.

In 25 of 50 states, electioneering advertisements are not required to be reported, according to the analysis by the National Institute.

The term “electioneering communications” came to be with the passage of the Bipartisan Campaign Reform Act of 2002. The federal law requires such expenditures be reported, but it applies only to television and radio ads that air shortly before an election.

In a few states, however, the definition of electioneering communications is broader than at the federal level, and may include non-broadcast expenditures like direct mail and print advertising. Independent expenditures refer to all expenditures used to support or oppose a candidate, including non-advertising costs like polling and yard signs.

Points were withheld in the survey based on the level of disclosure and whether disclosure forms differentiate between independent spending and other types of campaign expenditures.

While North Dakota scored a zero, the state passed legislation this year that will beef up disclosure requirements for outside groups once the law goes into effect August 1.

The National Institute’s rankings focus solely on spending and not on donors to the groups that are doing the spending. Increasingly, “social welfare” nonprofits — currently at the center of a scandal involving the IRS — and trade associations are being used to hide donors’ identities in both federal and state races.

In New Mexico, outside political action groups spent heavily on races for the state Legislature, races that typically attract fewer than 20,000 voters. Once sleepy contests have become bruising battles fought through statewide television ads, said state Sen. Peter Wirth, a Democrat from Santa Fe.

He’s pushed a bill requiring greater disclosure by outside groups through the Senate three times (twice with unanimous approval) only to see it die in the state House after frenetic lobbying by “very powerful special interests” from both parties, he says.

“It’s bipartisan support in the open, and then behind the scenes it’s full-on bipartisan opposition,” Wirth says.

But several states have enacted disclosure requirements that go beyond federal requirements.

• In Maryland, corporations are required to alert shareholders about a company’s independent political spending;
• A “stand by your ad” provision in a 2010 Massachusetts law requires that in corporate-funded ads, the CEO appear in the spot;
• Alaska, California and North Carolina require independent expenditure groups to list their top donors in political ads.

The National Institute’s rankings also factor whether states require independent spending groups to disclose which candidate they are targeting.

Two states, Florida and Delaware, require that spending be made public but not the targets or the purpose of the spending. The result: It’s virtually impossible to track how much was spent by outside groups trying to hurt or help a particular candidate.

Thirty-six states will elect governors in 2014. Edwin Bender, executive director of the National Institute on Money in State Politics, said he hopes states with poor grades will strengthen their reporting requirements.

“The majority of states will elect their governors and other major statewide offices in 2014,” he said. “We think the public should know how much money is spent on these races, and by whom.”

John Dunbar contributed to this report.

The Center for Public Integrity is a non-profit, independent investigative news outlet. For more of its stories on this topic go to publicintegrity.org. For more information about money in state politics, visit www.followthemoney.org.

Florida House Speaker Will Weatherford and other House Republicans kept their insurance premiums low while denying Medicaid to low-income Floridians. (Photo courtesy of the Florida Legislature.)

By Ashley Lopez
Florida Center for Investigative Reporting

At the same time the Republican-led Florida Legislature was turning down federal funds that would pay for expanding the state’s Medicaid program to more than 1 million people who cannot afford health insurance, those same state lawmakers were working to keep their own insurance premiums lower than most other state employees.

According to Tia Mitchell of The Tampa Bay Times/Miami Herald:

House members will pay just $8.34 a month for state-subsidized health care next year, or $30 a month to cover their entire family.

That’s one-sixth of what state senators and most state employees will pay, and one-tenth of the cost to the average private-sector worker, according to the Kaiser Family Foundation.

It’s also less than the $25 a month House Republicans wanted to charge poor Floridians for basic coverage such as a limited number of doctor visits or preventive care.

House Republicans, including Speaker Will Weatherford, R-Wesley Chapel, would not say why the House did not raise its premiums to match the Senate. The premium increase was also part of Gov. Rick Scott’s proposed budget.

In a statement Monday, Weatherford said: “We are aware of the differences in what House members pay compared to other state employees for health insurance and are looking forward to addressing it next session.”

The Times asked three members of the Pinellas County delegation about the discrepancy this week. Reps. Larry Ahern, Ed Hooper and Kathleen Peters, who voted against Medicaid expansion, defended their state-subsidized health insurance premiums — but said they would be willing to pay more if the issue was addressed by the Legislature:

“I don’t mind paying more for that insurance,” Ahern told aTimes reporter after the 90-minute luncheon at the St. Petersburg Marriott Clearwater Hotel …

Ahern and Hooper, R-Clearwater, pointed to the national debt, saying Florida could not rely on the federal government. Peters, R-South Pasadena, stressed she voted against the Medicaid expansion alternative because there was never a focus on how it would work, not because of the federal money.

As far as her own health insurance, Peters noted that House members only make about $29,000 a year. Still, she said their low premiums are “not fair and equitable” compared with what state workers and others pay for health insurance.

Members of the Florida Senate proposed a plan that was endorsed by both Republicans and Democrats in the Legislature. The plan would have accepted the millions in federal funds, but would have directed the money through a state program to buy private insurance for those Floridians who qualified.

However, the more conservative members of the Florida House were opposed to accepting any federal money allocated through the health care law. Florida House Speaker Will Weatherford, R-Wesley Chapel, was among them.

Weatherford has been staunchly opposed to expanding Medicaid in the state, even though Gov. Rick Scott has said he supported the expansion.

Health experts warn that not moving on Medicaid expansion will hurt the state’s businesses and hospitals.

