Special Reports

KLC paid millions to relative's firms

In the past decade, the Kentucky League of Cities paid $2.3 million to two law firms while Bernard Lovely, the husband of League Executive Director Sylvia Lovely, was a partner.

The vast majority of the work, for the League's Insurance Services division, was done by the Lexington office of Bowles Rice McDavid Graff and Love. In 2005, Bernard Lovely became a partner there when his previous firm, Vimont & Wills, merged with Bowles Rice.

From 2000 until the merger in 2005, Vimont & Wills was paid about $388,000 by the League.

Before the merger, Bowles Rice billed about $610,000 to the League. After the merger, Bowles Rice billed roughly $1.9 million to the League.

The work involved representing cities that are members of KLC in insurance claims, public financing deals and various other legal work. Overall, the League has spent $22.5 million on legal services since 2000, spread among more than 80 firms.

One other firm, Adams, Stepner, Woltermann & Dusing, of Covington, made more than Bowles Rice, about $2.8 million.

The League gets most of its funding from dues from local governments and fees for providing insurance and financing services to member cities.

Sylvia Lovely has worked for the League since 1988 and became executive director in 1990.

Bernard Lovely has done some of the legal work, but Temple Juett, the League's general counsel, could not specify how much.

A receptionist at Bowles Rice said that Bernard Lovely was a managing partner there. Typically, partners, considered shareholders or owners of a firm, earn a larger piece of the overall profits than other attorneys in the firm.

Asked whether the work Bernard Lovely's firms have done for the League constitutes a conflict of interest, Arthur Byrn, the mayor of Mayfield, said the League has no policy restricting League employees from doing business with relatives.

"It's most certainly a perception of conflict of interest," said Byrn, who chairs the League's Insurance Services Board of Directors. He added that a policy task force recently created by the executive board will address such issues.

Neither Sylvia Lovely nor Bernard Lovely was available for comment on Friday.

Credibility issues

State Sen. Damon Thayer R-Georgetown, said this newest revelation raises serious questions about personal enrichment at a cost to taxpayers.

"The restaurant usage and now the law firm usage add to the problem the League has in terms of public perception," said Thayer, the co-chair of the legislature's Local Government committee.

The committee has requested that officials from both the League and the Kentucky Association of Counties appear at its Aug. 26 meeting to answer questions about spending.

"It doesn't look good, particularly in this environment, where the public is justifiable in its wish to make sure tax dollars are spent well," Thayer said.

"It's essential these credibility issues be resolved so the League can do its work representing our cities," said Lexington Vice Mayor Jim Gray, a member of the League's advisory board. "If they go unresolved, Lexington will need to consider suspending its business with the League."

A series of Herald-Leader stories detailed expenses and salaries at both the League and KACo. In particular, at the League, three officials had spent more than $300,000 in three years on travel, meals and other expenses. Sylvia Lovely's compensation package for 2008 was $315,000, including the use of a BMW SUV.

The stories also showed that League officials had spent almost $21,000 at Azur, a Lexington restaurant partly owned by Bernard Lovely.

Since then, the League and its executive board have suspended several practices of the executive staff, including credit card use, paying for the travel of spouses and League events at Azur.

Concerns from legislators

Currently, State Auditor Crit Luallen's office is auditing the League's operations, as well as those at KACo, a similar association. The audit began soon after League officials refused to release the actual legal bills to the Herald-Leader. They later decided to release the totals paid to law firms.

Byrn said that, without a formal policy on conflicts, board members "have allowed things to happen that, if we had had something in place, we probably would have addressed it in a different manner."

The League's problems have rippled across the state in the last month. The Henderson City Commission voted unanimously to suspend its membership until the League strengthens policies on spending and travel.

Byrn said he doesn't know whether the League will now suffer from a credibility gap in Frankfort.

"I have heard some concerns from legislators, but I don't know," he said. "Our group is very serious about addressing these concerns.

"I think in the future things will be totally different."

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