Auditor finds problems in county attorney offices. One gave a $126,500 bonus to wife.
Kentucky Auditor Mike Harmon is referring three county attorney offices to federal and state law enforcement officials for questionable spending, including a $126,500 bonus to a spouse and using public funds to pay for personal expenses.
Harmon said in a news conference Thursday from his Frankfort office that the three are in Lawrence, Gallatin and Boyd counties. His review of the offices covered activity from July 1, 2017, to June 30, 2019.
He also found problems that were less serious in six other county attorney offices. He is calling on state legislators next year to pass a law to require annual audits of county attorney offices.
Harmon’s 93-page report contained responses from the various county attorneys.
In Lawrence County Attorney Michael Hogan’s office, Harmon said, Hogan awarded $134,500 in bonuses from delinquent tax fees to office employees. Of that amount, 94 percent — or $126,500 — was given to his wife, Joy Hogan, Harmon said.
Harmon said the awarding of bonuses violates the Kentucky Constitution unless the recipients are being paid for work performed.
He also said the bonuses may violate ethics rules because more than 90 percent of the amount went to Hogan’s wife, providing a substantial benefit to him. Hogan ran unsuccessfully for lieutenant governor in the 2019 Republican primary election with gubernatorial candidate Robert Goforth.
Harmon referred the Lawrence County finding to the FBI, IRS, state attorney general, state Department of Revenue and the Lawrence County Ethics Commission.
Hogan said his wife is “the central figure in the daily operation and conduct of the office,” handling several duties. He said she was in the office since his tenure began in 2003 and had previously worked in his private law office. They were married in 2008.
Hogan said the Lawrence County Ethics Commission determined she was “best qualified” for her job in the county attorney’s office.
He said there is “wide latitude” for discretionary spending of the delinquent tax fund and that his wife’s salary supplementation was “honest pay for honest work that clearly benefited the public in the form of compensating an exemplary employee who goes above and beyond to serve the office and the people of Lawrence County at a consistently high level.”
Hogan also said the payment to his wife did not exceed statutory limitations.
However, Hogan said, he will follow Harmon’s recommendation and end all supplementary salary payments to employees out of the delinquent tax fund.
In Boyd County Attorney C. Phillip Hedrick’s child support enforcement office, state auditors identified possible fraudulent activity resulting in more than $16,000 in excess payments to a former supervisor in fiscal year 2018.
Harmon said documents detailed questionable activities by the former office supervisor, including falsified expense reimbursement requests, altered supporting documents for expenditures, and excess income and unearned benefits paid to the supervisor.
Child support enforcement funds are state and federal funds paid through the state Cabinet for Health and Family Services to county attorney offices on a reimbursement basis to cover expenses in administering the child support program.
Based on the activity discovered, said Harmon’s report, the state reimbursed the county attorney child support office for “non-authorized expenses, as well as expenses not actually incurred.”
This activity was uncovered after auditors requested bank records related to the Boyd County child support program, said Harmon.
At that time, Harmon said, Hedrick told state auditors that the former office supervisor had returned the bank records, and acknowledged she had taken money from the office.
Kentucky State Police investigated, which led to the former office supervisor, Mary Pickett of Flatwoods, being indicted on 77 charges late last year relating to more than $113,000 allegedly taken by her over a seven-year period.
“In this case, by simply asking questions and providing a bit of sunlight, our auditors led to the law enforcement investigation that brought about her indictment,” said Harmon.
In addition to a referral to state police, Harmon said he now has referred the findings to the FBI and the state attorney general.
Hedrick said in his response that the child support matters “are reportedly being investigated.”
Pickett’s attorney, David Mussetter of Catlettsburg, said Thursday that she has pleaded not guilty and the charges are still pending. He also said he did not see anything new in Harmon’s report about the Boyd County case.
Harmon said his auditors found that the office of Gallatin County Attorney John G. Wright used money, mostly from the delinquent tax fund, to pay more than $36,000 for personal expenses.
Harmon said the money was used to pay credit card bills, a family’s monthly cell phone bill, expenses for the county attorney’s private law office and a loan to the private office.
This finding, Harmon said, will be referred to the FBI, attorney general and the Gallatin County Ethics Commission.
Wright said he takes Harmon’s review “very seriously and have already begun the process of correcting the alleged errors.”
He said he has hired a CPA to review the audit and that he questions some of the findings that relate to personal expenses. “Steps are under way to reconcile all accounts to preserve the sanctity of public funds,” he said.
Wright also asked Harmon on May 15 for “at least a 30-day delay on the release of the report” to give his office time to go over it “and better understand and respond with more detail.”
Harmon said he would be glad to meet personally with any county attorney but that he could not wait to release his report. All the county attorneys will have 60 additional days to respond to his findings, he said.
The findings for the county offices arose from Harmon’s special examination last year of the state Cabinet for Health and Family Services’ child support enforcement program.
In that exam, he said, “we identified various issues that prompted our decision to conduct an examination of nine county attorney offices.”
“We found numerous issues related to poor oversight and lack of controls over taxpayers funds, and little guidance and review from the state level,” he said.
Harmon said his office initially conducted a survey of 16 county attorney offices across the state, and nine were selected for additional review.
He said the nine had “poor accounting and record-keeping practices.”
In addition to Boyd, Gallatin and Lawrence, the others were Breathitt, Christian, Clark, Knox, Pike and Todd.
In six county attorney offices, Harmon said, 36 percent or more of all expenditures reviewed lacked an invoice to support the expense.
Similar issues were also discovered for county attorney offices in Christian and Clark County, but they took place under prior county attorneys in both counties, he said.
Various questionable spending practices were identified in the nine offices, such as employee bonuses, donations, holiday and other employee meals or parties and overdraft fees.
Donations to various local organizations were made, including $1,900 by the Pike County attorney to local groups and organizations, including local high school sports teams. This was documented in the office’s expenses as “bad check advertising,” Harmon said.
Also, one instance was identified where the Lawrence County attorney used public funds to pay for an advertisement for his private law practice, Harmon said.
The state auditor also said eight of the nine county attorney offices failed to turn over excess cold check fees to their county fiscal courts, which is required by state law.
“Based on the findings identified in our exam, including the referrals to federal and state law enforcement, I am calling on the Kentucky General Assembly to pass legislation in 2021 to require an annual audit of all county attorney offices,” Harmon said. “If we truly want to shine the light of transparency on how public funds are spent, then county attorneys must be included in the same way fiscal courts, sheriffs, and clerks are held accountable to the taxpayers.”
The full report, which includes responses from the county attorneys, can be found at auditor.ky.gov.
County attorneys prosecute all violations of criminal law within jurisdiction of the district court. That includes all misdemeanors, such as DUI offenses, other traffic violations, assault and theft of less than $500.
This story was originally published May 21, 2020 at 10:00 AM.