WUSF’s Health News Florida reports:

Florida corporations have been “too quiet” about Medicaid expansion and other health care issues, and should make elected officials aware of their displeasure before the damage gets worse, said William Kramer, a national health policy leader in San Francisco who works with corporations.

“If Medicaid is not expanded, it’s going to raise the premiums employers pay for health coverage, because hospitals will raise the costs they charge,” Kramer said. “Businesses have to speak up. They don’t have to do it in a political way, they just have to say it’s bad for business. It’s bad for employees, too, because the more money that goes for health benefits, the less that is available for wages.”

Regardless, the Florida Senate and House would have to reach a basic agreement before Scott can call a special session to vote on a plan.

RNC Chairman Reince Priebus speaks at the Republican Leadership Conference. (Photo by Gage Skidmore.)

By Ashley Lopez
Florida Center for Investigative Reporting

Pablo Pantoja, a state director for the Republican National Committee in charge of Hispanic outreach in Florida, is leaving the Republican Party.

In an email to his colleagues, Pantoja cited among his reasons for leaving a “culture of intolerance surrounding the Republican Party.” He also said he will join the Democratic Party.

Since the 2012 presidential election, in which Republicans received dismal support from minority voters, the RNC has been making an effort to reach out to Hispanic voters. The committee hired state directors to carry out this work in key swing states including Florida. Pantoja was among the hires whose job was to attract Hispanics to the Republican Party.

As the Tampa Bay Times reports, Pantoja was well qualified for his position with the Republican National Committee. A Puerto Rican and a graduate of Florida State University, Pantoja was a field director in the 2010 midterm elections for the GOP.

However, his time working with the national Republican Party during immigration reform prompted a change of heart.

The Times reports that the change comes on the heels of a “Heritage Foundation study on immigrants touted by a fellow who used to argue that Hispanics have a lower IQ than non-Hispanic immigrants.”

The foundation study was released at the same time a bipartisan coalition of U.S. Senators — which includes Sen. Marco Rubio, R-Florida — proposed legislation for comprehensive immigration reform in the United States.

Here is Pantoja’s letter (via the Times):

Friend,

Yes, I have changed my political affiliation to the Democratic Party.

It doesn’t take much to see the culture of intolerance surrounding the Republican Party today. I have wondered before about the seemingly harsh undertones about immigrants and others. Look no further; a well-known organization recently confirms the intolerance of that which seems different or strange to them.

Studies geared towards making – human beings – viewed as less because of their immigrant status to outright unacceptable claims, are at the center of the immigration debate. Without going too deep on everything surrounding immigration today, the more resounding example this past week was reported by several media outlets.

A researcher included as part of a past dissertation his theory that “the totality of the evidence suggests a genetic component to group differences in IQ.” The researcher reinforces these views by saying “No one knows whether Hispanics will ever reach IQ parity with whites, but the prediction that new Hispanic immigrants will have low-IQ children and grandchildren is difficult to argue against.”

Although the organization distanced themselves from those assertions, other immigration-related research is still padded with the same racist and eugenics-based innuendo. Some Republican leaders have blandly (if at all) denied and distanced themselves from this but it doesn’t take away from the culture within the ranks of intolerance. The pseudo-apologies appear to be a quick fix to deep-rooted issues in the Republican Party in hopes that it will soon pass and be forgotten.

The complete disregard of those who are in disadvantage is also palpable. We are not looking at an isolated incident of rhetoric or research. Others subscribe to motivating people to action by stating, “In California, a majority of all Hispanic births are illegitimate. That’s a lot of Democratic voters coming.” The discourse that moves the Republican Party is filled with this anti-immigrant movement and overall radicalization that is far removed from reality.  Another quick example beyond the immigration debate happened during CPAC this year when a supporter shouted ““For giving him shelter and food for all those years?” while a moderator explained how Frederick Douglass had written a letter to his slave master saying that he forgave him for “all the things you did to me.” I think you get the idea.

When the political discourse resorts to intolerance and hate, we all lose in what makes America great and the progress made in society.

Although I was born an American citizen, I feel that my experience, and that of many from Puerto Rico, is intertwined with those who are referred to as illegal. My grandfather served in an all-Puerto Rican segregated Army unit, the 65th Infantry Regiment. He then helped, along my grandmother, shatter glass ceilings for Puerto Rican women raising my aunt to become the first Puerto Rican woman astronomer with a PhD in astrophysics (an IQ of a genius as far as I’m concerned). Puerto Ricans, as many other Americans still today have to face issues of discrimination in voting and civil rights.

Regardless of what political affiliation people choose, my respect for some remains. I don’t expect all Hispanics to do the same (although I would hope so) but I’m taking a stand against this culture of intolerance.

I am also making a modest contribution (here: http://bit.ly/12uf3g8) to the American Civil Liberties Union (ACLU) for the efforts in helping protect the rights of immigrants and civil liberties in general.

With warm regards,

-pablo

Some members of the Republican Party in the U.S. House and Senate have taken issue with the Senate’s immigration bill. Among their reasons for opposing the bill is a provision that provides a lengthy path to citizenship for undocumented immigrants already in the country, as well as what they say are few border security measures.

However, the Senate has to vote on hundreds of amendments to the bill, which could drastically change the final legislation.

Even though more conservative members of the House and Senate oppose the path to citizenship, a large percentage of Floridians support immigration reform plans.

While Rubio is fighting for immigration reform in the Senate, U.S. Rep. Mario Diaz Balart, R-Miami, is trying to hammer out a similar plan in the House.

