More On The "Cesspool" That Is Kentucky Transportation Cabinet, Involving Bill Nighbert And Highway Contractor, Leonard Lawson.

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Nighbert Investigated

FBI documents detail investigation
By Brad Hicks

Former Kentucky Transportation Cabinet secretary and former Williamsburg mayor Bill Nighbert is at the heart of a federal investigation which led to the issuance and execution of two federal search warrants earlier this week.

The search warrants were issued on Aug. 1 and executed Monday at locations in Corbin and Pikeville. The warrants, as well as an affidavit relating to the investigation, was filed Friday in United States District Court in London.

According to the documents, Nighbert is being investigated for allegedly releasing confidential engineer’s construction estimates to a contractor to help the contractor win state projects. In return, investigators believe Nighbert was paid tens of thousands of dollars through a “fictitious company” created to cover the scam.

An affidavit signed Aug. 1 by United States Magistrate Judge Robert E. Wier details the alleged events leading up to the search warrants. The affidavit was written by Federal Bureau of Investigations Special Agent Clay Mason, who has been involved with an investigation into “allegations of corruption” within the Kentucky Transportation Cabinet since July 2007, it states.

The KTC is a state agency that receives millions of dollars annually in Federal Highway funds to assist with construction or repair of state roads and highways. The KTC chooses companies to repair or construct roads by having contractors submit sealed bids for the projects.

Prior to the bidding, a KTC engineer prepares an estimated cost for each project. This estimate is considered confidential and is not released outside of the KTC until bids are opened. When they are, only the final, calculated estimate is made available, and the policy of the KTC is to reject any bids more than 107 percent of the engineer’s estimate.

Nighbert served as transportation secretary until Dec. 10, 2007, and was responsible as secretary for the process of letting contracts for bid.

James Rummage, who served as Deputy Chief State Highway Engineer during 2006 and 2007, supervised the unit preparing the engineer’s estimates. The affidavit alleges that around June 2006, Nighbert, acting as Secretary of the KTC, told Rummage to obtain the estimate on a specific job because he was concerned the confidential numbers were being leaked.

The affidavit alleges that over the next year, on about seven more occasions, either Nighbert or road contractor Leonard Lawson, an eastern Kentucky-based contractor who also had a network of contracting companies in central and south central Kentucky, would direct Rummage to deliver the estimates to them.

During four instances in which Rummage allegedly delivered the estimates, Rummage said he was given $5,000 in cash each time. The affidavit also states that from 2006-07, Lawson-affiliated companies won approximately $130 million in contracts for which Lawson allegedly had the engineer’s estimates.

Ryan Griffith, one of the estimate preparers, brought the alleged activity to light. According to the affidavit, Griffith kept a log each time Rummage requested the engineer’s estimate from him, detailing which contracts Rummage was seeking. This collected information was relayed to the FBI’s Louisville Division, and agents from the Kentucky Attorney General’s Department of Criminal Investigation joined in the investigation.

In late February 2008, the affidavit states that Rummage was interviewed and denied his actions, but returned with a lawyer and retracted that statement about one week later. Rummage’s bank records indicate that during the time he was receiving cash from Lawson, he no longer went to the ATM for regular cash withdrawals. Telephone records show phone calls between Nighbert and Lawson around the times the estimates were being requested by Rummage, with this information often matching up with Griffith’s log.

In March, Rummage agreed to conduct several recordings with Lawson and others. Agent Mason writes that these tapes provided investigators with incriminating evidence. At one point, cited in the affidavit, Lawson allegedly told Rummage that “they can’t trace cash” and made offers to help Rummage with hiring an attorney. Lawson also allegedly encouraged Rummage to “take the Fifth” at an upcoming Grand Jury session.

The investigation then shifted its focus to illegal payments allegedly being made from Lawson to Nighbert, using a corporation as a means of distribution. Nighbert’s bank, First State Financial of Middlesboro, was subpoenaed for his account records. A transaction occurring on Jan. 7, 2008 shows a check for $36,050 was deposited into Nighbert’s personal account — it was written by Utility Management Group (UMG) and made payable to “Two Bucks, LLC.”

However, a search of the Kentucky Secretary of State records showed there was not an active corporation named “Two Bucks.”

Investigators found that UMG manages the Mountain Water District in Pike County and the company’s Web site lists two business addresses — on Town Mountain Road in Pikeville and the other on Summit Drive in Corbin.

UMG was found to be operated by Gregory May, Archie Marr and Robert A. Combs. Marr and Combs are Certified Public Accountants with an office located at the same address listed for UMG in Corbin. The affidavit states May has several business interests in Pikeville.

Investigators later found that May had ties to Lawson. In an interview with State Senate President David Williams, Williams said that at a recent political function in Frankfort, Nighbert introduced May to him using the terms that May worked “with” or “for” Lawson.

Investigators searched the Kentucky Secretary of State Web site and found several entities involving UMG principals — UMG Investors, LLC and Utility Management Holding, LLC, both of which utilize the same organizing attorney.

Also mentioned in the affidavit is James R. Cox, an attorney who has organized The Lawson Foundation, Inc. and Elkhorn Stone, Inc., both of which are Lawson-related companies, the affidavit states. Records indicate that Cox is a partner with Marr in a coal operation in Whitley County.

Mason writes that in a conversation with a news reporter investigating a related matter, he was told the reporter had two confidential sources, independent of each other, who indicated Lawson has a silent ownership role in UMG. Mason also states that he was advised by a prosecutor handling the case that in conversations with attorneys for Marr, May, Combs and the UMG Corporation, the attorneys allegedly admitted their clients have relationships with Lawson.

