A sworn statement from an FBI agent accuses a politically influential road contractor in Kentucky of paying $20,000 to a state highway engineer in exchange for confidential bid information on state contracts.
The FBI affidavit says investigators are exploring whether former Transportation Cabinet Secretary Bill Nighbert facilitated the release of secret bid estimates to the contractor, Leonard Lawson.
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Details of the affidavit, filed in U.S. District Court in London, were first reported Saturday by The Times-Tribune of Corbin and The Courier-Journal of Louisville.
Attorneys for Nighbert and Lawson questioned Saturday how FBI Special Agent Clay Mason's statement became public. The affidavit was used to obtain a warrant last week to search two Eastern Kentucky businesses for evidence of a financial link between Nighbert and Lawson.
”The search warrant affidavit is a collection of innuendo and raw suspicions and should have never been made public,“ Larry Mackey, Lawson's attorney, said in a statement. ”At this stage of criminal investigations, the law presumes innocence and imposes heavy burdens on prosecutors and FBI agents not to prematurely release information about matters occurring before the grand jury.“
No charges have been filed, and Assistant U.S. Attorney Ken Taylor said he wouldn't ”argue in the press“ with the attorneys over the affidavit's release. ”If they have problems, they can bring it up to the court,“ he said.
The Herald-Leader has previously reported that a federal grand jury has convened in Lexington to weigh information pertaining to the state Transportation Cabinet.
A key figure in the investigation is James Rummage, a former highway district engineer and later a deputy chief highway district engineer, who oversaw the division that calculated cost estimates of road projects.
Those calculations are supposed to remain sealed until contractors place their bids to build the project. The cabinet's policy is generally to reject bids that are more than 7 percent above the estimate.
The affidavit says Rummage, at the direction of either Lawson or Nighbert, obtained the confidential contract estimates about eight times between June 2006 and August 2007.
During that time, the state awarded 43 contracts to Lawson-related companies, according to a Herald-Leader analysis. Of those, nine were between 6 and 7 percent over the engineer's confidential estimate. Lawson was the only bidder in eight of those nine contracts.
Ryan Griffith, who prepares estimates for the cabinet, documented each time Rummage asked him for the confidential figures for certain road projects, the Times-Tribune reported.
Griffith, reached by the Herald-Leader on Saturday, declined to answer questions about why he began keeping the log or whether Rummage explained why he wanted that information.
Key witness makes claims
Rummage, who retired from the cabinet March 31, initially denied the allegations to FBI agents in February, according to the Times-Tribune's summary of the affidavit. But a week later, Rummage, accompanied by a lawyer, recanted that statement.
He then claimed Nighbert — who led the cabinet from March 2005 to Dec. 10, 2007 — asked him in June 2006 to get the cabinet engineers' estimate for a specific project, the newspaper reported.
Rummage said Lawson gave him $5,000 in cash four times in exchange for the cabinet's road cost estimates. Rummage's bank records, according to Mason's statement, show that he didn't make regular withdrawals during that span, the Times-Tribune reported.
Howard Mann, Nighbert's attorney, told the Herald-Leader that Rummage's accusations are ”false and baseless“ and that Rummage isn't a credible witness, let alone a sturdy foundation on which prosecutors can build a case.
”If his story is true, then he has essentially admitted to lying to get the cost estimates, admitted to lying to the (cabinet's) Office of Inspector General, admitted lying to the FBI and if it happened in 2006 then he lied on his income tax returns,“ Mann said. ”He is completely unbelievable.“
The Herald-Leader has confirmed that the Transportation Cabinet's Office of Inspector General is investigating Rummage and others, but the cabinet declined to release any documents regarding the investigation because it is continuing.
Rummage's attorney, Marc S. Murphy, acknowledged in an interview with the Herald-Leader that ”very qualified counsel for the defense for this case will make a lot out of“ Rummage's initial denial.
”I think his initial story to the FBI was a product of very understandable human nature: fear, concern for his job and a lack of counsel,“ said Murphy, an attorney with Stites & Harbison in Louisville.
Murphy said Rummage has cooperated with authorities since then and has done so without the promise of immunity or any deal with prosecutors.
When asked whether Rummage's subsequent confessions without a deal could leave him open to charges, Murphy said, ”Yes.“
”I don't know what to expect,“ he said. ”My hope, on behalf of Jim, is that the government appreciates his cooperation and his efforts ... and (will) treat him appropriately.“
Murphy said he is not aware of Rummage making allegations about other contractors beyond Lawson.
Before Rummage retired in March, he recorded telephone conversations with Lawson.
”Lawson told Rummage on one tape that "they can't trace cash' and made overt offers to assist Rummage with finding and paying for an attorney,“ the affidavit said, as reported by The Courier-Journal. ”He also encouraged Rummage to "take the Fifth' at an upcoming grand jury session and to get an attorney they could work with.“
Lawson has been a major road contractor and political contributor in Kentucky for more than 20 years. He and his family own interests in construction companies that do business in central and south-central Kentucky.
Links to Nighbert?
The purpose of the affidavit, according to the Times-Tribune, was to obtain search warrants for Utility Management Group of Pikeville and that company's accounting firm, Marr, Miller & Myers in Corbin, to find evidence of financial ties between Lawson and Nighbert.
Agents searched offices last week. Attorneys for both firms didn't return phone calls.
Federal investigators wrote that they were following links between Lawson and Utility Management Group — operated by Gregory May, the Times-Tribune reported. The utility firm, which specializes in water lines, has hired Nighbert as a consultant.
Mason's sworn statement says bank records show that Utility Management Group wrote a $36,050 check payable to a business called Two Bucks LLC. That money was deposited in Nighbert's personal bank account on Jan. 7.
While Two Bucks LLC is not an active company, Nighbert and his brother Edwin had set up a partnership in February 2007 called Double-Buck LLC, according to filings with the secretary of state.
Nighbert was an aide in Republican Senate President David Williams' office during the 2008 General Assembly session and through June.
Mann said Nighbert performed consulting work for Utility Management Group before and after taking the position with Williams but didn't cash checks from the utility firm while he was on the state Senate payroll.
Investigators said in the court documents that they suspected an employment agreement between Nighbert and Utility Management Group might have been drawn up after word of the federal inquiry leaked out, the Times-Tribune reported.
The court documents don't reveal what investigators found during their search of the utility and accounting firms.
Meanwhile, a Herald-Leader analysis of telephone records obtained through an open records request shows that Nighbert might have spoken to Rummage after Nighbert left the cabinet in December.
He called Rummage's state-issued cell phone four times between Jan. 18 and Jan. 25 — a month before Rummage spoke to federal agents. None of the calls lasted more than two minutes.
Nighbert also recommended that Rummage receive a nearly $10,000 raise just days before Rummage briefly retired in August 2007, according to personnel records obtained by the Herald-Leader.
In his letter recommending the salary increase, Nighbert said Rummage had been ”key“ to the department's success in reaching a record level of contracted work. Additionally, ”Rummage's office has been instrumental in successfully managing change orders and improving contracting efficiencies for the Cabinet,“ Nighbert wrote.
Nighbert rehired Rummage four months later in November 2007 for a non-merit position. Rummage resigned in March.