In 1995, State Auditor Ben Chandler issued a highly critical review of the Bluegrass Area Development District, citing excessive spending on travel and meals, insufficient board oversight, and a conflict-ridden relationship with a foundation that owns the district's office space.
Almost 20 years later, State Auditor Adam Edelen last week issued a highly critical review of the Bluegrass Area Development District, citing excessive spending on travel and meals, insufficient board oversight, and a conflict-ridden relationship with a foundation that owns the district's office space.
Chandler blamed Jas Sekhon, the district's director between 1971 and 2005. Edelen chastised his successor, Lenny Stoltz II, but the district's history remains intertwined with Sekhon.
Even after he resigned in 2005, Sekhon continued as president of the Bluegrass Industrial Foundation, using some of the $260,000 in rent the Bluegrass ADD pays the foundation every year to attend numerous conferences, which he says helps his continued efforts to advance economic development in Central Kentucky.
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"It occurs to me that Jas Sekhon built this empire, and he ran it like an empire," said Edelen, whose exam found that the Bluegrass ADD was often run more for private benefit than for public good.
Sekhon's legacy included building shell organizations to help skirt public scrutiny, Edelen said, and an accounting system that could be operated only by one person, Sekhon's chief financial officer, Stoltz, who became Sekhon's successor.
On Thursday, Edelen said the 14 other development districts around the state appear to be better managed. The Bluegrass ADD, however, has been allowed to get away with too much for too long by its board of local elected officials and private citizens.
"There is a need for oversight for Bluegrass," Edelen said. "This thing has reached critical mass, and in the event the new leadership fails to right the ship, there will be questions about whether it should continue to exist."
Jas Sekhon was the district's first and, for a while, only employee. On his retirement in 2005, a story in a district publication described the early years: "Originally, he operated the ADD out of his briefcase and out of his car as he traveled to city halls and courthouses in each of the ADD's 17 counties to enlist support for the then-fledgling ADD organization."
Sekhon is largely credited with the district's rapid growth, coordinating federal and state grants to help grow the 17-county region's economy. The district is a clearinghouse for federal aging funds and Workforce Investment Act money, and it helps with regional economic development. In 1994, annual revenues were about $10 million; by last year, according to Edelen's exam, they were close to $25 million. The agency has more than 80 employees.
In 1982, Sekhon started the Bluegrass Industrial Foundation as another tool to aid regional economic development. In 1993, he engineered a deal for the foundation to use state grants and collateral from the Bluegrass ADD to buy an office building at 699 Perimeter Drive, near the intersection of Alumni Drive and New Circle Road; the district soon moved its offices there.
He also started the Bluegrass International Trade Association in 1986, the Bluegrass Regional Recycling Corporation in 1990, and Global Opportunities for Kentucky in 2005. All of these organizations shared board members with the district, although Edelen's report pointed out that some board members of the recycling corporation didn't even know they were listed as board members. Global Opportunities and the trade association are now defunct, and it's not clear what they did.
The Bluegrass Industrial Foundation and Bluegrass ADD remained enmeshed. Chandler's auditors found that from 1992 to 1994, the district spent $116,840 on out-of-state trips for board members, Sekhon, staff and other individuals for conferences, training and other meetings. About $1,400 was picked up by the foundation. On three of those trips, the district bought airline tickets for 14 board members, three relatives and the executive director. (In 1994, the district's chairman was former Danville Mayor John Bowling, who is now chairman of the Bluegrass Industrial Foundation.)
In 1992, Chandler's report found, Sekhon and a board member traveled to San Francisco for the foundation to drum up new industry. The district paid for airline tickets, while the foundation paid for expensive meals and alcoholic beverages, the report said.
Although Chandler recommended tightening policies on who traveled and how much was spent, little changed.
For example, in 2008, according to records obtained by the Herald-Leader, 12 board members and three employees of the district went to Anchorage, Alaska, for a conference at a cost of more than $40,000 for airfare, meals, hotel rooms and other items, including rented vans to take people to restaurants and meetings. Spouses of nine board members went to Alaska as well, although their costs were reimbursed to the district.
$500 per meeting
After Sekhon retired in 2005, he continued as the foundation's president. In 2013, after controversy over a felon re-entry program erupted at Bluegrass ADD, the Herald-Leader requested the foundation's spending records, which Sekhon refused to provide.
