Published: August 22, 2008 08:04 pm      

Beshear's highway engineer resigns over conflict of interest

Project would benefit property in which Newman had ownership interest

FRANKFORT — The state Transportation Cabinet’s highway engineer resigned his position late Friday afternoon over a conflict of interest involving a road project that could benefit property he owns.

Gilbert Newman resigned after questions were raised by an internal auditor about a project to improve a portion of U.S. 421 in Franklin County near property Newman owns. Bill Gulick, executive advisor to the Office of Project Development, also resigned. Newman and Gulick were responsible for oversight of the project. Their resignations are effective at the end of the month.

Gov. Steve Beshear and Transportation Secretary Joe Prather, who hired Newman, have pledged to “clean up the transportation department.”

Prather said he thanks Newman and Gulick “for the work they have done on behalf of the cabinet. At the same time, as we create a culture of integrity in the Transportation Cabinet, we must ask everyone to live up to a higher standard of expectations and conduct.”

Beshear issued a statement shortly after the announcement about Newman’s resignation, saying it “demonstrates clearly that we mean what we say. If we are to create a culture of integrity in the Transportation Cabinet and throughout state government, if we are to shore up the public’s trust in our ability to look after their interests, we must hold ourselves accountable to a standard of conduct that is more stringent than ever before.” One of Beshear’s campaign promises was to return “integrity and competence to Frankfort.”

Interviewed late Friday, Prather said he learned of the possible conflicts on the project in the last two to three days. He said he met with Newman Friday to discuss them.

“Suffice to say he offered his resignation after our discussion and I accepted it,” Prather said. “It was basically by agreement.”

Newman said in his resignation letter he “may have erred by signing an Engineering Consultant Services Contract Change Order involving a project adjacent to which I have ownership interest in property.” The letter asserts he assigned the project to his executive advisor, presumably Gulick, to review it and from that point “I had no knowledge of the direction the project would advance nor did I attend any meetings in which this project was discussed.”

But later Newman signed a change order on the project, characterizing it as a “routine signature under the recommendations of two others.” He said he regrets the embarrassment he may have caused and welcomes any investigation into the matter.

Prather said he remains committed to reforming the cabinet, long plagued by scandal and allegations of corruption, and hopes this latest controversy won’t make the public skeptical of those efforts.

“Obviously, there are no winners here,” Prather said. “It’s one of those things I suppose are inevitable. In the arena in which we operate, issues will occur and it’s how we react and how we deal with them. Bottom line is we saw a problem and we dealt with it quickly.”

He said this setback will not delay the reforms.

“We have thousands of honorable and hard-working employees in the Transportation Cabinet who are doing tremendous and important work on behalf of Kentucky,” Prather said. “But we must have the trust of the taxpayers. Today’s actions, in my judgment, demonstrate that our processes work. Our oversight and internal audit led to these questions and we have moved to rectify the situation.”

Newman was hired in December as chief engineer after a career in the road building business, either as a cabinet employee or working for road contractors. He worked as state highway engineer during the administration of Wallace Wilkinson who was governor from 1987 to 1991.

Newman has also been quoted in news stories concerning an FBI investigation into bid rigging allegations involving former Transportation Secretary Bill Nighbert and eastern Kentucky road contractor Leonard Lawson. According to an FBI affidavit made public two weeks ago in stories by the Corbin Times Tribune, a CNHI owned paper, and The Courier Journal, the investigation began in July of 2007 but only began to focus on Nighbert and Lawson during the transition between the administrations of Republican Gov. Ernie Fletcher and Beshear.

That was about the time Prather hired Newman who once worked for Lawson and has worked for other road contractors as well.

Cabinet spokesman Chuck Wolfe said the potential conflict on the U.S. 421 project which led to Newman’s and Gulick’s resignations “was completely unrelated to the FBI investigation into alleged improprieties in previous years under previous administrations.”

Newman is an owner of CHN Developers which owns property under development on U.S. 421. According to information provided by the cabinet, Newman disclosed that ownership interest when he accepted his position as Chief Highway Engineer last December.

But he apparently took part in discussions about widening the road and then signed a change order for the project. Both actions were discovered during a subsequent audit.

Gulick, a former employee of the company in charge of the project design – WMB – also took part in discussions about the project with WM.

The cabinet’s internal auditor said both men should have assigned supervision of the project to an impartial third party and since they didn’t “a perceived conflict of interest could have resulted.”

Prather placed the U.S. 421 project on hold until it is thoroughly reviewed.

“We’ll be going back and taking time to make sure we dot every i, go back and make sure it’s done right,” Prather said. “It’s actually a very good project and in the end, in the near future, it will go forward.”

Prather’s chief of staff, Mike Hancock, will serve as interim state highway engineer until Newman’s replacement is named.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com.