State won't release emails in conflict investigation

The state of South Dakota is refusing to release emails between a cabinet official and a consultant that mentioned state Sen. Blake Curd, who is under scrutiny for a potential conflict of interest.

The emails in question would show whether Curd, who is the CEO of the Sioux Falls Specialty Hospital, was involved in negotiations that led to his hospital winning contracts to provide health services under the state employee health plan. The South Dakota Constitution bars lawmakers from having a direct or indirect interest in any contract with the state. The Sioux Falls Specialty Hospital, of which Curd is an owner, has two contracts on file to provide health services to state employees.

Argus Leader Media requested copies of any emails that mentioned Curd’s name between Human Resources Commissioner Laurie Gill and Jean Reed, a consultant who negotiates contracts on behalf of the state health plan. Government emails are typically public records in most states and with the federal government, hence, for example, the scrutiny over emails that Democratic presidential candidate Hillary Clinton wrote and received during her time as secretary of state.

But in his denial to release the emails, David Zolnowsky, the commissioner of the Bureau of Information and Telecommunications, cited a state law that exempts “correspondence” from being public record in South Dakota.

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Curd, a Sioux Falls Republican, denies having a conflict of interest. The contracts in question, he said, were signed before he was CEO of Sioux Falls Specialty Hospital, although he was an owner at the time and a state lawmaker. He said he had no role in negotiating the contracts.

The state Supreme Court, however, has broadly interpreted the constitution’s prohibition barring lawmakers from having direct or indirect interests in contracts with the state. The constitution even forbids former lawmakers from having a direct or indirect interest within a year after they leave office, and other lawmakers have been forced from office or forced to forego contracts with the state.

The issue surrounding Curd’s contract with the state comes at a time when lawmakers are considering bills that would make it illegal for local and state officials to have conflicts. Those bills, however, don’t include lawmakers, who have exempted themselves from past laws that defined conflicts.

Reed, a former Avera Health executive who now works as a consultant for the state, said Friday that she was unable to comment publicly on negotiations that took place on the contracts that the Sioux Falls Specialty Hospital won to provide some health services to state employees. The state has paid her more than $1 million in the past two-and-a-half years, according to state records.

“Any contractual negotiations that I do on behalf of the state with any specific providers would be confidential,” she said. She added that she typically works with business office managers when it comes to negotiating hospital contracts.

Under Senate rules, it takes two senators to deliver a motion to the president pro tempore asking for another member to be disciplined or expelled. Sen. Gary Cammack, the current Senate president pro tempore, did not respond to a message and email last week. Cammack is also a Republican.

The contracts in question were signed Nov. 5, 2014 by Scott Morstad, the chief financial officer for the Sioux Falls Specialty Hospital. The date is significant because it was the day after Curd won election to his Senate seat, which Gov. Dennis Daugaard had appointed him to in 2013.

The date was also significant because it was the day after voters approved Initiated Measure 17, the so-called patient choice bill that allows doctors to participate in any insurance program they want. The Sioux Falls Specialty Hospital and Medical Facilities Corp., a Canadian company that owns a majority stake in Sioux Falls Specialty Hospital, financed Initiated Measure 17, along with Curd and other independent doctors. Curd is also a board member of Medical Facilities Corp.

Following voter approval of Initiated Measure 17, state records show that Curd lobbied to have it interpreted in a way that would be most lucrative for doctors and his hospital.

On Jan. 26, 2015, the South Dakota Code Council met in Pierre to figure out where to put Initiated 17 in state statute. The Code Council is tasked with taking laws passed by the Legislature or voters and finding the best place to insert them in statute.

In this case, officials were perplexed.

“We were trying to figure out where the hell to put the law,” said Mike DeMersseman, a Rapid City lawyer and former legislator who is the chairman of the Code Council.

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Typically, Code Council meetings are unheralded affairs that draw few visitors from the public. But the Jan. 26 meeting was different, DeMersseman said. Besides Curd, the room was full of lobbyists who represent various medical interests.

“All the lobbyists were there,” DeMersseman said. “We had a full room.”

The council’s staff had recommended putting Initiated Measure 17 into Chapter 58 of state law, which regulates insurance products. But Chapter 58 excludes the state health plan, which meant that the lucrative insurance pool of state employees and their spouses and dependents, would not be subject to Initiated Measure 17.

Curd insisted that Initiated Measure 17 should also apply to the state health plan, according to the minutes of the meeting. He suggested that Initiated Measure 17 should be put under its own title of state law so that it would apply to the state health plan.

The minutes also reflect that Curd was negotiating with the governor’s office “to work something out on this matter.”

“I think he showed his frustration and said he was going to talk to some people about it,” DeMersseman said.

Ultimately, those talks did not pay off and the measure was left in Chapter 58.

“Blake Curd offered his opinion to our office about the placement of IM 17, but we relied on the Code Commission to make that decision,” said Tony Venhuizen, Daugaard’s chief of staff.

Follow Jonathan Ellis on Twitter @argusjellis.