Metro Councilman Has New Job At TARC — And He’s Keeping Elected Seat Friday, Sep 18 2020 

Louisville Metro Councilman Pat Mulvihill is now the top lawyer at the Transit Authority of River City — and he’s keeping his council seat, too.

Mulvihill has represented District 10, which stretches from Germantown south to Watterson Park, since 2015. The Democrat draws a $48,790 annual council salary. 

J. Tyler Franklin

Councilman Pat Mulvihill

Though city lawyers have concluded Mulvihill can legally hold both jobs, council members and ethics experts say such a move creates the perception of a conflict of interest. At TARC, Mulvihill reports to the executive director, who is appointed by Mayor Greg Fischer. That means he in essence is working at Fischer’s discretion. This, critics say, could muddy his ability to be an impartial voice for his district.

“It causes concerns,” said Metro Council President David James, also a Democrat. “Constituents could wonder if he is voting what he thinks is right or if he is voting for what the mayor wants.”

Mulvihill worked as Fischer’s general counsel and director of legislative affairs from 2011 to 2014. A spokesman for Fischer did not respond to a request for comment.  

[Read: Before contractor billed TARC for no work, She worked for MSD director]

Mulvihill said he doesn’t see the two jobs as a conflict, and he intends to recuse himself as a councilman from anything connected to TARC.

“Before I took the job, I tried to do as much due diligence as I could,” Mulvihill said.

When asked his salary for the TARC role, which he started this week, he said that could be obtained through an open records request.

TARC has been engulfed in scandal in recent months. The agency’s former executive director, Ferdinand Risco, resigned earlier this year after being credibly accused of sexual assault and harassment, and misappropriating agency funds. The council is currently investigating TARC for issues related to the scandals brought on by Risco. 

The opinion of the Louisville Metro Ethics Commission states that Mulvihill should recuse himself from any discussion, decision making or voting related to any matter involving TARC that comes before the council.

The commission stated that although the city’s Ethics Code does not ban holding simultaneous positions of an employee of TARC and a councilmember, “the public may reasonably conclude this is a conflict.”

Last week, Fischer announced a new executive director for the agency — Carrie Butler, the former general manager of the public transit system in Lexington. Fischer had appointed interim co-executive directors to lead the agency while a new leader was hired, and a TARC spokesman said they hired Mulvihill.

A ‘Terrible’ Public Perception

When council members take jobs for other public entities it sullies their ability to be impartial and calls into question the validity of votes, positions and representation, said Richard Beliles, the state chair of Common Cause, a national nonpartisan government watchdog group.

“It’s a problem,” he said.” I think it’s a decision that should be reversed.”

Eric King, a spokesman for TARC, said the agency isn’t focused on the perception of a conflict of interest, but instead on if someone is qualified — and he said Mulvihill is. 

Mulvihill’s mother, Mary Margaret Mulivhill, is credited with playing a pivotal role in the creation of TARC in the 1970s when she served as a city Alderwoman. She died late last month.

“It’s really full circle for him,” King said of Mulvihill’s hiring.

Mulvihill obtained opinions from the Kentucky League of Cities, the Jefferson County Attorney and the Louisville Metro Ethics Commission that “opined favorable to his service,” King said.

The three agencies found no legal standing that would prevent Mulvihill from serving both as a council member and as a top executive for TARC, a review of the opinions show. 

But the opinion from the Jefferson County Attorney’s Office, where Mulvihill has twice worked in the past, warned that accepting the job at TARC could lead to his Metro Council seat being vacated if a court found the two positions incompatible.

Beliles, a longtime ethics expert in Kentucky, said legal opinions aside, the situation “just looks bad.”

Councilman Brent Ackerson, a Democrat who chairs the council’s Government Oversight and Accountability committee, said even if it’s legal for Mulvihill to serve both as a council member as TARC general counsel, it “has a terrible public perception.”

The council has a role in several aspects of TARC’s operations: it votes to approve TARC board appointees, which are recommended by Fischer. The council also approves the transit authority’s budgeted spending from a mass transit trust fund, which holds occupational tax funds and accounts for a bulk of the agency’s annual budget. 

Louisville Attorney Peter L. Ostermiller, who specializes in ethics law, said Mulvihill would be wise to abstain from voting on any matter that relates to TARC.

“They wouldn’t have the interest if they don’t vote,” he said. “But that requires the person to be very diligent.”

Such recusal is necessary on the council’s actions and any action taken by TARC that will be submitted to the council, said Richard Briffault, a professor of legislation at Columbia Law School.

“One way or the other, he won’t be able to do the job he is supposed to do,” he said.

And if he can’t participate on the council, he is ultimately silencing his constituents, Briffault said.

“He’s denying his voters their say.”

This story has been updated to include comments from Councilman Mulvihill, who returned a call after publication. Contact Jacob Ryan at jryan@kycir.org.

The post Metro Councilman Has New Job At TARC — And He’s Keeping Elected Seat appeared first on Kentucky Center for Investigative Reporting.

Which Louisville Judge Let Police Search Your House? Most Signatures Are Unreadable Wednesday, Sep 16 2020 

A Louisville Metro Police detective had a hunch that a man was selling heroin out of an apartment in the Russell neighborhood. 

He didn’t know the man’s name. He didn’t conduct surveillance. But working from information provided by a confidential informant, the detective asked a Jefferson County District Court judge to give him the legal authority to search the man’s home.

The judge signed the search warrant at 4:30 p.m. on January 13. The next night, at 10 p.m., the detective and 10 other officers executed the warrant. 

Charles King Jr., said the police “aggressively” beat on his door before they kicked it in, announcing themselves as they entered his apartment.

Signature on the warrant to search King’s home

He asked to see the warrant, and he was surprised by the scant evidence listed in the one-paragraph narrative provided by the detective. He looked to see which judge signed the warrant, but couldn’t make out the signature.

“It was, like, scribble scrabble,” King said. “Like, I could kind of make out the first letter, maybe.”

But because so many of the signatures are illegible, those tied to the legal system and some even some judges say more transparency is necessary to hold judges and police accountable — especially now, as trust in police and the criminal justice system is eroding. 

King’s was one of 231 Jefferson County search warrants executed since January 2019 and examined by the Kentucky Center for Investigative Reporting and WDRB News. That review found dozens of flashy loops, “scribble scrabble,” and identical swirls derived from an electronic image file. Few judges took the time to sign their whole name. Only one printed her last name underneath her signature.  

On the vast majority of search warrants — nearly 72% — the names of the judges who approved them were illegible.

King was ultimately charged with drug trafficking after police said on the seized property form that they found powder in a bag and “cutting agent” in his kitchen. His criminal case is ongoing. He still has no idea which judge approved the search.

“It was crazy,” he said. “I feel like they could have made their own warrant and signed it.”

With a judge’s signature, police can bust down doors, rifle through homes, search phones or computers and confiscate nearly anything they consider to be evidence of a crime. Judges in Louisville sign thousands of search warrants each year based only on the evidence police present within the four corners of the search warrant and affidavits.

 

Does Readability Matter? Judges Differ

In Louisville, the issue emerged after the signature on the search warrant of Breonna Taylor’s apartment was difficult to read. LMPD shot and killed Taylor, a 26-year-old Black woman and emergency room technician, in her home while officers executed a no-knock search warrant signed, though not legibly, by Judge Mary Shaw.

At least a dozen of the 30 Jefferson County judges do sign their names in legible handwriting, according to the warrant review.

Judge Julie Kaelin’s signature

And one, Jefferson District Court Judge Julie Kaelin, takes the extra step of printing her name beneath her signature.

The reason is simple, Kaelin says — she wants to be transparent.

“It is problematic to not be able to look at a warrant and see which judge signed it,” she said. “I don’t want anyone to ever think I’m hiding behind an illegible signature.”

Zach Crabtree

Judge Julie Kaelin

Kaelin, who was elected to the bench in 2018, said the point of presenting a search warrant to a resident is to show that judicial authorities have legitimately approved the search, which she said is an invasion of privacy.

“How can they tell if it’s legitimate if they can’t tell who signed it?” she asked.

