Private gun sales. Personalized julep cups. See what audit of Kentucky’s courts found.

‘No one, including judges, should be above the law.” Auditor says AOC should be reviewed regularly.

State Auditor Mike Harmon says he was disappointed that the Administrative Office of the Courts did not agree to undergo an outside audit every year and ignored suggestions about forming an independent ethics body.
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State Auditor Mike Harmon says he was disappointed that the Administrative Office of the Courts did not agree to undergo an outside audit every year and ignored suggestions about forming an independent ethics body.

A lack of oversight among executives and elected officials in the Kentucky Court System has created a culture ripe for abuse, a report conducted by Auditor Mike Harmon’s office found.

“There is a pervasive lack of accountability at the (Administrative Office of the Courts),” the audit says.

The report, the first comprehensive external audit of the administrative arm of Kentucky’s court system since it was founded in 1976, found several examples of “unchecked leadership” in the organization that led to a litany of problems ranging from the private sale of state firearms to the leasing of office space from a company owned by a Supreme Court Justice’s sons.

“We sought an external audit to help us identify areas that needed improvement, particularly around policies related to our administrative functions,” said Laurie Dudgeon, the executive director of the AOC. “We anticipated many of the findings and have already begun implementing changes to strengthen our operations.”

For more than a year, Harmon’s office has been investigating the Administrative Office of the Courts after questions from the Herald-Leader and Attorney General about the AOC’s practice of holding employee-only surplus item sales led Chief Justice John Minton to request the audit.

And while the AOC said it accepted several of the auditor’s recommendations about policy changes that could add more accountability to the organization, it also ignored some recommendations about creating an independent ethics watchdog and the recommendation that the AOC serve as a check on judges elected in the state.

“The AOC agrees that any policies developed by the Supreme Court should be enforced uniformly and consistently,” Lauri Dudgeon, the executive director of the AOC, said in her response. “Ultimately, elected officials are accountable to the voters and to the appropriate disciplinary bodies.”

Examples of questionable actions by the state’s highest ranking judges appear throughout the pages of the report. While the audit does not name any specific justices, through cross-referencing records, the Herald-Leader determined that Justice Samuel Wright of Letcher County, appears multiple times in the report.

“AOC’s administrative rules are not applied equally to higher levels of management and elected officials,” the audit said. “Senior management, Justices, and judges must be held to the same standards as other employees when it comes to such matters.”

The report contains smaller indiscretions, like a staffer spending $410.20 on personalized mint julep cups for the State Justice Institute, but also exposes practices and a lack of oversight among leadership that occurred for years.

The AOC held several employee-only surplus sales, often failed to report accurate inventory from the sales and was inconsistent about applying sales tax to the items sold. Among those items, the AOC sold 28 surplus vehicles between 2012 and 2017. Seven of the vehicles were sold privately, including one privately sold to a Supreme Court Justice. The report did not name which Supreme Court Justice purchased the vehicle.

It also didn’t name the man who conducted the sales of surplus equipment - former executive officer for administrative services Scott Brown. Brown was fired last year amid the investigation and subsequently filed a whistleblower lawsuit against the agency.

The report is highly critical of Brown’s record while he was in charge of administrative services. Harmon’s investigators found that Brown not only ignored the AOC counsel’s advice about how to conduct surplus sales, he frequently conducted the sales and sold items to himself and neglected to record the vehicle identification number or license plates for five cars that he sold.

The Herald-Leader found last year that all of the vehicles were sold under their current Kelley Blue Book value, two years after they were sold. Among the cars that were sold, Brown purchased two Chevy Impalas, one in 2014 and one in 2016, both of which he advertised as having much higher mileage than was accurate.

The issue is being referred to the attorney general’s office, the audit says.

Most of the vehicles were sold in employee-only sales that were advertised to employees at the Administrative Office of the Courts headquarters in Frankfort. But some surplus items weren’t auctioned off and were instead sold directly to employees and public officials.

