A Hindu ground-blessing ceremony for a new company in Elizabethtown became a campaign controversy last month after Democratic Gov. Steve Beshear participated and his Republican challenger criticized him for it.
What went unnoticed is that one of Beshear's sons, Louisville attorney Andrew Beshear, is paid to represent the company in question, UFLEX Ltd. of India, preparing to collect $20 million in tax breaks from the Kentucky Cabinet for Economic Development. The cabinet has granted UFLEX preliminary approval for tax breaks, but the factory, which will make flexible packaging, first must achieve specific goals for jobs and investment. It's eventually expected to employ 250 people.
Steve Beshear oversees the cabinet as chairman of the Kentucky Economic Development Partnership Board; in 2008, he appointed his friend and aide Larry Hayes as the state's economic development secretary.
Andrew Beshear handles economic development clients, including UFLEX, at the law firm of Stites & Harbison, where his father was a managing partner until he was elected governor in 2007.
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The potential for conflicts of interest is obvious, an ethics watchdog said Tuesday.
"It does not look good for the governor's son to be involved in deals like this with state tax money at stake," said Richard Beliles, chairman of Common Cause of Kentucky. "Presumably, Andrew Beshear is getting paid a healthy legal fee for his work in this deal. This just seems a little too close."
The governor's office said Tuesday there is no potential for conflict.
Tax breaks are awarded by the cabinet's Kentucky Economic Development Finance Authority, or KEDFA. While KEDFA is appointed and overseen by the board that the governor chairs, the governor is not a KEDFA member, so it should be considered "an independent agency of state government," said Beshear spokesman Terry Sebastian.
The Beshear administration does not recommend to companies that they hire the governor's son, Sebastian added.
"Companies make their own decisions on who they would like to represent them in their legal affairs, and it is understandable that some choose Stites & Harbison, one of Kentucky's largest firms and one with experience in this area for decades," Sebastian said.
Andrew Beshear, who joined Stites & Harbison in 2005, declined to comment for this story.
Ram Srivastav, business head for Flex Films (USA) Inc., the division of UFLEX that is building the Elizabethtown plant, said the company decided to hire lawyers in Kentucky based on who best could help with tax incentives, employment and construction. UFLEX is aware that its attorney is the governor's son, but that's not why it hired him, Srivastav said.
"That was a totally independent decision made for a legal firm," Srivastav said. "It was totally independent of anything else."
Andrew Beshear attended his father's speech in Elizabethtown in April announcing the UFLEX plant and led the applause for him, according to a local newspaper story at the time. That same month, he flew in a state plane with his father and other members of the Beshear family to the NCAA Final Four basketball tournament in Houston. The Kentucky Democratic Party later paid the $6,105 tab for the flight.
The chairman of Stites & Harbison, Kennedy Helm III, confirmed that Andrew Beshear and another of the firm's lawyers, Alex "Mike" Herrington Jr., are lead counsel for UFLEX in Kentucky. The company negotiated its preliminary deal for tax breaks with the cabinet prior to hiring the law firm, Helm said.
The firm assists the company with continuing "economic incentive" and other matters, he said.
Andrew Beshear is one of "numerous attorneys" at the firm who help clients with "Kentucky economic development transactions," Helm said.
He declined to name any other companies Andrew Beshear has represented before the cabinet, citing client confidentiality rules. He also declined to say how much the firm is getting paid by UFLEX.
The Cabinet for Economic Development confirmed that it has correspondence from Andrew Beshear regarding UFLEX but declined to release the documents, citing exemptions in the Kentucky Open Records Act related to documents regarding economic development deals. The cabinet said it cannot identify other tax-break projects in which Andrew Beshear might be involved unless it's presented with a list of company names.
Steve Robertson, chairman of the Kentucky Republican Party, said the governor's son should avoid doing business with state government until the Beshear administration ends in December 2015.
"I can't speak to Andrew Beshear's qualifications," Robertson said. "But any time the relative of an elected official is benefiting from the award of public funds under that elected official, you have at least the appearance of impropriety. It doesn't sound like they've decided to exercise an abundance of caution on this matter."