FCIR took first place in three categories.

Ashley Lopez’s series on the 11 constitutional amendments on the 2012 Florida ballot won first place in Public Service in Radio Journalism. The series was the result of a collaboration with Florida’s NPR member stations.

FCIR’s series of reports on K12 Inc., the nation’s largest for-profit online education company, won first place in Online Investigative Reporting. The stories, reported by Trevor Aaronson of FCIR and John O’Connor of StateImpact Florida, were also the result of a collaboration with Florida’s NPR member stations.

Amy Green’s reporting on sugar subsidies and Big Sugar in Florida won first place in Online Business Reporting.

FCIR also took second and third place in Public Service in Online Journalism. Second place went to “13th Grade“ – a collaboration between FCIR and StateImpact Florida and reported by Sarah Gonzalez and John O’Connor of StateImpact Florida and Mc Nelly Torres and Lynn Waddell of FCIR — that explored the crisis of remedial education in Florida’s community colleges. Third place went to FCIR’s and StateImpact Florida’s reporting on K12 Inc. The Tampa Bay Times’ PolitiFact won first place in the category.

Other honors included third place in Specialized Site for Voter’s Edge Florida, a companion to Lopez’s radio and print reporting on the constitutional amendments, and third place in Online Non-Deadline Reporting for Torres’ reporting on poverty and homelessness among Florida students.

(Photo: Stock.xchng.)

By Tracy Weber, Charles Ornstein and Jennifer LaFleur
ProPublica

This story was co-published with The Washington Post.

Ten years ago, a sharply divided Congress decided to pour billions of dollars into subsidizing the purchase of drugs by elderly and disabled Americans.

The initiative, the biggest expansion of Medicare since its creation in 1965, proved wildly popular. It now serves more than 35 million people, delivering critical medicines to patients who might otherwise be unable to afford them. Its price tag is far lower than expected.

But an investigation by ProPublica has found the program, in its drive to get drugs into patients’ hands, has failed to properly monitor safety. An analysis of four years of Medicare prescription records shows that some doctors and other health professionals across the country prescribe large quantities of drugs that are potentially harmful, disorienting or addictive. Federal officials have done little to detect or deter these hazardous prescribing patterns.

Searches through hundreds of millions of records turned up physicians such as the Miami psychiatrist who has given hundreds of elderly dementia patients the same antipsychotic, despite the government’s most serious “black box” warning that it increases the risk of death. He believes he has no other options.

Some doctors are using drugs in unapproved ways that may be unsafe or ineffective, records showed. An Oklahoma psychiatrist regularly prescribes the Alzheimer’s drug Namenda for autism patients as young as 12; he says he thinks it calms them. Autism experts said there is scant scientific support for this practice.

The data analysis showed widespread prescribing of drugs such as carisoprodol, which was pulled from the European market in 2007. In 2010 alone, health-care professionals wrote more than 500,000 prescriptions for the drug to patients 65 and older. The muscle relaxant, also known as Soma, is on the American Geriatrics Society’s list of drugs seniors should avoid.

The data, obtained under the Freedom of Information Act, makes public for the first time the prescribing practices and identities of doctors and other health-care providers. The information does not include patient names or the reasons why doctors prescribed particular drugs, so reporters interviewed the physicians to learn their rationales.

Medicare has access to reams of data about its patients, their diagnoses and the medical services they received. It could analyze all of this information to determine whether patients are being prescribed appropriate drugs for their conditions.

But officials at the Centers for Medicare and Medicaid Services say the job of monitoring prescribing falls to the private health plans that administer the program, not the government. Congress never intended for CMS to second-guess doctors – and didn’t give it that authority, officials said.

“CMS’s payments don’t go to physicians, don’t go to pharmacies. They go to plans, which is how our oversight framework has been established,” Jonathan Blum, the agency’s director of Medicare, said in an interview. The philosophy “really has been to defer to physicians” about whether a drug is medically necessary, he said.

Asked repeatedly to cite which provision in the law limits their oversight of prescribers, CMS officials could not do so.

The Office of the Inspector General of the Department of Health and Human Services has repeatedly criticized CMS for its failure to police the program, known as Part D. In report after report, the inspector general has advised CMS officials to be more vigilant. Yet the agency has rejected several key recommendations as unnecessary or overreaching.

Other experts in prescription drug monitoring also said Medicare should use its data to identify troubling prescribing patterns and take steps to investigate or restrict unsafe practitioners. That’s what state Medicaid programs for the poor routinely do.

“For Medicare to just turn a blind eye and refuse to look at data in front of them . . . it’s just beyond comprehension,” said John Eadie, director of the Prescription Drug Monitoring Program Center of Excellence at Brandeis University.

“They’re putting their patients at risk.”

Although Medicare hands responsibility to private insurers, experts say they are ill-equipped for the task. Insurers have access solely to the prescriptions for their members – not to a provider’s prescriptions across multiple health plans.

Only Medicare can see that.

“A red flag can turn out to be nothing, or it can turn out to be something really, really horrible,” said Kathryn Locatell, a California physician who specializes in geriatrics and elder abuse. “You won’t know unless you flag it.”

In lawsuits and disciplinary records, state and federal authorities cite a number of reasons that doctors prescribe improperly. Some run mills where patients get prescriptions if they pay cash for a visit. Others have relationships with drug companies that influence what they prescribe. Regulators say some doctors choose inappropriate medications under pressure from families or facilities.

