The Cylvia Files

A firm owned by the governor's companion got a $60,000 contract it didn't deserve.

First Lady Cylvia Hayes

Since last August, three investigations involving Cylvia Hayes, the longtime companion of Gov. John Kitzhaber, have hung over Salem like the stagnant smoke from a Willamette Valley grass fire.

The investigations centered on whether four Oregon Department of Energy employees broke the law or violated state rules by steering a $60,000 contract to Hayes' firm. Until now, it's been hard to know what really happened. Lawyers have worked to shape the story, the state's investigation produced conflicting signals, and the key players haven't told their stories publicly.

Last week, the state released thousands of pages of records that for the first time show what happened.

Then-interim Energy Department Director Mark Long and three subordinates—Joan Fraser, Shelli Honeywell and Paul Seesing—were eventually put on paid leave. All have been cleared and returned to work. Long denies steering a contract to Hayes. "All I did was ask a question about keeping the [contract] money in state," Long says.

A report ordered by the Kitzhaber administration found the Hayes deal "deviated from established best practices." But the report rationalized the whole mess and found fault with the whistle-blower who triggered the investigation.

"Despite irregularities in the process, no deliberate violations of the law were identified at the time, and procurement staff approved the contract," wrote lawyers Ed Harnden and Paula Barran in the May 27 report. 

Their report contradicted earlier findings of a retired judge, Francisco Yraguen, who had concluded the employees should be fired. Yraguen based his report largely on evidence from an Oregon Department of Justice criminal investigation. The DOJ chose not to prosecute the employees but also recommended they be fired.

WW examined the evidence to find out what really happened. Here's what we learned from the sometimes conflicting accounts.

1. Cylvia Hayes was angling for a no-bid contract from the Energy Department. In mid-2009, an Energy Department official, Diana Enright, told Hayes there was a $547,000 federal Energy Assurance Grant available. Hayes contacted Long, the new interim director, and told him her Bend consulting firm, Toward Energy Efficient Municipalities, or TEEM, would help Oregon get the cash. 

"My attitude in helping with this was, this is good for Oregon," Hayes told DOJ investigators. "We shouldn't leave half a million dollars sittin' on the table." (Hayes declined comment. She was not accused of any wrongdoing.)

TEEM was the only company that helped write Oregon's proposal. The Energy Department's deputy director, Joan Fraser, told Harnden that arrangement was "very unusual." Early on, Long looked for a way to get Hayes at least $200,000 without a competitive bid. Energy Department employees told investigators that Long even suggested running the contract through two other state agencies where Hayes already had contracts.

"He was looking like he was trying to get a sole-source contract to Cylvia," Fraser told Harnden.

2. A Long subordinate, Shelli Honeywell, worked to steer a contract Hayes' way. Long brought Honeywell to Energy from the Corrections Department over the objections of the governor's office, a hiring panel and Fraser. He put Honeywell in charge of overseeing federal stimulus money.

When procurement officials nixed a no-bid contract for Hayes, Long insisted Honeywell be part of the scoring panel for a competitive bidding process. Honeywell scored Hayes' company far higher than did any other panel members. But records show Hayes' firm finished last out of the four bidders. Fraser told Harnden TEEM's proposal should not have even been considered.

"They didn't produce a work sample," she said. "I would have said, 'It's not qualified.' That would have been the end of it."

Honeywell told investigators Long was upset when she told him Hayes' company didn't win. Long then ordered Honeywell to "fix it," according to Honeywell.

Seattle-based R.W. Beck won the competition. Rather than tell R.W. Beck the news, Honeywell asked the firm to consider splitting the money with Hayes' company—but not the second- or third-place bidders. "Shelli was following Mark's direction," Fraser told Harnden.

That raised red flags. Honeywell told Harnden that procurement officials worried the other bidders might find out and "would find problems with the fact that somebody that got a lower score than they did was part of this contract."

3. Hayes' company was unqualified for the contract it received. Records show that TEEM was formed in June 2009, the same month that Hayes learned about the federal money. Tom Barquinero, Hayes' partner and TEEM's managing director, acknowledged TEEM's inexperience.

