Allegations in Kentucky's U.S. Senate Democratic primary are now in the hands of the Executive Branch Ethics Commission.
Lt. Governor Daniel Mongiardo filed an official complaint against Attorney General Jack Conway today, saying Conway should not accept campaign contributions from utility company executives or lobbyists because the Attorney General's office is involved in negotiating rate increases.
Meanwhile, during a candidate forum last night, Conway revealed he will seek to dismiss LG&E and Kentucky Utilities $220 million rate increase request. Mongiardo says Conway is taking action now because he got caught with his hand in the cookie jar.
But Conway says he has already saved ratepayers more than $100 million, which shows that contributions from utility interests do not influence his role as Attorney General.
Here is the official complaint filed by Mongiardo:
TO: Executive Branch Ethics Commission
FR: Daniel Mongiardo
RE: Attorney General Jack Conway – Violations of KRS 11A.
DATE: May 3, 2010
I am filing this formal complaint on the behalf of Kentucky’s ratepayers. Additionally, I respectfully request an expedited ruling on the following merits contained herein, as Kentucky Utilities and Louisville Gas & Electric have formally filed a $262 million rate hike request with the Public Service Commission and their request is currently pending action by the Attorney General.
KRS 11A.005(1)(a) states:
(1) It is the public policy of this Commonwealth that a public servant shall work for the benefit of the people of the Commonwealth. The principles of ethical behavior contained in this chapter recognize that public office is a public trust and that the proper operation of democratic government requires that:
(a) A public servant be independent and impartial
. . .
(d) The public has confidence in the integrity of its government and public servants.
The Executive Branch Ethics Commission’s Guide To The Executive Branch Code of Ethics addresses the issue of ‘Solicitation’ on page 4. It states: “A state employee (or state agency) should not solicit money … from persons or businesses that do business with or are regulated by the agency for which the employee works unless the solicitation is to raise funds for a charitable, nonprofit organization. ... The appearance of a conflict of interest prohibits an employee or state agency from soliciting or accepting such donations.”
Jack Conway, as the Attorney General for the Commonwealth of Kentucky, and the Attorney General’s Office of Rate Intervention, over which the Attorney General has direct authority and control, play an integral role in regulating utility companies doing business in Kentucky. As Attorney General, Jack Conway’s duty and responsibility is to represent Kentucky’s rate payers – and to protect them from unnecessary utility rate hikes.
It is customary for the Attorney General to intervene on behalf of Kentucky rate payers whenever a utility company requests/applies for a rate increase with the Public Service Commission (PSC). Typically, before the PSC officially acts on the utility company’s rate increase request, the Attorney General’s office will enter into negotiations with the utility company and will often reach a negotiated settlement, which the Attorney General approves and recommends to the PSC for final action.
What is not customary, and I believe a clear violation of KRS 11A and/or the appearance of a conflict of interest if not in fact a conflict, is for the Attorney General - who is negotiating rate increases on behalf of rate payers - to personally solicit and/or accept donations to his political campaign from the executives and/or lobbyists for the utility company with whom the Attorney General/his office staff is negotiating, has negotiated or will negotiate.
In Advisory Opinions 93-45,00-15, it provides specific examples of conduct or solicitation by a state employee that is expressly prohibited. Example 2 reads: “An employee of an agency that regulates utility companies, but who works within a separate division from the division that has direct regulatory control over the utility companies, wants to solicit donations from the utility companies for a worthwhile environmental educational project. The employee is prohibited from soliciting donations from the utility companies.” [emphasis added]
If one substitutes words ‘Attorney General Jack Conway’ for the words - “state employee,” substitute the words ‘Conway for Senate Campaign’ for the words – “worthwhile environmental education project,” and substitute the words ‘campaign contribution’ for the word “donation,” I believe it is clear that the Attorney General, who is a state employee, plays a direct or indirect regulatory role over utility companies and is expressly prohibited from soliciting donations/contributions from utility executives and their registered lobbyists who are agents of the utility companies in question.
Attorney General Conway’s U.S Senate campaign is neither a charity nor a non-profit organization. Furthermore, Conway stands to personally profit from contributions made to his Senate campaign. Finally, Conway has personally solicited and accepted donations or contributions from those over whom he has a regulatory role as Attorney General.
As Attorney General, Jack Conway has violated KRS 11A and the public trust by soliciting and accepting over $70,000 in donations to his political campaign for U.S. Senate from utility executives and their registered lobbyists while approving millions in rate hikes for the utility companies whose executives and lobbyists have contributed to his political campaign.
Following are four examples that I believe constitute violations of KRS 11A.
1) In January, 2009, Attorney General Jack Conway personally approved a $22 million negotiated rate increase for Louisville Gas & Electric (LG&E), a subsidiary of E.On (see attachment 1). Based on public statements made by the Attorney General, before, during and after January, 2009, Conway was actively considering a race for U.S. Senate (see attachment 2). Within weeks of formally announcing his candidacy for U.S. Senate, the Attorney General solicited and accepted thousands of dollars in campaign contributions from LG&E executives and their registered lobbyists (see attachment 3).
Does the fact that the Attorney General solicited/accepted campaign contributions from the utility executives and registered lobbyists of E.On/LG&E for which he/his office negotiated and approved a $22 million rate increase constitute a violation of KRS 11A? Does it constitute a conflict of interest or the appearance of a conflict of interest?