The report found that the AOC conducted 34 private sales between 2010 and 2017. Members of staff or elected officials were able to directly buy firearms, vehicles and furniture in these private transactions. Two supreme court justices privately purchased items from the AOC. One purchased furniture and another purchased a vehicle.

The AOC created an official policy for selling off surplus property in April 2017, after the Herald-Leader raised questions about the practice. The vehicle sales are now handled by the Executive Branch.

While the report often mentioned Brown as an example of the lack of oversight at the agency, it also confirmed at least one thing he alleged in his whistleblower lawsuit — that a supreme court justice leased his office space from a company owned by his sons.

The request to re-lease the space revealed that the rent was three times higher than the next bid and would require extra work to make it accessible to people with disabilities. While the audit did not mention the justice’s name, it has previously been revealed to be Justice Samuel Wright.

“The memo did not provide a complete assessment of the offers, did not provide a reason for the decision, or mention the fact that the potential lessor was owned by the Supreme Court Justice’s sons,” the audit said.

In response to the accusations, the AOC said the alternative space was unacceptable and that the lease only ended up costing twice the amount as the second bid.

“While the AOC acknowledges that there was a lack of documentation in the lease file, the other proposed property was not suitable due to structural problems, persistent roof leaks and an inadequate HVAC system,” Dudgeon said. “The AOC’s decision on office space depends largely on what is available in that market and sometimes elected officials live in an area with very limited real estate options.”

The audit also found issues with the way employees and elected officials record their mileage reimbursements to the Administrative Office of the Courts, causing limited oversight on whether the vehicles are used for personal or professional travel.

For example, Wright took out a state car on March 8, 2016, and failed to report the date he returned it. Records obtained by the Herald-Leader show that he switched cars with Dudgeon on July 25 of that year, but the mileage Wright recorded on the car was not accounted for. (The audit did not name Wright, but mileage logs show that he was the only Supreme Court Justice who took out a car on March 8, 2016).

Along with mileage logs, the audit found a lack oversight on the credit card accounts for Dudgeon, Minton and Minton’s chief of staff. According to the audit, every purchase made on the credit cards lacked pre-approval and all but three lacked the approval from someone other than the cardholder.

Among those purchases was a going away party for an outgoing Supreme Court Justice where Minton spent $1,316.19 of taxpayer money “for a reception catered by a local bakery.”

The audit found that many of the issues stemmed from a lack of clear policy structure at the AOC which stems in part from Minton’s decision to set policy based on the input of all justices instead of making policy decisions with his authority as Chief Justice. When Harmon recommended policy matters determined by the full court should be open to the public, the AOC pushed back against the recommendation.

“There is no decision-making body in the Commonwealth similar to the Supreme Court, which must have discretion to conference confidentially about pending matters, administrative or otherwise,” Dudgeon’s response said.

The AOC has taken some steps to address problems found in the audit already. Along with changing its policy on surplus sales and creating a formal policy on open records, it established a tip line so employees can report government waste and abuse and tweaked their procedures to address some of the issues found in the audit.

But Harmon found that the effort was not enough. Because the AOC did not agree with undergoing an audit every year and ignored suggestions about forming an independent ethics body like the Executive Branch Ethics Commission, Harmon said he was disappointed by the reaction.

“While I appreciate both that AOC invited us in and embraced some of what my office has recommended, their dismissive attitude towards key recommendations regarding ethics and accountability quite frankly saddens me,” Harmon said. “No matter what branch of government, we owe it to the taxpayers of Kentucky to strive toward openness and transparency.”

AOC Spokeswoman Leigh Anne Hiatt said she disagreed with the characterization that the AOC’s response was dismissive.

“The AOC would not publicly invite this level of scrutiny and then be dismissive of the results,” Hiatt said. “We agreed with the majority of the auditor’s recommendations and have already begun implementing many of them and will continue to make other changes aggressively.”

Kentucky Supreme Court Chief Justice John Minton urged lawmakers Friday to raise salaries of judges in the 2018 state legislative session.

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