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FBI: Lawson owned part of firm that hired Nighbert
By Tom Loftus

LEXINGTON, Ky. — Road contractor Leonard Lawson had a hidden ownership interest of at least 19 percent in a Pikeville company that hired Bill Nighbert after he stepped down as transportation secretary in December 2007, an FBI agent testified Friday.

The agent, Clay Mason, was the second witness in a pre-trial hearing in the federal bid-rigging case against Nighbert, Lawson and Lawson employee Brian Billings.

His testimony provided the first detailed description by prosecutors of Lawson's ties to the company —– Utility Management Group, or UMG — through which prosecutors say Lawson bribed Nighbert to provide him confidential cost estimates for road projects.

Mason also testified that he interviewed the current transportation secretary, Joe Prather, about a meeting he had with Nighbert just before Nighbert left office in December 2007.

According to Mason, Prather said Nighbert told him, “To succeed in this job you've got to get along well with Leonard Lawson. ... Leonard Lawson had more employees in the Transportation Cabinet than he (Nighbert) did.”

During the morning session of the hearing, defense attorneys attacked the credibility of the key prosecution witness — former transportation official Jim Rummage — getting him to admit that he had lied at times to investigators.

“I just want to get to the number of lies you've told,” Nighbert's attorney Howard Mann said to Rummage. “Would 40 to 50 be a ballpark figure?”

Rummage replied that he didn't know.

The hearing, before U.S. District Judge Karl S. Forester, is to determine the admissibility at trial of statements made by Rummage, Mason and other witnesses, as well as recordings secretly made by Rummage.

Forester has not set a trial date.

The indictment alleges that, while he was transportation secretary in 2006 and 2007, Nighbert leaked cost estimates for road contracts to Lawson, who used them to increase the amounts he bid.

Nighbert, Lawson and Billings also are accused of obstructing justice for allegedly trying to stop Rummage from cooperating with investigators in early 2008. All three have pleaded innocent, and Rummage has not been charged.

The indictment charges that Lawson paid Rummage $20,000 for his assistance in leaking the cost estimates, and that he rewarded Nighbert by paying him $67,251 in early 2008 through what prosecutors call a fake consulting contract with UMG, a Pikeville company that manages the Mountain Water District in Pike County.

At the time those payments were made, Nighbert was also working on the staff of Senate President David Williams, R-Burkesville, a political ally.

Mason testified Friday that, when he first heard Nighbert might be employed by UMG, he interviewed one of the company's officers as listed on records in the secretary of state's office, Corbin certified public accountant Archie Marr.

“He was particularly vague and noncommittal in his answers,” Mason said of his attempts to learn if Lawson had a stake in UMG.

But Mason said he obtained a federal search warrant for all UMG records, which revealed connections not included in any corporate records filed with the Kentucky secretary of state.

Assistant U.S. Attorney Ken Taylor produced records, obtained as a result of the search, that showed Lawson owned a company that in turn owned 19 per cent of UMG.

And Mason testified that other records showed Lawson's involvement was greater than 19 percent. Mason and Taylor described a 2006 UMG tax record that they said showed Lawson was entitled to about 57 percent of UMG's profits.

Mason also testified about matters previously disclosed, describing how UMG paid $36,000 to a “fictitious” Nighbert company for a new Toyota Avalon in January 2008, followed by three monthly checks of $10,417.

Defense attorneys will have a chance to challenge Mason's testimony when the hearing resumes Monday.

The defense got a crack at Rummage Friday morning, getting him to say he had lied numerous times.

Under questioning by Mann, Rummage admitted that he lied, when first asked in early 2008 by investigators from the Transportation Cabinet's Office of Inspector General, about being involved in any scheme to leak estimates.

“You've agreed you lied to the OIG?” Mann asked.

“Yes,” Rummage said.

Mann also asked Rummage if he lied when first questioned about the matter by the FBI, and Rummage said he had.

In addition, Rummage agreed that he lied in filing tax returns in 2006 and 2007 in which he did not report the cash he said he got from Lawson as income. Rummage said he has since filed amended returns to account for that income.

But Rummage also testified that shortly after his interviews with the inspector general's investigators and the FBI he met with a lawyer and decided to tell the truth about the matter.

Mann also raised questions Friday about why Nighbert, a stalwart Republican new to the cabinet in 2005, would choose Rummage, a veteran cabinet employee and a Democrat, to be involved in any conspiracy.

Mann noted that Rummage's name was on the cabinet's so-called “hit list” of names of employees marked for firing, transfer or demotion. That list surfaced in the investigation of illegal hiring during the 2003-07 administration of Republican Ernie Fletcher.

“I heard about the hit list,” Rummage said. “I knew my name was on it.”

Reporter Tom Loftus can be reached at (502) 875-5136.