Gov. Steve Beshear says he is expanding his administration's ethics policy after questions about private business deals between his chief of staff, Adam Edelen, and top Frankfort lobbyist Bob Babbage.
The new policy calls for increased reporting of business associations and transactions by the governor's senior staff, cabinet secretaries and the heads of agencies administratively attached to the governor's office.
The policy will also require an annual review of those officials' financial disclosure forms by Beshear's Office of General Counsel for potential conflicts of interest. Currently, financial disclosure forms are filed with the executive branch ethics commission directly and not reviewed by the governor's general counsel.
The Herald-Leader reported on Jan. 1 that Edelen and Babbage were partners in a company that developed and sold, at a loss, a $660,000 home in Bourbon County and in a $257,100 condo unit in downtown Lexington, in the Main and Rose building.
On Jan. 6 the newspaper reported that, in violation of state law, Babbage failed to disclose the private deals to the Executive Branch Ethics Commission.
The men dissolved the partnership in the company involved with the Bourbon County home on Monday. Both say they are now seeking the commission's advice on how to close the other partnership.
Beshear said in a statement Friday that he was concerned about Babbage's lack of disclosure in the case.
The governor said Edelen disclosed the relationship, which existed years before Beshear's election.
"Adam completely adhered to both the letter and the spirit of the law," Beshear said.
"But Mr. Babbage's failure to properly disclose this relationship has raised questions, and those must be fully and forcefully addressed."
Babbage reiterated in an interview Friday that he told the ethics commission in May that he and Edelen did business together, but put nothing in writing.
"It was an inadvertent mistake in my paperwork. I take responsibility. Now we will take the ethics commission's advice on how to close the other partnership," Babbage said.
Beshear said that his new policy goes beyond what the law requires in an effort to promote greater transparency and openness.
Beshear said that under the new policy, as future or amended disclosure forms are filed each year, the governor's senior staff, cabinet secretaries, and the heads of agencies administratively attached to the governor's office will list outside businesses in which they have an ownership stake, as well as identify everyone who also has ownership in those interests. Now the law requires only a listing of outside business interests on disclosure forms.
Richard Beliles, chairman of Common Cause Kentucky, a government watchdog group, criticized the situation in an interview with the Herald-Leader last week.
But on Friday, Beliles said, "I think that's a great proposal by the governor. It's an improvement over what we've had for the past 10 or 15 years. It couldn't have been better if I had written it myself."
Babbage is a former secretary of state, state auditor and Kentucky Democratic Party chairman. He has more than two dozen clients who want something from state government.
Under the state ethics law, lobbyists who knowingly file a false disclosure report to the ethics commission can be found guilty of a Class D felony, which can bring up to five years in prison and substantial fines.
But the ethics commission agreed to accept a corrected report from Babbage earlier this month, in which he disclosed his ties to Edelen. Interim General Counsel Rebecca Goodman said the matter is closed unless someone files a complaint to the ethics commission.
Beshear said that to avoid even the appearance of conflict, the administration's general counsel, on behalf of Edelen, has written to the commission to ask how to divest the interest in the Lexington office condominium co-owned with Babbage.
In 2006, Edelen's wife, Catherine, and Babbage signed a pre-construction purchase agreement for a Lexington office condominium. The condo unit provides office space for Babbage and Catherine Edelen, an Apple Inc. account executive who sells computers to the Kentucky Department of Education.
Beshear said that his administration did not know that Babbage did not disclose the business interest on his financial disclosure form.
Edelen said Friday he that he wanted to take the step of divesting his family's interest in the condominium to remove any questions. Previously, he had said there were no plans to sell the condo.