Jefferson Circuit Court Chief Judge Angela McCormick Bisig disagrees that the readability of the signatures matters. As chief judge, Bisig oversees the other judges and can waive rules or implement local policies.

In an interview, Bisig dismissed the notion that judge signatures need to be legible, or clearly identifiable, on a search warrant.

“I don’t see anything hidden or lacking in transparency,” she said. “I don’t believe a judge is going to sign a search warrant and no one will know that it’s them.

“It’s clear who is signing each search warrant,” Bisig said. But even she could not identify signatures KyCIR and WDRB reporters shared with her from search warrants.

Zach Crabtree

Chief Judge Angela McCormick Bisig

Since she was elected to the bench in 2002, Bisig said her own signature — like that of many other judges, she presumed — has evolved. It was readable, she said, but now “resembles a scribble.” She blames the volume of documents that judges sign each day.

Ultimately, she said the identity of a judge can be determined by examining other public court documents from a particular judge’s cases and comparing signatures to find a match.

“At some point, you would know,” she said. 

The Jefferson Trial Court Administration office knows, because the court clerks maintain a key that matches all judges to their signatures. 

But the administrator, Carla Kreitman, refused to provide a copy of the key. She said it was an “internal list for the clerks use.”

The Office of the Jefferson County Circuit Court Clerk also refused to provide a copy of their database of search warrants, claiming the “informal index” is not a public record, and to make public would require a “great deal of time” redacting information.

When told the clerk’s office wouldn’t share those documents, Bisig said, “I know the judges believe it’s public; anybody can see it. There’s nothing hidden about any of our signatures.”

Bisig wonders “what difference [the signature] would make, in terms of if the document was valid.”

Court records

Whose signature is this? Your guess is as good as ours.

But because unreadable signatures make it nearly impossible to discern which judges sign warrants, KyCIR and WDRB’s review can’t determine whether police more often obtain warrants from specific judges. Police in Jefferson County can approach any judge they choose when they’re seeking a search warrant, and some judges have rebuked calls for safeguards that would deter the practice of “judge shopping.”

Which judge approved a search warrant matters for transparency’s sake — and for public trust, said Ted Shouse, a Louisville criminal defense attorney.

Zach Crabtree

Louisville attorney Ted Shouse

Shouse has practiced in Louisville for more than 20 years, and he couldn’t identify any of the judges’ signatures shared with him by WDRB.

Not being able to determine that, he said, can be a hurdle for people trying to defend themselves in court.

“Transparency is supposed to be the norm in a criminal proceeding,” he said. 

He noted that his signature is also akin to chicken scratch.

But underneath, he writes “Theodore S. Shouse.”

‘What’s wrong’ with transparency?

Breonna Taylor’s death came as police carried out a sting operation authorized by five individual no-knock warrants, which allow police to burst into a person’s home without first knocking. Such warrants have since been banned in Louisville.

Taylor family

Breonna Taylor.

Sam Aguiar, an attorney for Taylor’s family, said he initially couldn’t tell which judge approved the warrant approving the raid of the 26-year-old’s apartment because the signature was illegible.

It was Jefferson Circuit Court Judge Mary Shaw. She signed seven of the warrants reviewed by KyCIR and WDRB. 

Aguiar said warrants are difficult to read, and “it would be nice if they printed their names.”

“Our Circuit Court judges do excellent work, but we hope this case has shown there are some simple measures which could be implemented to afford more scrutiny into these warrants,” he said.

Warrants are sought for an array of police actions — drug investigations, shooting follow ups, robbery cases and more. Police seek warrants to search houses, cars, mail, phones and people. While it’s a routine part of policing, it’s also inherently opaque, said Shouse, the defense attorney.

Shouse thinks it’s a no-brainer that people who are getting their homes searched should at least be able to know which judge approved that search. Addressing it, he said, would also be an easy fix: they’d just have to pass a local rule requiring printed names under the signature.

“What’s wrong with knowing who and why and when and how?” Shouse asked. “What’s wrong with knowing those things? I don’t understand why there’s so much push back on this when that kind of transparency is what the court system is about in every other instance.”

The issue is not unique to Louisville.

In Texas, state legislators passed a bill in 2015 requiring that magistrate judges who approve search warrants sign in “clearly legible handwriting or in typewritten form with the magistrate’s signature.”

The measure was in response to a now-disbanded South Texas narcotics task force that falsified judges’ names on warrants using illegible signatures, then stole drugs, guns and other property from people, said its main sponsor, state Rep. Terry Canales.

Canales, an attorney, said judges’ names can be hard to decipher because they often review batches of documents. In his experience, he estimates that 75% of the judges he interacts with don’t have clear signatures.

“If I didn’t know who they were, I wouldn’t be able to read their signatures. I just know it because I’ve been practicing so long,” Canales said. “But the reality is the public doesn’t know, and so that creates a problem – especially when you’re dealing with something as dear and as important as the freedom from unreasonable searches and seizures.”

The Texas bill had the backing of police and lawyers’ groups. Canales said he’s aware of one case that led to a challenge over a judge’s signature.

And while the legislation only sought to bring transparency to warrants in Texas, Canales said it’s “sound public policy” that ought to be widespread to ensure that the actions taken by police are legitimate.

Warrants give authorities legal power to infringe on people’s rights, Canales said, and “in order to do that, I think we need to know where that authority flows from, and we should be able to identify that at that moment, instantaneously and in real time.”

Canales’s energy for change, however, is not shared by top Louisville judges.

Bisig said there’s no need to require judges to print their names.

“I think we all want the system and our government to be transparent, and I believe we are transparent,” she said. “I just don’t agree that there is something sneaky about who signs them.”

Kaelin, the District Court judge, said this is a small piece to the larger issue of reforming the process of obtaining search warrants, but fixing it could have a big effect on the public’s confidence in the criminal justice system. 

“We’re accountable to the people,” she said. “It seems like such a simple, effective change we could make.” 

This story was produced in collaboration with WDRB News. See more of their work at WDRB.com.

WDRB’s Marcus Green, Jason Riley and Chris Otts contributed to this report. This work was supported by a grant from the Fund for Investigative Journalism to KyCIR.

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Before Contractor Billed TARC For No Work, She Worked For MSD Director Monday, Sep 14 2020 

A scathing report released last week revealed widespread misspending and sexual misconduct at Louisville’s public transit agency. Much of the report focused on then-executive director Ferdinand Risco’s relationship with a contractor who was paid more than $228,000 for no demonstrable work. 

That contractor previously worked for another top city official: Tony Parrott, the executive director of the Louisville Metropolitan Sewer District. When he worked in Cincinnati, Parrott paid the same contractor $3 million over five years, a deal one city councilman at the time called “unconscionable.” 

This is not a coincidence: Parrott introduced the contractor to Risco.

The referral came just months after an Ohio state audit revealed Parrott had misspent more than $750,000 on bloated, often unnecessary contracts during his time running Cincinnati MSD.

Risco was fired in February after sexual assault and harassment allegations from staff came to light.

(Read: Investigation Uncovers Ex-TARC Director’s Sexual, Financial Misconduct)

The contractor that worked with Risco at TARC was not named in the report because she has accused him of sexual assault. But her attorney confirmed her identity, and the report makes it fairly clear who she is: the same woman who Parrott worked with closely for over a decade in Cincinnati. 

In a brief response to emailed questions, Parrott downplayed his role in connecting Risco and the contractor, saying it was simply a referral. He did not offer more details on why he would refer this specific contractor to TARC, or what services he thought she would be best suited to provide. 

Jean Porter, a spokesperson for Mayor Greg Fischer, also dismissed the concern, saying Parrott advised Fischer’s office that all he did was introduce Risco and the contractor at a “water equity task force meeting” years ago.

But the contractor told TARC investigators that Parrott was the one who initially reached out to her about an opportunity at TARC, and that she came to Louisville at his invitation. And the meeting where they all met?

According to the report, it was attended by only five people: Risco, Parrott, two MSD consultants and the woman who would become TARC’s newest contractor — and, five days later, would send a bill for $27,000.

In Cincinnati, Controversy

Metropolitan Sewer District (MSD) Executive Director James "Tony" Parrott

[/media-credit] “Tony” Parrott

When Parrott was hired to run Louisville MSD in July 2015, Fischer said he was “the right leader for our city.”

