Climate, Changed

Gov. John Kitzhaber should be at the pinnacle of his power. His role in an unfolding scandal has brought him low.

Gov. John Kitzhaber

For four months, Kitzhaber had refused to answer questions about allegations of influence-peddling involving first lady Cylvia Hayes. After WW first reported in October on Hayes’ questionable dealings, Kitzhaber went into hiding, ducked interviews and flouted the state’s public records law, all of which added to the perception of misconduct in his administration.

The screw tightened Jan. 27 after reporter Hillary Borrud of EO Media Group/Pamplin Media Group revealed Hayes had been paid $118,000 in consulting fees in 2011 and 2012 while working in the governor’s office. The money came from a now-defunct nonprofit that had interest in the energy plan Hayes worked on for Kitzhaber. (That money is in addition to $85,000 in contracts she had received in 2013.)

Hayes had earlier shared her tax returns with WW, and it appeared she hadn’t reported the newly disclosed income on her 2012 federal tax return—which, if true, could be a crime.

On Jan. 30, Kitzhaber shifted the narrative with Oregonians. Wearing a suit and his trademark cowboy boots, Kitzhaber took his case directly to the public, via a press conference carried live statewide on television and radio.

His strategy was to use his brains and charm to squelch a scandal spinning out of control, just as the 2015 legislative session begins. Kitzhaber—the only four-term governor in state history—needed to show he still had his grip on Oregon.

What followed was perhaps the most bizarre public appearance by any Oregon governor since the dawn of TV.

Kitzhaber announced that Hayes (who was conspicuously absent) would no longer have a role in his administration. That was not news at all—he’d said as much back in October.

He then bounced between claiming he had no knowledge about key information—such as Hayes’ possible tax evasion—and insisting that all other questions should be left to the Oregon Government Ethics Commission, a citizen panel whose members are appointed by the governor. The commission received two complaints against Kitzhaber and Hayes in October.

Kitzhaber’s unwillingness to answer questions prompted some to wonder why he went before Oregonians in the first place.

“The facts need to come out sooner rather than later,” State Treasurer Ted Wheeler, a fellow Democrat, tells WW. “This presents a potential crisis of confidence in government.”

Kitzhaber’s insistence on drawing the public’s attention to the Ethics Commission, which can only levy civil fines, suggested he was diverting attention from a more serious concern: that he and Hayes may have engaged in criminal behavior.

On Jan. 9, WW had reported the FBI was investigating Hayes. The agency has jurisdiction, through the Public Integrity Section at the U.S. Department of Justice, to investigate possible corruption at any level of government—federal, state or local. There are increasing parallels between Kitzhaber’s situation and the former governor and first lady of Virginia who were recently convicted of selling access to the governor’s office (see our report on these similarities here).

Meanwhile, Oregon’s top law enforcement officer, Attorney General Ellen Rosenblum, a fellow Democrat, has shown little interest in finding out what has really happened (see here for an analysis).

The mess in Kitzhaber’s administration has riveted observers.

“I can’t remember anything quite like this. It’s really astonishing,” says former state Attorney General and University of Oregon President Dave Frohnmayer, a Republican who’s been involved in public life for 50 years. “It’s like water torture. The drips just keep coming.”

Two former Democratic governors, Ted Kulongoski and Barbara Roberts, say they are concerned about how Kitzhaber’s handling of the situation is affecting Oregon.

“The dilemma,” says Kulongoski, “is that all these issues are making it very difficult for the governor to manage state government.”

Adds Roberts: “I can’t recall a governor of either party in this state who has put the integrity of the office at this kind of risk.”

People who talk about “the Cylvia Hayes scandal,” are missing the point. Kitzhaber owns this scandal from beginning to end.

Under state law, it’s Kitzhaber who is ultimately responsible for the conduct of the people in his office, including Hayes: her soliciting of contracts that conflict with her official duties as first lady and policy adviser for the governor; her soliciting of money from a business lobby group; and her use of state employees to help run her private consulting firm.

