MAXIMUS, Inc.

MAXIMUS, Inc., based in Reston, Virginia, is a publicly-traded (NYSE:MMS) for-profit corporation that receives government contracts to provide "business process services" to government health and human services agencies in the United States, Australia, Canada, the United Kingdom, and Saudi Arabia. The company focuses primarily on "operating government-sponsored programs for vulnerable populations, such as Children’s Health Insurance Program (CHIP), Medicaid, health insurance exchanges and other health care reform initiatives under the Affordable Care Act, Medicare, welfare-to-work, and child support services," according to its annual report. The outsourcing of health and human services function to private for-profit firms raises significant concerns. According to non-profit research group In the Public Interest, a comprehensive resource center on privatization and responsible contracting, "many children and adults rely on government-provided health and human services. The ability of these programs to deliver services efficiently and appropriately often is a matter of life and death. Numerous state and local governmental entities are finding that turning over these programs to private contractors not only fails to achieve projected cost savings but also decreases access to these important services, hurting many vulnerable families. In many cases, the service quality declines dramatically and many sick or at-risk people are left with substandard care."

PROFITS AND OWNERSHIP: For the fiscal year ending September 30, 2012, Maximus, Inc. took in revenues of $1.1 billion and reported profits of $76 million. It is publicly traded on the New York Stock Exchange. Profits were on an upward trend during the 2013 fiscal year. In the first three quarters of 2013, Maximus earned $946.94 million in revenue and reported $268.53 million in profits. It is publicly traded on the New York Stock Exchange.

BUSINESS MODEL: Maximus Inc.'s health division advertises that it provides various services including government health insurance program administration, program eligibility and enrollment, application assistance and enrollment counseling, and administration and consumer outreach. In its human services division, services provided include welfare case management, job training, and support services, such as welfare-to-work, customer contact center operations, child support case management, K-12 special education case management, and tax credit and employer services. Maximus has the following subsidiaries as of November 2012:


 * MAXNetwork Pty Limited (incorporated/organized in Australia)
 * MAXIMUS Canada, Inc. (incorporated/organized in Canada)
 * MAXIMUS Properties LLC (incorporated/organized in Virginia)
 * MAXIMUS International, LLC (incorporated/organized in Virginia)
 * MAXIMUS Federal Services, Inc. (incorporated/organized in Virginia)
 * MAXIMUS Consulting Services, Inc. (incorporated/organized in Virginia)
 * MAXIMUS Health Services, Inc. (incorporated/organized in Indiana)
 * MAXIMUS Human Services, Inc. (incorporated/organized in Virginia)
 * MAXIMUS K-12 Education, Inc. (incorporated/organized in Virginia)
 * MAXIMUS Higher Education, Inc. (incorporated/organized in Virginia)
 * MAXIMUS BC Health, Inc. (incorporated/organized in British Columbia)
 * MAXIMUS Employment & Training Limited (incorporated/organized in United Kingdom)
 * MAXIMUS Employment UK Limited (incorporated/organized in United Kingdom)
 * Policy Studies, Inc. (incorporated/organized in Colorado)
 * PSI Services Holding, Inc. (incorporated/organized in Delaware)

FOUNDING: Maximus was founded in 1975.

Potentially cost Wisconsin tens of millions as consultant for metal health program
In 2004, the state of Wisconsin awarded Maximus with a $3.4 million contract to ensure the state received as much federal funding as possible for a mental health program known as Health Check. Health Check is a Medicaid program providing psychiatric services from private institutions to young people. Since 2004 the state, acting on Maximus's advice, has received $67 million from the federal government.

A September 2013 federal audit revealed, however, that there was improper billing on the part of the state and as a result the state may have to return some or all of the funding it received. The audit calls for a $22.8 million payback from the state for improper billing from October 2004 to September 2006. The state allegedly improperly claimed $19 for every $20 reported. The audit report found that the state included administrative costs that should not have been covered. Traditionally this type of Medicaid program the state picks up 40 cents on the dollar with the federal government covering the rest.

Maximus has been a consultant to the state of Wisconsin since the 1990s. It signed its first Medicaid contract with the state in November 1998, a relationship that continued through 2009. Maximus had been called by the state government a ""revenue-maximization consultant." In 2004, the state sharply increased its claims to the federal government for the mental health program based on Maximus' advice. Maximus' contract with the state of Wisconsin did not provide a flat fee for consulting services. Rather the corporation was paid a contingency based on how much money the state received from the federal government, providing Maximus with an incentive to inflate Wisconsin's claims.

The state of Wisconsin has continued to use the method for claims suggested by Maximus and the two year budget through June 2015 includes an expected $14 million in federal funding for the Health Check program.

