Special Reports

KLC agency to change law firms

The Kentucky League of Cities' insurance arm will stop using a law firm where the husband of League executive director Sylvia Lovely is a partner.

The KLC Insurance Services board of directors voted last week to immediately suspend use of Bowles Rice McDavid Graff & Love, where Bernard Lovely works. The move came just a few weeks after the Herald-Leader found that KLC had paid $2.3 million in the past 10 years to Bowles Rice, and to another firm where Lovely also was a partner.

The League provides 382 member cities with training and lobbying services, but the bulk of its work — and revenue — stems from providing insurance services to city governments, including liability, property and workers' compensation.

The board also voted to accept a recommendation from the Kentucky Department of Insurance to end a tenant-landlord relationship between Collins & Co., a major claims adjustor for the League, and Denise Hamilton, the wife of William Hamilton, director of the League's insurance services.

"Every vote that we took was unanimous," said Mayfield Mayor Arthur Byrn, the chairman of the board. "We wanted to send a statement to our members and our customers that we are aware of their concerns, and the board is taking those concerns seriously and wanting to be proactive."

Byrn has said he was concerned about the appearance of a conflict of interest in Lovely's husband gaining financially from the League.

Richard Wehrle, a member of the executive committee of Bowles Rice, said the firm's members were "disappointed" by the League's decision.

"We had a longstanding relationship with the League, and we're sorry they decided to end it," he said. "Bowles Rice has done work for them long before Bernie was associated with the firm."

According to documents provided by the League, Bowles Rice billed about $610,000 to the League between 2000 and 2005, when Bernard Lovely joined it. Since that time, Bowles Rice has billed roughly $1.9 million to the League.

The League's executive board will meet in Louisville on Wednesday. Board members voted Monday to open that meeting to the public after initially saying it would be a closed meeting.

The League already is fielding criticism from some of its member cities, where officials, including those in Lexington, have refused to pay dues in the light of Herald-Leader stories detailing high salaries, travel and other expenses by top executives of the League. The city of Henderson recently stopped its dues and the Kentucky Enquirer reported that Erlanger Mayor Tom Rouse and several city council members will skip the League's annual meeting in Covington because of the reports.

In three years, the top three executives, including Lovely, spent $300,000 on travel, meals and items such as sports tickets. The expenses included almost $21,000 at Azur, a restaurant partly owned by Bernard Lovely. Sylvia Lovely's 2008 compensation package was worth about $315,000 and included the use of a BMW SUV.

Since those stories, the League has made several changes: The board suspended the use of all executive credit cards, including Sylvia Lovely's. Lovely herself stopped League-paid travel for executive spouses and any League functions at Azur, and she has stopped driving the BMW.

Lexington Mayor Jim Newberry, who also is a member of the League's executive board, recently said Lexington would hold onto its $26,000 in annual dues until the League resolved its problems; last week, the executive board briefly discussed kicking him off the executive board but did not bring the issue to a vote.

"I'm pleased at the changes made ... and I look forward to more changes from the Executive Board at the open meeting planned for Wednesday," Newberry said.

The League is being audited by State Auditor Crit Luallen's office.

At Wednesday's meeting in Louisville, a task force formed to look at the League's policies will hand out recommendations for new rules on credit card use, travel and other expenses; and a conflict-of-interest policy, which the League did not have previously.

Top League officials and board members have been summoned to speak before the General Assembly's Local Government Committee on Aug. 26 about the issues raised in the newspaper. Officials from the Kentucky Association of Counties, a similar group to the League, also will appear before the committee. The Herald-Leader found that top officials at that group spent about $600,000 in two years on travel, meals and other expenses.

Related stories from Lexington Herald Leader