Parrott had faced controversy in his last job over some residency requirements; at the time, Fischer announced he had hired a private investigator to look into the concerns, and came away confident in the decision to hire Parrott. 

But within a few months of him taking the Louisville job, an investigative series from the Cincinnati Enquirer laid out Parrott’s mismanagement of the Cincinnati Metro Sewer District’s massive budget. 

The FBI opened an investigation and the city undertook its own audit. 

Fischer’s office told WHAS at the time that they were aware of the allegations, but Parrott had been thoroughly vetted and the Mayor had full confidence in him. 

“However, the Mayor’s Office will be looking into the situation in the coming weeks,” the spokesperson said. 

One major issue raised in the investigative series and confirmed in the audit was Parrott’s over-reliance on expensive outside contractors. Taxpayers received little benefit from many of these inflated contracts, the audit found. 

Parrott awarded a contract to a former Cincinnati councilman for $294,000 that auditors could find no work product to show for it. Another contractor billed for more than 24 hours of work in a day. Contractors were paid by Cincinnati MSD to do work for a private foundation that Parrott also ran.

One article by the Enquirer focused in part on a contract with a Pittsburgh-based company. Between 2010 and Parrott’s departure in 2015, that firm was paid more than $3 million to help manage the agency’s budget, the Enquirer reported. Much of that sum came not from the actual wages of contractors, but from a “multiplier” written into the contract.

MSD agreed to pay 2.95 times as much as the contractor’s wages, with the excess going directly to the firm. Most contracts contain some multiplier, but experts interviewed by the Enquirer said, across the board, it seemed like Cincinnati MSD was significantly overpaying.

The recent TARC investigation cited these “questionable billing practices” from the contractor’s time with Cincinnati MSD as evidence that she was not suited to take on work in Louisville. 

“An examination of Contractor’s relationship with Cincinnati MSD would have revealed to even the most uninitiated a troubling relationship,” the report says. “Contractor had previously been embroiled in billing controversies while contracting for Cincinnati MSD” — contracts approved by Parrott himself. 

In 2018, after Parrott had been in Louisville for several years, the Ohio State Auditor released a report on his time at Cincinnati MSD. The audit uncovered $779,000 in improper expenses. 

The auditor did not flag the $3 million paid to the woman who went on to work for TARC in the list of improper contracts.

Parrott was deemed jointly liable for $461,594, meaning he would have to repay the city if the companies did not. In an email, Parrott said he cannot comment on the status of that restitution due to ongoing civil litigation.

In an email, Porter praised Parrott as an effective leader for MSD and echoed the Mayor’s previous statements on the issue. 

“The issues raised in his previous job were thoroughly vetted before he was hired here,” Porter said in an email. “Transparency and accountability are priorities at MSD.”

Pay From TARC, But No Work 

In December 2018, the same month Ferdinand Risco was promoted to executive director of the Transit Authority of River City, Parrott reached out to the contractor to discuss “an opportunity to provide consulting services to TARC,” she told investigators. 

The woman told investigators that Parrott invited her to Louisville from Dallas to discuss the opportunity with Risco. Investigators found evidence that an MSD contractor actually organized the meeting. 

But in January 2019, Parrott, Risco, the contractor, the MSD contractor and another consultant all met. 

Five days later, the contractor submitted her first invoice to TARC for $27,000. This was ostensibly in exchange for a “three phased study for TARC” that she submitted a proposal to perform, though internal investigators found no evidence that she actually did the work promised. 

The payment violated several TARC policies, including the requirement to seek bids from local contractors first and not provide advance payments. There also was no formal contract until about nine months into the relationship. 

The contractor billed more than $228,000 between February 2019 and Risco’s termination in February 2020. 

The contracts — and payments in the absence of contracts — were further complicated by the woman’s report to investigators that she quickly began a sexual relationship with Risco. 

“Over the course of a mere 22 days, Contractor had met with Risco, Contractor invoiced and secured $27,000.00 in taxpayer funds through a ‘no bid sole source’ contract that circumvented TARC policies and procedures, and the two had sex with each other, as Contractor…travelled at TARC’s expense,” the report wrote. 

That sexual encounter was consensual, according to the woman’s account in the report. But in April 2019, while attending a conference in Dallas with Risco, she said they were alone in his hotel room when she said he grabbed her, attempted to lift up her shirt and sodomize her without her consent. 

She told investigators about two other incidents of sexual assault in hotel rooms, one where he performed oral sex on her without her consent, and another when he got on top of her and she blacked out while he had sex with her. 

“When asked whether the approval or continuation of any or all of her contracts was conditioned upon her submission to sexual relations, Contractor stated unequivocally that she was not asked or required to have sex with Risco in exchange for any of the contracts with TARC,” the report wrote. “She explained that her fear of Risco’s explosive temper deprived her of a choice.”

The contractor’s lawyer declined comment on her behalf. 

Investigators concluded that, whatever her role was, it was Risco who, as a city employee, violated several policies by sending explicit text messages and not disclosing his sexual relationship with a contractor. 

Asked whether he knew about allegations of sexual assault by Risco, Parrott responded emphatically: “No. No. None.”

Contact Eleanor Klibanoff at eklibanoff@kycir.org.

The post Before Contractor Billed TARC For No Work, She Worked For MSD Director appeared first on Kentucky Center for Investigative Reporting.

‘They Need That Post Office’: Ky. Post Offices Have Been Disappearing For A Decade Tuesday, Sep 1 2020 

Graham Ambrose

The post office in Waddy, Ky., an unincorporated town in rural Shelby County. It’s the closest post office for residents of Mount Eden, where the post office has been closed.

Residents of Paint Lick don’t like to dwell on what’s been lost: the grocery stores, the gas station, the barbershop, the local bank, and countless residents who have moved away or died. 

Instead, in this rural Appalachian town in Garrard County suffering decades of business loss, residents have championed an attitude that’s become something of a civic slogan: “Press on regardless,” in the words of a long-departed local leader, Dean Cornett.

What presses on are the few institutions that remain: a doctor’s office, an environmental consultancy, an auto mechanic, and what might be the most important institution of all—the post office.

“The mail is just vital to folks out in a rural community,” said Joe Brown, a lifelong resident of Paint Lick. 

But Paint Lick’s post office is struggling. It’s now open just two hours a day for retail, and rumors have been swirling for years it will close. Brown said he’s thankful the post office is still open at all. 

Kentucky’s rural post offices are threatened. Over the last decade, more post offices have been closed in Kentucky than in any other state, according to data from the U.S. Postal Service. Closures have hit every region, from coal towns in Appalachia to villages in the open fields of the Jackson Purchase. 

What’s lost is a beloved institution and last public commons in communities with few if any public spaces left.

“The post office is a gathering place. It’s a hub for local information exchange,” said Ken Tunnell, a Paint Lick resident and sociologist who taught at Eastern Kentucky University.

Most of the Kentucky towns that have lost a post office are rural, unincorporated, and losing people. Disproportionately poor and elderly, they’re places where vital services are already difficult to access and where high-paying jobs can be hard to find. 

For years, conservative policymakers have targeted rural mail delivery for privatization, restructuring, or downsizing. The fight ramped up last month when U.S. Sen. Rand Paul said the Postal Service should save money by slashing jobs and reducing rural delivery. President Donald Trump has opposed an emergency USPS bailout and efforts to expand mail-balloting in the November election.

Rural Kentuckians are paying attention. The USPS delivers mail to every address in the state, providing prescription medicine, Social Security Checks, and correspondence to the most remote homes not reached by private carriers. 

Mail delays can be dangerous. Brown, 74, is an Army veteran who relies on the U.S. Postal Service to deliver medication. This summer, medicine that typically arrives in 18 days took five weeks to arrive. 

Those rallying behind the USPS also say rural post office closures and service reductions undermine something more basic: local autonomy and identity.

“Part of the pride of the community in that you have a post office,” said Brown. “In our little village of Paint Lick, it’d be another devastating blow if the post office were no longer there.”

