A major Kentucky political donor "got what he paid for politically" when Gov. Steve Beshear's office weighed in for him on the subject of roadside mowing, state Transportation Secretary Mike Hancock told investigators last year.
Neal Swartz, vice president of Swartz Mowing of Bath County, lobbied Beshear and Mike Haydon, his then-chief of staff, to switch the Transportation Cabinet's mowing projects to a bid process that yielded less competition and higher prices.
Haydon called Hancock in late 2011 and told him to "look into this," Hancock said. The cabinet made the requested change, overruling its own maintenance officials, who warned it would cost taxpayers more.
Swartz Mowing subsequently saw a 23 percent jump in the value of its state contracts, from $3.1 million in 2011 to $3.9 million in 2012. Statewide, the cabinet paid $13 million for roadside mowing in 2012, up 20 percent from 2011.
On Sept. 13, 2011, the Swartz family gave $30,000 to the state Democratic Party, which supported Beshear's re-election that fall. A week after Beshear won, the family gave the party $10,000 more. Overall in the last 15 years, the Swartzes have made nearly $200,000 in political donations, including $11,000 to Beshear and $69,500 to the state Democratic Party.
"Swartz got what he paid for politically by voicing his concern and having someone voice that concern to us," Hancock told the Transportation Cabinet's Office of Inspector General in August 2012.
Inspector General Cindy James and her investigators spent much of 2012 looking into an anonymous complaint that Swartz Mowing used political influence to change the cabinet's bidding process.
James' investigators did not interview Beshear and were unable to interview Haydon, who died last August after a heart attack.
In a prepared statement to the Lexington Herald-Leader, Beshear spokeswoman Kerri Richardson said political donations do not affect the governor's decisions. The Swartz family was treated no differently than any other Kentuckian with an interest in policy, Richardson said.
"The governor and his staff hear from constituents every day with concerns and requests on any number of issues and follow up accordingly with requests and discussions with various cabinets," Richardson said.
In her report, James wrote that Roosevelt "Sonny" Swartz Jr. and Neal Swartz, the mowing company's president and vice president, respectively, approached various high-level state officials during Beshear's first term in office to lobby about their company's contracts.
James confirmed the family's political donations, the call from the governor's office to Hancock and the subsequent rise in project costs. In November, she submitted her report to Hancock and the cabinet's auditors and lawyers for their review.
She also gave it to the Executive Branch Ethics Commission upon its request, James said last week. The ethics commission said it could not comment on matters that may be pending before it.
In an interview last week, Hancock told the Herald-Leader he stood by his remark on Swartz. However, Hancock said, he already wanted to change the cabinet's mowing program in late 2011 to impose higher standards on companies submitting bids. One mowing contractor walked off the job, and another temporarily closed an interstate highway, he said.
The call from the governor's office was a request, not an order, he said.
"It was very much at my discretion to follow up as I saw fit," Hancock said.
'I'll give you this'
Neal Swartz told the inspector general in July 2012 that he lobbied Beshear personally. Eddie Jacobs, a special adviser to Beshear and longtime Democratic Party leader, arranged for him to meet the governor, Neal Swartz said.
"Asked if he thought the (family's political) donations helped him get his foot in the door and get the change he wanted, Swartz responded, 'You know, when you don't give them anything, they don't even look at you. If you will give them something, at least they will entertain something,'" the investigators wrote in their report.
Swartz told the inspector general that he would say to state officials, "'Hey, you know, I'll give you this or this or this, if you'll do this. Would you consider this? Would you look into this?' And sometimes they've done it."
Speaking last week to the Herald-Leader, Neal Swartz said the donations may have helped him get access to policy makers, but nothing more. Swartz said he complained about the bid process for several years before the cabinet acted.
"We've always given a lot of money to the Democrats," Swartz said. "They do see your name if you donate something to them. That's common knowledge. But I don't think there were any political favors. If there were, it sure took me a few years to get them."
Sonny Swartz, Neal's father, did not return calls seeking comment. Neither did Jacobs, now at the state Labor Cabinet.
Since the 1980s, Swartz Mowing has won Transportation Cabinet contracts for roadside mowing along interstate highways and state routes across Kentucky. Cabinet records show $19.2 million in awards to the company in the decade before the 2011 election.