Research also shows that doctors often don’t keep up with the latest studies and drug warnings.

ProPublica’s examination of Part D data from 2007 through 2010 showed that, in many cases, Medicare failed to act against providers who have been suspended or disciplined by other regulatory authorities.

Doctors barred by state Medicaid programs for questionable prescribing remain able to dole out the same drugs under Medicare. So can dozens of practitioners who have been criminally charged or convicted for problem prescribing, or who have been disciplined by state medical boards.

The Part D records detail 1.1 billion claims in 2010 alone, including prescriptions and refills dispensed. ProPublica has created an online tool, Prescriber Checkup, to allow anyone to search for individual providers and see which drugs they prescribe.

About 70 providers each churned out more than 50,000 prescriptions and refills in 2010, the data show, averaging at least 137 a day.

A few had high tallies because they work in institutional settings, such as nursing homes, or operate busy clinics. In other cases, doctors said they think the prescriptions of their colleagues were attributed to them. They acknowledged in interviews that their numbers should have sparked questions.

Some families say they, too, think Medicare should be paying closer attention.

When 79-year-old Mable “Nanny” Webb’s family put her in a nursing home near Fort Worth in 2004 to rehabilitate her back, she came under the care of Adolphus Ray Lewis, who would later become one of Medicare’s busiest prescribers.

Records show that the Texas medical board temporarily restricted Lewis’s license in 1998 for improper prescribing of painkillers and that he was sued repeatedly for malpractice. But Webb’s family didn’t know that.

While under Lewis’s supervision, Webb developed a urinary tract infection that went untreated and was given a painkiller in doses that were excessive and dangerous for her condition, court testimony shows. Within a month, she died.

Webb’s relatives sued. During the 2008 trial, Lewis admitted responsibility for her death, testifying that he had not reduced the dosage ordered by a nurse he supervised.

A jury ordered Lewis to pay $1.6 million in damages to Webb’s relatives. They later settled for a lesser amount – one of at least eight malpractice settlements in cases involving Lewis since the mid-1990s, according to court records and interviews.

Yet Lewis continued to prescribe, racking up nearly 99,000 Medicare prescription claims including refills in 2010, fifth-most in the country. He wrote 46,000 more under Medicaid that same year. He declined to comment for this article.

Webb’s granddaughter, Michelle Wheeler, said that though it’s too late for her family, information about a doctor’s drug choices could help others decide who should care for their loved ones.

“Everybody should be able to know that,” she said.

Antipsychotics for Seniors

In his worn Miami office, psychiatrist Enrique Casuso said he has no choice but to give antipsychotics to many of his elderly patients.

Often, they are beset with dementia and have been abandoned by their families in understaffed assisted-living facilities. They may dress for work and wait in the street for a bus, he said, when they haven’t had a job in a decade.

Drugs keep them safe and ease their anxiety, Casuso said: “You have to submerge them in medication to avoid a catastrophic event.”

But Casuso, 74, prescribes powerful antipsychotics at a rate that other providers and experts call alarming. In 2010, he prescribed more of these medicines to seniors in Medicare than any other physician in the country – 50 percent more than the second-ranking doctor. Three-quarters of the prescriptions were for a single brand, Seroquel, which Casuso said is “less evil” and has less-severe side effects than other antipsychotics.

Although antipsychotics are an important treatment for patients with serious mental illness, such as schizophrenia, the Food and Drug Administration warns against their use in dementia patients, citing increased risk of death. Regulators are trying to discourage their use in nursing homes.

Casuso also leads the nation in giving seniors powerful sedatives, such as zolpidem, the generic form of Ambien, despite warnings from geriatric experts that the drugs do little to help the elderly sleep and that the medications increase the risk of confusion, falls and bone fractures. Casuso said the pills allow his agitated patients to sleep.

Casuso’s prescribing patterns have not triggered any intervention from Medicare.

In his office, Casuso sits surrounded by mementos of his native Cuba, where he served 16 years in prison for his role in the Bay of Pigs invasion. “I know what it is to be locked in one place,” he said.

He flipped through a stack of letters from Part D insurers about his patients. Some have alerted him to the government warnings about risks on a drug’s label.

“They say this medication has a black-box warning on the elderly,” said Casuso, raising his hands in a gesture of surrender. “I know! I don’t like that. What am I going to use?”

Still, none of the letters forbids him from using the drugs. Casuso has continued prescribing the same drugs, and Part D has continued to pay for them.

Medicare records show a long list of doctors who routinely prescribe antipsychotics to older patients. In 2010, nearly 340 physicians and other providers accounted for more than 1,000 antipsychotic prescriptions each for patients 65 and older.

CMS’s Blum said his agency deserves credit for trying to reduce antipsychotic use in nursing homes. But when asked whether the agency was likewise focusing on the doctors who prescribe risky drugs, he said, “Not at this time.”

The agency declined to comment on Casuso or any of the other physicians named in this article.

Florida’s Medicaid program has not been nearly as accepting of Casuso’s practices as Medicare, public records show.

In 2005, the state kicked him out of its Medicaid network using a provision that allows it to end a contract without cause on 30 days’ notice. An internal memo justifying his removal said Casuso was seeing up to 81 Medicaid patients a day in addition to non-Medicaid cases. Investigators found cases in which he lacked “awareness or oversight of the medication prescribed,” according to the memo, obtained under a public records request.