Trusted in rural Kentucky

The Postal Service is one of the oldest government services, enshrined in Article I of the U.S. Constitution. The first post office in the present-day borders of Kentucky was opened in Danville, in 1792.

Today Americans consistently rate the Postal Service to be one of the most trusted government agencies. The support is bipartisan. A public opinion poll conducted by Pew Research Center in March found an overwhelming 91% of both Democrats and Republicans had a favorable view of the Postal Service.

Katie Rollins knows that trust firsthand. She worked for 12 years at the post office in Paint Lick, her adopted hometown. Residents still trust her with confidential tasks.

When one elderly Paint Lick resident needed cash to send her great-granddaughter a birthday gift, she recruited Rollins to help. The two were strangers, but the elderly woman trusted Rollins to withdraw money from her bank account, unsupervised, because she knew Rollins had worked at the post office.

“I was like a social worker to those people,” Rollins said. 

The post office is where the oft-anonymous government bureaucracy gets a human face. As a post office employee, Rollins said she often assisted adults who needed help drafting letters, filling out government forms, or writing checks. Others were in poor health and couldn’t sign their own name, let alone hold a pen. 

In Kentucky, nearly half of all people older than 65 live in rural areas. That’s one of the highest rates in the country. Kentucky also claims one of the highest rates of poverty for older Americans. 

“These elderly people down here don’t have anybody,” Rollins said. “They need that post office.” 

The post office forms a core part of rural history, particularly in Appalachian coal country. 

More than a century ago, when permanent settlements developed around Kentucky’s coal mines, records were often lost or not kept in the first place.

But there was one date that was both well-documented and well-accepted to mean a community was on the map: the date its post office was established.

“We tag the history of a lot of these little places by when the post office was established, because we don’t have records of when the first ton of coal was brought out, or when the first people were settled,” explained Ken Martis, a professor emeritus of geography at West Virginia University. “The post office was a good marker of the historical establishment of a place.”

The loss of a post office can signal the opposite: a community in decline. Most towns that have lost their post office also are losing residents and businesses.

Two decades of challenges for USPS

Mount Eden, a small unincorporated town in rural Spencer County, lost its post office in 2017, according to USPS. The building is now home to a maker of headstones and monuments. 

Residents miss the convenience of a local post office. They have to travel 10 miles to Waddy, the next-closest post office. But they still get home mail delivery six days a week, an essential if imperfect service. Longtime Mount Eden residents said there are occasional service delays as well as high rates of carrier turnover. 

“As far as our mail service, they’re very spotty,” said resident Chris Hensley. Part of the problem is that the rural carriers are overworked, he added.

Mount Eden’s post office was one of 699 shuttered nationwide between 2010 and 2020, according to USPS data. Kentucky was hit hardest. 

The 62 offices closed in the Bluegrass State means one in every 11 discontinued post offices was in Kentucky. West Virginia’s 54 closed offices ranked second, while Pennsylvania’s 52 came in third.

The Postal Service workforce is shrinking, too. In 1999, USPS employed roughly 800,000 career workers, according to USPS data. Twenty years later, that figure had fallen to 500,000, a 37% decrease. 

In Kentucky, the number of postal workers has dropped about 8% over the last decade, according to data from the Bureau of Labor Statistics. 

The decline in Postal Service jobs is a particular crisis in rural communities, where government mail service is most essential and where delivering mail has cleared a reliable path into the middle class. 

“Especially in rural areas, where jobs are harder to come by that aren’t just minimum wage, people feel really lucky to get a job like it,” said Silas House, a Lexington-based writer who worked as a mail carrier in rural Laurel County in the early 2000s. 

House, who recently defended rural mail service in an essay for The Atlantic, said the job was “incredibly hard,” involving long days on his feet, uncooperative weather, and difficult terrain in the mountains of Appalachia. He had a gun pulled on him twice. Yet the work remains essential, he said.

“A lot of these areas don’t have UPS or FedEx, or those services are much more expensive,” House said. “My service was a real lifeline in many ways for the people in the very rural areas.”

Cuts coming?

The USPS faces big challenges. Due to the ubiquity of email and social media, the emergence of competitor online retailers such as Amazon, and a 2006 law requiring the Postal Service to pre-fund its retiree benefits program, mail volume is dwindling while USPS debts mount.

In the third quarter of FY20, USPS reported a net loss of $2.2 billion, nearly matching the $2.3 billion net loss in the same quarter last year. In addition to attacking voting by mail, Trump has said he opposes a USPS bailout. Last week, Sen. Paul, a Kentucky Republican, said cutting a single day of rural service would save up to $1.5 billion. He also suggested reducing rural delivery to as few as two days a week.  

But advocates of rural delivery emphasize that the value of the Postal Service shouldn’t be reduced to a cost-benefit analysis.

“The Postal Service is not a business. It’s a government service,” said Stan Brunn, a professor emeritus of geography at the University of Kentucky who grew up in the rural Midwest. “It’s designed to serve everybody. It’s not just serving specific clientele.”

A USPS spokesperson based in Kentucky said there are currently no plans to close post offices.

As states and counties prepare for unprecedented numbers of voters to participate in the November election by mail, some have accused the Trump administration of sabotaging the USPS as a way to undercut Democrats. In a Congressional hearing earlier this month, Postmaster General Louis DeJoy was grilled by lawmakers over his decision to cut some employee overtime and remove sorting machines. DeJoy told senators delivering election mail was a “sacred duty” that the USPS would fulfill “securely and on time.”

Last week, residents of Inez, a small Appalachian town in Martin County, staged a protest against Robert “Mike” Duncan, chairman of the USPS board of governors and a friend of Senate Majority Leader Mitch McConnell. Protester Mickey McCoy said Duncan was “slowing down the post office” to benefit Trump. 

With so many residents of Martin County living in rural areas at or below the poverty level, “this is like a kick in the nuts to all of them for slowing down the Postal Service,” said McCoy, a retired English teacher who serves on the county board of education.  

Caught in the middle of the politics are rural Americans, who live in communities where political frustrations are already palpable.

“This is just another assault on people and communities that in many cases feel abandoned already,” said Shane Barton, an economic developer at the University of Kentucky and candidate for Berea City Council. A ninth-generation resident of Appalachia, Barton said the Postal Service strengthens “mountain values” such as resilience and neighborliness. “However large or small that post office is, it provides a public benefit.”

Data from the U.S. Postal Service shows mail service performance, a measurement of delivery and processing times compared to expectations, declined in July. 

Kentucky ranks in the bottom 10 states in per-capita mail sorters, processors, and processing machine operators, according to BLS data. That’s one of several concerns for the November election.

In Kentucky, any voter who wants an absentee ballot can request one at GoVoteKy.com, and state officials have approved a plan through which any voter concerned about the spread of COVID-19 can cast an absentee ballot and vote by mail.

Ballots must be postmarked by Election Day — Tuesday, Nov. 3 — and received by county clerks by Nov. 6 in order to count. The three-day cushion after Election Day could help mitigate some issues with mail delays.

To ensure the integrity of the mail system in the small towns where post offices are still open, residents say it’s paramount they stay open.

When asked what the closure of the Paint Lick post office would mean for the town, Rollins refused to consider the possibility. She and the rest of her adopted town plan to press on regardless of obstacles.

“It won’t close in Paint Lick, Ky. We will stop it,” she said. “We’re going to strive, no matter what. We have people down here who care.”

Graham Ambrose is an investigative reporter covering social services and youth issues. He is a Report for America Corps member. Contact Graham at gambrose@kycir.org.

The post ‘They Need That Post Office’: Ky. Post Offices Have Been Disappearing For A Decade appeared first on Kentucky Center for Investigative Reporting.

Kentucky Violated Federal Rules In Rush To Pay Some Unemployment Benefits Thursday, Aug 20 2020 

By late April, Kentucky’s unemployment insurance office was handling more than a hundred thousand claims a week, and Gov. Andy Beshear was urging anyone who was out of work to apply during his daily briefings.

He said the state was doing everything in its power to swiftly get money to people who lost work due to the coronavirus.

In its haste to help cash-strapped Kentuckians, however, Kentucky’s unemployment office took shortcuts that violated unemployment policies and drew criticism from federal officials in Washington, according to emails obtained by the Kentucky Center for Investigative Reporting through a public records request.