The attorney general later ruled that the foundation must hand over the documents because more than 25 percent of the foundation's funds come from public sources.
According to those documents, the foundation's seven-member board holds quarterly meetings, usually at the Chop House restaurant on Richmond Road, where each board member receives a $500 payment for attending. Board members Everette Varney, the mayor of Georgetown, and Kent Clark, the judge-executive of Madison County, also serve on the Bluegrass ADD board.
The foundation pays about $29,000 a year in salary to Sekhon. It also pays for his cellphone, which in 2012 cost about $2,337.
The foundation spent about $90,000 between 2011 and 2013 on Sekhon's travel, cell phone, meals, golf outings and trips to Keeneland. Sometimes Sekhon also expenses the travel costs of board members. In January of 2013, for example, the foundation paid $17,138 for Sekhon, his wife, Miriam Amick Sekhon; contract employee Craig McAnelly; and foundation board members Bowling, Varney and former Lincoln County Judge-Executive R.W. Gilbert to travel to an Urban Land Institute conference in Orlando, Fla. The foundation was later reimbursed for Miriam Sekhon's expenses.
The foundation has continued receiving rent from and making loans to Bluegrass ADD, including $40,000 for building renovations and $25,082 for computer equipment that the district paid back between 2011 and 2013.
Sekhon has declined to speak directly to the Herald-Leader, instead issuing comments through his attorney, Luke Morgan.
Morgan said the foundation bought the district's geographic information systems (GIS) equipment, which helps local communities with 911 services, mapping, and land-use planning. In 2011, that ownership was turned over to Bluegrass ADD.
The district's employees run those programs; nonetheless, Sekhon has made several trips to San Diego for the annual summer conference of the ESRI software company, which makes the software used by Bluegrass ADD's GIS equipment. In 2011 and 2012, Sekhon spent about $10,538 on air travel, hotels and meals to attend that conference.
Morgan said Sekhon attends to possibly attract new companies to Kentucky.
"He goes there because he feels that it's an important part of industrial development of the Bluegrass to be on the cutting edge of communications industries and other high tech areas," Morgan said.
Edelen, however, said his auditors saw nothing at the foundation office on Perimeter Drive that indicated ongoing work on economic development. It has one employee, who manages the Perimeter Drive building. In fact, Edelen said, the foundation's office there is used as the place where new Bluegrass ADD employees get their identification photos taken.
Nor were auditors able to figure out why the foundation would pay for equipment and renovations at the district.
"I think that's a great question," Edelen said. "That's not something we looked at, but consider the implications of a public organization like the ADD, using what they believe to be a private organization to buy equipment — clearly they wouldn't have to follow bid and procurement policies."
'Behind the scenes'
Sekhon also uses foundation money to attend conferences on real estate investment and financing.
In 2012, the foundation spent $10,997.08 to send Sekhon, Bowling, Varney and Gilbert to the San Diego conference of CoreNet Global, which has a mission to "advance the effectiveness of corporate real estate professionals and the entire industry engaged in delivering value to corporations through the strategic management of corporate real estate and workplace resources."
Morgan said CoreNet started out as a group interested in industrial real estate development, which is why Sekhon has been a member for many years.
"It's the way these things happen," Morgan said. "It's the way networking gets done. Connections are made through these entities."
Morgan said Sekhon's behind-the-scenes networking helped bring the Southern Molding company to Frankfort and helped fill a former dairy company property in Winchester, to name two. Morgan said Sekhon also traveled with government delegations to Japan in the early 1980s to help lure Toyota to Scott County.
"It's not going to be Jas there cutting the ribbon," Morgan said. The foundation is "very much behind the scenes, getting people together."
Southern Molding moved to Frankfort more than 30 years ago, a spokeswoman said; it was bought by American Wire in 1990.
Edelen said he will keep a sharp eye on Bluegrass ADD to make sure needed reforms happen.
But people like Charles Payne, head of the River Park Neighborhood Association, who started the investigation that led to the auditor's exam, and that association's city council member, George Myers, think otherwise.
"The problems seen there 20 years ago have only gotten worse," Payne said. "Yes, there's a problem there, and it's not going to be fixed without legislation."
Myers said he believes development districts should be put under the purview of the Program Review and Investigations Committee of the state legislature.
"Ultimately, oversight lies at the feet of the General Assembly," Myers said. "We've been asking them to get involved since 2012. Maybe now they'll do their job."