--2 Leavitt Partners Declines to Disclose Private Equity Investments
       
Sept. 20, 2014

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Michael O Leavitt

Leavitt Partners Declines to Disclose Private Equity Investments

The Utah firm hired to help New Mexico craft Obamacare has ownership in six companies. But taxpayers don't know which ones.

November 30, 2012, 2:30 pm
By Justin Horwath

A state contractor awarded $1.1 million of taxpayer money to help New Mexico implement Obamacare is declining to disclose its private equity investments.

In late April, Gov. Susana Martinez' administration awarded Leavitt Partners the 12-month contract to help the state shape its own health insurance exchange, an online shop where people will purchase coverage and apply for benefits under Obamacare starting in 2014. Leavitt Partners is a Salt Lake City, Utah-based consulting firm founded in 2009 by that state's former Republican governor, Michael O. Leavitt. 

Last week, SFR reported on the close ties between Leavitt Partners and Leavitt Group--one of the nation's largest privately held brokerage firms now run by Michael Leavitt's two brothers, Eric and Dane. State lawmakers and health care advocates expressed concerns about Leavitt Partners' influence in crafting the exchange, since Leavitt Group has heath insurance brokerage operations in New Mexico whose revenues could take a hit from an exchange that's easy to navigate.

Six 'small companies'

But Leavitt Partners' connections with other companies raise further concerns.

It has ownership in six "small companies," says Natalie Gochnour, a vice president with the firm. She declined to name the companies, but writes in an email that they are not involved in brokerage. "None of them do business in New Mexico," she adds.

Departing Sen. Dede Feldman, D-Bernalillo, who chairs the Health and Human Services Committee, says Leavitt Partners' investments in the companies, even if they're not operating in New Mexico, could be a "concern" if those companies are "bidding on any of the operational components of the exchange." (Leavitt Partners is helping New Mexico write requests for proposals for exchange, according to emails obtained by SFR through a public records request).

Gochnour writes in an email that the "companies we have ownership in would have no reason to bid on the New Mexico exchange contracts." But she has declined several requests from SFR to name to companies, saying on Monday that, "I can’t see any connection to, you know, anything that would be of interest to the Santa Fe Reporter."

"[The companies] share our view of the health care future," she told SFR last week. "They tend to be companies that are--like I said--part of the solution. They deal with increasing transparency [and] improving quality--advancing, you know, the market approach to health care."

State 'did not know'

Matt Kennicott, spokesman for New Mexico's Human Services Department, sat on the three-member committee that scored the proposals of five companies bidding on the lucrative exchange contract that ultimately went to Leavitt Partners.

"We did not know that they had investments in any other companies," he says. "[Leavitt Partners has] been a technical consultant to us, so I don’t see any conflict there at all."

But an exchange included in the months worth of emails SFR obtained through a public records request is one example of the behind-the-scenes role Leavitt Partners has been playing in shaping New Mexico's health care policy. On May 25, secretary of DHS, Sidonie Squier, emailed Cheryl Smith, director at Leavitt Partners, that: "It seems like you're waiting for us to tell you what we want, and we want you to tell us what we need." 

On a June 18 email, Smith sent a speech she prepared for Squier to present at a Health Insurance Alliance board meeting, writing that she "wrote this in a narrative" but that the speech should be vetted by HSD and Gov. Martinez' office because, "This pretty clearly stakes out a position..." 

The administration's choice of the Health Insurance Alliance to run the exchange has sparked controversy because the nonprofit is run by the very insurance carriers an exchange is supposed to regulate.

"Cheryl, I love it!!!!" replied Squier. "I can work with this. And this is probably all I need for this Friday. But, I'm now doing a leg[islative] hearing early July, so if you think I need more for that, then let's do it."

After incorporating his firm in 2009, according to documents filed with the Utah Department of Commerce, Leavitt and the firm's president Richard B. McKeown also established four limited liability companies:

"LP Special Asset 1, LLC," registered Dec. 20, 2010; LP Special Asset 2, LLC," registered Jan. 18, 2011; "LP Special Asset 3, LLC," registered Jan. 18, 2011; and "LP Special Asset 4, LLC," registered Jan. 4, 2012.