The U.S. Department of Labor, which oversees unemployment insurance, had gotten wind that Kentucky was mishandling payments to independent contractors and self-employed workers by automatically approving applicants for the state’s minimum weekly amount, plus the $600-a-week in extra federal money offered in response to the pandemic.

That got benefits out the door faster, but at a cost: The state was likely underpaying some workers while violating the CARES Act, which required states to determine how much money workers were eligible to receive before starting payments.

“Hoping that’s not the case,” wrote Gay Gilbert, the U.S. Department of Labor’s administrator of unemployment insurance in an email sent on April 20 to Kentucky’s executive director of unemployment, Muncie McNamara. “[B]ut can you confirm?”

McNamara responded three hours later to Gilbert’s email to confirm: yes, Kentucky had indeed been automatically providing applicants with the minimum payments. But in his email, McNamara attributed much of the confusion to Gilbert’s agency.

McNamara wrote that Kentucky’s leadership was frustrated with the lack of timely guidance from the federal government, which he described as “more of an obstacle.”

“Frankly, I feel like Kentucky is being punished for acting quickly, as we were encouraged to do,” McNamara wrote in his email. McNamara was quietly fired two weeks later, as KyCIR reported last month

Marjorie Arnold, chief of staff at the Kentucky Labor Cabinet, which now oversees the unemployment office, said in an email that McNamara’s correspondence with Gilbert “[does] not represent the Kentucky Labor Cabinet’s position with respect to the U.S. Department of Labor, but are representative of the type of unprofessional behavior that was exhibited on a regular basis.”

“As with any emergency program, federal guidance evolved over time, and as issues arose, the Office of Unemployment Assistance worked diligently with U.S. Department of Labor personnel to implement guidance as it was provided,” Arnold said.

McNamara said his supervisor at the unemployment office was aware of the tone and content of the email. He added that he was fired without cause.

A spokesperson for the Department of Labor said that many states had issues implementing the new unemployment policies, and that it is working to make sure states follow federal law.

Kentucky Problems

In the week before Gilbert’s email, Kentucky’s unemployment agency handled just over 103,000 initial unemployment claims.

The agency was scrambling to keep up with the influx of claims by adding staff to operate phone lines and answer questions. Congress had weeks earlier authorized the Pandemic Unemployment Assistance program, which allocated unemployment funds for state agencies to distribute to newly unemployed independent contractors and self-employed workers who lost work due to the coronavirus pandemic.

It was the states responsibility to calculate how much money such workers were eligible for based on previous earnings. The best way to do that would be to use earnings statements from tax filings. However, the deadline to file taxes was pushed back to July, so states like Kentucky didn’t always have the documents they’d need to quickly calculate eligibility and start paying benefits.

Kentucky’s solution was to approve every claimant for the minimum benefit, initially set at $180 a week, plus the additional $600 payment also authorized by the CARES Act.

“We decided it best to pay the minimum and the $600 to eligible PUA recipients so we could give them assistance as quickly as possible,” McNamara wrote to Gilbert.

This could result in underpayments, where the state paid unemployed workers less than they were entitled to, but McNamara wrote that if the agency later determined the individual was eligible for more money, the state would pay them in arrears and “make them whole.”

In a later email, Gilbert raised another issue with Kentucky’s administration of the federal unemployment program that could pose a more serious problem for people receiving benefits. The payments to independent workers were only supposed to be available to those whose unemployment was directly tied to COVID-19. Under federal guidelines, those workers were supposed to certify that the COVID-19 related conditions that led to their unemployment persisted for every week they filed a claim.

Gilbert attached a notice sent to people receiving benefits from Kentucky’s unemployment office that showed the state wasn’t asking people to certify their unemployment situation on a weekly basis, as required.

A spokesperson for the federal Department of Labor said it is working with states to correct policy violations such as these, but that states “may also be required to take specific corrective actions that may require reconsidering claims that may have been improperly determined as eligible for payment.”

Kentuckians who receive unemployment payments that are reconsidered and later determined to be improper will have to pay that money back. The state can collect on unemployment overpayment debts by withholding future benefits or even taking recipients to court.

Marjorie Arnold of the Kentucky Labor Cabinet said that Kentucky is “obliged to attempt to recover improperly paid benefits in accordance with federal and state law.”

Frustration

In his emails to the federal Department of Labor, McNamara said he was frustrated, and this frustration was shared by other officials in Kentucky’s unemployment office.

McNamara said the federal Labor department was slow to provide guidance, or at times gave guidance that conflicted with earlier policies. For example, McNamara said the federal government had initially set Kentucky’s minimum weekly benefit amount for independent contractors at $180, only to lower that amount to $174 in later guidance. “These may seem like minor things but given the volume of claims we have this represents a tremendous amount of money,” McNamara wrote.

The issues were compounded by the fact that neighboring states were moving slower than Kentucky. Indiana didn’t start accepting claims from self-employed workers and independent contractors until April 24, nearly a month after Kentucky. McNamara thought Kentucky was bearing the cost of that delay.

“As a result of their tardiness, people who live in Indiana and might be an independent contractor or self-employed doing business on both sides of the river are applying for PUA benefits in Kentucky, because we are making payments and Indiana isn’t,” McNamara wrote to Gilbert.

‘Extremely Concerned’

When Gilbert responded two weeks later, the federal unemployment administrator was conciliatory. “Having been in your seat as a state UI director, I understand why there is sometimes frustration and tension when our system is asked to quickly ramp up new and complex programs,” Gilbert wrote on May 4.

However, Gilbert said that the federal government was “extremely concerned” that Kentucky and other states were not implementing unemployment programs properly. Gilbert wrote that states needed to make sure payments were going to eligible claimants and not just simply make payments and determine eligibility later.

McNamara never got a chance to respond, however. He was fired the next day, and emails show interim unemployment director Stefanie Ebbens Kingsley scheduled a call with Gilbert to talk about the issues with Kentucky’s unemployment process.

When McNamara was invited to testify before a legislative committee last month about the state’s unemployment office, he mentioned that Kentucky’s rush to pay unemployment benefits resulted in errors that delayed claims for months at a time. He also said they were clearing holds on unemployment claims in bulk, without investigating the claims individually, until the federal government ordered them to stop.

The post Kentucky Violated Federal Rules In Rush To Pay Some Unemployment Benefits appeared first on Kentucky Center for Investigative Reporting.

In Kentucky, Unemployment Checks Are Docked For Old State Debts Thursday, Aug 6 2020 

Kimberly Iacono lost her job when the Bardstown Cracker Barrel closed its dining room in March.

Kentucky’s unemployment office approved her benefits but deemed her eligible for only $114 a week from the state, far less than she’d normally take home in tips as a server. Iacono has seen that modest check reduced even further because the Kentucky Office of Unemployment Insurance says she owes them $6,570. 

The office alleges she was overpaid eight years ago, and they docked her checks during the pandemic to begin reducing that debt. At one point, they asked Iacono to pay them $600 a month. Iacono was shocked. 

“I’m eligible for $114 a week in unemployment insurance and you’re telling me that you want me to pay $600 a month,” Iacono said. “I mean, that’s absolutely preposterous.”

More people in Kentucky and across the country will likely find themselves in a similar situation. Policy experts and public benefits lawyers say the unemployment crisis has already created a wave of overpayment debts due to the complexity and speed at which state administrators adjusted to the circumstances.

Cali Mills, an executive advisor with the Kentucky Labor Cabinet, which began overseeing the unemployment office in May, said the office is mandated to collect debts, and they will soon start pursuing legal action against fraudulent claims and overpayments alike.

For some unemployed Kentuckians, that could mean a day in court. 

Fraud prosecutions have been limited due to the pandemic, Mills said in an email to KyCIR, “but with the courts beginning to resume a more regular schedule, legal actions will resume.”

Her Debt, But Not Her Fault

Iacono’s debt stems from 2012, when Iacono was allegedly overpaid in unemployment benefits during a stint between jobs. At first, state workers said they couldn’t provide any information about the overpayment besides how much Iacono owed, and that they would withhold $25 a week to put towards the debt.

