A little-known Lexington-based foundation that has received more than $1 million from the troubled Bluegrass Area Development District since 2009 refuses to release documents showing exactly how the money was spent, or by whom.
The Bluegrass Industrial Foundation has gotten most of that money in rent from the Bluegrass ADD. The foundation owns the office building at 699 Perimeter Drive where the development district is located. Its president is Jas Sekhon, who ran Bluegrass ADD from 1971 to 2005.
The foundation's board members — most of them former Bluegrass ADD board members — have referred all questions to Sekhon, who declined to release spending documents requested by the Lexington Herald-Leader under the state Open Records Act.
"It is the opinion of the BIF Board that the Bluegrass Industrial Foundation is not a public agency and receives no public funds for its operation; it is not subject to KY Open Records Act," Sekhon wrote.
First Amendment expert and Louisville attorney Jon Fleischaker rejected Sekhon's argument, noting that at least 75 percent of the foundation's income comes from a public agency. (The foundation also receives rent money from dentist Fred Arnold.)
"I think there is a very strong argument that it is itself a public agency," Fleischaker said. "I think that if they receive more than 25 percent from a local authority, then in fact it is in my judgment very likely they are a public agency under the law."
For now, the only details available about the nonprofit foundation can be found in its tax records, which are public documents, and in documents that detail the Bluegrass ADD's payments to the foundation.
The tax forms show that the foundation's Perimeter Drive building generated profits of between $60,000 and $70,000 a year from 2009 to 2011, but the foundation reported an overall deficit each year after accounting for other expenses, including about $115,000 for travel over three years.
The foundation's expenses for those years also include $60,000 in compensation for Sekhon and the foundation's seven-member board, $25,000 for conferences and almost $50,000 for "prospect development."
The forms do not say who traveled or provide any details about what prospect development took place as the foundation pursued its mission of "industrial development in the Central Kentucky region."
Those questions might be answered by State Auditor Adam Edelen, who is investigating the Bluegrass ADD after the forced resignation of its executive director, Lenny Stoltz II, in July amid questions about spending.
The Bluegrass ADD handles about $30 million a year, helping coordinate regional planning and federal spending among local governments in a 17-county area of Central Kentucky. Its board of directors is made up of mayors and judge-executives.
The auditor's office does not comment on ongoing investigations, but Lexington Mayor Jim Gray, who is also a Bluegrass ADD board member, said he thought the examination of the district's use of tax dollars would expand to the foundation.
"I'm sure Adam's audit will look closely at the financial relationship with the ADD's landlord, the Bluegrass Industrial Foundation," Gray said. "Transparency is essential. Citizens have a right to know their tax dollars are being spent responsibly."
In total, the development district has paid the foundation between $238,000 and $260,000 a year in rent, plus $28,000 a year for renovations and equipment.
The two entities are intertwined in other ways as well. According to documents from Bluegrass ADD, the foundation and the district have contracts to help staff the Paris-Bourbon Economic Development Authority.
In 2009, the foundation paid the development district $30,000 to help staff the Bourbon County agency. In 2010, 2011 and 2012, the district paid the foundation $5,000 a year for the same work.
However, Craig McAnelly, who oversees economic development efforts for Bluegrass ADD, said he's not aware that his agency has had a contract with Bourbon County for "some time."
David Duttlinger, the current executive director of Bluegrass ADD, and Edwinna Baker, chairwoman of the district's executive board, did not return calls seeking comment.
In a telephone interview, Sekhon said the foundation has worked largely behind the scenes, trying to lure more businesses to Kentucky and to forge better ties between the state and his native country of India. He said he is most proud of his work helping to move the Kentucky Community and Technical College System administration into an empty office building in Versailles.
KCTCS spokeswoman Terri Giltner said the city of Versailles approached KCTCS in 2002 about the building, and the city brought Sekhon with them "in his role as executive director of the Bluegrass ADD."
Most of the foundation's travel is made by Sekhon and a few board members to build up business networks and attend conferences, Sekhon said.
"We have a network with national organizations ... you can go to companies and somehow get the access, you learn from them," he said.
He declined to answer questions about current work by the foundation, citing confidentiality agreements with businesses.
'A lot of questions'
Sekhon formed the foundation in 1982, according to state business filings. The foundation bought the Perimeter Drive property in 1993 for $1.6 million. It's now valued at $2.2 million, according to the Fayette PVA.
Sekhon would not divulge how the foundation financed the purchase, except to say the foundation got the money for the down payment from donations and other private sources.
As executive director of the Bluegrass ADD at the time, he said, he liked the deal because it saved the agency money on rent. "It was a very favorable deal and good for the region," he said.
When asked if there could be a conflict of interest for him to head an organization that is the landlord for the organization he previously led, Sekhon said: "I don't know what you're talking about."
Not everyone thinks the deal is great for the development district.
At a Jan. 6, 2012, meeting of the Bluegrass ADD's executive board, Garrard County Judge-Executive John Wilson made a motion for the district to buy the Perimeter Drive property so it could stop paying rent.
Wilson said the motion passed unanimously, but nothing ever happened.
"My concern was that if the ADD had all this money in reserve, why were we continuing to pay rent?" Wilson said in a recent interview. "My point was we shouldn't be paying rent when we can own, and it would be a good idea to end that relationship."
Wilson said he'd like to know more about the foundation and its ties to the development district.
"The more information everyone has, the better," he said. "I think there's a lot of questions about what all exactly is involved in the relationship between the two organizations."
Winchester Mayor Ed Burtner, who serves on the Bluegrass ADD board, said he's never heard an explanation of the relationship between the two groups.
"I've heard of it, but I don't know much about it or what it does," Burtner said. "I'd like to know more about the business arrangement."
Bluegrass Industrial Foundation board members
Source: IRS, Bluegrass Area Development District
Bluegrass ADD rent payments
Payments by Bluegrass Area Development District to the Bluegrass Industrial Foundation for rent, renovations and equipment:
Source: IRS, Bluegrass Area Development District