Maximus Pays $30.5 Million to Settle Medicaid Fraud Criminal Charges
In July 2007, Maximus, Inc. agreed to pay $30.5 million to settle a criminal investigation under the False Claims Act led by Daniel R. Levinson, inspector general for the U.S. Department of Health and Human Services and Jeffrey A. Taylor, U.S. Attorney for the District of Columbia regarding allegations that Maximus falsified Medicaid claims. The contention was whether Maximus colluded with the District of Columbia’s Child and Family Services Agency to falsify claims to Medicaid for services provided by DC to children in its foster care program. Benjamin Turner, a former division manager at Maximus, helped initiate the investigation under whistleblower provisions of the False Claims Act and received $4.93 million for his efforts.

In addition to the settlement from Maximus, the U.S. also recovered $12.15 million from the District of Columbia government after a review conducted by the Department of Health and Human Services' Centers for Medicaid and Medicare Services indicated that the Child and Family Services Agency had inflated its number of case management claims.

Assistant Attorney General for the Justice Department’s Civil Division, Peter D. Keisler, stated in announcing the Medicaid fraud prosecution agreement against Maximus, “The $42.65 million settlement with Maximus demonstrates the Justice Department’s strong commitment to vigorously pursuing those companies that defraud the Medicaid program.”

Contract Failures

 * CT: Failed Upgrade of a Major Law Enforcement Database: Former Connecticut Attorney General Richard Blumenthal demanded that Maximus, Inc. reimburse the state the $6.2 million that it spent on a failed upgrade of the Connecticut On-Line Law Enforcement Communications Teleprocessing System (COLLECT System) used to access criminal justice information and conduct immediate criminal background checks. The state had hired Maximus in 2002 to carry out a required update of the COLLECT system to meet federal standards. In 2007, Blumenthal sued Maximus for breach of contract. He said the company failed to provide the state with a functioning law enforcement database. The Associated Press that “during the system's testing period, state officials found 821 defects, half of which Blumenthal said Maximus failed to fix.” State officials did not put the database into operation for “fear it could endanger police and the public.” In 2010, the state reached a $2.5 million settlement with Maximus and a subcontractor, resolving the dispute over the contract on the computer system upgrade work. As of February 2013, the state still had a contract with Maximus related to the upgrade.


 * TN: Child Support Enforcement: Maximus directs child support enforcement offices in more than 20 Tennessee counties. The Tennessee Department of Human Services (DHS) received 894 complaints related to Maximus employee behavior in the various offices between July 2009 and September 2012., Complaints heard by the Tennessee DHS include lack of professionalism on the part of Maximus employees, lost or late child-support payments, and administrative gaffes on the part of Maximus employees that have cost the jobs of non-custodial parents. Maximus and a subsidiary that it purchased in 2012, Policy Studies, Inc. (PSI), directed the Davidson County Child Support Enforcement Office (CCSEO) between 1993 and 2013. When Maximus ran the Davidson County office in 2012, after its purchase of PSI, it logged 36 complaints from May 1 to December 31. Control of the Davidson County office was granted to a new firm in June, 2013.


 * TX: Social Services Privatization Gone Awry: In January 2006, the state of Texas hired a private consortium headed by Accenture LLP to develop, operate, and staff Texas's eligibility and enrollment system for Medicaid, Children's Health Insurance Program (CHIP), Food Stamps, and Temporary Assistance for Needy Families (TANF). Maximus was a primary subcontractor. The watchdog group In the Public Interest reported that this outsourcing effort resulted in various operational problems such as “high call center wait times, technical issues, insufficiently trained contractor staff, delays in application processing, and improper benefit denials…and many families eligible for public benefits failed to receive the assistance they needed when they needed it.” In March 2007, the state cancelled the contract with Accenture and Maximus took over many of the contracted functions, such as staffing the call centers. In the Public Interest noted that, “although there have been some improvements since the original contract cancellation, problems persist with application processing timeliness, improper benefit denials and other issues.”


 * WI: Improper Use of W-2 Program Funds: In 2000, a scandal surrounding Maximus, Inc. and its handling of Wisconsin Works (W-2) welfare funds led lawmakers to call for the termination of the corporation's $46 million contract with the state. A 2000 Wisconsin Legislative Audit Bureau report showed that Maximus, Inc. had been billing the state almost $500,000 in improper or questionable expenses since 1997. This included thousands in W-2 funds spent on soliciting contracts in other states, concerts and meals for clients, and a holiday party for Maximus employees. Maximus agreed to pay back $500,000 for “improper spending of taxpayer W-2 money.”


