Kansas Bioscience Authority auditor grilled in hearing

01/25/2012 5:00 AM

01/26/2012 10:23 AM

Two days after a $960,000 audit revealed problems in the Kansas Bioscience Authority, the chief auditor faced a grilling Wednesday by lawmakers who questioned whether the investigation had gone far enough and raised the possibility of prosecuting the KBA’s former chief executive.

The audit, by the national firm BKD, confirmed numerous problems with the way that former KBA chief executive Tom Thornton had done his job, including destroying documents and misspending public funds on artwork for his home and plane tickets to an interview for a new job.

But the audit overall found little fault with the structure and operations of the state-funded KBA in its primary duty: attracting of high-tech biological science companies and jobs to Kansas.

In a joint meeting of the House and Senate commerce committees, lawmakers questioned those findings and raised the issue of whether Thornton should be prosecuted for destroying documents after the audit was launched and after KBA records were subpoenaed by the Johnson County district attorney.

The audit found that Thornton had electronically shredded files on his KBA-issue laptop before returning it to the agency after he resigned to take a job in the innovations division of the Cleveland Clinic, a major Ohio health care provider. A secretary at the Cleveland Clinic said Thornton was not available for comment, and he did not return a message left with her.

Auditors also uncovered some evidence that Thornton may have tampered with files in a drive in the KBA’s mainframe computer that held some of the agency’s most guarded records and was only accessible to top-level management. It could not be determined whether Thornton deleted the files because the backup copies of the drive’s contents deleted themselves after 30 days, officials said.

Sen. Ty Masterson, R-Andover, said the erasure of records left a “gaping hole” in the information flow, which he said calls the audit’s conclusions into question.

Rep. Scott Schwab, R-Olathe, raised the possibility that Thornton should be prosecuted for obstruction of justice for erasing files.

“There’s got to be some form of reciprocity there, because to me, that’s very egregious, arrogant and just inappropriate,” Schwab said. “You don’t erase drives unless you’ve got criminal activity or you’re trying to hide something from your wife maybe.”

Jim Snyder, a BKD executive who oversaw the audit process, said he couldn’t comment on whether Thornton should be prosecuted, but said the audit had been turned over to the Johnson County District Attorney’s Office, which has also been investigating the KBA.

“I absolutely agree with much of what you said,” Snyder told Schwab. “There’s no good reason why somebody would do that. I can’t support it, and it was one of the very first things that we were concerned about.”

However, he added that the analysis of the wiped laptop indicated that there was “embarrassing personal information on the hard drive that this particular person wished not to have seen by others. Whether that’s true or not, you and I will never know.”

The audit said some of the file extensions recovered from Thornton’s laptop indicated the files were pornography.

Wagle dissatisfied with audit

Sen. Susan Wagle, R-Wichita and chairwoman of the Senate Commerce Committee, accused auditors of downplaying the inappropriate nature of an office romance between Thornton and the former Lindsay Holwick, whom Thornton hired at the KBA and later married.

Wagle said one employee was fired for walking in on the couple while they were having sex and others were warned not to talk about it or they would be fired, too.

“People who worked in the KBA heard sexual relations in the executives’ offices and then one person walked in accidentally and that person was fired,” Wagle said. “In the report, the words that you use to describe that action is ‘inappropriate intimate behavior in KBA offices.’ ”

Snyder denied soft-pedaling anything.

“When we took on this engagement, I looked the folks in the eye and said, ‘Listen, if you’re not prepared to let the chips fall where they may, don’t hire me because I don’t want the job,’ ” he said. “Our report is not sanitized.”

Wagle also assailed the audit’s claim that she had been interviewed in connection with the investigation. She said she had had only two brief conversations with BKD auditor Shauna Woody-Coussens, after the audit was essentially complete and was in the editing stage.

“There was never a thorough vetting between Shauna and I about what my concerns were,” Wagle said.

Wagle started the investigation last year and said she has boxes of information provided by current and former KBA employees and clients.

Snyder said he had tried to reach Wagle three times without success and that he understood she had declined to release information to protect her sources.

“If there’s other information you have that you would wish for us to take a look at, I will take it back today,” Snyder said.

Where money went

Sen. Chris Steineger, R-Kansas City, said he had yet to get an answer to how the agency has spent the $175 million the state has committed to it so far. He said it looked like much of the money had been spent on executive salaries, travel, lawyers, consultants and overhead.

“The ‘Venture Accelerator’ – nice name for an office building – has only a small amount of lab space and a lot of high-end architecture and quite nice furniture,” he said. “Since I invest money for a living, I would like to know what happened to my money. How much was spent on dining and hotels and nice office buildings and how much was spent on labs and research?”

Snyder said the answer was contained in the audit.

“It goes into a lot of detail in terms of what expenditures and commitments have been made,” Snyder said. “There are about, I would say, 20 pages that detail the answer to that question.”

He also said he had been to the building Steineger referenced and found a “significant investment in lab space out there.”

Most of the legislators were not fully familiar with the audit’s findings. The report is about 300 pages, backed up by about 600 pages of supporting exhibits. It was released in electronic form late Monday afternoon and printed copies became available to lawmakers Wednesday.

The hearing continues today with an appearance by Secretary of Agriculture Dale Rodman, who monitored the process on behalf of Gov. Sam Brownback. Brownback’s office pressured the KBA to contract for the audit and successfully pushed to broaden its scope during the process.

When the audit report was released Monday, Brownback issued a statement saying he found the findings disturbing. He said the KBA, which is directed by an independent board, should put a moratorium on new investment until the Legislature has time to act.

KBA chairman Dan Watkins said a moratorium could decrease confidence in the agency and that it will continue to execute its current spending and investment plan.

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