"My assumption was that this was a stimulus to create jobs, and I needed a job," he told a DOJ investigator.

Barquinero was new to energy and had known Hayes  for less than a year when they formed TEEM. “She has connections, and I don’t,” he said.

Barquinero and Hayes expected a no-bid contract. "Both Cylvia and I were under the impression we were going to get it," he said. "I'm presuming at that time I'm getting a fat number."

Having to bid for the contract put TEEM at a disadvantage. The bid required TEEM to show it had done similar work. "We had nothing," Barquinero said, "so we left that section blank.” 

4. R.W. Beck neither wanted nor needed Hayes' help. After TEEM came in fourth in the bidding, Long told Fraser two things, according to her interview with Harnden: "TEEM is Cylvia Hayes" and "I think it's really important that we have [an] Oregon presence involved in this particular contract." (Hayes also told investigators the subcontract was the agency's idea.) 

"There wasn't any criteria that were identified in the [request for proposals] that would suggest any preference given to an Oregon firm," George Thompson, the Energy Department's federal grant officer, told an investigator.

Internal emails show that officials at R.W. Beck, a 69-year-old engineering and consulting firm, were unhappy at Honeywell's suggestion they hire Hayes' firm. 

"Jeesh what yahoos," wrote R.W. Beck Vice President Roger Jenkins on April 27, 2010.

"They realize their request [that R.W. Beck hire Hayes' company] is unusual and possibly politically sensitive given the relationship between TEEM and the next gov," R.W. Beck project manager Bob Kinsella wrote in a June 15, 2010, internal email. 

R.W. Beck agreed to hire Hayes' firm as a subcontractor because executives wanted to cultivate state business and please their new client, the Energy Department. Jenkins, Kinsella's boss, cautioned him not to drive a hard bargain with Hayes.

"We don't want to piss off the future govs [sic] honey too much," Jenkins wrote in an email on May 6, 2010.

5. A wide range of Energy Department employees thought the contract didn't pass the sniff test. At least four of the agency's contracting employees raised serious questions about the agency cutting TEEM in on the R.W. Beck contract. Jim Gores, the Energy Department's fiscal manager, told an investigator the agency sometimes bent the rules on contracts.

"This was just a more flagrant one," Gores said. "And we talked with folks about that, too, and just said that's not acceptable."

The person who blew the whistle the loudest was Lorena Wise, the Energy Department's procurement officer. She wrote a memo that came to the attention of the state Audits Division, which in turn called in the Justice Department.

Wise told criminal investigators that she and two other employees didn't want to sign the R.W. Beck contract because the connection to TEEM was improper. Wise said a senior Energy Department official told her she could be fired for refusing. 

"It doesn't look good," Wise told her boss. "It doesn't smell good."

The Harnden and Barran report, nonetheless, asserts Wise failed to identify specific violations of the law when she blew the whistle—and was too passive. "Ms. Wise admitted to us she was not sufficiently forceful in how she handled her responsibilities," Harnden and Barran wrote.

6. A good lawyer makes all the difference. Long hired former Oregon Attorney General Dave Frohnmayer and his former top deputy, Bill Gary. Together, they took control of the narrative. They wisely refused to let DOJ investigators interview Long. They later sued DOJ over access to records, threatened a broader lawsuit against the state, and filed a bar complaint against DOJ criminal chief Sean Riddell. Lawyers for the other employees followed in Frohnmayer and Gary's wake. 

The issues the lawyers raised were among those cited in the Harnden and Barran report as reasons the state should not fire Long and the other employees.

Early on, Long predicted the bureaucracy would prevail. Honeywell told investigators that, on Aug. 13, 2010, the day she was placed on paid leave, Long reassured her.

"You need to not talk to anybody. That will be a bad thing. Just keep quiet," Honeywell says Long told her. "Let's get through the fall, let's get through the election. This will all be OK."

And it was. 

WWeek 2015

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