Casuso said he believes Medicaid terminated him because he prescribed a lot of expensive drugs, not because he endangered patients. He suggested that his prescribing numbers are high because some insurers require two prescriptions if patients need a different-strength pill in the morning than at night.

Locatell, the geriatrics expert, said Medicare should be doing more to protect patients whose conditions render them unable to question their own care.

“They can’t watch out for themselves, that’s for sure,” she said.

‘Like Tying Both Hands’

Congress created Medicare’s drug program in 2003 after a contentious, middle-of-the-night vote marked by aggressive arm-twisting and called-in favors.

Republicans, led by President George W. Bush, pushed through more spending to lower seniors’ drug costs. Most Democrats called the plan a blank check for drugmakers because it prohibited Medicare from negotiating with the companies for lower prices.

Typically in Medicare, the government is responsible for contracting with doctors, reviewing claims for treatment and paying the bills.

But Part D is different: Patients get their drugs through stand-alone drug plans, which cover only drugs, or through Medicare HMOs that also cover medical services.

Medicare pays private insurers a set amount per enrollee to run the program and pay for the drugs. All the insurance plans are supposed to alert pharmacies to potentially harmful drug interactions, query doctors who prescribe high levels of narcotics to individual patients and be on the lookout for fraud, among other things.

Medicare also expects the insurers to prevent inappropriate prescribing for individual patients. But it doesn’t give them enough information or the tools to do that.

With rare exceptions, Medicare does not allow insurers to reject drug claims. It also does not give the stand-alone plans access to their members’ medical claims, making it nearly impossible for them to discern if patients have been given the wrong drug for their conditions.

Insurers say they must pay for prescriptions from all providers – even those they believe are acting improperly – unless they have been formally excluded from the program. They are asked to refer questionable cases to Medicare’s fraud contractor.

“It’s like tying both hands behind someone’s back,” said Jerry Avorn, a Harvard medical professor and author of a book on the risks and benefits of prescription drugs.

From the start, Avorn and other experts were concerned that Congress was making a mistake by segregating patients’ drug coverage from the rest of their care. But Congress, under heavy lobbying by the drug industry, opted for a payment pipeline for drugs, not another layer of bureaucracy.

The priority for CMS was to get seniors their drugs.

“They just did not want to be accused of letting the Part D plans interfere with a physician’s medical judgment,” said Thomas Barker, who was CMS’s top lawyer when the program’s rules were crafted.

Told of ProPublica’s findings, Barker said it might be time to revisit how the program is run.

“We did what we thought would be in the best interest of beneficiaries,” he said. “We had no idea what was going to happen.”

Alarms Sounded

Some of Medicare’s most controversial providers have been in the headlines, but it hasn’t hindered their ability to prescribe drugs in Part D.

Chicago psychiatrist Michael Reinstein, who works at a string of nursing homes for the mentally ill, was the subject of articles published jointly by ProPublica and the Chicago Tribune in 2009 for giving more of the potent schizophrenia drug clozapine to Medicaid patients than all of the physicians in Texas.

Clozapine is the only drug approved for treatment-resistant schizophrenia, but it carries a risk of serious side effects, including seizures, diabetes and the potential for a dangerous decrease in the number of white blood cells.

Reinstein, 69, has been sued more than a dozen times since 2005 for malpractice involving patients who died. Neither he nor his attorney responded to multiple requests for comment.

Records show that Reinstein’s most-prescribed drugs in Medicare were the same as those in Medicaid.

From 2007 to 2009, he wrote an average of 20,000 Medicare prescriptions annually for clozapine and a brand-name version, FazaClo, with most going to disabled patients younger than 65. Although he wrote fewer prescriptions in 2010 – 14,000 – the number was still more than double the next-highest prescriber of these drugs.

Reinstein was the Part D program’s top prescriber of antipsychotics to seniors and the disabled over the four-year period analyzed by ProPublica.

Last November, the Justice Department filed suit against Reinstein, alleging that he prescribed certain medicines in exchange for speaking or consulting payments from their makers, Novartis, Teva Pharmaceuticals and Ivax Pharmaceuticals, which Teva acquired in 2006. The suit also accused him of submitting false claims to Medicare and Medicaid.

The next day, the state medical board filed a complaint against Reinstein, and Illinois Medicaid suspended payments to him. But he remains able to prescribe in Medicare.

That same month, Reinstein defended his prescribing to the Chicago Tribune, saying his use of clozapine was “the best choice” for his severely mentally ill patients. “I am confident that I will be vindicated,” he said.

Chicago psychiatrist Mark Amdur, who complained about Reinstein to Illinois officials in 2003, said Medicare and Medicaid officials share in the blame for leaving Reinstein’s patients at risk.

“They know what people are prescribing, or they should know,” he said.

Miami psychiatrist Fernando Mendez-Villamil‘s prescribing habits came to light in a 2009 letter from Sen. Charles E. Grassley (R-Iowa) to HHS Secretary Kathleen Sebelius.

In Florida Medicaid alone, Mendez-Villamil had written more than 96,000 prescriptions for mental-health drugs from July 2007 to March 2009, more than anyone else in the program, Grassley noted. He asked Sebelius what her department had done about him, and what it does to track the prescribing of others.

Months later, in April 2010, Florida Medicaid expelled Mendez-Villamil without publicly revealing its reasons. An internal memo cited concerns about “the volume of patients being seen, and the medications being prescribed.”

Earlier this year, the Florida medical board accused him of giving patients as young as 3 a variety of mental health drugs without properly diagnosing or monitoring them.

