Ethics complaint filed over LIPA bidding process for new grid manager contract, sources say

The LIPA board of trustees’ chaotic search for a company to operate the Long Island electric system faces additional turbulence this week after at least one person close to the procurement initiated an ethics complaint alleging irregularities in the bidding process, according to two people familiar with the filing.

The confidential complaint filed internally at LIPA on Friday involves whether pressure was brought to bear on LIPA’s senior staff to lower scores for one of the bidders, Quanta Services, the Houston-based energy infrastructure giant. At least two of the people on the team resisted the alleged pressure, according to three people familiar with the matter, who asked not to be named for fear of retribution.

LIPA in a statement on Wednesday night announced a team of seven utility officials and board members who would “initiate the negotiation process with PSEG immediately to ensure uninterrupted, reliable, and affordable service for LIPA customers, which remains LIPA’s top priority.”

The team includes three board members, Valerie Anderson Campbell, Anthony LaPinta and Tracey Edwards, and the utility’s general counsel Bobbi O’Connor; senior vice president of power supply Gary Stephenson; chief financial officer Donna Mongiardo and senior vice president Kenneth Kane.

The statement did not address the ethics claims, which were sent to LIPA by an attorney for the complainant, people familiar with the matter say, noting LIPA could opt to dispute, negotiate or settle the claims.

Despite a LIPA search committee’s recommendation to award the grid management contract to Quanta, LIPA’s board, in an unprecedented move, rejected Quanta’s bid by a 6-1 vote, and later voted to cancel the bidding process altogether after more than a year of work.

Board members who voted to reject Quanta's bid, including four appointed by Gov. Kathy Hochul, have defended their actions to LIPA and in a letter to state leaders, saying they acted independently after considerable consideration and informational meetings and debate. Among their concerns, LIPA chairwoman Edwards said the company doesn't have "end-to-end" experience running a utility and that Quanta's bid "would not have been less expensive" over a 10-year period for LIPA. Quanta has disputed those claims and requested a full public release of all bidding documents. 

The ethics filing is in the early stages and there are no assurances that it will be pursued by LIPA or prove actionable.

A Quanta spokesman on Wednesday said the company was “concerned by the allegations of ethics irregularities in the selection process,” and added Quanta and LIPA customers “deserve to know what factors may have affected the selection process.”

The filing came the same day a top Quanta official called the board’s rejection of Quanta’s bid "highly irregular and potentially improper," and urged Hochul to step in and reinstate the bidding process. Spokespeople for Hochul didn’t respond to requests for comment.

The board is now taking the step of hiring its own team to negotiate an extension of LIPA’s existing contract with PSEG Long Island, which expires at year end. PSEG was the only other bidder in the process, but its offer did not meet the minimum bid requirements, LIPA interim chief executive John Rhodes told the board in April.

In April, Newsday sent a series of questions to the authority asking if any members of LIPA’s internal bidding review committee had ever been pressured to change their scores. LIPA has not responded to the questions. It subsequently hired an outside law firm, WilmerHale, to advise it on matters surrounding the procurement. Individual board members have also hired lawyers.

LIPA has undergone a period of tumult since Hochul named new board members at the end of 2023, followed by an exodus of top talent.

But LIPA within days could name Carrie Meek Gallagher, who currently serves as director of LIPA’s chief "oversight" body, the Department of Public Service Long Island, as its permanent chief executive, Newsday has reported. She would replace Rhodes, a former Public Service Commission chairman.

Rhodes last month acknowledged at the end of LIPA’s board meeting that he’d held a large quantity of Quanta stock in the early days of the procurement process.

Rhodes sold the stock, managed by an outside financial adviser, when he discovered it in December, long before Quanta was announced as the winning bidder. The board nevertheless voted to reject Quanta before the stock revelations came to light, though a board resolution canceling the bidding cited a perception of a conflict of interest for their move.

Newsday has reported the state Inspector General’s Office is investigating the utility and the procurement process.

A spokesman for the inspector general's office declined to say if the agency was aware of the complaint or even to confirm a LIPA investigation was ongoing, saying: "As a matter of policy, we do not comment on the existence or status of investigations." 

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.