After KyCIR asked the state about Iacono’s debt, the unemployment office called her with new information: The last time she filed for unemployment, her employer challenged Iacono’s claim and won. But no one told Iacono.

The state kept sending her unemployment checks, though she was no longer eligible, and now, she’ll have to pay that money back. It will likely take a long time: She’s back to work and no longer collecting unemployment, but she’s agreed to a payment plan of $28 a month.

Overpayment debt can pop up years after a person first collected unemployment, says James Maxson, an unemployment insurance lawyer who served as in-house counsel of Kentucky’s Office of Unemployment Insurance from 2008 until 2016.

“If you’ve received benefits and it was later determined that you were ineligible, not only do you stop receiving benefits prospectively, not only do they turn off the tap, but you actually have to pay those benefits back,” Maxson said.

State agencies are required by federal regulations to pursue any overpayment in unemployment benefits, but some states have passed laws allowing them to waive debt that is the result of an agency error, or that causes financial hardship. Kentucky is one of just 10 states that does not allow a waiver of overpayment debt in any circumstances, according to the federal Department of Labor.

“It’s an aspect of Kentucky’s system that I disagree with very much,” Maxson said. “But I’m sure that (overpayments) are beginning to happen and I’m talking to people pretty regularly who say, ‘They told me I’m not eligible and they want me to repay that amount.’”

To recover the overpayment debt, Kentucky’s unemployment office can withhold future benefits, as it did with Iacono, or file a lawsuit. Once that debt turns delinquent, state unemployment agencies are required to turn it over to the federal Treasury as the debt collector of last resort, though often, that happens before any collection attempts.

The Treasury withholds tax returns and other federal payments to offset the debt. This means the feds have been withholding aid to people put out of work by a global pandemic to pay a debt they probably didn’t know about.

The Treasury can withhold up to 50 percent of the $600 weekly payment Pandemic Unemployment Assistance authorized by Congress’ coronavirus relief package. In just the first half of 2020, the Treasury offset program has collected more than $1 million on behalf of Kentucky’s Department of Labor and more than $202 million for state agencies nationwide.

Improper Payments Abound

Unemployment overpayments are fairly common in Kentucky under normal circumstances.

The federal Department of Labor estimates that Kentucky’s unemployment office made nearly $26 million in improper payments last year, including overpayments and underpayments.

According to 2016-19 data from the Department of Labor, Kentucky overpaid on unemployment insurance benefits roughly 17% of the time. That’s well above the 10 percent improper payment rate the federal government requires states and federal programs to maintain.

Marjorie Arnold, chief of staff at the Kentucky Labor Cabinet, said in an email that recent changes in program administration have lowered overpayment rates to around 9%.

Quarterly payment accuracy reports would reveal how much Kentucky has overpaid since the coronavirus pandemic struck the commonwealth in March, but those were put on hold until July.

Michele Evermore, an unemployment policy expert at the National Employment Law Project, said that the pandemic has without question created a looming overpayment problem.

When the first coronavirus case popped up in Kentucky and businesses closed, the state expanded unemployment to reach independent contractors and the self-employed. The CARES Act followed shortly after, codifying the expansion in federal law and creating another $600 weekly payment under the federal Pandemic Unemployment Assistance.

Kentucky officials rushed to get money to people who desperately needed it. Evermore said the sheer number of people collecting unemployment, along with the new policies states like Kentucky have implemented on the fly, means state agencies are more likely to make mistakes.

“The administration in Kentucky really seems like they are trying their best to adopt whatever best practices they can to get benefits out the door as quickly as they can,” Evermore said. ”Ironically, some of the states that are doing the best at trying to get benefits out might get hit with this a little more.”

The problem isn’t likely to go away, even if state unemployment officials would prefer to avoid collecting overpayments. The Department of Labor Office of Inspector General said in its most recent report to Congress that it is considering auditing state workforce agencies’ efforts to detect and recover overpayments. 

The inspector general said it expects that phase of oversight, including any audits, to be completed by September 2021.

The inspector general’s report focuses on fraud in the unemployment program that can result in overpayments. But more often, overpayments are the result of simple paperwork problems or even administration errors made by the state, according to David Super, a public benefits attorney who teaches at Georgetown Law School.

“There needs to be program integrity and there needs to be serious measures taken (to prevent and punish fraud), but that’s not most of what we’re talking about here,” Super said. “A lot of what we are talking about are people who needed the money and were subsequently eligible for the money, but the paperwork went wrong.”

For example, Kentucky reports the most common “root cause” of overpayments in its unemployment system is that applicants didn’t register for required employment services, to connect them with job leads or training opportunities.

Most unemployed people have no problem doing so, Super said. “But if they are never asked, or the form is never handed to them or it sticks to another form and doesn’t get signed, then that becomes an overpayment,” Super said. 

If programs were properly administered and the application process simplified, he said, fewer people would be caught by paperwork errors.

In fact, Marjorie Arnold, chief of staff at the Kentucky Labor Cabinet, said in an email that the unemployment office has significantly lowered its improper payment rate after loosening the requirements surrounding employment search registration.

‘Broken for many, many years’

Submitted

Kimberly Iacono

The state has withheld hundreds of dollars from Iacono at a time, she said, when every penny counts.

She’s mostly been kept afloat by the $600 per-week in federal Pandemic Unemployment Assistance authorized by the CARES Act. But in July, $300 of that check was withheld, with no warning or explanation. 

Iacono said the unemployment office told her this week that it’s too late to appeal the decision, even though they made a mistake in not cutting her off once her employer successfully challenged her claim. She says she’s planning on talking to an attorney about it.

Iacono knows that, given the state of Kentucky’s unemployment system, things could be worse. The application process was confusing and full of mixed messages even when she filed for unemployment back in 2012, and she knows people who filed claims back in March and who have yet to receive a single check. 

“It’s not working and it’s been broken for many, many years,” Iacono said. “Unfortunately now taking into consideration the events that have caused so many to have to file for benefits, the evidence that it’s broken is even greater.”

Iacono went back to work at Cracker Barrel a few weeks ago. Business has been slow, and she’s worried about getting sick.

She wishes the unemployment office told her about the debt when it supposedly took place, instead of waiting until she was out of a job. “I would have had the opportunity to resolve this eight years ago, and not have this thrown in my face at a time when it’s not exactly ideal to have to contend with this.”

Contact Jared Bennett at jbennett@kycir.org.

The post In Kentucky, Unemployment Checks Are Docked For Old State Debts appeared first on Kentucky Center for Investigative Reporting.

Fired Unemployment Director Testifies About Chaotic Pandemic Response Thursday, Jul 30 2020 

The former executive director of the Kentucky Office of Unemployment Insurance told legislators Thursday the agency’s chaotic rush to deliver benefits in the early days of the coronavirus pandemic led to months-long delays — and may have violated federal unemployment regulations. 

Muncie McNamara testified before the Interim Joint Committee on Economic Development and Workforce Investment. The Kentucky Center for Investigative Reporting first reported the details of McNamara’s time at the Office of Unemployment Insurance earlier this month; he was hired personally by Lt. Gov. Jacqueline Coleman in January and fired in May, amid the chaos of the pandemic. 

McNamara spoke for almost half an hour about the issues he saw at the agency. After his testimony, Republican lawmakers questioned him about Gov. Andy Beshear’s response, the months-long delays and data security. Only one Democratic lawmaker was called on to ask questions. 

McNamara told legislators that neither he nor Josh Benton, the Deputy Secretary for the Cabinet for Education and Workforce Development, were consulted before Beshear announced a statewide shutdown of in-person business that led to a massive spike in unemployment. 

According to McNamara, Beshear and Benton wanted to quickly extend benefits to independent contractors and other workers who previously wouldn’t have qualified. 

“[Benton] stated he wanted to do this as soon as possible, and he did not want to wait for the feds, the U.S. Department of Labor, to act,” McNamara testified. “He wanted Kentucky to take the lead in this.”

McNamara said that decision to move quickly at the beginning has contributed to the months-long delays for benefits the state is now trying to untangle. The agency’s computer systems were set up to reject these claims, and McNamara said staffing shortages left the agency unable to respond quickly to the huge number of claimants. 

