FRANKFORT, Ky. — Tim Hale emailed his aunt in 2015 to ask about her recent hip surgery and update her on his children’s horse riding hobby. But he also told her about how his Florida-based company was bringing high-paying tech jobs to southern states, and asked if she could introduce him to Kentucky officials that would help expand his business.
Hale’s aunt could help because she was married to Kentucky’s governor at the time, Democrat Steve Beshear. Jane Beshear forwarded that email to the state’s economic development cabinet secretary, which led to introductions and eventually more than $1 million in state contracts for the company, Coastal Cloud LLC, and its associated businesses.
That email, and accusations of illegal and unethical behavior by the state in awarding the contract, is part of the latest report by Republican Gov. Matt Bevin’s administration in his ongoing investigation of his Democratic predecessor, whom he has labeled as corrupt.
Steve Beshear says his administration followed proper contracting procedures and dismissed the report as a “political vendetta.”
And Tim Hale and his wife, company co-owner Sara Hale, say they followed the law and won the contracts based on merit. They called the report a “witch hunt,” saying they were never interviewed or contacted by investigators. They said they were astounded at why the governor would seek to ruin the reputation of a company that employs 15 people in Kentucky and has 25 clients.
“Do they want us to leave the state and take the jobs somewhere else?” asked Sara Hale.
“It feels like we are being bullied,” Tim Hale said.
Coastal Cloud started in Florida five years ago. The company sells and implements computer software that helps companies automate their business practices. Sara Hale says the company was growing and creating jobs when Steve Beshear told her “I want you to come and create jobs in Kentucky just like you did in Florida.” Sara Hale said Beshear told her to send an email to Jane Beshear, who would forward it to the Economic Development Cabinet, which is responsible for recruiting businesses to the state.
Discussions with state officials led to two state contracts for the company. Neither contract was awarded through a competitive bidding process.
The first contract was awarded without competitive bidding because state officials said they had to act quickly to take advantage of expiring federal grant money. It was a “pass-through” contract, meaning the state amended an existing contract with another company, NTT Data, to require them to hire Coastal Cloud to do the work.
Stuart Johnston negotiated that contract with Coastal Cloud for the Education and Workforce Development Cabinet. The report says Johnston was “adamant” he did not know the Hales were related to the Beshears during the negotiations.
“We knew up front there might be some sensitivity to this. We understood the optics of it. As a result, we didn’t tell anybody I had a relationship,” Tim Hale said, adding that the only people who knew at the agency were their initial contacts at the cabinet. “We were super, super clean on it.”
The second contract was awarded without competitive bidding because state officials said it was “not practical or feasible to bid.” At the time, the state had been trying to implement some computer software since 2011 and was facing another delay. Erik Dunnigan, the Economic Development Cabinet’s deputy secretary at the time, negotiated that contract. He then left the cabinet to work for Coastal Cloud. The Executive Branch Ethics Commission later fined Dunnigan for continuing to contact the state on the company’s behalf before the required one-year waiting period expired.
Kenneth F. Bohac, the inspector general in the Finance and Administration Cabinet who wrote the report, said both contracts violated state procurement laws. He said the “pass-through” contract was “tantamount to the commission of a fraud upon the Commonwealth.”
Steve Beshear said when any company asked about moving to the state during his eight years in office, including the company owned by his wife’s nephew, they were referred to the Cabinet for Economic Development.
“To our knowledge, the Cabinet followed the proper contracting procedures with every company they dealt with, including Mr. Hale’s company,” the former governor said. “How unfortunate it is for the families of Kentucky that we have a governor who – more than halfway through his term – is still obsessively engaged in a political vendetta against our administration.”
Finance and Administration Cabinet spokeswoman Pamela Trautner said the inspector general’s office was doing its job to find out if the state followed the law in awarding state contracts. She said the report has been referred to the Executive Branch Ethics Commission, which could launch its own inquiry.