Still, it’s a truism in politics that the cover-up is often worse than the crime.

Kitzhaber sought to dispel concerns that he had anything to hide with his Jan. 30 press conference. Yet key moments showed that Kitzhaber may have left himself in worse shape politically than before he went in front of TV cameras.

Kitzhaber refused to say anything of substance. He would not answer questions about what he knew of Hayes’ contracts, or the degree to which he used his office to benefit Hayes’ private business.

He also refused to answer the most pressing question on reporters’ minds: Did she evade income taxes?

“Allegations have been raised concerning whether Cylvia falsified taxes,” Kitzhaber said. “Cylvia and I file separate returns. So I have not reviewed or did not prepare, and cannot answer any questions concerning her tax returns.”

Reporters didn’t accept that response.

Q: “Did you pick up the phone and say, “Hey, Cylvia, did you claim this money?’ Have you done that in the last week?”

Kitzhaber: “No, I have nothing else to say on the issue of her taxes.”

Kitzhaber has sworn on state economic disclosure forms that he considered Hayes a member of his household. That means he benefited financially from Hayes’ contracts.

Yet at the press conference, Kitzhaber backed away from those sworn statements.

Kitzhaber: “I have no idea whether she is legally a member of my household. And I think that’s a question that the Ethics Commission is going to look at.”

Q: “For four years, you have filled out statements of economic interest listing her as a member of your household. So what’s changed?”

Kitzhaber: “Nothing’s changed. As I said earlier, we operated under an abundance of caution—”

Q: “How can you not answer that question? For four years, you filled out that form listing her as a member of your household. Is she a member of your household or not?”

Kitzhaber: “I don’t know the legal answer to that.”

The questions about the first lady’s activities kept coming.

Kitzhaber said that only Hayes—who is traveling in Europe—could provide answers.

Would he make her available?

“She’s an independent woman,” Kitzhaber said. “She doesn’t work for the state of Oregon, and it’s not my role to make her available.”

Then he added, “If Cylvia wants to talk to the press, she’ll get in touch with you.”

With that, Kitzhaber walked out.

Oregonians have much to lose as the scandal plays out.

Kitzhaber’s ability to carry through his agenda of reforming public education, addressing climate change, and delivering new money for roads and bridges is in doubt.

Even before the scandal, 2014 was a tough year for Kitzhaber. He spent most of it trying to distance himself from the wreckage of Cover Oregon, the online health care exchange whose $300 million failure reminded Oregonians that while he is great at hatching ideas, he’s sometimes not so good at implementing them.

Kitzhaber’s approval ratings were dismal long before WW first reported that Hayes had run her private consulting business out of the governor’s office (“First Lady Inc.,” WW, Oct. 8, 2014).

A May 2014 poll by the Portland firm of Davis Hibbitts & Midghall found a high level of dissatisfaction with Kitzhaber. Fully 49 percent of those surveyed said they wanted him replaced, while only 35 percent said he deserved to be re-elected (15 percent were undecided).

By the fall, almost anyone could have beaten Kitzhaber—anyone, that is, except his actual opponent, state Rep. Dennis Richardson (R-Central Point), whose hard-right views on social issues and the environment were far outside the mainstream.

In November, Oregon Democrats bucked the national Republican sweep and strengthened their hold on Salem.

What’s striking today, however, is the degree to which the state’s top Democrat is isolated.

The Legislature reconvened this week with large Democratic majorities that should have allowed Kitzhaber to push through whatever legislation he wanted.

But he’s no longer the governor who regularly bent lawmakers to his will in the past four years.

Neither of the two people he needs the most in politics, Senate President Peter Courtney (D-Salem) and House Speaker Tina Kotek (D-Portland), returned WW’s calls about him.

The governor sent lawmakers his budget in December. Legislators typically study a governor’s plan for a couple of months before moving forward. This time they barely glanced at its cover before producing a substantially different plan.

“I was surprised at how summarily legislative leadership dismissed the governor’s budget,” says Kulongoski, the former governor, who also served in the Legislature.

