WW has learned that four Oregon Department of Energy employees will be reinstated today, marking the latest twist in story that began with an Oregon Department of Justice investigation into ODOE contracting practices that last August.

The investigation has received intense scrutiny because the employees were accused of steering state business to Cylvia Hayes, the long-time companion of Gov. John Kitzhaber.

The employees got the news this morning, and they were told none would face any discipline. They are all free to go back to their jobs tomorrow.

A Department of Administrative Services spokesman said that his agency will make a formal announcement on the reinstatement of the employees later this morning.

The reinstatement of the employees is a setback for Attorney General John Kroger. Kroger's criminal chief, Sean Riddell, personally handled much of the case. Last December, DOJ determined that it wouldn't charge the four ODOE employees with official misconduct for they way they handled a $200,000 contract with the Seattle engineering firm R.W. Beck.

Three ODOE employees were placed on leave in August 2010, pending resolution of the investigation. A fourth, interim ODOE director Mark Long, was only placed on leave after the investigation concluded. In a meeting with then-Gov. Ted Kulongoski, who requested the investigation, DOJ officials recommended that the ODOE employees be fired because their conduct violated state contracting practices.

A firm co-owned by Hayes got a $60,000 subcontract from R.W. Beck at the urging of Energy Department employees.

Before leaving office in January, Kulongoski hired retired Judge Frank Yraguen to do an independent review of the DOJ conclusion on the fate of the four ODOE employees.

After Kitzhaber took office in January, the case devolved into legal wrangling between DOJ, lawyers for Mark Long and other involved state agencies (although all four employees worked for ODOE at the time the Beck contract was executed, three of them—Long, Joan Frasier and Shelli Honeywell were permanent employees of other agencies but on "loan" to ODOE, which had been going through substantial turmoil).

DOJ admitted to mistakes in the handling of documents related to the investigation. (Essentially, it turned over to lawyers for the four ODOE employees materials that should not have been disclosed.) Kitzhaber later decided to stop relying on Kroger's office for legal advice on the case. The Oregon Department of Administrative Services and the Oregon Department of Corrections to hire another independent counsel—Portland lawyer Ed Harnden—to review both the DOJ investigation and Judge Yraguen's report.

Now, it appears that all four employees will be returned to their positions. Lawyers for at least two of them—Long and Honeywell—have already informed the state that they may sue for damages based on DOJ's handling of the case. 

Kroger's office, in a statement released today, is defending the way it handled the case.

"Defense counsel has made allegations of ethical improprieties during the course of the investigation," the statement says. "We conducted a thorough internal review and have concluded that the allegations are baseless. We stand by the integrity of the investigation"