Yet throughout, Mendez-Villamil has remained in good standing with Medicare. Working primarily out of his walk-in clinic, he wrote 6,100 prescriptions for antipsychotics in 2009 and 5,500 more in 2010, records show.

Mendez-Villamil could not be reached for comment, but his attorney, Mike Gennett, denied that his client mistreated patients. “We categorically deny any wrongdoing by Dr. Mendez-Villamil in regards to his care of patients or prescribing of medications,” he wrote in an email. Mendez-Villamil has requested a formal hearing on the medical board complaint.

Sebelius responded to Grassley’s inquiry in March 2010, assuring the senator that Mendez-Villamil was under investigation by Medicare’s fraud contractor.

More than three years later, there has been no public action.

CMS did not respond to questions about Mendez-Villamil, saying it could not discuss ongoing administrative or criminal investigations.

In an interview for this article, Grassley said it is “kind of ridiculous” for Medicare and Medicaid to take such different actions.

“What I expect here is a little common sense on the part of CMS,” he said.

Rx for Narcotics

Medicare does little to stop some doctors with criminal or disciplinary histories from continuing to prescribe to patients.

Perhaps the most striking example: its inaction on prolific prescribers of OxyContin and oxycodone, two often-abused narcotics with a high street value.

Half of Medicare’s top 20 prescribers of OxyContin in 2010 have been criminally charged, convicted or settled fraud claims, or have been disciplined by their state medical boards, records show.

Similarly, eight of the top 20 prescribers of 30-milligram oxycodone pills – the strongest dose – have been charged, convicted or barred from prescribing controlled substances, or face discipline by licensing boards.

Yet as of today, only one of those doctors has been barred from Medicare – and that wasn’t until nearly a year after his conviction for drug trafficking and health-care fraud.

Medicare shares responsibility with the HHS inspector general for allowing the doctors to remain in the program. Medicare has not sought authority from Congress to suspend providers from Part D – as experts say it should. The inspector general, which is responsible for excluding providers, hasn’t done so in these cases.

Criminal charges alone are not enough to bar a practitioner, said Don White, a spokesman for the inspector general. The office must exclude providers convicted of certain offenses, including fraud, and has discretion to do so if they have lost licenses. But White said his office relies on other agencies to flag these cases.

“The legal process is sure but not fast,” he said.

Blum said CMS is now taking steps to search for doctors and patients who may be engaged in fraud involving painkillers. The agency has encouraged insurance plans to send warning letters to doctors if signs indicate a patient may be going to different doctors to feed a drug habit.

Former CMS administrator Mark McClellan said Medicare should at least be able to stop paying for prescriptions written by doctors facing fraud charges.

“That’s the kind of thing that seems like you ought to be able to find a way to deal with,” he said.

In some cases, after years of inaction by Medicare and others, high prescribers were accused of harming patients.

Gerson Sternstein, 61, a Connecticut psychiatrist, consistently ranked among Medicare’s most prolific OxyContin prescribers from 2007 to 2010. (OxyContin was reformulated in late 2010 to make it less prone to abuse.)

Since 2009, at least five malpractice lawsuits have been filed in Connecticut accusing him of questionable prescribing. A state medical board investigation found that his count of painkillers and other controlled substances – for the 12 months beginning July 2008 – exceeded that of Yale-New Haven Hospital.

In revoking Sternstein’s license in 2011, the board cited 10 cases in which he had given out painkillers inappropriately, including two in which patients died – one from opiate toxicity, the other from a heart condition that can be associated with drug overdose.

In an e-mail, Sternstein said he was a specialist in treating patients whose pain could not be managed by anyone else. “I considered it my responsibility to try and help these individuals in their suffering,” he said, noting that he faced no criminal action.

In defending himself to the medical board, documents show, one of the doctor’s arguments was that Medicare allowed him to prescribe as he chose.

“Dr. Sternstein believes Medicare [Part] D allows wide latitude in off label use of medications,” the board report states.

Potential for Fraud

Since Part D was launched, the HHS inspector general and the Government Accountability Office have grown increasingly worried that it lacks adequate oversight.

Several reports have found that Part D is vulnerable to fraud. Insurers have paid for prescriptions from doctors who were barred by Medicare. Separately, in 2007 alone, the program covered $1.2 billion worth of drugs prescribed by providers whose identities were unknown to insurers or Medicare, according to a June 2010 report.

The inspector general even found fault with the contractors Medicare hired to dig out fraud: The contractors generated few of their own investigations, relying on outside complaints for direction.

Although many reports focus on fraud, analysts also have found that the program was vulnerable to inappropriate prescribing that put patients’ lives in danger.

A May 2011 report said Medicare has not ensured that Part D paid only for drugs prescribed for FDA-approved and widely accepted off-label indications as federal law requires. About half of the 1.4 million antipsychotic prescriptions made to nursing home patients in the first six months of 2007 “were not used for medically accepted indications,” the report said.

“There’s certainly room for improvement,” Robert Vito, a regional inspector general who has directed many of the reports, said in an interview.

Medicare should, for example, require that prescriptions include a patient’s diagnosis as a way to monitor how Part D drugs were being used, his agency said.

But Medicare officials told the inspector general that neither state boards of pharmacy nor private industry requires this practice, so neither would they.

CMS also has rejected proposals to require insurers to report suspicious prescribing to its fraud contractor. Such sharing is now voluntary.

Medicare’s safeguards lag well behind those of many state Medicaid programs.