 * CA: Drug Testing Errors: In 2004, Maximus was awarded a $8.7 million contract to run California’s “diversion program” over five years which treats hundreds of licensed nurses, dentists, pharmacists, and other medical professionals with a history of substance abuse. The contract also gave Maximus the responsibility to drug test the medical personnel, who should have been completely abstaining from drug and alcohol use. Due to improper drug testing standards used by Maximus’ subcontractors, Pennsylvania-based First Lab and Kansas-based Clinical Reference Lab, 146 individuals who had tested positive during drug or alcohol screenings between December 2009 and August 2010, were permitted to keep working without any discipline or receiving treatment.

Discrimination

 * Disability Discrimination Lawuit: In August 2012, Maximus, paid $50,000 to settle an Equal Employment Opportunity Commission (EEOC) disability discrimination lawsuit filed by a woman who alleged that the company failed to promote her because of concerns about the residual effects of a stroke that she suffered in July 2009. The plaintiff had been employed by Maximus for two years and was seeking promotion to a senior client services position. Title I of the Americans with Disabilities Act protects employees and applicants from discrimination based on perceived or actual disabilities. The EEOC filed suit after it failed to reach a pre-litigation settlement through the conciliation process.


 * Gender Discrimination Lawsuit: In September 2000, the United States Equal Employment Opportunity Commission found that Maximus “violated federal law by paying lower wages to women than to men placed in the same jobs in a Milwaukee warehouse." The EEOC ruling found that a woman was paid $7.01 an hour for the same work as her male colleagues who received $8.13 an hour. The wage discrimination took place under the auspices of MaxStaff, one of Maximus’ subsidiaries that functions as a temporary employment agency. Despite claims by Maximus executives that the difference was based on the woman being paid a training wage in a program for people with little job history, the commission ruled that "the evidence indicates that female employees working in warehouse positions had substantially equal qualifications to males working in the same positions, but were paid lower wages even though females were performing the same duties as males."


 * Racial Discrimination Complaint: In June 2002, two African-American managers in Milwaukee filed employment discrimination complaints against Maximus alleging they had been passed over for promotions and paid less because of their race. The two managers also brought to light that the W-2 agency's top staff was so lacking in diversity that employees referred to it as "White Castle," despite the fact that at the time 79 percent of Maximus employees who worked in the Wisconsin Works program are minorities.

Health and Safety Complaints
Maximus facilities have been targeted for inspection by the United States Department of Labor Occupational Safety & Health Administration (OSHA) in Arizona (2010), California (2011), and Iowa (2012). Two of those inspections followed safety and health complaints.

Ties to the America Legislative Exchange Council
Maximus has been a Private Sector member of the American Legislative Exchange Council (ALEC) at least from 1994 to 1995. ALEC’s full list of corporate funders over the past few decades is not known, and so any subsequent funding of ALEC by Maximus is not known.

ALEC has pursued a decades-long agenda to privatize the most profitable aspects of government and shrink those that remain. In the 1990s, ALEC approved the "Privatization of Foster Care and Adoption Services" Act, an area in which Maximus has direct interests. According to a 2012 report by the non-profit research group In the Public Interest:


 * "The American Legislative Exchange Council has been a major force in pushing for the privatization of public services and assets. They actively promote privatization that allows corporate takeover of public functions. This agenda is evident in ALEC’s model bills. ALEC works with its corporate members to draft model bills that state legislators can introduce and push in their states. Many of these bills create incentives to privatize services and call for the increased use of private financing and control of public infrastructure projects. The bills also have the potential to generate lucrative sources of revenue for ALEC’s corporate sponsors. For example, ALEC bills make it easier to create virtual public schools, encourage states to privatize vital health programs that help vulnerable populations, force state governments to sell public prisons to private corporations, and help other industries take control of public services. As a result, we stand to lose control of critical public services and assets and we risk a weakened democracy."

Additionally, ALEC has approved bills and resolutions to advance the privatization of pensions, Social Security, Medicare, Medicaid, and public infrastructure such as roads.

Political Activity
According to a review by the Wisconsin Democracy Campaign, Maximus employees contributed $34,500 in political action committee contributions to state politicians between 1999 and 2011. Maximus employees also contributed another $3,225 to state candidates between 2000 and 2010.

Maximus provided $5,000 in PAC contributions to current Wisconsin Governor Scott Walker's campaign in January 2011 and previously $5,000 to former Governor Jim Doyle. In both cases Maximus contributed right after the governors took office for their first term. The corporation also gave $15,000 in PAC contributions to former Governor Scott McCallum from employees in 2001-2002. Former Governor Tommy Thompson received $5,000 from Maximus's PAC in 1999.

