LIPA hires outside law firm to probe ethics complaint over bidding process

The Long Island Power Authority has hired an outside law firm to conduct an internal ethics investigation into matters surrounding the bidding process that led the utility to reject a superior offer from Quanta Services and go forward with PSEG on a contract to manage the power grid, according to three people with knowledge of the matter.

LIPA has hired the firm Holland & Knight to conduct the probe, which stemmed from an ethics complaint filed in June, they said. At that time, Newsday reported, LIPA received a letter from attorneys for people connected with the procurement process raising questions about alleged irregularities. At least two people initiated that complaint, Newsday has learned. No one has been charged with any wrongdoing.

LIPA declined to comment.

Former LIPA trustee Drew Biondo in February resigned from the board, citing what he wrote in a letter as "significant concerns about the undue influence of PSEG lobbyists."

PSEG did not respond to a request for comment. 

LIPA's internal probe comes four months after the state Inspector General launched a separate investigation into alleged pressures brought to bear during the LIPA procurement process and related matters, Newsday has reported.

LIPA trustees individually and the authority’s board itself have retained separate legal counsel to respond to the Inspector General’s requests for interviews, Newsday reported. In the months since, the people who filed the June ethics complaint have met with state investigators, Newsday reported, and the board is also expected to be questioned for the ethics probe, sources said.

Separately this week, LIPA officials and the board's outside legal counsel, Brendan McGuire of the firm WilmerHale, met with officials and legal counsel for Quanta Services, the Houston-based energy company whose superior bid in the procurement process was rejected by the LIPA board, Quanta confirmed.

The trustees who voted to reject Quanta cited a range of reasons, including alleged cost considerations, experience concerns and Quanta’s joint venture with Luma Energy, the entity running the troubled Puerto Rico grid. LIPA has declined to publicly release supporting documents for its claims in response to a Newsday request. 

The Quanta meeting Wednesday was ostensibly a “debriefing" to explain why the company did not win the contract. The meeting was attended by lawyers for Quanta at the firm Steptoe LLP, which earlier this summer filed an exhaustive document request from LIPA, as well as Quanta officials, Quanta confirmed in response to Newsday questions.

The company declined to elaborate on specifics of the meeting. Newsday has reported the company is considering its legal options in the matter and may face a statute of limitations of 120 days from cancellation of the bid to file any claim.

In addition to the board's outside counsel McGuire, the meeting was attended by LIPA chairwoman Tracey Edwards, former LIPA interim chief executive John Rhodes and LIPA general council Bobbi O’Connor, Quanta confirmed in response to Newsday questions.

After rejecting Quanta’s bid in April, LIPA trustees later canceled the procurement altogether, citing in its resolution Rhodes’ one-time holdings in Quanta stock. Rhodes, who was on the three-person committee that reviewed the bids, said during the board meeting he sold the stock, which was managed by an outside manager, as soon as he learned of his holdings in Quanta in December.

The LIPA board later voted to move forward with PSEG Long Island, which has managed LIPA’s grid since 2014 under an approximately $80 million annual contract that expires at year's end. LIPA created a committee, which includes three LIPA trustees, to negotiate with PSEG.

Negotiations are underway and LIPA’s board could vote to approve a contract as early as its next board meeting in September. The contract would still require approvals from the state comptroller and attorney general.

Three people familiar with the process say that among those negotiating with LIPA on PSEG’s behalf is Thomas Garry, a partner at the law firm Harris Beach, which has an extensive energy practice.

Garry is first vice chairman and law chairman of both the Nassau and New York State Democratic committees, respectively. Garry is also a Long Island adviser to Gov. Kathy Hochul, for whom he chairs her judicial screening panel for Long Island, New York City and the Hudson Valley.

Hochul appoints five of the nine LIPA trustees, including the chairwoman. The Friends for Kathy Hochul campaign has received more than $65,000 from a Harris Beach Partners Political Action Committee since 2021. 

Hochul’s office on Friday said the executive chamber was “unaware of" Garry’s role in advising PSEG on the contract, and added, “There have been no discussions with Tom Garry and the chamber regarding these negotiations.” No one is alleging Garry’s role for PSEG is improper.

Garry did not return messages seeking comment. 

Harris Beach has represented numerous energy companies and projects, including Caithness Long Island, Sunrise Wind and New York Transco, which with the New York Power Authority is advancing the $3.2 billion Propel New York Energy transmission project. The Harris Beach office is in the same Uniondale office building as LIPA.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

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