Louisiana requires that doctors include diagnosis codes when they write prescriptions for painkillers and antipsychotics. Similar checks have proved effective in other states. Florida found that antipsychotics given to children younger than 6 dropped when specialists reviewed prescriptions.

Even some of Medicare’s top prescribers think the program should do more to research unusual or suspicious prescribing patterns.

Indiana physician Daniel J. Hurley led the country with more than 160,000 prescriptions under Part D in 2010, ProPublica’s analysis shows. In an interview, he said nursing home pharmacies had credited him with prescriptions by other health professionals in his practice, a quirk Medicare should want to address.

It’s unclear how often this might happen, and some nursing home doctors do write lots of prescriptions on their own. Medicare said it recently addressed this issue, but according to Medicare’s own numbers, Hurley’s prescriptions have dropped only slightly.

“Why wouldn’t they call us up and ask us?” Hurley said. “If you hustled, you couldn’t come anywhere near that number, nor should you.”

Off-label Treatment

Several times a week, psychiatrist Robert O. Morton loads his car with plastic bins of medical records and drives to facilities across Oklahoma to care for older children and adults with autism and developmental disabilities.

At many of the stops, Morton does something unorthodox: He prescribes patients Namenda, a drug normally given to elderly Alzheimer’s patients.

“In autism, you’ll know that when they get overstimulated, they start rocking and they start flapping,” he said. “What we’ve seen Namenda do is just tone that down.”

Morton stands out in Medicare’s data because two-thirds of his prescriptions for Alzheimer’s drugs were written for patients younger than 65 – a greater proportion than any other physician in the country.

Morton’s prescribing of Namenda does not appear to meet Medicare payment rules, which say drugs can be covered for off-label uses only if they are supported by science and included in one of three recognized drug reference guides.

Medicare also hasn’t imposed a requirement similar to Oklahoma Medicaid, which requires that Morton and other doctors get permission to give Namenda to patients 50 and younger who do not have Alzheimer’s.

Several experts in autism and developmental disabilities said there is little support for the efficacy of Namenda as a treatment for autism. No studies have been done on the effects of long-term use of Namenda in children, they said.

Fred Volkmar, director of the Child Study Center at the Yale School of Medicine, said he has never prescribed the drug and would be “dubious about the rationale.”

Alexander Capron, a law professor and medical ethicist at the University of Southern California, said testing new treatments is part of scientific innovation. “But when one moves beyond a single patient or maybe a couple of patients,” he said, ” . . . you’re basically saying, ‘I’m doing a study.’ ”

In a clinical study, patients or their families would be informed about side effects and risks.

Morton, 66, said that Namenda calms the behavioral symptoms of developmental disabilities by lessening the effects of a neurotransmitter in the brain called glutamate. Asked if he has written up his findings in a research paper, he said he hasn’t had time.

Psychiatry has offered Morton a second chance in medicine. His license was revoked twice in the 1990s when he battled an opiate addiction as an internist. “I lost my wife, lost my practice, lost my job, so I had to think about what I really wanted to do,” he said.

He now is the medical director at an Ada, Okla., psychiatric hospital and sees patients in a variety of other settings.

At Oakridge Home in Wewoka, Okla., one of the facilities Morton visits, nursing director Lisa Brown said Namenda has “worked wonders for mood behaviors” in developmentally disabled patients.

But even Morton conceded that his practice should have drawn Medicare’s scrutiny.

“If they see a pattern that’s unusual,” he said, “they should go look at it.”

Listen to the companion radio report by John O’Connor of StateImpact Florida:

The Florida Center for Investigative Reporting and StateImpact Florida have obtained internal emails and a recording of a company meeting that provide new insight into allegations that K12 Inc., the nation’s largest online education company, uses teachers in Florida who do not have all of the required state certifications.

The for-profit online educator knew of teacher certification problems in Florida for years.

Last month, a draft report by the state Department of Education’s Office of Inspector General found that the publicly traded company employed at least three teachers in Seminole County who did not have the proper state subject certifications. According to Florida law, teachers must pass three exams to earn state certification as well as be certified for the subjects and grades they teach.

Department of Education investigators did not find teachers without state certification, as a complaint filed by the Seminole County School District had claimed. But the investigators did find teachers without necessary subject certifications. The draft report attributed the problem to sloppy paperwork at Virginia-based K12, rather than intent to skirt the law.

If that’s true, then paperwork for Florida classes has been a problem at K12 since 2009, according to the internal emails and the recording of a company meeting.

K12 operates in 43 Florida school districts, including in Miami-Dade, Broward, Hillsborough, Orange and Duval counties. The company teaches everything from art to algebra to students in kindergarten through high school.

In October 2009, K12 teachers first complained in an email to Julie Frein, then the senior director of the K12 Educator Group, that paperwork seemed to suggest the company was using a so-called “teacher of record” system in Florida. That’s a system in which certified teachers sign off on teaching classes that were taught day to day by other teachers, who may not have had the necessary state certifications. Florida law prohibits this practice.

“This has major credibility issues with these teachers,” Laura Creach, a curriculum specialist at K12, wrote in an Oct. 30, 2009, email to Frein.

The teachers’ concern was that signing off on classes they didn’t teach — a potential violation of Florida law — was not only unethical but could result in the loss of their state certification. The email prompted a conference call with Creach, Frein and another K12 employee on Nov. 3, 2009. The call was recorded.

