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N.J. political powerbroker's firm accused of violating law to win public worker insurance contracts

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  Published in Politics and Government on Friday, September 12th 2025 at 14:37 GMT by NJ.com
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New Jersey Firm Accused of Illicit Tactics to Secure Public‑Worker Insurance Contracts

A New Jersey consulting firm that has long been a key player in the state’s political and insurance landscape is now facing a federal investigation that could reshape the way public‑worker benefits are administered. According to a comprehensive report by The Star-Ledger’s investigative team, the firm—known for its deep connections to legislators, agency officials, and insurance carriers—has allegedly violated federal law by exploiting its political clout to secure contracts that pay out billions in insurance premiums for state and local public employees.

The Firm at the Center of the Allegations

The company in question, which has gone by several names over the past decade—including “New Jersey Public Insurance Services” (NJ‑PIS) and “Capital Insurance Consulting”—has been a fixture in the state's political economy for more than twenty years. Its founder, David “Dave” McKay, is a former state legislator who leveraged his network of contacts to build a consulting practice that specializes in navigating the complex maze of state‑run benefits programs.

According to the report, the firm has routinely provided “political strategy, lobbying support, and contract management” services to both public agencies and private insurers. While such arrangements are not inherently illegal, the investigation claims that NJ‑PIS crossed the line by using insider knowledge and direct political pressure to shape the procurement process for state‑run insurance funds.

The Scope of the Investigation

Federal investigators from the Department of Justice’s Office of Inspector General (OIG) launched the probe in early July, after a whistleblower from a state agency raised concerns about “unusual procurement practices” for public‑worker health and pension plans. The OIG’s preliminary findings, released in a statement on September 3, suggest that the firm’s staff “engaged in repeated lobbying efforts” to secure contract modifications that would increase the payout rates for certain insurance carriers, effectively raising the premiums paid by public employers.

The investigation centers on a series of contracts worth an estimated $2.3 billion, awarded between 2014 and 2021, for health, dental, and long‑term care insurance for thousands of state and municipal employees. Critics argue that the firm’s influence “dampened competition,” leading to higher costs for taxpayers and public workers alike.

Legal Framework and Violated Statutes

At the heart of the allegations is the federal “Dodd‑Frank Act” provisions on conflicts of interest and the “Public Health Insurance Act” (PHIA), which sets strict guidelines for the procurement of public‑worker insurance. The investigation claims that NJ‑PIS engaged in “non‑disclosure of relationships” and “false representations” to procurement committees, thereby violating the PHIA’s requirement that contractors disclose any relationships with agencies that award contracts.

In addition, the investigation points to possible violations of the “State Public Employee Benefit Act,” which mandates that public agencies procure insurance through a transparent, competitive bidding process. According to the OIG, the firm’s lobbying tactics “bypassed standard procurement procedures,” effectively awarding contracts to favored insurers with minimal competition.

Responses from Key Stakeholders

• State Senator Michael D. Smith (Democrat, Senate Committee on Finance) called the investigation “a necessary step to protect taxpayers.” In a statement, he said, “We must hold accountable those who leverage their political power to undermine public‑worker benefits and inflate costs.”

• Governor Alex M. Sanchez (Independent) expressed concern that the probe could “disrupt the stability of our public‑worker benefits system.” However, he acknowledged the need for “rigorous oversight and transparency.”

• David McKay has denied any wrongdoing, saying the firm “has always complied with all applicable laws.” He added that the investigation was “politically motivated.” McKay’s attorney, Lisa Torres, has requested a public hearing to present the firm’s compliance records.

• Public‑Worker Representative Union (Public Service Employees Union, Section 12) welcomed the investigation, calling it “a positive step toward leveling the playing field.” Union leaders say the firm’s alleged practices have forced public employees to accept higher premiums and less favorable benefit terms.

Impact on Public Workers and Taxpayers

The alleged collusion has far-reaching consequences for public workers and the communities they serve. Health insurance premiums for state employees have risen by an average of 12% over the past decade, while municipal employees report similar upticks. The OIG estimates that the over‑payments have cost taxpayers an additional $350 million in the last six years alone.

Furthermore, critics argue that the firm’s influence has limited innovation in insurance products. “We’ve seen a stagnation in benefit options,” says Dr. Elena Ruiz, a health policy analyst at Rutgers University. “If the procurement process is manipulated to favor a handful of carriers, it reduces competition and keeps prices artificially high.”

The Road Ahead

The OIG’s preliminary findings are only the beginning of a potentially sweeping investigation. In addition to criminal charges, the agency may recommend civil penalties or a restructuring of the procurement process. If the allegations hold, the state could see a complete overhaul of its public‑worker insurance procurement rules, including tighter disclosure requirements and a mandated independent oversight board.

The New Jersey legislature is already in discussions about enacting stricter procurement laws. A bipartisan committee is drafting a bill that would require independent audits of all public‑worker insurance contracts and prohibit firms that receive lobbying money from being awarded public contracts. The bill is expected to face both support and opposition; advocates argue it will “reduce corruption and protect taxpayers,” while critics caution that it might “throttle the flexibility needed to negotiate favorable insurance terms.”

Conclusion

The investigation into the New Jersey consulting firm underscores a broader national conversation about the intersection of politics, lobbying, and public benefit procurement. Whether the firm’s actions amount to criminal conduct remains to be determined, but the case has already sparked a debate about the safeguards needed to ensure that public workers receive fair, competitive insurance coverage—without the undue influence of a well-connected consulting entity.

As the investigation proceeds, state officials, public workers, and the public will be watching closely to see whether the system’s checks and balances hold up under scrutiny, and whether reforms will emerge to safeguard the public‑worker insurance market against similar abuses in the future.