Workers in the Minnesota Attorney General’s office have alleged under oath that current AG Lori Swanson and her predecessor, Mike Hatch, may have illegally diverted federal monies meant to investigate Medicaid fraud, and that a legal settlement negotiated by Swanson and Hatch financially benefited a nonprofit organization that later endorsed Hatch’s campaign for governor.
The gist of these sworn allegations was unveiled at a Legislative Audit Commission meeting Monday at the State Capitol. On March 28, the commission had asked the Office of the Legislative Auditor (OLA) to conduct a preliminary assessment of allegations of wrongdoing within the Attorney General’s office to determine if a further, more formal investigation was warranted. In a June 3 letter to the commission, Legislative Auditor Jim Nobles responded that while sworn testimony from seven current or former employees in the office—who all asked for and were granted confidentiality out of fear of reprisal—corroborated these allegations, Nobles concluded that further investigation was not within the legal purview of the OLA.
Asked to elaborate on that conclusion at Monday’s Legislative Audit Commission meeting, Nobles essentially repeated what he said in his letter: That while there was credibility in the allegations that employees felt pressured by Hatch and Swanson to do things they considered unethical and that fostered favorable media attention for the Attorney General’s office, the charges were too subjective to fit the strict definition that the OLA “investigate noncompliance with legal requirements related to the use of public funds.
The specifics of those sworn allegations against Hatch and Swanson may have remained under wraps were it not for detailed questioning from Rep. Steve Simon (DFL-St. Louis Park). Simon, an attorney and former employee in the AG’s office, was one of the legislators instrumental in getting Nobles to launch his preliminary assessment of potential wrongdoing in the office. His first question to Nobles was front-loaded with information about allegations that had been relayed to him. He then offered a legal rationale on why Nobles did not act on this information—and, then asked Nobles if his assumption was accurate.
Specifically, Simon spoke of an employee who said he had been approached by Hatch (who, after Hatch’s gubernatorial defeat and Swanson’s AG victory in the 2006 elections, was serving as Swanson’s deputy) to create a blog post favorable to Swanson, a post Hatch had already composed for him. The employee said he refused to do this, but that Hatch posted it under the employee’s name anyway—and then wanted the employee to falsify his vacation time to cover the period when the blog post was made. Simon surmised that Nobles believed this matter lay outside his purview because the vacation time in question belonged to the employee, not the State of Minnesota, and thus could not be seen as misusing public funds. Nobles then replied that Simon’s account “was an accurate reflection of the testimony under oath,” and one corroborated by other sources. But, Nobles added, “We just put the whole story on the record,” and wondered what else about it would require further investigation—especially since the employee never changed his vacation time card.
Simon then asked about a state settlement with the financial services company Capital One. After assuring the commission that the identity of those who testified would not be compromised, Nobles talked about a negotiated agreement reached between the AG’s office and Capital One in 2005, settling a suit that claimed the company was misleading the public over the terms of its credit cards. According to Minnesota law, any settlement of $750,000 or more must go into the state’s general fund, Nobles explained. The Capital One settlement was $749,999, with a third of the money going to the nonprofit group known as ACORN. Shortly after receiving the settlement money, ACORN endorsed Hatch’s 2006 campaign for governor. The person who negotiated the deal was Hatch’s solicitor general at the time, current AG Lori Swanson.
Nobles said that he asked for and received a written response from Swanson and Hatch, defending their conduct on the settlement. And he noted that because the Legislature had set the $750,000 standard for the monies to go to the general fund, and that the settlement did not reach that standard, nothing in the OLA’s purview compelled further investigation. In response to a question from Rep. Sondra Erickson (R-Princeton), Nobles said that skirting the $750,000 threshold by a token amount was “not common practice, but not unique either…Should you keep your eyes on that as a legislator? Yep.”
Nobles did say that when the OLA does its normal audit of the AG’s office early next year, it definitely will “go out and pursue” allegations that the Attorney General’s office had misused federal monies earmarked to uncover Medicaid fraud. According to the legislative auditor, some of the sworn testimony claimed that as far back as 2005 some of this federal money had been instead been “siphoned to other, more headline-grabbing” areas of investigation in the AG’s office.
Although it was specifically not meant to be a part of his preliminary assessment, Nobles did comment on the strife over a drive to unionize employees in the AG’s office. He noted that some employees in some constitutional offices such as the Secretary of State and Auditor have a majority of employees protected by civil service, whereas workers in the AG’s office, like the Governor and Lieutenant Governor’s offices, are unclassified employees who serve “at the will” of their boss. A “middle ground,” he suggested, might be civil service protection for the employees in the AG’s office in lieu of either unionization or the status quo. He noted that Swanson has argued that the office is more like that of the Governor and Lt. Governor and “at will” employment should remain the norm.
In closing, Legislative Audit Commission chair Rep. Rick Hansen (DFL-South St. Paul) noted that Swanson’s office was invited to come to the meeting and provide any rebuttal to the comments presented. The offer was declined.