Aide to Newberry revealed allegation

Alerted subject of fraud accusation

lblackford@herald-leader.comAugust 10, 2010 

Mayor Jim Newberry's top aide told the city's chief lawyer that the lawyer was the subject of a fraud allegation in 2009.

The law commissioner, Logan Askew, then filed an open records request for the allegation, which is allowed under state law, he told an Urban County Council investigative committee on Monday.

Much of the information in the allegation had been blocked out, but not the name of its author, Patrick Johnston, the city's director of risk management. Six months later, Johnston found out that the Newberry administration had slated his job for elimination.

An internal investigation of the fraud allegations found "no material misstatement of the city's finances," but Monday's revelation that Askew saw a redacted copy of the allegation prompted concern from council members about exactly how such allegations are investigated.

"You find out from Joe Kelly (Newberry's senior adviser) that you had been the subject of an allegation, you were able to get that fraud assessment survey with Patrick Johnston's name on it," council member Diane Lawless said to Askew. "I wonder why only one person in county government has filed one of these ... then he didn't have a job left."

"You're making quite a jump there, Miss Lawless," responded Askew, who was accompanied by two personal attorneys, Bill Lear and David Royse of Stoll Keenon Ogden.

Lawless agreed that the two events might not be connected, but "it doesn't look good," she said.

Monday's meeting revealed much more information about allegations that Johnston filed in 2008 and 2009, including that both were about the city's procurement of insurance from the Kentucky League of Cities and its costs since 2007. Johnston filled out the fraud questionnaires as part of routine financial audits of the Urban County Government.

Kelly is a non-voting member of the internal audit board, but officials have said repeatedly that the only people who knew about the allegations were Bruce Sahli, director of internal audit, and the internal audit board's former chairman, DeWitt Hisle. Askew said Monday that he thought Sahli had told Kelly about the fraud allegation and subsequent investigation.

The external auditor, Mountjoy Chilton Medley, has said it had "direct inquiry" with some senior administration officials but did not reveal Johnston's name or the nature of the allegations.

Newberry spokeswoman Susan Straub said Monday night that Kelly "has never seen the document on which the allegations were made; however he is Logan's supervisor."

"There is no connection to Mr. Johnston's employment," Straub said. Finance Commissioner Linda Rumpke recommended Johnston's job be eliminated, but she didn't start with city government until October 2009, Straub said.

Johnston, who also testified Monday, has questioned why city officials, including Askew, allegedly pushed to hire KLC as its insurance agent. Johnston said he was forced to change certain information that was presented to the council before they voted to hire KLC.

In addition, Johnston said he had lunch with KLC insurance chief William Hamilton and other KLC employees in March 2007, one month after a newly elected Mayor Newberry joined the KLC Executive Board.

"They advised they had talked to the mayor after the election and he was desirous of doing business with KLC," Johnston told the committee.

Johnston said he opposed hiring KLC because he was concerned about its ethics, but as the department of risk management was broken up, "I became rather submissive," he said. "I was tired of fighting the battle, to be quite honest with you."

Instead, he filled out the surveys, citing his concerns about the insurance procurement. When council members asked for copies of the allegations of fraud, city lawyers told them they were a "third party" and could not see them. The Herald-Leader has appealed a similar decision to the attorney general.

"In essence," said the committee's attorney, retired Judge Roger Crittenden said, "the confidentiality of these reports are not confidential if they name someone in government."

In April, Johnston found out that a consulting firm had advised that his job be eliminated.

"I felt I was being retaliated against," he said.

Askew was the only other person to speak Monday, beginning his session with a prepared statement: "This entire situation has caused me and my family tremendous stress and hardship," he said.

Askew also said he had questioned the way Johnston had purchased insurance in the past, which included allowing a broker to give companies "last looks," in hopes of lowering the price.

"I didn't think it was appropriate," Askew said.

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