Maximus spent a total of $447,500 lobbying at the federal level in 2012 and it has spent $3,810,500 in total on federal lobbying since 1998, according to the Center for Responsive Politics. The company has lobbied on the issues of welfare (specifically relating to the Supplemental Nutrition Assistance Program ("SNAP"), Needs Assessment Program, and Workforce Investment Act), healthcare (specifically relating to implementation of the Affordable Care Act and administration of Health and Human Services public programs), Medicare and Medicaid (specifically Medicaid Exchanges), and taxes (proposed changes to current tax code and issues related to the Work Opportunity Tax Credit).

Maximus, its employees, and its PAC spent $1,990,510 on political contributions at the federal level from 1998 to 2013, according to the Center for Responsive Politics.

At the state level, Maximus and its employees have spent a total of $343,863 from 2003 to 2012 in contributions toward candidates, party committees, and ballot measures, including expenditures by its political action committee, MaxPac. Maximus has hired 260 lobbyists in 29 states during the same time period.

Corporate Subsidies and Government Contracts
On October 1, 2013, it was announced that Maximus had received a contract from the U.S. Department of Education to provide operational and maintenance support to the Office of Federal Student Aid. The contract runs for at least two years and is guaranteed to pay Maximus at least $143.3 million. The DOE can exercise eight one-year options which could make the contract worth up to $848.4 million.

According to Subsidy Tracker, a project of Good Jobs First, Maximus' Virginia-based subsidiary, Maximus Federal Services, received a $2 million subsidy (in the form of a tax credit/rebate) from the state of New York in 2013 through the state's Excelsior Jobs Program. As of July 2013, the subsidy represents a total capital investment of $1,694,600.

Maximus has received $479,440,951 in contract awards and $309,727,408 in sub-awards from the federal government according to USASpending.gov. Maximus has received the largest amount in awards from the Department of Justice, the Social Security Administration, the Department of Defense, and the Department of Health and Human Services.

"Risk Factors" in SEC Filings
In its SEC filings, Maximus cites several aspects related to government funding and regulation of the health and human services sector as “risk factors” that may affect its business and future prospects. These risk factors often show the incentives the company has to influence public policy and the direction its advocacy would take. In this case, the company's revenues are dependent on contracts from the federal government to carry out services that would ordinarily be provided by public agencies and their employees. Maximus mentions, unions, negative media coverage, limits on outsourcing of government programs, and failure to "maintain important relationships with government entities and agencies" as potential risks that could adversely affect its business and market opportunities:


 * "Government unions may oppose outsourcing of government programs to outside vendors such as us, which could limit our market opportunities and could impact us adversely. In addition, our unionized workers could disrupt our operations."
 * "Negative media coverage could adversely affect our reputation and our ability to bid for government contracts."
 * "If we fail to establish and maintain important relationships with government entities and agencies, our ability to successfully bid under RFPs may be adversely affected."
 * "The federal government may limit or prohibit the outsourcing of certain programs or may refuse to grant consents and/or waivers necessary to permit private entities, such as us, to perform certain elements of government programs."

Chief Executive Officer
The chief executive officer of Maximus is Richard Montoni, who has held this post since 2006. Prior to becoming CEO, he was chief financial officer and treasurer, a position he had held since 2002. Montoni's base salary for the fiscal year 2012 was $700,000, the same as the previous year. He was also given a 100 percent percent bonus of $700,000 and received $2.65 million in stock awards plus $98,263 in other compensation, for a total compensation of $4,148,263. He received $16,194,847 in total compensation from 2008 to 2012, according to Morningstar, while all of Maximus' top executives received cumulative total compensation of $41,808,585 over the same period.

Board of Directors
As of July 2013:
 * Richard A. Montoni, President and Chief Executive Officer
 * David N. Walker, Chief Financial Officer and Treasurer
 * Peter B. Pond, Chairman of the Board of Directors
 * Russell A. Beliveau
 * John J. Haley - President and CEO of Watson Wyatt & Company Holdings,
 * Paul R. Lederer - Executive Vice President at Federal Mogul
 * Raymond B. Ruddy
 * Marilyn R. Seymann - Chairman and CEO of the International Institute of the Americas,
 * James R. Thompson, Jr. - former governor of Illinois
 * Wellington E. Webb - former mayor of Denver, CO

Executive Management
As of July 2013:
 * Richard A. Montoni - Chief Executive Officer, President and Director
 * David N. Walker - Chief Financial Officer
 * David Francis - General Counsel and Secretary
 * Bruce L. Caswell - President and General Manager of the Health Services
 * Akbar Piloti - President and General Manager of the Human Services Segment
 * Mark S. Andrekovich - Chief of Human Capital

Contact Information
1891 Metro Center Drive Reston, Virginia 20190 (703) 251-8500 http://www.maximus.com/