Bevin launches probe of ‘questionable activities’ in Beshear administration

Gov. Matt Bevin said Tuesday his staff has uncovered evidence that officials in former Gov. Steve Beshear’s administration “failed to meet the high standards that the law and people of Kentucky demand from state government officials.”

He ordered Finance and Administration Secretary William Landrum to hire investigators to conduct a wide-ranging inquiry of actions taken by Beshear administration officials.

He also said the FBI might be looking into some of the matters. An FBI spokeswoman in Louisville said the agency has “no comment” on Bevin’s statements.

Beshear, a Democrat, said accusations by the Republican governor “have absolutely no basis in truth.”

Bevin, who rarely reads from a prepared text, read a five-page statement at a Capitol news conference that made several allegations of “questionable activities,” including improper use of no-bid contracts, mishandling of a major technology contract in the Medicaid program and financial irregularities in the state workers’ compensation program.

In the state Personnel Cabinet, Bevin said it appears that rank-and-file state workers were coerced into making political contributions to Democratic causes and candidates while Tim Longmeyer was the state personnel secretary.

Longmeyer, who later became deputy attorney general, pleaded guilty to bribery Tuesday in federal court. He acknowledged taking kickbacks from a consulting company in exchange for steering state contracts to the company. Some of the bribe money was then funneled to political campaigns.

Bevin said Longmeyer helped found the “Capitol Club,” which solicited contributions from scores of donors to Democratic candidates, including raising money from state employees in the Frankfort area — all while Longmeyer was a top official for Beshear.

“We have learned from rank-and-file state employees of closed door demands by high-level Beshear administration officials that they make contributions to Democratic candidates in the last election, including the party’s candidates,” Bevin said. “Employees have stepped forward on numerous occasions and explained how they were essentially coerced and that they complied out of fear of loss of their jobs or other retribution. This investigation is preliminary, but we’ve learned enough to have significant concerns.”

State Democratic Party spokesman Daniel Lowry said the Capitol Club, now called Capitol Dems, was founded 16 years ago and existed before Tim Longmeyer became involved.

Bevin called on Attorney General Andy Beshear, the son of the former Democratic governor, to return thousands of dollars of “questionable contributions” involving Longmeyer.

Andy Beshear, in a statement, said Tuesday that U.S. Attorney Kerry Harvey has said neither he nor anyone in his office was involved in the Longmeyer scandal.

“The sworn affidavit in that case also found there was no knowledge by any campaign related to any contributions,” Andy Beshear said.

“My campaign is awaiting a routine audit by the Kentucky Registry of Election Finance, and will then donate any remaining funds to Common Cause, a government watchdog organization.”

John Steffen, head of the registry, said it is auditing Andy Beshear’s campaign finances as it does all statewide officials.

Asked if he is investigating Beshear’s campaign or contributions involving Longmeyer, Steffen said he could neither confirm nor deny that there is any investigation.

Beshear said the appropriate agency for investigating Bevin’s allegations is the Kentucky Executive Branch Ethics Commission, an independent agency, and “not a cabinet that answers to the governor.”

“The governor is once again overstating his authority under state law,” he said. “Spending taxpayer money on an outside contract when such allegations should be sent to the commission is wasteful.”

Katie Gabhart, executive director of the ethics commission, said her agency only investigates potential violations of the state’s ethics code, not mismanagement of state money.

“If someone violates state law and they use their position to do so, they could violate ethics laws,” Gabhart said. “I can’t investigate unless the ethics code is violated.”

The Republican governor also questioned a $3 million no-bid contract the Steve Beshear administration awarded for fraud-detection services on Beshear’s last day in office. The contract was given to SAS Institute of North Carolina, which retained the husband of Beshear’s cabinet secretary as a consultant and employed a former governor’s office official as a lobbyist.

The Courier-Journal reported in February that Frank Lassiter, the husband of Beshear's executive cabinet secretary, Mary Lassiter, has been a consultant for SAS Institute since 2012.

Frank Lassiter told the newspaper that he played no role in helping get the no-bid contract for SAS and did not make any additional fees because SAS got the contract. Mary Lassiter told the newspaper she “wasn't involved at all” with any government dealing with SAS.

John Esham, chief deputy policy adviser in the Governor’s Office under Beshear from late 2008 through early 2011, works as a lobbyist for SAS in Kentucky, the newspaper said.

Andy Beshear said Tuesday he agrees that no-bid contracts deserve scrutiny, “including the two no-bid contracts totaling $4 million awarded by the Bevin administration in its first three months.”

He was referring to a $3.62 million contract from March 1 to June 30 to McKinsey & Company for an evaluation of managed care organizations and a $65,070 contract to KWH Law for helping the governor’s office identify candidates for unclassified positions in the executive branch.

Bevin, who took office last December, also questioned the procurement process for an information technology system that would run the state Medicaid program and potential financial irregularities in the Workers’ Compensation branch of the state Personnel Cabinet.

Bevin said it appears former officials in the Personnel Cabinet made unjustified awards of lump-sum death benefits, medical benefits and indemnity benefits to volunteer firefighters that may have cost millions of dollars over several years.

He also alleged that the Beshear administration inappropriately assigned hand-picked attorneys to handle workers compensation claims rather than holding a fair bidding process.

Bevin declined to take any questions about the allegations but pledged to release the findings of his investigation.

Steve Beshear called Bevin’s accusations a “pathetic spectacle.”

“At some point, Matt Bevin has to realize there is a time to campaign and a time to govern,” he said. “Attacking me in an effort to distract the public from his Benefind debacle and his plan to strip away health care from hundreds of thousands of Kentuckians will not work.”

Beshear was referring to recent problems in a new public benefit system and Bevin’s efforts to end Kynect, a health-insurance exchange, and curb Medicaid expansion.

The former governor added: “There was never any attempt to pressure employees to make political contributions, and we followed both the spirit and the letter of procurement laws. Furthermore, I made my tax returns public all eight years I was governor, something Gov. Bevin refuses to do even after promising to do so. Kentuckians deserve better.”

This story was originally published April 19, 2016 at 12:15 PM with the headline "Bevin launches probe of ‘questionable activities’ in Beshear administration."