These companies are "a part of Leavitt Partners' private equity business," says Gochnour, who later wrote that were formed "as a mechanism to hold an equity interest."

Around the time his company won the contract with New Mexico, Michael Leavitt took a post on the transition team of Republican presidential candidate Mitt Romney, whose own private equity business, Bain Capital, became a damaging campaign issue at times. Romney's pick of Leavitt became a flashpoint for conservatives who doubted Romney's promise to repeal Obamacare.

Health care 'intelligence'

But Leavitt Partners is more than a consulting firm engaged in private equity.

The firm pitches itself as a health care "intelligence" business. It's partnered with AEA Investors, a New York City-based private equity firm whose founders include Rockefellers and Mellons, the eminent philanthropists who conquered American industries. Gochnour, Leavitt Partners' vice-president, says the firm helps AEA with due diligence. Rather than investing with AEA, according to Gochnour, Leavitt Partners compares "what we know about the health care system" for AEA "and [connects] it to the interests of people who invest in private equity."

Leavitt Partners also helps out with public relations. 

Just after scoring the New Mexico contract, a Chicago-based hospital debt collector, Accretive Health Inc., selected Michael Leavitt as the chairman of a health care expert panel the company established. It was a PR effort following allegations by Lori Swanson, Minnesota's attorney general, who sued Accretive for mishandling patient data. She said the company was harassing patients in hospital emergency rooms for bills. Accretive, owned by a Madison Avenue private equity firm, denied wrongdoing and reportedly entered into a settlement that barred it from operating in that state for at least two years.

Revolving door

Meanwhile, Michael Leavitt continues his trip through the revolving door. Under George W. Bush's administration, from 2005-'09, Leavitt served as the secretary of the Health and Human Services Department. After his public service, Leavitt started his company and began to score board memberships in the health care industry.

In Oct., 2011, the board of directors of the Minnesota-based medical devise manufacturer, Medtronic Inc., elected Leavitt as its independent director. On April 30, around the time the state awarded Leavitt Partners the contract, a Securities and Exchange Commission filing shows he had recently acquired 1,440 shares of Medtronic common stock.

Previously, in April 2010, HealthEquity, Inc., a Salt Lake City, Utah-based firm that manages health accounts, appointed Leavitt to its board of directors. HealthEquity is in the health insurance brokerage business--which could suffer at the implementation of health insurance exchanges.

He has also been appointed to the boards of Brentwood, Tenn.-based Cogent HMG, Inc., a developer of critical care and medicine programs for hospitals, and Independent Living Systems, LLC, a Miami, Fla.-based provider of long-term care management that offers nutritional meal plans and social services.

Leavitt's financial disclosure reports showed that he divested himself of his family's insurance brokerage firm, Leavitt Group, of which he used to be a CEO, after selling his stock to a blind trust that's paid him interest of nearly a half a million dollars annually.

Gochnour said this week that the six companies in which Leavitt Partners holds ownership does not include Leavitt Group. She would not say how much Leavitt Partners has invested in those companies, and repeatedly declined to name them, writing in an email: "We choose not to disclose or characterize the companies because they are privately held, and we respect that sensitivity."

In Jan. 2005, Sen. Max Baucus, D-Montana, told his colleagues that Michael Leavitt's nomination as the Health and Human Services Department secretary has "my very strong support." The US Senator spoke about Leavitt's reputation for expanding health care coverage in Utah.

"While he and I may disagree on policy grounds about the Utah approach," Baucus said, "Governor Leavitt has spoken at length about the importance of transparency, the importance of fairness and open debate, all of which are crucial to creating sound public policy."


Leavitt Partners' Filings With the Utah Department of Commerce. The LP Special Asset LLCs are Leavitt Partners' Private Equity Businesses

 

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