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Kitzhaber/Hayes probe: at one-year mark, state records provide insight

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Legal billings highlight role of key Kitzhaber staffer.


One year into the federal investigation of former governor John Kitzhaber and Cylvia Hayes, state records tracking the legal spending for 17 current and former state employees suggest the criminal probe is continuing and may be heating up.

They also show that of the $101,000 in legal fees spent for the group, more than $35,000 went to the lawyer for a single employee: former top Kitzhaber staffer Dan Carol. In contrast, 11 current and former state employees who've qualified for state legal funding have spent less than $2,000, and four haven’t spent a dime.

Carol played a key role in the Kitzhaber administration, as well as in Hayes’ career after he returned to office in 2011. They shared a bond of history and ideology – so much so that Carol, according to one former coworker, was referred to by some colleagues as “The Cylvia Whisperer.”

Laurie Levenson, a former federal prosecutor and professor at Loyola Law School, says of the legal billing records, “We are reading tea leaves but that is one of the tea leaves to read.”

Carol’s billings suggest “his lawyer has ramped up the work on his behalf,” Levenson says, adding “It does strike me that he's significantly involved” in the events investigators are trying to understand.

Carol and his lawyer, Jeff Coopersmith, did not respond to a request for comment. Nor did Kitzhaber’s attorney, Janet Hoffman, though in the past she has denied any wrongdoing. In an email, Lisa Hay, Hayes’ lawyer, expressed confidence that federal investigators will find “the media reported facts out of context and grossly misunderstood other facts, resulting in unfair claims. I believe they will conclude that Ms. Hayes honestly and in good faith followed the law when volunteering as First Lady and maintaining her professional work. We welcome the federal review and will continue to work with the U.S. Attorney's office to resolve this.”

The federal subpoena of the Kitzhaber administration went public on Feb. 13, 2015, and he announced his intent to resign the same day. Tens of thousands of documents released since then paint a clearer outline of Hayes’ outside work, Kitzhaber’s assistance with it, and Carol’s role in the administration. The documents show why this probe could be complicated, unusual, and might take a while.

In part that’s because foundations and nonprofits—the ones Carol interacted with as part of his job -- are at the heart of how Hayes received her funding. One of the open questions is whether her income was directly connected to the outsized influence on Oregon policies that Kitzhaber afforded the foundations paying her.

“Clearly the investigation is looking closely at jobs for influence,” says Jim Moore, a Pacific University politics professor who heads the Tom McCall Center for Policy Innovation.

Hayes needed cash

When former two-term governor Kitzhaber won reelection in Nov. 2010, he had a political problem involving his girlfriend. In August, news had broken of a criminal investigation into whether state officials steered a contract to Hayes in order to curry favor with her boyfriend.

No charges were filed. But to lessen the complications from her outside work, after the election Kitzhaber staffers actively brainstormed with her about possible jobs in the nonprofit world, according to one former staffer.

Her first job in 2011, with Rural Development Initiatives, was touted by Kitzhaber’s office as avoiding any conflicts with ethics law. But her need to raise money for a long-term position, one that would provide her with an $80,000 salary if successful, appeared to cause stress for her, and guilt for the newly ensconced governor.

Kitzhaber, in a February 2011 email, expressed sympathy for Hayes and wrote that he felt “responsible," adding “I doubt if I would have run again if I knew you would be going through this.”

“I will continue to do everything I can to make sure that the bridge funding comes through and will use my own resources if necessary,” Kitzhaber wrote in the email, first obtained by The Oregonian/OregonLIve. To assist in her fundraising, “I believe that I can send support letters to foundations, “ he added.

Carol, who had advised the campaign and worked closely with Hayes and Kitzhaber during a 2005 ballot measure drive, stepped up. Known as a rainmaker with strong foundation connections, Carol had been in close communication with Kitzhaber’s top aides and talked about a potential job with them. He took that job in September 2011.

Even before taking the job, Carol connected Hayes with a nonprofit he helped launch that hoped to influence polices in Oregon and elsewhere. The group was partly funded by a Washington, D.C.-based lobbying group – co-founded by Carol --- that aimed to improve the bottom line for entrepreneurs and investors in green energy and technology.

As first reported by the East Oregonian/Pamplin Media capital bureau, the resulting fellowship eventually paid Hayes $118,000. It also led to a subsequent $50,000 contract with the Energy Foundation.

The “Clean Economy Acceleration” fellowship dreamed up by Carol became closely aligned with a Kitzhaber administration initiative he spearheaded called the “Clean Economy Acceleration Agenda." He used it to invigorate an alliance with California, Washington and British Columbia called the Pacific Coast Collaborative.