“Looking back on it, we should have taken a more reasonable, measured response,” McNamara said. “This didn’t mean waiting a long, long time…We needed to take a little bit more time to come up with a plan on how are we going to pay these people that otherwise aren’t covered, and how are we going to administer that portion of the program?”

Unemployment claims skyrocketed as businesses closed in March. The unemployment office processed 49,000 claims by the 21st of that month. The office processed another 113,000 claims the following week.

McNamara said Benton and Beshear seemed to want to ask for forgiveness from the federal government, rather than wait for permission. And it seems they may need to: McNamara said the federal Department of Labor intervened at some point and told Kentucky officials to stop clearing claims en masse. 

McNamara said, in order to get money to claimants as quickly as possible, the office began clearing the “stops” on unemployment claims that delay payments, without investigating the claims individually. McNamara said it was “probably an underestimate” to say thousands of stops were cleared this way.

Federal regulations require each claim be investigated and cleared individually. “So whether practically speaking that was a good idea to try and get people paid, legally speaking you can’t do that. You have to investigate each individual claim,” McNamara said.

Rep. Daniel Elliott, a Republican from Danville, asked McNamara if that practice was against the law. McNamara didn’t answer directly.

“I will say that the federal government, the Department of Labor, the United States administrator for the federal unemployment system got wind that we were doing that and told us that we had to stop,” McNamara said.

Data Breaches Discussed

McNamara also addressed a high-profile data breach at the unemployment agency, saying that the Beshear administration’s explanation for the incident is “partially true.” State officials have said they took swift action as soon as the breach was identified on April 23. 

But McNamara said he emailed Benton and the executive director of the Office of Technology Services on April 22 about a potential data breach; he received an email that showed a claimant’s application contained someone else’s driver’s license.

It wasn’t until the next day when another, similar data breach was found that cabinet officials took action and temporarily shut down the system, McNamara said.

“That was the second one. I had forwarded them the initial one a day earlier, so they knew about it a day before they acknowledged that there was an issue,” McNamara said.

Republicans, including Attorney General Daniel Cameron and Kentucky Auditor Mike Harmon, have criticized the Beshear administration for not reporting the data breach to the correct agencies within three days, as required by Kentucky’s data protection law. The breach didn’t become public knowledge until May 28, over a month after it occured.

Another data breach was reported Wednesday, according to a statement from the Labor Cabinet. 

Sen. Karen Berg, a Democrat from Louisville, criticized McNamara for not doing enough.  

“Apparently, you are the first person in the administration to have been notified of this data breach, and you left your office without closing down the systems,” Berg said. “I don’t understand how.”

Committee co-chair Rep. Russell Webber, a Republican from Shepherdsville, rebuked Berg, saying McNamara was not on trial or there to be cross-examined. 

Berg also criticized the previous administration’s handling of the unemployment office. Berg said that a reorganization under former Gov. Matt Bevin resulted in the loss of 95 trained unemployment specialists who would have been helpful in dealing with the current crisis. 

McNamara said he knew he was walking into a challenge when he took the executive director job. 

“When I walked in, the office was in bad shape,” McNamara said.

Beshear said at a press briefing later Thursday that McNamara’s firing was valid and that the concerns McNamara raised at the time have all been addressed. Beshear said McNamara was one of a number of state officials who did not handle the data breach properly.

“What I was shown is that they forwarded an email to people that are getting thousands of emails, and then went home,” Beshear said. “If you’re the head of something, you’ve got a bigger obligation than that. And I believe when the inspector general report comes in about that data breach it’s going to show a number of people in leadership positions should have done more, and we’re going to make sure that we correct that and we’re going to make sure that we’re transparent about it.”

(Read: Cabinet Officials Defend Hiring, Firing Of Unemployment Director)

Berg was the only Democrat who questioned McNamara. After the hearing, a group of Democratic lawmakers told reporters that Republicans are on a “witch hunt” and didn’t allow them to ask questions, according to a tweet from WKYT’s Phil Pendelton.

Note: This story was updated at 6 p.m. Thursday to include comments from Gov. Andy Beshear. Contact Eleanor Klibanoff at eklibanoff@kycir.org. Contact Jared Bennett at jbennett@kycir.org.

The post Fired Unemployment Director Testifies About Chaotic Pandemic Response appeared first on Kentucky Center for Investigative Reporting.

Josh Benton To Leave Role At Education and Workforce Development Thursday, Jul 23 2020 

J. Tyler Franklin

Deputy Secretary for the Kentucky Education and Workforce Development Cabinet Josh Benton during a daily coronavirus briefing on 4/9/20.

Josh Benton, the deputy secretary of the Cabinet for Education and Workforce Development, is stepping down, a spokesperson said Thursday. 

Benton has been the face of the state’s unemployment office in recent months, often attending Gov. Andy Beshear’s daily press briefings to provide updates on the unprecedented jobless claims and months-long delays for benefits. He is leaving to pursue a career opportunity outside of state government, spokesperson J.T. Henderson said in an email. 

“He will be missed by everyone at the Education and Workforce Development Cabinet,” Henderson wrote. “We wish him and his family well in this new endeavor.”

Benton was appointed deputy secretary in July 2018 under former Gov. Matt Bevin. Before that, he worked for the Cabinet for Economic Development since 2005, according to his LinkedIn. 

Benton’s resignation is the latest in a series of senior-level departures at the Office of Unemployment Insurance since the pandemic hit. In May, the agency fired Muncie McNamara, the executive director of the Office of Unemployment Insurance, who had been hired in January.

McNamara was replaced by Stefanie Ebbens Kingsley, who subsequently stepped down. 

In late May, Beshear moved the Office of Unemployment Insurance from the Cabinet for Education and Workforce Development to the Labor Cabinet. But Benton remained the face of the office, continuing to speak at press conferences with Beshear. 

Benton’s departure hadn’t been announced by the state, but it became public knowledge after several senators thanked him for his service during Benton’s testimony before a legislative hearing Thursday.

“I know you’ve gone through some difficult days in recent months,” said Sen. Lynn Bechler, a Republican from Marion. “And we are very grateful for everything that you’ve done for this Commonwealth and we do wish you the very best in the future.”

 

The post Josh Benton To Leave Role At Education and Workforce Development appeared first on Kentucky Center for Investigative Reporting.

Cabinet Officials Defend Hiring, Firing Of Unemployment Director Thursday, Jul 23 2020 

Cabinet officials defended the hiring and downplayed the firing of the executive director of the Office of Unemployment Insurance at a legislative hearing Thursday. 

As KyCIR first reported Monday, the executive director, Muncie McNamara, was quietly fired in early May amid a mounting unemployment crisis caused by the coronavirus

McNamara was a campaign donor and friend of Lt. Gov. Jacqueline Coleman; she personally called to offer him the job running the Office of Unemployment Insurance in January. 

Josh Benton, the deputy secretary for the Cabinet for Education and Workforce Development, defended that hire to the legislative Program Review and Investigations Committee Thursday. 

“We felt that he met the qualifications for the job, there’s no doubt about that,” he said.

Sen. Danny Carroll, a Republican from Paducah, asked whether any of the delays in providing jobless benefits can be traced to McNamara’s inexperience on the job. 

“Every state has had complications. Every state has had frustrations,” Benton said. “So to fully lay that at any one person’s feet would be unfair.”

Benton described an agency thrown into chaos as unemployment claims skyrocketed amid the pandemic-related shutdowns. The agency went from processing a few thousand claims a week to hundreds of thousands, and the size of the agency’s staff ballooned as employees from other parts of state government came to help out.  

Legislators also questioned Benton — as well as Labor Secretary Larry Roberts and general counsel Amy Cubbage — about the contract the state gave Ernst and Young to help process claims. The $7.6 million no-bid contract is set to expire in three days, though Cubbage said they are considering extending it because the workers are already trained in the system. 

Benton and Cubbage also addressed a data breach that was first identified at the unemployment office in late April, which was not reported to the proper authorities until nearly a month later. Gov. Andy Beshear called for the Office of the Inspector General at the Transportation Cabinet to look into the incident, and Cubbage said that report is expected any day, but that it seemed likely the failure to report the breach came from within the legal department.  

