Ryan Alessi: Firings Cost KACO Millions.

Firings cost KACo millions
By Ryan Alessi - ralessi@herald-leader.com

The day after the Kentucky Association of Counties' board of directors officially hired Executive Director Bob Arnold in 2000, he instructed his deputy to tell longtime employee Janet Meyer that her services were no longer needed.

"I said 'Why, what's happened? What have I done?" Meyer said in court last year.

Arnold's deputy executive director, Denny Nunnelley, replied that he didn't know.
Bob Arnold

KACo Executive Director Bob Arnold has denied making an escort-service charge that appears on his card.

KACo's $2.26 million bill:

$931,155 in settlement and attorneys fees related to the firing of five employees;

$836,780 jury award to fired employee Jenni Clark;

$371,408 in buyout, settlement and attorney costs related to the termination of Joseph Meyer's contract;

$118,553 to buy out former executive director Michael Magee.

"Denny told me that Bob had asked him to wait until he went for lunch and then come in and tell me I was to leave," said Meyer, who worked for KACo from 1978 until her firing in November 2000.

Hers was the first in a string of terminations ordered by Arnold, with the most recent coming in August 2005. Six of the firings led to lawsuits that have cost KACo nearly $1.8 million, according to documents obtained by the Herald-Leader. The lawsuits alleged that Arnold improperly fired employees as revenge for their role in blowing the whistle on a "hostile workplace" fostered by Michael D. Magee, Arnold's friend and predecessor as executive director of KACo.

KACo also paid to buy out Magee and settle another related wrongful-termination suit, bringing KACo's total costs for the saga to at least $2.2 million.

During last year's trial, Arnold denied that he fired employees in retribution. But the jury agreed with the former employee, Jenni Clark, and awarded her $836,780 in April 2008.

Much of that cost and "all related legal fees" were paid through KACo's insurance program, which provides the organization with its liability coverage, according to KACo's 2008 financial statement.

Since then, Arnold's spending at KACo and the organization's expense procedures have come under scrutiny. He and four top lieutenants spent $600,000 on travel, entertainment and meals in 2007 and 2008, according to a Herald-Leader analysis.

Still, many KACo leaders have stood behind Arnold, noting the non-profit's healthy financial position. The association is paid by county governments for providing services such as lobbying, legal advice and insurance.

"I may not agree with everything Mr. Arnold has done, but I do believe he has brought the business back to where it needs to be," said Sandy Lee Watkins, who was president in 2000 when Arnold was hired. "It's profitable again."

Others argue that KACo could have done a lot more good for local governments with the more than $2.2 million it was forced to pay.

"Any dollars that have been paid out, either as attorney costs or settlement costs — those are dollars that deplete our bottom line," said LaRue County Judge-Executive Tommy Turner, a longtime KACo board member who said he wasn't aware of how much the firings had cost.

KACo's board of directors knew little about the firings and resulting legal actions, say board members. That information was tightly held, and it's unclear how much even KACo's executive committee knew.

"I don't recall any opportunity to address those settlements at all," said Pendleton County Judge-Executive Henry W. Bertram, who has served on KACo's larger board of 34 directors since 2002. "That was all done by the executive committee."

KACo leaders did move in 2003 to require that Arnold get the executive committee's approval before firing anyone. But they took no other actions in the wake of the costly firings.

"When you're not given information or allowed to make decisions or even offer suggestions, then there's nothing we can do," Bertram said.

Arnold declined to be interviewed for this article. KACo General Counsel Tim Sturgill said he couldn't discuss personnel matters or discussions between staff and board members.

However, court documents and testimony in last year's civil trial regarding Clark's firing offer a glimpse into KACo's culture, revealing both the circumstances that touched off several years of workplace upheaval as well as how power and information has been concentrated in the hands of a few officials.

The ousted employees say they are victims of "the good ol' boy network," as former employee Nancy Yelton called it.

The saga began with an intra-office soap opera in 2000, when KACo was run by Michael Magee, a former lobbyist and Kentucky County Judge-Executives Association official.

KACo leaders tapped Magee in 1997 to stabilize the organization, which was in dire financial straits. KACo also hired Joseph U. Meyer, a lawyer and former Democratic state senator, as general counsel that year.

According to testimony, by spring 2000, worker morale at KACo was declining because Magee was allegedly having an affair with KACo employee Laura Wagers, the director of training.

Magee didn't return a call for comment, and Wagers couldn't be located by the newspaper.

KACo employee Sandy Chapman, whom Arnold fired in 2001 from her job in KACo's insurance division, and others complained to Magee that the relationship was making them uncomfortable. KACo's business was grinding to a halt because Magee wasn't available to make key decisions, Chapman said.

Conditions only got worse after going to Magee, Chapman said.

"He wouldn't speak to me," she testified. "He excluded me from meetings I needed to be a part of to do my job."

