Fayette County

Boss obtained city employee's allegations against him

A Lexington employee said Thursday that he was promised confidentiality after he turned in fraud allegations, but he found out later that his documents were delivered directly into the hands of his boss.

In 2009, Patrick Johnston, the director of risk management for the Urban County Government, had given a fraud allegation survey to Bruce Sahli, the city's director of internal audit. Sahli determined that there was no merit to Johnston's concerns about problems with the way the city's law department procured insurance.

On Thursday, Johnston told an Urban County Council investigative committee that he asked Sahli not to disclose the allegations to anyone, or at least to notify him if he did. But during this summer's hearings, Johnston learned along with everyone else that in the fall of 2009, Sahli had responded to an open-records request by Law Commissioner Logan Askew by giving him a copy of the allegations.

Askew is Johnston's boss.

Much of the document — a questionnaire used by external auditors to ask employees whether they know of any fraud — was redacted, but not Johnston's name.

"No one ever told you your name had not been redacted?" committee chairman George Myers asked Johnston on Thursday.

"No," Johnston said.

In April 2010, Johnston learned that his job had been marked for elimination, which started some council members asking questions. The investigative committee is looking into Johnston's concerns and how they were handled by the administration. The state auditor also is looking into the matter.

Thursday's meeting further outlined problems with internal auditing, Myers said.

"It's hard for me to understand the internal auditor's continued position that a confidential document has to be protected," Myers said. "The notification (to Johnston) was not done and his name was not redacted. I think it speaks for itself."

Since the hearings began, Sahli has refused to release the fraud documents to the Herald-Leader, a decision upheld by the state attorney general's office, and Sahli refused to appear before the committee after it subpoenaed him. In response, Sahli and an external lawyer sued the committee to challenge its subpoena power, a move that the Internal Audit Board approved without meeting in open session.

That puts the Urban County Government in the position of paying attorneys' bills for both sides of the case.

Thursday's meeting was the last one scheduled to hear witnesses talk about whether there were problems when the city switched some of its insurance business to the Kentucky League of Cities.

Dawn Angarone, an administrative specialist who used to work for Johnston, said the city had saved money and improved services with KLC.

She said Johnston had showed her the fraud-allegation survey that he filled out in 2008. (He filled out a second one in 2009.)

"I did not see anything that was fraudulent," Angarone said. "I saw a difference in a vendor."

She said that Johnston was bitter over the reorganization of risk management in 2008.

"I didn't want to get mired down in all the negativity that seemed to consume him," she said.

Lutcher Sinclair, a risk management analyst who previously worked for Johnston, had a different perspective. He said he was concerned about the quality of data the city received after the League took over its insurance.

"I had no confidence in the numbers," he said.

When asked whether he knew of any fraud, Sinclair refused to answer, saying that he feared for his job. Sinclair echoed Johnston's previous statement about feeling intimidated about voicing his concerns about the League, which he thought was not a good fit for Lexington.

Sinclair recounted a meeting at League headquarters shortly after the city bought League insurance in 2007. He said that he, Johnston, Askew and several other employees met with William Hamilton, then chief of the League's insurance services. When one of the city representatives asked about claims handling, Sinclair said, "Hamilton told him to shut up and sit down."

Johnston later confirmed the story, saying he was waiting for Askew to object, but he looked over and Askew "had a kind of smirk on his face, so I knew what was going on."

Askew said Thursday he would not comment on the meeting.

The committee will meet again at 8 a.m. Tuesday to discuss its final report to the Urban County Council.

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