Ethics commission asks GBI to probe possible fraud

The state ethics commission has asked the Georgia Bureau of Investigation to help it determine whether former commission director Holly LaBerge illegally used state funds to pay her personal attorneys, the AJC has learned.

The GBI became involved after a state auditor asked Attorney General Sam Olens’ office to investigate possible fraud related to $10,780 in payments to LaBerge’s attorney, according to a report released Wednesday. A GBI spokeswoman told the AJC the agency has opened a preliminary inquiry.

The request for further investigation is part of a wide-ranging audit, requested by the commission a year ago, that found an agency unable to perform its statutory duties due to poor management, a lack of controls and frequent in-fighting and litigation. The report also found employees left millions of dollars in possible fines against candidates and lobbyists uncollected.

The Atlanta Journal-Constitution has reported on problems within the ethics commission, formally known as the Government Transparency and Campaign Finance Commission, for years. The audit released Wednesday is the first official finding from the state, corroborating much of what the newspaper has reported.

Commission Chairwoman Hillary Stringfellow told auditors that commissioners denied LaBerge’s request in March to use agency money to pay her personal legal bills. Stringfellow said she requested information from LaBerge’s attorneys on the payments but the law firm turned her down, citing attorney-client privilege.

Yet, auditors found $10,780 in legal fees paid in six invoices this year from January to August, each labeled “General Advice.”

“Given these issues, we have forwarded this matter to the AG’s office to determine if the nature of the expenditure is a matter of legal noncompliance, fraud or abuse,” the auditors wrote.

Olens’ office, in response, suggested the commission request a GBI investigation.

It’s unclear to whom the payments for legal services were made. LaBerge is represented by the Parks Chesin Walbert law firm. Travis Foust, an attorney at the Atlanta firm, said the payments were not to them. He had no other comment on the audit.

Stringfellow said she could not respond to questions about the audit until she consulted the commission’s attorney. But in a written response to auditors, she said the commission decided not to wait for the audit report to make changes.

Those changes, she said, have enabled the commission to begin handling cases again and to begin to right the ship.

The audit is the latest chapter in a saga spanning more than three years that has cost taxpayers more than $3 million in lawsuit settlements and other costs. LaBerge and the Attorney General’s Office were both sanctioned and fined $10,000 in September by a Fulton County judge for failing to turn over records to attorneys for LaBerge’s predecessor in her whistleblower lawsuit.

Former director Stacey Kalberman claimed she was forced from office in 2011 for investigating Gov. Nathan Deal’s 2010 campaign. A jury agreed and awarded her $1.15 million in damages and attorneys fees.

Months after the April verdict, the AJC reported that LaBerge claimed in a private memo that top Deal aides called and texted her in the days before commissioners ruled on the complaints against Deal. The commission cleared Deal of major charges and asked him to pay $3,350 in fees for technical defects in his campaign reports.

Because of the sanctions, Olens’ office is no longer representing the commission. Also, should the GBI find evidence of criminal activity, Fulton County District Attorney Paul Howard would prosecute.

The question of improper payment of legal fees is the newest and most damning finding in the 60-page report, which also details problem after problem plaguing the agency.

Auditors found the commission hired unqualified employees and cited “unusually high turnover” despite better-than-average pay.

The report said four of the eight staff members hired since 2011 did not meet the minimum qualifications for the job. The report does not name the employees, but a number of key staff members were hired during that period, including LaBerge.

Auditors found staff did not complete annual inventories, poorly managed thousands of dollars in postage and did not properly track the payment of fees. Any of these could lead to fraud and abuse, they said.

The commission, the audit said, has not notified some elected officials and candidates of assessed late fees, as required by law. As a result, some officials and candidates may have been let off the hook for millions.

The commission failed to collect more than $1.5 million of the fees it did assess in 2012 and 2013.

The auditors echoed growing calls for radically restructuring the commission and giving it political independence.

“Ultimately, the commission’s independence and effectiveness is decided by the public’s perception and its confidence in it,” the report states.

While much of the mismanagement may be blamed on LaBerge, auditors suggested the appointed commissioners were not doing their part.

“Implicit in the commission’s authority to employ an executive secretary is the responsibility to provide monitoring and oversight of the executive secretary and the agency’s overall performance,” report states.

Auditors found instead that commissioners did not receive regular reports on the day-to-day functioning of the agency.

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Staff writer James Salzer contributed to this story.