Two foundations, Energy Foundation and Rockefeller Brothers Fund, funded both Hayes’ fellowship as well as the work of the collaborative. Discussions with the foundations over Hayes’ fellowship and the PCC appear to have occurred in the same time frame, heating up in the second half of 2011.

Funders sought policies

The foundations literally wrote the agenda for the first meeting that set the direction for the collaborative, including discussion of coal export policy as well as the low carbon fuel standard known as “clean fuels,” according to a July 2011 draft agenda sent to Kitzhaber by Rockefeller Brothers Fund. Hayes eventually advocated on both issues while serving as an energy adviser to Kitzhaber.

In September 2011, following a meeting at Skamania to discuss the collaborative that was funded by the two foundations, Kitzhaber asked Rockefeller Brothers to copy Hayes on follow-up correspondence, saying “we are pretty much joined at the hip.”

Emails that have not previously been publicized add to the picture. One suggests Kitzhaber may have played an active role in raising money from foundations. Another suggests Carol may have played a role in helping coordinate funding for Hayes even after he joined state government.

Later in September 2011 Kitzhaber wrote to his scheduler that he wanted to travel to New York City the following January: “I am supposed to raise money for the clean economy work,” he explained.

That month, in New York, he met with the Rockefeller Brothers Fund staffer who was the point person on both the collaborative and Hayes’ fellowship. It’s unclear what they discussed, but the fund has denied any expectation of a quid pro quo. The Energy Foundation has also denied misconduct.

The fund gave $125,000 to support the fellowship program, split between October 2011 and Sept. 2012.

Hayes, meanwhile, was branching out to request funding from other foundations, often related to the work of the collaborative, such as on ocean acidification.

“Interesting conversation with Cylvia Hayes the other week,” wrote Michelle Knapik of Surdna Foundation to Carol in September 2012. “Didn’t expect to be pitched on an ocean’s grant.” Knapik expressed concern Hayes' effort could “complicate” another project pursued by the collaborative.

Carol replied “perhaps useful to chat together” with the nonprofit overseeing her fellowship, “about [the] pacing of asks like this.”

Later, as the nonprofit that oversaw Hayes' fellowship fizzled, Hayes sought to work directly for Rockefeller Brothers. Her proposal came at a time when her outside work was being reviewed by Kitzhaber counsel Liani Reeves. One of her other contracts calling for work in Oregon was revised to be more vague.

One email exchange suggests that in hiring Hayes, Rockefeller wanted tangible outcomes for Oregon policymaking on climate change, and Hayes sought to keep that from being memorialized on paper.

In March 2013, the fund sought tangible outcomes in a draft grant proposal she’d circulated. She replied that she preferred not to put “concrete outcomes” for policymaking in Oregon in her contract, citing “advice to leave the wording of the proposal fairly vague.”

She assured the fund that more explicit language wasn’t necessary. “Some of our intended outcomes are understated but not under-emphasized,” she wrote.

Tung Yin, a Lewis & Clark Law School professor who has been following the case, says if the Kitzhaber case does go to trial, the email “would put more pressure on the defense … as a link in the chain of evidence” against Hayes. It suggests “she knows she's not doing things the way she is supposed to do.”

Legal spending accelerates

Moore, Levenson and Yin say there’s no way of knowing whether the federal government will charge Kitzhaber or Hayes. And the answer could take a while.

“Similar cases … have taken years to develop,” says Moore.

But things could be heating up.

State records show that in the first seven and a half months before the federal subpoena that helped drive Kitzhaber from office, lawyers for state employees who could become witnesses billed the state only $41,000 combined, a pace of about $5,500 a month.

In the last four and a half months, the pace has more than doubled as the group has spent $60,000 combined.

As the spending accelerates, “that doesn't tell us which way the matter is going,” Levenson says, “But it does say that things may be coming to a head.”

Facts and figures

A state program has paid more than $100,000 in legal expenses for current and former employees subpoenaed as part of the Kitzhaber probe. Here are the top five:

Dan Carol, director of multi-state initiatives: $35,381.80

Margaret Hoffman, Kitzhaber energy adviser: $24,653.55

Scott Nelson, Kitzhaber economics adviser: $18,585.84

Jan Murdock, Kitzhaber scheduler/assistant $8,648.64

Gabriella Goldfarb, Kitzhaber natural resources adviser $3,306.80

Source: Department of Administrative Services