Audit: Spending irregularities found in 3 prosecutor offices

FRANKFORT, Ky. (AP) — A review of three county attorney offices turned up spending irregularities that included a former statewide candidate awarding large bonuses to his wife, Kentucky's auditor said Thursday.

Findings from the special examinations of the Boyd, Gallatin and Lawrence county attorney offices will be turned over to state and federal law enforcement authorities, state Auditor Mike Harmon said. The review covered activity from July 1, 2017 to June 30, 2019, he said.

Based on the findings, Harmon called on state lawmakers to enact legislation next year to require an annual audit of all county attorney offices.

“If we truly want to shine the light of transparency on how public funds are spent, then county attorneys must be included in the same way fiscal courts, sheriffs and clerks are held accountable to the taxpayers,” the auditor said.

In Lawrence County, auditors found that County Attorney Michael Hogan awarded employees with $134,500 in bonuses from delinquent tax fees, Harmon said. Hogan's wife received $126,500 of the amount, the auditor said.

The awarding of bonuses violates the state's Constitution unless the recipients are being paid for work performed, Harmon's office said. The bonuses also might violate local ethics rules because more than 90% went to the prosecutor's wife, providing a substantial benefit to him, it said.

The findings are being referred to the FBI, the IRS, the state attorney general's office, the state revenue department and the Lawrence County Ethics Commission, Harmon said.

Hogan ran for attorney general in 2015 and for lieutenant governor in 2019 on a ticket with gubernatorial candidate Robert Goforth. Hogan lost both times in the Republican primary.

In his response to the auditor's review, Hogan said his wife, Joy Hogan, is the “central figure" in the office's daily operations, handling multiple duties, and that her value to the office is “undisputed."

Her employment complies with the county's ethics code, he said, noting that the local ethics commission determined years ago that she was “best qualified" for her role in the office.

County attorneys have “wide latitude” for discretionary spending of the delinquent tax fund, Michael Hogan said. The salary supplements awarded to his wife amounted to “honest pay for honest work" that benefited the public, he said. However, he said he will end all supplementary salary payments to employees out of the delinquent tax fund.

In Gallatin County, the review found the county attorney's office paid more than $36,000 for both personal expenses and expenses related to the county attorney's private law office, Harmon said. Most of the funds came from the delinquent tax fund, he said.

Auditors discovered that accounts with the county attorney’s office were used to pay credit card bills, a family cellphone bill, expenses for the private law practice and a loan to the county attorney’s private law office, the auditor said.

The findings will be referred to the FBI, the state attorney general's office and the Gallatin County Ethics Commission, he said.

In his response, Gallatin County Attorney John G. Wright said he takes the auditor's report “very seriously" and has already started the process of “correcting the alleged errors." He said he has hired a CPA to review the audit and make recommendations on “best practices" going forward.

Wright said he questions some findings related to personal expenses, but added that “steps are under way to reconcile all accounts to preserve the sanctity of public funds."

Meanwhile, a review of the Boyd County Attorney’s Child Support Enforcement office showed more than $16,000 in excess payments to a former CSE office supervisor, the auditor said.

Documents detailed questionable activities by the former supervisor, including falsified expense reimbursement requests, altered supporting documents for expenditures and excess income and unearned benefits paid to the supervisor, Harmon said.

A Kentucky State Police investigation led to the former supervisor's indictment on 77 charges last year related to more than $113,000 allegedly taken by her over a seven-year period, he said.

The findings are being sent to the FBI and state attorney general's office, the auditor said.

In his response, Boyd County Attorney C. Phillip Hedrick said the child support matters “are reportedly being investigated.”

The special examinations found problems in several other county attorney offices. In six current offices, the percentage of expenditures tested that had no supporting documentation exceeded 36%, the auditor said. Also, eight county attorney offices examined failed to turn over excess cold check fees to their respective fiscal courts, which is required by state law, he said.