“I have a concern — I’ve already expressed it to you several times — about my license being used,” Creach told Frein in the conference call. “I’m not opposed to (the license) being used, but I just wanted to know ahead of time and I want to do my own research to know that is acceptable in that state to do that. And I want to know who’s teaching under me.”

“Well, I think the important part about Florida is that you are not actually teaching in Florida,” Frein replied. “You have not had any contact with students in Florida. Your name being on that list (of teachers in Florida) was nothing but a mistake.”

For K12, the mistake was convenient. In 2009, according to the recording, K12 was having trouble hiring teachers who could meet every Florida certification requirement, such as submitting fingerprints and going through a background check.

“They’re eligible for it, but we can’t go to the next step to get them certified,” Frein said of the teachers K12 had hired for Florida in the recorded conversation.

That meant the for-profit online educator was having difficulty complying with a request from the Seminole County School District to provide class rosters signed by teachers with the required subject certifications. No other Florida school districts required signed rosters. Seminole County officials were suspicious of K12’s practices.

At the time, according to the recording, K12 teachers were swapping “watercooler talk” that they had heard their certifications were used for classes they weren’t instructing. Teachers were objecting to the idea of signing off on students they had not taught.

Company managers said during the conversations recorded in 2009 that they were ending this practice. If that had happened, it would support the state investigation’s draft conclusion that teacher certification problems at K12 were due simply to paperwork problems.

But internal emails over a two-year period from K12, also obtained by the Florida Center for Investigative Reporting and StateImpact Florida, suggest that the practice of using teachers of record continued through at least early 2011.

In a Feb. 15, 2011, email, K12’s Samantha Gilormini, who was in charge of the company’s Florida schools, asked teachers to sign class rosters that included students they had not taught. The reason: K12 needed to use their certification to comply with Florida law on classes for which they didn’t have teachers with the required subject certifications.

“So if you see your name next to a student that might not be yours it’s because you were qualified to teach that subject and we needed to put your name there,” Gilormini wrote.

One teacher, Amy Capelle, was given a roster of 112 students. She’d only taught seven of those students, and refused to sign. After learning of this, Seminole County school officials called for a state investigation in 2012.

Asked about the emails and recording, K12 spokesman Jeff Kwitowski said in a written statement: “K12 takes compliance seriously. It is a core value of the company. K12 is committed to meeting all state requirements and to address any issues and errors that may arise.”

Listen to the K12 recording in full:

Gov. Rick Scott and local officials paid $19 million to move Hertz’s headquarters from New Jersey to South Florida. (Photo courtesy of Rick Scott.)

By Ashley Lopez
Florida Center for Investigative Reporting

Hertz, one of the nation’s largest rental car companies, announced this week that it is moving its headquarters from New Jersey to Southwest Florida. The Fortune 500 company committed to the move after officials with the state and Lee County offered $19 million in economic incentives.

According to The News Press in Fort Myers:

County commissioners approved $4.6 million in economic development incentives and the Florida Legislature approved $14.4 million in the same, to help entice Hertz to come to Southwest Florida.

Getting the money and taking advantage of other incentives is contingent on Hertz spending $60 million to build a 300,000 square-foot headquarters and employing 700 in Lee County by 2015.

Hertz recently acquired Dollar Thrifty, based in Oklahoma, and decided to consolidate operations and relocate to Florida, a tax-friendly state. In a news conference announcing the deal on Tuesday, Hertz CEO Mark P. Frissora said the combination of quality of life, business climate and tourism industry in the state and region persuaded the company to move to the area. Gov. Rick Scott credited Lee County’s success at job creation as a big factor in the decision.

Economic incentives have been the bedrock of Gov. Rick Scott’s job creation plans. These incentives, which can be tax breaks or subsidies, are meant to attract companies interested in expanding in or relocating to Florida. The incentive money is also used to prevent companies from moving out of Florida.

Open government advocates have criticized the millions of dollars spent on these incentives because there is so little transparency in the selection process and some doubt about whether these incentives create or sustain jobs in the state. This year, state lawmakers established new rules that will require greater accountability for these economic incentives.

With the Hertz relocation, state official anticipate the move will create quite a few jobs in Florida because the company has 700 well-paid positions at its headquarters. However, Hertz officials have said they anticipate about half of their current employees will relocate from the company’s current headquarters in New Jersey. This means the $19 million incentive would likely bring 300 to 400 jobs in Southwest Florida.

According to the News-Press, the money will mostly pay for some of the relocation costs:

But Hertz also will be able to use the tax credits to pay for the estimated $68 million construction cost of its planned 300,000-square-foot headquarters at the southeast corner of U.S. 41 and Williams Road in Estero, company vice president for corporate affairs Richard Broome said Tuesday.

“It’ll be spread out over 20 years starting once our headquarters building is completed,” he said. “It’s a maximum of $3.4 million a year for 20 years, based on the total investment in the facility.”

A release Monday from Enterprise Florida, a public/private organization that helps facilitate corporate investment in the state, said only that Hertz “could be eligible for certain corporate tax credits up to $3.4 million a year.” Enterprise Florida chief Gray Swoope called the deal an “incredibly important accomplishment.”

Among the more controversial aspects of the deal was that the Lee County Commission, which had to approve the economic incentives, voted on the money blind. The commissioners didn’t know which company they were giving money to until after the deal was done. State officials said secrecy was needed to protect current employees of Hertz.

For this year’s budget, which will be signed in the coming days, Scott asked the Legislature to set aside $278 million for the state’s economic incentives program. State lawmakers allocated about one-fourth of that amount.