Newberry asks auditor to release allegations

Newberry says testimony creates doubt about need for investigation

lblackford@herald-leader.comAugust 12, 2010 

Mayor Jim Newberry has asked the city's external auditor to release documents that are part of a city council committee investigation.

The documents include allegations of potential fraud made by city employee Patrick Johnston in 2008 and 2009.

In a letter to Mountjoy Chilton Medley written Wednesday, Newberry said that "inasmuch as the Lexington-Fayette Urban County Government is your client, it is appropriate that the Johnston documents be made available to the entire council and to me in a public meeting without delay."

An investigative committee of the council is looking into how the allegations — made by Johnston, the director of risk management — were handled by the administration. One of the reasons the investigation began is that city officials told council members they were a "third party" to the audit and could not have access to the confidential documents.

Newberry's letter apparently was prompted by Johnston's testimony before the committee Monday, during which he said, "I made observations of what I thought might be fraud, but I never directly accused anybody of fraud in those reports."

Newberry said "that stunning statement creates substantial doubt whether any of the activities by the committee are warranted since the committee's very existence is predicated on the notion that Mr. Johnston had made fraud allegations that were inadequately investigated."

The committee is also investigating whether the allegations had anything to do with Johnston's job being slated for elimination earlier this year.

Newberry also said that if Johnston did accuse someone of fraud, "his failure to be forthcoming with the committee should be exposed."

Mountjoy already has given the documents containing the allegations to the committee, but it asked that they remain confidential.

"The administration has had every opportunity to call on Mountjoy or whoever else to turn over documents that we asked for. Maybe if they had done so before, we wouldn't be here today," said George Myers, head of the council's investigative committee.

Johnston and committee members said Monday his allegations were concerned with the city's procurement of insurance from the Kentucky League of Cities, including: whether KLC met ethical and conflict-of-interest standards for insurance companies, whether council was given all the facts before it chose KLC and whether KLC saved the city money.

In 2009, Newberry denounced KLC for a host of ethical problems outlined in the Herald-Leader, including excessive spending and conflicts of interest, particularly in the insurance wing. But two years earlier, just after Newberry joined KLC's executive board, Johnston said KLC executives told him Newberry wanted the city to do business with the League.

An internal and external investigation of Johnston's allegations found there was no fraud as defined by the standard of a "material misstatement" of the city's finances because of fraud.

Newberry's letter also said only Johnston and committee members knew what was in the allegation. However, on Monday, Logan Askew, the city's chief lawyer, said he had seen parts of the 2009 allegation, which he received under an open records request after being tipped off by Newberry adviser Joe Kelly.

Newberry asked that Mountjoy representatives bring the documents to the council's work session on Tuesday.

The committee has subpoenaed several people and organizations to turn over documents related to the case. That prompted Bruce Sahli, internal audit director, to file a lawsuit against the council committee, questioning the committee's power to subpoena.

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