Lexington Herald Leader: Turns Out Mayor Jim Newberry's Administration Did Have Something To Hide.

Sloppy way to run government
Report: Fraud allegations mishandled

Turns out Mayor Jim Newberry's administration did have something to hide.

Maybe not much. Since the special committee of the Urban County Council investigating the administration's handling of fraud allegations had limited ability to look into the allegations themselves, the extent of what there was to hide will be placed in better perspective by a forthcoming report from state Auditor Crit Luallen's office.

Maybe what there was to hide wasn't even enough to justify the magnitude of the administration's stonewalling and cover-up efforts during recent months.


An investigative committee of the Lexington Fayette Urban County Council criticized the city's internal auditor over the way he handled the fraud allegations of a city employee and recommended that the Internal Audit Board that oversees his work be overhauled, according to the committee's final report.

The committee did not find evidence of fraud when the city switched to the Kentucky League of Cities for insurance in 2007, but recommended that the council refer possible ethics violations in the handling of the allegations to the city's Ethics Commission. Those possible violations involve alleged reprisals against the employees who reported concerns.

The council voted unanimously to form the investigative committee after some council members said they could not get any information from Mayor Jim Newberry's administration regarding fraud allegations made by Patrick Johnston, the city's director of risk management. He questioned the city's procurement of insurance from KLC in 2007 and filled out routine


Mayor Jim Newberry has asked the city's external auditor to release documents that are part of a city council committee investigation.

The documents include allegations of potential fraud made by city employee Patrick Johnston in 2008 and 2009.

In a letter to Mountjoy Chilton Medley written Wednesday, Newberry said that "inasmuch as the Lexington-Fayette Urban County Government is your client, it is appropriate that the Johnston documents be made available to the entire council and to me in a public meeting without delay."

Lexington's internal audit board has decided not to comply with a subpoena from an Urban County Council investigative committee.

However, at a meeting Wednesday, the board said it would turn over documents related to an ongoing investigation of fraud allegations made by Patrick Johnston, director of risk management for the city, if he gives permission to do so.

"This wasn't a simple decision for the board," said vice-chairwoman Jennifer Burke. "We're not trying to obstruct, but we do have an obligation to the public" regarding internal auditing.


Half a dozen senior officials in Mayor Jim Newberry's administration were informed about allegations of fraud made by one of their own employees in 2008 and 2009, according to new documents released Monday by a city council committee investigating the matter.

Mountjoy Chilton Medley, the city's external auditing firm, communicated with the officials in the course of investigating allegations of fraud by Patrick Johnston, director of risk management for the city. Although the specific allegations have never been made public, Johnston raised questions about the city's procurement of insurance from the Kentucky League of Cities in 2008, a process overseen by Commissioner of Law Logan Askew.

A July 28 letter from Mountjoy to the investigative committee indicates that far more of Newberry's closest advisers knew about Johnston's allegations than had been publicly known previously. A tug of war for information about the allegations has been going on between the administration and the Urban County Council


The Urban County Council voted unanimously Tuesday to form a special investigative committee to scrutinize allegations of fraud by a city employee whose job has been targeted for elimination.

The committee, whose membership of five to seven people will be set by Vice Mayor Jim Gray, has the power to subpoena witnesses and documents, according to the city's charter. It must report back to the full council before July 6.

Meanwhile, Lexington Mayor Jim Newberry's administration recommended a third-party review of its handling of the fraud allegations, possibly by State Auditor Crit Luallen.

But it was at least enough to be embarrassing.

Start with the perception, mentioned in the report committee members finalized Thursday, that the Newberry administration decided to shift the Urban County Government's workers compensation insurance contract to the Kentucky League of Cities prior to any bidding process.

While such activity may not rise to the level of fraud, it most definitely qualifies as another "F" word that has no place in the conduct of the public's business — favoritism.

As to the fraud allegations themselves, the committee report makes it clear city officials simply chose to ignore them.

Internal Auditor Bruce Sahli "did not interview the affected persons and did not report the allegations to the entire Internal Audit Board," the report said.

One of the allegations made by Patrick Johnston, the city's director of risk management, involved conflicts of interest involving KLC — conflicts later verified in investigations by the Herald-Leader and Luallen's office.

It's worth noting Newberry was a member of the KLC board at the time his administration was ignoring these allegations. He remains a board member.

Although Sahli did not share the allegations with the full Internal Audit Board, he did share one of them — along with Johnston's name — with senior members of the administration.

A reorganization plan subsequently put forward by the administration proposed the elimination of Johnston's job.

So, not only did the Newberry administration ignore a whistle-blower's complaints, it followed up by doing the one thing that almost guarantees the city gets slapped with a pricey retaliation suit.

Talk about your stupid government tricks. As part of its report, the investigating committee recommended referring this possible retaliation attempt to the city's Ethics Commission. It also recommended reorganization of the Internal Audit Board.

Both seem appropriate steps for the council to take.

No doubt, other needed changes will become obvious once Luallen's office finishes drilling down deeper into the insurance purchasing process and the subsequent fraud allegations.


Read more: http://www.kentucky.com/2010/09/10/1428043/sloppy-way-to-run-government.html#ixzz0z8N48mww