According the affidavit, Marr and Combs were interviewed on June 3 to obtain an explanation for UMG’s payment to Nighbert through “Two Bucks.” Marr allegedly said that May ran the operations at UMG, while he and Combs were involved in the corporate side. Marr allegedly told investigators that Nighbert was retained to perform consulting for UMG, but he could not recall if it was he or May that authorized payment for the check deposited into Nighbert’s account.

The affidavit states that UMG’s only customer was the Mountain Water District. Marr allegedly told investigators that Nighbert, through his political connections, could assist in developing additional business. However, Marr said Nighbert had done no work for UMG, the affidavit states. Since January 2008, Nighbert had been working for Senate President David Williams’ office as an advisor on transportation issues.

He resigned from that position on July 11.

Nighbert used the “Two Bucks” money to purchase an automobile, the affidavit states. Marr allegedly told investigators the check was indeed an advance for Nighbert to purchase a car because UMG did not want to purchase it for liability reasons.

Combs and Marr were served with Grand Jury subpoenas for UMG documents. Attorneys for UMG provided documents, which included copies of three checks made payable to “Two Bucks, LLC,” each for $10,417. These checks were dated Jan. 9, 2008, Feb. 9, 2008, and March 11, 2008.

Combs’ name appears on all three checks, but the affidavit states that neither Combs nor Marr mentioned these checks during their June interview.

Also submitted by UMG was an employment agreement of “questionable authenticity.” In this agreement, Nighbert was to receive compensation of $125,000 annually, with one payment coming on a monthly basis, along with an automobile. But the affidavit states that there is no signature or date on the alleged agreement. UMG’s attorney also provided a letter explaining the events leading up to this agreement.

Investigators discovered telephone numbers belonging to the parties allegedly involved in a number of ways. Lawson and Nighbert’s numbers were obtained from subpoena subscriber requests which came back in their names. Marr’s was obtained from his business card. May’s was obtained through a law enforcement database.

After reviewing phone records, it was found the parties allegedly involved contacted each other between September 2007 and January 2008.

On Sept. 26, 2007 and Sept. 27, 2007, phone records indicated numbers associated with Lawson communicated with numbers associated with Marr, including a call that lasted 15 minutes. The affidavit also states that Nighbert and Lawson communicated on those dates. Further phone records show that on Nov. 13 and 14, 2007, Nighbert and Lawson allegedly spoke several times, twice for 20 minutes or more.

Documents provided by UMG’s attorney show Nov. 13, 2007 was the date of a meeting between UMG principals and Nighbert about Nighbert’s impending work for them.

The affidavit states on Dec. 19, 2007, a date which the UMG/Nighbert agreement was reportedly modified, Nighbert allegedly called Marr twice and Lawson three times, all within 24 minutes of each other. It further states Lawson’s number called May’s home number twice on two occasions on Dec. 2, 2007.

Paragraph 12 of the affidavit offers some explanation as to the alleged connection between Rummage, Lawson and Nighbert and why the search warrant was needed. It states:

“Given that Lawson paid Rummage for information that Nighbert directed Rummage to obtain and give to Lawson, investigators believe that Lawson and Nighbert had some arrangement whereby Nighbert would be compensated when he left state government. Lawson’s companies benefitted greatly by knowing the price KTC would award a contract for, and in situation where they were the sold bidder, could bid to the 107 percent mark, thereby leaving no money on the table.”

It further states that Marr and Combs withheld information during an interview about the additional three checks to Two Bucks, LLC, which the affidavit refers to as “a fictitious company.”

In the affidavit, investigators suggest that UMG was the means by which Lawson could reward Nighbert for his assistance in obtaining the engineer’s estimates while serving as KTC Secretary.

Mason writes that in an interview with Joe Prather, current secretary of the KTC, and Gilbert Newman, Lawson had urged Prather to appoint Rummage as Chief State Highway Engineer, a request Prather rejected.

Prather also told investigators that Nighbert advised him that to succeed as secretary of the KTC, he would need to make friends with Lawson.

Investigators wrote that because the three aforementioned checks were not disclosed nor negotiated — and because Nighbert’s agreement with UMG was fashioned on Nov. 13, 2007 and modified on Dec. 19, 2007 — the agreement was likely generated after those involved learned of the federal investigation.

They also believe records, documents and other correspondence may reveal Lawson as the true owner or person in control of UMG.

Investigators also wished to obtain computers and have Agent Bill Baker, a Computer Forensic Examiner with the Kentucky Attorney General’s Office, examine them for any information pertaining to the investigation.

Monday morning, officials seized from the Pikeville UMG Office documents displaying a UMG organizational chart of the Mountain Water District Project, a record of owners and officers, a managerial organization chart, the UMG Mountain contract, an agreement for operations, maintenance and management services, a balance sheet as of June 30, a Union Central beneficiary form (a personnel file for Willie Brown), a UMG employee listing by department, and a handwritten list of the Mountain Water District Commission.

That same day, investigators also executed the search warrant at the UMG Office in Corbin, which is the office of Marr, Miller & Myers, CPA. There, they seized two Dell computers, a correspondence file, financial statements and tax information. An FBI file states that a folder marked “UMG” and containing miscellaneous documents, including one file labeled “consulting agreement,” documents regarding Bizzack Construction (allegedly one of Lawson’s companies) and a packet of documents regarding UMG were seized from the Corbin location on Summit Drive.

At this time, court documentation does not reflect what information, if any, was obtained from the items seized.

Nighbert’s attorney, Howard Mann of Corbin, said he did not have a copy of the search warrant to review and could not comment.

Editor's comment: As you wait for more BOMBSHELLS, you can follow some of the money that may have helped buy GRAFT.

You have to give it to Lawson, he sure knows how to try and buy -- or maybe he ACTUALLY BOUGHT -- influence.

SHAMEFUL!