Special Reports

Attorney general investigating KLC

The state attorney general has confirmed his office is investigating the Kentucky League of Cities for possible illegal activity.

"My official policy is not to comment on active investigations; that is an active investigation," Jack Conway said Tuesday. "There is some activity that is potentially criminal."

Conway, who was responding to questions during an interview with the Herald-Leader editorial board, would not say what activity might be illegal. In a report in December, State Auditor Crit Luallen detailed a host of problems at the League, including high expenses, questionable bonus practices and conflicts of interest. She forwarded the audit to Conway's office.

In 2009, Luallen audited the Blue Grass Airport, the Kentucky Association of Counties and the League, spurred by stories in the Herald-Leader about hundreds of thousands of dollars in expenses by those groups' officials.

Both KACo and the League sit on multimillion dollar finance and insurance operations that provide services to counties and cities, which also pay them dues for membership.

Luallen's airport audit was forwarded to the attorney general's office, which resulted in four former airport officials being indicted on charges of theft by deception.

John Coon and John Slone, two former deputy directors, pleaded guilty to amended charges of conspiracy to commit theft by deception. The charges are misdemeanors, which could mean up to 12 months of jail time. The plea deals require them to testify against former airport executive director Mike Gobb and deputy director John Rhodes.

Conway's office declined to investigate KACo.

The difference, Conway explained to the Herald-Leader in November, was the KACo board of directors had given its officials wide latitude in their spending. At the airport, state auditors found instances in which officials misrepresented the purpose for purchases to the board.

Luallen's audit found numerous problems in the League's insurance arm, including gifts to League employees from insurance vendors hired by the League, ranging from greens fees to trips to the Caribbean.

The League has changed numerous policies in the wake of the audit, including limiting credit card use and stopping spousal travel. Newly passed legislation will also require KACo and KLC to be more transparent.

Jackson Mayor Mike Miller, who chairs the League's executive board of directors, declined to comment in detail.

"I'll let the attorney general do what he thinks needs to be done," he said.

The auditor's office declined to comment.

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