Chapman, Yelton — who was KACo's director of governmental affairs — and another employee, Roberta A. Sandy, then took their concerns to Joseph Meyer, the general counsel.

At least four others later submitted written complaints about Magee to Meyer, who prepared a detailed report for the KACo board in time for its June 29, 2000, meeting. The document outlined examples of a "hostile workplace," where Magee took retribution against those who complained about his affair, and the potential liabilities the situation posed to KACo.

Before the board meeting, the five-member executive committee met behind closed doors and voted to place Magee on administrative leave. Magee's personal attorney was the only other person present at the meeting.

They also fired the messenger.

The board bought out Meyer's contract for $71,353. He later filed a lawsuit against KACo, which was settled in January 2004 for $175,000, according to the settlement, plus $125,055 in related legal bills that KACo's insurance paid.

Regime change at KACo

Afterward, then-KACo President Watkins, the Henderson County judge-executive, asked another law firm to perform an investigation.

When those attorneys delivered their findings and recommendations to KACo's executive committee in August, the men voted 3-2 to bring Magee back as executive director, with sanctions to be worked out by the executive committee, according to meeting minutes. The move stunned employees, as well as some KACo elected officials.

Eleven KACo employees, including Chapman, Yelton, Clark and Janet Meyer, KACo's director of special projects, hired Frankfort lawyer Phillip J. Shepherd to represent them.

Shepherd, now a Franklin Circuit judge, declined to comment.

Before KACo's full board met to ratify Magee's return, Shepherd sent a four-page letter to the 34 directors outlining alleged "retaliation" against the workers.

Tony Wilder, who was Boyle County judge-executive, was among officials who lobbied board members on the workers' behalf.

"I did have some concerns, and I did express some concerns," said Wilder, who is now commissioner of the state Department for Local Government.

By the time the board met on Aug. 31, Magee opted to resign and received $118,553 in severance. In a surprise move, Arnold was introduced as Magee's replacement, which the board approved.

Firings and lawsuits

Arnold, a former Franklin County judge-executive, introduced himself to staff with a brief speech the following month. He said he didn't know most of them and couldn't promise that all of them would stay, according to a transcript of the remarks.

"As far as I'm committed, if they do a good job and if they're loyal to this board and to me, then that's fine," he said.

Janet Meyer, who is no relation to Joseph Meyer, said in an interview that she was "upbeat" about Arnold, whom she knew personally.

Magee had taken away many of her job duties, and she hoped Arnold would restore them.

"He assured me that my job was secure ... right around the time that he took the position," Janet Meyer said.

She was the first to go.

Although Arnold wasn't supposed to start at KACo until Dec. 1, 2000, board members finalized his contract on Nov. 16, 2000. He ordered Meyer's firing the next day.

Arnold testified last year that Janet Meyer had "no defined work to do."

"At this time, I thought that was a luxury that KACo could not afford to have — someone sitting around (waiting) for something to happen," he said.

Over the next month, two other employees who had hired Shepherd resigned.

In January 2001, Chapman said, she received a call from a friend telling her that Arnold planned to fire her. Chapman, who was driving in the rain on a winding road in Jackson County, said she was shocked, missed a curve and wrecked her car.

Arnold officially informed her on Feb. 2, 2001, that her job was being eliminated.

Arnold fired three more employees by May. One ousted worker, Stephen Shackelford, unknowingly spent months training his replacement and after being fired, had to file for bankruptcy protection.

By the end of his first year, nine of the 11 employees who had hired Shepherd as their attorney had resigned or been fired.

Five who were fired sued for wrongful termination in February 2003.

The fallout

KACo settled the lawsuit with the employees on May 14, 2005. Although the terms were kept confidential, the total settlement and attorney fees cost $931,155, according to an April 2006 letter from Frankfort attorney J. Scott Mello to KACo board members.

Still, three months after the settlement with the five fired employees, members of a KACo financing program board fired Jenni Clark at Arnold's urging, according to testimony at Clark's trial.

Arnold repeatedly asked board members, including former Franklin County attorney Jim Boyd, to fire Clark. In January 2003, Arnold stopped by Boyd's home unannounced to discuss removing Clark, Boyd testified.

Arnold, however, denied on the stand that he targeted Clark because she was among those who hired Shepherd.

Current KACo President J. Michael Foster, the Christian County Attorney, said board members were "advised that there was a very defensible reason for the termination, but a jury found otherwise."

They awarded Clark $536,780 for lost wages and benefits and $300,000 for embarrassment, humiliation and mental distress in April 2008.

Today, some of the fired employees said they're still waiting for KACo's leaders to acknowledge Arnold's mistakes.

"Never once did I get an apology for how I was treated," Chapman said.

Reach Ryan Alessi at (859) 231-1303.