On March 13, the seven members of the state Ethics Commission will vote whether to dismiss the complaints against Kitzhaber and Hayes or launch a more serious investigation.

The FBI is mum about what it is doing. For Kitzhaber and Hayes, that’s where legal jeopardy lies.

“Their greatest risk is a federal criminal prosecution,” says a Portland defense lawyer who asked not to be named. “The worst-case scenario is what happened recently in Virginia, where the governor and his wife fraudulently exchanged something that belonged to the state—and that can be influence or access—for money.”

Leading Democrats in Salem are talking among themselves about whether the scandal will eventually force Kitzhaber from office. None will talk on the record—they note Kitzhaber still holds the legal authority of the office, if not the moral authority he once enjoyed.

But they say Kitzhaber looks as if he has put his and Hayes’ interests before those of the state.

“My colleagues and I were all stunned at the way he has let his personal feelings cloud his judgment,” says one Democratic legislator.

Kitzhaber says he has no intention of quitting, even if the Ethics Commission finds he has violated state law.

“I’m not going to consider resigning—of course not,” he said at the press conference. “I was elected by the people of the state to do this job, and I intend to do it.”

Kitzhaber could help his cause by releasing all records reporters have requested and holding another press conference where he provides some real answers.

“The governor has more than 30 years of goodwill built up with the citizens of this state,” says Wheeler, the state treasurer. “We need to hear his story.”


Timeline

Additional stories on Gov. Kitzhaber and Cylvia Hayes:

Feb. 4, 2015: “Kitzhaber Hired Ally Who Arranged Cylvia Hayes’ Fellowship, Making Him Highest-Paid Aide.”

Feb. 4, 2015: “Yes, Virginia, There is a Scandal”: The similarities and differences between Gov. Kitzhaber’s scandal and that of disgraced Virginia Gov. Robert F. McDonnell.

Feb. 4, 2015: “Hands Off”: Why is Oregon AG Ellen Rosenblum ducking the Kitzhaber-Hayes case?

Jan 30, 2015: Gov. Kitzhaber holds a press conference saying Cylvia Hayes will have no further role in his administration.

Jan. 30, 2015: A nonprofit’s Oregon state funding spiked eightfold during the year it employed Cylvia Hayes, WW reported.

Jan. 27, 2015: Hillary Borrud of EO Media Group/Pamplin Media Group revealed Hayes had been paid $118,000 in consulting fees in 2011 and 2012 while working in the governor’s office. WW reported Jan. 28 that this information suggested that Hayes did not report all of her income on her 2012 income tax forms.

Jan. 12, 2015: Gov. John Kitzhaber sworn in for historic fourth term.

Jan. 9, 2015: WW reports the FBI is investigating Cylvia Hayes.

Jan. 7, 2015: WW reports Cylvia Hayes used a taxpayer-funded trip to Seattle to work for private consulting clients.

December 17, 2014: New documents show why Cylvia Hayes qualifies as a public official and is subject to state ethics laws.

December 12, 2014: Cylvia Hayes regularly used a state employee to book private travel, WW reports.

Nov. 7, 2014: Five issues the Ethics Commission should consider on Hayes and Kitzhaber.

Oct. 16, 2014: State Rep. Vicki Berger files an ethics complaint against Cylvia Hayes.

Oct. 15, 2014: WW reports Gov. Kitzhaber’s office aided a financially troubled former client of Cylvia Hayes.

Oct. 15, 2014: WW reports Gov. Kitzhaber’s staff bent ethics standards to suit Cylvia Hayes.

Oct. 8, 2014: WW reports on Cylvia Hayes’ undisclosed marriage to an 18-year-old immigrant. The next day, Hayes admitted she broke federal law by taking part in an illegal marriage.

Oct. 8, 2014: ”First Lady Inc.,” WW’s cover story on Cylvia Hayes’ questionable public and private business dealings.

Jan. 8, 2014: Cylvia Hayes is cited for using a State Police pass to park her personal car.

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