June 7th, 2011 11:40 am | by NIGEL JAQUISS News | Posted In: Politics, Business, Cops and Courts

State Releases Conflicting ODOE Reports; Hayes a "Rock Star"

Cylvia HayesCylvia Hayes

Oregonians can now see two very different accounts of what happened in the Oregon Department of Energy investigation, in which four employees were accused of steering state business to Cylvia Hayes, Gov. John Kitzhaber’s companion.

The first report was prepared at the request of former Gov. Ted Kulongoski and written by retired Malheur County Judge Francisco Yraguen. Yraguen’s heavily-detailed report (it contains 130 footnotes, many of them lengthy) presents a damning portrait of four Department of Energy employees’ efforts to steer a contract to Hayes’ company, TEEM Inc.

A second report—this one ordered by the Kitzhaber administration—comes to a very different conclusion. The 60-page independent counsel’s report written by Portland lawyers Ed Harnden and Paula Barran said that the four employees should be returned to their posts with no discipline imposed. The employees went back to work June 2.

The state made both reports public this morning.

The differences in the reports are stark.

Yraguen endorses an earlier recommendation by Oregon Department of Justice lawyers that four ODOE employees involved in Hayes’ getting the subcontract be fired. Initially, Yraguen found, Hayes identified federal stimulus money available to Oregon and hoped that—after communicating with ODOE director Mark Long—she might be get a contract without competing for it.

“What Mr. Long wanted to do was use Cylvia Hayes as a sole source contractor,” Yraguen wrote.

But ODOE officials determined that would not be possible and held a competitive bid in the spring of 2010. Four companies submitted proposals, and the winner was R.W. Beck, a Seattle-based engineering company. According to Yraguen’s report, Long then directed subordinates to find a way for Hayes’ company, TEEM, to get part of the money.

“TEEM’s participation and gain in sharing the R.W. Beck contract resulted instead from the intervention of Mark Long in the procurement process,” Yraguen wrote.

Yraguen concluded that the four ODOE employees should be fired for manipulating the contracting process to deliver Hayes a contract, despite her company having finished fourth out of four bidders. (The other two companies that finished ahead of TEEM in the original bid were not give a chance to compete for the subcontract TEEM got).

Yraguen found that despite the concerns raised by no fewer than four ODOE contracting staffers, Long and three subordinates ensured TEEM got a $60,000 contract that it did not deserve. The subordinates were Joan Fraser, Shelli Honeywell and Paul Seesing.

“It is of primary importance in this independent reviewer's opinion to recognize that the circumstances involving ODOE’s negotiations with R.W. Beck and TEEM were improper no matter what the term is used to describe the conduct,” Yraguen wrote.

Yraguen gave Hayes a clean bill of health.

“Cylvia Hayes has become embroiled in this matter,” he wrote. “Nothing has been found during this independent review to impugn the credibility or integrity of Ms. Hayes. Ms. Hayes was simply pursuing [federal] stimulus dollars as a means of not only earning her livelihood but also as a means of pursuing her passion—making Oregon green.”

The second report came to a completely different conclusion about the employees' conduct.

“Despite irregularities in the process, no deliberate violations of the law were identified at the time, and procurement staff approved the contract,” lawyers Harnden and Barran wrote.

They also note that at least four Energy Department contracting employees raised concerns, and one whistleblower reported the situation to state auditors.

But the lawyers hired by Kitzhaber discounted those red flags, writing, “At the time of the events, as well as during the Department of Justice investigation, procurement staff expressed process concerns but did not clearly articulate whether there were any legal violations.”

Still, the report notes that in a June 2, 2010, meeting to discuss the contract, an ODOE contracting official, Sara Fast, referred to the way in which TEEM got its subcontract as “illegal and inappropriate.” Another ODOE contracting official, Jim Gores, said he thought the way the subcontract was handled was “a flagrant example of stepping out of bounds."

Harnden and Barran do acknowledge the employees' concerns but dismissed them this way: “It is important for the decisionmakers to consider that there is a non-frivolous argument that however ill-advised this process was, it was not illegal.”

Harnden and Barran also reasoned that, in order to fire or discipline them, it would be necessary to prove the employees knowingly and intentionally broke the law or violated contracting rules.

"It is our view that the decisionmakers should give consideration to whether the employees had a culpable state of mind at the time of their actions and what degree of responsibility there may have been," the lawyers wrote.

Harnden and Barran also went out their way to comment on Hayes’ bona fides.

“Ms. Hayes is well known in Salem and her businesses have done work with the State before,” they wrote. “At least one person told us she was considered a ‘rock star’ in Salem in the energy field.”

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