2) In June 2009, Attorney General Jack Conway solicited and/or accepted nearly $10,000 in campaign contributions from the executives and registered lobbyists with Atmos Energy, a gas utility company based in Texas that serves 176,000 gas customers in 32 Western Kentucky counties (see attachment 4). After accepting thousands in campaign donations from Atmos executives and their registered lobbyists, Attorney General Conway’s office approved a negotiated multi-million (5.9m) dollar rate increase (see attachment 5).
Does the fact that the Attorney General solicited/accepted campaign contributions from the utility executives and registered lobbyists of Atmos Energy for which he/his office negotiated and approved a $5.9 million rate increase constitute a violation of KRS 11A? Does it constitute a conflict of interest or the appearance of a conflict of interest?
3) While Attorney General Conway and or his office staff was negotiating the $5.9 million rate increase for Atmos Energy that the Attorney General subsequently approved and recommended to the PSC, Conway intentionally/unintentionally failed to disclose that Atmos Energy – with whom he/his office was negotiating - has a business partnership with a Texas-based energy company called Kinder-Morgan (see attachments 6, 7 &8). According to Attorney General Conway’s Personal Financial Disclosure statements filed with this Commission and with the Secretary of the United States Senate, the Attorney General has up to $5 million dollars invested in Kinder-Morgan – 90% of his entire stock investment portfolio (see attachment 9).
Does the fact that a business in which the Attorney General has invested millions of dollars directly or indirectly benefits as a result of the actions taken by the Attorney General constitute a violation of KRS 11A. Does it represent a conflict of interest or the appearance of a conflict of interest?
Does the fact that Attorney General Conway failed to recuse himself from having any direct or indirect involvement in the negotiations with Atmos Energy, a business partner with a company in which Conway has invested millions constitute a violation of KRS 11A? Does it represent a conflict of interest or the appearance of a conflict of interest?
4) Earlier this year, LG&E and KU formally applied for rate increases with the PSC totaling $262 million (see attachment 10). It is unclear at the time of this complaint whether or not the Attorney General or his staff has entered into settlement negotiations with either KU or LG&E. What is clear is that there are on-going public hearings being held across this Commonwealth to solicit public comment regarding their $262 million rate increase request (see attachment 11). It is also clear that registered lobbyists for LG&E and KU hosted a fundraiser – while LG&E’s and KU’s rate increase request IS PENDING (see attachment 12).
Does the fact that the Attorney General attended and accepted campaign contributions at a fundraiser hosted by the registered lobbyists of LG&E and KU, while their rate increase request is pending constitute a violation of KRS 11A? Does it represent a conflict of interest or the appearance of a conflict of interest?
Given the fact that the Attorney General profited from a campaign fundraiser hosted by registered lobbyists for LG&E and KU while their $262 Million rate increase request is pending, should the Attorney General publicly recuse himself from having any direct or indirect involvement in negotiating with the utilities’ representatives or from approving any possible negotiated rate increase that may result from efforts by his Office of Rate Intervention?
Attorney General Conway has publicly argued that he is free to solicit and accept campaign contributions from utility executives and their lobbyists because he is not a member of the Public Service Commission and thus does not actually vote for or against any utility rate increase requests.
That argument is baseless. First, no one has suggested that Attorney General Conway is a member of the PSC, or that he has actually voted for or against a utility rate increase. Second, it is an undeniable fact that the Attorney General has a very specific regulatory oversight role and power over utility companies applying for and requesting a utility rate increase. From the Attorney General’s website: “Under Kentucky law, the office is responsible for representing the interests of Kentucky consumers before governmental rate making agencies, concentrating on utility cases (electric, water, telecommunications, and natural gas) before the Public Service Commission – KRS 367.150 (8) – and health insurance rate cases filled with the department of Insurance – KRS 304.17A-095.” As Attorney General, Conway has the power and authority to challenge any utility rate increase request in court, power that he has not acted upon as Attorney General.
If a lawyer, pocketed money from the plaintiff while he was representing the defendant, the lawyer would be disbarred. While Conway is supposed to be the lead attorney representing the rate payers of Kentucky, he is pocketing campaign money from the very utility companies and their agents he is supposed to be protecting rate payers from. Conway’s actions not only cast an ethical pall over the Office of the Attorney General and the honorable career merit employees who serve in the Attorney General’s Office of Rate Intervention, but it violates the public’s trust and weakens their confidence in the Attorney General fighting for them.
The ultimate question for this Commission and for Kentucky ratepayers is: did the Attorney General do everything in his power to keep utility rates as low as possible? And the sad truth is, given the fact that he has taken over $70,000 from the utility companies, neither this Commission nor the rate payers of Kentucky can be sure. If Conway had been tougher in negotiations – would he have still pocketed over $70,000 form the utility companies? Could Conway have fought harder on behalf of Kentucky’s rate payers if he wasn’t more concerned about satisfying the utility companies and their registered agents in order to raise money for his Senate campaign?
In closing, I humbly request for this Commission to expedite its ruling on these issues raised in this complaint because there is a $262 million dollar rate increase request pending and the rate payers of Kentucky deserve to know – before they pay another dime in higher utility rates – that the Attorney General who has sworn to protect their interests has conducted himself in a manner that upholds and strengthens the public trust or he has violated the public trust and has placed himself in a position that is in conflict with the interests of Kentucky’s rate payers.