The Swartzes live in the Bath County community of Olympia. In 2007, patriarch Sonny Swartz pleaded guilty to conspiracy to buy votes in the previous year's Democratic primary, where he backed incumbent Bath County Judge-Executive Walter Shrout. Shrout resigned from office and went to prison for his role. Swartz was sentenced to two years on probation and a $20,000 fine.
Federal prosecutors said in 2007 that Sonny Swartz traded political donations for favors, such as tapping the county's Federal Emergency Management Agency funds.
"Sonny Swartz provides money for Walter Shrout's campaigns, and Walter Shrout ensures that Sonny Swartz gets the lion's share of the FEMA contracts," Assistant U.S. Attorney Kenneth Taylor wrote in a pre-trial motion. "That relationship did not arise in a vacuum in 2006. It has a history of tit-for-tat exchanges between Sonny Swartz and Walter Shrout."
'I pushed and pushed'
In 2006, while Sonny Swartz conspired to buy votes, the Transportation Cabinet prepared to change how it awarded mowing contracts.
A cabinet analysis predicted at least a 10 percent savings — $2.1 million annually — if mowing were moved from the Division of Construction Procurement, or DCP, to the Division of Purchases, or DOP. The DOP did not require prequalification or bid bonds, and it did not publish a list of bidders or release the engineer's estimate showing how much the cabinet thought a project should cost.
Under the DOP, more companies were eligible to submit bids, and greater competition forced down prices.
According to another cabinet analysis, when the DCP handled mowing, the projects received an average of 2.26 bids and cost an average of $35.91 per acre. Once the DOP took over, the average number of bidders rose to 5.98 and the average price fell to $32.84 an acre.
Cabinet officials were pleased by this outcome. Swartz Mowing was not.
Neal Swartz "always complained" about the switch and wanted the projects moved back to DCP, David Cornett, assistant director of the cabinet's Division of Maintenance, told the inspector general last year.
"I suspect it was because Swartz would have encountered more competition in Purchases than in Contract Procurement," Cornett told investigators. "I have heard from other people that he boasted of having influence with the governor's office and that he was going to make sure the contracts went back to DCP."
In 2007, Beshear defeated Republican Gov. Ernie Fletcher and took office.
Sonny Swartz and his family gave about $6,000 combined to Fletcher's 2003 and 2007 campaigns. Halfway through 2007, they switched and began giving to Beshear. In 2008, they started making large donations to the Kentucky Democratic Party for the first time in six years.
Neal Swartz hired Frankfort lobbyist David Whitehouse early in the Beshear administration. Together they went to see Joe Prather, who served as Beshear's transportation secretary until 2009, and made their pitch on mowing contracts.
By all accounts of the meeting, Prather was unmoved. He told the inspector general last year that Swartz "seemed very much interested in cornering the market." The cabinet didn't budge.
The inspector general's report contains few dates for meetings or calls. During Beshear's first term, Neal Swartz said last week, he met the governor at an official function, but he could not remember details. He also spoke multiple times with Haydon, the governor's chief of staff, and various others in state government.
"I pushed and pushed to hopefully make 'em see what I see," Swartz said last week. Speaking to the inspector general last year, Swartz said: "I got to know the governor by face and by name, and when he got elected, he did some things for us, and a lot of things he didn't do for us. You know how it is in politics."
Following the 2011 gubernatorial election and the call from the governor's office, the Transportation Cabinet moved mowing back to the DCP as Swartz wanted.
Hancock told the Herald-Leader last week that he made the decision. But State Highway Engineer Steve Waddle told the inspector general in July 2012 that it was he who made the decision while Hancock was gone on vacation. Hancock told him about the governor's office calling, but that wasn't considered a directive, Waddle said.
"It was more or less my idea because of complaints we were receiving from contractors," Waddle said.
However it happened, cabinet leaders overruled the objections of their own maintenance officials.
"It was somewhat of a surprise to me to learn that decision had been made," Cornett told the inspector general. Using the DOP allowed the state to "get good prices for mowing," he said. Cornett said he and his colleagues requested a meeting with cabinet leaders to discuss their concerns, but they were rebuffed.
The change proved to be temporary.
In 2012, with the DCP back in charge, competition for the average mowing project dropped by 48 percent (down to 3.05 bidders) and prices rose 16 percent (up to $38.24 per acre).
By the start of 2013, faced with escalating costs and an inspector general's report, the cabinet reversed itself and sent mowing projects back to the DOP with a few new restrictions, such as 100-percent performance bonds.
"We concluded after much discussion that the program for mowing is where it needs to be," Hancock said last week.