Auditing firm seeks city worker's permission to release fraud allegations

Mayor OK's release; johnston asked to do same

vhoneycutt@herald-leader.comJune 25, 2010 

Lexington's external auditors sought permission Thursday from Mayor Jim Newberry and another city employee to release documents that contain fraud allegations made by the employee, Patrick Johnston.

Newberry signed a consent form Thursday and asked Johnston, the city's director of risk management, to review the request and return it to him signed or unsigned by 9 a.m. Friday.

An Urban County Council investigative committee has given the auditing firm Mountjoy Chilton Medley a deadline of 2 p.m. Friday to turn over the papers.

Officials with the auditing firm have said the firm's professional ethics code requires it to have the consent of its client before releasing the documents.

Johnston declined to comment on the request Thursday afternoon. His attorney, Patrick Nash, said he did not know whether Johnston would sign the consent request.

"My initial reaction is that they don't need Patrick's signature to disclose them," he said.

"I don't know that legally he can sign off on it," Nash said. "I think that Mountjoy can only deal with their client, and their client is not Patrick individually."

Nash said Mountjoy's client was the city, which is represented by Newberry.

The committee wants to see Johnston's fraud allegation surveys — routine questionnaires filled out by city employees as part of audits. In surveys taken during recent years, Johnston made allegations that external and internal auditors found to have no foundation.

Additionally, in a series of e-mails in 2007 between Johnston and his superior, Johnston questioned the ethics and business practices of the Kentucky League of Cities' insurance division as his superior pushed to consider hiring the group.

Since then, Johnston's job has been marked for elimination as part of a proposed reorganization. The council committee wants to know whether the two issues are related.

The documents also are crucial to an ongoing audit of Johnston's fraud allegations and the city's insurance procurement process by State Auditor Crit Luallen. Terry Sebastian, a spokesman for Luallen, said this week that the state auditor's "intensive review" should be completed in the next several weeks.

Johnston has declined to release the fraud allegations that he made, saying city lawyers told him he would be open to lawsuits and would not be protected by city lawyers or city insurance.

In addition, Nash has said Johnston might be fired for releasing the documents. But Newberry spokeswoman Susan Straub said Thursday that Johnston would not be fired for signing the consent or releasing the allegations.

"City attorneys have not and are not advising Mr. Johnston as to potential personal liability in this matter," Straub said.

Reach Valarie Honeycutt Spears at (859) 231-3409 or 1-800-950-6397, ext. 3409.Reach Valarie Honeycutt Spears at (859) 231-3409 or 1-800-950-6397, Ext. 3409.

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