Norcross firm muscles in to Atlantic City contract -without specifying price
How did the powerful Norcross firm muscle out a local firm which had insured the CRDA for decades? Against the backdrop of the state takeover of Atlantic City, and questions about the ongoing influence and motives of Norcross and his allies in Atlantic City, the contract award has raised eyebrows.
ATLANTIC CITY — The contract was executed with an asterisk — three in fact, in the spots where maximum dollar amounts were to be spelled out.
The powerful insurance brokerage that submitted the winning bid to the N.J. Casino Reinvestment Development Authority was vague on the question of compensation, saying that it could "narrow it down quite a bit" and gave percentages "typically" used as commission.
Sure enough, at its March meeting, with no discussion, the CRDA awarded by unanimous vote a contract for commercial insurance brokerage services to Conner Strong & Buckelew, the Marlton-based firm headed by South Jersey power broker George E. Norcross III.
In doing so, the authority dropped Insurance Agencies Inc., a firm with longstanding ties to the Atlantic City area, which had held the CRDA insurance contract for 21 years.
The local brokerage firm had proposed a joint venture with Willis Towers Watson, the third-largest broker in the world, and had specified a maximum commission of $35,000 with no service or other fees.
How did the Norcross firm beat out a local firm that had insured the CRDA for decades? Against the backdrop of the state takeover of Atlantic City and questions about the ongoing influence and motives of Norcross and other Gov. Christie allies in Atlantic City, the contract award has raised eyebrows.
The president of IAI, a brokerage that insures numerous local public entities and employs 43 people, all of whom live in Atlantic County, was left wondering.
"I came in with the third-largest brokerage in the world in order to satisfy the specs" in the request for qualifications, said J. Eugene Siracusa, president of Northfield-based IAI. "I don't know how I wasn't equal or better after 21 years of service. Why they would replace me after 21 years."
Copies of the the contract, executed April 11, and the two competing bid submissions were obtained by the Inquirer last week through an Open Public Records Request.
The contract, awarded based on a Request for Qualifications (RFQ), not a Request for Proposals (RFP), included no requirement to specify the overall cost of the insurance premiums themselves that CRDA would pay, including coverage for the Atlantic City Convention Center and historic Boardwalk Hall, two big-ticket items that were added on as an addendum to the original RFQ.
CRDA executive director Chris Howard, newly appointed by Christie, defended the award in an email and said Conner Strong "presented a stronger and more thorough proposal" that was evaluated by staff and a committee.
"The evaluation committee was unanimous in their recommendation," he said.
Asked what role Norcross might have played in the awarding of the contract, Howard said, "None."
Howard was appointed by Christie in December 2016 to run the CRDA following stints in both Christie's office and at the powerful Parker McCay, a law firm headed by another Norcross: brother Philip.
Philip Norcross is also a lobbyist for the Casino Association of New Jersey and for New Jersey American Water, which has expressed interest in Atlantic City's Municipal Utility Authority, a water utility said to be worth $100 million.
Howard said that because the brokerage commissions come from the carriers, not directly from the CRDA, the contract carried no direct cost to the authority. He said he did not think the lack of a specified cap on total commissions would affect the overall cost of the policies Conner Strong negotiated.
Conner Strong's managing director Frank Proctor did not respond to an emailed request for comment. Daniel Fee, a spokesman for Norcross, responded to a separate email and said he would route the request for comment to the right person; on Friday, he emailed that "I was told the contract was a public bid," and noted that the relevant documents were available from the government.
Howard said he did not see any issue with soliciting bids through the RFQ, as opposed to a more concrete RFP, where an overall cost of premiums to the CRDA would have been a factor.
But others do.
"Oh, I hate RFQs," said Atlantic City Mayor Don Guardian, who sits on the CRDA board and voted to approve the contract to Conner Strong. He was surprised to learn it was based on an RFQ and said it was presented at the meeting by Howard simply as the winning bid. The minutes of the March 21 meeting indicate that there was no discussion among the board or comments from the public before the vote.
The motion was made by board member Edward Gant, former business manager of Local 351, of the International Brotherhood of Electrical Workers, who was a union colleague of U.S. Rep. Donald Norcross, brother of George. It was seconded by another union official, Richard Tolson, director of the New Jersey Bricklayers union.
Guardian noted that, typically, an RFQ leaves much more latitude in awarding a contract and said he was surprised it was used for a Commercial Insurance Brokerage Services bid. "Unless it's so complex, like should we build a boardwalk or a new dune system," he said. "I'm always concerned that things go out RFP or RFQ."
Six other awards approved at the March meeting included specific compensation caps, but not this one.
Guardian noted that the presence of a Norcross connection could have played a role when weighing bids. "Anyone at CRDA would say, 'No way I'm going to be placing a vote and knocking Norcross out of the pile.' "
Conner Strong, after executing a professional services agreement, then took over the existing policies. Howard said the firm would be evaluating all existing policies "to identify opportunities to improve coverage or reduce costs."
The CRDA is a powerful state authority that has controlled the investment of nearly $2 billion from a 1.25 percent tax on gross casino revenue since 1984. Its mandate has been constrained in the last year as much of its revenue was redirected to help Atlantic City stave off insolvency. Conceived as the vehicle for Atlantic City's revitalization, the CRDA has also directed hundreds of millions to other parts of New Jersey and back into casino projects.
The bid submitted by Conner Strong, signed by managing director Proctor, laid out the many public companies the insurance brokerage oversees. "We oversee the risk management and insurance needs for hundreds of public entities throughout the region," its executive summary states. Clients include the Pennsylvania Turnpike Authority, the School District of Philadelphia, the Philadelphia Housing Authority, and, for the last three years, a role in insuring Atlantic County.
The bid noted that "typically … we would be paid by the carriers in the form of commission earned on the placements."
"Of course, it's difficult to give an absolute percentage prior to actually making the placements, but we can narrow it down quite a bit to help you evaluate it."
The bid stated: "We would simply earn commission with no separate fees (that said, we are open to charging a flat fee billed directly to the authority, which would be based on standard commissions."
On the contract, the asterisk led to a handwritten phrase reiterating the compensation would be "paid by insurance companies as commission on insurance placement."
The IAI firm, which has insured the City of Atlantic City, Atlantic City Convention Center, Boardwalk Hall, and the city's Municipal Utilities Authority, among other public entities, noted in its bid: "Our team has a complete understanding of the tasks required for the CRDA, as we have insured the growth from a small office in Atlantic City 21 years ago to the large entity it is today."
The agency also insured the city's Special Improvement District and its Convention & Visitors' Authority before and during the time those agencies merged into the CRDA.
While Norcross' political power plays get a lot of attention, the many inroads made by Conner Strong often go under the radar. Told that the state authority had awarded a key contract to a politically powerful firm over a longtime local provider, Marc Pfeiffer, senior policy fellow and assistant director of Rutger's Bloustein Local Government Research Center, deadpanned: "I"m shocked to hear about that."