Benton said the issues facing the Office of Unemployment Insurance were much larger than any one person. 

“It was going to take our agency, or any agency, a significant amount of time to stabilize operations to meet the demand,” Benton said. 

He did not offer further explanation about why McNamara was suddenly fired on May 5, citing an ongoing Personnel Board action. 

McNamara filed an appeal with the personnel board claiming he was fired after raising a number of concerns about the cabinet’s handling of the unemployment program. Those concerns include issues of data security, conflicts of interest, a lack of clear guidelines and standards, compliance with federal regulations and concerns about the management of the unemployment trust fund.

Records show he was fired “without cause” and the Cabinet for Education and Workforce Development told KyCIR those allegations did not factor in his firing.

Benton’s recounting of events was more neutral than that of his boss, Gov. Andy Beshear. In a press conference Monday, Beshear described a much more fraught situation, calling McNamara’s departure “emotional” and “messy.”

“Certainly with it being messy in the end, I think everybody wishes the situation either hadn’t happened or turned out how it did,” Beshear said.

Contact Eleanor Klibanoff at eleanor@kycir.org. Contact Jared Bennett at jbennett@kycir.org.

The post Cabinet Officials Defend Hiring, Firing Of Unemployment Director appeared first on Kentucky Center for Investigative Reporting.

Attorney General Revives Lawsuit Against State Pension Officials and Hedge Funds Thursday, Jul 23 2020 

Kentucky Attorney General Daniel Cameron has revived and expanded a lawsuit accusing hedge fund managers and Kentucky Retirement System officials of mishandling the state’s troubled pension fund for public employees, which at 13 percent solvency is among the worst funded in the country.

Cameron filed an intervening complaint joining the Mayberry et al. v. KKR & Co., L.P. et al case on Monday. 

In the original case, retired Kentucky State Policeman Jeffrey C. Mayberry and seven other Kentuckians who are entitled to KRS pensions accuse KRS employees and a group of hedge funds and hedge fund owners of mishandling the pension investments.

The hedge funds, the plaintiffs say, siphoned off money from Kentucky’s public pension trust fund by selling secretive, costly investment products to KRS trustees who were in charge of managing the fund. According to the lawsuit, the KRS employees were eager to cover up — and eventually, improve — the disastrous financial shape of the fund, and were thus willing to take a chance on the hedge fund’s risky investments.

That case was originally filed in December 2017 and dismissed earlier this month after the Kentucky Supreme Court ruled the plaintiffs didn’t have standing to bring the lawsuit because they weren’t harmed in a concrete way by the collapse of Kentucky’s pension funds. 

Now Cameron has joined as a plaintiff and added new allegations. 

Cameron’s claims bring the Kentucky Teachers Retirement System (KTRS) into the mix by alleging funds sold to it by Blackstone and Prism were faulty. The new complaint also claims the CEOs of Blackstone and KKR enriched themselves personally through the relationship between KRS and their respective companies.

“Our goals in pursuing this litigation are straightforward: to protect the pensions of hardworking government employees and to safeguard taxpayer dollars,” said Krista Locke, the deputy communications director for the Office of the Attorney General.

KRS Director of Communications Shawn Sparks said the agency does not comment on ongoing litigation.

Fund Mismanagement

In his complaint, Cameron explains that, around 2009, Kentucky’s retirement system was in dire straits and looking for a quick fix. The fund had sustained massive losses in recent years, including a loss of $2.2 billion in 2000 and another $4.4 billion in 2009, amounting to half of the fund’s assets.

The KRS trustees decided to gamble with so-called “alternative investments,” which were being marketed to struggling public pension funds all over the country by the defendants: KKR & Co., Prisma Capital Partners, Pacific Alternative Asset Management and the Blackstone Group.

“It’s surprising the Attorney General’s office would pursue a case that has already been dismissed by the Kentucky Supreme Court,” said Don Kelly, an attorney at Wyatt, Tarrant & Combs who is representing Blackstone in the case. “As we’ve demonstrated repeatedly, these claims have absolutely no merit. We delivered more than $150 million in net profits to Kentucky pensioners – and exceeded by nearly three times the benchmark set by KRS itself.” Kelly’s statement was provided to KyCIR by a PR firm.

The funds were usually hedge funds that invest in other hedge funds, and they carried higher risks and higher fees than traditional investments. They also promised higher returns, but studies have shown these alternative investments often fail to live up to those promises and that steep management fees eat away at the profits.

The hedge funds designed plans specifically for Kentucky with names such as the “Daniel Boone Fund,” “Henry Clay Fund,” and “Newport Colonels Fund.”

Cameron’s lawsuit claims that KRS, eager to cover up years of financial disasters that cut the pension fund’s balances, bought these so-called “alternative investments” without scrutiny and covered it up when the funds performance didn’t meet expectations. The bets placed on these funds were the largest single investments ever made by KRS.

KyCIR investigated the secretive funds back in 2014. The investigation found that, at the time, a quarter of the $15.7 billion managed by KRS was parked in alternative investments, and KRS refused to disclose much about their performance or the cost of fees, calling the information proprietary.

Chris Tobe was a trustee of the Kentucky Retirement Systems from 2008 until 2012. He became a whistleblower in 2010 and in 2012, in his role as KRS trustee, hired an independent counsel to investigate abuses of public funds at KRS. He later wrote about Blackstone’s relationship to KRS in his book, “Kentucky Fried Pensions – A culture of Coverup and Corruption.”

Tobe said he is thrilled to see the Attorney General take up this case with the added allegations regarding KTRS investments and violations of fiduciary and transparency standards. “Hopefully this involvement by the AG will finally lead to real reform on the investments,” Tobe said. 

Cameron’s lawsuit claims that KRS “failed to follow legal mandates regarding the safeguarding and prudent investment of trust monies for which they were responsible.” As a result, Kentucky’s pension funds are still underfunded and nearing collapse even during the longest running “bull market” in history.

Kentucky Connections

The case has the potential to shed light on an especially opaque and powerful side of Wall Street — and carries significant political implications for Kentucky.

Cameron’s complaint accuses Stephen Schwarzman, the CEO and co-founder of Blackstone, of arranging for his company to rent a corporate jet he owned to fly to Kentucky and arrange meetings with KRS officials. The complaint alleges Schwarzman netted millions of dollars this way.

Schwarzman is one of Kentucky Senator Mitch McConnell’s most generous supporters, having already donated $10 million to the Senate Leadership Fund, a super PAC tied to McConnell this cycle alone. Schwarzman also gave $3 million to a super PAC supporting President Donald Trump this cycle.

KKR CEO and co-founder Henry Kravis, who Cameron says ran a similar private jet scheme as Schwarzman, is also a financial backer of Mitch McConnell. He gave a total of $5,000 to McConnell in 2019.

Cameron served as McConnell’s legal counsel from 2015 until 2017 and has long been associated with the Senator.

Gov. Andy Beshear’s former law firm, Stites & Harbison, represented the investment firm KKR while Beshear worked there. Cassandra Wiemken, an attorney who served directly as counsel for KKR worked closely with Beshear at the law firm.

Beshear declined as Attorney General to join the Mayberry lawsuit when it was filed in 2017. When the Supreme Court dismissed the case on July 9, Chief Justice John Minton Jr. wrote in the court’s opinion that the state Attorney General was better suited to bring the case but has so far declined to do so. The judge’s opinion says plaintiff’s provided the Attorney General a copy of the complaint before filing, but he declined to join the suit.

Beshear’s communications director, Crystal Staley, said in an email it is the Attorney General’s decision to intervene on any case. “To the governor’s knowledge, he did not perform any legal work for the entity,” Staley said, referring to KKR. Staley also noted that Attorney General Cameron worked for Stites & Harbison.

Note: This story was updated at 4:25 p.m. Thursday to include comments from Gov. Andy Beshear and Blackstone. Contact Jared Bennett at jbennett@kycir.org.

The post Attorney General Revives Lawsuit Against State Pension Officials and Hedge Funds appeared first on Kentucky Center for Investigative Reporting.

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